Exhibit 10.1


 




 





SENIOR SECURED, SUPER-PRIORITY


 


DEBTOR-IN-POSSESSION


 


CREDIT AGREEMENT


 


Dated as of December 2, 2004


 


among


 


APPLIED EXTRUSION TECHNOLOGIES, INC.


as Borrower,


 


THE OTHER CREDIT PARTIES SIGNATORY HERETO


 


FROM TIME TO TIME,


 


as Credit
Parties,


 


 


THE LENDERS SIGNATORY HERETO


 


FROM TIME TO TIME,


 


as Lenders,


 


and


 


GENERAL ELECTRIC CAPITAL CORPORATION,


 


as Agent and
Lender


 


 


GECC CAPITAL MARKETS GROUP, INC.

as Lead Arranger




 





 





















 


TABLE OF CONTENTS


 


	
  1.

  	
  AMOUNT AND TERMS OF CREDIT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
  Credit
  Facilities

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.2

  	
  Letters
  of Credit

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.3

  	
  Prepayments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.4

  	
  Use of
  Proceeds

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.5

  	
  Interest
  and Applicable Margins

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.6

  	
  Eligible Accounts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.7

  	
  Eligible Inventory

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.8

  	
  Cash Management Systems

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.9

  	
  Fees

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.10

  	
  Receipt of Payments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.11

  	
  Application and Allocation of Payments.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.12

  	
  Loan Account and Accounting

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.13

  	
  Indemnity

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.14

  	
  Access

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.15

  	
  Taxes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.16

  	
  Capital Adequacy; Increased Costs; Illegality

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.17

  	
  Single Loan

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.18

  	
  Super-Priority Nature of Obligations and Lenders’
  Liens

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.19

  	
  Payment of Obligations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.20

  	
  No Discharge; Survival of Claims

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.21

  	
  Release

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.22

  	
  Waiver of any Primary Rights

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  CONDITIONS
  PRECEDENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Conditions to the Initial Loans

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.2

  	
  Further Conditions to Each Loan

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.3

  	
  Further Conditions to Each
  Export-Related Advance

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.4

  	
  Further Conditions to Funding of Last Out
  Term Loan

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Corporate Existence; Compliance with Law

  	
   

  



 


i





















 


	
   

  	
  3.2

  	
  Executive Offices, Collateral Locations,
  FEIN

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.3

  	
  Corporate Power, Authorization,
  Enforceable Obligations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.4

  	
  Financial Statements, Projections and Net
  Cash Flow Forecast

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.5

  	
  Material Adverse Effect

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.6

  	
  Ownership of Property; Liens

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.7

  	
  Labor Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.8

  	
  Ventures, Subsidiaries and Affiliates;
  Outstanding Stock and Indebtedness

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.9

  	
  Government Regulation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.10

  	
  Margin Regulations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.11

  	
  Taxes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.12

  	
  ERISA and Canadian Plans

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.13

  	
  No Litigation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.14

  	
  Brokers

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.15

  	
  Intellectual Property

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.16

  	
  Full Disclosure

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.17

  	
  Environmental Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.18

  	
  Insurance

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.19

  	
  Deposit and Disbursement Accounts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.20

  	
  Government Contracts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.21

  	
  Customer and Trade Relations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.22

  	
  Agreements and Other Documents

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.23

  	
  Intentionally Omitted

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.24

  	
  Senior Note Documents

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.25

  	
  Reorganization Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  FINANCIAL
  STATEMENTS AND INFORMATION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Reports and Notices

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.2

  	
  Communication with Accountants

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  AFFIRMATIVE
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Maintenance of Existence and Conduct of
  Business

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.2

  	
  Payment of Charges

  	
   

  



 





















 


	
   

  	
  5.3

  	
  Books and Records

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.4

  	
  Insurance; Damage to or Destruction of
  Collateral

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.5

  	
  Compliance with Laws

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.6

  	
  Intentionally Omitted.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.7

  	
  Intellectual Property

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.8

  	
  Environmental Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.9

  	
  Landlords’ Agreements, Mortgagee
  Agreements, Bailee Letters and Real Estate Purchases

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.10

  	
  ERISA

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.11

  	
  Further Assurances

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  NEGATIVE
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Mergers, Subsidiaries, Etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.2

  	
  Investments; Loans and Advances

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.3

  	
  Indebtedness

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.4

  	
  Employee Loans and Affiliate Transactions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.5

  	
  Capital Structure and
  Business

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.6

  	
  Guaranteed Indebtedness

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.7

  	
  Liens

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.8

  	
  Sale of Stock and Assets

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.9

  	
  ERISA

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.10

  	
  Financial Covenants

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.11

  	
  Hazardous Materials

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.12

  	
  Sale-Leasebacks

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.13

  	
  Cancellation of Indebtedness

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.14

  	
  Restricted Payments; Employee Benefit Plan
  Contributions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.15

  	
  Change of Corporate Name or Location; Change of
  Fiscal Year

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.16

  	
  No Impairment
  of Intercompany Transfers

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.17

  	
  No Speculative Transactions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.18

  	
  Changes Relating to Subordinated Debt,
  Material Contracts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.19

  	
  AET Limited

  	
   

  



 





















 


	
   

  	
  6.20

  	
  Repayment of Indebtedness

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.21

  	
  Reclamation Claims

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  TERM

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Termination

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.2

  	
  Survival of Obligations Upon Termination of
  Financing Arrangements

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  EVENTS OF
  DEFAULT; RIGHTS AND REMEDIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  Events of Default

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.2

  	
  Remedies

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.3

  	
  Waivers by Credit Parties

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  ASSIGNMENT
  AND PARTICIPATIONS; APPOINTMENT OF AGENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Assignment and Participations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.2

  	
  Appointment of Agent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.3

  	
  Agent’s Reliance, Etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.4

  	
  GE Capital and Affiliates

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.5

  	
  Lender Credit Decision

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.6

  	
  Indemnification

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.7

  	
  Successor Agent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.8

  	
  Setoff and Sharing of Payments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.9

  	
  Advances; Payments; Non-Funding Lenders;
  Information; Actions in Concert

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  SUCCESSORS
  AND ASSIGNS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
  Successors and Assigns

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.1

  	
  Complete Agreement; Modification of Agreement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.2

  	
  Amendments and Waivers

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.3

  	
  Fees and Expenses

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.4

  	
  No Waiver

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.5

  	
  Remedies

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.6

  	
  Severability

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.7

  	
  Conflict of Terms

  	
   

  



 





















 


	
   

  	
  11.8

  	
  Confidentiality

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.9

  	
  GOVERNING LAW

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.10

  	
  Notices

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.11

  	
  Section Titles

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.12

  	
  Counterparts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.13

  	
  WAIVER OF JURY TRIAL

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.14

  	
  Press Releases and Related Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.15

  	
  Reinstatement

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.16

  	
  Advice of Counsel

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.17

  	
  Judgment Currency

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.18

  	
  Subordination

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.19

  	
  No Strict Construction

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.20

  	
  Parties
  Including Trustees; Bankruptcy Court Proceedings

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.21

  	
  Prepetition Loan Agreement

  	
   

  



 





















 


INDEX OF APPENDICES


 


	
  Annex A (Recitals)

  	
  -

  	
  Definitions

  	
   

  
	
  Annex B (Section 1.2)

  	
  -

  	
  Letters of Credit

  	
   

  
	
  Annex C (Section 1.8)

  	
  -

  	
  Cash Management System

  	
   

  
	
  Annex D (Section 2.1(a))

  	
  -

  	
  Closing Checklist

  	
   

  
	
  Annex D-1 (Annex D)

  	
  -

  	
  Mortgaged Properties

  	
   

  
	
  Annex E (Section 4.1(a))

  	
  -

  	
  Financial Statements and Projections —
  Reporting

  	
   

  
	
  Annex F (Section 4.1(b))

  	
  -

  	
  Collateral Reports

  	
   

  
	
  Annex G (Section 6.10)

  	
  -

  	
  Financial Covenants

  	
   

  
	
  Annex H (Section 9.9(a))

  	
  -

  	
  Lenders’ Wire Transfer Information

  	
   

  
	
  Annex I (Section 11.10)

  	
  -

  	
  Notice Addresses

  	
   

  
	
  Annex J (from Annex A - Commitments definition)

  	
   

  	
  Commitments as of Closing Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Exhibit 1.1(a)(i)

  	
  -

  	
  Form of Notice of Revolving Credit Advance

  	
   

  
	
  Exhibit 1.1(a)(ii)

  	
  -

  	
  Form of Revolving Note

  	
   

  
	
  Exhibit 1.1(b)

  	
  -

  	
  Form of Term Note

  	
   

  
	
  Exhibit 1.1(c)

  	
  -

  	
  Form of Last Out Term Note

  	
   

  
	
  Exhibit 1.1(d)(ii)

  	
  -

  	
  Form of Swing Line Note

  	
   

  
	
  Exhibit 1.1(e)(i)

  	
  -

  	
  Form of Notice of Export-Related Advance

  	
   

  
	
  Exhibit 1.1(e)(ii)

  	
  -

  	
  Form of Export-Related Loan Note

  	
   

  
	
  Exhibit 1.5(e)

  	
  -

  	
  Form of Notice of Conversion/Continuation

  	
   

  
	
  Exhibit 4.1(b)

  	
  -

  	
  Form of Borrowing Base Certificate

  	
   

  
	
  Exhibit 9.1(a)

  	
  -

  	
  Form of Assignment Agreement

  	
   

  
	
  Exhibit A-1

  	
  -

  	
  Master Documentary Agreement

  	
   

  
	
  Exhibit A-2

  	
  -

  	
  Master Standby Agreement

  	
   

  
	
  Exhibit A-3

  	
  -

  	
  Ex-Im Bank Borrower Agreement

  	
   

  
	
  Exhibit A-4

  	
  -

  	
  Interim Order

  	
   

  
	
  Exhibit B

  	
  -

  	
  Material Contracts

  	
   

  
	
  Schedule 1.1

  	
  -

  	
  Agent’s Representatives

  	
   

  
	
  Disclosure Schedule 1.4

  	
  -

  	
  Sources and Uses; Funds Flow Memorandum

  	
   

  
	
  Disclosure Schedule 2.1

  	
  -

  	
  First Day Orders

  	
   

  
	
  Disclosure Schedule 3.1

  	
  -

  	
  Type of Entity; State of Organization

  	
   

  
	
  Disclosure Schedule 3.2

  	
  -

  	
  Executive Offices, Collateral Locations, FEIN

  	
   

  
	
  Disclosure Schedule 3.4(a)

  	
  -

  	
  Financial Statements

  	
   

  
	
  Disclosure Schedule 3.4(c)

  	
  -

  	
  Net Cash Flow Forecast

  	
   

  
	
  Disclosure Schedule 3.5

  	
  -

  	
  Material Adverse Effect

  	
   

  
	
  Disclosure Schedule 3.6

  	
  -

  	
  Ownership of Properties; Real Estate and Leases;
  Purchase Options and similar rights

  	
   

  



 


vi





















 


	
  Disclosure Schedule 3.7

  	
  -

  	
  Labor Matters

  
	
  Disclosure Schedule 3.8

  	
  -

  	
  Ventures, Subsidiaries and Affiliates; Outstanding
  Stock; Indebtedness

  
	
  Disclosure Schedule 3.8(a)

  	
  -

  	
  Former Subsidiaries

  
	
  Disclosure Schedule 3.11

  	
  -

  	
  Tax Matters

  
	
  Disclosure Schedule 3.12

  	
  -

  	
  ERISA Plans

  
	
  Disclosure Schedule 3.12(c)

  	
  -

  	
  Canadian Plans

  
	
  Disclosure Schedule 3.13

  	
  -

  	
  Litigation

  
	
  Disclosure Schedule 3.15

  	
  -

  	
  Intellectual Property

  
	
  Disclosure Schedule 3.17

  	
  -

  	
  Hazardous Materials

  
	
  Disclosure Schedule 3.18

  	
  -

  	
  Insurance

  
	
  Disclosure Schedule 3.19

  	
  -

  	
  Deposit and Disbursement Accounts

  
	
  Disclosure Schedule 3.20

  	
  -

  	
  Government Contracts

  
	
  Disclosure Schedule 3.21

  	
  -

  	
  Customer Trade Relations

  
	
  Disclosure Schedule 3.22

  	
  -

  	
  Material Agreements

  
	
  Disclosure Schedule 3.22(b)

  	
  -

  	
  Customers and Clients

  
	
  Disclosure Schedule 3.22(c)

  	
  -

  	
  Suppliers and Vendors

  
	
  Disclosure Schedule 5.1

  	
  -

  	
  Trade Names

  
	
  Disclosure Schedule 5.9

  	
   

  	
  Excluded Locations

  
	
  Disclosure Schedule 6.3

  	
  -

  	
  Indebtedness

  
	
  Disclosure Schedule 6.4(a)

  	
  -

  	
  Transactions with Affiliates

  
	
  Disclosure Schedule 6.7

  	
  -

  	
  Existing Liens

  



 


vii





















 


This
SENIOR SECURED, SUPER-PRIORITY DEBTOR-IN-POSSESSION CREDIT AGREEMENT (this “Agreement”),
dated as of December 2, 2004 among APPLIED EXTRUSION TECHNOLOGIES, INC., a
Delaware corporation and a debtor and debtor-in-possession (the “Borrower”);
the other Credit Parties signatory hereto; GENERAL ELECTRIC CAPITAL
CORPORATION, a Delaware corporation (in its individual capacity, “GE Capital”),
for itself, as Lender, and as Agent for Lenders, the other Lenders signatory
hereto from time to time and GECC CAPITAL MARKETS GROUP, INC., as Lead Arranger
(“GECMG”).


 


RECITALS


 


WHEREAS,
on December 1, 2004 (the “Petition Date”),
the Borrower commenced Chapter 11 Case No. 04-13388 and
Applied Extrusion Technologies (Canada), Inc., a Delaware corporation (“AET
Canada”) commenced Chapter 11 Case No. 04-13389 which together with Chapter
11 Case No. 04-13388 has been
administratively consolidated as Chapter 11 Case No. 04-13388 (each a “Chapter
11 Case” and collectively, the “Chapter 11 Cases”) by filing voluntary
petitions for reorganization under Chapter 11 of Title 11 of the United States
Code, 11 U.S.C. §§101 et seq. (the “Bankruptcy Code”), with the United
States Bankruptcy Court for the District of Delaware (the
“Bankruptcy Court”), and each of the Borrower and AET Canada continues
to operate its business and manage its properties as a debtor and
debtor-in-possession pursuant to Sections 1107(a) and 1108 of the Bankruptcy
Code;


 


WHEREAS,
prior to the Petition Date, pursuant to that certain Credit Agreement, dated as
of October 3, 2003, among the Borrower, the other credit parties signatory
thereto, GE Capital, as Agent and Lender, and the lenders from time to time
signatory thereto (the “Prior Lenders”) (as amended, modified or
supplemented prior to the Petition Date, the “Prepetition Loan Agreement”),
the Prior Lenders provided financing to the Borrower;


 


WHEREAS,
the Borrower has requested that the Lenders provide a senior secured,
super-priority debtor-in-possession revolving and term credit facility to the
Borrower of up to One Hundred and Twenty-Five Million Dollars ($125,000,000) in
the aggregate to fund the working capital requirements of the Borrower and its
Subsidiaries during the pendency of the Chapter 11 Cases and to repay in full
all obligations under the Prepetition Loan Agreement;


 


WHEREAS,
Lenders are willing to make certain loans and other extensions of credit to
Borrower of up to such amount upon the terms and conditions set forth herein;


 


WHEREAS,
Borrower has agreed to secure all of its obligations under the Loan Documents
by granting to Agent, for the benefit of Agent and Lenders, a first priority
security interest in and lien upon all of its existing and after-acquired
personal and real property;


 


WHEREAS,
AET Canada is willing to guarantee all of the obligations of Borrower to Agent
and Lenders under the Loan Documents and to grant a first priority security
interest in all of its assets in favor of Agent to secure such guarantee; and


 


WHEREAS,
capitalized terms used in this Agreement shall have the meanings ascribed to
them in Annex A and, for purposes of this Agreement and the other Loan
Documents, the rules of construction set forth in Annex A shall
govern.  All Annexes, Disclosure
Schedules, Exhibits and other attachments (collectively, “Appendices”)
hereto, or expressly identified to this


 





















 


Agreement,
are incorporated herein by reference, and taken together with this Agreement,
shall constitute but a single agreement. 
These recitals shall be construed as part of the Agreement.


 


NOW,
THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, and for other good and valuable consideration, the
parties hereto agree as follows:


 


1.                                      AMOUNT AND TERMS OF CREDIT


 


1.1                                 Credit Facilities.


 


(a)                                  Revolving
Credit Facility.


 


(i)                                     (A)  Subject
to the terms and conditions hereof, each Revolving Lender agrees to make
available to Borrower from time to time until the Commitment Termination Date
its Pro Rata Share of advances (each, a “Revolving Credit Advance”).  The Pro Rata Share of the Revolving Loan of
any Revolving Lender shall not at any time exceed its separate Revolving Loan
Commitment (less its Pro Rata Share of the Export-Related Loan
Participations).  The obligations of each
Revolving Lender hereunder shall be several and not joint.  Until the Commitment Termination Date,
Borrower may borrow, repay and reborrow under this Section 1.1(a)(i)(A); provided, that the amount of any
Revolving Credit Advance to be made at any time shall not exceed Borrowing
Availability at such time.  Borrowing
Availability may be reduced by Reserves imposed by Agent in its reasonable
credit judgment.


 


(B)                                Each
Revolving Credit Advance shall be made on notice by Borrower to one of the
representatives of Agent identified in Schedule 1.1 at the address
specified therein.  Any such notice must
be given no later than: (1) 11:00 a.m. (New York time) on the Business Day
of the proposed Revolving Credit Advance, in the case of an Index Rate Loan; or
(2) 11:00 a.m. (New York time) on the date which is three (3) Business Days
prior to the proposed Revolving Credit Advance, in the case of a LIBOR
Loan.  Each such notice (a ”Notice
of Revolving Credit Advance”) must be given in writing (by telecopy or
overnight courier) substantially in the form of Exhibit 1.1(a)(i), and
shall include the information required in such Exhibit and such other
information as may be required by Agent. 
If Borrower desires to have the Revolving Credit Advances bear interest
by reference to a LIBOR Rate, Borrower must comply with Section 1.5(e).


 


(ii)                                  Except
as provided in Section 1.12, Borrower shall execute and deliver to each
Revolving Lender a note to evidence the Revolving Loan Commitment of that
Revolving Lender.  Each note shall be in
the principal amount of the Revolving Loan Commitment of the applicable
Revolving Lender, dated the Closing Date and substantially in the form of Exhibit
1.1(a)(ii) (each a “Revolving Note” and,
collectively, the “Revolving Notes”). Each Revolving Note shall
represent the obligation of Borrower to pay the amount of the applicable
Revolving Lender’s Revolving Loan Commitment or, if less, such Revolving
Lender’s Pro Rata Share of the aggregate unpaid principal amount of all
Revolving Credit Advances to Borrower together with interest thereon as prescribed
in Section 1.5.  The entire unpaid
balance of the aggregate Revolving Loan and all other non-contingent
Obligations shall


 


2





















 


be
immediately due and payable in full in immediately available funds on the
Commitment Termination Date.


 


(iii)                               Anything
in this Agreement to the contrary notwithstanding, at the request of Borrower,
Agent in its discretion may (but shall have absolutely no obligation to), make
Revolving Credit Advances to Borrower on behalf of Revolving Lenders in amounts
that cause the outstanding balance of the aggregate Revolving Loan to exceed
the Borrowing Base (less the Swing Line Loan) (any such excess Revolving Credit
Advances are herein referred to collectively, as “Overadvances”); provided,
that, (A) no such event or occurrence shall cause or constitute a waiver of
Agent’s, Swing Line Lender’s or Revolving Lenders’ right to refuse to make any
further Overadvances, Swing Line Advances or Revolving Credit Advances, or
incur any Letter of Credit Obligations, as the case may be, at any time that an
Overadvance exists, and (B) no Overadvance shall result in a Default or Event
of Default based on Borrower’s failure to comply with Section 1.3(b)(i)
for so long as Agent permits such Overadvance to be outstanding, but solely
with respect to the amount of such Overadvance. 
In addition, Overadvances may be made even if the conditions to lending
set forth in Section 2 have not been met.  All Overadvances shall constitute Index Rate
Loans, shall bear interest at the Default Rate and shall be payable on
demand.  Except as otherwise provided in Section
1.11(b), the authority of Agent to make Overadvances is limited to an
aggregate amount not to exceed $2,500,000 at any time and shall not cause the aggregate
Revolving Loan to exceed the Maximum Amount less the principal amount of the
Swing Line Loan and the Export-Related Loan.


 


(b)                                 Term
Loan.


 


(i)                                     Subject
to the terms and conditions hereof, each Term Lender agrees to make a term loan
(collectively, the “Term Loan”) on the Closing Date to Borrower in the
amount of the applicable Term Lender’s Term Loan Commitment.  The obligations of each Term Lender hereunder
shall be several and not joint.  Each
such Term Loan shall be evidenced by a promissory note substantially in the
form of Exhibit 1.1(b) (each a “Term Note” and collectively,
the “Term Notes”), and, except as provided in Section 1.12,
Borrower shall execute and deliver the Term Note to the applicable Term
Lender.  Each Term Note shall represent the
obligation of Borrower to pay the applicable Term Lender’s Term Loan
Commitment, together with interest thereon as prescribed in Section 1.5.


 


(ii)                                  Borrower
shall repay the Term Loan in four consecutive quarterly installments of
$875,000 each on the last day of March, June and September, with the remaining
principal balance due and payable on the Commitment Termination Date.


 


(iii)                               Notwithstanding
Section 1.1(b)(ii), the aggregate outstanding
principal balance together with accrued interest on the Term Loan shall be due
and payable in full in immediately available funds on the Commitment
Termination Date, if not sooner paid in full. 
No payment with respect to the Term Loan may be reborrowed.


 


(iv)                              Each
payment of principal with respect to the Term Loan shall be paid to Agent for
the ratable benefit of each Term Lender, ratably in proportion to each such
Term Lender’s respective Term Loan Commitment.


 


3





















 


(c)                                  Last
Out Term Loan.


 


(i)                                     Subject
to the terms and conditions hereof, each Last Out Term Lender agrees to make a
last out term loan (collectively, the “Last Out Term Loan”) on the
Closing Date to Borrower in the amount of the applicable Last Out Term Lender’s
Last Out Term Loan Commitment; provided that Borrower acknowledges and
agrees that a portion of the aggregate Last Out Term Loan in an amount of
$15,000,000 may not be funded until such time as the conditions set forth in Section
2.4 are satisfied.  The obligations
of each Last Out Term Lender hereunder shall be
several and not joint.  Each such Last
Out Term Loan shall be evidenced by a promissory note substantially in the form
of Exhibit 1.1(c) (each a “Last Out Term Note” and
collectively, the “Last Out Term Notes”), and, except as provided in Section 1.12,
Borrower shall execute and deliver the Last Out Term Note to the applicable
Last Out Term Lender.  Each Last Out Term Note shall represent the obligation of Borrower to
pay the applicable Last Out Term Lender’s Last Out Term Loan Commitment,
together with interest thereon as prescribed in Section 1.5.


 


(ii)                                  Borrower
shall repay the aggregate outstanding principal balance, together with accrued
interest, on the Last Out Term Loan in one lump sum
payment on the Commitment Termination Date, if not sooner paid in full.  No payment with respect to the Last Out Term Loan may be reborrowed.


 


(iii)                               Each
payment of principal with respect to the Last Out Term
Loan shall be paid to Agent for the ratable benefit of each Last Out Term
Lender, ratably in proportion to each such Last Out Term Lender’s respective
Last Out Term Loan Commitment.


 


(d)                                 Swing
Line Facility.


 


(i)                                     Agent
shall notify the Swing Line Lender upon Agent’s receipt of any Notice of
Revolving Credit Advance.  Subject to the
terms and conditions hereof, the Swing Line Lender may, in its discretion, make
available from time to time until the Commitment Termination Date advances
(each, a “Swing Line Advance”) in accordance with any such notice. The
provisions of this Section 1.1(d) shall not relieve Revolving Lenders of
their obligations to make Revolving Credit Advances under Section 1.1(a);
provided, that if the Swing Line Lender makes a Swing Line Advance
pursuant to any such notice, such Swing Line Advance shall be in lieu of any
Revolving Credit Advance that otherwise may be made by Revolving Credit Lenders
pursuant to such notice.  The aggregate
amount of Swing Line Advances outstanding shall not exceed at any time the
lesser (“Swing Line Availability”) of (A) the Swing Line Commitment, (B)
the Maximum Amount less the sum of the outstanding balance of the Revolving
Loan and the Export-Related Loan at such time and (C) the Aggregate Borrowing
Base less the aggregate outstanding balance of the Revolving Loan and the
Export-Related Loan (except for Overadvances) at such time.  Until the Commitment Termination Date,
Borrower may from time to time borrow, repay and reborrow under this Section
1.1(d).  Each Swing Line Advance
shall be made pursuant to a Notice of Revolving Credit Advance delivered to
Agent by Borrower in accordance with Section 1.1(a).  Any such notice must be given no later than
11:00 a.m. (New York time) on the Business Day of the proposed Swing Line
Advance.  Unless the Swing Line Lender
has received at least one Business Day’s prior written notice from Requisite
Revolving Lenders instructing it not to make a Swing Line Advance, the Swing
Line Lender shall,


 


4





















 


notwithstanding
the failure of any condition precedent set forth in Sections 2.2, be
entitled to fund that Swing Line Advance, and to have each Revolving Lender
make Revolving Credit Advances in accordance with Section 1.1(d)(iii).  Notwithstanding any other provision of this
Agreement or the other Loan Documents, the Swing Line Loan shall constitute an
Index Rate Loan.  Swing Line Lender,
subject to the terms hereof, shall make the requested Swing Line Advance to
Borrower not later than 3:00 p.m. (New York time) on the requested funding
date.  Borrower shall repay the aggregate
outstanding principal amount of the Swing Line Loan upon demand therefor by
Agent.


 


(ii)                                  Borrower
shall execute and deliver to the Swing Line Lender a promissory note to
evidence the Swing Line Commitment.  Such
note shall be in the principal amount of the Swing Line Commitment of the Swing
Line Lender, dated the Closing Date and substantially in the form of Exhibit
1.1(d)(ii) 
(the “Swing Line Note”). 
The Swing Line Note shall represent the obligation of Borrower to pay
the amount of the Swing Line Commitment or, if less, the aggregate unpaid
principal amount of all Swing Line Advances made to Borrower together with
interest thereon as prescribed in Section 1.5.  The entire unpaid balance of the Swing Line
Loan and all other noncontingent Obligations shall be immediately due and
payable in full in immediately available funds on the Commitment Termination
Date if not sooner paid in full.


 


(iii)                               The
Swing Line Lender, at any time and from time to time in its sole and absolute
discretion, but not less frequently than weekly and upon any demand by Agent to
Borrower to repay the Swing Line Loan, shall on behalf of Borrower (and
Borrower hereby irrevocably authorizes the Swing Line Lender to so act on its
behalf) request each Revolving Lender (including the Swing Line Lender) to make
a Revolving Credit Advance to Borrower (which shall be an Index Rate Loan) in
an amount equal to that Revolving Lender’s Pro Rata Share of the principal
amount of Borrower’s Swing Line Loan (the “Refunded Swing Line Loan”)
outstanding on the date such notice is given. 
Regardless of whether the conditions precedent set forth in this
Agreement to the making of a Revolving Credit Advance are then satisfied, each
Revolving Lender shall disburse directly to Agent, its Pro Rata Share of a
Revolving Credit Advance on behalf of the Swing Line Lender prior to 3:00 p.m.
(New York time) in immediately available funds on the Business Day next
succeeding the date that notice is given. 
The proceeds of those Revolving Credit Advances shall be immediately paid
to the Swing Line Lender and applied to repay the Refunded Swing Line Loan of
Borrower.


 


(iv)                              Intentionally
Omitted


 


(v)                                 Each
Revolving Lender’s obligation to make Revolving Credit Advances in accordance
with Section 1.1(d)(iii) shall be absolute and unconditional and shall
not be affected by any circumstance, including (A) any setoff, counterclaim,
recoupment, defense or other right that such Revolving Lender may have against
the Swing Line Lender, Borrower or any other Person for any reason whatsoever; (B)
the occurrence or continuance of any Default or Event of Default; (C) any
inability of Borrower to satisfy the conditions precedent to borrowing set
forth in this Agreement at any time or (D) any other circumstance, happening or
event whatsoever, whether or not similar to any of the foregoing.  If any Revolving Lender does not make
available to Agent or the Swing Line Lender, as applicable, the amount required
pursuant to Section 1.1(d)(iii), the Swing Line
Lender shall be entitled to recover such amount on demand


 


5





















 


from
such Revolving Lender, together with interest thereon for each day from the
date of non-payment until such amount is paid in full at the Federal Funds Rate
for the first two (2) Business Days and at the Index Rate thereafter.


 


(e)                                  Export-Related
Loan.


 


(i)                                     Subject
to the terms and conditions hereof, the Export-Related Loan Lender agrees to
make available to Borrower from time to time until the Commitment Termination
Date export-related advances (each, an “Export-Related Advance”) in
accordance with any such notice.  Until
the Commitment Termination Date, Borrower may from time to time borrow, repay
and reborrow under this Section 1.1(e)(i); provided, that (A) the
amount of any Export-Related Advance to be made at any time shall not exceed
Export-Related Borrowing Availability at such time, and (B) the aggregate
amount of Export-Related Advances outstanding shall not exceed at any the
Maximum Amount less the outstanding balances of the Revolving Loan (except for
Overadvances) and the Swing Line Loan at such time.  Export-Related Borrowing Availability may be
further reduced by Reserves imposed by Agent in its reasonable credit judgment.  Each Export-Related Advance shall be made on
notice by Borrower to one of the representatives of Agent identified in Schedule
1.1 at the address specified therein. 
Any such notice must be given no later than: (1) 11:00 a.m. (New
York time) on the Business Day of the proposed Export-Related Advance, in the
case of an Index Rate Loan; or (2) 11:00 a.m. (New York time) on the date which
is three (3) Business Days prior to the proposed Export-Related Advance, in the
case of a LIBOR Loan.  Each such notice (a ”Notice of Export-Related Advance”) must be
given in writing (by telecopy or overnight courier) substantially in the form
of Exhibit 1.1(e)(i), and shall include the information required in such
Exhibit and such other information as may be required by Agent.  If Borrower desires to have the
Export-Related Advances bear interest by reference to a LIBOR Rate, Borrower
must comply with Section 1.5(e). 
Agent shall notify the Export-Related Loan Lender upon Agent’s receipt
of any Notice of Export-Related Advance which requests an Export-Related
Advance.  Unless the Export-Related Loan
Lender has received at least one Business Day’s prior written notice from
Requisite Revolving Lenders instructing it not to make a Export-Related
Advance, the Export-Related Loan Lender shall, notwithstanding the failure of
any condition precedent set forth in Sections 2.2, be entitled to fund
that Export-Related Advance, and to have each Revolving Lender purchase
participating interests in accordance with Section 1.1(e)(iii).  The Export-Related Loan Lender, subject to
the terms hereof, shall make the requested Export-Related Advance to Borrower
not later than 3:00 p.m. (New York time) on the requested funding date.


 


(ii)                                  Borrower
shall execute and deliver to the Export-Related Loan Lender a promissory note
to evidence the Export-Related Loan Commitment. 
Such note shall be in the principal amount of the Export-Related Loan
Commitment of the Export-Related Loan Lender, dated the Closing Date and
substantially in the form of Exhibit 1.1(e)(ii)  (the “Export-Related Loan Note”).  The Export-Related Loan Note shall represent
the obligation of Borrower to pay the amount of the Export-Related Loan
Commitment or, if less, the aggregate unpaid principal amount of all
Export-Related Advances made to Borrower together with interest thereon as prescribed
in Section 1.5.  The entire unpaid
balance of the Export-Related Loan and all other noncontingent Obligations
shall be immediately due and payable in full in immediately available funds on
the Commitment Termination Date if not sooner paid in full.


 


6





















 


(iii)                               Immediately
upon the making of any Export-Related Advance by the Export-Related Loan
Lender, each Revolving Lender (including the Export-Related Loan Lender) shall
be deemed to have irrevocably and unconditionally purchased from the
Export-Related Loan Lender an undivided interest and participation in such
Export-Related Advance in an amount equal to its Pro Rata Share of the
principal amount of such Export-Related Advance (each an “Export-Related
Loan Participation” and collectively, the “Export-Related Loan
Participations”).  Each Revolving
Lender shall fund its participation in such Export-Related Advance in the same
manner as provided in the Agreement with respect to Revolving Credit Advances,
regardless of whether the conditions precedent set forth in this Agreement to
the making of a Revolving Credit Advance are then satisfied, and as set forth
in this Section 1.3(d).  The
Export-Related Loan Lender, at any time and from time to time in its sole and
absolute discretion, but not less frequently than weekly, shall request each
Revolving Lender (including the Export-Related Loan Lender) to fund its
participation in outstanding Export-Related Advances which have not been
previously funded in an amount equal to its Pro Rata Share of the principal
amount of such Export-Related Advances (a “Funded Export-Related Loan
Participation”), regardless of whether the conditions precedent set forth
in this Agreement to the making of a Revolving Credit Advance are then
satisfied.  Each Revolving Lender shall
disburse directly to the Agent such amount prior to 3:00 p.m. (New York time)
in immediately available funds on the Business Day next succeeding the date
that notice is given, and the Agent shall be immediately pay such amount to the
Export-Related Loan Lender.


 


(iv)                              Each
Revolving Lender’s obligation to purchase participation interests in accordance
with Section 1.1(e)(iii) shall be absolute and unconditional and shall
not be affected by any circumstance, including (A) any setoff, counterclaim,
recoupment, defense or other right that such Revolving Lender may have against
the Export-Related Loan Lender, Borrower or any other Person for any reason
whatsoever; (B) the occurrence or continuance of any Default or Event of
Default; (C) any inability of Borrower to satisfy the conditions precedent to
borrowing set forth in this Agreement at any time or (D) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing.  If any Revolving Lender
does not make available to Agent the amount required pursuant to Sections
1.1(e)(iii) the Export-Related Loan Lender shall
be entitled to recover such amount on demand from such Revolving Lender,
together with interest thereon for each day from the date of non-payment until
such amount is paid in full at the Federal Funds Rate for the first two (2)
Business Days and at the Index Rate thereafter.


 


(v)                                 Any
principal or interest received by the Agent in respect of any Export-Related
Advance shall be promptly paid by the Agent to the Revolving Lenders which have
a Funded Export-Related Loan Participation in such Export-Related Advance in an
amount equal to its Pro Rata Share of such principal or interest (and to the
Export-Related Loan Lender with respect to any such Export-Related Advance as
to which a Funded Export-Related Loan Participation does not exist).


 


(f)                                    Reliance
on Notices.  Agent shall be entitled
to rely upon, and shall be fully protected in relying upon, any Notice of
Revolving Credit Advance, Notice of Export-Related Advance, Notice of
Conversion/Continuation or similar notice believed by Agent to be genuine.  Agent may assume that each Person executing
and delivering any notice in accordance


 


7





















 


herewith
was duly authorized, unless the responsible individual acting thereon for Agent
has actual knowledge to the contrary.


 


1.2                                 Letters of Credit.


 


(a)                                  Subject
to and in accordance with the terms and conditions contained herein and in Annex
B, Borrower shall have the right to request, and Revolving Lenders agree to
incur, or purchase participations in, Letter of Credit Obligations in respect
of Borrower.


 


(b)                                 On
and as of the Closing Date, all letters of credit issued for the account of
Borrower under the Prepetition Loan Agreement (the “Existing Letters of
Credit”) shall continue in place as Letters of Credit under this Agreement
and shall be subject to the terms and conditions of this Agreement, including,
without limitation, Annex B.  All
obligations under or in connection with the Existing Letters of Credit shall
constitute Letter of Credit Obligations hereunder.


 


1.3                                 Prepayments.


 


(a)                                  Voluntary
Prepayments; Reductions in Revolving Loan Commitments.  Borrower may at any time on at least ten (10)
days’ prior written notice to Agent (i) voluntarily prepay all or part of the
Term Loan and/or (ii) permanently reduce (but not terminate) the Revolving Loan
Commitment; provided, that (A) any such prepayments or reductions of the
Term Loan shall be in a minimum amount of $1,000,000 and integral multiples of
$250,000 in excess of such amount and any such prepayments or reductions of the
Revolver Loan Commitment shall be in a minimum amount of $5,000,000 and
integral multiples of $1,000,000 in excess of such amount, (B) the Revolving
Loan Commitment shall not be reduced to an amount less than the greater of (x)
$30,000,000 and (y) the amount of the Revolving Loan then outstanding, and (C)
after giving effect to such reductions, Borrower shall comply with Section
1.3(b)(i).  In addition, Borrower may
at any time on at least ten (10) days’ prior written notice to Agent terminate
the Revolving Loan Commitment; provided, that
upon such termination, all Loans and other Obligations shall be immediately due
and payable in full and all Letter of Credit Obligations shall be cash
collateralized or otherwise satisfied in accordance with Annex B
hereto.  Any voluntary prepayment and any
reduction or termination of the Revolving Loan Commitment must be accompanied
by payment of the Fee required by Section 1.9(c), if any, plus
the payment of any LIBOR funding breakage costs in accordance with Section
1.13(b).  Upon any termination of the
Revolving Loan Commitment, Borrower’s right to request Revolving Credit
Advances, or request that Letter of Credit Obligations be incurred on its
behalf, or request Swing Line Advances or Export-Related Advances, shall
simultaneously be permanently terminated, and upon any such reduction of the
Revolving Loan Commitment, Borrower’s right to request Revolving Credit
Advances, or request that Letter of Credit Obligations be incurred on its
behalf, or request Swing Line Advances, shall simultaneously be permanently
reduced; provided, that a permanent reduction of the Revolving Loan
Commitment shall not require a corresponding pro rata reduction in the L/C
Sublimit and/or the Export-Related Loan Commitment.  Each notice of partial prepayment shall
designate the Loans or other Obligations to which such prepayment is to be
applied; provided, that any partial prepayments of the Term Loan made by
or on behalf of Borrower shall be applied to prepay the scheduled installments
of Borrower’s Term Loan in inverse order of maturity.


 


8





















 


(b)                                 Mandatory
Prepayments.


 


(i)                                     If
on any day the aggregate outstanding balances of the Revolving Loan, the Swing
Line Loan and the Export-Related Loan exceed the Maximum Amount, Borrower shall
on such day repay the aggregate outstanding Revolving Credit Advances to the
extent required to eliminate such excess. 
If any such excess remains after repayment in full of the aggregate
outstanding Revolving Credit Advances, Borrower shall provide cash collateral
for the Letter of Credit Obligations in the manner set forth in Annex B
to the extent required to eliminate such excess.  If on any day the aggregate outstanding
balances of the Revolving Loan and the Swing Line Loan exceed the Borrowing
Base, Borrower shall on such day repay the aggregate outstanding Revolving
Credit Advances to the extent required to eliminate such excess; provided,
that solely for purposes of this sentence, any reduction in the Borrowing Base
due to the establishment or modification of Reserves (other than pursuant to Section
5.4(a)), or the adjustment of any criteria in Section 1.6 or 1.7,
or the establishment of any new criteria for, or adjustment of advance rates
with respect to, Eligible Accounts or Eligible Inventory, shall be effective on
the second Business Day after receipt by Borrower of notice from the Agent of
such reduction.  If any such excess
remains after repayment in full of the aggregate outstanding Revolving Credit
Advances, Borrower shall provide cash collateral for the Letter of Credit
Obligations in the manner set forth in Annex B to the extent required to
eliminate such excess.  If on any day the
outstanding balance of the Export-Related Loan exceeds the lesser of (A) the
Export-Related Loan Commitment and (B) the Export-Related Borrowing Base,
Borrower shall on such day repay the aggregate outstanding Export-Related
Advances to the extent required to eliminate such excess.  Notwithstanding the foregoing, any
Overadvance made pursuant to Section 1.1(a)(iii)
shall be repaid only on demand.


 


(ii)                                  On
the date of receipt by any Credit Party of proceeds of any asset disposition
(excluding proceeds of asset dispositions permitted by Section 6.8 (a), (d)
and (f), and proceeds of asset dispositions permitted by Section
6.8(c) in an aggregate amount not exceeding $300,000 in any Fiscal Year) or
any sale of Stock of any Subsidiary of any Credit Party, Borrower shall prepay
the Loans in an amount equal to all such proceeds, net of (A) commissions and
other reasonable and customary transaction costs, fees and expenses properly
attributable to such transaction and payable by Borrower in connection
therewith (in each case, paid to non-Affiliates), (B) transfer taxes, (C)
amounts payable to holders of senior Liens (to the extent such Liens constitute
Permitted Encumbrances hereunder), if any, and (D) an appropriate reserve for
income taxes in accordance with GAAP in connection therewith.  Any such prepayment shall be applied in
accordance with Section 1.3(c).


 


(iii)                               If any Credit Party
issues Stock (other than proceeds in an aggregate amount not exceeding $1,000,000
received upon issuance or sale of Stock to directors, management or employees
of any Credit Party under any employment or similar agreement or stock option,
stock purchase or benefit plan) or any debt securities (other then Indebtedness
permitted under Section 6.3), no later than the Business Day following
the date of receipt of the proceeds thereof, Borrower shall prepay the Loans in
an amount equal to the product of (x) 75% multiplied by (y) all
such proceeds, net of underwriting discounts and commissions and other
reasonable costs, fees and expenses paid to non-Affiliates in connection
therewith.  Any such prepayment shall be
applied in accordance with Section 1.3(c).


 


9





















 


(iv)                              Borrower
shall prepay the Term Loan on the date that is 10 days after (a) the date on
which the Borrower’s annual audited financial statements for the Fiscal Year
ending September 30, 2005 are delivered pursuant to Annex E or (b) the
date on which such annual audited financial statements were required to be
delivered pursuant to Annex E in an amount equal to twenty-five percent
(25%) of Excess Cash Flow for the immediately preceding Fiscal Year; provided,
that the sum of any such prepayments pursuant to this Section 1.3(b)(iv)
along with the aggregate amount of payment pursuant to Section 1.1(b)(ii)
shall not exceed, in the aggregate, $6,250,000. 
Any prepayments from Excess Cash Flow paid pursuant to this clause (iv) shall be applied in accordance with Section
1.3(c).  Each such prepayment shall
be accompanied by a certificate signed by Borrower’s chief financial officer or
treasurer certifying the manner in which Excess Cash Flow was calculated and
the resulting prepayment, which certificate shall be in form and substance
reasonably satisfactory to Agent.


 


(c)                                  Application
of Certain Mandatory Prepayments. 
Any prepayments made by Borrower pursuant to Sections 1.3(b)(ii),
(b)(iii) or (b)(iv) above shall be applied as follows: first, to
prepay the scheduled principal installments of the Term Loan in inverse order
of maturity, until paid in full; second, to the principal balance of the
Swing Line Loan outstanding until the same has been repaid in full; third,
to the principal balance of Revolving Credit Advances outstanding until the
same has been paid in full; fourth, to the principal balance of
Export-Related Advances outstanding until the same has been paid in full; fifth,
to any Letter of Credit Obligations to provide cash collateral therefor in the
manner set forth in Annex B, until all such Letter of Credit
Obligations have been fully cash collateralized in the manner set forth in Annex
B; and sixth, to prepay the principal and any accrued interest on
the Last Out Term Loan, until paid in full; provided, however,
any Term Lender may elect by written notice to the Agent prior to the date of
any prepayment made pursuant to Section 1.3(b)(iv) to decline any or all
of such prepayment of its Term Loan, in which case the aggregate amount which
would have been applied to prepay the Term Loan but was so declined shall be
applied as follows: first, to the principal balance of the Swing Line
Loan outstanding until the same has been repaid in full; second, to the
principal balance of Revolving Credit Advances outstanding until the same has
been paid in full; third, to the principal balance of Export-Related
Advances outstanding until the same has been paid in full; fourth, to
any Letter of Credit Obligations to provide cash collateral therefor in the
manner set forth in Annex B, until all such Letter of Credit
Obligations have been fully cash collateralized in the manner set forth in Annex
B; and fifth, to prepay the principal and any accrued interest on
the Last Out Term Loan, until paid in full. 
None of the Revolving Loan Commitment, the Export-Related Loan
Commitment or the Swing Line Commitment shall be permanently reduced by the
amount of any such prepayments.


 


(d)                                 Application
of Prepayments from Insurance and Condemnation Proceeds.  Prepayments from insurance or condemnation
proceeds in accordance with Section 5.4(c) and the Mortgages,
respectively, shall be applied as follows: 
(i) insurance proceeds from casualties or losses to Inventory shall be
applied, first, to the Swing Line Loan, second, to Revolving
Credit Advances, third, to Export-Related Advances, fourth, to
the Term Loan; and (ii) insurance or condemnation proceeds from casualties or
losses to Equipment, Fixtures and Real Estate shall be applied, first,
to prepay the scheduled principal installments of the Term Loan in inverse
order of maturity, until paid in full; second, to the principal balance
of the Swing Line Loan outstanding until the same has been repaid in full; third,
to the principal balance of Revolving Credit Advances outstanding until the
same has been paid in full; fourth, to the principal balance of


 


10





















 


Export-Related Advances outstanding until the same has
been paid in full; fifth, to any Letter of Credit Obligations to provide
cash collateral therefor in the manner set forth in Annex B, until
all such Letter of Credit Obligations have been fully cash collateralized in
the manner set forth in Annex B; and sixth to prepay the
principal and any accrued interest on the Last Out Term Loan, until paid in
full.  Neither the Revolving
Loan Commitment, the Export-Related Loan Commitment or the Swing Line
Loan Commitment shall be permanently reduced by the amount of any such
prepayments.


 


(e)                                  To
the extent consistent with Sections 1.3(c) and (d), amounts to be
applied pursuant to Sections 1.3(b) and (d) to the prepayment of Loans
shall be applied, as applicable, first to prepay outstanding Index Rate Loans,
and then any amounts remaining after each such application shall, at the option
of Borrower, be applied to prepay LIBOR Loans, and/or shall be deposited in the
Prepayment Account (as defined below). 
The Agent shall apply any cash deposited in the Prepayment Account (i)
allocable to Term Loans to prepay Term Loans which are LIBOR Loans, (ii)
allocable to Revolving Loans to prepay Revolving Loans which are LIBOR Loans
and (iii) allocable to Last Out Term Loans to prepay Last Out Term Loans which
are LIBOR Loans in each case on the last day of their respective LIBOR Periods
(or, at the direction of Borrower, on any earlier date) until all outstanding
Term Loans, Revolving Loans or Last Out Term Loans, as the case may be, have
been prepaid or until all the allocable cash on deposit with respect to such
Loans has been fully applied.  For
purposes of this Agreement, the term “Prepayment Account” shall mean a cash
collateral account maintained at a bank or financial institution acceptable to
Agent.  The Prepayment Account shall be
in the name of Borrower and shall be pledged to, and subject to the control of,
Agent, for the benefit of Agent and Lenders, in manner satisfactory to
Agent.  Borrower hereby pledges and
grants to Agent, on behalf of itself and Lenders, a first priority security
interest in all funds held in the Prepayment Account from time to time and all
proceeds thereof, as security for the payment of all Obligations, whether or
not then due.  The Agreement, including
this Section 1.3(e), shall constitute a security agreement under
applicable law.  After the occurrence of
and during the continuance of an Event of Default, Agent will apply funds then
held in the Prepayment Account to the payment of Term Loans, Last Out Term
Loans and Revolving Loans (allocated to such Loans as provided above in this Section
1.3(e)), and any remaining funds shall, subject to Section 1.11(b),
be applied, in such order as Agent may elect, to any other Obligations then due
and payable.  Neither Borrower nor any
Person claiming on behalf of or through Borrower shall have any right to
withdraw any of the funds held in the Prepayment Account, except as provided
above in this Section 1.3(e). 
Interest earned on deposits in the Prepayment Account shall be for the
account of Lenders ratably based upon their Pro Rata Shares of all of the
Loans.


 


(f)                                    No
Implied Consent.  Nothing in this Section
1.3 shall be construed to constitute Agent’s or any Lender’s consent to any
transaction that is not permitted by other provisions of this Agreement or the
other Loan Documents.


 


1.4                                 Use of Proceeds. 
Borrower shall utilize the proceeds of the Loans (net of any amounts used
on the Closing Date to pay Fees) (a) to the extent permitted by the Interim
Order or the Final Order, as the case may be, to repay in full the outstanding
principal, accrued interest, and accrued fees and expenses, if any, owing to
Prior Lenders under the Prepetition Loan Agreement, (b) for working capital and
general corporate purposes including certain fees and expenses of professionals
retained by the Borrower and the Committee (within the meaning


 


11





















 


of clause (a) of the definition thereof),
subject to the Carve-Out Amount and the procedures set forth in the Interim
Order and Final Order, as applicable, but excluding in any event the making of
any Restricted Payment not specifically permitted by Section 6.14) and
(c) certain other Prepetition expenses that are approved by the Bankruptcy
Court and consented to by the Agent. 
Borrower shall not be permitted to use the proceeds of the Loans: (i)
for the payment of interest and principal with respect to Subordinated Debt,
(ii) to finance in any way any adversary action, suit, arbitration, proceeding,
application, motion or other litigation of any type relating to or in
connection with the Prepetition Loan Agreement or any of the loan documents or
in instruments entered into in connection therewith, including, without
limitation, any challenges to the obligations under the Prepetition Loan
Agreement, or the validity, perfection, priority, or enforceability of any Lien
securing such claims or any payment made thereunder, (iii) to finance in any
way any action, suit, arbitration, proceeding, application, motion or other
litigation of any type adverse to the interests of Agent and Lenders or their
rights and remedies under this Agreement, the other Loan Documents, the Interim
Order or the Final Order (it being understood that funds used to pay
professionals retained by the Committee (within the meaning of clause (a)
of the definition thereof) to investigate causes of action against the Agent
and the Lenders pursuant to an order of the Bankruptcy Court and consistent
with the terms of the Interim Order and the Final Order shall not constitute a
violation of this clause (iii)), (iv) to make any distribution under a
plan of reorganization in any Chapter 11 Case and (v) to make any payment in
settlement of any claim, action or proceeding before any court, arbitrator or
other governmental body without the prior written consent of Agent.  Disclosure Schedule (1.4) contains a
description of Borrower’s sources and uses of funds as of the Closing Date,
including Loans and Letter of Credit Obligations to be made or incurred on that
date, and a funds flow memorandum detailing how funds from each source are to
be transferred to particular uses.


 


1.5                                 Interest and Applicable Margins.


 


(a)                                  Borrower
shall pay interest to Agent, for the ratable benefit of Lenders in accordance
with the various Loans being made by each Lender, in arrears on each applicable
Interest Payment Date, at the following rates: 
(i) with respect to the Revolving Credit Advances, the Index Rate plus
the Applicable Revolver Index Margin per annum or, at the election of Borrower,
the applicable LIBOR Rate plus the Applicable Revolver LIBOR Margin per
annum, based on the aggregate Revolving Credit Advances outstanding from time
to time;  (ii) with respect to the
Export-Related Advances, the Index Rate plus the Applicable Revolver
Index Margin per annum or, at the election of Borrower, the applicable LIBOR
Rate plus the Applicable Revolver LIBOR Margin per annum, based on the
aggregate Export-Related Advances outstanding from time to time; (iii) with
respect to the Term Loan, the Index Rate plus the Applicable Term Loan
Index Margin per annum or, at the election of Borrower, the applicable LIBOR
Rate plus the Applicable Term Loan LIBOR Margin per annum; (iv) with
respect to the Last Out Term Loan, the Index Rate plus the Applicable
Last Out Term Loan Index Margin per annum or, at the election of Borrower, the
applicable LIBOR Rate plus the Applicable Last Out Term Loan LIBOR
Margin per annum; and (v) with respect to the Swing Line Loan, the Index Rate plus
the Applicable Revolver Index Margin per annum.


 


12





















 


As of
the Closing Date, the Applicable Margins are as follows:


 


	
  Applicable Revolver Index Margin

  	
   

  	
  2.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Applicable Revolver LIBOR Margin

  	
   

  	
  3.50

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Applicable Term Loan Index Margin

  	
   

  	
  3.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Applicable Term Loan LIBOR Margin

  	
   

  	
  4.50

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Applicable Last Out Term Loan Index Margin

  	
   

  	
  5.00

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Applicable Last Out Term Loan LIBOR Margin

  	
   

  	
  6.50

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Applicable L/C Margin

  	
   

  	
  3.50

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Applicable Unused Facility Fee Margin

  	
   

  	
  0.50

  	
  %

  



 


The Applicable Margins may be adjusted by reference
to the following grids:


 


	
  If Senior Leverage Ratio is:

  	
   

  	
  Level of

  Applicable Margins:

  	
   

  
	
  < 2.0

  	
   

  	
  Level I

  	
   

  
	
  <2.5, but > 2.0

  	
   

  	
  Level II

  	
   

  
	
  >2.5, but < 3.0

  	
   

  	
  Level III

  	
   

  
	
  >3.0, but < 4.0

  	
   

  	
  Level IV

  	
   

  
	
  >4.0, but < 5.0

  	
   

  	
  Level V

  	
   

  
	
  >5.0

  	
   

  	
  Level VI

  	
   

  



 


	
   

  	
   

  	
  Applicable Margins

  	
   

  
	
   

  	
   

  	
  Level I

  	
   

  	
  Level II

  	
   

  	
  Level
  III

  	
   

  	
  Level IV

  	
   

  	
  Level V

  	
   

  	
  Level VI

  	
   

  
	
  Applicable Revolver Index Margin

  	
   

  	
  1.00

  	
  %

  	
  1.25

  	
  %

  	
  1.50

  	
  %

  	
  1.75

  	
  %

  	
  2.00

  	
  %

  	
  2.25

  	
  %

  
	
  Applicable Revolver LIBOR Margin

  	
   

  	
  2.50

  	
  %

  	
  2.75

  	
  %

  	
  3.00

  	
  %

  	
  3.25

  	
  %

  	
  3.50

  	
  %

  	
  3.50

  	
  %

  
	
  Applicable Term Loan Index Margin

  	
   

  	
  2.00

  	
  %

  	
  2.25

  	
  %

  	
  2.50

  	
  %

  	
  2.75

  	
  %

  	
  3.00

  	
  %

  	
  3.25

  	
  %

  
	
  Applicable Term Loan LIBOR Margin

  	
   

  	
  3.50

  	
  %

  	
  3.75

  	
  %

  	
  4.00

  	
  %

  	
  4.25

  	
  %

  	
  4.50

  	
  %

  	
  4.75

  	
  %

  
	
  Applicable Last Out Term Loan Index
  Margin4.25%

  	
   

  	
  4.25

  	
  %

  	
  4.25

  	
  %

  	
  4.25

  	
  %

  	
  4.50

  	
  %

  	
  5.00

  	
  %

  	
  5.50

  	
  %

  
	
  Applicable Last Out Term Loan LIBOR Margin

  	
   

  	
  5.75

  	
  %

  	
  5.75

  	
  %

  	
  5.75

  	
  %

  	
  6.00

  	
  %

  	
  6.50

  	
  %

  	
  7.00

  	
  %

  
	
  Applicable L/C Margin

  	
   

  	
  2.50

  	
  %

  	
  2.75

  	
  %

  	
  3.00

  	
  %

  	
  3.25

  	
  %

  	
  3.50

  	
  %

  	
  3.50

  	
  %

  
	
  Applicable Unused Facility Fee Margin

  	
   

  	
  0.50

  	
  %

  	
  0.50

  	
  %

  	
  0.50

  	
  %

  	
  0.50

  	
  %

  	
  0.50

  	
  %

  	
  0.50

  	
  %

  



 


13





















 


Adjustments
in the Applicable Margins commencing with the Fiscal Quarter ending December
31, 2004 shall be implemented quarterly on a prospective basis based on
Borrower’s consolidated financial performance for the trailing four (4) Fiscal
Quarters most recently ended, for each calendar month commencing at least five
(5) days after the date of delivery to Lenders of the quarterly unaudited or
annual audited (as applicable) Financial Statements evidencing the need for an
adjustment.  Concurrently with the
delivery of those Financial Statements, Borrower shall deliver to Agent and
Lenders a certificate, signed by its chief financial officer, setting forth in
reasonable detail the basis for the continuance of, or any change in, the
Applicable Margins.  Failure to timely
deliver such Financial Statements shall, in addition to any other remedy provided
for in this Agreement (including the application of the Default Rate), result
in an increase in the Applicable Margins to the highest level set forth in the
foregoing grid, until the first day of the first calendar month following the
delivery of those Financial Statements demonstrating that such an increase is
not required.  If a Default or Event of
Default has occurred and is continuing at the time any reduction in the
Applicable Margins is to be implemented, that reduction shall be deferred until
the first day of the first calendar month following the date on which such
Default or Event of Default is waived or cured.


 


Notwithstanding the
foregoing, (A) commencing on the Closing Date until the date on which the Last
Out Term Lenders advance the unfunded portion of the Last Out Term Loan in an
aggregate amount of $15,000,000 following satisfaction of the condition set
forth in Section 2.4, the Applicable Term Loan Index Margin, the
Applicable Term Loan LIBOR Margin, the Applicable Last Out Term Loan Index
Margin and the Applicable Last Out Term Loan LIBOR Margin shall each be
increased by an additional 100 basis points (it being understood that, in the
event that the conditions set forth in Section 2.4 are not satisfied on
or prior to the entry of the Final Order, such increases in the Applicable Term
Loan Index Margin, the Applicable Term Loan LIBOR Margin, the Applicable Last
Out Term Loan Index Margin and the Applicable Last Out Term Loan LIBOR Margin
shall remain in effect), and (B) commencing on the ninety first (91st)
day after the earlier to occur of (i) the Closing Date and (ii) the tenth (10th)
day after the entry of the Interim Order, the Applicable Term Loan Index
Margin, the Applicable Term Loan LIBOR Margin, the Applicable Last Out Term
Loan Index Margin and the Applicable Last Out Term Loan LIBOR Margin shall each
be increased by an additional 100 basis points.


 


(b)                                 If
any payment on any Loan becomes due and payable on a day other than a Business
Day, the maturity thereof will be extended to the next succeeding Business Day
(except as set forth in the definition of LIBOR Period) and, with respect to
payments of principal, interest thereon shall be payable at the then applicable
rate during such extension.


 


(c)                                  All
computations of Fees calculated on a per annum basis and interest shall be made
by Agent on the basis of a 360-day year, in each case for the actual number of
days occurring in the period for which such interest and Fees are payable.  The Index Rate is a


 


14





















 


floating
rate determined for each day.  Each
determination by Agent of an interest rate and Fees hereunder shall be final,
binding and conclusive on Borrower, absent manifest error.


 


(d)                                 So
long as an Event of Default has occurred and is continuing under Section
8.1(a) or so long as any other Event of Default has occurred and is
continuing and at the election of Agent (or upon the written request of
Requisite Lenders or any individual Lender holding at least 33% of either the
Revolving Loan Commitment or the Term Loan Commitment) confirmed by written
notice from Agent to Borrower, the interest rates applicable to the Loans and
the Letter of Credit Fees shall be increased by two percentage points (2%) per
annum above the rates of interest or the rate of such Fees otherwise applicable
hereunder (“Default Rate”), and all outstanding Obligations shall bear
interest at the Default Rate applicable to such Obligations. Interest and
Letter of Credit Fees at the Default Rate shall accrue from the initial date of
such Event of Default (or, with respect to any Event of Default under Section
8.1(d), from the earlier of (i) the initial date any Credit Party has
knowledge of the occurrence of such Event of Default and (ii) the date the
Borrower receives notice of such Event of Default from the Agent or any Lender)
until that Event of Default is cured or waived and shall be payable upon
demand.


 


(e)                                  Subject
to the conditions precedent set forth in Section 2.2, Borrower shall
have the option to (i) request that any Revolving Credit Advance be made as a
LIBOR Loan, (ii) convert at any time all or any part of outstanding Loans
(other than the Swing Line Loan) from Index Rate Loans to LIBOR Loans, (iii)
convert any LIBOR Loan to an Index Rate Loan, subject to payment of LIBOR
breakage costs in accordance with Section 1.13(b) if such conversion is
made prior to the expiration of the LIBOR Period applicable thereto, or (iv)
continue all or any portion of any Loan (other than the Swing Line Loan) as a
LIBOR Loan upon the expiration of the applicable LIBOR Period and the
succeeding LIBOR Period of that continued Loan shall commence on the first day
after the last day of the LIBOR Period of the Loan to be continued.  Any Loan or group of Loans having the same
proposed LIBOR Period to be made or continued as, or converted into, a LIBOR
Loan must be in a minimum amount of $2,000,000 and integral multiples of
$500,000 in excess of such amount.  Any
such election must be made by 11:00 a.m. (New York time) on the 3rd Business
Day prior to: (1) the date of any proposed Advance which is to bear
interest at the LIBOR Rate; (2) the end of each LIBOR Period with respect to
any LIBOR Loans to be continued as such; or (3) the date on which Borrower
wishes to convert any Index Rate Loan to a LIBOR Loan for a LIBOR Period
designated by Borrower in such election. 
If no election is received with respect to a LIBOR Loan by 11:00 a.m.
(New York time) on the 3rd Business Day prior to the end of the LIBOR Period
with respect thereto (or if a Default or an Event of Default has occurred and
is continuing or if the additional conditions precedent set forth in Section
2.2 shall not have been satisfied), that LIBOR Loan shall be converted to
an Index Rate Loan at the end of its LIBOR Period.  Borrower must make such election by notice to
Agent in writing, by telecopy or overnight courier.  In the case of any conversion or
continuation, such election must be made pursuant to a written notice (a “Notice
of Conversion/Continuation”) in the form of Exhibit 1.5(e).


 


(f)                                    Notwithstanding
anything to the contrary set forth in this Section 1.5, if a court
of competent jurisdiction determines in a final order that the rate of interest
payable hereunder exceeds the highest rate of interest permissible under law
(the “Maximum Lawful Rate”), then so long as the Maximum Lawful Rate
would be so exceeded, the rate of interest payable hereunder shall be equal to
the Maximum Lawful Rate; provided, however, that if at any


 


15





















 


time thereafter the rate of interest payable hereunder
is less than the Maximum Lawful Rate, Borrower shall continue to pay interest
hereunder at the Maximum Lawful Rate until such time as the total interest
received by Agent, on behalf of Lenders, is equal to the total interest that
would have been received had the interest rate payable hereunder been (but for
the operation of this paragraph) the interest rate payable since the Closing
Date as otherwise provided in this Agreement. Thereafter, interest hereunder
shall be paid at the rate(s) of interest and in the manner provided in Sections
1.5(a) through (e), unless and until the rate of interest again exceeds the
Maximum Lawful Rate, and at that time this paragraph shall again apply.  In no event shall the total interest received
by any Lender pursuant to the terms hereof exceed the amount that such Lender
could lawfully have received had the interest due hereunder been calculated for
the full term hereof at the Maximum Lawful Rate.  If the Maximum Lawful Rate is calculated
pursuant to this paragraph, such interest shall be calculated at a daily rate
equal to the Maximum Lawful Rate divided by the number of days in the year in
which such calculation is made.  If,
notwithstanding the provisions of this Section 1.5(f), a court of
competent jurisdiction shall finally determine that a Lender has received
interest hereunder in excess of the Maximum Lawful Rate, Agent shall, to the
extent permitted by applicable law, promptly apply such excess in the order
specified in Section 1.11 and thereafter shall refund any excess to
Borrower or as a court of competent jurisdiction may otherwise order.


 


(g)                                 If
any provision of this Agreement or any of the other Loan Documents would
obligate Borrower to make any payment of interest or other amount payable to
the Agent or any Lender in an amount or calculated at a rate which would be
prohibited by law or would result in a receipt by the Agent or any Lender of
interest at a criminal rate (as such terms are construed under the Criminal
Code (Canada)) then, notwithstanding such provision, such amount or rate shall
be deemed to have been adjusted with retroactive effect to the maximum amount
or rate of interest, as the case may be, as would not be so prohibited by law
or so result in a receipt by the Agent or any Lender of interest at a criminal
rate, such adjustment to be effected, to the extent necessary, as follows:  (1) firstly, by reducing the amount or rate
of interest required to be paid to the Agent or any Lender under the Notes; and
(2) thereafter, by reducing any fees, commissions, premiums and other amounts
required to be paid to the Agent or any Lender which would constitute interest
for purposes of Section 347 of the Criminal Code (Canada).  Notwithstanding the foregoing, and after
giving effect to all adjustments contemplated thereby, if the Agent or any
Lender shall have received an amount in excess of the maximum permitted by that
section of the Criminal Code (Canada), then the Borrower shall be entitled, by
notice in writing to the Agent or such Lender, as applicable, to obtain
reimbursement from the Agent or such Lender, as applicable, in an amount equal
to such excess, and pending such reimbursement, such amount shall be deemed to
be an amount payable by the Agent or such Lender to the Borrower.  Any amount or rate of interest referred to in
this Section 1.5 shall be determined in accordance with generally
accepted actuarial practices and principles as an effective annual rate of
interest over the term that any Loan remains outstanding on the assumption that
any charges, fees or expenses that fall within the meaning of “interest” (as
defined in the Criminal Code (Canada)) shall, if they relate to a specific
period of time, be pro-rated over that period of time and otherwise be
pro-rated over the period from the Closing Date to the Termination Date and, in
the event of a dispute, a certificate of a Fellow of the Canadian Institute of
Actuaries appointed by the Agent shall be conclusive for the purposes of such determination.


 


16





















For
purposes of disclosure pursuant to the Interest Act (Canada), the annual rates
of interest or fees to which the rates of interest or fees provided in this
Agreement and the other Loan Documents (and stated herein or therein, as
applicable, to be computed on the basis of a 360 day year or any other period
of time less than a calendar year) are equivalent are the rates so determined
multiplied by the actual number of days in the applicable calendar year and
divided by 360 or such other period of time, respectively


 


1.6                                 Eligible Accounts.  All of the Accounts (other than Export-Related
Accounts) owned by Borrower and AET Canada and reflected in the most recent
Borrowing Base Certificate delivered by Borrower to Agent shall be “Eligible
Accounts” for purposes of this Agreement, except any Account to which any
of the exclusionary criteria set forth below applies.  Agent shall have the right (upon prior or
contemporaneous notice to Borrower) to establish, modify or eliminate Reserves
against Eligible Accounts from time to time in its reasonable credit
judgment.  In addition, Agent reserves
the right (upon prior or contemporaneous notice to Borrower), at any time and
from time to time after the Closing Date, to adjust any of the criteria set
forth below, to establish new criteria and to adjust advance rates with respect
to Eligible Accounts, in its reasonable credit judgment.  Eligible Accounts shall not include any
Account of Borrower or AET Canada:


 


(a)                                  that does not arise from the sale of goods or the performance
of services by such Credit Party in the ordinary course of its business;


 


(b)                                 (i) upon
which such Credit Party’s right to receive payment is not absolute or is
contingent upon the fulfillment of any condition whatsoever or (ii) as to which
such Credit Party is not able to bring suit or otherwise enforce its remedies
against the Account Debtor through judicial process or (iii) if the Account
represents a progress billing consisting of an invoice for goods sold or used
or services rendered pursuant to a contract under which the Account Debtor’s
obligation to pay that invoice is subject to such Credit Party’s completion of
further performance under such contract or is subject to the equitable lien of
a surety bond issuer;


 


(c)                                  in the event that any defense, counterclaim, setoff or
dispute is asserted as to such Account other than as provided in clause (j);


 


(d)                                 that
is not a true and correct statement of bona fide indebtedness incurred in the
amount of the Account for merchandise sold to or services rendered and accepted
by the applicable Account Debtor;


 


(e)                                  with respect to which an invoice, reasonably acceptable to
Agent in form and substance, has not been sent to the applicable Account
Debtor;


 


(f)                                    that
(i) is not owned by such Credit Party or (ii) is subject to any Prior Claim,
right, claim, security interest or other interest of any other Person, other
than Liens in favor of Agent, on behalf of itself and Lenders;


 


(g)                                 that arises from a sale to any director, officer, other
employee or Affiliate of any Credit Party;


 


17





















 


(h)                                 that
is the obligation of an Account Debtor that is (i) the United States government
or a political subdivision thereof, or any state, county or municipality or
department, agency or instrumentality thereof or (ii) the Canadian government
(Her Majesty the Queen in Right of Canada) or a political subdivision thereof,
or any province, territory, municipality or department, agency or
instrumentality thereof, unless Agent, in its sole discretion, has agreed to
the contrary in writing and Borrower, if necessary or desirable, has complied
with respect to such obligation with the Federal Assignment of Claims Act of
1940, the Financial Administration Act (Canada) or any applicable provincial or
state, county or municipal law restricting assignment thereof;


 


(i)                                     that
is the obligation of an Account Debtor located in a foreign country other than
Canada (excluding the province of Newfoundland, the Northwest Territories and
the Territory of Nunavit) unless payment thereof is assured by a letter of
credit assigned and delivered to Agent, reasonably satisfactory to Agent as to
form, amount and issuer;


 


(j)                                     to the extent Borrower or any Subsidiary thereof is liable
for goods sold or services rendered by the applicable Account Debtor to
Borrower or any Subsidiary thereof but only to the extent of the potential
offset;


 


(k)                                  that
arises with respect to goods that are delivered on a bill-and-hold, cash-on-delivery
basis or placed on consignment, guaranteed sale or other terms by reason of
which the payment by the Account Debtor is or may be conditional;


 


(l)                                     that
is not eligible for any of the following reasons:


 


(i)                                     the Account is not paid within the earlier of: sixty (60)
days following its due date or ninety (90) days following its original invoice
date;


 


(ii)                                  the
Account Debtor obligated upon such Account suspends business, makes a general
assignment for the benefit of creditors or fails to pay its debts generally as
they come due; or


 


(iii)                               a
petition is filed by or against any Account Debtor obligated upon such Account
under any bankruptcy law or any other federal, state or foreign (including any
provincial) receivership, insolvency relief or other law or laws for the relief
of debtors;


 


(m)                               that
is the obligation of an Account Debtor if 50% or more of the Dollar amount of
all Accounts owing by that Account Debtor are ineligible under the other
criteria set forth in this Section 1.6;


 


(n)                                 as
to which Agent’s Lien thereon, on behalf of itself and Lenders, is not a first
priority perfected Lien;


 


(o)                                 as to which any of the representations or warranties in
Section 4(f) of the Security Agreement are untrue;


 


(p)                                 to the extent such Account is evidenced by a judgment,
Instrument or Chattel Paper;


 


18





















 


(q)                                 to the extent such Account exceeds any credit limit
established by Agent, in its reasonable credit judgment;


 


(r)                                    to
the extent that such Account, together with all other Accounts owing by such
Account Debtor and its Affiliates as of any date of determination, exceed 15%
of all Eligible Accounts (unless otherwise agreed to by Agent), it being agreed
that any such excess above 15% shall be excluded;


 


(s)                                  that is payable in any currency other than Dollars or
Canadian Dollars; or


 


(t)                                    that
is otherwise unacceptable to Agent in its reasonable credit judgment.


 


1.6A                       Eligible
Export-Related Accounts.  All of the
Export-Related Accounts of Borrower reflected in the most recent Borrowing Base
Certificate delivered by Borrower to Agent shall be “Eligible Export-Related
Accounts” for purposes of this Agreement, except any Account to which any
of the exclusionary criteria set forth below apply. Agent shall have the right
(upon prior or contemporaneous notice to Borrower) to establish, modify or
eliminate Reserves against Eligible Export-Related Accounts from time to time
in its reasonable credit judgment.  In
addition, Agent reserves the right (upon prior or contemporaneous notice to
Borrower), at any time and from time to time after the Closing Date, to adjust
any of the criteria set forth below, to establish new criteria and to adjust
advance rates with respect to Eligible Export-Related Accounts, in its
reasonable credit judgment.  Eligible
Export-Related Accounts shall not include any Export-Related Account of
Borrower that does not satisfy the criteria set forth in the definition of “Eligible
Export-Related Account Receivable” contained in the Ex-Im Borrower Agreement.


 


1.7                                 Eligible Inventory.  All of the Inventory owned by the Borrower
and AET Canada and reflected in the most recent Borrowing Base Certificate
delivered by Borrower to Agent shall be “Eligible Inventory” for
purposes of this Agreement, except any Inventory to which any of the
exclusionary criteria set forth below applies. 
Agent shall have the right (upon prior or contemporaneous notice to
Borrower) to establish, modify or eliminate Reserves against Eligible Inventory
from time to time in its reasonable credit judgment.  In addition, Agent reserves the right (upon prior
or contemporaneous notice to Borrower), at any time and from time to time after
the Closing Date, to adjust any of the criteria set forth below, to establish
new criteria and to adjust advance rates with respect to Eligible Inventory, in
its reasonable credit judgment.  Eligible Inventory shall not
include any Inventory of Borrower or AET Canada that:


 


(a)                                  is
not owned by such Credit Party free and clear of all Liens and rights of any
other Person (including the rights of a purchaser that has made progress
payments and the rights of a surety that has issued a bond to assure such
Credit Party’s performance with respect to that Inventory), except the Liens in
favor of Agent, on behalf of itself and Lenders, and Permitted Encumbrances in
favor of landlords and bailees to the extent permitted in Section 5.9
hereof (subject to Reserves established by Agent in accordance with Section
5.9 hereof);


 


(b)                                 (i)
is not located on premises owned, leased or rented by such Credit Party and set
forth in Disclosure Schedule (3.2), or (ii) is stored at a leased
location, unless either (x) a reasonably satisfactory landlord waiver has been
delivered to Agent, or (y) Reserves reasonably


 


19





















 


satisfactory to Agent have been established with
respect thereto or (iii) is stored with a processor, toller or toll converter,
warehouseman or other bailee, unless either (x) a reasonably satisfactory,
acknowledged bailee letter has been received by Agent, or (y) Reserves
reasonably satisfactory to Agent have been established with respect thereto, or
(iv) is located at an owned location subject to a mortgage in favor of a lender
other than Agent unless a reasonably satisfactory mortgagee waiver has been
delivered to Agent, or (v) is located at any site if the aggregate book value
of Inventory at any such location is less than $50,000;


 


(c)                                  is
placed on consignment, unless (i) a reasonably satisfactory consignment
agreement among the Borrower, the Agent and the consignee has been delivered to
Agent, (ii) the Borrower’s and Agent’s interest in the consigned inventory is
fully perfected under the Code by the filing of appropriate financing
statements or other action required by Agent, (iii) prior to delivery of such
consigned Inventory to the consignee any Person holding a security interest in
Goods of such consignee has been properly notified of the Borrower’s and Agent’s
interest in the consigned Inventory in accordance with section 9-324(b) of the
Code, and (iv) such Inventory is located in the United States at a location of
the consignee satisfactory to the Agent and as to which the requirements of Section
1.7(b) have been satisfied;


 


(d)                                 is
in transit (other than Inventory of Borrower or AET Canada which is in transit
in the ordinary course of business within or between the United States and
Canada between locations owned by the Borrower or AET Canada or with respect to
which Agent has received a satisfactory landlord waiver or bailee letter, as
applicable;


 


(e)                                  is
covered by a negotiable document of title, unless such document has been
delivered to Agent with all necessary endorsements, free and clear of all Liens
except those in favor of Agent and Lenders;


 


(f)                                    is
excess, obsolete, unsalable, shopworn, damaged or unfit for sale;


 


(g)                                 consists of display items or packing or shipping materials,
manufacturing supplies, work-in-process Inventory or replacement parts;


 


(h)                                 consists of goods which have been returned by the buyer
unless such Inventory is not excess, obsolete, unsalable, shopworn, damaged or
unfit for sale;


 


(i)                                     is
not of a type held for sale in the ordinary course of such Credit Party’s
business;


 


(j)                                     is
not subject to a first priority lien in favor of Agent on behalf of itself and
Lenders, subject to Permitted Encumbrances;


 


(k)                                  as to which any of the representations or warranties in
Section 4(g) of the Security Agreement are untrue;


 


(l)                                     consists of Hazardous Materials or goods that can be
transported or sold only with licenses that are not readily available;


 


(m)                               is not covered by casualty insurance reasonably acceptable
to Agent; or


 


20





















 


(n)                                 is otherwise unacceptable to Agent in its reasonable credit
judgment.


 


1.8                                 Cash Management Systems.  On or prior to the Closing Date, Borrower and
the other Credit Parties will establish and will maintain until the Termination
Date, the cash management systems described in Annex C (the “Cash
Management Systems”).


 


1.9                                 Fees.


 


(a)                                  Borrower
shall pay to GE Capital, individually, the Fees specified in that certain
amended and restated fee letter, dated as of October 20, 2004, by and between
Borrower and GE Capital (as amended, restated, supplemented or otherwise
modified from time to time, the “GE Capital Fee Letter”), at the times
specified for payment therein.


 


(b)                                 As
additional compensation for the Revolving Lenders, Borrower shall pay to Agent,
for the ratable benefit of such Lenders, in arrears, on the first Business Day
of each month prior to the Commitment Termination Date and on the Commitment
Termination Date, a Fee for Borrower’s non-use of available funds in an amount
equal to the Applicable Unused Facility Fee Margin multiplied by the difference
between (x) the Maximum Amount (as it may be reduced from time to time) and (y)
the average for the period of the daily closing balances of the aggregate
Revolving Loan, the Export-Related Loan and the Swing Line Loan outstanding
during the period for which such Fee is due.


 


(c)                                  If
Borrower pays after acceleration or prepays all or any portion of the Term Loan
or prepays the Revolving Loan and reduces or terminates the Revolving Loan
Commitment, whether voluntarily or involuntarily and whether before or after
acceleration of the Obligations, or if any of the Commitments are otherwise
terminated, in either case prior to the first anniversary of the Closing Date,
Borrower shall pay to Agent, for the benefit of Lenders as liquidated damages
and compensation for the costs of being prepared to make funds available
hereunder an amount equal to the Applicable Percentage multiplied by the sum of
(i) the principal amount of the Term Loan paid after acceleration or prepaid,
and (ii) the amount of the reduction of the Revolving Loan Commitment.  As used herein, the term “Applicable
Percentage” shall mean one percent (1.0%). 
The Credit Parties agree that the Applicable Percentage is a reasonable
calculation of Lenders’ lost profits in view of the difficulties and
impracticality of determining actual damages resulting from an early
termination of the Commitments.  Notwithstanding
the foregoing, (i) no prepayment fee shall be payable if the Obligations are
repaid in full with the proceeds of an exit credit facility in which the Agent
acts as agent for the lenders thereunder, and (ii) no prepayment fee shall be
payable by Borrower upon a mandatory prepayment made pursuant to Sections
1.3(b)(ii), 1.3(d) or 1.16(c); provided that Borrower does not
permanently reduce or terminate the Revolving Loan Commitment upon any such
prepayment and, in the case of prepayments made pursuant to Section
1.3(b)(ii), the transaction giving rise to the applicable prepayment is
expressly permitted under Section 6.


 


(d)                                 Borrower
shall pay to Agent, for the ratable benefit of Revolving Lenders, the Letter of
Credit Fee as provided in Annex B.


 


1.10                           Receipt of Payments.  Borrower shall make each payment under this
Agreement not later than 2:00 p.m. (New York time) on the day when due in
immediately


 


21





















 


available
funds in Dollars to the Collection Account. 
For purposes of computing interest and determining Borrowing
Availability and Export-Related Borrowing Availability as of any date, all
payments shall be deemed received on the first Business Day following the
Business Day on which immediately available funds therefor are received in the
Collection Account prior to 2:00 p.m. (New York time).  Payments received after 2:00 p.m. (New York
time) on any Business Day or on a day that is not a Business Day shall be
deemed to have been received on the following Business Day.


 


1.11                           Application and Allocation of Payments.


 


(a)                                  So
long as no Default or Event of Default has occurred and is continuing, (i)
payments consisting of proceeds of Accounts (other than Export-Related
Accounts) received in the ordinary course of business shall be applied, first,
to the Swing Line Loan, second, the Revolving Credit Advances, and third,
to the Export-Related Advances, (ii) payments consisting of proceeds of
Export-Related Accounts received in the ordinary course of business shall be
applied, first, to the Export-Related Advances, second, to the
Swing Line Loan, and third, to the Revolving Credit Advances; (iii)
payments matching specific scheduled payments then due shall be applied to
those scheduled payments; (iv) voluntary prepayments shall be applied as
determined by Borrower, subject to the provisions of Section 1.3(a); and
(v) mandatory prepayments shall be applied as set forth in Sections 1.3(c)
and 1.3(d).  All payments and
prepayments applied to a particular Loan shall be applied ratably to the
portion thereof held by each Lender as determined by its Pro Rata Share.
As to any other payment, and as to all payments made when a Default or Event of
Default has occurred and is continuing or following the Commitment Termination Date,
Borrower hereby irrevocably waives the right to direct the application of any
and all payments received from or on behalf of Borrower, and Borrower hereby
irrevocably agrees that Agent shall have the continuing exclusive right to
apply any and all such payments against the Obligations of Borrower as Agent
may deem advisable notwithstanding any previous entry by Agent in the Loan
Account or any other books and records. 
In the absence of a specific determination by Agent with respect thereto
and except as provided in Section 1.11(b), payments shall be applied to
amounts then due and payable in the following order: (1) to Fees and Agent’s
expenses reimbursable hereunder; (2) to interest on the Swing Line Loan; (3) to
principal payments on the Swing Line Loan; (4) to interest on the other Loans,
ratably in proportion to the interest accrued as to each Loan; (5) to principal
payments on the other Loans and to provide cash collateral for Letter of Credit
Obligations in the manner described in Annex B, ratably to the
aggregate, combined principal balance of the other Loans and outstanding Letter
of Credit Obligations; and (6) to all other Obligations, including expenses of
Lenders to the extent reimbursable under Section 11.3.


 


(b)                                 The
Lenders hereby agree that so long as any of the Loans have been declared to be
immediately due and payable, all proceeds of the Collateral shall be applied first
to Fees and Agent’s expenses reimbursable hereunder; and (i) with respect to
proceeds of Term Loan Priority Collateral, second to interest on the
Term Loan, third to principal payments on the Term Loan, fourth
to all other Obligations of the Term Lenders, including expenses of Term
Lenders to the extent reimbursable under Section 11.3, fifth to
interest on the Swing Line Loan, sixth to principal payments on the
Swing Line Loan, seventh to interest on the other Loans (other than the
Last Out Term Loan), ratably in proportion to the interest accrued as to each
Loan, eighth to principal payments on the other Loans (other than the
Last Out Term Loan) and to


 


22





















 


provide cash collateral for Letter of Credit
Obligations in the manner described in Annex B, ratably to the
aggregate, combined principal balance of the other Loans (other than the Last
Out Term Loan) and outstanding Letter of Credit Obligations, ninth to
all other Obligations of the Revolving Lenders, including expenses of Revolving
Lenders to the extent reimbursable under Section 11.3,  tenth to interest on the Last Out Term
Loan, eleventh to principal payments on the Last Out Term Loan, twelfth
to all other Obligations of the Last Out Term Lenders, including expenses of
Last Out Term Lenders to the extent reimbursable under Section 11.3, and
(ii) (A) with respect to proceeds of Revolving Loan Priority Collateral which
constitutes Export-Related Accounts, second to interest on the
Export-Related Loan, third to principal payments on the Export-Related
Loan, fourth to interest on the Swing Line Loan, fifth to
principal payments on the Swing Line Loan, sixth to interest on the
Revolving Loan, seventh to principal payments on the Revolving Loan and
to provide cash collateral for Letter of Credit Obligations in the manner
described in Annex B, eighth to all other Obligations of the
Revolving Lenders, including expenses of Revolving Lenders to the extent
reimbursable under Section 11.3, ninth to interest on the Term
Loan, tenth to principal payments on the Term Loan, eleventh to
all other Obligations of the Term Lenders, including expenses of Term Lenders
to the extent reimbursable under Section 11.3, twelfth to
interest on the Last Out Term Loan, thirteenth to principal payments on
the Last Out Term Loan, fourteenth to all other Obligations of the Last
Out Term Lenders, including expenses of the Last Out Term Lenders to the extent
reimbursable under Section 11.3, and (B) with respect to proceeds of
Revolving Loan Priority Collateral (other than Export-Related Accounts), second
to interest on the Revolving Loan, third to principal payments on the
Revolving Loan, fourth to interest on the Swing Line Loan, fifth
to principal payments on the Swing Line Loan, sixth to interest on the
Export-Related Loan, seventh to principal payments on the Export-Related
Loan and to provide cash collateral for Letter of Credit Obligations in the
manner described in Annex B, eighth to all other Obligations of
the Revolving Lenders, including expenses of Revolving Lenders to the extent
reimbursable under Section 11.3, ninth to interest on the Term
Loan, tenth to principal payments on the Term Loan, eleventh to
all other Obligations of the Term Lenders, including expenses of Term Lenders
to the extent reimbursable under Section 11.3, twelfth to
interest on the Last Out Term Loan, thirteenth to principal payments on
the Last Out Term Loan, fourteenth to all other Obligations of the Last
Out Term Lenders, including expenses of Last Out Term Lenders to the extent
reimbursable under Section 11.3. 
The provisions of this clause (b) is for
the benefit of the Lenders and Borrower shall have no rights with respect
hereto.  Agent shall use commercially
reasonable efforts to apply, promptly upon receipt, as provided herein, all
payments and proceeds of Collateral which are required to be paid to a Lender
or applied to a Loan under this Agreement.


 


(c)                                  Agent
is authorized to (and at its sole election may) charge to the Revolving Loan
balance on behalf of Borrower and cause to be paid all Fees, expenses, Charges,
costs (including insurance premiums in accordance with Section 5.4(a)),
interest and other Obligations (but not principal on the Revolving Loan), owing
by Borrower under this Agreement or any of the other Loan Documents if and to
the extent Borrower fails to pay promptly any such amounts as and when due,
even if the amount of such charges would exceed Borrowing Availability at such
time.


 


1.12                           Loan Account and Accounting.  Agent shall maintain a loan account (the “Loan
Account”) on its books to record: all Advances, the Term Loan and the Last Out Term Loan, all payments made by Borrower, and all other
debits and credits as provided in this


 


23





















 


Agreement with respect to
the Loans or any other Obligations.  All entries in the Loan Account shall be made
in accordance with Agent’s customary accounting practices as in effect from
time to time. The balance in the Loan Account, as recorded on Agent’s most
recent printout or other written statement, shall, absent manifest error, be
presumptive evidence of the amounts due and owing to Agent and Lenders by
Borrower; provided, that any failure to so record or any error in so
recording shall not limit or otherwise affect Borrower’s duty to pay the
Obligations.  Agent shall render to
Borrower a monthly accounting of transactions with respect to the Loans setting
forth the balance of the Loan Account as to Borrower for the immediately
preceding month.  Unless Borrower
notifies Agent in writing of any objection to any such accounting (specifically
describing the basis for such objection), within thirty (30) days after the
date thereof, each and every such accounting shall (absent manifest error) be
deemed final, binding and conclusive on Borrower in all respects as to all
matters reflected therein.  Only those
items expressly objected to in such notice shall be deemed to be disputed by
Borrower.  Notwithstanding any provision
herein contained to the contrary, any Lender may elect (which election may be
revoked) to dispense with the issuance of Notes to that Lender and may rely on
the Loan Account as evidence of the amount of Obligations from time to time
owing to it.


 


1.13                           Indemnity.


 


(a)                                  Each
Credit Party that is a signatory hereto shall jointly and severally indemnify
and hold harmless each of Agent, Lenders and their respective Affiliates, and
each such Person’s respective officers, directors, employees, attorneys, agents
and representatives (each, an “Indemnified Person”), from and against
any and all suits, actions, proceedings, claims, damages, losses, liabilities
and expenses (including reasonable attorneys’ fees and disbursements and other
out-of-pocket costs of investigation or defense, including those incurred upon
any appeal) that may be instituted or asserted against or incurred by any such
Indemnified Person as the result of credit having been extended, suspended or
terminated under this Agreement and the other Loan Documents and the
administration of such credit, and in connection with or arising out of the
transactions contemplated hereunder and thereunder and any actions or failures
to act in connection therewith, including any and all Environmental
Liabilities, and any and all reasonable out-of-pocket legal costs and expenses
arising out of or incurred in connection with disputes between or among any
parties to any of the Loan Documents (collectively, “Indemnified Liabilities”);
provided, that no such Credit Party shall be liable for any
indemnification to an Indemnified Person to the extent that any such suit,
action, proceeding, claim, damage, loss, liability or expense results from
that  Indemnified Person’s gross
negligence or willful misconduct.  NO
INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO ANY
LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH
PERSON OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY,
FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED
AS A RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER ANY
LOAN DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR
THEREUNDER.


 


(b)                                 To
induce Lenders to provide the LIBOR Rate option on the terms provided herein,
if (i) any LIBOR Loans are repaid in whole or in part prior to the last day of
any applicable LIBOR Period (whether that repayment is made pursuant to any
provision of this


 


24





















 


Agreement or any other Loan Document or occurs as a
result of acceleration, by operation of law or otherwise); (ii) Borrower shall
default in payment when due of the principal amount of or interest on any LIBOR
Loan; (iii) Borrower shall refuse to accept any borrowing of, or shall request
a termination of, any borrowing of, conversion into or continuation of, LIBOR
Loans after Borrower has given notice requesting the same in accordance
herewith; or (iv) Borrower shall fail to make any prepayment of a LIBOR
Loan after Borrower has given a notice thereof in accordance herewith, then
Borrower shall indemnify and hold harmless each Lender from and against all
losses, costs and expenses resulting from or arising from any of the
foregoing.  Such indemnification shall
include any loss (including loss of margin) or expense arising from the
reemployment of funds obtained by it or from fees payable to terminate deposits
from which such funds were obtained.  For
the purpose of calculating amounts payable to a Lender under this subsection,
each Lender shall be deemed to have actually funded its relevant LIBOR Loan
through the purchase of a deposit bearing interest at the LIBOR Rate in an
amount equal to the amount of that LIBOR Loan and having a maturity comparable
to the relevant LIBOR Period; provided, that each Lender may fund each
of its LIBOR Loans in any manner it sees fit, and the foregoing assumption
shall be utilized only for the calculation of amounts payable under this
subsection.  This covenant shall survive
the termination of this Agreement and the payment of the Notes and all other
amounts payable hereunder.  As promptly
as practicable under the circumstances, each Lender shall provide Borrower with
its written calculation of all amounts payable pursuant to this Section
1.13(b), and such calculation shall be binding on the parties hereto unless
Borrower shall object in writing within ten (10) Business Days of receipt
thereof, specifying the basis for such objection in detail.


 


1.14                           Access.  Each
Credit Party that is a party hereto shall, during normal business hours, from
time to time upon one Business Day’s prior notice as frequently as Agent or any
Lender reasonably determines to be appropriate: (a) provide Agent or such
Lender (at such Lender’s own cost and expense), as applicable, and any of its
officers, employees and agents access to its properties, facilities, advisors
and employees (including officers) of each Credit Party and to the Collateral,
(b) permit Agent or such Lender (at such Lender’s own cost and expense), as
applicable, and any of its officers, employees and agents, to inspect, audit
and make extracts from any Credit Party’s books and records, and (c) permit
Agent, and its officers, employees and agents, to inspect, review, evaluate and
make test verifications and counts of the Accounts, Inventory and other
Collateral of any Credit Party.  If a
Default or Event of Default has occurred and is continuing or if access is
necessary to preserve or protect the Collateral as determined by Agent, each
such Credit Party shall provide such access to Agent and to each Lender at all
times and without advance notice.  Furthermore,
so long as any Event of Default has occurred and is continuing, Borrower shall
use commercially reasonable efforts to provide Agent and each Lender with
access to their suppliers and customers. 
Each Credit Party shall make available to Agent and its counsel, as
quickly as is possible under the circumstances, originals or copies of all
books and records that Agent may reasonably request.  Each Credit Party shall deliver any document
or instrument necessary for Agent, as it may from time to time reasonably
request, to obtain records from any service bureau or other Person that
maintains records for such Credit Party, and shall maintain duplicate records
or supporting documentation on media, including computer tapes and discs owned
by such Credit Party.  Agent will give
Lenders at least 5 days’ prior written notice of regularly scheduled
audits.  Representatives of other Lenders
may (at their own cost and expense) accompany Agent’s representatives on
regularly scheduled audits at no charge to Borrower.  Each Lender shall give Agent at least five


 


25





















 


(5) days’ prior written
notice of its intention to exercise access rights under this Section 1.14
and Agent’s representatives may accompany Lender’s representatives in
exercising such access rights.


 


1.15                           Taxes.


 


(a)                                  Any
and all payments by Borrower or any other Credit Party hereunder or under the
Notes or any other Loan Document shall be made, in accordance with this Section
1.15, free and clear of and without deduction for any and all present or future
Taxes.  If Borrower or any other Credit
Party shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder or under the Notes or any other Loan Document, (i) the
sum payable shall be increased as much as shall be necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 1.15) Agent or Lenders, as applicable,
receive an amount equal to the sum they would have received had no such
deductions been made, (ii) Borrower or such other Credit Party shall make
such deductions, and (iii) Borrower or such other Credit Party shall pay
the full amount deducted to the relevant taxing or other authority in
accordance with applicable law.  Within
thirty (30) days after the date of any payment of Taxes, Borrower or such other
Credit Party shall furnish to Agent the original or a certified copy of a
receipt evidencing payment thereof. Except as set forth in Section 1.15(e),
Agent and Lenders shall not be obligated to return or refund any amounts
received pursuant to this Section.


 


(b)                                 Each
Credit Party that is a signatory hereto shall jointly and severally indemnify
and, within ten (10) days of demand therefor, pay Agent and each Lender for the
full amount of Taxes (including any Taxes imposed by any jurisdiction on
amounts payable under this Section 1.15) paid by Agent or such Lender,
as appropriate, and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto, whether or not such Taxes were
correctly or legally asserted.


 


(c)                                  Each
Lender organized under the laws of a jurisdiction outside the United States (a “Foreign
Lender”) as to which payments to be made under this Agreement or under the
Notes are exempt from United States withholding tax under an applicable statute
or tax treaty shall provide to Borrower and Agent prior to becoming a party to
this Agreement a properly completed and executed IRS Form W-8ECI or Form W-8BEN
or other applicable form, certificate or document prescribed by the IRS or the
United States certifying as to such Foreign Lender’s entitlement to a complete
exemption from U.S. withholding taxes (a “Certificate of Exemption”).  Any foreign Person that seeks to become a
Lender under this Agreement shall provide a Certificate of Exemption to
Borrower and Agent prior to becoming a Lender hereunder.  No foreign Person may become a Lender
hereunder if such Person fails to deliver a Certificate of Exemption in advance
of becoming a Lender. In addition, each Foreign Lender shall deliver such forms
upon the obsolescence or invalidity of any form previously delivered by such
Foreign Lender.  Notwithstanding any
other provision of this Section 1.15(c), a Foreign Lender shall not be
required to deliver any form pursuant to this Section 1.15(c) (other
than the form required to be delivered pursuant to the first sentence of this
clause) that such Foreign Lender is not legally able to deliver.


 


26





















 


(d)                                 The
Borrower shall not be required to indemnify any Foreign Lender, or to pay any
additional amounts to any Foreign Lender, in respect of United States federal,
state or local withholding Tax pursuant to paragraph (a) or (b)
above to the extent that (i) the obligation to withhold amounts with respect to
United States federal, state or local withholding Tax existed on the date such
Foreign Lender became a party to this Agreement (or, in the case of a
transferee, on the effective date of the Assignment Agreement pursuant to which
such transferee becomes a Lender) or, with respect to payments to a new lending
office, the date such Foreign Lender designated such new lending office; provided,
however, that this clause (i) shall not apply to any Lender that becomes
a Lender or new lending office that becomes a new lending office as a result of
an assignment or designation made at the request of the Borrower; and provided,
further, that this clause (i) shall not apply to the extent that the
indemnity payment or additional amounts any Lender, the Agent or any Lender
through a new lending office would be entitled to receive (without regard to
this clause (i)) do not exceed the indemnity payment or additional amounts that
the person making the assignment or transfer to such Lender, the Agent or such
Lender making the designation of such new lending office would have been
entitled to receive in the absence of such assignment, transfer or designation
or (ii) the obligation to pay such additional amounts or such indemnity
payments would not have arisen but for a failure by such Foreign Lender to
comply with the provisions of 1.15(c) above.


 


(e)                                  If
any of Agent or any Lender, as applicable, determines, in its sole discretion,
that it has received a refund of any Taxes as to which it has been indemnified
by the Borrower or a Credit Party or with respect to which the Borrower or a
Credit Party has paid additional amounts pursuant to this Section 1.15,
it shall pay over such refund to the Borrower (but only to the extent of
indemnity payments made, or additional amounts paid, by the Borrower or Credit
Party under this Section 1.15 with respect to the Taxes giving rise to
such refund), net of all Charges imposed on such refund, out-of-pocket expenses
of such Agent or Lender and without interest (other than any interest paid by
the relevant Governmental Authority with respect to such refund).


 


1.16                           Capital Adequacy; Increased Costs; Illegality.


 


(a)                                  If
any Lender shall have determined that any law, treaty, governmental (or quasi-governmental)
rule, regulation, guideline or order regarding capital adequacy, reserve
requirements or similar requirements or compliance by any Lender with any
request or directive regarding capital adequacy, reserve requirements or
similar requirements (whether or not having the force of law), in each case,
adopted after the Closing Date, from any central bank or other Governmental
Authority increases or would have the effect of increasing the amount of
capital, reserves or other funds required to be maintained by such Lender and
thereby reducing the rate of return on such Lender’s capital as a consequence
of its obligations hereunder, then Borrower shall from time to time upon demand
by such Lender (with a copy of such demand to Agent) pay to Agent, for the
account of such Lender, additional amounts sufficient to compensate such Lender
for such reduction.  A certificate in
reasonable detail as to the amount of that reduction and showing the basis of
the computation thereof submitted by such Lender to Borrower and to Agent
shall, absent manifest error, be final, conclusive and binding for all
purposes.


 


(b)                                 If,
due to either (i) the introduction of or any change in any law or
regulation (or any change in the interpretation thereof) or (ii) the
compliance with any guideline


 


27





















 


or request from any central bank or other Governmental
Authority (whether or not having the force of law), in each case adopted after
the Closing Date, there shall be any increase in the cost to any Lender of agreeing
to make or making, funding or maintaining any Loan, then Borrower shall from
time to time, upon demand by such Lender (with a copy of such demand to Agent),
pay to Agent for the account of such Lender additional amounts sufficient to
compensate such Lender for such increased cost. 
A certificate in reasonable detail as to the amount of such increased
cost, submitted to Borrower and to Agent by such Lender, shall be conclusive
and binding on Borrower for all purposes, absent manifest error.  Each Lender agrees that, as promptly as
practicable after it becomes aware of any circumstances referred to above which
would result in any such increased cost, the affected Lender shall, to the
extent not inconsistent with such Lender’s internal policies of general
application, use reasonable commercial efforts to change its lending office or
otherwise minimize costs and expenses incurred by it and payable to it by
Borrower pursuant to this Section 1.16(b).


 


(c)                                  Notwithstanding
anything to the contrary contained herein, if the introduction of or any change
in any law or regulation (or any change in the interpretation thereof) shall
make it unlawful, or any central bank or other Governmental Authority shall
assert that it is unlawful, for any Lender to agree to make or to make or to
continue to fund or maintain any LIBOR Loan, then, unless that Lender is able
to make or to continue to fund or to maintain such LIBOR Loan at another branch
or office of that Lender without, in that Lender’s opinion, adversely affecting
it or its Loans or the income obtained therefrom, on notice thereof and demand
therefor by such Lender to Borrower through Agent, (i) the obligation of
such Lender to agree to make or to make or to continue to fund or maintain
LIBOR Loans shall terminate and (ii) Borrower shall forthwith prepay in
full all outstanding LIBOR Loans owing by Borrower to such Lender, together
with interest accrued thereon, unless Borrower, within five (5) Business Days
after the delivery of such notice and demand, converts all LIBOR Loans into
Index Rate Loans.


 


(d)                                 Within
fifteen (15) days after receipt by Borrower of written notice and demand from
any Lender (an “Affected Lender”) for payment of additional amounts or
increased costs as provided in Sections 1.15(a), 1.16(a) or 1.16(b), or
of its inability to fund as provided in Section 1.16(c), Borrower may,
at its option, notify Agent and such Affected Lender of its intention to
replace the Affected Lender.  So long as
no Default or Event of Default has occurred and is continuing, Borrower, with
the consent of Agent (which consent shall not be unreasonably withheld or
delayed with respect to a Qualified Assignee), may obtain, at Borrower’s
expense, a replacement Lender (“Replacement Lender”) for the Affected
Lender.  If Borrower obtains a
Replacement Lender within ninety (90) days following notice of its intention to
do so, the Affected Lender must sell and assign its Loans and Commitments to
such Replacement Lender for an amount equal to the principal balance of all
Loans held by the Affected Lender and all accrued interest and Fees with
respect thereto through the date of such sale; provided, that Borrower
shall have reimbursed such Affected Lender for the additional amounts or
increased costs that it is entitled to receive under this Agreement through the
date of such sale and assignment. 
Notwithstanding the foregoing, Borrower shall not have the right to
obtain a Replacement Lender if the Affected Lender rescinds its demand for
increased costs or additional amounts within fifteen (15) days following its
receipt of Borrower’s notice of intention to replace such Affected Lender.  Furthermore, if Borrower gives a notice of
intention to replace and does not so replace such Affected Lender within ninety
(90) days thereafter, Borrower’s rights under


 


28





















 


this Section 1.16(d) shall terminate and
Borrower shall promptly pay all increased costs or additional amounts demanded
by such Affected Lender pursuant to Sections 1.15(a), 1.16(a) and 1.16(b).


 


1.17                           Single Loan. 
All Loans to Borrower and all of the other Obligations of Borrower
arising under this Agreement and the other Loan Documents shall constitute one
general obligation of Borrower secured, until the Termination Date, by all of
the Collateral.


 


1.18                           Super-Priority Nature of Obligations and Lenders’
Liens.


 


(a)                                  The
priority of Lenders’ Liens on the Collateral owned by the Borrower and the
Guarantor shall be set forth in the Interim Order, the Final Order, the
Canadian Interim Order and the Canadian Final Order.


 


(b)                                 All
Obligations shall constitute administrative expenses of Borrower and, where
applicable, any Credit Party in their respective Chapter 11 Cases, with
administrative priority and senior secured status under Sections 364(c) and
364(d) of the Bankruptcy Code.  Subject
to the Carve-Out Expenses up to the Carve-Out Amount, such administrative claim
shall have priority over all other costs and expenses of the kinds specified
in, or ordered pursuant to, Sections 105, 326, 330, 331, 503(b), 507(a), 507(b)
or 726 of the Bankruptcy Code and shall at all times be senior to the rights of
Borrower or any Credit Party, Borrower’s or any Credit Parties’ estate, and any
successor trustee or estate representative in their Chapter 11 Cases or any
subsequent proceeding or case under the Bankruptcy Code.  The liens and security interests granted to
Lenders on the Collateral owned by the Borrower and the other Credit Parties,
and the priorities accorded to the Obligations shall have the priority and
senior secured status afforded by Sections 364(c) and 364(d)(1) of the
Bankruptcy Code (all as more fully set forth in the Interim Order, Final Order,
Canadian Interim Order and Canadian Final Order) senior to all claims and
interests other than Permitted Encumbrances and the Carve-Out Expenses up to
the Carve-Out Amount.


 


(c)                                  Lenders’
Liens on the Collateral owned by the Borrower or the other Credit Parties
filing a Chapter 11 Case and the Lenders’ administrative claim under Sections
364(c)(1) and 364(d) of the Bankruptcy Code afforded the Obligations shall also
have priority over any claims arising under Section 506(c) of the Bankruptcy
Code subject and subordinate only to the following (hereafter referred to as
the “Carve-Out Expenses”): fees and disbursements incurred and allowed
on and after the Petition Date by professionals retained by the Borrower or the
other Credit Parties filing a Chapter 11 Case, the Committee (within the
meaning of clause (a) of the definition thereof) and any statutorily mandated
costs and fees of the U.S. Trustee with respect to the Chapter 11 Cases, up to
a maximum unpaid aggregate amount not to exceed $2,000,000 (such dollar amount
being referred to herein as the “Carve-Out Amount”) (determined without
regard to fees and expenses which may be awarded and paid on an interim basis
or paid pursuant to procedures for the payment of fees and expenses of
professionals approved by the Bankruptcy Court after notice to the Agent and a
hearing or any Prepetition retainer paid to Borrower’s counsel, any other
Credit Party filing a Chapter 11 Case’s counsel or the Committees’ counsel (as “Committee”
is defined in clause (a) of the definition thereof) in connection with a
Chapter 11 Case), provided, that the Carve-Out Expenses shall not include
any other claims that are or may be senior to or pari passu with any of the
Carve-Out


 


29





















 


Expenses
or any professional fees and expenses of a Chapter 7 trustee and, provided,
further, that Carve-Out Expenses shall not include any fees or
disbursements (A) arising after the conversion of any Chapter 11 Case to a case
under Chapter 7 of the Bankruptcy Code or (B) related to the investigation of,
preparation for, or commencement or prosecution of, any claims or proceedings
against (i) the Agent or the Lenders or their claims or security interests in
or Liens on, the Collateral whether under this Agreement or any other Loan
Document. and (ii) any agent or lender under the
Prepetition Loan Agreement or their claims or security interests in connection
with the Prepetition Loan Agreement or any of the loan documents or instruments
entered into in connection therewith. Except as set forth herein or in the
Final Order, no other claim having a priority superior or pari passu to that
granted to Lenders by the Final Order shall be granted or approved while any
Obligations under this Agreement remain outstanding.


 


1.19                           Payment of Obligations.  Subject to the provisions of the Interim
Order and the Final Order, upon the maturity (whether by acceleration or
otherwise) of any of the Obligations under this Agreement or any of the other
Loan Documents, Lenders shall be entitled to immediate payment of such
Obligations without further application to or order of the Bankruptcy Court.


 


1.20                           No Discharge; Survival of Claims.  Borrower agrees that (a) the Obligations
hereunder shall not be discharged by the entry of an order confirming a plan of
reorganization in any Chapter 11 Case (and Borrower pursuant to Section
1141(d)(4) of the Bankruptcy Code, hereby waives any such discharge) and (b)
the super-priority administrative claim granted to Agent and Lenders pursuant
to the Interim Order and Final Order and described in Section 1.18, the
Liens granted to Agent pursuant to the Interim Order and Final Order and
described in Section 1.18 and the priority and the Liens set forth in
the Canadian Interim Order and the Canadian Final Order shall not be affected
in any manner by the entry of an order confirming a plan of reorganization in
any Chapter 11 Case.


 


1.21                           Release.  Borrower hereby acknowledges effective upon
entry of the Final Order, that neither Borrower nor any of its Subsidiaries
have any defense, counterclaim, offset, recoupment, cross-complaint, claim or
demand of any kind or nature whatsoever that can be asserted to reduce or
eliminate all of any part of the Borrower’s or its Subsidiaries’ liability to
repay Agent or any Lender as provided in this Agreement or to seek affirmative
relief or damages of any kind or nature from Agent or any Lender.  Borrower and the other Credit Parties filing
a Chapter 11 Case, in their own right and with respect to the Borrower and the
other Credit Parties filing a Chapter 11 Case, on behalf of their bankruptcy
estates, and on behalf of all such parties, successors, assigns, Subsidiaries
and any Affiliates and any Person acting for and on behalf of, or claiming
through them, (collectively, the “Releasing Parties”), hereby fully,
finally and forever release and discharge Agent and Lenders and all of Agent’s
and Lenders’ past and present officers, directors, servants, agents, attorneys,
assigns, heirs, parents, subsidiaries, and each Person acting for or on behalf
of any of them (collectively, the “Released Parties”) of and from any
and all past, present and future actions, causes of action, demands, suits,
claims, liabilities, Liens, lawsuits, adverse consequences, amounts paid in
settlement, costs, damages, debts, deficiencies, diminution in value,
disbursements, expenses, losses and other obligations of any kind or nature
whatsoever, whether in law, equity or otherwise (including, without limitation,
those arising under Sections 541 through 550 of the Bankruptcy Code and
interest or other carrying costs, penalties, legal, accounting and other professional
fees and expenses, and


 


30





















 


incidental, consequential and punitive damages payable
to third parties, but excluding those caused by the Released Parties’ gross
negligence, willful misconduct or criminal misconduct), whether known or
unknown, fixed or contingent, direct, indirect, or derivative, asserted or
unasserted, foreseen or unforeseen, suspected or unsuspected, now existing,
heretofore existing or which may heretofore accrue against any of the Released
Parties, whether held in a personal or representative capacity, and which are
based on any act, fact, event or omission or other matter, cause or thing
occurring at or from any time prior to and including the date hereof in any
way, directly or indirectly arising out of, connected with or relating to this
Agreement, the Interim Order, the Final Order, the Canadian Interim Order, the
Canadian Final Order and the transactions contemplated hereby, and all other
agreements, certificates, instruments and other documents and statements
(whether written or oral) related to any of the foregoing.


 


1.22                           Waiver of any Primary Rights.  Upon the Closing Date, and on behalf of
themselves and their estates, and for so long as any Obligation shall be
outstanding, Borrower and each other Credit Party filing a Chapter 11 Case
hereby irrevocably waives any right, pursuant to Sections 364(c) or 364(d) of
the Bankruptcy Code or otherwise, to grant any Lien of equal or greater
priority than the Lien securing the Obligations, or to approve a claim of equal
or greater priority than the Obligations.


 


2.                                      CONDITIONS PRECEDENT


 


2.1                                 Conditions to the Initial Loans.  No Lender shall be obligated to make any Loan
or incur any Letter of Credit Obligations on the Closing Date, or to take,
fulfill, or perform any other action hereunder, until the following conditions
have been satisfied or provided for in a manner satisfactory to Agent, or
waived in writing by Agent and Lenders:


 


(a)                                  Credit
Agreement; Loan Documents.  This
Agreement or counterparts hereof shall have been duly executed by, and
delivered to, Borrower, each other Credit Party, Agent and Lenders; and Agent
shall have received such documents, instruments, agreements and legal opinions
as Agent shall reasonably request in connection with the transactions
contemplated by this Agreement and the other Loan Documents, including all
those listed in the Closing Checklist attached hereto as Annex D, each
in form and substance reasonably satisfactory to Agent.


 


(b)                                 Approvals.  Agent shall have received (i) satisfactory
evidence that the Credit Parties have obtained all required consents and
approvals of all Persons including all requisite Governmental Authorities, to
the execution, delivery and performance of this Agreement and the other Loan
Documents and the consummation of the Related Transactions or (ii) an officer’s
certificate in form and substance reasonably satisfactory to Agent affirming
that no such consents or approvals are required.


 


(c)                                  Payment
of Fees. Borrower shall have paid the Fees required to be paid on the
Closing Date in the respective amounts specified in Section 1.9
(including the Fees specified in the GE Capital Fee Letter), and shall have
reimbursed Agent for all out-of-pocket fees, costs and expenses of closing (including
all reasonable attorneys’ fees) presented as of the Closing Date.


 


31





















 


(d)                                 Due
Diligence.  Agent shall have
completed its business and legal due diligence, including a roll forward of its
previous Collateral audit, with results reasonably satisfactory to Agent.


 


(e)                                  Consummation
of Related Transactions.  Agent shall
have received fully executed copies of the Related Transactions Documents, each
of which shall be in form and substance reasonably satisfactory to Agent and
its counsel.  The Related Transactions
shall have been consummated in accordance with the terms of the Related
Transactions Documents.


 


(f)                                    Entry
of Interim Order and Issuance of Canadian Interim Order. Entry by the
Bankruptcy Court of the Interim Order and, by no later than two (2) days after
the entry of the Interim Order, issuance of the Canadian Interim Order,
approving the transactions contemplated hereby and granting a first priority
perfected security interest in the Collateral subject only to Permitted
Encumbrances and the Carve-Out Expenses up to the Carve-Out Amount (it being
understood that the entry of the Canadian Interim Order shall not be a
condition precedent to any Lender’s obligation to make any Loan or incur any
Letter of Credit Obligations on the Closing Date).


 


(g)                                 Corporate
Structure. Agent shall be reasonably satisfied with the corporate
structure, capital structure, debt instruments, material contracts, and
governing documents of Borrower and its Subsidiaries, and the tax effects
resulting from the commencement of the Chapter 11 Cases and the credit facility
evidenced by this Agreement.


 


(h)                                 Cash
Management System. Borrower shall have established the Cash Management
System described in Annex C and Borrower shall have obtained appropriate
court orders approving such system, all as reasonably acceptable to Agent; and


 


(i)                                     First
Day Orders.  The “first day” orders
described on Disclosure Schedule (2.1) in form and substance reasonably
satisfactory to Agent shall have been entered in the Chapter 11 Cases.


 


2.2                                 Further Conditions to Each Loan.  Except as otherwise expressly provided
herein, no Lender shall be obligated to fund any Advance, convert or continue
any Loan as a LIBOR Loan or incur any Letter of Credit Obligation, if, as of
the date thereof:


 


(a)                                  the
Advance, Loan or Letter of Credit Obligation requested would cause the
aggregate outstanding amount of the Loans and/or Letter of Credit Obligations
to exceed the amount then authorized by the Interim Order or the Final Order,
as the case may be, or any order modifying or vacating such order shall have
been entered, or any appeal of such order shall have been timely filed;


 


(b)                                 any
representation or warranty by any Credit Party contained herein or in any other
Loan Document is untrue or incorrect as of such date, except to the extent that
such representation or warranty expressly relates to an earlier date and except
for changes therein expressly permitted or expressly contemplated by this
Agreement, and Agent or Requisite Revolving Lenders (or (i) Requisite Term
Lenders, with respect to the making of any Term Loan or the conversion or
continuation of any Term Loan as a LIBOR Loan or (ii) Requisite Last Out Term
Lenders, with respect to the making of any Last Out Term Loan or the conversion
or


 


32





















 


continuation of any Last Out Term Loan as a LIBOR
Loan)  have determined not to make such
Advance, convert or continue any Loan as LIBOR Loan or incur such Letter of
Credit Obligation as a result of the fact that such warranty or representation
is untrue or incorrect;


 


(c)                                  any
event or circumstance having a Material Adverse Effect has occurred since the
date hereof as determined by the Requisite Revolving Lenders and Agent or Requisite
Revolving Lenders (or (i) Requisite Term Lenders, with respect to the making of
any Term Loan or the conversion or continuation of any Term Loan as a LIBOR
Loan or (ii) Requisite Last Out Term Lenders, with respect to the making of any
Last Out Term Loan or the conversion or continuation of any Last Out Term Loan
as a LIBOR Loan) have determined not to make such Advance, convert or continue
any Loan as a LIBOR Loan or incur such Letter of Credit Obligation as a result
of the fact that such event or circumstance has occurred;


 


(d)                                 any
Default or Event of Default has occurred and is continuing or would result
after giving effect to any Advance (or the incurrence of any Letter of Credit
Obligation), and Agent or Requisite Revolving Lenders (or (i) Requisite Term
Lenders, with respect to the making of any Term Loan or the conversion or
continuation of any Term Loan as a LIBOR Loan or (ii) Requisite Last Out Term
Lenders, with respect to the making of any Last Out Term Loan or the conversion
or continuation of any Last Out Term Loan as a LIBOR Loan) shall have
determined not to make any Advance, convert or continue any Loan as a LIBOR
Loan or incur any Letter of Credit Obligation as a result of that Default or
Event of Default;


 


(e)                                  after
giving effect to any Advance (or the incurrence of any Letter of Credit
Obligations), (i) the outstanding principal amount of the aggregate Revolving
Loan would exceed the Maximum Amount less the then outstanding principal amount
of the Swing Line Loan and the Export-Related Loan, (ii) the outstanding
principal amount of the aggregate Revolving Credit Advances would exceed the
Borrowing Base less the then outstanding principal amount of the Swing Line
Loan, or (iii) the outstanding principal amount of the Export-Related Loan would
exceed the lesser of the Export-Related Borrowing Availability and the Export-Related
Loan Commitment; or


 


(f)                                    (i)
(x) in the case of Advances, Loans or Letters of Credit made or issued prior to
the date that is twenty-five (25) days after the Petition Date, the Interim
Order or the Canadian Interim Order shall not be in full force and effect and,
if the Interim Order or the Canadian Interim Order has expired prior to such
date, the Final Order and the Canadian Final Order shall not have been entered
prior to or immediately following such expiration, or (y) in the case of
Advances, Loans or Letters of Credit made or issued from and after the date
that is twenty-five (25) days after the Petition Date, the Bankruptcy Court
shall not have entered the Final Order, (iii) the Interim Order, the Canadian
Interim Order, the Final Order or the Canadian Final Order, as the case may be,
shall have been vacated, reversed, modified or amended without Lenders’
consent, (iv) a motion for reconsideration of any such order shall have been
timely filed or (v) an appeal of any such order shall have been timely filed
and if such order is the subject of a pending appeal in any respect, either the
making of any Loans, the granting of super-priority claim status with respect to
the Obligations, the granting of the Liens described herein, or the performance
by the Borrower or any Credit Party of any of their obligations under this
Agreement or any other Loan Document or under any other instrument or agreement
referred to in this Agreement shall be the subject of a presently effective
stay pending appeal.


 


33





















 


Without limiting the foregoing, no Lender shall be
obligated to fund any Advance, convert or continue any Loan as a LIBOR Loan or
incur any Letter of Credit Obligation, if as of the date of entry of the Final
Order, Borrower shall have Borrowing Availability of less than (i) $22,500,000
in the event that the unfunded portion of the Last Out Term Loan is advanced by
such date following satisfaction of the conditions set forth in Section 2.4,
or (ii) $7,500,000 in the event that the unfunded portion of the Last Out Term
Loan is not advanced by such date.


 


The request and acceptance by Borrower of the proceeds
of any Advance, the incurrence of any Letter of Credit Obligations or the
conversion or continuation of any Loan into, or as, a LIBOR Loan shall be
deemed to constitute, as of the date thereof, (i) a representation and warranty
by Borrower that the conditions in this Section 2.2 have been satisfied
and (ii) a reaffirmation by Borrower of the granting and continuance of Agent’s
Liens, on behalf of itself and Lenders, pursuant to the Collateral Documents.


 


2.3                                 Further Conditions to Each Export-Related
Advance.  Except as otherwise expressly
provided herein, no Lender shall be obligated to fund any Export-Related
Advance, if, as of the date thereof:


 


(a)                                  Agent
has not received satisfactory evidence that Borrower has obtained all consents
and approvals from Ex-Im Bank;


 


(b)                                 Agent
has not received duly executed copies of all Ex-Im Bank Documents, each in form
and substance satisfactory to Agent and signed by each party thereto;


 


(c)                                  Borrower
has not duly executed any necessary application forms required by Ex-Im Bank;


 


(d)                                 any Ex-Im Bank Document is not in full force and effect; or


 


(e)                                  with
respect to any Export-Related Advance requested after the date of any scheduled
termination of any Ex-Im Bank Guarantee, Agent has not received written notice
at least ninety (90) days prior to such scheduled termination (or such lesser
time as may be agreed to by Agent) that the Ex-Im Bank Guarantee has been
renewed.


 


The request and acceptance by Borrower of the proceeds
of any Export-Related Advance as of the date thereof, (i) a representation and warranty
by Borrower that the conditions in this Section 2.3 have been satisfied
and (ii) a reaffirmation by Borrower of the granting and continuance of Agent’s
Liens, on behalf of itself and Lenders, pursuant to the Collateral Documents.


 


2.4                                 Further Conditions to Funding of Last Out Term
Loan.  No Lender shall be obligated
to advance any portion of the Last Out Term Loan in an aggregate amount equal
to $15,000,000 unless and until Agent and GECMG shall have syndicated such
portion of the Last Out Term Loan to the Agent’s satisfaction in its sole
discretion.


 


34





















 


3.                                      REPRESENTATIONS AND WARRANTIES


 


To
induce Lenders to make the Loans and to incur Letter of Credit Obligations, the
Credit Parties executing this Agreement, jointly and severally, make the
following representations and warranties to Agent and each Lender with respect
to all Credit Parties, each and all of which shall survive the execution and
delivery of this Agreement.


 


3.1                                 Corporate Existence; Compliance with Law.  Each Credit Party (a) is a corporation,
limited liability company or limited partnership duly organized, validly
existing and in good standing under the laws of its respective jurisdiction of
incorporation or organization set forth in Disclosure Schedule (3.1);
(b) is duly qualified to conduct business and is in good standing in each other
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification, except where the failure to be so qualified
would not result in exposure to losses, damages or liabilities in excess of
$250,000; (c) subject to the entry of the Interim Order (or the Final Order,
when applicable) by the Bankruptcy Court, has the requisite power and authority
and the legal right to own, pledge, mortgage or otherwise encumber and operate
its properties, to lease the property it operates under lease and to conduct
its business as now, heretofore and proposed to be conducted; (d) subject to
specific representations regarding Environmental Laws, has all licenses,
permits, consents or approvals from or by, and has made all filings with, and
has given all notices to, all Governmental Authorities having jurisdiction, to
the extent required for such ownership, operation and conduct, except where the
failure to have such licenses, permits, consents or approvals, make such
filings or give such notices, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect; (e) is in compliance
with its charter and bylaws or partnership or operating agreement, as
applicable; and (f) subject to specific representations set forth herein
regarding ERISA, Environmental Laws, tax and other laws, is in compliance with
all applicable provisions of law, except where the failure to comply,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.


 


3.2                                 Executive Offices, Collateral Locations, FEIN.  As of the Closing Date, the current location
of each Credit Party’s chief executive office and the processor, toller or toll
converter locations, warehouses, consignment, and other premises at which any
Collateral is located are set forth in Disclosure Schedule (3.2).  In addition, Disclosure Schedule (3.2)
lists the federal employer identification number of each Credit Party.


 


3.3                                 Corporate Power, Authorization, Enforceable
Obligations.  Upon the entry by the
Bankruptcy Court of the Interim Order (or the Final Order, when applicable) the
execution, delivery and performance by each Credit Party of the Loan Documents
to which it is a party and the creation of all Liens provided for therein: (a)
are within such Person’s power; (b) have been duly authorized by all necessary
corporate, limited liability company or limited partnership action; (c) do not
contravene any provision of such Person’s charter, bylaws or partnership or
operating agreement as applicable; (d) do not violate any applicable law or
regulation, or any applicable order or decree of any court of competent
jurisdiction or Governmental Authority; (e) do not conflict with or result in
the breach or termination of, constitute a default under or accelerate or
permit the acceleration of any performance required by, any indenture,
mortgage, deed of trust, lease, agreement or other instrument to which such
Person is a party or by which such Person or any of its property is bound; (f)
do not result in the creation or imposition of any Lien upon any of the
property of such Person other than those in favor of Agent, on behalf of itself
and Lenders, pursuant to the Loan Documents; and (g) do not


 


35





















 


require
the consent or approval of any Governmental Authority or any other Person,
except those referred to in Section 2.1(c), all of which will have been
duly obtained, made or complied with prior to the Closing Date.  Each of the Loan Documents shall be duly
executed and delivered by each Credit Party that is a party thereto and subject
to the entry of the Interim Order and the Final Order, each such Loan Document
shall constitute a legal, valid and binding obligation of such Credit Party
enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other laws relative to or affecting the
enforcement of creditors’ rights generally in effect from time to time.


 


3.4                                 Financial Statements, Projections and Net Cash
Flow Forecast.  Except for the
Projections and the Net Cash Flow Forecast, all Financial Statements concerning
Borrower and its Subsidiaries that are referred to below have been prepared in
accordance with GAAP consistently applied throughout the periods covered
(except as disclosed therein and except, with respect to unaudited Financial Statements,
for the absence of footnotes and normal year-end audit adjustments) and present
fairly in all material respects the financial position of the Persons covered
thereby as at the dates thereof and the results of their operations and cash
flows for the periods then ended.


 


(a)                                  Financial Statements.  The following Financial Statements attached
hereto as Disclosure Schedule (3.4(a)) have been delivered on the date
hereof:


 


(i)                                     The
audited consolidated balance sheets at September 30, 2002 and September 30,
2003 and the related statements of income and cash flows of Borrower and its
Subsidiaries for the Fiscal Years then ended, certified by Deloitte and Touche,
LLP.


 


(ii)                                  The
unaudited balance sheet at October 31, 2004 and the related statement(s) of
income and cash flows of Borrower and its Subsidiaries for the one-month period
then ended.


 


(iii)                               The
unaudited balance sheet at September 30, 2004 and the related statement(s) of
income and cash flows of Borrower and its Subsidiaries for the Fiscal Year then
ended.


 


(b)                                 Projections. 
The Projections delivered on the date hereof have been prepared by
Borrower in light of the past operations of its businesses, but including
future payments of known contingent liabilities, and reflect projections for
the three-year period beginning on October 1, 2004 on a month-by-month basis
for the first year and on a year-by-year basis thereafter.  The Projections are based upon estimates and
assumptions stated therein, all of which Borrower believes to be reasonable and
fair in light of current conditions and current facts known to Borrower and, as
of the Closing Date, reflect Borrower’s good faith and reasonable estimates of
the future financial performance of Borrower and of the other information
projected therein for the period set forth therein, it being understood by the
Lenders that such Projections relate to future events and not to present facts,
and that actual results during the period covered therein may differ from such
Projections by a material amount.


 


36





















 


(c)                                  Net Cash Flow Forecast.  The Net Cash Flow Forecast delivered on the
date hereof and attached hereto as Disclosure Schedule (3.4(c)) has been
prepared by Borrower in light of the past operations of its businesses, but
including future payments of known contingent liabilities, and reflects
Borrower’s net cash flow forecast for the year period beginning on the Closing
Date on a month-by-month basis and ending on the first anniversary of the
Closing Date.  The Net Cash Flow Forecast
is based upon estimates and assumptions which Borrower believes to be
reasonable and fair in light of current conditions and current facts known to
Borrower as of the Closing Date, and reflects Borrower’s good faith and
reasonable estimates of the future financial performance of Borrower, it being
understood by the Lenders that the Net Cash Flow Forecast relates to future
events and not to present facts, and that actual results during the period
covered therein may differ from the Net Cash Flow Forecast by a material
amount.


 


3.5                                 Material Adverse Effect.  Between June 30, 2004 and the Closing Date:
(a) no Credit Party has incurred any obligations, contingent or noncontingent
liabilities, liabilities for Charges, long-term leases or unusual forward or
long-term commitments that are not reflected in the Pro Forma and that, alone
or in the aggregate, could reasonably be expected to have a Material Adverse
Effect, (b) no contract, lease or other agreement or instrument has been
entered into by any Credit Party or has become binding upon any Credit Party’s
assets and no law or regulation applicable to any Credit Party has been adopted
that has had or could reasonably be expected to have a Material Adverse Effect,
and (c) other than in connection with the commencement of the Chapter 11 Cases
or as set forth in Disclosure Schedule (3.5), no Credit Party is in
default and to Borrower’s knowledge no third party is in default under any
material contract, lease or other agreement or instrument, that alone or in the
aggregate could reasonably be expected to have a Material Adverse Effect.  Between June 30,
2004 and the Closing Date no event has occurred, that alone or together with
other events, could reasonably be expected to have a Material Adverse Effect
other in connection with the commencement of the Chapter 11 Cases or as set
forth in Disclosure Schedule (3.5).


 


3.6                                 Ownership of Property; Liens.  As of the Closing Date, the real estate (“Real
Estate”) listed in Disclosure Schedule (3.6) constitutes all of the
real property owned, leased, subleased, or used by any Credit Party.  Each Credit Party owns good and marketable
fee simple title to all of its owned Real Estate, and valid and marketable
leasehold interests in all of its leased Real Estate, all as described on Disclosure
Schedule (3.6), and copies of all such leases or a summary of terms thereof
reasonably satisfactory to Agent have been delivered to Agent.  Disclosure Schedule (3.6) further
describes any Real Estate with respect to which any Credit Party is a lessor,
sublessor or assignor as of the Closing Date. 
Each Credit Party also has good and marketable title to, or valid
leasehold interests in, all of its personal property and assets.  As of the Closing Date, none of the
properties and assets of any Credit Party are subject to any Liens other than
Permitted Encumbrances, and there are no facts, circumstances or conditions
known to any Credit Party that may result in any Liens (including Liens arising
under Environmental Laws) other than Permitted Encumbrances.  Each Credit Party has received all deeds,
assignments, waivers, consents, nondisturbance and attornment or similar
agreements, bills of sale and other documents, and has duly effected all
recordings, filings and other actions necessary to establish, protect and
perfect such Credit Party’s right, title and interest in and to all such Real
Estate and other properties and assets.  Disclosure
Schedule (3.6) also describes any purchase options, rights of first refusal
or other similar contractual rights pertaining to any Real


 


37





















 


Estate.  As of the Closing Date, no portion of any
Credit Party’s Real Estate has suffered any material damage by fire or other
casualty loss that has not heretofore been repaired and restored in all
material respects to its original condition or otherwise remedied.  As of the Closing Date, all material permits
required to have been issued or appropriate to enable the Real Estate to be
lawfully occupied and used for all of the purposes for which it is currently
occupied and used have been lawfully issued and are in full force and effect.


 


3.7                                 Labor Matters. 
As of the Closing Date (a) no strikes or other material labor disputes
against any Credit Party are pending or, to any Credit Party’s knowledge,
threatened; (b) hours worked by and payment made to employees of each Credit
Party comply in all material respects with the Fair Labor Standards Act and
each other federal, state, local or foreign law applicable to such matters; (c)
all payments due from any Credit Party for employee health and welfare
insurance have been paid or accrued as a liability on the books of such Credit
Party; (d) except as set forth in Disclosure Schedule (3.7), no Credit
Party is a party to or bound by any collective bargaining agreement, management
agreement, consulting agreement, employment agreement, bonus, restricted stock,
stock option, or stock appreciation plan or agreement or any similar plan,
agreement or arrangement (and true and complete copies of any agreements
described on Disclosure Schedule (3.7) have been delivered to Agent);
(e) there is no organizing activity involving any Credit Party pending or, to
any Credit Party’s knowledge, threatened by any labor union or group of
employees; (f) there are no representation proceedings pending or, to any
Credit Party’s knowledge, threatened with the National Labor Relations Board,
and no labor organization or group of employees of any Credit Party has made a
pending demand for recognition; and (g) except as set forth in Disclosure
Schedule (3.7), there are no material complaints or charges against any
Credit Party pending or, to the knowledge of any Credit Party, threatened to be
filed with any Governmental Authority or arbitrator based on, arising out of,
in connection with, or otherwise relating to the employment or termination of
employment by any Credit Party of any individual.


 


3.8                                 Ventures, Subsidiaries and Affiliates; Outstanding
Stock and Indebtedness.  Except as
set forth in Disclosure Schedule (3.8), as of the Closing Date, no
Credit Party has any Subsidiaries, is engaged in any joint venture or
partnership with any other Person, or is an Affiliate of any other Person.  All of the issued and outstanding Stock of
each Subsidiary of Borrower is owned by the Borrower in the amounts set forth
in Disclosure Schedule (3.8). 
Except as set forth in Disclosure Schedule (3.8), there are no
outstanding rights to purchase, options, warrants or similar rights or
agreements pursuant to which any Credit Party may be required to issue, sell,
repurchase or redeem any of its Stock or other equity securities or any Stock
or other equity securities of its Subsidiaries. 
All outstanding Indebtedness and Guaranteed Indebtedness of each Credit
Party as of the Closing Date (except for the Obligations) is described in Section
6.3 (including Disclosure Schedule (6.3)).  As of the Closing Date, AET Limited is an
inactive Subsidiary and does not have any assets (other than the bank account
referred to in Annex C and cash on deposit therein in an amount not
exceeding $50,000) or any Indebtedness or Guaranteed Indebtedness or other
material liabilities and does not conduct any business or operations.  Except as set forth in Disclosure Schedule
(3.8(a)), Applied Extrusion Technologies Holdings, Inc., Applied Extrusion
Technologies Australia Holdings, Inc., Applied Extrusion Technologies Belgium,
Inc., and Applied Extrusion Technologies, Scotland, Inc. (collectively, the “Former
Subsidiaries”), each a corporation organized in Delaware and prior to the
date hereof merged into Borrower, did not own any assets.  At the time of the applicable merger of


 


38





















 


each
Foreign Subsidiary into Borrower, such Former Subsidiary did not have any
liabilities or other obligations to any Person.


 


3.9                                 Government Regulation.  No Credit Party is an “investment company” or
an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment
company,” as such terms are defined in the Investment
Company Act of 1940.  No Credit Party is
subject to regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, or any other federal or state statute that restricts or
limits its ability to incur Indebtedness or to perform its obligations
hereunder. The making of the Loans by Lenders to Borrower, the incurrence of
the Letter of Credit Obligations on behalf of Borrower, the application of the
proceeds thereof and repayment thereof and the consummation of the Related Transactions
will not violate any provision of any such statute or any rule, regulation or
order issued by the Securities and Exchange Commission.


 


3.10                           Margin Regulations.  No Credit Party is engaged, nor will it
engage, principally or as one of its important activities, in the business of
extending credit for the purpose of “purchasing” or “carrying” any “margin
stock” as such terms are defined in Regulation U of the Federal Reserve Board
as now and from time to time hereafter in effect (such securities being
referred to herein as “Margin Stock”). 
No Credit Party owns any Margin Stock, and none of the proceeds of the
Loans or other extensions of credit under this Agreement will be used, directly
or indirectly, for the purpose of purchasing or carrying any Margin Stock, for
the purpose of reducing or retiring any Indebtedness that was originally
incurred to purchase or carry any Margin Stock or for any other purpose that
might cause any of the Loans or other extensions of credit under this Agreement
to be considered a “purpose credit” within the meaning of Regulations T, U or X
of the Federal Reserve Board.  No Credit
Party will take or permit to be taken any action that might cause any Loan
Document to violate any regulation of the Federal Reserve Board.


 


3.11                           Taxes.  All
income tax returns and all other material property tax returns, reports and
statements, including information returns, required by any Governmental
Authority (“Tax Returns”) to be filed by any Credit Party have been
filed with the appropriate Governmental Authority; all such Tax Returns are
true, correct and complete in all material respects; and all Charges have been
paid prior to the date on which any fine, penalty, interest or late charge may
be added thereto for nonpayment thereof (or any such fine, penalty, interest,
late charge or loss has been paid), 
excluding Charges or other amounts being contested in accordance with Section
5.2(b).  There are no Liens for
Charges (other than for current Charges not yet due and payable or being contested
in good faith in accordance with Section 5.2(b)) upon the assets of any
Credit Party.  No adjustment relating to
such Tax Returns has been proposed formally or informally by any Governmental
Authority and, to the knowledge of each Credit Party, no basis exists for any
such adjustment.   Proper and accurate
amounts have been withheld by each Credit Party from its respective employees,
independent contractors, creditors, members, partners and other third parties
for all periods in full and complete compliance with all applicable federal,
state, local and foreign laws and such withholdings have been timely paid to
the respective Governmental Authorities. Disclosure Schedule (3.11) sets
forth as of the Closing Date those taxable years for which any Credit Party’s
tax returns are currently being audited by the IRS or any other applicable
Governmental Authority, and any assessments or threatened assessments in
connection with such audit, or otherwise currently outstanding. Except as


 


39





















 


indicated on Disclosure Schedule (3.11), as of
the Closing Date all, Charges that have been claimed, proposed, asserted or
assessed against any Credit Party (or with respect to any of their assets) have
been fully paid or finally settled or are being contested in good faith in
accordance with Section 5.2(b). 
Except as described in Disclosure Schedule (3.11), as of the
Closing Date, no Credit Party has executed or filed with the IRS or any other
Governmental Authority any agreement or other document extending, or having the
effect of extending, the period for assessment or collection of any
Charges.  None of the Credit Parties and
their respective predecessors are liable for any
Charges: (a) under any agreement (including any tax sharing agreements) or (b)
to each Credit Party’s knowledge, as a transferee.  As of the Closing Date, no Credit Party has
agreed or been requested to make any adjustment under IRC Section 481(a), by
reason of a change in accounting method or otherwise, which would have a
Material Adverse Effect.


 


3.12                           ERISA and Canadian Plans.


 


(a)                                  Disclosure
Schedule (3.12) lists (i) all ERISA Affiliates and (ii) all Plans and
separately identifies all Pension Plans, including Title IV Plans,
Multiemployer Plans, ESOPs and Welfare Plans, including all Retiree Welfare
Plans.  As of the Closing Date, copies of
all such listed Plans, together with a copy of the latest IRS/DOL 5500-series
form for each such Plan, have been delivered to Agent.  Except with respect to Multiemployer Plans,
each Qualified Plan has been determined by the IRS to qualify under Section 401
of the IRC, the trusts created thereunder have been determined to be exempt
from tax under the provisions of Section 501 of the IRC, and nothing has
occurred that would cause the loss of such qualification or tax-exempt
status.  Each Plan is in compliance with
the applicable provisions of ERISA and the IRC, including the timely filing of
all reports required under the IRC or ERISA, including the statement required
by 29 C.F.R. Section 2520.104-23. 
Neither any Credit Party nor ERISA Affiliate has failed to make any
contribution or pay any amount due as required by either Section 412 of the IRC
or Section 302 of ERISA or the terms of any such Plan.  Neither any Credit Party nor ERISA Affiliate
has engaged in a “prohibited transaction,” as defined in Section 406 of ERISA
and Section 4975 of the IRC, in connection with any Plan, that would subject
any Credit Party to a material tax on prohibited transactions imposed by Section
502(i) of ERISA or Section 4975 of the IRC.


 


(b)                                 Except
as set forth in Disclosure Schedule (3.12): (i) no Title IV Plan has any
Unfunded Pension Liability; (ii) no ERISA Event or event described in Section
4062(e) of ERISA with respect to any Title IV Plan has occurred or is
reasonably expected to occur; (iii) there are no pending, or to the knowledge
of any Credit Party, threatened claims (other than claims for benefits in the
normal course), sanctions, actions or lawsuits, asserted or instituted against
any Plan or any Person as fiduciary or sponsor of any Plan; (iv) no Credit
Party or ERISA Affiliate has incurred or reasonably expects to incur any
liability as a result of a complete or partial withdrawal from a Multiemployer
Plan; (v) within the last five years no Title IV Plan of any Credit Party or
ERISA Affiliate has been terminated, whether or not in a “standard termination”
as that term is used in Section 4041(b)(1) of ERISA, nor has any Title IV Plan
of any Credit Party or any ERISA Affiliate (determined at any time within the
last five years) with Unfunded Pension Liabilities been transferred outside of
the “controlled group” (within the meaning of Section 4001(a)(14) of ERISA) of
any Credit Party or ERISA Affiliate (determined at such time); (vi) except in
the case of any ESOP, Stock of all Credit Parties and their ERISA


 


40





















 


Affiliates makes up, in the aggregate, no more than
10% of fair market value of the assets of any Plan measured on the basis of
fair market value as of the latest valuation date of any Plan; and (vii) no
liability under any Title IV Plan has been satisfied with the purchase of a
contract from an insurance company that is not rated AAA by the Standard &
Poor’s Corporation or an equivalent rating by another nationally recognized
rating agency


 


(c)                                  Disclosure
Schedule 3.12(c) sets forth all Canadian Benefit Plans (other than, for
greater certainty, universal plans created by and to which any Credit Party is
obligated to contribute by statute) and Canadian Pension Plans adopted by each
Credit Party.  The Canadian Pension Plans
are duly registered under the ITA and all other applicable laws which require
registration and no event has occurred which is reasonably likely to cause the
loss of such registered status.  All
material obligations of each Credit Party (including fiduciary, funding,
investment and administration obligations) required to be performed in
connection with the Canadian Pension Plans and the funding agreements therefor
have been performed in a timely fashion. 
There have been no improper withdrawals or applications of the assets of
the Canadian Pension Plans or the Canadian Benefit Plans.  There are no outstanding disputes concerning
the assets of the Canadian Pension Plans or the Canadian Benefit Plans.  Each of the Canadian Pension Plans is fully
funded on a solvency basis (using actuarial methods and assumptions which are
consistent with the valuations last filed with the applicable Governmental
Bodies and which are consistent with generally accepted actuarial principles).


 


3.13                           No Litigation. 
Other than the commencement of the Chapter 11 Cases, no action, claim,
lawsuit, demand, investigation or proceeding is now pending or, to the
knowledge of any Credit Party, threatened against any Credit Party, before any
Governmental Authority or before any arbitrator or panel of arbitrators
(collectively, “Litigation”), (a) that challenges any Credit Party’s
right or power to enter into or perform any of its obligations under the Loan
Documents to which it is a party, or the validity or enforceability of any Loan
Document or any action taken thereunder, or (b) that has a reasonable risk of
being determined adversely to any Credit Party and that , if so determined,
could be reasonably be expected to have a Material Adverse Effect.  Except as set forth on Disclosure Schedule
(3.13), as of the Closing Date there is no Litigation pending or, to any
Credit Party’s knowledge, threatened, that seeks damages in excess of $100,000
or injunctive relief against, or alleges criminal misconduct of, any Credit
Party.


 


3.14                           Brokers.  No
broker or finder brought about the obtaining, making or closing of the Loans or
the Related Transactions, and no Credit Party or Affiliate thereof has any
obligation to any Person in respect of any finder’s or brokerage fees in
connection therewith.


 


3.15                           Intellectual Property.  As of the Closing Date, each Credit Party
owns or has rights to use all Intellectual Property necessary to continue to
conduct its business as now or heretofore conducted by it or proposed to be
conducted by it, and each Patent, Trademark, Copyright and License is listed,
together with application or registration numbers, as applicable, in Disclosure
Schedule (3.15).  Each Credit Party
conducts its business and affairs without infringement of or interference with
any Intellectual Property of any other Person in any material respect.  Except as set forth in Disclosure Schedule
(3.15), as of the Closing Date, no Credit Party is aware of any infringement
claim by any other Person with respect to any Intellectual Property.


 


41





















 


3.16                           Full Disclosure. 
No information contained in this Agreement, any of the other Loan
Documents, any Projections, Financial Statements or Collateral Reports or other
written reports from time to time delivered hereunder or any written statement
furnished by or on behalf of any Credit Party to Agent or any Lender pursuant
to the terms of this Agreement contains or will contain when made any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading in
light of the circumstances under which they were made.  The Liens granted to Agent, on behalf of
itself and Lenders, pursuant to the Collateral Documents will at all times be
fully perfected first priority Liens in and to the Collateral described
therein, subject, as to priority, only to Permitted Encumbrances and Carve-Out
Expenses up to the Carve-Out Amount.


 


3.17                           Environmental Matters.


 


(a)                                  Except
as set forth in Disclosure Schedule (3.17), as of the Closing Date: (i)
the Real Estate is free of contamination from, or presence of, any Hazardous
Material except for such contamination that would not adversely impact the
value or marketability of such Real Estate and that would not result in
Environmental Liabilities that could reasonably be expected to exceed $100,000;
(ii) no Credit Party has caused or suffered to occur any Release of Hazardous
Materials on, at, in, under, above, to, from or about any of its Real Estate
and that could reasonably be expected to result in Environmental Liabilities in
excess of  $100,000; (iii) the Credit
Parties are and have been in compliance with all Environmental Laws, except for
such noncompliance that would not result in Environmental Liabilities which
could reasonably be expected to exceed $100,000; (iv) the Credit Parties have
obtained, and are in compliance with, all Environmental Permits required by
Environmental Laws for the operations of their respective businesses as
presently conducted or as proposed to be conducted, except where the failure to
so obtain or comply with such Environmental Permits would not result in
Environmental Liabilities that could reasonably be expected to exceed $100,000,
and all such Environmental Permits are valid, uncontested and in good standing;
(v) no Credit Party is involved in operations or knows of any facts,
circumstances or conditions, including any Releases of Hazardous Materials,
that are likely to result in any Environmental Liabilities of such Credit Party
which could reasonably be expected to exceed $100,000, and no Credit Party has
permitted any current or former tenant or occupant of the Real Estate to engage
in any such operations; (vi) there is no Litigation arising under or related to
any Environmental Laws, Environmental Permits or Hazardous Material that seeks
damages, penalties, fines, costs or expenses in excess of $100,000 or
injunctive relief against, that orders characterization or rehabilitative work,
or that alleges criminal misconduct by, any Credit Party; (vii) no notice has
been received by any Credit Party identifying it as a “potentially responsible
party” or requesting information under CERCLA or analogous state statutes or
other Environmental Law, and to the knowledge of the Credit Parties, there are
no facts, circumstances or conditions that may result in any Credit Party being
identified as a “potentially responsible party” under CERCLA or analogous state
statutes or other Environmental Laws; and (viii) as of the Closing Date, the
Credit Parties have provided to Agent copies of all existing environmental
reports, studies, reviews and audits and all written information pertaining to
actual or potential Environmental Liabilities, in each case relating to any
Credit Party.


 


42





















 


(b)                                 Each
Credit Party hereby acknowledges and agrees that Agent is not now, and to
Credit Party’s knowledge, has not ever been, in control of any of the Real
Estate or any Credit Party’s affairs.


 


3.18                           Insurance.  Disclosure
Schedule (3.18) lists all insurance policies of any nature maintained, as
of the Closing Date, for current occurrences by each Credit Party, as well as a
summary of the terms of each such policy.


 


3.19                           Deposit and Disbursement Accounts.  Disclosure Schedule (3.19) lists all
banks and other financial institutions at which any Credit Party and AET
Limited maintains deposit or other accounts as of the Closing Date, including
any Disbursement Accounts, and such Schedule correctly identifies the name,
address and telephone number of each depository, the name in which the account
is held, a description of the purpose of the account, and the complete account
number therefor.  Borrower acknowledges
and agrees that Annex C hereto is substantially the same as the Borrower’s
Prepetition cash management system and that such system, including all accounts
established thereto, shall continue to govern the rights of the respective
parties thereto, and shall be applicable under this Agreement subject to the
approval of the Bankruptcy Court.


 


3.20                           Government Contracts.  Except as set forth in Disclosure Schedule
(3.20), as of the Closing Date, no Credit Party is a party to any contract
or agreement with any Governmental Authority and no Credit Party’s Accounts are
subject to the Federal Assignment of Claims Act (31 U.S.C. §3727) or any
similar state or local law.


 


3.21                           Customer and Trade Relations.  Except as set forth in Disclosure Schedule
(3.21), as of the Closing Date, there exists no actual or, to the knowledge
of any Credit Party, threatened termination or cancellation of, or any material
adverse modification or change in: the business relationship of any Credit
Party with any customer or group of customers whose purchases during the
preceding 12 months caused them to be ranked among the ten largest customers of
such Credit Party; or the business relationship of any Credit Party with any
supplier material to its operations.


 


3.22                           Agreements and Other Documents.


 


(a)                                  As
of the Closing Date, each Credit Party has provided to Agent or its counsel, on
behalf of Lenders, accurate and complete copies (or summaries) of all of the
following agreements or documents to which it is subject and each of which is
listed in Disclosure Schedule (3.22): 
rebate agreements with end users who annually purchase $15,000,000 or
more of products sold by any Credit Party or whose purchases account for 5% or
more of the total annual sales volume of the Credit Parties; supply agreements
and purchase agreements not terminable by such Credit Party within sixty (60)
days following written notice issued by such Credit Party and involving
transactions in excess of $1,000,000 per annum; 
leases of Equipment having a remaining term of one year or longer and
requiring aggregate rental and other payments in excess of $500,000 per
annum;  licenses and permits held by the
Credit Parties, the absence of which could be reasonably likely to have a
Material Adverse Effect;  instruments and
documents evidencing any Indebtedness or Guaranteed Indebtedness of such Credit
Party and any Lien granted by such Credit Party with respect thereto; and


 


43





















 


instruments
and agreements evidencing the issuance of any equity securities, warrants,
rights or options to purchase equity securities of such Credit Party.


 


(b)                                 Set
forth in Disclosure Schedule (3.22(b)) is a list, as of the Closing Date
of the ten largest customers and clients of the Credit Parties, taken as a
whole as measured by gross revenues of the Credit Parties generated by such
customers and clients, for the two years ended as of September 30, 2003 and
September 30, 2004.  Except as disclosed
in Disclosure Schedule 3.22(b), as of the Closing Date, no significant
customer or client (or group of related customers or clients which in the
aggregate is significant) of the Credit Parties, taken as a whole, has given
them notice or, to the knowledge of the Credit Parties, has taken any other
action which has given any Credit Party any reason to believe that such
customer or client (or group of related customers or clients) will materially
reduce the amount of its purchases or materially adversely change the price or
terms of such purchases.  For such
purposes, a customer or client (or group of related customers or clients) shall
be deemed “significant” if such customer or client (or group of related
customers or clients) has accounted for more than 5% of the total gross
revenues of the Credit Parties (taken as a whole) during the past Fiscal Year.


 


(c)                                  Set
forth in Disclosure Schedule 3.22(c) is a list, as of the Closing Date,
of the ten largest suppliers and vendors of the Credit Parties, taken as a
whole, as measured by the cost of purchases made by the Credit Parties for the
two years ended as of September 30, 2003 and September 30, 2004.  Except as disclosed in Disclosure Schedule
3.22(c), as of the Closing Date, no significant supplier or vendor (or
group of related suppliers or vendors which in the aggregate is significant) of
the Credit Parties, taken as a whole, has given them notice or, to the knowledge
of the Credit Parties, has taken any other action which has given any Credit
Party any reason to believe that such supplier or vendor (or group of related
suppliers or vendors) will cease to supply or materially restrict the amount
supplied or materially adversely change its price or terms to any Credit Party
of any products or services.  For such
purposes, a supplier or vendor (or group of related suppliers or vendors) shall
be deemed “significant” if such supplier or vendor (or group of related
suppliers or vendors) has accounted for more than 5% of such total cost of
purchases of the Credit Parties (taken as a whole) during the past Fiscal Year.


 


(d)                                 Neither
the Borrower nor any other Credit Party is subject to any derivative or forward
contract that can be terminated based upon the bankruptcy filing of such
Person.


 


3.23                           Intentionally Omitted.


 


3.24                           Senior Note Documents.  As of the Closing Date, Borrower has
delivered to Agent a complete and correct copy of the Senior Note Documents
(including all schedules and exhibits thereto and all amendments, supplements
or modifications, as in effect on the Closing Date).


 


3.25                           Reorganization Matters.


 


(a)                                  The
Chapter 11 Cases were commenced on the Petition Date in accordance with
applicable law and proper notice thereof and the proper notice for the hearing


 


44





















 


for
the approval of the Interim Order has been given and proper notice for the
hearing for the approval of the Final Order will be given.


 


(b)                                 After
the entry of the Interim Order, and pursuant to and to the extent permitted in
the Interim Order and the Final Order, the Obligations will constitute allowed
administrative expense claims in the Chapter 11 Cases having priority over all
administrative expense claims, reclamation claims and unsecured claims against
the Borrower or the Credit Parties filing a Chapter 11 Case now existing or
hereafter arising, of any kind whatsoever, including, without limitation, all
administrative expense claims of the kind specified in Sections 105, 326, 330,
331, 503(b), 506(c), 507(a), 507(b), 546(c) or 726 of the Bankruptcy Code, as
provided under Section 364(c)(1) of the Bankruptcy Code, subject, as to
priority only to the Carve-Out Expenses up to the Carve-Out Amount.


 


(c)                                  After
the entry of the Interim Order and pursuant to and to the extent provided in
the Interim Order and the Final Order, the Obligations will be secured by a
valid and perfected first priority Lien on all of the Collateral.


 


(d)                                 The
Interim Order and the Canadian Interim Order (with respect to the period prior
to entry of the Final Order) or the Final Order and the Canadian Final Order
(with respect to the period on and after entry of the Final Order), as the case
may be, are in full force and effect and have not been reversed, stayed,
modified or amended.


 


(e)                                  Notwithstanding
the provisions of Section 362 of the Bankruptcy Code, subject to the provisions
of the Interim Order and the Final Order, upon the maturity (whether by
acceleration or otherwise) of any of the Obligations, Agent and Lenders shall
be entitled to immediate payment of such Obligations and to enforce the
remedies provided for hereunder, without further application to or order by the
Bankruptcy Court.


 


4.                                      FINANCIAL STATEMENTS AND INFORMATION


 


4.1                                 Reports and Notices.


 


(a)                                  Each
Credit Party executing this Agreement hereby agrees that from and after the
Closing Date and until the Termination Date, it shall deliver to Agent or to
Agent and Lenders, as required, the Financial Statements, notices, Projections
and other information at the times, to the Persons and in the manner set forth
in Annex E.


 


(b)                                 Each
Credit Party executing this Agreement hereby agrees that, from and after the
Closing Date and until the Termination Date, it shall deliver to Agent or to
Agent and Lenders, as required, the various Collateral Reports (including
Borrowing Base Certificates in the form of Exhibit 4.1(b) at the times,
to the Persons and in the manner set forth in Annex F.


 


4.2                                 Communication with Accountants.  Each Credit Party executing this Agreement
authorizes Agent to communicate directly with its independent certified public
accountants, including Deloitte and Touche, LLP (after such prior notice to
Borrower and provided Borrower may participate in any such communications), and
authorizes and, at Agent’s request, shall instruct those accountants and
advisors to disclose and make available to Agent and each Lender any and all
Financial Statements and other supporting financial documents,


 


45





















 


schedules and information relating to any Credit Party
(including copies of any issued management letters) with respect to the
business, financial condition and other affairs of any Credit Party.


 


5.                                      AFFIRMATIVE COVENANTS


 


Each
Credit Party executing this Agreement jointly and severally agrees as to all
Credit Parties that from and after the date hereof and until the Termination
Date:


 


5.1                                 Maintenance of Existence and Conduct of Business.  Except as occasioned by the Chapter 11 Cases,
each Credit Party shall: do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence and its
material rights and franchises; continue to conduct its business substantially
as now conducted or as otherwise permitted hereunder; at all times, in the
exercise of its reasonable business judgment, maintain, preserve and protect
all of its assets and properties used or useful in the conduct of its business,
and keep the same in good repair, working order and condition in all material
respects (taking into consideration ordinary wear and tear) and from time to
time make, or cause to be made, all necessary or appropriate repairs,
replacements and improvements thereto consistent with industry practices; and  transact business only in such corporate and
trade names as are set forth in Disclosure Schedule (5.1).


 


5.2                                 Payment of Charges.


 


(a)                                  Subject
to Section 5.2(b), each Credit Party shall pay and discharge or cause to
be paid and discharged promptly all Charges payable by it, including (i)
Charges imposed upon it, its income and profits, or any of its property (real,
personal or mixed) and all Charges with respect to tax, social security and
unemployment withholding with respect to its employees, (ii) lawful claims for
labor, materials, supplies and services or otherwise, and (iii) all storage or
rental charges payable to warehousemen or bailees, in each case, before any
thereof shall become past due; provided, Borrower shall not be required
to pay any Charges, Taxes or Claims the nonpayment of which is permitted by the
Bankruptcy Code.


 


(b)                                 Each
Credit Party may in good faith contest, by appropriate proceedings, the
validity or amount of any Charges, Taxes or claims described in Section
5.2(a); provided, that (i) adequate reserves with respect to such
contest are maintained on the books of such Credit Party, in accordance with
GAAP; (ii) no Lien shall be imposed to secure payment of such Charges (other
than payments to warehousemen and/or bailees) that is superior to any of the
Liens securing the Obligations and such contest is maintained and prosecuted
continuously and with diligence and operates to suspend collection or
enforcement of such Charges; (iii) none of the Collateral becomes subject to
forfeiture or loss as a result of such contest; (iv) such Credit Party shall
promptly pay or discharge such contested Charges, Taxes or claims and all
additional charges, interest, penalties and expenses, if any, and shall deliver
to Agent evidence reasonably acceptable to Agent of such compliance, payment or
discharge, if such contest is terminated or discontinued adversely to such
Credit Party or the conditions set forth in this Section 5.2(b) are no
longer met; and (v) Agent has not advised Borrower in writing that Agent reasonably
believes that nonpayment or nondischarge thereof could have or result in a
Material Adverse Effect.


 


46





















 


5.3                                 Books and Records. 
Each Credit Party shall keep adequate books and records with respect to
its business activities in which proper entries, reflecting in all material
respects all financial transactions, are made in accordance with GAAP and on a
basis consistent with the Financial Statements attached as Disclosure
Schedule (3.4(a)).


 


5.4                                 Insurance; Damage to or Destruction of
Collateral.


 


(a)                                  The
Credit Parties shall, at their sole cost and expense, maintain the policies of
insurance described on Disclosure Schedule (3.18) as in effect on
the date hereof or otherwise in form and amounts and with insurers reasonably
acceptable to Agent.  Such policies of
insurance (or the loss payable and additional insured endorsements delivered to
Agent) shall contain provisions pursuant to which the insurer agrees to provide
thirty (30) days prior written notice to Agent in the event of any non-renewal,
cancellation or amendment of any such insurance policy.  If any Credit Party at any time or times
hereafter shall fail to obtain or maintain any of the policies of insurance
required above, or to pay all premiums relating thereto, Agent may at any time
or times thereafter obtain and maintain such policies of insurance and pay such
premiums and take any other action with respect thereto that Agent deems
advisable in its reasonable judgment. 
Agent shall have no obligation to obtain insurance for any Credit Party
or pay any premiums therefor.  By doing
so, Agent shall not be deemed to have waived any Default or Event of Default
arising from any Credit Party’s failure to maintain such insurance or pay any
premiums therefor.  All sums so
disbursed, including reasonable attorneys’ fees, court costs and other charges
related thereto, shall be payable on demand by Borrower to Agent and shall be
additional Obligations hereunder secured by the Collateral.


 


(b)                                 Agent
reserves the right at any time upon any change in any Credit Party’s risk
profile (including any change in the product mix maintained by any Credit Party
or any laws affecting the potential liability of such Credit Party) to require
additional forms and limits of insurance to, in Agent’s reasonable opinion,
adequately protect both Agent’s and Lenders’ interests in all or any portion of
the Collateral and to ensure that each Credit Party is protected by insurance
in amounts and with coverage customary for its industry.  If reasonably requested by Agent, each Credit
Party shall deliver to Agent from time to time a report of a reputable
insurance broker, reasonably satisfactory to Agent, with respect to its
insurance policies.


 


(c)                                  Each
Credit Party (other than AET Limited) shall deliver to Agent, in form and
substance reasonably satisfactory to Agent, endorsements to (i) all “All Risk”
and business interruption insurance naming Agent, on behalf of itself and
Lenders, as loss payee, and (ii) all general liability and other liability
policies naming Agent, on behalf of itself and Lenders, as additional
insured.  Each Credit Party irrevocably
makes, constitutes and appoints Agent (and all officers, employees or agents
designated by Agent), so long as any Event of Default has occurred and is
continuing, as such Credit Party’s true and lawful agent and attorney-in-fact
for the purpose of making, settling and adjusting claims under such “All Risk”
policies of insurance, endorsing the name of such Credit Party on any check or
other item of payment for the proceeds of such “All Risk” policies of insurance
and for making all determinations and decisions with respect to such “All Risk”
policies of insurance.  Agent shall have
no duty to exercise any rights or powers granted to it pursuant to the
foregoing power-of-attorney.  Borrower
shall promptly notify Agent of any loss, damage, or destruction to the
Collateral in the amount of $250,000 or more, whether or not covered by
insurance.  After deducting from such
proceeds the expenses, if


 


47





















 


any, incurred by Agent in the collection or handling
thereof, Agent may, at its option, apply such proceeds to the reduction of the
Obligations in accordance with Section 1.3(d), or permit or require
the applicable Credit Party to use such money, or any part thereof, to replace,
repair, restore or rebuild the Collateral in a diligent and expeditious manner
with materials and workmanship of substantially the same quality as existed
before the loss, damage or destruction. Notwithstanding the foregoing, if the
casualty giving rise to such insurance proceeds could not reasonably be
expected to have a Material Adverse Effect and such insurance proceeds do not
exceed $2,000,000 in the aggregate, Agent shall permit the applicable Credit
Party to replace, restore, repair or rebuild the property; provided that
if such Credit Party shall not have completed such replacement, restoration,
repair or rebuilding within three hundred and sixty (360) days of such casualty
or entered into binding agreements within one hundred and eighty (180) days of
such casualty to complete, such replacement, restoration, repair or rebuilding
within three hundred and sixty (360) days of such casualty, Agent may apply
such insurance proceeds to the Obligations in accordance with Section 1.3(d).  All insurance proceeds that are to be made
available to any Credit Party to replace, repair, restore or rebuild the
Collateral shall be applied by Agent to reduce the outstanding principal balance
of the Revolving Loan (which application shall not result in a permanent
reduction of the Revolving Loan Commitment) and upon such application, Agent
shall establish a Reserve against the Borrowing Base in an amount equal to the
amount of such proceeds so applied. 
Thereafter, such funds shall be made available to Borrower to provide
funds to replace, repair, restore or rebuild the Collateral as follows: (i)
Borrower shall request a Revolving Credit Advance be made to Borrower in the
amount requested to be released; (ii) so long as the conditions set forth in Section
2.2 have been met, Revolving Lenders shall make such Revolving Credit
Advance; and (iii) in the case of insurance proceeds applied against the
Revolving Loan, the Reserve established with respect to such insurance proceeds
shall be reduced by the amount of such Revolving Credit Advance.  To the extent not used to replace, repair,
restore or rebuild the Collateral, such insurance proceeds shall be applied in
accordance with Section 1.3(d).


 


5.5                                 Compliance with Laws.  Each Credit Party shall comply with all
federal, state, provincial, regional, municipal, local and foreign laws and
regulations applicable to it, including those relating to ERISA and labor
matters and Environmental Laws and Environmental Permits, except to the extent
that the failure to comply, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.


 


5.6                                 Intentionally Omitted.


 


5.7                                 Intellectual Property.  Each
Credit Party will conduct its business and affairs without infringement of or
interference with any Intellectual Property of any other Person in any material
respect.


 


5.8                                 Environmental Matters.  Each Credit Party shall and shall cause each
Person within its control to: (a) conduct its operations and keep and maintain
its Real Estate in compliance with all Environmental Laws and Environmental
Permits other than noncompliance that could not reasonably be expected to have
a Material Adverse Effect; (b) implement any and all investigation,
remediation, removal and response actions that are appropriate or necessary to
maintain the value and marketability of the Real Estate or to otherwise comply
with Environmental Laws and Environmental Permits pertaining to the presence,
generation,


 


48





















 


treatment, storage, use, recovery, recycling,
disposal, transportation or Release of any Hazardous Material on, at, in,
under, above, to, from or about any of its Real Estate and shall at all times
employ a qualified environmental manager to have primary responsibility for
compliance with the provisions of this Section 5.8; (c) notify Agent
promptly after such Credit Party becomes aware of any violation of
Environmental Laws or Environmental Permits or any Release on, at, in, under,
above, to, from or about any Real Estate that is reasonably likely to result in
Environmental Liabilities in excess of $100,000; and (d) promptly forward to
Agent a copy of any order, notice, request for information or any communication
or report received by such Credit Party in connection with any such violation
or Release or any other matter relating to any Environmental Laws or
Environmental Permits that could reasonably be expected to result in
Environmental Liabilities in excess of $100,000, in each case whether or not
the Environmental Protection Agency or any Governmental Authority has taken or
threatened any action in connection with any such violation, Release or other
matter.  If Agent at any time has a
reasonable basis to believe that there may be a violation of any Environmental
Laws or Environmental Permits by any Credit Party or any Environmental
Liability arising thereunder, or a Release of Hazardous Materials on, at, in,
under, above, to, from or about any of its Real Estate, that, in each case,
could reasonably be expected to have a Material Adverse Effect, then each
Credit Party shall, upon Agent’s written request (i) cause the performance of
such environmental audits including subsurface sampling of soil and groundwater,
and preparation of such environmental reports, at Borrower’s expense, as Agent
may from time to time reasonably request, which shall be conducted by reputable
environmental consulting firms reasonably acceptable to Agent and shall be in
form and substance reasonably acceptable to Agent, and (ii) permit Agent or its
representatives to have access to all Real Estate for the purpose of conducting
such environmental audits and testing as Agent deems appropriate, including
subsurface sampling of soil and groundwater. 
Borrower shall reimburse Agent for the costs of such audits and tests
and the same will constitute a part of the Obligations secured hereunder.


 


5.9                                 Landlords’ Agreements, Mortgagee Agreements,
Bailee Letters and Real Estate Purchases. 
As reasonably requested by Agent and to the extent not otherwise
addressed to Agent’s reasonable satisfaction in the Final Order and except for
the locations set forth in Disclosure Schedule (5.9) as of the Closing
Date, each Credit Party shall obtain a landlord’s agreement, mortgagee
agreement or bailee letter, as applicable, from the lessor of each leased
property, mortgagee of owned property or bailee with respect to any warehouse,
processor, toller or toll converter facility or other location where Collateral
is stored or located as of the Closing Date, which agreement or letter shall
contain a waiver or subordination of all Liens or claims that the landlord,
mortgagee or bailee may assert against the Collateral at that location, and
shall otherwise be reasonably satisfactory in form and substance to Agent.  With respect to such locations set forth in Disclosure
Schedule (5.9) as of the Closing Date, so long as Agent has not received a
satisfactory landlord or mortgagee agreement or bailee letter, or entry of the
Final Order providing for collateral access, Borrower’s Eligible Inventory at
that location shall, unless otherwise determined by Agent in its discretion, be
excluded from the Borrowing Base.  After
the Closing Date, no real property shall be leased by any Credit Party (nor
shall the Credit Parties conduct any business or activities or store any
material property at its leased locations in Norcross, Georgia and Peabody,
Massachusetts), without the prior written consent of Agent (which consent, in
Agent’s reasonable credit judgment, may be conditioned upon the exclusion from
the Borrowing Base of Eligible Inventory at that location or the establishment
of Reserves acceptable to Agent) or, unless and until a reasonably satisfactory
landlord agreement shall first


 


49





















 


have
been obtained with respect to such location. 
After the Closing Date, no Inventory shall be shipped to or located at
any third party warehouse location for which reasonably satisfactory bailee
letters have not been obtained if the aggregate amount of all such Inventory
held at all such third party warehouse locations at any time would exceed
$250,000, without the prior written consent of Agent (which consent, in Agent’s
reasonable credit judgment, may be conditioned upon the exclusion from the
Borrowing Base of Eligible Inventory at that location or the establishment of
Reserves acceptable to Agent).  After the
Closing Date, no Inventory shall be shipped to a processor, toller or toll
converter if the aggregate amount of all such Inventory held by such processor,
toller or toll converter at any time would exceed $500,000 without the prior
written consent of Agent (which consent, in Agent’s reasonable credit judgment,
may be conditioned upon the exclusion from the Borrowing Base of Eligible
Inventory at that location or the establishment of Reserves acceptable to
Agent) or, unless and until a reasonably satisfactory bailee letter shall first
have been obtained with respect to such location.  Each Credit Party shall timely and fully pay
and perform in all material respects its obligations under all leases and other
agreements with respect to each leased location or public warehouse where any
Collateral is or may be located.  To the
extent otherwise permitted hereunder, if any Credit Party proposes to acquire
after the Closing Date a fee ownership interest in Real Estate or any other
material leasehold interest in Real Estate, it shall first provide to Agent a
Mortgage granting Agent a first priority Lien on such Real Estate, together
with environmental audits and studies, mortgage title insurance commitment,
real property survey, local counsel opinion(s), and, if required by Agent,
supplemental casualty insurance and flood insurance, and, with respect to all
of Borrower’s leasehold interests, agreements from their landlords satisfactory
to Agent and an acceptable non-disturbance agreement from the landlords’ fee
mortgagees, and such other documents, instruments or agreements reasonably
requested by Agent, in each case, in form and substance reasonably satisfactory
to Agent.


 


5.10                           ERISA.


 


(a)                                  Each
Credit Party shall comply in all material respects with the applicable
provisions of ERISA and the IRC, except to the extent such failure to company,
individually or in the aggregate, could not reasonably be expected to have
a Material Adverse Affect.  Each Credit Party shall furnish to the Agent
written notice as soon as possible, and in any event within ten (10) Business
Days after any Credit Party knows or has reason to know, of: (a) a material
increase in the benefits of any existing Plan, the establishment of any new
Plan, or the commencement of contributions to any Plan; or (b) an ERISA
Event, together with a statement of an officer setting forth the details
of such ERISA Event and action which the Credit Parties propose to take with
respect thereto.  The Credit Parties shall furnish to the
Agent, within thirty (30) Business Days after the filing thereof with the
Department of Labor, IRS or PBGC, copies of each annual report (From 5500
series) filed for each Plan.  The Credit Parties shall furnish to the
Agent, within thirty (30) days after receipt by any Credit Party or
ERISA Affiliate, copies of each actuarial report for each Title IV Plan or
Multiemployer Plan and each annual report for any Multiemployer Plan.


 


(b)                                 For
each existing Canadian Pension Plan, each Credit Party shall ensure that such
plan retains its registered status under and is administered in a timely manner
in all respects in accordance with the applicable pension plan text, funding
agreement, the ITA and all other applicable laws.


 


50





















 


(c)                                  For
each Canadian Pension Plan hereafter adopted by any Credit Party which is
required to be registered under the ITA or any other applicable laws, that
Credit Party shall use its best efforts to seek and receive confirmation in
writing from the applicable Governmental Authority to the effect that such plan
is unconditionally registered under the ITA and such other applicable laws.


 


(d)                                 For
each existing Canadian Pension Plan and Canadian Benefit Plan hereafter
adopted, each Credit Party shall in a timely fashion perform in all material
respects all obligations (including fiduciary, funding, investment and administration
obligations) required to be performed in connection with such plan and the
funding media therefor.


 


(e)                                  Each
Credit Party shall deliver to the Agent if requested by the Agent promptly
after the filing thereof by any Credit Party with any applicable Governmental
Authority, copies of each annual and other return, report or valuation with
respect to each Canadian Pension Plan; promptly after receipt thereof, a copy
of any direction, order, notice, ruling or opinion that any Credit Party may
receive from any applicable Governmental Authority with respect to any Canadian
Pension Plan; and notification within thirty (30) days of any increases having
a cost to such Credit Party in excess of $100,000 per annum, in the benefits of
any existing Canadian Pension Plan or Canadian Benefit Plan, or the
establishment of any new Canadian Pension Plan or Canadian benefit Plan, or the
commencement of contributions to any such plan to which any Credit Party was
not previously contributing.


 


5.11                           Further Assurances.  Each Credit Party executing this Agreement
agrees that it shall and shall cause each other Credit Party to, at such Credit
Party’s expense and upon request of Agent, duly execute and deliver, or cause
to be duly executed and delivered, to Agent such further instruments and do and
cause to be done such further acts as may be necessary or proper in the
reasonable opinion of Agent to carry out more effectively the provisions and
purposes of this Agreement or any other Loan Document.


 


6.                                      NEGATIVE COVENANTS


 


Each
Credit Party executing this Agreement jointly and severally agrees as to all
Credit Parties that from and after the date hereof until the Termination Date:


 


6.1                                 Mergers, Subsidiaries, Etc.  No Credit Party shall directly or indirectly,
by operation of law or otherwise, (a) form or acquire any Subsidiary, or (b)
merge with, consolidate with, acquire all or substantially all of the assets or
Stock of, or otherwise combine with or acquire, any Person.


 


6.2                                 Investments; Loans and Advances.  Except as otherwise expressly permitted by
this Section 6, no Credit Party shall make or permit to exist any
investment in, or make, accrue or permit to exist loans or advances of money
to, any Person, through the direct or indirect lending of money, holding of
securities or otherwise, except that: (a) Borrower and AET Canada may hold
investments comprised of notes payable, or stock or other securities issued by
Account Debtors to Borrower or AET Canada, as applicable pursuant to negotiated
agreements with respect to settlement of such Account Debtor’s Accounts (which
are not Eligible Accounts) in the ordinary course of business, so long as the
aggregate amount of such Accounts so settled


 


51





















 


by Borrower and AET Canada do not exceed $1,000,000 in
any Fiscal Year; and (b) each Credit Party may maintain its existing
investments in its Subsidiaries as of the Closing Date; and (c) so long as no
Default or Event of Default has occurred and is continuing AET Canada may, with
respect to any amounts permitted to remain on deposit in the AET Canada Account
as set forth in Annex C, make investments, subject to Control Letters in
favor of Agent for the benefit of Lenders or otherwise subject to a first
priority perfected security interest in favor of Agent for the benefit of
Lenders, in (i) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency thereof maturing
within one year from the date of acquisition thereof, (ii) commercial paper
maturing no more than one year from the date of creation thereof and currently
having the highest rating obtainable from either Standard & Poor’s Ratings
Group or Moody’s Investors Service, Inc., (iii) certificates of deposit
maturing no more than one year from the date of creation thereof issued by
commercial banks incorporated under the laws of the United States of America,
each having combined capital, surplus and undivided profits of not less than
$300,000,000 and having a senior unsecured rating of “A” or better by a
nationally recognized rating agency (an “A Rated Bank”), (iv) time
deposits maturing no more than thirty (30) days from the date of creation
thereof with A Rated Banks and (v) mutual funds that invest solely in one or
more of the investments described in clauses (i) through (iv) above.


 


6.3                                 Indebtedness.


 


(a)                                  No
Credit Party shall create, incur, assume or permit to exist any Indebtedness,
except (without duplication) (i) Indebtedness secured by purchase money
security interests and Capital Leases permitted in Section 6.7(c), (ii)
the Loans and the other Obligations, (iii) unfunded pension fund and other
employee benefit plan obligations and liabilities to the extent they are
permitted to remain unfunded under applicable law, (iv) the Senior Notes, (v)
existing Indebtedness described in Disclosure Schedule (6.3) and
refinancings thereof or amendments or modifications thereto that do not have
the effect of increasing the principal amount thereof or changing the
amortization thereof (other than to extend the same) and that are otherwise on
terms and conditions no less favorable (taken as a whole) to any Credit Party,
Agent or any Lender, as reasonably determined by Agent, than the terms of the
Indebtedness being refinanced, amended or modified, (vi) Indebtedness
consisting of intercompany loans and advances made by Borrower to AET Canada
and by AET Canada to Borrower; provided, that: (A) each such Credit
Party shall have executed and delivered to each other such Credit Party, on the
Closing Date, a demand note (the “Intercompany Note”) to evidence any
such intercompany Indebtedness owing at any time by each such Credit Party to
such other Credit Party which Intercompany Note shall be in form and substance
reasonably satisfactory to Agent and shall be pledged and delivered to Agent
pursuant to the applicable Pledge Agreement or Security Agreement as additional
collateral security for the Obligations; (B) each such Credit Party shall
record all intercompany transactions on its books and records in a manner
reasonably satisfactory to Agent; (C) the obligations of each such Credit Party
under the Intercompany Notes shall be subordinated to its Obligations hereunder
in a manner reasonably satisfactory to Agent; (D) no Default or Event of
Default would occur and be continuing after giving effect to any such proposed
intercompany loan; and (E) with respect to intercompany loans and advances made
by Borrower to AET Canada: (1) Borrower shall have Borrowing Availability of at
least $5,000,000 after giving effect to any such loan or advance; and (2) the
aggregate amount of all Indebtedness, together with all intercompany payables,
owing by AET Canada to Borrower shall not exceed $80,000,000 at any one time
outstanding; (vii) unsecured Indebtedness of AET Canada to


 


52





















 


Investissement Quebec in an aggregate principal amount
not exceeding CDN$3,000,000 at any one time outstanding, provided  that
(x) such Indebtedness is unsecured and contains no covenant or event of default
the effect of which is to impose a restriction, limitation or obligation in
favor of the lender not imposed in favor of the Lenders hereunder and (y)
payments with respect to the principal thereof or interest thereon are not
required prior to the third anniversary of the date of incurrence thereof; and
(viii) Indebtedness permitted under Section 6.17.


 


(b)                                 No
Credit Party shall, directly or indirectly, voluntarily purchase, redeem,
defease or prepay any principal of, premium, if any, interest or other amount
payable in respect of any Indebtedness, other than (i) the Obligations; (ii)
Indebtedness secured by a Permitted Encumbrance if the asset securing such
Indebtedness has been sold or otherwise disposed of in accordance with Sections
6.8(b) or (c); (iii) Indebtedness permitted by Section 6.3(a)(v)
upon any refinancing thereof in accordance with Section 6.3(a)(v); (iv)
the Senior Notes to the extent permitted in Section 6.14; and (v) as
otherwise permitted in Section 6.14.


 


6.4                                 Employee Loans and Affiliate Transactions.


 


(a)                                  Except as set forth on Disclosure Schedule
6.4(a) and except as expressly permitted in this Section 6 with
respect to Affiliates, no Credit Party shall enter into or be a party to
any transaction with any other Credit Party or any Affiliate thereof except in
the ordinary course of and pursuant to the reasonable requirements of such
Credit Party’s business and upon fair and reasonable terms that are no less
favorable to such Credit Party than would be obtained in a comparable arm’s length
transaction with a Person not an Affiliate of such Credit Party.  In addition, if any such transaction or
series of related transactions involves payments in excess of $1,000,000 in the
aggregate, the terms of these transactions must be disclosed in advance to
Agent and Lenders.  All such transactions
existing as of the date hereof are described in Disclosure Schedule (6.4(a)).


 


(b)                                 No
Credit Party shall enter into any lending or borrowing transaction with any
employees of any Credit Party, except loans to its respective employees in the
ordinary course of business consistent with past practices for travel and
entertainment expenses, relocation costs and similar purposes up to a maximum
of $250,000 to any employee and up to a maximum of $1,000,000 in the aggregate
at any one time outstanding.


 


6.5                                 Capital Structure and Business.  No Credit Party shall (a) make any changes in
any of its business objectives, purposes or operations that could in any way
adversely affect the repayment of the Loans or any of the other Obligations or
could reasonably be expected to have or result in a Material Adverse Effect,
(b) make any change in its capital structure as described in Disclosure
Schedule (3.8), including the issuance or sale of any shares of Stock,
warrants or other securities convertible into Stock or any revision of the
terms of its outstanding Stock; provided, that Borrower may issue or
sell shares of its Stock for cash so long as (i) the proceeds thereof are
applied in prepayment of the Obligations as required by Section 1.3(b)(iii),
and (ii) no Change of Control occurs after giving effect thereto, or (c) amend
its charter or bylaws in a manner that would adversely affect Agent or Lenders
or such Credit Party’s duty or ability to repay the Obligations.  No Credit Party shall engage in any business
other than the businesses currently engaged in by it and those reasonably
related thereto.


 


53





















 


6.6                                 Guaranteed Indebtedness.  No Credit Party shall create, incur, assume
or permit to exist any Guaranteed Indebtedness except (a) by endorsement of
instruments or items of payment for deposit to the general account of any
Credit Party, and (b) for Guaranteed Indebtedness incurred for the benefit of
any other Credit Party if the primary Indebtedness or other obligation (other
than Indebtedness permitted under Sections 6.3(a)(vi)
and (vii)) is expressly permitted by this Agreement.


 


6.7                                 Liens.  No Credit
Party shall create, incur, assume or permit to exist any Lien on or with
respect to its Accounts or any of its other properties or assets (whether now
owned or hereafter acquired) except for (a) Permitted Encumbrances;  (b) Liens in existence on the date hereof and
summarized on Disclosure Schedule (6.7) including those Liens securing
the Indebtedness described on Disclosure Schedule (6.3), if any, and
permitted refinancings, extensions and renewals thereof, including extensions
or renewals of any such Liens; provided, that the principal amount of
the Indebtedness so secured is not increased and the Lien does not attach to
any other property; and (c) Liens created after the date hereof by conditional
sale or other title retention agreements (including Capital Leases) or in
connection with purchase money Indebtedness with respect to Equipment and
Fixtures acquired by any Credit Party in the ordinary course of business,
involving the incurrence of an aggregate amount of purchase money Indebtedness
and Capital Lease Obligations of not more than $2,000,000 outstanding at any
one time for all such Liens (provided, that such Liens attach only to
the assets subject to such purchase money debt and such Indebtedness is
incurred within twenty (20) days following such purchase and does not exceed
100% of the purchase price of the subject assets).  In addition, no Credit Party shall become a
party to any agreement, note, indenture or instrument, or take any other
action, that would prohibit the creation of a Lien on any of its properties or
other assets in favor of Agent, on behalf of itself and Lenders, as additional
collateral for the Obligations, except operating leases, purchase money
Indebtedness, Capital Leases or Licenses which prohibit Liens upon the assets
that are subject thereto.  The prohibition
provided for in this Section 6.7 specifically includes, without
limitation, any effort by Borrower or any other Credit Party (whether alone or
by providing assistance or other support to any other party-in-interest in the
Chapter 11 Cases) to prime or create pari passu to any claims or interests of
Lenders any Lien (other than for the Carve-Out Expenses up to the Carve-Out
Amount) irrespective of whether such claims or interest may be “ adequately protected.”


 


6.8                                 Sale of Stock and Assets.  No Credit Party shall sell, transfer, convey,
assign or otherwise dispose of any of its properties or other assets, including
the Stock of any of its Subsidiaries (whether in a public or a private offering
or otherwise) or any of its Accounts, other than (a) the sale of Inventory in
the ordinary course of business and the transfer of inventory in the ordinary
course of business between Borrower and AET Canada; (b) the sale, transfer,
conveyance or other disposition by a Credit Party of Equipment or Fixtures that
are obsolete or no longer used or useful in such Credit Party’s business and
having a book value not exceeding $1,000,000 in any single transaction or
$2,000,000 in the aggregate in any Fiscal Year; (c) other Equipment and
Fixtures having a value not exceeding $1,000,000 in any single transaction or
$2,000,000 in the aggregate in any Fiscal Year; and (d) the making and
repayment of intercompany loans and advances permitted under Section
6.3(a)(vi).  With respect to any
disposition of assets or other properties permitted pursuant to clauses (b)
and (c) above, subject to Section 1.3(b), Agent agrees on
reasonable prior written notice to release its Lien on such assets or other
properties in order to permit the applicable Credit Party to effect such
disposition


 


54





















 


and
shall execute and deliver to Borrower, at Borrower’s expense, appropriate UCC-3
termination statements and other releases as reasonably requested by Borrower.


 


6.9                                 ERISA.  No
Credit Party shall, or shall cause or permit any ERISA Affiliate to, cause or
permit to occur an event that could result in the imposition of a Lien under
Section 412 of the IRC or Section 302 or 4068 of ERISA or cause or permit to
occur an ERISA Event to the extent such ERISA Event could reasonably be
expected to have a Material Adverse Effect.


 


6.10                           Financial Covenants.  Borrower shall not breach or fail to
comply with any of the Financial Covenants.


 


6.11                           Hazardous Materials.  No Credit Party shall cause or permit a
Release of any Hazardous Material on, at, in, under, above, to, from or about
any of the Real Estate where such Release would (a) violate in any respect, or
form the basis for any Environmental Liabilities under, any Environmental Laws
or Environmental Permits or (b) otherwise adversely impact the value or marketability
of any of the Real Estate or any of the Collateral, other than such violations
or Environmental Liabilities that could not reasonably be expected to have a
Material Adverse Effect.


 


6.12                           Sale-Leasebacks.  No Credit Party shall engage in any sale-leaseback,
synthetic lease or similar transaction involving any of its assets.


 


6.13                           Cancellation of Indebtedness.  No Credit Party shall cancel any claim or
debt owing to it, except for reasonable consideration negotiated on an arm’s
length basis and in the ordinary course of its business consistent with past
practices.


 


6.14                           Restricted Payments; Employee Benefit Plan
Contributions.  No Credit Party shall
make any Restricted Payment, except (a) intercompany loans and advances
between Credit Parties to the extent permitted by Section 6.3 and any
payments in respect thereof; (b) dividends and distributions by
Subsidiaries of Borrower paid to Borrower, (c) employee loans permitted
under Section 6.4(b); and (d) payments of principal and interest of
Intercompany Notes issued in accordance with Section 6.3.  No Credit Party shall make any payments or
other contributions to any grantor trusts (also known as rabbi
trusts) associated with any Nonqualified Benefit Plans (or directly
to participants in such Plans) to the extent the amount of such
payment or other contribution would exceed the expense that such Credit
Party recognizes with respect to a Nonqualified Benefit Plan or Plans and
deducts as a current expense in determining net income of such Credit
Party in accordance with GAAP for the period in which such payment or other
contribution is made; provided, that nothing in this sentence shall
prevent an existing grantor trust associated with one or more Nonqualified
Plans from making benefit payments to beneficiaries in accordance with the
terms of such trust, as in effect on the Closing Date.


 


6.15                           Change of Corporate Name or Location; Change of
Fiscal Year.  No Credit Party shall
(a) change its name as it appears in official filings in the state of its
incorporation or other organization, (b) change its chief executive office,
principal place of business, corporate offices or warehouses or locations
(other than third party converter or processor locations) at which Collateral
is held or stored, or the location of its records concerning


 


55





















 


the Collateral, (c) change the type of entity that it
is, (d) change its organization identification number, if any, issued by its
state of incorporation or other organization, or (e) change its state of
incorporation or organization, in each case, without at least thirty (30) days
prior written notice to Agent and after Agent’s written acknowledgment that any
reasonable action requested by Agent in connection therewith, including to
continue the perfection of any Liens in favor of Agent, on behalf of Lenders,
in any Collateral, has been completed or taken, and provided, that any
such new location shall be in the continental United States.  No Credit Party shall change its Fiscal Year.


 


6.16                           No Impairment of Intercompany
Transfers.  No Credit Party shall
directly or indirectly enter into or become bound by any agreement, instrument,
indenture or other obligation (other than this Agreement and the other Loan
Documents) that could directly or indirectly restrict, prohibit or require the
consent of any Person with respect to the payment of dividends or distributions
or the making or repayment of intercompany loans by a Subsidiary of Borrower to
Borrower.


 


6.17                           No Speculative Transactions.  No Credit Party shall engage in any
transaction involving commodity options, futures contracts or similar
transactions, except solely to hedge against fluctuations in the prices of
commodities owned or purchased by it and the values of foreign currencies receivable
or payable by it and interest swaps, caps or collars.


 


6.18                           Changes Relating to Subordinated Debt, Material
Contracts.  No Credit Party shall
change or amend the terms of any Subordinated Debt or any Material Contract
(other than immaterial amendments and waivers as consented in writing to by the
Agent).  No Credit Party shall change or
amend the terms of any early payment provisions of any Nonqualified Benefit
Plans without the prior written consent of the Agent.


 


6.19                           AET Limited. 
Borrower shall cause AET Limited to not engage in any trade or business,
or own or hold any assets (other than, for a period of 60 days following the
Closing Date, the bank account referenced in Annex C and cash on deposit
therein in an amount not exceeding $50,000 at any time), or incur any
Indebtedness or Guaranteed Indebtedness or other material liabilities.


 


6.20                           Repayment of Indebtedness.  Except pursuant to a confirmed reorganization
plan and except as specifically permitted hereunder, Borrower shall not,
without the express prior written consent of Lenders or pursuant to an order of
the Bankruptcy Court after notice and hearing, make any payment or transfer
with respect to any Lien or Indebtedness incurred or arising prior to the
filing of the Chapter 11 Cases that is subject to the automatic stay provisions
of the Bankruptcy Code whether by way of “adequate protection” under the
Bankruptcy Code or otherwise.


 


6.21                           Reclamation Claims.  No Credit Party shall enter into any
agreement to return any of its Inventory to any of its creditors for
application against any Prepetition Indebtedness, Prepetition trade payables or
other Prepetition claims under Section 546(g) of the Bankruptcy Code or allow
any creditor to take any setoff or recoupment against any of its Prepetition
Indebtedness, Prepetition trade payables or other Prepetition claims based upon
any such return pursuant to Section 553(b)(1) of the Bankruptcy Code or
otherwise if, after giving


 


56





















 


effect
to any such agreement, setoff or recoupment, the aggregate amount of
Prepetition Indebtedness, Prepetition trade payables and other Prepetition
claims subject to all such agreements, setoffs and recoupments since the
Petition Date would exceed $5,000,000. Subject to the foregoing limitation, the
Borrower shall be permitted to make payments in respect of Prepetition trade
payables that are in the ordinary course of business so long as such payments
are approved by the Bankruptcy Court.


 


7.                                      TERM


 


7.1                                 Termination. 
The financing arrangements contemplated hereby shall be in effect until
the Commitment Termination Date, and the Loans and all other Obligations shall
be automatically due and payable in full on such date.


 


7.2                                 Survival of Obligations Upon
Termination of Financing Arrangements. 
Except as otherwise expressly provided for in the Loan Documents, no
termination or cancellation (regardless of cause or procedure) of any financing
arrangement under this Agreement shall in any way affect or impair the
obligations, duties and liabilities of the Credit Parties or the rights of
Agent and Lenders relating to any unpaid portion of the Loans or any other
Obligations, due or not due, liquidated, contingent or unliquidated, or any
transaction or event occurring prior to such termination, or any transaction or
event, the performance of which is required after the Commitment Termination
Date.  Except as otherwise expressly
provided herein or in any other Loan Document, all undertakings, agreements,
covenants, warranties and representations of or binding upon the Credit
Parties, and all rights of Agent and each Lender, all as contained in the Loan
Documents, shall not terminate or expire, but rather shall survive any such
termination or cancellation and shall continue in full force and effect until
the Termination Date; provided, that the provisions of Section 11,
the payment obligations under Sections 1.15 and 1.16, and the
indemnities contained in the Loan Documents shall survive the Termination Date.


 


8.                                      EVENTS OF DEFAULT; RIGHTS AND REMEDIES


 


8.1                                 Events of Default.  Notwithstanding the provisions of Section 362
of the Bankruptcy Code and without application or motion to the Bankruptcy
Court or any notice to any Credit Party, and subject to Section 8.2(b),
the occurrence of any one or more of the following events (regardless of the
reason therefor) shall constitute an “Event of Default” hereunder:


 


(a)                                  Borrower
(i) fails to make any payment of principal of, or interest on, or Fees owing in
respect of, the Loans or any of the other Obligations when due and payable, or
(ii) fails to pay or reimburse Agent or Lenders for any expense reimbursable
hereunder or under any other Loan Document within ten (10) days following Agent’s
demand for such reimbursement or payment of expenses.


 


(b)                                 Any
Credit Party fails or neglects to perform, keep or observe any of the
provisions of Sections 1.4, 1.8, 1.18, 1.21, 1.22, 5.4(a) or 6, or any
of the provisions set forth in Annexes C or G, respectively.


 


57





















 


(c)                                  Borrower
fails or neglects to perform, keep or observe any of the provisions of Section
4 or any provisions set forth in Annexes E or F, respectively, and
the same shall remain unremedied for five (5) days or more.


 


(d)                                 Any
Credit Party or any Guarantor fails or neglects to perform, keep or observe any
other provision of this Agreement or of any of the other Loan Documents (other
than any provision embodied in or covered by any other clause of this Section
8.1) and the same shall remain unremedied for thirty (30) days or more.


 


(e)                                  Except
for defaults occasioned by the filing of the Chapter 11 Cases and defaults
resulting from obligations with respect to which the Bankruptcy Code prohibits
any Credit Party from complying or permits any Credit Party not to comply, a
default or breach occurs under any other agreement, document or instrument  entered into either (x) Prepetition and which
is affirmed after the Petition Date or (y) Postpetition, to which any Credit
Party or any Guarantor is a party that is not cured within any applicable grace
period therefor, and such default or breach (i) involves the failure to make
any payment when due in respect of any Indebtedness or Guaranteed Indebtedness
(other than the Obligations) of any Credit Party or any Guarantor in excess of
$500,000 in aggregate principal amount (including (x) undrawn committed or
available amounts and (y) amounts owing to all creditors under any combined or
syndicated credit arrangements), or (ii) causes, or permits any holder of such
Indebtedness or Guaranteed Indebtedness or a trustee to cause, Indebtedness or
Guaranteed Indebtedness or a portion thereof in excess of $500,000 in the
aggregate to become due prior to its stated maturity or prior to its regularly
scheduled dates of payment, or cash collateral in respect thereof to be
demanded, in each case, regardless of whether such default is waived, or such
right is exercised, by such holder or trustee.


 


(f)                                    Any
information contained in any Borrowing Base Certificate is untrue or incorrect
in any respect (other than inadvertent, immaterial errors not exceeding
$100,000 in the aggregate in any Borrowing Base Certificate), or any
representation or warranty herein or in any Loan Document is untrue or
incorrect in any material respect when made or any representation or warranty
in any written statement, report, financial statement or certificate (other
than a Borrowing Base Certificate) made or delivered to Agent or any Lender by
any Credit Party or any Guarantor is untrue or incorrect in any material
respect as of the date when made or deemed made.


 


(g)                                 Assets
of any Credit Party or any Guarantor with a fair market value of $250,000 or
more are attached, seized, levied upon or subjected to a writ or distress
warrant, or come within the possession of any receiver, trustee, custodian or
assignee for the benefit of creditors of any Credit Party or any Guarantor and
such condition continues for thirty (30) days or more.


 


(h)                                 Any
Event of Default under and as defined in any Mortgage shall occur and be continuing.


 


(i)                                     Any
“default”, “event of default” or “termination event” under and as defined in
any of the Material Contracts shall have occurred.


 


58





















 


(j)                                     A
final judgment or judgments for the payment of money in excess of $250,000 in
the aggregate at any time are outstanding against one or more of the Credit
Parties and the same are not, within thirty (30) days after the entry thereof,
discharged or execution thereof stayed or bonded pending appeal, or such judgments
are not discharged prior to the expiration of any such stay.


 


(k)                                  Any
material provision of any Loan Document for any reason ceases to be valid,
binding and enforceable in accordance with its terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws relative to or affecting the
enforcement of creditors’ rights generally in effect from time to time) or any
Credit Party or any Guarantor shall challenge the enforceability of any Loan
Document or shall assert in writing, or engage in any action or inaction based
on any such assertion, that any provision of any of the Loan Documents has
ceased to be or otherwise is not valid, binding and enforceable in accordance
with its terms, or any Lien created under any Loan Document ceases to be a
valid and perfected first priority Lien (except as otherwise permitted herein
or therein) in any of the Collateral purported to be covered thereby, other
than Collateral having a fair market value of less than $100,000 in the
aggregate.


 


(l)                                     Any
Change of Control or Senior Note Remedy Event occurs.


 


(m)                               Any
event occurs, whether or not insured or insurable, as a result of which
revenue-producing activities cease or are substantially curtailed at any facility
of any Credit Party generating more than 7.5% of Borrower’s consolidated
revenues for the Fiscal Year preceding such event and such cessation or
curtailment continues for more than twenty (20) days.


 


(n)                                 (i)
The Ex-Im Bank Guarantee is terminated (other than as a result of the scheduled
maturity of the Ex-Im Bank Guarantee) or any material provision of the Ex-Im
Bank Guarantee for any reason ceases to be valid, binding and enforceable in
accordance with its terms (or Ex-Im Bank shall challenge the enforceability of
the Ex-Im Bank Guarantee or shall assert in writing, or engage in any action or
inaction based on any such assertion, that any provision of the Ex-Im Bank
Guarantee has ceased to be or otherwise is not valid, binding and enforceable
in accordance with its terms) and (ii) any Export Related Advances remain
outstanding as of 5:00 p.m. (New York time) on the first (1st) Business Day
following any event referred to in the foregoing clause (i).


 


(o)                                 The
occurrence of any of the following in any Chapter 11 Case:


 


(i)                                     the
bringing of a motion, taking of any action or the filing of any plan of
reorganization or disclosure statement attendant thereto by Borrower or, as
applicable, any Credit Party, in a Chapter 11 Case:  (w) to obtain additional financing under
Section 364(c) or (d) of the Bankruptcy Code not otherwise permitted pursuant
to this Agreement; (x) to grant any Lien other than Permitted Encumbrances upon
or affecting any Collateral; (y) except as provided in the Interim or Final
Order, as the case may be, to use cash collateral of Agent under Section 363(c)
of the Bankruptcy Code without the prior written consent of the Agent and the
Lenders; or (z) any other action or actions adverse to the Agent and the
Lenders or their rights and remedies hereunder or their interest in the
Collateral;


 


59





















 


(ii)                                  the
filing of any plan of reorganization or disclosure statement attendant thereto
by Borrower, any Credit Party or any other Person to which the Lenders do not
consent or otherwise agree to the treatment of their claims;


 


(iii)                               the
entry of an order in any Chapter 11 Case confirming a plan or plans of
reorganization that does not contemplate the repayment in full in cash of all
of the Obligations under this Agreement as a condition precedent to the
effectiveness of such plan of reorganization;


 


(iv)                              the
entry of an order amending, supplementing, staying, vacating or otherwise
modifying the Loan Documents or the Interim Order or the Canadian Interim Order
or the Final Order or the Canadian Final Order without the written consent of
the Agent or the filing of a motion for reconsideration with respect to the
Interim Order, the Canadian Interim Order, the Final Order or the Canadian
Final Order;


 


(v)                                 the Final Order is not entered before or immediately
following the expiration of the Interim Order;


 


(vi)                              the
payment of, or application for authority to pay, any Prepetition claim without
the Lenders’ prior written consent or pursuant to an order of the Bankruptcy
Court after notice and hearing unless otherwise permitted under this Agreement;


 


(vii)                           the
allowance of any claim or claims under Section 506(c) of the Bankruptcy Code
against or with respect to any of the Collateral, other than the Carve-Out
Expenses;


 


(viii)                        the
appointment of an interim or permanent trustee in any Chapter 11 Case or the
appointment of a receiver or an examiner in any Chapter 11 Case with expanded
powers to operate or manage the financial affairs, the business, or
reorganization of Borrower or any other Credit Party; or the sale without the
Agent and Lenders’ consent, of all or substantially all of Borrower’s or other
Credit Parties’ assets either through a sale under Section 363 of the
Bankruptcy Code, through a confirmed plan of reorganization in any Chapter 11
Case, or otherwise that does not provide for payment in full of the Obligations
and termination of Lenders’ commitment to make Loans;


 


(ix)                                the
dismissal of any Chapter 11 Case, or the conversion of any Chapter 11 Case from
one under Chapter 11 to one under Chapter 7 of the Bankruptcy Code or any
credit party shall file a motion or other pleading seeking the dismissal of any
Chapter 11 Case under Section 1112 of the Bankruptcy Code or otherwise;


 


(x)                                   the
entry of an order by the Court granting relief from or modifying the automatic
stay of Section 362 of the Bankruptcy Code (x) to allow any creditor to execute
upon or enforce a Lien on any Collateral, or (y) with respect to any Lien of or
the granting of any Lien on any Collateral to any state or local environmental
or regulatory agency or authority, which  in either case would have a Material
Adverse Effect;


 


(xi)                                the commencement of a suit or action against Agent or any
Lender and, as to any suit or action brought by any Person other than a Credit
Party or a Subsidiary,


 


60





















 


officer or employee of a Credit Party, the
continuation thereof without dismissal for thirty (30) days after service
thereof on Agent or such Lender, that asserts by or on behalf of Borrower or
any other Credit Party, the Environmental Protection Agency, any state
environmental protection or health and safety agency, or any official committee
in any Chapter 11 Case, any claim or legal or equitable remedy which seeks
subordination of the claim or Lien of Agent or the Lenders;


 


(xii)                             the entry of an order in any Chapter 11 Case avoiding or
requiring repayment of any portion of the payments made on account of the
Obligations owing under this Agreement;


 


(xiii)                          the failure
of Borrower to comply with the terms of the Interim Order, the Canadian Interim
Order, the Final Order or the Canadian Final Order; or


 


(xiv)                         the entry of an order in any Chapter 11 Case granting any
other super-priority administrative claim or Lien equal or superior to that
granted to Agent, on behalf of itself and Lenders.


 


8.2                                 Remedies.


 


(a)                                  If
any Default or Event of Default has occurred and is continuing, Agent may (and
at the written request of the Requisite Revolving Lenders shall), notwithstanding
the provisions of Section 362 of the Bankruptcy Code, without any application,
motion or notice to or order from the Bankruptcy Court but subject to the
Interim Order and the Final Order, suspend the Revolving Loan facility with
respect to additional Advances and/or the incurrence of additional Letter of
Credit Obligations, whereupon any additional Advances and additional Letter of
Credit Obligations shall be made or incurred in Agent’s sole discretion (or in
the sole discretion of the Requisite Revolving Lenders, if such suspension
occurred at their direction) so long as such Default or Event of Default is
continuing.  If any Default or Event of
Default has occurred and is continuing, Agent may (i) (and at the written
request of Requisite Revolving Lenders shall), notwithstanding the provisions
of Section 362 of the Bankruptcy Code, without any application, motion or
notice to or order from the Bankruptcy Court but subject to the Interim Order
and the Final Order, except as otherwise expressly provided herein, increase
the rate of interest applicable to the Revolving Loans and the Letter of Credit
Fees to the Default Rate and (ii) (and at the written request of Requisite Term
Lenders shall), without notice except as otherwise expressly provided herein, increase
the rate of interest applicable to the Term Loans and Last Out Term Loans to
the Default Rate.


 


(b)                                 If
any Event of Default has occurred and is continuing, Agent may (and at the
written request of the Requisite Revolving Lenders shall), notwithstanding the
provisions of Section 362 of the Bankruptcy Code, without any application,
motion or notice to or order from, the Bankruptcy Court but subject to the
Interim Order and the Final Order: (i) terminate the Revolving Loan facility
with respect to further Advances or the incurrence of further Letter of Credit
Obligations; and (ii) Agent may (and at the written request of the
Requisite Lenders (or at the request of the Requisite Term Lenders, Requisite
Last Out Lenders or Requisite Revolving Lenders as provided in clause (c)(i)
below) shall), (x) declare all or any portion of the Obligations,
including all or any portion of any Loan to be forthwith due and payable, and
require that the Letter of Credit Obligations be cash collateralized as
provided in Annex B, all


 


61





















 


without presentment, demand, protest or further notice
of any kind, all of which are expressly waived by Borrower and each other
Credit Party; and/or (y) exercise any rights and remedies provided to
Agent under the Loan Documents or at law or equity, including all remedies
provided under the Code; and pursuant to the Interim Order and the Final Order,
the automatic stay of Section 362 of the Bankruptcy Code shall be modified and
vacated to permit Lenders to exercise their remedies under this Agreement and
the Loan Documents, without further application or motion to, or order from,
the Bankruptcy Court, provided, however, notwithstanding anything to the
contrary contained herein, the Agent shall be permitted to exercise any remedy
in the nature of a liquidation of, or foreclosure on, any interest of Borrower
or any other Credit Party in the Collateral only upon three (3) Business Days’
prior written notice to Borrower or such other Credit Party, the Committee, the
United States Trustee and counsel for the Committee.  Upon the occurrence of an Event of Default
and the exercise by Lenders of their rights and remedies under this Agreement
and the other Loan Documents, Borrower and each other Credit Party shall assist
Lenders in effecting a sale or other disposition of the Collateral upon such
terms as are designed to maximize the proceeds obtainable from such sale or
other disposition.


 


(c)                                  Notwithstanding
anything herein or in the other Loan Documents to the contrary, Agent and
Lenders hereby agree that, (i) at any time after the occurrence of any Event of
Default which is continuing, (x) Requisite Term Lenders (without consent of any
Revolving Lender or Last Out Term Lender and without regard to the vote of the
Requisite Lenders) shall be permitted to declare the Term Loan to be forthwith
due and payable, (y) Requisite Revolving Lenders (without consent of any Term
Lender or Last Out Term Lender and without regard to the vote of the Requisite
Lenders) shall be permitted to declare the Revolving Loan and the
Export-Related Loan to be forthwith due and payable and require that the Letter
of Credit Obligations be cash collateralized as provided in Annex B, and
(z) Requisite Last Out Term Lenders (without consent of any Revolving Lender
and without regard to the vote of the Requisite Lenders) shall be permitted to
declare the Last Out Term Loan to be forthwith due and payable, and (ii) if any
of the Loans become or are declared to be immediately due and payable in
accordance with this Section 8.2, (x) Requisite Term Lenders (without
consent of any Revolving Lender or Last Out Term Lender and without regard to
the vote of the Requisite Lenders) shall have the exclusive right to (and to
direct the Agent to) enforce rights and remedies with respect to the Term Loan
Priority Collateral pursuant to the Loan Documents and no Revolving Lender or
Last Out Term Lender shall take any Collateral Enforcement Action and (y)
Requisite Revolving Lenders (without consent of any Term Lender or Last Out
Term Lender and without regard to the vote of the Requisite Lenders) shall have
the exclusive right to (and to direct the Agent to) enforce rights and remedies
with respect to the Revolving Loan Priority Collateral pursuant to the Loan
Documents and no Term Lender or Last Out Term Lender shall take any Collateral
Enforcement Action.


 


8.3                                 Waivers by Credit Parties.  Except as otherwise provided for in this
Agreement or by applicable law, each Credit Party waives:  (a) presentment, demand and protest and
notice of presentment, dishonor, notice of intent to accelerate, notice of
acceleration, protest, default, nonpayment, maturity, release, compromise,
settlement, extension or renewal of any or all commercial paper, accounts,
contract rights, documents, instruments, chattel paper and guaranties at any
time held by Agent on which any Credit Party may in any way be liable, and
hereby ratifies and confirms whatever Agent may do in this regard, (b) all
rights to notice and a


 


62





















 


hearing prior to Agent’s taking possession or control
of, or to Agent’s replevy, attachment or levy upon, the Collateral or any bond
or security that might be required by any court prior to allowing Agent to
exercise any of its remedies, and (c) the benefit of all valuation, appraisal,
marshaling and exemption laws.


 


9.                                      ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT


 


9.1                                 Assignment and Participations.


 


(a)                                  Subject
to the terms of this Section 9.1, any Lender may make an assignment to a
Qualified Assignee of, or sell participations in, at any time or times, the
Loan Documents, Loans, Letter of Credit Obligations and any Commitment or any
portion thereof or interest therein, including any Lender’s rights, title,
interests, remedies, powers or duties thereunder.  Any assignment by a Lender shall: (i) require
the consent of Agent (which consent shall not be unreasonably withheld or
delayed with respect to a Qualified Assignee) and the execution of an
assignment agreement (an “Assignment Agreement”) substantially in the
form attached hereto as Exhibit 9.1(a) and otherwise in form and
substance reasonably satisfactory to, and acknowledged by, Agent; (ii) be
conditioned on such assignee Lender representing to the assigning Lender and
Agent that it is purchasing the applicable Loans to be assigned to it for its
own account, for investment purposes and not with a view to the distribution
thereof; (iii) after giving effect to any such partial assignment, the assignee
Lender shall have Commitments in an amount at least equal to $5,000,000 and the
assigning Lender shall have retained Commitments in an amount at least equal to
$10,000,000; (iv) include a payment to Agent of an assignment fee of $3,500;
and (v) so long as no Event of Default has occurred and is continuing, require
the consent of Borrower, which shall not be unreasonably withheld or
delayed.  In the case of an assignment by
a Lender under this Section 9.1, the assignee shall have, to the extent
of such assignment, the same rights, benefits and obligations as all other
Lenders hereunder.  The assigning Lender
shall be relieved of its obligations hereunder with respect to its Commitments
or assigned portion thereof from and after the date of such assignment.  Borrower hereby acknowledges and agrees that
any assignment shall give rise to a direct obligation of Borrower to the
assignee and that the assignee shall be considered to be a “Lender”.  In all instances, each Lender’s liability to
make Loans hereunder shall be several and not joint and shall be limited to
such Lender’s Pro Rata Share of the applicable Commitment.  In the event Agent or any Lender assigns or
otherwise transfers all or any part of the Obligations, Agent or any such
Lender shall so notify Borrower and Borrower shall, upon the request of Agent
or such Lender, execute new Notes in exchange for the Notes, if any, being
assigned, which shall be cancelled upon return. 
Notwithstanding the foregoing provisions of this Section 9.1(a),
any Lender may at any time pledge the Obligations held by it and such Lender’s
rights under this Agreement and the other Loan Documents to a Federal Reserve
Bank, and any Lender that is an investment fund may assign the Obligations held
by it and such Lender’s rights under this Agreement and the other Loan
Documents to another investment fund managed by the same investment advisor; provided,
that no such pledge to a Federal Reserve Bank shall release such Lender from
such Lender’s obligations hereunder or under any other Loan Document.


 


(b)                                 Any
participation by a Lender of all or any part of its Commitments shall be made
with the understanding that all amounts payable by Borrower hereunder shall be
determined as if that Lender had not sold such participation, and that the
holder of any such


 


63





















 


participation shall not be entitled to require such
Lender to take or omit to take any action hereunder except actions directly
affecting (i) any reduction in the principal amount of, or interest rate or
Fees payable with respect to, any Loan in which such holder participates, (ii)
any extension of the scheduled amortization of the principal amount of any Loan
in which such holder participates or the final maturity date thereof, and (iii)
any release of all or substantially all of the Collateral (other than in
accordance with the terms of this Agreement, the Collateral Documents or the
other Loan Documents).  Solely for
purposes of Sections 1.13, 1.15, 1.16 and 9.8, Borrower acknowledges and
agrees that a participation shall give rise to a direct obligation of Borrower
to the participant and the participant shall be considered to be a “Lender” provided,
that no participant shall be entitled to receive any greater amount pursuant to
Sections 1.13, 1.15 and 1.16 than the transferor Lender would have been
entitled to receive in respect of the amount of the participation transferred
by such transferor Lender to such participant had no such transfer
occurred.  Except as set forth in the
preceding sentence no Borrower or Credit Party shall have any obligation or
duty to any participant.  Neither Agent
nor any Lender (other than the Lender selling a participation)
shall have any duty to any participant and may continue to deal solely with the
Lender selling a participation as if no such sale had occurred.


 


(c)                                  Except
as expressly provided in this Section 9.1, no Lender shall, as between
Borrower and that Lender, or Agent and that Lender, be relieved of any of its
obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or granting of participation in, all or any part of the Loans,
the Notes or other Obligations owed to such Lender.


 


(d)                                 Each
Credit Party executing this Agreement shall assist Agent to sell assignments or
participations under this Section 9.1 as reasonably required to enable
the assigning or selling Lender to effect any such assignment or participation,
including the execution and delivery of any and all agreements, notes and other
documents and instruments as shall be requested and, if requested by Agent, the
preparation of informational materials for, and the participation of management
in meetings with, potential assignees or participants.  Each Credit Party executing this Agreement
shall certify the correctness, completeness and accuracy of all descriptions of
the Credit Parties and their respective affairs contained in any selling
materials provided by them and all other information provided by them and
included in such materials, except that any Projections delivered by Borrower
shall only be certified by Borrower as having been prepared by Borrower in
compliance with the representations contained in Section 3.4(b).


 


(e)                                  Any
Lender may furnish any information concerning Credit Parties in the possession
of such Lender from time to time to assignees and participants (including
prospective assignees and participants); provided,
that such Lender shall obtain from assignees or participants confidentiality
covenants substantially equivalent to those contained in Section 11.8.


 


(f)                                    Notwithstanding
anything to the contrary contained herein, any Lender (a “Granting Lender”),
may grant to a special purpose funding vehicle (an “SPC”), identified as
such in writing by the Granting Lender to Agent and Borrower, the option to
provide to Borrower all or any part of any Loans that such Granting Lender
would otherwise be obligated to make to Borrower pursuant to this Agreement; provided,
that (i) nothing herein shall constitute a commitment by any SPC to make any
Loan; and (ii) if an SPC elects not to exercise such option or otherwise fails
to provide all or any part of such Loan, the Granting Lender shall be obligated


 


64





















 


to
make such Loan pursuant to the terms hereof. 
The making of a Loan by an SPC hereunder shall utilize the Commitment of
the Granting Lender to the same extent, and as if such Loan were made by such
Granting Lender.  No SPC shall be liable
for any indemnity or similar payment obligation under this Agreement (all
liability for which shall remain with the Granting Lender).  Any SPC may (i) with notice to, but without
the prior written consent of, Borrower and Agent assign all or a portion of its
interests in any Loans to the Granting Lender or to any financial institutions
(consented to by Borrower and Agent) providing liquidity and/or credit support
to or for the account of such SPC to support the funding or maintenance of
Loans and (ii) disclose on a confidential basis any non-public information
relating to its Loans to any rating agency, commercial paper dealer or provider
of any surety, guarantee or credit or liquidity enhancement to such SPC.  This Section 9.1(g) may not be amended
without the prior written consent of each Granting Lender, all or any of whose
Loans are being funded by an SPC at the time of such amendment.  For the avoidance of doubt, the Granting
Lender shall for all purposes, including without limitation, the approval of
any amendment or waiver of any provision of any Loan Document or the obligation
to pay any amount otherwise payable by the Granting Lender under the Loan
Documents, continue to be the Lender of record hereunder.


 


(g)                                 So
long as no Event of Default has occurred and is continuing, no Lender shall
assign or sell participations in any portion of its Loans or Commitments to a
potential Lender or participant, if, as of the date of the proposed assignment
or sale, the assignee Lender or participant would be subject to capital
adequacy or similar requirements under Section 1.16(a), increased costs
under Section 1.16(b), an inability to fund LIBOR Loans under Section
1.16(c), or withholding taxes in accordance with Section 1.15(a).


 


9.2                                 Appointment of Agent.  GE Capital is hereby appointed to act on
behalf of all Lenders as Agent under this Agreement and the other Loan
Documents.  Without limiting the
generality of the foregoing, each Lender hereby authorizes GE Capital to
consent, on behalf of each Lender, to an Interim Order substantially in the
form attached as Exhibit A-4 hereto, to the Canadian Interim Order, to
the Final Order and to the Canadian Final Order.  The provisions of this Section 9.2 are
solely for the benefit of Agent and Lenders and no Credit Party nor any other
Person shall have any rights as a third party beneficiary of any of the
provisions hereof.  In performing its
functions and duties under this Agreement and the other Loan Documents, Agent
shall act solely as an agent of Lenders and does not assume and shall not be
deemed to have assumed any obligation toward or relationship of agency or trust
with or for any Credit Party or any other Person.  Agent shall have no duties or
responsibilities except for those expressly set forth in this Agreement and the
other Loan Documents.  The duties of
Agent shall be mechanical and administrative in nature and Agent shall not
have, or be deemed to have, by reason of this Agreement, any other Loan
Document or otherwise a fiduciary relationship in respect of any Lender.  Except as expressly set forth in this
Agreement and the other Loan Documents, Agent shall not have any duty to
disclose, and shall not be liable for failure to disclose, any information
relating to any Credit Party or any of their respective Subsidiaries or any
Account Debtor that is communicated to or obtained by GE Capital or any of its
Affiliates in any capacity.  Neither
Agent nor any of its Affiliates nor any of their respective officers,
directors, employees, agents or representatives shall be liable to any Lender
for any action taken or omitted to be taken by it hereunder or under any other
Loan Document, or in connection herewith or therewith, except for damages
caused by its or their own gross negligence or willful misconduct.  The Agent is authorized to hold any
Collateral on behalf of the Lenders and to execute in their name any Loan


 


65





















 


Document.  For greater certainty, the Agent is
authorized to act as representative (fondé
de pouvoir) of the Lenders (notwithstanding that the Agent is also a
Lender) for the purposes of any hypothec granted by any Credit Party pursuant
to article 2692 of the Civil Code of Quebec
to secure debentures or similar instruments issued for the benefit of the
Lenders pursuant to the Quebec Hypothec.


 


If
Agent shall request instructions from Requisite Lenders, Requisite Revolving
Lenders, Requisite Term Lenders, Requisite Last Out Term Lenders or all
affected Lenders with respect to any act or action (including failure to act)
in connection with this Agreement or any other Loan Document, then Agent shall
be entitled to refrain from such act or taking such action unless and until
Agent shall have received instructions from Requisite Lenders, Requisite
Revolving Lenders, Requisite Term Lenders, Requisite Last Out Term Landers or
all affected Lenders, as the case may be, and Agent shall not incur liability
to any Person by reason of so refraining. 
Agent shall be fully justified in failing or refusing to take any action
hereunder or under any other Loan Document (a) if such action would, in the
opinion of Agent, be contrary to law or the terms of this Agreement or any
other Loan Document, (b) if such action would, in the opinion of Agent, expose
Agent to Environmental Liabilities or (c) if Agent shall not first be
indemnified to its satisfaction against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such
action.  Without limiting the foregoing,
no Lender shall have any right of action whatsoever against Agent as a result
of Agent acting or refraining from acting hereunder or under any other Loan
Document in accordance with the instructions of Requisite Lenders, Requisite
Revolving Lenders, Requisite Term Lenders, Requisite Last Out Term Lenders or
all affected Lenders, as applicable.


 


9.3                                 Agent’s Reliance, Etc.  Neither Agent nor any of its Affiliates nor
any of their respective directors, officers, agents or employees shall be
liable for any action taken or omitted to be taken by it or them under or in
connection with this Agreement or the other Loan Documents, except for damages
caused by its or their own gross negligence or willful misconduct.  Without limiting the generality of the
foregoing, Agent:  (a) may treat the
payee of any Note as the holder thereof until Agent receives written notice of
the assignment or transfer thereof signed by such payee and in form reasonably
satisfactory to Agent; (b) may consult with legal counsel, independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts; (c) makes no warranty or
representation to any Lender and shall not be responsible to any Lender for any
statements, warranties or representations made in or in connection with this
Agreement or the other Loan Documents; (d) shall not have any duty to ascertain
or to inquire as to the performance or observance of any of the terms,
covenants or conditions of this Agreement or the other Loan Documents on the
part of any Credit Party or to inspect the Collateral (including the books and
records) of any Credit Party; (e) shall not be responsible to any Lender for
the due execution, legality, validity, enforceability, genuineness, sufficiency
or value of this Agreement or the other Loan Documents or any other instrument
or document furnished pursuant hereto or thereto; and (f) shall incur no
liability under or in respect of this Agreement or the other Loan Documents by
acting upon any notice, consent, certificate or other instrument or writing
(which may be by telecopy, telegram, cable or telex) believed by it to be
genuine and signed or sent by the proper party or parties.


 


66





















 


9.4                                 GE Capital and Affiliates.  With respect to its Commitments hereunder,
GE Capital shall have the same rights and powers under this Agreement and
the other Loan Documents as any other Lender and may exercise the same as
though it were not Agent; and the term “Lender” or “Lenders” shall, unless
otherwise expressly indicated, include GE Capital in its individual
capacity.  GE Capital and its Affiliates
may lend money to, invest in, and generally engage in any kind of business
with, any Credit Party, any of their Affiliates and any Person who may do
business with or own securities of any Credit Party or any such Affiliate, all
as if GE Capital were not Agent and without any duty to account therefor to
Lenders.  GE Capital and its Affiliates
may accept fees and other consideration from any Credit Party for services in
connection with this Agreement or otherwise without having to account for the
same to Lenders.  Each Lender
acknowledges the potential conflict of interest between GE Capital as a Lender
holding disproportionate interests in the Loans and GE Capital as Agent.


 


9.5                                 Lender Credit Decision.  Each Lender acknowledges that it has,
independently and without reliance upon Agent or any other Lender and based on
the Financial Statements referred to in Section 3.4(a) and such other
documents and information as it has deemed appropriate, made its own credit and
financial analysis of the Credit Parties and its own decision to enter into
this Agreement.  Each Lender also
acknowledges that it will, independently and without reliance upon Agent or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement. 
Each Lender acknowledges the potential conflict of interest of each
other Lender as a result of Lenders holding disproportionate interests in the
Loans, and expressly consents to, and waives any claim based upon, such
conflict of interest.


 


9.6                                 Indemnification.  Lenders agree to indemnify Agent (to the
extent not reimbursed by Credit Parties and without limiting the obligations of
Credit Parties hereunder), ratably according to their respective Pro Rata
Shares, from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever, including Environmental Liability that may be
imposed on, incurred by, or asserted against Agent in any way relating to or
arising out of this Agreement or any other Loan Document or any action taken or
omitted to be taken by Agent in connection therewith; provided, that no
Lender shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from Agent’s gross negligence or willful misconduct.
Without limiting the foregoing, each Lender agrees to reimburse Agent promptly
upon demand for its ratable share of any out-of-pocket expenses (including
reasonable counsel and consultants’ fees) incurred by Agent in connection with
the preparation, execution, delivery, administration, modification, amendment
or enforcement (whether through negotiations, legal proceedings or otherwise)
of, or legal advice in respect of rights or responsibilities under, this
Agreement and each other Loan Document, to the extent that Agent is not
reimbursed for such expenses by Credit Parties.


 


9.7                                 Successor Agent.  Agent may resign at any time by giving not
less than thirty (30) days’ prior written notice thereof to Lenders and
Borrower.  Upon any such resignation, the
Requisite Lenders shall have the right to appoint a successor Agent, with, so
long as no Event of Default has occurred and is continuing, the consent of
Borrower, which shall not


 


67





















be
unreasonably withheld or delayed.  If no
successor Agent shall have been so appointed by the Requisite Lenders and shall
have accepted such appointment within thirty (30) days after the resigning
Agent’s giving notice of resignation, then the resigning Agent may, on behalf
of Lenders, appoint a successor Agent, which shall be a Lender, if a Lender is
willing to accept such appointment, or otherwise shall be a commercial bank or
financial institution or a subsidiary of a commercial bank or financial institution
if such commercial bank or financial institution is organized under the laws of
the United States of America or of any State thereof and has a combined capital
and surplus of at least $300,000,000.  If
no successor Agent has been appointed pursuant to the foregoing, within thirty
(30) days after the date such notice of resignation was given by the resigning
Agent, such resignation shall become effective and the Requisite Lenders shall
thereafter perform all the duties of Agent hereunder until such time, if any,
as the Requisite Lenders appoint a successor Agent as provided above.  Any successor Agent appointed by Requisite
Lenders hereunder shall be subject to the approval of Borrower, such approval
not to be unreasonably withheld or delayed; provided that such approval
shall not be required if a Default or an Event of Default has occurred and is
continuing.  Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
succeed to and become vested with all the rights, powers, privileges and duties
of the resigning Agent.  Upon the earlier
of the acceptance of any appointment as Agent hereunder by a successor Agent or
the effective date of the resigning Agent’s resignation, the resigning Agent
shall be discharged from its duties and obligations under this Agreement and
the other Loan Documents, except that any indemnity rights or other rights in
favor of such resigning Agent shall continue. 
After any resigning Agent’s resignation hereunder, the provisions of this
Section 9 shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was acting as Agent under this Agreement and the
other Loan Documents.


 


9.8                                 Setoff and Sharing of Payments.  In addition to any rights now or hereafter granted
under applicable law and not by way of limitation of any such rights, upon the
occurrence and during the continuance of any Event of Default and subject to Section
9.9(f), each Lender is hereby authorized (notwithstanding the provisions of
Section 362 of the Bankruptcy Code and without any application, motion or
notice to, or order from, the Bankruptcy Court but subject to the Interim Order
and the Final Order) at any time or from time to time, without notice to any
Credit Party or to any other Person, any such notice being hereby expressly
waived, to offset and to appropriate and to apply any and all balances held by
it at any of its offices for the account of Borrower or any Guarantor
(regardless of whether such balances are then due to Borrower or Guarantor) and
any other properties or assets at any time held or owing by that Lender or that
holder to or for the credit or for the account of Borrower or any Guarantor
against and on account of any of the Obligations that are not paid when due.  Any Lender exercising a right of setoff or
otherwise receiving any payment on account of the Obligations in excess of its
Pro Rata Share thereof shall purchase for cash (and the other Lenders or
holders shall sell) such participations in each such other Lender’s or holder’s
Pro Rata Share of the Obligations as would be necessary to cause such Lender to
share the amount so offset or otherwise received with each other Lender or
holder in accordance with their respective Pro Rata Shares (other than offset
rights exercised by any Lender with respect to Sections 1.13, 1.15 or 1.16).  Each Lender’s obligation under this Section
9.8 shall be in addition to and not in limitation of its obligations to
purchase a participation in an amount equal to its Pro Rata Share of the Swing
Line Loans under Section 1.1(d) and to purchase a participation in an
amount equal to its Pro Rata Share (based on Revolving Loan Commitments) of the
Export-Related Loan


 


68





















 


under
Section 1.1(e).  Each Credit Party
that is a Borrower or Guarantor agrees, to the fullest extent permitted by law
(notwithstanding the provisions of Section 362 of the Bankruptcy Code and
without any application, motion or notice to, or order from, the Bankruptcy
Court but subject to the Interim Order and the Final Order), that (a) any
Lender may exercise its right to offset with respect to amounts in excess of
its Pro Rata Share of the Obligations and may sell participations in such
amounts so offset to other Lenders and holders and (b) any Lender so purchasing
a participation in the Loans made or other Obligations held by other Lenders or
holders may exercise all rights of offset, bankers’ lien, counterclaim or
similar rights with respect to such participation as fully as if such Lender or
holder were a direct holder of the Loans and the other Obligations in the
amount of such participation. 
Notwithstanding the foregoing, if all or any portion of the offset
amount or payment otherwise received is thereafter recovered from the Lender
that has exercised the right of offset, the purchase of participations by that
Lender shall be rescinded and the purchase price restored without interest.


 


9.9                                 Advances; Payments; Non-Funding Lenders;
Information; Actions in Concert.


 


(a)                                  Advances;
Payments.


 


(i)                                     Revolving
Lenders shall refund or participate in the Swing Line Loan in accordance with clause
(iii) of Section 1.1(d).  If
the Swing Line Lender declines to make a Swing Line Loan or if Swing Line
Availability is zero, Agent shall notify Revolving Lenders, promptly after
receipt of a Notice of Revolving Credit Advance and in any event prior to 1:00
p.m. (New York time) on the date such Notice of Revolving Advance is received,
by telecopy, telephone or other similar form of transmission.  Each Revolving Lender shall make the amount
of such Lender’s Pro Rata Share of such Revolving Credit Advance available to
Agent in same day funds by wire transfer to Agent’s account as set forth in Annex
H not later than 2:00 p.m. (New York time) on the requested funding date,
in the case of an Index Rate Loan, and not later than 11:00 a.m. (New York
time) on the requested funding date, in the case of a LIBOR Loan.  After receipt of such wire transfers (or, in
the Agent’s sole discretion, before receipt of such wire transfers), subject to
the terms hereof, Agent shall make the requested Revolving Credit Advance to
Borrower not later than 3:00 p.m. (New York time) on the requested funding
date.  All payments by each Revolving
Lender shall be made without setoff, counterclaim or deduction of any kind.


 


(ii)                                  On
the 2nd Business Day of each calendar week or more frequently at Agent’s
election (each, a “Settlement Date”), Agent shall advise each Lender by
telephone, or telecopy of the amount of such Lender’s Pro Rata Share of
principal, interest and Fees paid for the benefit of Lenders with respect to
each applicable Loan.  Provided that each
Lender has funded all payments or Advances required to be made by it and has
purchased all participations required to be purchased by it under this
Agreement and the other Loan Documents as of such Settlement Date, Agent shall
pay to each Lender such Lender’s Pro Rata Share of principal, interest and Fees
paid by Borrower since the previous Settlement Date for the benefit of such
Lender on the Loans held by it.  To the
extent that any Lender (a “Non-Funding Lender”) has failed to fund all
such payments and Advances or failed to fund the purchase of all such
participations, Agent shall be entitled to set off the funding short-fall
against that Non-Funding Lender’s Pro Rata Share of all payments received
from Borrower.  Such payments


 


69





















 


shall
be made by wire transfer to such Lender’s account (as specified by such Lender
in Annex H or the applicable Assignment Agreement) not later than 2:00
p.m. (New York time) on the next Business Day following each Settlement Date.


 


(b)                                 Availability
of Lender’s Pro Rata Share.  Agent
may assume that each Revolving Lender will make its Pro Rata Share of each
Revolving Credit Advance available to Agent on each funding date.  If such Pro Rata Share is not, in fact, paid
to Agent by such Revolving Lender when due, Agent will be entitled to recover
such amount on demand from such Revolving Lender without setoff, counterclaim
or deduction of any kind.  If any
Revolving Lender fails to pay the amount of its Pro Rata Share forthwith upon
Agent’s demand, Agent shall promptly notify Borrower and Borrower shall
immediately repay such amount to Agent. 
Nothing in this Section 9.9(b) or elsewhere in this Agreement or
the other Loan Documents shall be deemed to require Agent to advance funds on
behalf of any Revolving Lender or to relieve any Revolving Lender from its
obligation to fulfill its Commitments hereunder or to prejudice any rights that
Borrower may have against any Revolving Lender as a result of any default by
such Revolving Lender hereunder.  To the
extent that Agent advances funds to Borrower on behalf of any Revolving Lender
and is not reimbursed therefor on the same Business Day as such Advance is
made, Agent shall be entitled to retain for its account all interest accrued on
such Advance until reimbursed by the applicable Revolving Lender.


 


(c)                                  Return
of Payments.


 


(i)                                     If
Agent pays an amount to a Lender under this Agreement in the belief or
expectation that a related payment has been or will be received by Agent from
Borrower and such related payment is not received by Agent, then Agent will be
entitled to recover such amount from such Lender on demand without setoff,
counterclaim or deduction of any kind.


 


(ii)                                  If
Agent determines at any time that any amount received by Agent under this
Agreement must be returned to Borrower or paid to any other Person pursuant to
any insolvency law or otherwise, then, notwithstanding any other term or
condition of this Agreement or any other Loan Document, Agent will not be
required to distribute any portion thereof to any Lender.  In addition, each Lender will repay to Agent on
demand any portion of such amount that Agent has distributed to such Lender,
together with interest at such rate, if any, as Agent is required to pay to
Borrower or such other Person, without setoff, counterclaim or deduction of any
kind.


 


(d)                                 Non-Funding
Lenders.  The failure of any Non-Funding
Lender to make any Revolving Credit Advance or any payment required by it
hereunder or to purchase any participation in any Swing Line Loan or
Export-Related Loan to be made or purchased by it on the date specified
therefor shall not relieve any other Lender (each such other Revolving Lender,
an “Other Lender”) of its obligations to make such Advance or purchase
such participation on such date, but neither any Other Lender nor Agent shall
be responsible for the failure of any Non-Funding Lender to make an Advance,
purchase a participation or make any other payment required hereunder.  Notwithstanding anything set forth herein to
the contrary, a Non-Funding Lender shall not have any voting or consent rights
under or with respect to any Loan Document or constitute a “Lender” or a
“Revolving Lender” (or be included in the calculation of “Requisite Lenders”,
“Requisite Revolving Lenders”, “Requisite Term Lenders” or “Requisite Last Out


 


70





















 


Term Lenders” hereunder)
for any voting or consent rights under or with respect to any Loan Document.  At Borrower’s request, Agent or a Person
reasonably acceptable to Agent shall have the right with Agent’s consent and in
Agent’s sole discretion (but shall have no obligation) to purchase from any
Non-Funding Lender, and each Non-Funding Lender agrees that it shall, at
Agent’s request, sell and assign to Agent or such Person, all of the
Commitments of that Non-Funding Lender for an amount equal to the principal
balance of all Loans held by such Non-Funding Lender and all accrued interest
and fees with respect thereto through the date of sale, such purchase and sale
to be consummated pursuant to an executed Assignment Agreement.


 


(e)                                  Dissemination
of Information.  Agent shall use
reasonable efforts to provide Lenders with any notice of Default or Event of
Default received by Agent from, or delivered by Agent to, any Credit Party,
with notice of any Event of Default of which Agent has actually become aware
and with notice of any action taken by Agent following any Event of Default; provided,
that Agent shall not be liable to any Lender for any failure to do so, except
to the extent that such failure is attributable to Agent’s gross negligence or
willful misconduct.  Lenders acknowledge
that Borrower is required to provide Collateral Reports to Agent in accordance
with Annex F hereto and agree that Agent shall have no duty to provide
the same to Lenders; provided, that Agent shall, upon request of any
Lender, provide to such Lender copies of the Borrowing Base Certificates
delivered to Agent (and upon Agent’s request Borrower shall provide to Agent
sufficient copies thereof for each such requesting Lender).


 


(f)                                    Actions
in Concert.  Anything in this
Agreement to the contrary notwithstanding, each Lender hereby agrees with each
other Lender that no Lender shall take any action to protect or enforce its
rights arising out of this Agreement or the Notes (including exercising any
rights of setoff) without first obtaining the prior written consent of Agent
and Requisite Lenders, it being the intent of Lenders that any such action to
protect or enforce rights under this Agreement and the Notes shall be taken in
concert and at the direction or with the consent of Agent or Requisite Lenders.


 


9.10                           Acknowledgements Regarding Collateral Bonds.  For greater certainty, and without limiting
the powers of the Agent hereunder or under any of the other Loan Documents, it
is hereby acknowledged and agreed that each of the Credit Parties may issue and
pledge to the Agent, as security for any of its indebtedness and liabilities
under any of the Loan Documents, bonds or debentures (any such bond or
debenture so issued and pledged, individually, a “Collateral Bond” and,
collectively, the “Collateral Bonds”) secured by a hypothec charging any
and all of their property and assets and granted pursuant to the laws of the
Province of Quebec to a fondé de pouvoir (holder
of the power of attorney) of the holder(s) of the related Collateral
Bonds.  In that respect, each Lender
acknowledges and agrees that the Agent shall hold each of the Collateral Bonds
so issued to it in pledge for its benefit and for the benefit of each of the
Lenders, and to the full extent necessary, each Lender, acting in the aforesaid
manner, hereby appoints the Agent for such purposes.  Each assignee of any Lender shall be deemed
to have confirmed and ratified the constitution of the Agent to act in the
manner set out in this Section 9.10 upon becoming a Lender under
this Agreement.  Notwithstanding the
provisions of Section 32 of An Act Respecting the
Special Powers of Legal Persons (Quebec), the fondé de
pouvoir (person holding the power of attorney) of the holder(s) of
any of the Collateral Bonds in whose favor a hypothec securing any such Collateral
Bond is granted may (but need not) be the Agent to whom such Collateral Bond
has been issued and pledged.  Each


 


71





















 


Lender
(by accepting the benefits of each Loan Document) acknowledges that each Collateral
Bond constitutes a title of indebtedness, as such term
is used in Article 2692 of the Civil Code of Quebec,
as amended.


 


10.                               SUCCESSORS AND ASSIGNS


 


10.1                           Successors and Assigns.  This Agreement and the other Loan Documents
shall be binding on and shall inure to the benefit of each Credit Party, Agent,
Lenders and their respective successors and assigns, except as otherwise
provided herein or therein.  No Credit
Party may assign, transfer, hypothecate or otherwise convey its rights,
benefits, obligations or duties hereunder or under any of the other Loan
Documents without the prior express written consent of Agent and Lenders.  Any such purported assignment, transfer,
hypothecation or other conveyance by any Credit Party without the prior express
written consent of Agent and Lenders shall be void.  The terms and provisions of this Agreement
are for the purpose of defining the relative rights and obligations of each
Credit Party, Agent and Lenders with respect to the transactions contemplated
hereby and no Person shall be a third party beneficiary of any of the terms and
provisions of this Agreement or any of the other Loan Documents.


 


11.                               MISCELLANEOUS


 


11.1                           Complete Agreement; Modification of Agreement.  The Loan Documents constitute the complete
agreement between the parties with respect to the subject matter thereof and
may not be modified, altered or amended except as set forth in Section 11.2.  Any letter of interest, commitment letter, or
fee letter (other than the GE Capital Fee Letter and other than terms under any
commitment letter which expressly survive the execution of this Agreement) or
confidentiality agreement, if any, between any Credit Party and Agent or any
Lender or any of their respective Affiliates, predating this Agreement and relating
to a financing of substantially similar form, purpose or effect shall be
superseded by this Agreement.


 


11.2                           Amendments and Waivers.


 


(a)                                  Except
for actions expressly permitted to be taken by Agent, no amendment,
modification, termination or waiver of any provision of this Agreement or any
other Loan Document, or any consent to any departure by any Credit Party
therefrom, shall in any event be effective unless the same shall be in writing
and signed by Agent and Borrower, and by Requisite Lenders, Requisite Revolving
Lenders, Requisite Term Lenders, Requisite Last Out Lenders or all affected
Lenders, as applicable.  Except as set
forth in clauses (b) and (c) below, all such amendments, modifications,
terminations or waivers requiring the consent of any Lenders shall require the
written consent of Requisite Lenders.


 


(b)                                 No
amendment, modification, termination or waiver of or consent with respect to
any provision of this Agreement that waives compliance with the conditions
precedent set forth in Section 2.2 to the making of any Revolving Credit
Advance, the incurrence of any Letter of Credit Obligations or the continuation
or conversion of any Loan as a LIBOR Loan shall be effective unless the same
shall be in writing and signed by Agent, Requisite Revolving Lenders (or (i)
with respect to the making of any Term Loan or the continuation or conversion
of a Term Loan as a LIBOR Loan, the Requisite Term Lenders or (ii) with respect
to the making of


 


72





















 


any Last Out Term Loan or the continuation or
conversion of a Last Out Term Loan as a LIBOR Loan, the Requisite Last Out Term
Lenders) and Borrower.  Notwithstanding
anything contained in this Agreement to the contrary, no waiver or consent with
respect to any Default or any Event of Default shall be effective for purposes
of the conditions precedent to the making of Term Loans, Last Out Term Loans,
Revolving Credit Advances or the incurrence of Letter of Credit Obligations set
forth in Section 2.2 unless the same shall be in writing and signed by
Agent, Requisite Term Lenders, Requisite Last Out Term Lenders or Requisite
Revolving Lenders, as applicable, and Borrower.


 


(c)                                  No
amendment, modification, termination or waiver shall, unless in writing and
signed by Agent and each Lender directly affected thereby: (i) increase the
principal amount of any Lender’s Commitment, which action shall be deemed only
to affect those Lenders whose Commitments are increased and may be approved by
Requisite Lenders, including those Lenders whose Commitments are increased;
(ii) reduce the principal of, rate of interest on or Fees payable with respect
to any Loan or Letter of Credit Obligations of any affected Lender; (iii)
extend any scheduled payment date (other than payment dates of mandatory
prepayments under Section 1.3(b)(ii)-(iv)) or final maturity date of the
principal amount of any Loan of any affected Lender; (iv) waive, forgive,
defer, extend or postpone any payment of interest or Fees as to any affected
Lender; (v) change the percentage of the Commitments or of the aggregate unpaid
principal amount of the Loans that shall be required for Lenders or any of them
to take any action hereunder; and (vi) amend or waive this Section 11.2
or the definitions of the terms “Requisite Lenders”, “Requisite Revolving
Lenders”, “Requisite Term Lenders” or “Requisite Last Out Term Lenders” insofar
as such definitions affect the substance of this Section 11.2.  Furthermore, no amendment, modification,
termination or waiver affecting the rights or duties of Agent or L/C Issuer
under this Agreement or any other Loan Document shall be effective unless in
writing and signed by Agent or L/C Issuer, as the case may be, in addition to
Lenders required hereinabove to take such action.  Each amendment, modification, termination or
waiver shall be effective only in the specific instance and for the specific
purpose for which it was given.  No
amendment, modification, termination or waiver shall be required for Agent to take
additional Collateral pursuant to any Loan Document.  No amendment, modification, termination or
waiver of any provision of any Note shall be effective without the written
concurrence of the holder of that Note.  No
notice to or demand on any Credit Party in any case shall entitle such Credit
Party or any other Credit Party to any other or further notice or demand in
similar or other circumstances.  Any
amendment, modification, termination, waiver or consent effected
in accordance with this Section 11.2 shall be binding upon each holder
of the Notes at the time outstanding and each future holder of the Notes.


 


(d)                                 If,
in connection with any proposed amendment, modification, waiver or termination
(a “Proposed Change”):


 


(i)                                     requiring
the consent of all affected Lenders, the consent of Requisite Lenders is
obtained, but the consent of other Lenders whose consent is required is not
obtained (any such Lender whose consent is not obtained as described in this clause
(i) and in clauses (ii), and (iii) below being referred to as
a “Non-Consenting Lender”),


 


(ii)                                  requiring the consent of Requisite Term Lenders (including
any vote of the Required Lenders), the consent of Term Lenders holding 51% or
more of the


 


73





















 


outstanding
principal amount of the Term Loan is obtained, but the consent of Requisite
Term Lenders is not obtained, or


 


(iii)                               requiring the consent of Requisite Last Out Term Lenders
(including any vote of the Required Lenders), the consent of Last Out Term
Lenders holding 51% or more of the outstanding principal amount of the Last Out
Term Loan is obtained, but the consent of Requisite Last Out Term Lenders is
not obtained,


 


then, so long as Agent is not a Non-Consenting Lender,
at Borrower’s request, Agent or a Person reasonably acceptable to Agent shall
have the right with Agent’s consent and in Agent’s sole discretion (but shall
have no obligation) to purchase from such Non-Consenting Lenders, and such
Non-Consenting Lenders agree that they shall, upon Agent’s request, sell and
assign to Agent or such Person, all of the Commitments of such Non-Consenting
Lenders for an amount equal to the principal balance of all Loans held by the
Non-Consenting Lenders and all accrued interest and Fees with respect thereto
through the date of sale, such purchase and sale to be consummated pursuant to
an executed Assignment Agreement.


 


(e)                                  Upon
payment in full in cash and performance of all of the Obligations (other than
indemnification Obligations), termination of the Commitments, and so long as no
suits, actions, proceedings or claims are pending or threatened against any
Indemnified Person asserting any damages, losses or liabilities that are
Indemnified Liabilities, Agent shall deliver to Borrower termination
statements, mortgage releases and other documents necessary or appropriate (as
reasonably requested by Borrower) to evidence the termination of the Liens
securing payment of the Obligations.


 


11.3                           Fees and Expenses.  Borrower shall reimburse Agent (and, with
respect to clauses (c) and (d) below, all Lenders) for all
out-of-pocket fees, costs and expenses, including the reasonable fees, costs
and expenses of counsel, consultants, auditors or other advisors (including
environmental and management consultants and appraisers), incurred in
connection with the negotiation and preparation of the Loan Documents and
incurred in connection with:


 


(a)                                  the forwarding to Borrower or any other Person on behalf of
Borrower by Agent of the proceeds of any Loan (including a wire transfer fee of
$25 per wire transfer);


 


(b)                                 any
amendment, modification or waiver of, consent with respect to, or termination
of, any of the Loan Documents or Related Transactions Documents or advice in
connection with the syndication and administration of the Loans made pursuant
hereto or its rights hereunder or thereunder;


 


(c)                                  any
litigation, contest, dispute, suit, proceeding or action (whether instituted by
Agent, any Lender, Borrower or any other Person and whether as a party, witness
or otherwise) in any way relating to the Collateral, any of the Loan Documents
or any other agreement to be executed or delivered in connection herewith or
therewith, including any litigation, contest, dispute, suit, case, proceeding
or action, and any appeal or review thereof, in connection with a case commenced
by or against any or all of the Borrower or any other Person that may be
obligated to Agent by virtue of the Loan Documents; including any such
litigation, contest, dispute, suit, proceeding or action arising in connection
with any work-out or


 


74





















 


restructuring of the Loans during the pendency of one
or more Events of Default; provided, that in the case of reimbursement
of counsel for Lenders other than Agent, such reimbursement shall be limited to
one counsel for all such Lenders; provided, further, that no
Person shall be entitled to reimbursement under this clause (c) in respect of
any litigation, contest, dispute, suit, proceeding or action to the extent any
of the foregoing results from such Person’s gross negligence or willful
misconduct;


 


(d)                                 any
attempt to enforce any remedies of Agent against any or all of the Credit
Parties or any other Person that may be obligated to Agent or any Lender by
virtue of any of the Loan Documents, including any such attempt to enforce any
such remedies in the course of any work-out or restructuring of the Loans
during the pendency of one or more Events of Default; provided, that in
the case of reimbursement of counsel for Lenders other than Agent, such
reimbursement shall be limited to one counsel for all such Lenders;


 


(e)                                  any workout or restructuring of the Loans during the
pendency of one or more Events of Default;


 


(f)                                    the obtaining of approval of the Loan Documents by the
Bankruptcy Court;


 


(g)                                 the
preparation and review of pleadings, documents and reports related to any
Chapter 11 Case and any subsequent case under Chapter 7 of the Bankruptcy Code,
attendance at meetings, court hearings or conferences related to any Chapter 11
Case and any subsequent case under Chapter 7 of the Bankruptcy Code, and
general monitoring of any Chapter 11 Case and any subsequent case under Chapter
7 of the Bankruptcy Code; and


 


(h)                                 efforts
to (i) monitor the Loans or any of the other Obligations, (ii) evaluate,
observe or assess any of the Credit Parties or their respective affairs, and
(iii) verify, protect, evaluate, assess, appraise, collect, sell, liquidate or
otherwise dispose of any of the Collateral; including, as to each of clauses
(a) through (h) above, all reasonable attorneys’ and other professional and
service providers’ fees arising from such services and other advice, assistance
or other representation, including those in connection with any appellate
proceedings, and all expenses, costs, charges and other fees incurred by such counsel
and others in connection with or relating to any of the events or actions
described in this Section 11.3, all of which shall be payable, on
demand, by Borrower to Agent.  Without
limiting the generality of the foregoing, such out-of-pocket fees expenses,
costs, charges and fees may include: fees, costs and expenses of accountants,
environmental consultants and advisors, appraisers, investment bankers,
management and other consultants and paralegals; court costs and expenses;
photocopying and duplication expenses; court reporter fees, costs and expenses;
long distance telephone charges; air express charges; telegram or telecopy
charges; secretarial overtime charges; and expenses for travel, lodging and
food paid or incurred in connection with the performance of such legal or other
advisory services.


 


11.4                           No Waiver. 
Agent’s or any Lender’s failure, at any time or times, to require strict
performance by the Credit Parties of any provision of this Agreement or any
other Loan Document shall not waive, affect or diminish any right of Agent or
such Lender thereafter to demand strict compliance and performance herewith or
therewith.  Any suspension or waiver


 


75





















 


of
an Event of Default shall not suspend, waive or affect any other Event of
Default whether the same is prior or subsequent thereto and whether the same or
of a different type.  Subject to the
provisions of Section 11.2, none of the undertakings, agreements,
warranties, covenants and representations of any Credit Party contained in this
Agreement or any of the other Loan Documents and no Default or Event of Default
by any Credit Party shall be deemed to have been suspended or waived by Agent
or any Lender, unless such waiver or suspension is by an instrument in writing
signed by an officer of or other authorized employee of Agent and the
applicable required Lenders, and directed to Borrower specifying such
suspension or waiver.


 


11.5                           Remedies. 
Agent’s and Lenders’ rights and remedies under this Agreement shall
be cumulative and nonexclusive of any other rights and remedies that Agent or
any Lender may have under any other agreement, including the other Loan
Documents, by operation of law or otherwise. 
Recourse to the Collateral shall not be required.


 


11.6                           Severability. 
Wherever possible, each provision of this Agreement and the other Loan
Documents shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement or any other Loan
Document shall be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or the remaining
provisions of this Agreement or such other Loan Document.


 


11.7                           Conflict of Terms.  Except as otherwise provided in this
Agreement or any of the other Loan Documents by specific reference to the
applicable provisions of this Agreement, if any provision contained in this
Agreement conflicts with any provision in any of the other Loan Documents
(other than the Interim Order and the Final Order), the provision contained in
this Agreement shall govern and control. 
If any provision contained in this Agreement, the Canadian Interim Order
or the Canadian Final Order conflicts with any provision in the Interim Order
or the Final Order, the provision contained in the Interim Order or the Final
Order, as the case may be, shall govern and control.


 


11.8                           Confidentiality.  Agent and each Lender agree to use commercially
reasonable efforts (equivalent to the efforts Agent or such Lender applies to
maintaining the confidentiality of its own confidential information) to
maintain as confidential all information provided to them by the Credit Parties
for a period of 2 years following receipt thereof, except that Agent and any
Lender may disclose such information (a) to Persons employed or engaged by
Agent or such Lender under commercially reasonable obligations of
confidentiality; (b) to any bona fide assignee or participant or potential
assignee or participant that has agreed to comply with the covenant contained
in this Section 11.8 (and any such bona fide assignee or participant or
potential assignee or participant may disclose such information to Persons
employed or engaged by them as described in clause (a) above); (c) as
required or requested by any Governmental Authority or reasonably believed by
Agent or such Lender to be compelled by any court decree, subpoena or legal or
administrative order or process; (d) as, on the advice of Agent’s or such
Lender’s counsel, is required by law; (e) in connection with the exercise of
any right or remedy under the Loan Documents or in connection with any
Litigation to which Agent or such Lender is a party; or (f) which is information
already in its possession prior to delivery in accordance herewith or which is
available to the public other than as a result of the failure of


 


76





















 


Agent or any Lender to comply with the covenant contained
in this Section 11.8, or which otherwise ceases to be confidential
through no fault of Agent or any Lender.


 


Notwithstanding
anything to the contrary set forth herein or in any other agreement to which
the parties hereto are parties or by which they are bound, the obligations of
confidentiality contained herein and therein, as they relate to the
transactions contemplated by this Agreement and the other loan documents (the “Transaction”),
shall not apply to the federal tax structure or federal tax treatment of the
Transaction, and each party hereto (and any employee, representative, agent of
any party hereto) may disclose to any and all persons, without limitation of
any kind, the federal tax structure and federal tax treatment of the
Transaction.  The preceding sentence is
intended to cause the Transaction to be treated as not having been offered
under conditions of confidentiality for purposes of Section 1.6011-4(b)(3) (or
any successor provision) of the Treasury Regulations promulgated under Section 6011
of the Internal Revenue Code of 1986, as amended, and shall be construed in a
manner consistent with such purpose.  In
addition, each party hereto acknowledges that it has no proprietary or
exclusive rights to the federal tax structure of the Transaction or any federal
tax matter or federal tax idea related to the Transaction.


 


11.9                           GOVERNING LAW. 
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF THE LOAN DOCUMENTS, IN
ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE,
THE LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN THAT STATE AND ANY APPLICABLE
LAWS OF THE UNITED STATES OF AMERICA. 
EACH PARTY HERETO HEREBY CONSENTS AND AGREES THAT THE BANKRUPTCY COURT
SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ALL CLAIMS OR DISPUTES
BETWEEN THE PARTIES HERETO PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED, THAT THE PARTIES HERETO
ACKNOWLEDGE THAT ANY APPEALS FROM THE BANKRUPTCY COURT MAY HAVE TO BE HEARD BY
A COURT OTHER THAN THE BANKRUPTCY COURT; 
PROVIDED  FURTHER, THAT NOTHING IN THIS AGREEMENT SHALL BE
DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL
ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER
SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN
FAVOR OF AGENT.  EACH PARTY HERETO
EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR
SUIT COMMENCED IN ANY SUCH COURT, AND EACH PARTY HEREBY WAIVES ANY OBJECTION
THAT PARTY MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR
FORUM  NON  CONVENIENS AND HEREBY CONSENTS TO THE GRANTING
OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.  EACH PARTY HEREBY WAIVES PERSONAL SERVICE OF
THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER PROCESS MAY BE MADE
BY


 


77





















 


REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH PARTY
AT THE ADDRESS SET FORTH IN ANNEX I OF THIS AGREEMENT AND THAT SERVICE
SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH PARTY’S ACTUAL
RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS,
PROPER POSTAGE PREPAID.


 


11.10                     Notices.  Except
as otherwise provided herein, whenever it is provided herein that any notice,
demand, request, consent, approval, declaration or other communication shall or
may be given to or served upon any of the parties by any other parties, or
whenever any of the parties desires to give or serve upon any other parties any
communication with respect to this Agreement, each such notice, demand,
request, consent, approval, declaration or other communication shall be in
writing and shall be deemed to have been validly served, given or delivered:
(a) upon the earlier of actual receipt and three (3) Business Days after
deposit in the United States Mail, registered or certified mail, return receipt
requested, with proper postage prepaid; (b) upon transmission, when sent by
telecopy or other similar facsimile transmission (with such telecopy or
facsimile promptly confirmed by delivery of a copy by personal delivery or
United States Mail as otherwise provided in this Section 11.10); (c) one
(1) Business Day after deposit with a reputable overnight courier with all
charges prepaid or (d) when delivered, if hand-delivered by messenger, all of
which shall be addressed to the party to be notified and sent to the address or
facsimile number indicated in Annex I or to such other address (or
facsimile number) as may be substituted by notice given as herein
provided.  The giving of any notice
required hereunder may be waived in writing by the party entitled to receive
such notice.  Failure or delay in
delivering copies of any notice, demand, request, consent, approval,
declaration or other communication to any Person (other than Borrower or Agent)
designated in Annex I to receive copies shall in no way adversely affect
the effectiveness of such notice, demand, request, consent, approval,
declaration or other communication.


 


11.11                     Section Titles. 
The Section titles and Table of Contents contained in this Agreement are
and shall be without substantive meaning or content of any kind whatsoever and
are not a part of the agreement between the parties hereto.


 


11.12                     Counterparts. 
This Agreement may be executed in any number of separate counterparts,
each of which shall collectively and separately constitute one agreement.


 


11.13                     WAIVER OF JURY TRIAL.  BECAUSE DISPUTES ARISING IN CONNECTION WITH
COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS.  THEREFORE, TO ACHIEVE THE BEST COMBINATION OF
THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO
WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO
RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG
AGENT, LENDERS AND ANY CREDIT PARTY ARISING OUT OF, CONNECTED WITH, RELATED TO,
OR INCIDENTAL TO THE RELATIONSHIP


 


78





















 


ESTABLISHED AMONG THEM IN
CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE
TRANSACTIONS RELATED THERETO.


 


11.14                     Press Releases and Related Matters.  Each Credit Party executing this Agreement
agrees that neither it nor its Subsidiaries will in the future issue any press
releases or other public disclosure using the name of GE Capital or its
affiliates without at least two (2) Business Days’ prior notice to GE Capital
and without the prior written consent of GE Capital unless (and only to the
extent that) such Credit Party or Subsidiary is required to do so under law and
then, in any event, such Credit Party or Subsidiary will consult with GE
Capital before issuing such press release or other public disclosure (other
than disclosure of the fact that GE Capital is the Agent under this Agreement
and the filing of Loan Documents with the Securities and Exchange Commission,
in each case, to the extent required under applicable law).  Each Credit Party consents to the publication
by Agent or any Lender of a tombstone or similar advertising material relating
to the financing transactions contemplated by this Agreement.  Agent or such Lender shall provide a draft of
any such tombstone or similar advertising material to each Credit Party for
review and comment prior to the publication thereof.  Agent reserves the right to provide to
industry trade organizations information necessary and customary for inclusion
in league table measurements.


 


11.15                     Reinstatement. 
This Agreement shall remain in full force and effect and shall continue
to be effective or to be reinstated, as the case may be, if at any time payment
and performance of the Obligations, or any part thereof, is, pursuant to
applicable law, rescinded or reduced in amount, or must otherwise be restored
or returned by any obligee of the Obligations, whether as a “voidable
preference,” “fraudulent conveyance,” or otherwise, all as though such payment
or performance had not been made.  In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Obligations shall be reinstated and deemed reduced only by such
amount paid and not so rescinded, reduced, restored or returned.


 


11.16                     Advice of Counsel.  Each of the parties represents to each other
party hereto that it has discussed this Agreement and, specifically, the
provisions of Sections 11.9 and 11.13, with its counsel.


 


11.17                     Judgment Currency.


 


(a)                                  If,
for the purpose of obtaining or enforcing judgment against any Credit Party in
any court in any jurisdiction, it becomes necessary to convert into any other
currency (such other currency being hereinafter in this Section 11.17
referred to as the “Judgment Currency”) an amount due under any Loan
Document in any currency (the “Obligation Currency”) other than the
Judgment Currency, the conversion shall be made at the rate of exchange
prevailing on the Business Day immediately preceding (a) the date of actual
payment of the amount due, in the case of any proceeding in the courts of the
Province of Quebec or in the courts of any other jurisdiction that will give
effect to such conversion being made on such date, or (b) the date on which the
judgment is given, in the case of any proceeding in the courts of any other
jurisdiction (the applicable date as of which such conversion is made pursuant
to this Section 11.17 being hereinafter in this Section 11.17
referred to as the “Judgment Conversion Date”).


 


79





















 


(b)                                 If,
in the case of any proceeding in the court of any jurisdiction referred to in Section
11.17 (a), there is a change in the rate of exchange prevailing between the
Judgment Conversion Date and the date of actual receipt of the amount due in
immediately available funds, the applicable Credit Party shall pay such
additional amount (if any, but in any event not a lesser amount) as may be
necessary to ensure that the amount actually received in the Judgment Currency,
when converted at the rate of exchange prevailing on the date of payment, will
produce the amount of the Obligation Currency which could have been purchased
with the amount of the Judgment Currency stipulated in the judgment or judicial
order at the rate of exchange prevailing on the Judgment Conversion Date.  Any amount due from a Credit Party under the Section
11.17(b) shall be due as a separate debt and shall not be affected by
judgment being obtained for any other amounts due under or in respect of any of
the Loan Documents.


 


(c)                                  The
term “rate of exchange” in this Section 11.17 means the rate of exchange
at which the Agent would, on the relevant date at or about 11:00 a.m. (New York
time), be prepared to sell the Obligation Currency against the Judgment
Currency.


 


11.18                     Subordination.


 


(a)                                  Each
Credit Party executing this Agreement covenants and agrees that the payment of
all indebtedness, principal, interest (including interest which accrues after
the commencement of any case or proceeding in bankruptcy, or for the
reorganization of any Credit Party), fees, charges, expenses, attorneys’ fees
and any other sum, obligation or liability owing by any other Credit Party to
such Credit Party, including any intercompany trade payables or royalty or
licensing fees (collectively, the “Intercompany Obligations”), is
subordinated, to the extent and in the manner provided in this Section 11.18,
to the prior payment in full of all Obligations (herein, the “Senior
Obligations”) and that the subordination is for the benefit of the Agent
and Lenders, and Agent may enforce such provisions directly.


 


(b)                                 Each
Credit Party executing this Agreement hereby (i) authorizes Agent to demand
specific performance of the terms of this Section 11.18, whether or not
any other Credit Party shall have complied with any of the provisions hereof
applicable to it, at any time when such Credit Party shall have failed to
comply with any provisions of this Section 11.18 which are applicable to
it and (ii) irrevocably waives any defense based on the adequacy of a remedy at
law, which might be asserted as a bar to such remedy of specific performance.


 


(c)                                  Upon
any distribution of assets of any Credit Party in any dissolution, winding up,
liquidation or reorganization (whether in bankruptcy, insolvency or
receivership proceedings or upon an assignment for the benefit of creditors or
otherwise):


 


(i)                                     The
Agent and Lenders shall first be entitled to receive payment in full in cash of
the Senior Obligations before any Credit Party is entitled to receive any
payment on account of the Intercompany Obligations.


 


(ii)                                  Any
payment or distribution of assets of any Credit Party of any kind or character,
whether in cash, property or securities, to which any other Credit Party would
be entitled except for the provisions of this Section 11.18(c), shall be
paid by the liquidating trustee or agent or other Person making such payment or
distribution directly to the Agent, to the


 


80





















 


extent
necessary to make payment in full of all Senior Obligations remaining unpaid
after giving effect to any concurrent payment or distribution or provisions
therefor to the Agent and Lenders.


 


(iii)                               In
the event that notwithstanding the foregoing provisions of this Section
11.18(c), any payment or distribution of assets of any Credit Party of any
kind or character, whether in cash, property or securities, shall be received by
any other Credit Party on account of the Intercompany Obligations before all
Senior Obligations are paid in full, such payment or distribution shall be
received and held in trust for and shall be paid over to the Agent for
application to the payment of the Senior Obligations until all of the Senior
Obligations shall have been paid in full, after giving effect to any concurrent
payment or distribution or provision therefor to the Agent and Lenders.


 


(d)                                 No
right of the Agent and Lenders or any other present or future holders of any
Senior Obligations to enforce the subordination provisions herein shall at any
time in any way be prejudiced or impaired by any act or failure to act on the
part of any Credit Party or by any act or failure to act, in good faith, by any
such holder, or by any noncompliance by any Credit Party with the terms hereof,
regardless of any knowledge thereof which any such holder may have or be
otherwise charged with.


 


(e)                                  The
Intercompany Obligations shall also be subordinated in right of payment to the
Senior Notes (and the Credit Parties’ obligations under the Senior Note
Documents) to the same extent, mutatis, mutandis  as the Senior Obligations hereunder.


 


11.19                     No Strict Construction.  The parties hereto have participated jointly
in the negotiation and drafting of this Agreement.  In the event an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the parties hereto and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of
any provisions of this Agreement.


 


11.20                     Parties Including Trustees;
Bankruptcy Court Proceedings. 
This Agreement, the other Loan Documents, and all Liens created hereby
or pursuant hereto or to any other Loan Document shall be binding upon each
Credit Party, the estate of Borrower, the estate of any Credit Party filing a
Chapter 11 Case, and any trustee or successor in interest of Borrower or any
other Credit Party in a Chapter 11 Case or any subsequent case commenced under
Chapter 7 of the Bankruptcy Code, and shall not be subject to Section 365 of
the Bankruptcy Code.  This Agreement and
the other Loan Documents shall be binding upon, and inure to the benefit of,
the permitted successors of Agent and Lenders and their respective permitted
assigns, transferees and endorsees.  The
Liens created by the Loan Documents shall be and remain valid and perfected in
the event of the substantive consolidation or conversion of any Chapter 11 Case
or any other bankruptcy case of any Credit Party to a case under Chapter 7 of
the Bankruptcy Code or in the event of dismissal of any Chapter 11 Case or the
release of any Collateral from the jurisdiction of the Bankruptcy Court for any
reason, without the necessity that Lenders file financing statements or
otherwise perfect its security interests or Liens under applicable law.


 


11.21                     Prepetition Loan Agreement.  Borrower hereby agrees that (i) this
Agreement is separate and distinct from the Prepetition Loan Agreement and (ii)
the Prepetition Loan Agreement is in full force and effect.  Borrower further agrees that by entering into
this Agreement, Lenders do not waive any Default or Event of Default under the
Prepetition Loan Agreement.


 


81





















 


IN
WITNESS WHEREOF, this Agreement has been duly executed as of the date first
written above.


 


	
   

  	
  BORROWER

  
	
   

  	
   

  	
   

  
	
   

  	
  APPLIED EXTRUSION TECHNOLOGIES,

  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Brian P. Crescenzo

  	
   

  
	
   

  	
  Name:
  

  	
  Brian
  P. Crescenzo

  
	
   

  	
  Title:

  	
   CFO,
  Secretary & Treasurer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  GENERAL ELECTRIC CAPITAL

  CORPORATION,

  
	
   

  	
  as
  Agent and Lender

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Christopher Cox

  	
   

  
	
   

  	
   

  	
  Duly Authorized
  Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  James  H. Kaufman

  	
   

  
	
   

  	
   

  	
  Duly Authorized
  Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MERRILL LYNCH CAPITAL, a division of

  Merrill Lynch Business Financial Services Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Steve Coley

  	
   

  
	
   

  	
  Name:
  

  	
  Steve
  Coley

  
	
   

  	
  Title:

  	
   VP,
  Group Credit Manager

  
							



 





















 


	
   

  	
  The
  following Person is a signatory to this

  Agreement in its capacity as a Credit Party and not

  as Borrower.

  
	
   

  	
   

  	
   

  
	
   

  	
  APPLIED EXTRUSION TECHNOLOGIES

  (CANADA), INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Brian P. Crescenzo

  	
   

  
	
   

  	
  Name:
  

  	
  Brian
  P. Crescenzo

  
	
   

  	
  Title:

  	
   VP
  Finance, Secretary & Treasurer

  
						



 





















 


ANNEX A (RECITALS)

TO

CREDIT AGREEMENT


 


DEFINITIONS


 


Capitalized
terms used in the Loan Documents shall have (unless otherwise provided
elsewhere in the Loan Documents) the following respective meanings,
and all references to Sections, Exhibits, Schedules or Annexes in the following
definitions shall refer to Sections, Exhibits, Schedules or Annexes of or to the
Agreement:


 


“Account
Debtor” means any Person who may become obligated to any Credit Party
under, with respect to, or on account of, an Account, Chattel Paper or General
Intangibles (including a payment intangible).


 


“Accounting
Changes” has the meaning ascribed thereto in Annex G.


 


“Accounts”
means all “accounts,” as such term is defined in the Code, now owned or
hereafter acquired by any Credit Party, including (a) all accounts receivable,
other receivables, book debts and other forms of obligations (other than forms
of obligations evidenced by Chattel Paper, or Instruments), (including any such
obligations that may be characterized as an account or contract right under the
Code), (b) all of each Credit Party’s rights in, to and under all purchase orders
or receipts for goods or services, (c) all of each Credit Party’s rights to any
goods represented by any of the foregoing (including unpaid sellers’ rights of
rescission, replevin, reclamation and stoppage in transit and rights to
returned, reclaimed or repossessed goods), (d) all rights to payment due to any
Credit Party for property sold, leased, licensed, assigned or otherwise
disposed of, for a policy of insurance issued or to be issued, for a secondary
obligation incurred or to be incurred, for energy provided or to be provided,
for the use or hire of a vessel under a charter or other contract, arising out
of the use of a credit card or charge card, or for services rendered or to be
rendered by such Credit Party or in connection with any other transaction
(whether or not yet earned by performance on the part of such Credit Party),
(e) all health care insurance receivables and (f) all collateral security of
any kind, given by any Account Debtor or any other Person with respect to any
of the foregoing.


 


“Advance”
means any Revolving Credit Advance, Export-Related Advance or Swing Line
Advance, as the context may require.


 


“AET
Canada” has the meaning ascribed thereto in the recitals to the Agreement.


 


“AET
Limited” means Applied Extrusion Technologies Limited, a company organized
under the laws of the United Kingdom.


 


“Affected
Lender” has the meaning ascribed to it in Section 1.16(d).


 


“Affiliate”
means, with respect to any Person, (a) each Person that, directly or
indirectly, owns or controls, whether beneficially, or as a trustee, guardian
or other fiduciary, 5% or more of the Stock having ordinary voting power in the
election of directors of such Person, (b) each Person that controls, is
controlled by or is under common control with such Person, (c) each


 


A-1





















 


of such Person’s officers,
directors, joint venturers and partners and (d) in the case of Borrower, the
immediate family members, spouses and lineal descendants of individuals who are
Affiliates of Borrower.  For the purposes
of this definition, “control” of a Person shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of its
management or policies, whether through the ownership of voting securities, by
contract or otherwise; provided, however, that the term “Affiliate”
shall specifically exclude Agent and each Lender.


 


“Agent”
means GE Capital in its capacity as Agent for Lenders or its successor
appointed pursuant to Section 9.7.


 


 “Aggregate Borrowing Base” means, at
any date of determination by Agent, the sum of the Borrowing Base and the
Export-Related Borrowing Base.


 


“Agreement”
means the Senior Secured, Super-Priority Debtor-in-Possession Credit Agreement
by and among Borrower, the other Credit Parties party thereto, GE Capital, as
Agent and Lender and the other Lenders from time to time party thereto, as the
same may be amended, supplemented, restated or otherwise modified from time to
time.


 


“Appendices”
has the meaning ascribed to it in the recitals to the Agreement.


 


“Applicable
Margins” means collectively, the Applicable Revolver Index Margin, the
Applicable Term Loan Index Margin, the Applicable Last Out
Term Loan Index Margin, the Applicable Revolver LIBOR Margin, the Applicable
Last Out Term Loan LIBOR Margin, the Applicable Term Loan LIBOR Margin, the
Applicable L/C Margin and the Applicable Unused Facility Fee Margin.


 


“Applicable
Last Out Term Loan Index Margin” means the per annum interest rate margin
from time to time in effect and payable in addition to the Index Rate
applicable to the Last Out Term Loan, as determined by reference to Section
1.5(a).


 


“Applicable
Last Out Term Loan LIBOR Margin” means the per annum interest rate from
time to time in effect and payable in addition to the LIBOR Rate applicable to
the Last Out Term Loan, as determined by reference to Section 1.5(a).


 


“Applicable
L/C Margin” means the per annum fee from time to time in effect payable
with respect to outstanding Letter of Credit Obligations as determined by reference
to Section 1.5(a).


 


“Applicable
Revolver Index Margin” means the per annum interest rate margin from time
to time in effect and payable in addition to the Index Rate applicable to the
Revolving Loan, as determined by reference to Section 1.5(a).


 


“Applicable
Revolver LIBOR Margin” means the per annum interest rate from time to time
in effect and payable in addition to the LIBOR Rate applicable to the Revolving
Loan, as determined by reference to Section 1.5(a).


 


A-2





















 


“Applicable
Term Loan Index Margin” means the per annum interest rate from time to time
in effect and payable in addition to the Index Rate applicable to the Term
Loan, as determined by reference to Section 1.5(a).


 


“Applicable
Term Loan LIBOR Margin” means the per annum interest rate from time to time
in effect and payable in addition to the LIBOR Rate applicable to the Term
Loan, as determined by reference to Section 1.5(a).


 


“Applicable
Unused Facility Fee Margin” means the per annum fee from time to time in
effect payable in respect of Borrower’s non-use of committed funds pursuant to Section
1.9(b), which fee is as determined by reference to Section 1.5(a).


 


“A
Rated Bank” has the meaning ascribed to it in Section 6.2.


 


“Assignment
Agreement” has the meaning ascribed to it in Section 9.1(a).


 


“Bankruptcy
Code” shall have the meaning ascribed to it in the recitals to the
Agreement.


 


“Bankruptcy
Court” shall have the meaning ascribed to it in the recitals to the
Agreement.


 


“Blocked
Accounts” has the meaning ascribed to it in Annex C.


 


“Borrower”
has the meaning ascribed thereto in the preamble to the Agreement.


 


“Borrowing
Availability” means as of any date of determination the lesser of
(i) the Maximum Amount and (ii) the Aggregate Borrowing Base, in each case
less the sum of the aggregate Revolving Loan, Export-Related Loan and
Swing Line Loan then outstanding, provided, that an Overadvance in
accordance with Section 1.1(a)(iii) may cause
the Revolving Loan, the Export-Related Loan and the Swing Line Loan to exceed
the Aggregate Borrowing Base by the amount of such permitted Overadvance.


 


“Borrowing
Base” means, as of any date of determination by Agent, from time to time,
an amount equal to the sum at such time of:


 


(a)                                  85%
of the book value of Borrower’s and AET Canada’s Eligible Accounts; and


 


(b)                                 the
lesser of (i) 60% of the book value of Borrower’s and AET Canada’s
Eligible Inventory valued at the lower of average cost or market or
(ii) 85% of the appraised net orderly liquidation value of Borrower’s and
AET Canada’s Eligible Inventory;


 


in each case, less any Reserves
established by Agent at such time in its reasonable credit judgment upon prior
or contemporaneous notice to Borrower.


 


“Borrowing
Base Certificate” means any certificate to be executed and delivered from
time to time by Borrower in the form attached to the Agreement as Exhibit
4.1(b).


 


A-3





















 


“Business
Day” means any day that is not a Saturday, a Sunday or a day on which banks
are required or permitted to be closed in the State of New York and in
reference to LIBOR Loans shall mean any such day that is also a LIBOR Business
Day.


 


“Canadian Benefit Plans” shall mean all
material employee benefit plans of any nature or kind whatsoever that are not
Canadian Pension Plans and are maintained or contributed to by any Credit Party
having employees in Canada.


 


“Canadian
Collateral Documents” means the Quebec Hypothec and the AET Canada Blocked
Account Agreement and any other document relating thereto.


 


“Canadian
Final Order” means, collectively, the order of the Superior Court of the
Province of Quebec to be issued upon AET Canada’s motion under Section 18 of
the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 (“CCAA”),
together with all extensions, modifications and amendments thereto, in each
case in form and substance reasonably satisfactory to Agent, which, among other
matters but not by way of limitation, recognizes and declares the Final Order
enforceable in Canada.


 


“Canadian
Interim Order” means, collectively, the order of the Superior Court of the
Province of Quebec to be issued upon AET Canada’s motion under Section 18 of
the CCAA, together with all extensions, modifications and amendments thereto,
in each case in form and substance reasonably satisfactory to Agent, which,
among other matters but not by way of limitation, recognizes and declares the
Interim Order enforceable in Canada.


 


“Canadian
Pension Plans” shall mean each plan which is considered to be a pension
plan for the purposes of any applicable pension benefits standards statute
and/or regulation in Canada established, maintained or contributed to by any
Credit Party for its employees or former employees.


 


“Capital
Expenditures” means, with respect to any Person, all expenditures (by the
expenditure of cash or the incurrence of Indebtedness) by such Person during
any measuring period for any fixed assets or improvements or for replacements,
substitutions or additions thereto that have a useful life of more than one
year and that are required to be capitalized under GAAP (excluding any
capitalized Interest Expense and excluding expenditures made with proceeds of
any casualty or condemnation in accordance with Section 5.4(c)).


 


“Capital
Lease” means, with respect to any Person, any lease of any property
(whether real, personal or mixed) by such Person as lessee that, in accordance
with GAAP, would be required to be classified and accounted for as a capital
lease on a balance sheet of such Person.


 


“Capital
Lease Obligation” means, with respect to any Capital Lease of any Person,
the amount of the obligation of the lessee thereunder that, in accordance with
GAAP, would appear on a balance sheet of such lessee in respect of such Capital
Lease.


 


“Carve-Out
Amount” shall have the meaning ascribed to it in Section 1.18(c).


 


“Carve-Out
Expenses” shall have the meaning ascribed to it in Section 1.18(c).


 


A-4





















 


“Cash
Collateral Account” has the meaning ascribed to it Annex B.


 


“Cash
Equivalents” has the meaning ascribed to it in Annex B.


 


“Cash
Management Systems” has the meaning ascribed to it in Section 1.8.


 


“CCAA”
has the meaning ascribed to it in the definition of “Canadian Final Order”.


 


“Certificate
of Exemption” has the meaning ascribed to it in Section 1.15(c).


 


“Change
of Control” means any of the following: 
(a) any person or group of persons (within the meaning of the Securities
Exchange Act of 1934,) shall have acquired beneficial ownership (within the
meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission
under the Securities Exchange Act of 1934,) of 25% or more of the issued and
outstanding shares of capital Stock of Borrower having the right to vote for
the election of directors of Borrower under ordinary circumstances; (b) during
any period of twelve consecutive calendar months, individuals who at the
beginning of such period constituted the board of directors of Borrower
(together with any new directors whose election by the board of directors of Borrower
or whose nomination for election by the Stockholders of Borrower was approved
by a vote of at least two-thirds of the directors then still in office who
either were directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason other
than death or disability to constitute a majority of the directors then in
office; (c) Borrower ceases to own and control all of the economic and voting
rights associated with all of the outstanding capital Stock of any of its
Subsidiaries; or (d) the occurrence of a “Change of Control” under and as
defined in the Senior Note Indenture.


 


“Chapter
11 Case” and “Chapter 11 Cases” shall have the meaning ascribed to
such terms in the recitals to the Agreement.


 


“Charges”
means all federal, state, county, city, municipal, local, foreign or other
governmental taxes (including taxes owed to the PBGC at the time due and
payable), levies, assessments, charges, liens, claims or encumbrances upon or
relating to (a) the Collateral, (b) the Obligations, (c) the employees,
payroll, income or gross receipts of any Credit Party, (d) any Credit Party’s
ownership or use of any properties or other assets, or (e) any other aspect of
any Credit Party’s business.


 


“Chattel
Paper” means any “chattel paper,” as such term is defined in the Code,
including electronic chattel paper, now owned or hereafter acquired by any
Credit Party.


 


“Closing
Date” means December 2, 2004.


 


“Closing
Checklist” means the schedule, including all appendices, exhibits or
schedules thereto, listing certain documents and information to be delivered in
connection with the Agreement, the other Loan Documents and the transactions
contemplated thereunder, substantially in the form attached hereto as Annex
D.


 


A-5





















 


“Code”
means the Uniform Commercial Code as the same may, from time to time, be
enacted and in effect in the State of New York; provided, that to the
extent that the Code is used to define any term herein or in any Loan Document
and such term is defined differently in different Articles or Divisions of the
Code, the definition of such term contained in Article or Division 9 shall
govern; provided  further, that in the event that, by reason of
mandatory provisions of law, any or all of the attachment, perfection or
priority of, or remedies with respect to, Agent’s or any Lender’s Lien on any
Collateral is governed by the Uniform Commercial Code as enacted and in effect
in a jurisdiction other than the State of New York, the term “Code”
shall mean the Uniform Commercial Code as enacted and in effect in such other
jurisdiction solely for purposes of the provisions thereof relating to such
attachment, perfection, priority or remedies and for purposes of definitions
related to such provisions.


 


“Collateral”
means the property covered by the Security Agreement, the Mortgages and the
other Collateral Documents and any other property, real or personal, tangible
or intangible, now existing or hereafter acquired, that may at any time be or
become subject to a security interest or Lien in favor of Agent, on behalf of
itself and Lenders, to secure the Obligations.


 


“Collateral
Bonds” and “Collateral Bond” shall have the meaning ascribed to such
terms in Section 9.10.


 


“Collateral
Documents” means the Interim Order, the Final Order, the Security
Agreement, the Pledge Agreements, the Guaranties, the Mortgages, the
Intellectual Property Security Agreement, the Canadian Collateral Documents and
all similar agreements entered into guaranteeing payment of, or granting a Lien
upon property as security for payment of, the Obligations.


 


“Collateral
Enforcement Action” means (a) with respect to any Revolving Lender, any
action by such Revolving Lender to (i) exercise or seek to exercise any
rights or exercise any remedies with respect to any Term Loan Priority
Collateral, (ii) institute any action or proceeding with respect to such
rights or remedies, including any action of foreclosure or (iii) contest,
protest or object to any foreclosure proceeding, use of cash collateral or
action brought by the Agent or any Term Lender or to any other exercise by the
Agent or any Term Lender of any rights and remedies under any Loan Documents
with respect to the Term Loan Priority Collateral, (b) with respect to any Term
Lender, any action by such Term Lender to (i) exercise or seek to exercise
any rights or exercise any remedies with respect to any Revolving Loan Priority
Collateral, (ii) institute any action or proceeding with respect to such
rights or remedies, including any action of foreclosure or (iii) contest,
protest or object to any foreclosure proceeding use of cash collateral or
action brought by the Agent or any Revolving Lender or to any other exercise by
the Agent or any Revolving Lender of any rights and remedies under any Loan
Documents with respect to the Revolving Loan Priority Collateral or (c) with
respect to any Last Out Term Lender, any action by such Last Out Term Lender to
(i) exercise or seek to exercise any rights or exercise any remedies with
respect to any Term Loan Priority Collateral or Revolving Loan Priority
Collateral, (ii) institute any action or proceeding with respect to such
rights or remedies, including any action of foreclosure or (iii) contest,
protest or object to any foreclosure proceeding, use of cash collateral or
action brought by the Agent or any Term Lender or any Revolving Lender or to
any other exercise by the Agent or any Term Lender or any


 


A-6





















 


Revolving Lender of any rights and remedies under any
Loan Documents with respect to the Term Loan Priority Collateral or the
Revolving Loan Priority Collateral.


 


“Collateral
Reports” means the reports with respect to the Collateral referred to in Annex
F.


 


“Collection
Account” means that certain account of Agent, account number 502-328-54 in
the name of Agent at Deutsche Bank Trust Company Americas in New York, New York
ABA No. 021 001 033, or such other account as may be specified in writing by
Agent as the “Collection Account.”


 


“Commercial
Tort Claim” means a claim arising in tort with respect to which: (a) the
claimant is an organization; or (b) the claimant is an individual and the
claim: (i) arose in the course of the claimant’s business or profession; and
(ii) does not include damages arising out of personal injury to or the death of
an individual.


 


“Commitment
Termination Date” means the earliest of (a) December 2, 2005, (b) the date
of termination of Lenders’ obligations to make Advances and to incur Letter of
Credit Obligations or permit existing Loans to remain outstanding pursuant to Section
8.2(b), (c) the date of indefeasible prepayment in full by Borrower of the
Loans and the cancellation and return (or stand-by guarantee) of all Letters of
Credit or the cash collateralization of all Letter of Credit Obligations
pursuant to Annex B, and the permanent reduction of all Commitments to
zero dollars ($0), (d) five (5) days following the Petition Date if the Interim
Order has not been entered by the Bankruptcy Court or if the Canadian Interim
Order has not been issued by such date, (e) twenty-five (25) days following the
Petition Date if the Final Order has not been entered by the Bankruptcy Court
or if the Canadian Final Order has not been issued by such date, (f) the date
upon which the Interim Order or the Canadian Interim Order expires, unless the
Final Order shall have been entered and become effective by such date, (g) the
close of business on the first Business Day after the entry of the Final Order
and the Canadian Final Order, if by that time Borrower has not paid Agent the
fees required under the GE Capital Fee Letter, unless the Agent and the Lenders
agree otherwise, (h) the date of the closing of a sale of all or substantially
all of  Borrower’s assets pursuant to
Section 363 of the Bankruptcy Code or a liquidation pursuant to Chapter 7 of
the Bankruptcy Code, (i) the date a plan of reorganization is confirmed in any
Chapter 11 Case that does not provide for the payment in full in cash of all amounts
owed to the Agent and the Lenders under this Agreement and the other Loan
Documents as of the effective date of such plan, and (j) the effective date of
a plan of reorganization or arrangement in any Chapter 11 Case.


 


“Commitments”
means (a) as to any Lender, the aggregate of such Lender’s Revolving Loan
Commitment (including without duplication the Swing Line Lender’s Swing Line
Commitment and the Export-Related Loan Lender’s Export-Related Loan Commitment
as subsets of their respective Revolving Loan Commitments), Last Out Term Loan
Commitment and Term Loan Commitment as set forth on Annex J to the
Agreement or in the most recent Assignment Agreement executed by such Lender
and (b) as to all Lenders, the aggregate of all Lenders’ Revolving Loan Commitments
(including without duplication the Swing Line Lender’s Swing Line Commitment as
a subset of its Revolving Loan Commitment), Last Out Term Loan Commitments and
Term Loan Commitments, which aggregate commitment shall be One


 


A-7





















 


Hundred and Twenty Five Million Dollars ($125,000,000) on the Closing
Date, as to each of clauses (a) and (b), as such Commitments may be reduced,
amortized or adjusted from time to time in accordance with the Agreement.


 


 “Committee” and “Committees”
means (a) an official committee of unsecured creditors if such a committee is
appointed in the Chapter 11 Cases, or (b) the ad hoc committee of holders of
the Senior Notes and certain other holders of Senior Notes.


 


“Compliance
Certificate” has the meaning ascribed to it in Annex E.


 


“Concentration
Account” has the meaning ascribed to it in Annex C.


 


“Contracts”
means all “contracts,” as such term is defined in the Code, now owned or
hereafter acquired by any Credit Party, in any event, including all contracts,
undertakings, or agreements (other than rights evidenced by Chattel Paper,
Documents or Instruments) in or under which any Credit Party may now or
hereafter have any right, title or interest, including any agreement relating
to the terms of payment or the terms of performance of any Account.


 


“Control
Letter” means a letter agreement between Agent and (i) the issuer of
uncertificated securities with respect to uncertificated securities in the name
of any Credit Party, (ii) a securities intermediary with respect to securities,
whether certificated or uncertificated, securities entitlements and other
financial assets held in a securities account in the name of any Credit Party,
(iii) a futures commission merchant or clearing house, as applicable, with
respect to commodity accounts and commodity contracts held by any Credit Party,
whereby, among other things, the issuer, securities intermediary or futures
commission merchant disclaims any security interest in the applicable financial
assets, acknowledges the Lien of Agent, on behalf of itself and Lenders, on
such financial assets, and agrees to follow the instructions or entitlement
orders of Agent without further consent by the affected Credit Party.


 


“Copyright
License” means any and all rights now owned or hereafter acquired by any
Credit Party under any written agreement granting any right to use any
Copyright or Copyright registration.


 


“Copyrights”
means all of the following now owned or hereafter adopted or acquired by any
Credit Party: (a) all copyrights and General Intangibles of like nature
(whether registered or unregistered), all registrations and recordings thereof,
and all applications in connection therewith, including all registrations,
recordings and applications in the United States Copyright Office or in any
similar office or agency of the United States, any state or territory thereof,
or any other country or any political subdivision thereof, and (b) all
reissues, extensions or renewals thereof.


 


“Credit
Party Pledge Agreement” means the Pledge Agreement of even date herewith
executed by each of the Credit Parties in favor of Agent, on behalf of itself
and Lenders, pledging all Stock of its Subsidiaries, if any, and all
Intercompany Notes owing to or held by it.


 


A-8





















“Credit Parties” means Borrower and AET Canada
and each other Subsidiary of Borrower (other than AET Limited).


 


“Default” means any event that, with the
passage of time or notice or both, would, unless cured or waived, become an
Event of Default.


 


“Default Rate” has the meaning ascribed to it
in Section 1.5(d).


 


“Deposit Accounts” means all “deposit accounts”
as such term is defined in the Code, now or hereafter held in the name of any
Credit Party.


 


“Disbursement Accounts” has the meaning
ascribed to it in Annex C.


 


“Disclosure Schedules” means the Schedules
prepared by Borrower and denominated as Disclosure Schedules (1.4)
through (6. 8(f)) in the Index to the Agreement.


 


“Documents” means all “documents,” as such term
is defined in the Code, now owned or hereafter acquired by any Credit Party,
wherever located.


 


“Dollars” or “$” means lawful currency
of the United States of America.


 


“EBITDA” means, for any fiscal period, the sum (determined on a consolidated basis for
the Borrower and its Subsidiaries) of (a) the net income of the Borrower and
its Subsidiaries for such period computed in accordance with GAAP, plus
(b) Interest Expense for such period as reported on the Borrower’s consolidated
financial statements for such period, plus (c) the income tax expense of
the Borrower and its Subsidiaries for such period as reported on the Borrower’s
consolidated financial statements for such period, plus (d) the amount
reported on the Borrower’s consolidated financial statements as the
depreciation of the assets of the Borrower and its Subsidiaries for such period
computed in accordance with GAAP, plus (e) the amount reported on the
Borrower’s consolidated financial statements as the amortization of intangibles
assets of the Borrower and its Subsidiaries for such period computed in
accordance with GAAP, plus (f) the amount reported on the Borrower’s
consolidated financial statements as the write-down of intangible assets of the
Borrower and its Subsidiaries that consist of goodwill for such period computed
in accordance with GAAP, plus (g) all cash and non-cash extraordinary
expenses and losses of the Borrower and its Subsidiaries for such period
computed in accordance with GAAP, and plus (h) cash restructuring fees
paid or incurred by the Borrower or any other Credit Party during such period, minus
(i) all cash and non-cash extraordinary income and gains of the Borrower and
its Subsidiaries for such period, in each case as such item is used in the
computation of net income of the Borrower and its Subsidiaries for such period.


 


“Eligible Accounts” has the meaning ascribed to
it in Section 1.6.


 


“Eligible Export-Related Accounts” has the
meaning ascribed to it in Section 1.6A of the Agreement.


 


“Eligible Inventory” has the meaning ascribed
to it in Section 1.7.


 


A-9





















 


“Environmental Laws” means all applicable
federal, state, local and foreign laws, statutes, ordinances, codes, rules,
standards, policies, guidelines, directives and regulations, now or hereafter
in effect, and any applicable judicial or administrative interpretation
thereof, including any applicable judicial or administrative order, consent
decree, order or judgment, imposing liability or standards of conduct for or
relating to the regulation and protection of human health, safety, the
environment and natural resources (including ambient air, surface water,
groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic
species and vegetation).  Environmental
Laws include the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 (42 U.S.C. §§ 9601 et seq.) (“CERCLA”);
the Hazardous Materials Transportation Authorization Act of 1994 (49 U.S.C. §§ 5101
et seq.); the Federal Insecticide, Fungicide, and Rodenticide Act (7
U.S.C. §§ 136 et seq.); the Solid Waste Disposal Act (42 U.S.C. §§ 6901
et seq.); the Toxic Substance Control Act (15 U.S.C. §§ 2601 et
seq.); the Clean Air Act (42 U.S.C. §§ 7401 et seq.); the
Federal Water Pollution Control Act (33 U.S.C. §§ 1251 et seq.);
the Occupational Safety and Health Act (29 U.S.C. §§ 651 et seq.);
and the Safe Drinking Water Act (42 U.S.C. §§ 300(f) et seq.), and
any and all regulations promulgated thereunder, and all analogous state,
provincial, regional, municipal, local and foreign counterparts or equivalents
and any transfer of ownership notification or approval statutes.


 


“Environmental Liabilities” means, with respect
to any Person, all liabilities, obligations, responsibilities, response,
characterization, rehabilitation, remedial and removal costs, investigation and
feasibility study costs, capital costs, operation and maintenance costs,
losses, damages, punitive damages, property damages, natural resource damages,
consequential damages, treble damages, costs and expenses (including all
reasonable fees, disbursements and expenses of counsel, experts and
consultants), fines, penalties, sanctions, charges, debts and interest incurred
as a result of or related to any claim, suit, action, investigation, proceeding
or demand by any Person, whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute or common law, including
any arising under or related to any Environmental Laws, Environmental Permits,
or in connection with any Release or threatened Release or presence of a
Hazardous Material whether on, at, in, under, from or about or in the vicinity
of any real or personal property.


 


“Environmental Permits” means all permits,
licenses, authorizations, certificates, approvals or registrations required by
any Governmental Authority under any Environmental Laws.


 


“Equipment” means all “equipment,” as such term
is defined in the Code, now owned or hereafter acquired by any Credit Party,
wherever located and, in any event, including all such Credit Party’s machinery
and equipment, including processing equipment, conveyors, machine tools, data
processing and computer equipment, including embedded software and peripheral
equipment and all engineering, processing and manufacturing equipment, office
machinery, furniture, materials handling equipment, tools, attachments,
accessories, automotive equipment, trailers, trucks, forklifts, molds, dies,
stamps, motor vehicles, rolling stock and other equipment of every kind and
nature, trade fixtures and fixtures not forming a part of real property,
together with all additions and accessions thereto, replacements therefor, all
parts therefor, all substitutes for any of the foregoing, fuel therefor, and
all manuals, drawings,


 


A-10





















 


instructions, warranties and rights with respect
thereto, and all products and proceeds thereof and condemnation awards and
insurance proceeds with respect thereto.


 


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


 


“ERISA Affiliate” means, with respect to any
Credit Party, any trade or business (whether or not incorporated) that,
together with such Credit Party, are treated as a single employer within the
meaning of Sections 414(b), (c), (m) or (o) of the IRC.


 


“ERISA Event” means, with respect to any Credit
Party or any ERISA Affiliate, (a) any event described in Section 4043(c)
of ERISA with respect to a Title IV Plan; (b) the withdrawal of any Credit
Party or ERISA Affiliate from a Title IV 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; (c) the complete or partial withdrawal of any Credit Party or any
ERISA Affiliate from any Multiemployer Plan; (d) the filing of a notice of
intent to terminate a Title IV Plan or the treatment of a plan amendment as a
termination under Section 4041 of ERISA; (e) the institution of
proceedings to terminate a Title IV Plan or Multiemployer Plan by the PBGC; (f)
the failure by any Credit Party or ERISA Affiliate to make when due required
contributions to a Multiemployer Plan or Title IV Plan unless such failure is
cured within thirty (30) days; (g) any other event or condition that might
reasonably be expected to constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any
Title IV Plan or Multiemployer Plan or for the imposition of liability under Section 4069
or 4212(c) of ERISA; (h) the termination of a Multiemployer Plan under Section 4041A
of ERISA or the reorganization or insolvency of a Multiemployer Plan under Section 4241
or 4245 of ERISA; or (i) the revocation or threatened revocation of a Qualified
Plan’s qualification or tax exempt status; or (j) the termination of a Plan
described in Section 4064 of ERISA.


 


“ESOP” means a Plan that is intended to satisfy
the requirements of Section 4975(e)(7) of the IRC.


 


“Event of Default” has the meaning ascribed to
it in Section 8.1.


 


“Excess Cash Flow” means, without duplication,
with respect to a Fiscal Year of Borrower, EBITDA for such Fiscal Year minus
(a) taxes paid or payable in cash in respect of such Fiscal Year, minus
(b) Capital Expenditures paid in cash during such Fiscal Year (excluding the
financed portion), minus (c) Interest Expense paid in cash during such
Fiscal Year, minus (d) scheduled principal payments paid or payable in
respect of Funded Debt, minus (e) cash restructuring fees paid or
incurred by the Borrower during such Fiscal Year.


 


“Ex-Im Bank” shall mean the Export-Import Bank
of the United States.


 


“Ex-Im Bank Borrower Agreement” means an
agreement executed by Borrower in favor of Ex-Im Bank and Lender the form of
which is attached hereto as Exhibit A-3.


 


“Ex-Im Bank Documents” shall mean collectively,
the Ex-Im Bank Guarantee, any Loan Authorization Agreement between Agent and
Ex-Im Bank and the Ex-Im Bank Borrower Agreement.


 


A-11





















 


“Ex-Im Bank Guarantee” shall mean any Guarantee
executed by Ex-Im Bank in favor of GE Capital in form and substance
satisfactory to Agent, together with all amendments, modifications and
supplements thereto.


 


“Existing Letters of Credit” has the meaning
ascribed to it in Section 1.2(b).


 


“Export-Related Accounts” shall mean those
Accounts of Borrower that are an obligation of an Account Debtor located in a
foreign country (other than Canada) which arise from the sale of goods or
services which are intended for export pursuant to written export orders or
contracts for the purchase by the Account Debtor of such goods or services.


 


“Export-Related Advance” has the
meaning ascribed to it in Section 1.1(e).


 


“Export-Related Borrowing Availability” means
as of the date of determination the lesser of (i) the Export-Related Loan
Commitment and (ii) the Export-Related Borrowing Base, in each case, less the
aggregate Export-Related Loan then outstanding.


 


“Export-Related Borrowing Base” means, as of
any date of determination by Agent, from time to time, an amount equal to 90%
of the book value of Borrower’s Eligible Export-Related Accounts at such time,
less any Reserves established by Agent at such time with respect to the
Export-Related Borrowing Base.


 


“Export-Related Loan Lender” means GE Capital.


 


“Export-Related Loan” means, at any time, the
aggregate amount of Export-Related Advances outstanding to Borrower.


 


“Export-Related Loan Commitment” means Five
Million Dollars ($5,000,000).


 


“Export-Related Loan Note” has the meaning
ascribed to it in Section 1.1(e)(ii).


 


“Export-Related Loan Participation”
and  “Export-Related Loan
Participations” has the meaning ascribed to it in Section 1.1(e)(iii).


 


“Export-Related Revolving Loan Reserve” means a
reserve established by Agent against the Borrowing Base in an amount equal to
ten percent (10%) of the amount of the Export-Related Loan.


 


“Fair Labor Standards Act” means the Fair Labor
Standards Act, 29 U.S.C. §201 et  seq.


 


“Federal Funds Rate” means, for any day, a
floating rate equal to the weighted average of the rates on overnight Federal
funds transactions among members of the Federal Reserve System, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day, provided, that (a) if such day is not a Business Day, the Federal
Funds Rate for such day shall be such rate on such transactions on the next
preceding Business Day, and (b) if no such rate is so published on the next
succeeding Business Day, the Federal Funds


 


A-12





















 


Rate for such day shall be the average of the rate
quotations for such day for such transactions received by the Agent from three
Federal Funds brokers of recognized standing selected by it.


 


“Federal Reserve Board” means the Board of
Governors of the Federal Reserve System.


 


“Fees” means any and all fees payable to Agent
or any Lender pursuant to the Agreement or any of the other Loan Documents.


 


“Final Order” means, collectively, the order of
the Bankruptcy Court entered in the Chapter 11 Cases after a final hearing
under Bankruptcy Rule 4001(c)(2) or such other procedures as approved by the
Court which order shall be reasonably satisfactory in form and substance to the
Agent and the Requisite Term Lenders, and from which no appeal or motion to
reconsider has been timely filed, or if timely filed, such appeal or motion to
reconsider has been dismissed or denied (unless the Agent and the Lenders waive
such requirement), together with all extensions, modifications and amendments
thereto, which, among other matters but not by way of limitation, authorizes
the Borrower and the other Credit Parties to obtain credit, incur (or
Guarantee) Indebtedness, and grant Liens under this Agreement and the other
Loan Documents, as the case may be, and provides for the super-priority of the
Agent’s and the Lenders’ claims.


 


“Financial Covenants” means the financial
covenants set forth in Annex G.


 


“Financial Statements” means the consolidated
and consolidating income statements, statements of cash flows and balance
sheets of Borrower delivered in accordance with Section 3.4 and Annex
E.


 


“Fiscal Month” means any of the monthly
accounting periods of Borrower.


 


“Fiscal Quarter” means any of the quarterly
accounting periods of Borrower, ending on March 31, June 30, September 30
and December 31 of each year.


 


“Fiscal Year” means any of the annual
accounting periods of Borrower ending on September 30 of each year.


 


“Fixed Charges” means, with respect to any
Person for any fiscal period, (a) the aggregate of all Interest Expense
paid or payable in cash during such period plus (b) scheduled payments
of principal with respect to Indebtedness during such period, plus (c)
all Taxes, paid or payable in cash during such period.


 


“Fixed Charge Coverage Ratio” means, with
respect to any Person for any fiscal period, the ratio of (a) EBITDA minus
Capital Expenditures to (b) Fixed Charges.


 


“Fixtures” means all “fixtures” as such term is
defined in the Code, now owned or hereafter acquired by any Credit Party.


 


“Foreign Lender” has the meaning ascribed to it
in Section 1.15(c).


 


A-13





















 


“Funded Debt” means, with respect to any
Person, without duplication, all Indebtedness for borrowed money evidenced by
notes, bonds, debentures, or similar evidences of Indebtedness that by its
terms matures more than one year from, or is directly or indirectly renewable
or extendible at such Person’s sole option under a revolving credit or similar
agreement obligating the lender or lenders to extend credit over a period of
more than one year from the date of creation thereof, and specifically
including Capital Lease Obligations, current maturities of long-term debt,
revolving credit and short-term debt extendible beyond one year at the option
of the debtor, and also including,  in
the case of Borrower, the Loans and, without duplication, Guaranteed
Indebtedness consisting of guaranties of Funded Debt of other Persons.


 


“Funded Export-Related Loan Participation”
has the meaning ascribed to it in Section 1.1(e)(iii).


 


“GAAP” means generally accepted accounting
principles in the United States of America consistently applied, as such term
is further defined in Annex G to the Agreement.


 


“GE Capital” means General Electric Capital
Corporation, a Delaware corporation.


 


“GE Capital Fee Letter” has the meaning
ascribed to it in Section 1.9(a).


 


“General Intangibles” means all “general
intangibles,” as such term is defined in the Code, now owned or hereafter
acquired by any Credit Party, including all right, title and interest that such
Credit Party may now or hereafter have in or under any Contract, all payment
intangibles, customer lists, Licenses, Copyrights, Trademarks, Patents, and all
applications therefore and reissues, extensions or renewals thereof, rights in Intellectual
Property, interests in partnerships, joint ventures and other business
associations, licenses, permits, copyrights, trade secrets, proprietary or
confidential information, inventions (whether or not patented or patentable),
technical information, procedures, designs, knowledge, know-how, software, data
bases, data, skill, expertise, experience, processes, models, drawings,
materials and records, goodwill (including the goodwill associated with any
Trademark or Trademark License), all rights and claims in or under insurance
policies (including insurance for fire, damage, loss and casualty, whether
covering personal property, real property, tangible rights or intangible
rights, all liability, life, key man and business interruption insurance, and all
unearned premiums), uncertificated securities, causes in action, deposit,
checking and other bank accounts, rights to receive tax refunds and other
payments, rights to receive dividends, distributions, cash, Instruments and
other property in respect of or in exchange for pledged Stock and Investment
Property, rights of indemnification, all books and records, correspondence,
credit files, invoices and other papers, including without limitation all
tapes, cards, computer runs and other papers and documents in the possession or
under the control of such Credit Party or any computer bureau or service
company from time to time acting for such Credit Party.


 


“Goods” means all “goods” as defined in the
Code, now owned or hereafter acquired by any Credit Party, wherever located,
including embedded software to the extent included in “goods” as defined in the
Code, manufactured homes, standing timber that is cut and removed for sale and
unborn young of animals.


 


A-14





















 


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


 


“Granting Lender” has the meaning ascribed to
it in Section 9.1(f).


 


“Guaranteed Indebtedness” means as to any
Person, any obligation of such Person guaranteeing, providing comfort or
otherwise supporting any Indebtedness, lease, dividend, or other obligation (“primary
obligation”) of any other Person (the “primary obligor”) in any
manner, including any obligation or arrangement of such Person to (a) purchase
or repurchase any such primary obligation, (b) advance or supply funds (i) for
the purchase or payment of any such primary obligation or (ii) to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency or any balance sheet condition of the
primary obligor, (c) purchase property, securities or services primarily for
the purpose of assuring the owner of any such primary obligation of the ability
of the primary obligor to make payment of such primary obligation, (d) protect
the beneficiary of such arrangement from loss (other than product warranties
given in the ordinary course of business) or (e) indemnify the owner of such
primary obligation against loss in respect thereof.  The amount of any Guaranteed Indebtedness at
any time shall be deemed to be an amount equal to the lesser at such time of
(x) the stated or determinable amount of the primary obligation in respect of
which such Guaranteed Indebtedness is incurred and (y) the maximum amount for
which such Person may be liable pursuant to the terms of the instrument
embodying such Guaranteed Indebtedness, or, if not stated or determinable, the
maximum reasonably anticipated liability (assuming full performance) in respect
thereof.


 


“Guaranties” means, collectively, each
Subsidiary Guarantee and any other guarantee executed by any Guarantor in favor
of Agent and Lenders in respect of the Obligations.


 


“Guarantors” means each Subsidiary of Borrower
(other than AET Limited) and each other Person, if any, that executes a
guarantee or other similar agreement in favor of Agent, for itself and the
ratable benefit of Lenders, in connection with the transactions contemplated by
the Agreement and the other Loan Documents.


 


“Hazardous Material” means any substance,
material or waste that is regulated by, or forms the basis of liability now or
hereafter under, any Environmental Laws, including any material or substance
that is (a) defined as a “solid waste,” “hazardous waste,” “hazardous material,”
“residual hazardous material,” “hazardous substance,” “extremely hazardous
waste,”  “restricted hazardous waste,” “pollutant,”
“contaminant,” “hazardous constituent,” “special waste,” “toxic substance” or
other similar term or phrase under any Environmental Laws, or (b) petroleum or
any fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB’s),
or any radioactive substance.


 


“Indebtedness” means, with respect to any
Person, without duplication, (a) all indebtedness of such Person for borrowed
money or for the deferred purchase price of property payment for which is
deferred 6 months or more, but excluding obligations to trade creditors


 


A-15





















 


incurred in the ordinary course of business that are
unsecured and not overdue by more than 6 months from the due date unless being
contested in good faith, (b) all reimbursement and other obligations with
respect to letters of credit, bankers’ acceptances and surety bonds, whether or
not matured, (c) all obligations evidenced by notes, bonds, debentures or
similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such property), (e) all Capital Lease Obligations and the present
value (discounted at the Index Rate as in effect on the Closing Date) of future
rental payments under all synthetic leases, (f) all net liabilities of such
Person under commodity purchase or option agreements or other commodity price
hedging arrangements, in each case whether contingent or matured, (g) all net
liabilities of such Person under any foreign exchange contract, currency swap
agreement, interest rate swap, cap or collar agreement or other similar
agreement or arrangement designed to alter the risks of that Person arising
from fluctuations in currency values or interest rates, in each case whether
contingent or matured, (h) all Indebtedness referred to above secured by (or
for which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in property or other assets
(including accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Indebtedness,
and (i) the Obligations.


 


“Indemnified Liabilities” has the meaning
ascribed to it in Section 1.13.


 


“Indemnified Person” has the meaning ascribed
to it in Section 1.13.


 


“Index Rate” means, for any day, a floating
rate equal to the higher of (i) the rate publicly quoted from time to time by The Wall Street Journal
in the Money Rate section as the “Prime Rate” (or, if The Wall Street
Journal ceases quoting a base rate of the type described, the highest per
annum rate of interest published by the Federal Reserve Board in Federal
Reserve statistical release H.15 (519) entitled “Selected Interest Rates”
as the Bank prime loan rate or its equivalent), and (ii) the Federal Funds Rate
plus 50 basis points per annum.  
Each change in any interest rate provided for in the Agreement based
upon the Index Rate shall take effect at the time of such change in the Index
Rate.


 


“Index Rate Loan” means a Loan or portion
thereof bearing interest by reference to the Index Rate.


 


“Industrial Revenue Bonds” means The City of
Salem, Massachusetts Flexible Mode Industrial Development Revenue Bonds in the
original principal amount of $6,500,000.


 


“Insolvency Law” shall mean any of the
Bankruptcy and Insolvency Act (Canada), the CCAA and titles 7 and 11 of the
United States Code entitled “Bankruptcy,” each as now and hereafter in effect,
any successors to such statutes and any other applicable insolvency or other
similar law of any jurisdiction.


 


“Instruments” means all “instruments,” as such
term is defined in the Code, now owned or hereafter acquired by any Credit
Party, wherever located, and, in any event, including all certificated
securities, all certificates of deposit, and all promissory notes and other
evidences


 


A-16





















 


of indebtedness, other than instruments that
constitute, or are a part of a group of writings that constitute, Chattel
Paper.


 


“Interim Order” means, collectively, the order
of the Bankruptcy Court entered in the Chapter 11 Cases after an interim
hearing (assuming satisfaction of the standards prescribed in Section 364
of the Bankruptcy Code and Bankruptcy Rule 4001 and other applicable law),
together with all extension, modifications, and amendments thereto, in form and
substance reasonably satisfactory to Agent, which, among other matters but not
by way of limitation, authorizes, on an interim basis, the Borrower to execute
and perform under the terms of the Agreement and the other Loan Documents,
substantially in the form of Exhibit A-4.


 


“ITA” shall mean the Income Tax Act (Canada), as the same may,
from time to time, be in effect.


 


“Intellectual Property” means any and all
Licenses, Patents, Copyrights, Trademarks, and the goodwill associated with
such Trademarks.


 


“Intellectual Property Security Agreements”
means the Intellectual Property Security Agreements made in favor of Agent, on
behalf of itself and Lenders, by each applicable Credit Party.


 


“Intercompany Note” has the meaning ascribed to
it in Section 6.3.


 


“Interest Expense” means, with respect to any
Person for any fiscal period, interest expense (whether cash or non-cash) of
such Person determined in accordance with GAAP for the relevant period ended on
such date, including, interest expense with respect to any Funded Debt of such
Person and interest expense for the relevant period that has been capitalized
on the balance sheet of such Person.


 


“Interest Payment Date” means (a) as to
any Index Rate Loan, the first Business Day of each month to occur while such
Loan is outstanding, and (b) as to any LIBOR Loan, the last day of the
applicable LIBOR Period; provided that, in addition to the foregoing,
each of (x) the date upon which all of the Commitments have been terminated
and the Loans have been paid in full and (y) the Commitment Termination
Date shall be deemed to be an “Interest Payment Date” with respect to any
interest that has then accrued under the Agreement.


 


“Inventory” means all “inventory,” as such term
is defined in the Code, now owned or hereafter acquired by any Credit Party,
wherever located, and in any event including inventory, merchandise, goods and
other personal property that are held by or on behalf of any Credit Party for
sale or lease or are furnished or are to be furnished under a contract of
service, or that constitute raw materials, work in process, finished goods,
returned goods, or materials or supplies of any kind, nature or description
used or consumed or to be used or consumed in such Credit Party’s business or
in the processing, production, packaging, promotion, delivery or shipping of
the same, including all supplies and embedded software.


 


“Investment Property” means all “investment
property” as such term is defined in the Code now owned or hereafter acquired
by any Credit Party, wherever located, including (i) all securities,
whether certificated or uncertificated, including stocks, bonds, interests in


 


A-17





















 


limited liability companies, partnership interests,
treasuries, certificates of deposit, and mutual fund shares; (ii) all
securities entitlements of any Credit Party, including the rights of any Credit
Party to any securities account and the financial assets held by a securities
intermediary in such securities account and any free credit balance or other
money owing by any securities intermediary with respect to that account;
(iii) all securities accounts of any Credit Party; (iv) all commodity
contracts of any Credit Party; and (v) all commodity accounts held by any
Credit Party.


 


“IRC” means the Internal Revenue Code of 1986
and all regulations promulgated thereunder.


 


“IRS” means the Internal Revenue Service.


 


“Last Out Term Lenders” means those Lenders
having Last Out Term Loan Commitments.


 


“Last Out Term Loan” has the meaning ascribed
to it in Section 1.1(c)(i).


 


“Last Out Term Loan Commitment” means (a) as to
any Lender with a Last Term Loan Commitment, the commitment of such Lender to
make its Pro Rata Share of the Last Out Term Loan as set forth on Annex J
to the Agreement or in the most recent Assignment Agreement executed by such
Lender, and (b) as to all Lenders with a Last Out Term Loan Commitment, the
aggregate commitment of all Lenders to make the Last Out Term Loan, which aggregate
commitment shall be Twenty Million Dollars ($20,000,000) on the Closing
Date.  After advancing the Last Out Term
Loan, each reference to a Lender’s Last Out Term Loan Commitment shall refer to
that Lender’s Pro Rata Share of the outstanding Last Out Term Loan.


 


“Last Out Term Note” has the meaning ascribed
to it in Section 1.1(c)(i).


 


“L/C Issuer” has the meaning ascribed to it in Annex
B.


 


“L/C Sublimit” has the meaning ascribed to it
in Annex B.


 


“Lenders” means GE Capital, the other Lenders
named on the signature pages of the Agreement, and, if any such Lender shall
decide to assign all or any portion of the Obligations, such term shall include
any assignee of such Lender.


 


“Letter of Credit Fee” has the meaning ascribed
to it in Annex B.


 


“Letter of Credit Obligations” means all
outstanding obligations incurred by Agent and Lenders at the request of
Borrower, whether direct or indirect, contingent or otherwise, due or not due,
in connection with the issuance of Letters of Credit by Agent or another L/C
Issuer or the purchase of a participation as set forth in Annex B
with respect to any Letter of Credit. 
The amount of such Letter of Credit Obligations shall equal the maximum
amount that may be payable at such time or at any time thereafter by Agent or
Lenders thereupon or pursuant thereto.


 


A-18





















 


“Letters of Credit” means documentary or
standby letters of credit issued for the account of Borrower by any L/C Issuer,
and bankers’ acceptances issued by Borrower, for which Agent and Lenders have
incurred Letter of Credit Obligations.


 


“Letter-of-Credit Rights” means “letter-of-credit
rights” as such term is defined in the Code, now owned or hereafter acquired by
any Credit Party, including rights to payment or performance under a letter of
credit, whether or not such Credit Party, as beneficiary, has demanded or is
entitled to demand payment or performance.


 


“LIBOR Business Day” means a Business Day on
which banks in the City of London are generally open for interbank or foreign
exchange transactions.


 


“LIBOR Loan” means a Loan or any portion
thereof bearing interest by reference to the LIBOR Rate.


 


“LIBOR Period” means, with respect to any LIBOR
Loan, each period commencing on a LIBOR Business Day selected by Borrower
pursuant to the Agreement and ending one, two or three months thereafter, as
selected by Borrower’s irrevocable notice to Agent as set forth in Section 1.5(e);
provided, that the foregoing provision relating to LIBOR Periods is
subject to the following:


 


(a)                                  if
any LIBOR Period would otherwise end on a day that is not a LIBOR Business Day,
such LIBOR Period shall be extended to the next succeeding LIBOR Business Day
unless the result of such extension would be to carry such LIBOR Period into
another calendar month in which event such LIBOR Period shall end on the
immediately preceding LIBOR Business Day;


 


(b)                                 any
LIBOR Period that would otherwise extend beyond the Commitment Termination Date
shall end two (2) LIBOR Business Days prior to such date;


 


(c)                                  any
LIBOR Period that begins on the last LIBOR Business Day of a calendar month (or
on a day for which there is no numerically corresponding day in the calendar
month at the end of such LIBOR Period) shall end on the last LIBOR Business Day
of a calendar month;


 


(d)                                 Borrower
shall use reasonable efforts to select LIBOR Periods so as not to require a
payment or prepayment of any LIBOR Loan during a LIBOR Period for such Loan;
and


 


(e)                                  Borrower
shall select LIBOR Periods so that there shall be no more than 7 separate LIBOR
Loans in existence at any one time.


 


“LIBOR Rate” means for each LIBOR Period, a
rate of interest determined by Agent equal to:


 


(a)                                  the
offered rate for deposits in United States Dollars for the applicable LIBOR
Period that appears on Telerate Page 3750 as of 11:00 a.m. (London time),
on the second


 


A-19





















 


full LIBOR Business Day next preceding the first day
of such LIBOR Period (unless such date is not a Business Day, in which event
the next succeeding Business Day will be used); divided by


 


(b)                                 a
number equal to 1.0 minus the aggregate (but without duplication) of the
rates (expressed as a decimal fraction) of reserve requirements in effect on
the day that is two (2) LIBOR Business Days prior to the beginning of such
LIBOR Period (including basic, supplemental, marginal and emergency reserves
under any regulations of the Federal Reserve Board or other Governmental
Authority having jurisdiction with respect thereto, as now and from time to time
in effect) for Eurocurrency funding (currently referred to as “Eurocurrency
Liabilities” in Regulation D of the Federal Reserve Board that are required to
be maintained by a member bank of the Federal Reserve System.


 


If such interest rates shall cease to be available
from Telerate News Service, the LIBOR Rate shall be determined from such
financial reporting service or other information as shall be mutually
acceptable to Agent and Borrower.


 


“License” means any Copyright License, Patent
License, Trademark License or other license of rights or interests now held or
hereafter acquired by any Credit Party.


 


“Lien” means any mortgage or deed of trust,
pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim,
security interest, easement or encumbrance, or preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
(including any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security
interest under the Code or comparable law of any jurisdiction).


 


“Litigation” has the meaning ascribed to it in Section 3.13.


 


“Loan Account” has the meaning ascribed to it
in Section 1.12.


 


“Loan Documents” means the Agreement, the
Notes, the Collateral Documents, the GE Capital Fee Letter, the Master Standby
Agreement, the Master Documentary Agreement, and all other agreements,
instruments, documents and certificates identified in the Closing Checklist
executed and delivered to, or in favor of, Agent or any Lenders and including
all other pledges, powers of attorney, consents, assignments, contracts,
notices, and all other written matter whether heretofore, now or hereafter
executed by or on behalf of any Credit Party, or any employee of any Credit
Party, and delivered to Agent or any Lender in connection with the Agreement or
the transactions contemplated thereby (including the terms of any commitment
letter which expressly survive the execution of this Agreement).  Any reference in the Agreement or any other
Loan Document to a Loan Document shall include all appendices, exhibits or
schedules thereto, and all amendments, restatements, supplements or other modifications
thereto, and shall refer to the Agreement or such Loan Document as the same may
be in effect at any and all times such reference becomes operative.


 


“Loans” means the Revolving Loan, the Swing
Line Loan, the Export-Related Loan, the Last Out Term Loan and the Term Loan.


 


A-20





















 


“Lock Boxes” has the meaning ascribed to it in Annex
C.


 


“Margin Stock” has the meaning ascribed to it
in Section 3.10.


 


“Master Documentary Agreement” means the Master
Agreement for Documentary Letters of Credit dated as of the Closing Date among
Borrower, as Applicant(s), and GE Capital, attached as Exhibit A-1
hereto.


 


“Master Standby Agreement” means the Master
Agreement for Standby Letters of Credit dated as of the Closing Date among
Borrower, as Applicant(s), and GE Capital, as issuer, attached as Exhibit
A-2 hereto.


 


“Material Adverse Effect” means a material
adverse effect on (a) the business, assets, operations, prospects or
financial or other condition of the Credit Parties considered as a whole,
(b) any Credit Party’s ability to pay any of the Loans or any of the other
Obligations in accordance with the terms of the Agreement, (c) the
Collateral (taken as a whole) or Agent’s Liens, on behalf of itself and
Lenders, on the Collateral (taken as a whole) or the priority of such Liens, or
(d) Agent’s or any Lender’s rights and remedies under the Agreement and
the other Loan Documents.  Without
limiting the generality of the foregoing, any event or occurrence adverse to
one or more Credit Parties which results or could reasonably be expected to
result in costs and/or liabilities or loss of revenues, individually or in the
aggregate, to any Credit Party in any 30-day period in excess of the lesser of
$ 10,000,000 and 20% of the lesser of the Maximum Amount and the Borrowing Base
at any date of determination shall constitute a Material Adverse Effect.


 


“Material Contracts” means the agreements set
forth in Exhibit B.


 


“Maximum Amount” means, as of any date of
determination, an amount equal to the Revolving Loan Commitment of all Lenders
as of that date.


 


“Mortgaged Properties” has the meaning ascribed
to it in Annex D.


 


“Mortgages” means each of the mortgages, deeds
of trust, leasehold mortgages, leasehold deeds of trust, collateral assignments
of leases or other real estate security documents delivered by any Credit Party
to Agent on behalf of itself and Lenders with respect to the Mortgaged
Properties or other Real Estate pursuant to Section 5.9, all in
form and substance reasonably satisfactory to Agent.


 


“Multiemployer Plan” means a “multiemployer
plan” as defined in Section 4001(a)(3) of ERISA, and to which any Credit
Party or ERISA Affiliate is making, is obligated to make or has made or been
obligated to make, contributions on behalf of participants who are or were
employed by any of them.


 


“Net Cash Flow Forecast” means the Borrower’s
net cash flow forecast for the period from the Closing Date through the end of
the month immediately preceding the first anniversary after the Closing Date,
attached hereto as Disclosure Schedule 3.4(c).


 


“Non-Funding Lender” has the meaning ascribed
to it in Section 9.9(a)(ii).


 


A-21





















 


“Nonqualified Benefit Plans” means,
collectively, Borrower’s Supplemental Executive Retirement Plan, Executive
Deferred Compensation Plan, 1999 Deferred Compensation Plan Trust, and any
other Plan described in Section 201(2) of ERISA.


 


“Notes” means, collectively, the Revolving
Notes, the Export-Related Loan Note, Swing Line Notes, the Term Notes and the
Last Out Term Notes.


 


“Notice of Conversion/Continuation” has the
meaning ascribed to it in Section 1.5(e).


 


“Notice of Export-Related Advance” has the
meaning ascribed to it in Section 1.1(e).


 


“Notice of Revolving Credit Advance” has the
meaning ascribed to it in Section 1.1(a).


 


“Obligations” means all loans, advances, debts,
liabilities and obligations for the performance of covenants, tasks or duties
or for payment of monetary amounts (whether or not such performance is then
required or contingent, or such amounts are liquidated or determinable) owing
by any Credit Party to Agent or any Lender, and all covenants and duties
regarding such amounts, of any kind or nature, present or future, whether or
not evidenced by any note, agreement or other instrument, arising under the
Agreement or any of the other Loan Documents. 
This term includes all principal, accrued and unpaid interest (including
all interest that accrues after the commencement of any case or proceeding by
or against any Credit Party in bankruptcy (including any Chapter 11 Case),
whether or not allowed in such case or proceeding), Fees, Charges, expenses,
attorneys’ fees and any other sum chargeable to any Credit Party under the
Agreement or any of the other Loan Documents.


 


“Overadvance” has the meaning ascribed to it in
Section 1.1(a)(iii).


 


“Patent License” means rights under any written
agreement now owned or hereafter acquired by any Credit Party granting any
right with respect to any invention on which a Patent is in existence.


 


“Patent Security Agreements” means the Patent
Security Agreements made in favor of Agent, on behalf of itself and Lenders, by
each applicable Credit Party.


 


“Patents” means all of the following in which
any Credit Party now holds or hereafter acquires any interest: (a) all letters
patent of the United States or of any other country, all registrations and
recordings thereof, and all applications for letters patent of the United
States or of any other country, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State, or any other country, and (b)
all reissues, continuations, continuations-in-part or extensions thereof.


 


“PBGC” means the Pension Benefit Guaranty
Corporation.


 


“Pension Plan” means a Plan described in Section 3(2)
of ERISA.


 


A-22





















 


“Permitted Encumbrances” means the following
encumbrances: (a) Liens for taxes or assessments or other governmental Charges
not yet due and payable or which are being contested in accordance with Section 5.2(b)
or to the extent that nonpayment thereof is permitted under the Bankruptcy
Code; (b) pledges or deposits of money securing statutory obligations under
workmen’s compensation, unemployment insurance, social security or public
liability laws or similar legislation (excluding Liens under ERISA); (c)
pledges or deposits of money securing bids, tenders, contracts (other than
contracts for the payment of money) or leases to which any Credit Party is a
party as lessee made in the ordinary course of business; (d) workers’,
mechanics’ or similar liens arising in the ordinary course of business which
attach only to Equipment, Fixtures and/or Real Estate and which are either
inchoate and unperfected or payment of which is being contested in accordance
with Section 5.2(b); (e) carriers’, warehousemen’s, suppliers’,
custom’s brokers’, or other similar possessory liens arising in the ordinary
course of business and securing liabilities in an outstanding aggregate amount
not in excess of $100,000 at any time, so long as such Liens attach only to
Inventory; (f) deposits securing, or in lieu of, surety, appeal or customs
bonds in proceedings to which any Credit Party is a party; (g) any attachment
or judgment lien not constituting an Event of Default under Section 8.1(j);
(h) zoning restrictions, servitudes, easements, licenses, or other restrictions
on the use of any Real Estate or other minor irregularities in title (including
leasehold title) thereto, including, those matters set forth on the title
insurance policies insuring the Mortgages, so long as the same do not
materially impair the use, value, or marketability of such Real Estate; (i)
Liens arising from precautionary UCC-1 financing statement filings regarding
operating leases entered into by the Credit Parties in the ordinary course of
business; (j) presently existing or hereafter created Liens in favor of Agent,
on behalf of Lenders; (k) a Lien for Carve-Out Expenses not exceeding the
Carve-Out Amount, (l) Liens expressly permitted under clauses (b) and (c)
of Section 6.7 of the Agreement and (m) with respect to the Real
Estate located in Terre Haute, Indiana, that certain (i) Notice of Intention to
Hold Mechanic’s Lien filed by Steel Services Inc. and (ii) Notice of Intention
to Hold Mechanic’s Lien filed by JRA Architecture, LLC.


 


“Person” means any individual, sole
proprietorship, partnership, joint venture, trust, unincorporated organization,
association, corporation, limited liability company, institution, public
benefit corporation, other entity or government (whether federal, state,
county, city, municipal, local, foreign, or otherwise, including any
instrumentality, division, agency, body or department thereof).


 


“Petition Date” shall have the meaning ascribed
to it in the recitals to this Agreement.


 


“Plan” means, at any time, an “employee benefit
plan”, as defined in Section 3(3) of ERISA, that any Credit Party or ERISA
Affiliate maintains, contributes to or has an obligation to contribute to or
has maintained, contributed to or had an obligation to contribute to at any
time within the past 7 years on behalf of participants who are or were employed
by any Credit Party or ERISA Affiliate.


 


“Pledge Agreements” means, collectively, the
Credit Party Pledge Agreement and any pledge agreements entered into after the
Closing Date by any Credit Party (as required by the Agreement or any other
Loan Document).


 


A-23





















 


“Postpetition” means the time period beginning
immediately after the filing of the Chapter 11 Cases.


 


“Prepayment Account” has the meaning ascribed
to it in Section 1.3(e).


 


“Prepetition” means the time period ending
immediately prior to the filing of the Chapter 11 Cases.


 


“Prepetition Indebtedness” means all
Indebtedness of the Borrower outstanding on the Petition Date immediately prior
to the filing of the Chapter 11 Cases other than Indebtedness under the
Prepetition Loan Agreement.


 


“Prepetition Loan Agreement” shall have the
meaning ascribed to it in the recitals to the Agreement.


 


“Principal Financial Officer” means at any time
the chief financial officer, treasurer or other officer of Borrower then
primarily responsible for the Borrower’s finance and treasury matters.


 


“Prior Claims” means all Liens created by
applicable law (in contrast with Liens voluntarily granted) which rank or are
capable of ranking prior to or pari passu with Agent’s and Lenders’ security
interest (or the applicable equivalent thereof) against all or part of the
Collateral, including for amounts owing for wages employee deductions, goods
and services taxes, sales taxes, employer health taxes, municipal taxes,
workers’ compensation, pension fund obligations and overdue rents.


 


“Prior Lenders” has the meaning ascribed to it
in the recitals to the Agreement.


 


“Prior Lender Obligations” means all
obligations of any Credit Party and any of their Subsidiaries to the Prior
Lenders pursuant to the Prepetition Loan Agreement, and all instruments and
documents executed pursuant thereto or in connection therewith.


 


“Proceeds” means “proceeds,” as such term is
defined in the Code, including (a) any and all proceeds of any insurance,
indemnity, warranty or guarantee payable to any Credit Party from time to time
with respect to any of the Collateral, (b) any and all payments (in any form
whatsoever) made or due and payable to any Credit Party from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental Authority
(or any Person acting under color of governmental authority), (c) any claim of
any Credit Party against third parties (i) for past, present or future
infringement of any Patent or Patent License, or  (ii) for past, present or future infringement
or dilution of any Copyright, Copyright License, Trademark or Trademark
License, or for injury to the goodwill associated with any Trademark or
Trademark License, (d) any recoveries by any Credit Party against third parties
with respect to any litigation or dispute concerning any of the Collateral
including claims arising out of the loss or nonconformity of, interference with
the use of, defects in, or infringement of rights in, or damage to, Collateral,
(e) all amounts collected on, or distributed on account of, other Collateral,
including dividends, interest, distributions and Instruments with respect to
Investment Property and pledged Stock, and (f) any and all other


 


A-24





















 


amounts, rights to payment or other property acquired
upon the sale, lease, license, exchange or other disposition of Collateral and
all rights arising out of Collateral.


 


“Pro Forma” means the unaudited consolidated
balance sheet of Borrower and its Subsidiaries as of September 30, 2004
after giving pro  forma effect to the Related Transactions.


 


“Projections” means Borrower’s forecasted
consolidated and consolidating:  (a)
balance sheets; (b) profit and loss statements; and (c) cash flow statements,
all prepared on a Subsidiary by Subsidiary or division-by-division basis, if
applicable, and otherwise consistent with the historical Financial Statements
of Borrower, together with appropriate supporting details and a statement of
underlying assumptions.


 


“Pro Rata Share” means with respect to all
matters relating to any Lender, (a) with respect to the Revolving Loan and the
Export Related Loan Participation, the percentage obtained by dividing (i) the
Revolving Loan Commitment of that Lender by (ii) the aggregate Revolving Loan
Commitments of all Lenders, (b) with respect to the Term Loans, the percentage
obtained by dividing (i) the Term Loan Commitment of that Lender by (ii) the
aggregate Term Loan Commitments of all Lenders, as any such percentages may be
adjusted by assignments permitted pursuant to Section 9.1, (c) with
respect to the Last Out Term Loans, the percentage obtained by dividing (i) the
Last Out Term Loan Commitment of that Lender by (ii) the aggregate Last Out
Term Loan Commitments of all Lenders, as any such percentages may be adjusted
by assignments permitted pursuant to Section 9.1, (d) with respect
to all Loans, the percentage obtained by dividing (i) the aggregate Commitments
of that Lender by (ii) the aggregate Commitments of all Lenders, and (d) with
respect to all Loans on and after the Commitment Termination Date, the
percentage obtained by dividing (i) the aggregate outstanding principal balance
of the Loans held by that Lender, by (ii) the outstanding principal balance of
the Loans held by all Lenders.


 


 “Qualified
Plan” means a Pension Plan that is intended to be tax-qualified under Section 401(a)
of the IRC.


 


“Qualified Assignee” means (a) any Lender, any
Affiliate of any Lender and, with respect to any Lender that is an investment
fund that invests in commercial loans, any other investment fund that invests
in commercial loans and that is managed or advised by the same investment
advisor as such Lender or by an Affiliate of such investment advisor, and (b)
any commercial bank, savings and loan association or savings bank or any other
entity which is an “accredited investor” (as defined in Regulation D under the
Securities Act of 1933) which extends credit or buys loans as one of its
businesses, including insurance companies, mutual funds, lease financing
companies and commercial finance companies, in each case, which has a rating of
BBB or higher from S&P and a rating of Baa2 or higher from Moody’s at the
date that it becomes a Lender and which, through its applicable lending office,
is capable of lending to Borrower without the imposition of any withholding or
similar taxes; provided that no Person determined by Agent to be acting
in the capacity of a vulture fund or distressed debt purchaser shall be a
Qualified Assignee, and no Person or Affiliate of such Person (other than a
Person that is already a Lender) holding Subordinated Debt or Stock issued by
any Credit Party shall be a Qualified Assignee.


 


A-25





















 


“Quebec Hypothec” means (i) the Deed of Movable
and Immovable Hypothec dated on or about the Closing Date granted by AET Canada
in favor of the Agent, (ii) the Collateral Mortgage Demand Bond issued
thereunder in the principal amount of CDN$200,000,000 made by AET Canada and
registered in the name of the Agent, and (iii) the Bond Pledge Agreement dated
on or about the Closing Date granted by AET Canada in favor of the Agent.


 


“Real Estate” has the meaning ascribed to it in
Section 3.6.


 


“Refunded Swing Line Loan” has the meaning
ascribed to it in Section 1.1(d)(iii).


 


“Related Transactions” means the initial
borrowing under the Revolving Loan, the Term Loan and the Last Out Term Loan on
the Closing Date, the payment of all fees, costs and expenses associated with
all of the foregoing and the execution and delivery of all of the Related
Transactions Documents.


 


“Related Transactions Documents” means the Loan
Documents and all other agreements or instruments executed in connection with
the Related Transactions and all other agreements or instruments executed in
connection therewith.


 


“Release” means any release, threatened
release, spill, emission, leaking, pumping, pouring, emitting, emptying,
escape, injection, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Material in the indoor or outdoor environment,
including the movement of Hazardous Material through or in the air, soil,
surface water, ground water or property.


 


“Replacement Lender” has the meaning ascribed
to it in Section 1.16(d).


 


“Requisite Last Out Term Lenders” means Lenders
having more than 66 2/3% of the aggregate outstanding amount of the Term Loan
and the Last Out Term Loan.


 


“Requisite Lenders” means collectively, (a) the
Requisite Revolving Lenders, (b) the Requisite Term Lenders and (c) the
Requisite Last Out Term Lenders.


 


“Requisite Revolving Lenders” means Lenders
having (a) more than 51% of the Revolving Loan Commitments of all Lenders, or
(b) if the Revolving Loan Commitments have been terminated, more than 51% of
the aggregate outstanding amount of the Revolving Loan.


 


“Requisite Term Lenders” means Lenders having
more than 66 2/3% of the aggregate outstanding amount of the Term Loan.


 


“Reserves” means (a) reserves established by
Agent from time to time against Eligible Inventory pursuant to Section 5.9,
(b) reserves established pursuant to Section 5.4(c), (c) the
Export-Related Loan Reserve, (d) a reserve or reserves in the full amount of
the Carve-Out Amount as established by Agent on the Closing Date and thereafter
modified, as and to the extent, Agent determines to do so, and (e) such other
reserves against Eligible Accounts, Eligible Export-Related Accounts, Eligible
Inventory, Borrowing Availability or Export-Related


 


A-26





















 


Borrowing Availability of Borrower that Agent may, in
its reasonable credit judgment and upon prior or contemporaneous notice to
Borrower, establish from time to time.


 


“Restricted Payment” means, with respect to any
Credit Party (a) the declaration or payment of any dividend or the incurrence
of any liability to make any other payment or distribution of cash or other
property or assets in respect of Stock; (b) any payment on account of the
purchase, redemption, defeasance, sinking fund or other retirement of such
Credit Party’s Stock or any other payment or distribution made in respect
thereof, either directly or indirectly; (c) any payment or prepayment of
principal of, premium, if any, or interest, fees or other charges on or with
respect to, and any redemption, purchase, retirement, defeasance, sinking fund
or similar payment and any claim for rescission with respect to, any
Subordinated Debt; (d) any payment made to redeem, purchase, repurchase or
retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire Stock of such Credit Party now or hereafter
outstanding; (e) any payment of a claim for the rescission of the purchase or
sale of, or for material damages arising from the purchase or sale of, any
shares of such Credit Party’s Stock or of a claim for reimbursement,
indemnification or contribution arising out of or related to any such claim for
damages or rescission; (f) any payment, loan, contribution, or other transfer
of funds or other property to any Stockholder of such Credit Party other than
payment of compensation in the ordinary course of business to Stockholders who
are employees of such Person; and (g) any payment of management fees (or other
fees of a similar nature) by such Credit Party to any Stockholder of such
Credit Party or its Affiliates.


 


“Restructuring Agreement” means that certain
Restructuring Agreement, dated as of August 24, 2004, as amended prior to
the date hereof, by and among Borrower, AET Canada, AET Limited and the
Participating Holders.


 


“Restructuring Agreement Noteholders” means DDJ
Capital Management, LLC, Pequot Capital Management, Inc., Post Advisory Group
LLC, Trust Company of the West, Xerion Capital Partners, Barclays Capital, and
each other holder of Senior Notes that was a “Participating Holder” in
accordance with the terms of the Restructuring Agreement immediately prior to
the filing of the Chapter 11 Cases.


 


“Retiree Welfare Plan” means, at any time, a
Welfare Plan that provides for continuing coverage or benefits for any
participant or any beneficiary of a participant after such participant’s
termination of employment, other than continuation coverage provided pursuant
to Section 4980B of the IRC and at the sole expense of the participant or
the beneficiary of the participant.


 


“Revolving Credit Advance” has the meaning
ascribed to it in Section 1.1(a)(i).


 


“Revolving Lenders” means, as of any date of
determination, Lenders having a Revolving Loan Commitment.


 


“Revolving Loan” means, at any time, the sum of
(i) the aggregate amount of Revolving Credit Advances outstanding to Borrower plus
(ii) the aggregate Letter of Credit Obligations incurred on behalf of
Borrower.  Unless the context otherwise
requires, references to


 


A-27





















 


the outstanding principal balance of the Revolving
Loan shall include the outstanding balance of Letter of Credit Obligations.


 


“Revolving Loan Commitment” means (a) as to any
Lender, the aggregate commitment of such Lender to make Revolving Credit
Advances, incur Letter of Credit Obligations or purchase Export-Related Loan
Participations as set forth on Annex J to the Agreement or in the
most recent Assignment Agreement executed by such Lender and (b) as to all
Lenders, the aggregate commitment of all Lenders to make Revolving Credit
Advances, incur Letter of Credit Obligations, or purchase Export-Related Loan
Participations which aggregate commitment shall be Fifty-Five Million Dollars
($55,000,000) on the Closing Date, as such amount may be adjusted, if at all,
from time to time in accordance with the Agreement.


 


“Revolving Loan Priority Collateral” means any
Collateral consisting of Accounts or Inventory or any Proceeds thereof.


 


“Revolving Note” has the meaning ascribed to it
in Section 1.1(a)(ii)(A).


 


“Security Agreement” means the Security
Agreement of even date herewith entered into by and among Agent, on behalf of
itself and Lenders, and each Credit Party that is a signatory thereto.


 


“Senior Leverage
Ratio” means with respect to the Borrower the ratio of (a) Funded Debt as
of the date of determination (other than Subordinated Debt) to (b) the sum of
EBITDA for the twelve (12) months ending at the date of determination.


 


“Senior Note Documents” means the Senior Notes,
the Senior Note Indenture, any Guarantee (as defined in the Senior Note
Indenture) and the Registration Rights Agreement (as defined in the Senior Note
Indenture).


 


“Senior Note Indenture” means the Senior Note
Indenture, dated, June 19, 2001 made by the Borrower and AET Canada in
favor of Wells Fargo Bank Minnesota, National Association, as trustee.


 


“Senior Note Remedy Event” shall mean any of
the following by any holders of the Senior Notes: (a) the acceleration of the
Senior Notes or the taking of actions to collect or enforce all or any part of
the Senior Notes or any claims in respect thereof against any Credit Party or
any of its property or assets, (b) the application of any property or assets of
any Credit Party to the Senior Notes or the repossession of, foreclosure on, or
the exercise of any other remedy (judicially or nonjudicially) with respect to
any Credit Party or any of its property or assets; (c) the taking of control or
possession of, or the exercise of any right of setoff with respect to, any property
or assets of any Credit Party or the sale or other disposition of any interest
in such property or assets; (d) the taking of any action to interfere with any
rights in respect of such property or assets of the Agent and Lenders or their
ability to realize upon or otherwise deal with such property or assets; or (e)
the commencement or maintenance of any action, suit or other proceeding at law,
in equity or otherwise in furtherance of any of the foregoing or to otherwise
enforce rights against any Credit Party or any of its property or assets


 


A-28





















 


or to direct the owner of such property or assets to
sell or otherwise dispose of any interest therein.


 


“Senior Notes” means those certain 10 3/4%
Senior Notes due 2011 and 10 3⁄4% Series B Senior Notes due 2011 issued by
Borrower pursuant to the Senior Note Indenture.


 


“Software” means all “software” as such term is
defined in the Code, now owned or hereafter acquired by any Credit Party, other
than software embedded in any category of Goods, including all computer
programs and all supporting information provided in connection with a
transaction related to any program.


 


“SPC” has the meaning ascribed to it in Section 9.1(f).


 


“Stock” means all shares, options, warrants,
general or limited partnership interests, membership interests or other
equivalents (regardless of how designated) of or in a corporation, partnership,
limited liability company or equivalent entity whether voting or nonvoting,
including common stock, preferred stock or any other “equity security” (as such
term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated
by the Securities and Exchange Commission under the Securities Exchange Act of
1934).


 


“Stockholder” means, with respect to any
Person, each holder of Stock of such Person.  


 


“Subordinated Debt” means collectively, the
Indebtedness evidenced by the Senior Note Documents and any Indebtedness of any
Credit Party subordinated to the Obligations in a manner and form satisfactory
to Agent and Lenders in their sole discretion, as to right and time of payment
and as to any other rights and remedies thereunder.


 


“Subsidiary” means, with respect to any Person,
(a) any corporation of which an aggregate of more than 50% of the outstanding
Stock having ordinary voting power to elect a majority of the board of
directors of such corporation (irrespective of whether, at the time, Stock of
any other class or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the time, directly
or indirectly, owned legally or beneficially by such Person or one or more
Subsidiaries of such Person, or with respect to which any such Person has the
right to vote or designate the vote of 50% or more of such Stock whether by
proxy, agreement, operation of law or otherwise, and (b) any partnership or
limited liability company in which such Person and/or one or more Subsidiaries
of such Person shall have an interest (whether in the form of voting or participation
in profits or capital contribution) of more than 50% or of which any such
Person is a general partner or may exercise the powers of a general
partner.  Unless the context otherwise
requires, each reference to a Subsidiary shall be a reference to a Subsidiary
of Borrower.


 


“Subsidiary Guarantee” means the Subsidiary
Guarantee of even date herewith executed by each Subsidiary of Borrower (other
than AET Limited)  in favor of Agent, on
behalf of itself and Lenders.


 


A-29





















 


“Supporting Obligations” means all “supporting
obligations” as such term is defined in the Code, including letters of credit
and guaranties issued in support of Accounts, Chattel Paper, Documents, General
Intangibles, Instruments, or Investment Property.


 


“Swing Line Advance” has the meaning ascribed
to it in Section 1.1(d)(i).


 


“Swing Line Availability” has the meaning
ascribed to it in Section 1.1(d)(i).


 


“Swing Line Commitment” means, as to the Swing
Line Lender, the commitment of the Swing Line Lender to make Swing Line
Advances as set forth on Annex J to the Agreement, which commitment
constitutes a subfacility of the Revolving Loan Commitment of the Swing Line
Lender.


 


“Swing Line Lender” means GE Capital.


 


“Swing Line Loan” means, as the context may
require, at any time, the aggregate amount of Swing Line Advances outstanding
to Borrower.


 


“Swing Line Note” has the meaning ascribed to
it in Section 1.1(d)(ii).


 


“Taxes” means taxes, levies, imposts,
deductions, Charges or withholdings, and all liabilities with respect thereto,
excluding franchise or other taxes imposed on or measured by the net income of
Agent or a Lender by the jurisdictions under the laws of which Agent and
Lenders are organized or conduct business or any political subdivision thereof.


 


“Tax Returns” has the meaning ascribed to it in
Section 3.11.


 


“Termination Date” means the date on which (a)
the Loans have been indefeasibly repaid in full, (b) all other Obligations
under the Agreement and the other Loan Documents have been completely
discharged (other than indemnification Obligations and so long as no suits,
actions, proceedings or claims are pending or threatened against any
Indemnified Person asserting any damages, losses or liabilities that are
Indemnified Liabilities), (c) all Letter of Credit Obligations have been cash
collateralized, canceled or backed by standby letters of credit in accordance
with Annex B, and (d) the Borrower shall not have any further right to
borrow any monies under the Agreement.


 


“Term Lenders” means those Lenders having Term
Loan Commitments.


 


“Term Loan” has the meaning ascribed to it in Section 1.1(b)(i).


 


 “Term Loan
Commitment” means (a) as to any Lender with a Term Loan Commitment, the
commitment of such Lender to make its Pro Rata Share of the Term Loan as set
forth on Annex J to the Agreement or in the most recent Assignment
Agreement executed by such Lender, and (b) as to all Lenders with a Term Loan
Commitment, the aggregate commitment of all Lenders to make the Term Loan, which
aggregate commitment shall be Fifty Million Dollars ($50,000,000) on the
Closing Date.  After advancing the Term
Loan, each reference to a Lender’s Term Loan Commitment shall refer to that
Lender’s Pro Rata Share of the outstanding Term Loan.


 


A-30





















 


“Term Loan Priority Collateral” means all
Collateral other than Revolving Loan Priority Collateral.


 


“Term Note” has the meaning ascribed to it in Section 1.1(b)(i).


 


“Title IV Plan” means a Pension Plan (other
than a Multiemployer Plan), that is covered by Title IV of ERISA, and that any
Credit Party or ERISA Affiliate maintains, contributes to or has an obligation
to contribute to on behalf of participants who are or were employed by any of
them.


 


“Trademark License” means rights under any
written agreement now owned or hereafter acquired by any Credit Party granting
any right to use any Trademark.


 


“Trademarks” means all of the following now
owned or hereafter existing or adopted or acquired by any Credit Party: (a) all
trademarks, trade names, corporate names, business names, trade styles, service
marks, logos, other source or business identifiers, prints and labels on which
any of the foregoing have appeared or appear, designs and general intangibles
of like nature (whether registered or unregistered), all registrations and
recordings thereof, and all applications in connection therewith, including
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
state or territory thereof, or any other country or any political subdivision
thereof; (b) all reissues, extensions or renewals thereof; and (c) all goodwill
associated with or symbolized by any of the foregoing.


 


“Unfunded Pension Liability” means, at any
time, the aggregate amount, if any, of the sum of (a) the amount by which the
present value of all accrued benefits under each Title IV Plan exceeds the fair
market value of all assets of such Title IV Plan allocable to such benefits in
accordance with Title IV of ERISA, all determined as of the most recent
valuation date for each such Title IV Plan using the actuarial assumptions for
funding purposes in effect under such Title IV Plan, and (b) for a period of 5
years following a transaction which might reasonably be expected to be covered
by Section 4069 of ERISA, the liabilities (whether or not accrued) that
could be avoided by any Credit Party or any ERISA Affiliate as a result of such
transaction.


 


“Welfare Plan” means a Plan described in Section 3(i)
of ERISA.


 


Rules of construction with respect to accounting terms
used in the Agreement or the other Loan Documents shall be as set forth in Annex
G.  All other undefined terms
contained in any of the Loan Documents shall, unless the context indicates
otherwise, have the meanings provided for by the Code to the extent the same
are used or defined therein; in the event that any term is defined differently
in different Articles or Divisions of the Code, the definition contained in Article or
Division 9 shall control.  Unless
otherwise specified, references in the Agreement or any of the Appendices to a
Section, subsection or clause refer to such Section, subsection or
clause as contained in the Agreement. 
The words “herein,” “hereof” and “hereunder” and other words of similar
import refer to the Agreement as a whole, including all Annexes, Exhibits and
Schedules, as the same may from time to time be amended, restated, modified or
supplemented, and not to any particular section, subsection or clause
contained in the Agreement or any such Annex, Exhibit or Schedule.


 


A-31





















 


Wherever from the context it appears appropriate, each
term stated in either the singular or plural shall include the singular and the
plural, and pronouns stated in the masculine, feminine or neuter gender shall
include the masculine, feminine and neuter genders.  The words “including”, “includes” and “include”
shall be deemed to be followed by the words “without limitation”; the word “or”
is not exclusive; references to Persons include their respective successors and
assigns (to the extent and only to the extent permitted by the Loan Documents)
or, in the case of governmental Persons, Persons succeeding to the relevant
functions of such Persons; and all references to statutes and related
regulations shall include any amendments of the same and any successor statutes
and regulations.  Whenever any provision
in any Loan Document refers to the knowledge (or an analogous phrase) of any
Credit Party, such words are intended to signify that a member of management or
officer or member of the board of directors of such Credit Party has actual
knowledge or awareness of a particular fact or circumstance or a member of management
or officer or director of such Credit Party, if it had exercised reasonable
diligence, would have known or been aware of such fact or circumstance.


 


With respect to the amount of any obligation or
liability denominated in a currency other than Dollars, for purposes of making
calculations or determinations under the Loan Documents on any date, the amount
of such obligation or liability shall be measured in Dollars by converting such
amount in such other currency to Dollars at the conversion rate quoted on the
applicable Reuters Monitor Screen or other service selected by the Agent on
such date or, if such date is not a Business Day, on the Business Day
immediately preceding such date of determination, or at such other rate as may
have been agreed in writing between the Borrower and the Agent.


 


A-32





















 


ANNEX B (SECTION 1.2)


TO


CREDIT AGREEMENT


 


LETTERS OF CREDIT


 


(a)                                  Issuance.
Subject to the terms and conditions of the Agreement, Agent and Revolving
Lenders agree to incur, from time to time prior to the Commitment Termination
Date, upon the request of Borrower and for Borrower’s account, Letter of Credit
Obligations by causing Letters of Credit to be issued by GE Capital or a
Subsidiary thereof or a bank or other legally authorized Person selected by or
acceptable to Agent in its sole discretion (each, an “L/C Issuer”) for
Borrower’s account and guaranteed by Agent; provided, that if the L/C
Issuer is a Revolving Lender, then such Letters of Credit shall not be
guaranteed by Agent but rather each Revolving Lender shall, subject to the
terms and conditions hereinafter set forth, purchase (or be deemed to have
purchased) risk participations in all such Letters of Credit issued with the
written consent of Agent, as more fully described in paragraph (b)(ii)
below.  The aggregate amount of all such
Letter of Credit Obligations shall not at any time exceed the least of (i) Ten
Million Dollars ($10,000,000) (the “L/C Sublimit”) and (ii) the
Maximum Amount less the aggregate outstanding principal balance of the
Revolving Credit Advances, the Export-Related Loan and the Swing Line Loan, and
(iii) the Borrowing Base less the aggregate outstanding principal balance
of the Revolving Credit Advances and the Swing Line Loan.  No such Letter of Credit shall have an expiry
date that is more than one year following the date of issuance thereof, unless
otherwise determined by the Agent, in its sole discretion, and neither Agent
nor Revolving Lenders shall be under any obligation to incur Letter of Credit
Obligations in respect of, or purchase risk participations in, any Letter of
Credit having an expiry date that is later than the Commitment Termination
Date.  All letters of credit issued under
the Prepetition Loan Agreement shall be deemed to have been issued under this
Agreement and shall for all purposes constitute “Letters of Credit” hereunder
(provided that no additional issuance fees shall be applicable in respect of
such Letters of Credit).


 


(b)                                 (i)                                     Advances
Automatic; Participations.  In the
event that Agent or any Revolving Lender shall make any payment on or pursuant
to any Letter of Credit Obligation, such payment shall then be deemed
automatically to constitute a Revolving Credit Advance to Borrower under Section 1.1(a)
of the Agreement regardless of whether a Default or Event of Default has
occurred and is continuing and notwithstanding Borrower’s failure to satisfy
the conditions precedent set forth in Section 2, and each Revolving
Lender shall be obligated to pay its Pro Rata Share thereof in accordance with
the Agreement.  The failure of any
Revolving Lender to make available to Agent for Agent’s own account its Pro
Rata Share of any such Revolving Credit Advance or payment by Agent under or in
respect of a Letter of Credit shall not relieve any other Revolving Lender of
its obligation hereunder to make available to Agent its Pro Rata Share thereof,
but no Revolving Lender shall be responsible for the failure of any other
Revolving Lender to make available such other Revolving Lender’s Pro Rata Share
of any such payment.


 


(ii)                                  If
it shall be illegal or unlawful for Borrower to incur Revolving Credit Advances
as contemplated by paragraph (b)(i) above or if it shall be illegal or
unlawful for any Revolving Lender to be deemed to have assumed a ratable share
of the reimbursement


 


B-1





















 


obligations owed to an L/C Issuer, or if the L/C
Issuer is a Revolving Lender, then (A) immediately and without further action
whatsoever, each Revolving Lender shall be deemed to have irrevocably and
unconditionally purchased from Agent (or such L/C Issuer, as the case may be)
an undivided interest and participation equal to such Revolving Lender’s Pro
Rata Share (based on the Revolving Loan Commitments) of the Letter of Credit
Obligations in respect of all Letters of Credit then outstanding and (B)
thereafter, immediately upon issuance of any Letter of Credit, each Revolving
Lender shall be deemed to have irrevocably and unconditionally purchased from
Agent (or such L/C Issuer, as the case may be) an undivided interest and
participation in such Revolving Lender’s Pro Rata Share (based on the Revolving
Loan Commitments) of the Letter of Credit Obligations with respect to such
Letter of Credit on the date of such issuance. 
Each Revolving Lender shall fund its participation in all payments or disbursements
made under the Letters of Credit in the same manner as provided in the
Agreement with respect to Revolving Credit Advances.


 


(c)                                  Cash
Collateral.


 


(i)                                     If
Borrower is required to provide cash collateral for any Letter of Credit
Obligations pursuant to the Agreement prior to the Commitment Termination Date,
Borrower will pay to Agent for the ratable benefit of itself and Revolving
Lenders cash or cash equivalents acceptable to Agent (“Cash Equivalents”)
in an amount equal to 105% of the maximum amount then available to be drawn
under each applicable Letter of Credit outstanding for the benefit of
Borrower.  Such funds or Cash Equivalents
shall be held by Agent in a cash collateral account (the “Cash Collateral
Account”) maintained at a bank or financial institution acceptable to
Agent.  The Cash Collateral Account shall
be in the name of Borrower and shall be pledged to, and subject to the control
of, Agent, for the benefit of Agent and Lenders, in a manner satisfactory to
Agent.  Borrower hereby pledges and
grants to Agent, on behalf of itself and Lenders, a first priority security
interest in all such funds and Cash Equivalents held in the Cash Collateral
Account from time to time and all proceeds thereof, as security for the payment
of all amounts due in respect of the Letter of Credit Obligations and other
Obligations, whether or not then due. 
The Agreement, including this Annex B, shall constitute a
security agreement under applicable law.


 


(ii)                                  If
any Letter of Credit Obligations, whether or not then due and payable, shall
for any reason be outstanding on the Commitment Termination Date, Borrower
shall either (A) provide cash collateral therefor in the manner described
above, or (B) cause all such Letters of Credit and guaranties thereof, if any,
to be canceled and returned, or (C) deliver a stand-by letter (or letters) of
credit in guarantee of such Letter of Credit Obligations, which stand-by letter
(or letters) of credit shall be of like tenor and duration (plus thirty
(30) additional days) as, and in an amount equal to 105% of, the aggregate
maximum amount then available to be drawn under, the Letters of Credit to which
such outstanding Letter of Credit Obligations relate and shall be issued by a
Person, and shall be subject to such terms and conditions, as are be
satisfactory to Agent in its sole discretion.


 


(iii)                               From
time to time after funds are deposited in the Cash Collateral Account by
Borrower, whether before or after the Commitment Termination Date, Agent may
apply such funds or Cash Equivalents then held in the Cash Collateral Account
to the payment of any amounts, and in such order as Agent may elect, as shall
be or shall become due and payable


 


B-2





















 


by
Borrower to Agent and Lenders with respect to such Letter of Credit Obligations
of Borrower and, upon the satisfaction in full of all Letter of Credit
Obligations of Borrower, to any other Obligations of Borrower then due and
payable.


 


(iv)                              Neither
Borrower nor any Person claiming on behalf of or through Borrower shall have
any right to withdraw any of the funds or Cash Equivalents held in the Cash
Collateral Account, except that upon the termination of all Letter of Credit
Obligations and the payment of all amounts payable by Borrower to Agent and
Lenders in respect thereof, any funds remaining in the Cash Collateral Account
shall be applied to other Obligations then due and owing and upon payment in
full of such Obligations, any remaining amount shall be paid to Borrower or as
otherwise required by law.  Interest
earned on deposits in the Cash Collateral Account shall be for the account of
Agent.


 


(d)                                 Fees
and Expenses.  Borrower agrees to pay
to Agent for the benefit of Revolving Lenders, as compensation to such Lenders
for Letter of Credit Obligations incurred hereunder, (i) all costs and expenses
incurred by Agent or any Lender on account of such Letter of Credit
Obligations, and (ii) for each month during which any Letter of Credit
Obligation shall remain outstanding, a fee (the “Letter of Credit Fee”)
in an amount equal to the Applicable L/C Margin multiplied by the maximum
amount available from time to time to be drawn under the applicable Letter of
Credit.  Such fee shall be paid to Agent
for the benefit of the Revolving Lenders in arrears, on the first day of each
month and on the Commitment Termination Date. 
In addition, Borrower shall pay to any L/C Issuer, on demand, such fees
(including all per annum fees), charges and expenses of such L/C Issuer in
respect of the issuance, negotiation, acceptance, amendment, transfer and
payment of such Letter of Credit or otherwise payable pursuant to the
application and related documentation under which such Letter of Credit is
issued.


 


(e)                                  Request
for Incurrence of Letter of Credit Obligations.  Borrower shall give Agent at least two (2)
Business Days’ prior written notice requesting the incurrence of any Letter of
Credit Obligation.  The notice shall be
accompanied by the form of the Letter of Credit (which shall be acceptable to
the L/C Issuer) and a completed Application for Standby Letter of Credit or
Application for Documentary Letter of Credit (as applicable) in the form
customarily used by the L/C Issuer. 
Notwithstanding anything contained herein to the contrary, Letter of
Credit applications by Borrower and approvals by Agent and the L/C Issuer may
be made and transmitted pursuant to electronic codes and security measures
mutually agreed upon and established by and among Borrower, Agent and the L/C
Issuer.


 


(f)                                    Obligation
Absolute.  The obligation of Borrower
to reimburse Agent and Revolving Lenders for payments made with respect to any
Letter of Credit Obligation shall be absolute, unconditional and irrevocable,
without necessity of presentment, demand, protest or other formalities, and the
obligations of each Revolving Lender to make payments to Agent with respect to
Letters of Credit shall be unconditional and irrevocable.  Such obligations of Borrower and Revolving
Lenders shall be paid strictly in accordance with the terms hereof under all
circumstances including the following:


 


(i)                                     any lack of validity or enforceability of any Letter of
Credit or the Agreement or the other Loan Documents or any other agreement;


 


B-3





















 


(ii)                                  the
existence of any claim, setoff, defense or other right that Borrower or any of
its Affiliates or any Lender may at any time have against a beneficiary or any
transferee of any Letter of Credit (or any Persons or entities for whom any
such transferee may be acting), Agent, any Lender, or any other Person, whether
in connection with the Agreement, the Letter of Credit, the transactions
contemplated herein or therein or any unrelated transaction (including any
underlying transaction between Borrower or any of its Affiliates and the
beneficiary for which the Letter of Credit was procured);


 


(iii)                               any
draft, demand, certificate or any other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect;


 


(iv)                              payment
by Agent (except as otherwise expressly provided in paragraph (g)(ii)(C)
below) or any L/C Issuer under any Letter of Credit or guarantee thereof
against presentation of a demand, draft or certificate or other document that
does not comply with the terms of such Letter of Credit or such guarantee;


 


(v)                                 any other circumstance or event whatsoever, that is similar
to any of the foregoing; or


 


(vi)                              the fact that a Default or an Event of Default has occurred and is continuing.


 


(g)                                 Indemnification;
Nature of Lenders’ Duties.


 


(i)                                     In
addition to amounts payable as elsewhere provided in the Agreement, Borrower
hereby agree to pay and to protect, indemnify, and save harmless Agent and each
Lender from and against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including reasonable attorneys’ fees and
allocated costs of internal counsel) that Agent or any Lender may incur or be
subject to as a consequence, direct or indirect, of (A) the issuance of any
Letter of Credit or guarantee thereof, or (B) the failure of Agent or any
Lender seeking indemnification or of any L/C Issuer to honor a demand for
payment under any Letter of Credit or guarantee thereof as a result of any act
or omission, whether rightful or wrongful, of any present or future de jure or
de facto government or Governmental Authority, in each case other than to the
extent solely as a result of the gross negligence or willful misconduct of
Agent or such Lender (as finally determined by a court of competent
jurisdiction).


 


(ii)                                  As
between Agent and any Lender and Borrower, Borrower assume
all risks of the acts and omissions of, or misuse of any Letter of Credit by
beneficiaries, of any Letter of Credit.  In
furtherance and not in limitation of the foregoing, to the fullest extent
permitted by law, neither Agent nor any Lender shall be responsible for:  (A) the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document issued by any party in
connection with the application for and issuance of any Letter of Credit, even
if it should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (B) the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or


 


B-4





















 


assign any Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, that may prove to be
invalid or ineffective for any reason; (C) failure of the beneficiary of any
Letter of Credit to comply fully with conditions required in order to demand
payment under such Letter of Credit; provided, that in the case of any
payment by Agent under any Letter of Credit or guarantee thereof, Agent shall
be liable to the extent such payment was made solely as a result of its gross
negligence or willful misconduct (as finally determined by a court of competent
jurisdiction) in determining that the demand for payment under such Letter of
Credit or guarantee thereof complies on its face with any applicable
requirements for a demand for payment under such Letter of Credit or guarantee
thereof; (D) errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise,
whether or not they may be in cipher; (E) errors in interpretation of technical
terms; (F) any loss or delay in the transmission or otherwise of any document
required in order to make a payment under any Letter of Credit or guarantee
thereof or of the proceeds thereof; (G) the credit of the proceeds of any
drawing under any Letter of Credit or guarantee thereof; and (H) any
consequences arising from causes beyond the control of Agent or any Lender.
None of the above shall affect, impair, or prevent the vesting of any of Agent’s
or any Lender’s rights or powers hereunder or under the Agreement.


 


(iii)                               Nothing
contained herein shall be deemed to limit or to expand any waivers, covenants
or indemnities made by Borrower in favor of any L/C Issuer in any letter of
credit application, reimbursement agreement or similar document, instrument or
agreement between or among Borrower and such L/C Issuer, including any
Application For Standby Letter of Credit or Documentary Letter of Credit, the
Master Documentary Agreement and the Master Standby Agreement entered into with
Agent.


 


B-5





















 


ANNEX C (SECTION 1.8)

TO

CREDIT AGREEMENT


 


CASH MANAGEMENT SYSTEM


 


Borrower shall, and shall cause its Subsidiaries to,
establish and maintain the Cash Management Systems described below:


 


On or before the Closing Date and until the
Termination Date, Borrower and AET Canada shall (i) establish lock boxes (“Lock
Boxes”) or at Agent’s discretion, blocked accounts (“Blocked Accounts”)
at one or more of the banks set forth in Disclosure Schedule (3.19),
and shall request in writing and otherwise take such reasonable steps to ensure
that all Account Debtors forward payment directly to such Lock Boxes,
(ii) deposit and cause its Subsidiaries to deposit or cause to be
deposited promptly, and in any event no later than the first Business Day after
the date of receipt thereof, all cash, checks, drafts or other similar items of
payment relating to or constituting payments made in respect of any and all
Collateral (whether or not otherwise delivered to a Lock Box) (“Collections”)
into one or more Blocked Accounts in Borrower’s name or any such Subsidiary’s
name and at a bank identified in Disclosure Schedule (3.19) (each,
a “Relationship Bank”).  At all
times when any Export-Related Advance is outstanding, Borrower shall (i) take
all such reasonable steps to ensure that all Account Debtors with respect to
Export-Related Accounts forward payment directly to a separate Lock Box
established solely for receipt of Export-Related Accounts, and (ii) deposit and
cause its Subsidiaries to deposit or cause to be deposited promptly, and in any
event no later than the first Business Day after the date of receipt thereof,
all Collections with respect to Export-Related Accounts (whether or not
otherwise delivered to a Lock Box) into a separate Blocked Account established
solely for receipt of such Collections (the “Export-Related Blocked Account”,
in Borrower’s name and at a Relationship Bank identified in Disclosure Schedule (3.19)
as the “Export-Related Blocked Account”. 
In the event either Borrower or AET Canada establishes more than one
Blocked Account for its Collections, Borrower shall establish a concentration
account in its name, which account may be a Blocked Account referred to in
clause (a)(i) above (the “Concentration Account”),
at the bank designated as the Concentration Account bank for Borrower in Disclosure
Schedule (3.19) (the “Concentration Account Bank”), which bank
shall be reasonably satisfactory to Agent.


 


(b)                                 Each
of Borrower and AET Canada may maintain, in its name, accounts (each a “Disbursement
Account” and collectively, the “Disbursement Accounts”) at banks
reasonably acceptable to Agent which shall be used by such Credit Parties for
payments and disbursements.  Borrower’s
Disbursement Account (Account No. 8543522469 with PNC Bank, National
Association) shall be used by Agent, from time to time, to deposit proceeds of
Revolving Credit Advances, Export-Related Advances and Swing Line Advances made
to Borrower pursuant to Section 1.1 for use by Borrower solely in
accordance with the provisions of Section 1.4.


 


(c)                                  On
or before the Closing Date (or such later date as Agent shall consent to in
writing), the Concentration Account Bank, each bank where a Disbursement
Account is maintained and all other Relationship Banks, shall have entered into
tri-party blocked account


 


C-1





















 


agreements
with Agent, for the benefit of itself and Lenders, and Borrower and
Subsidiaries thereof, as applicable, in form and substance reasonably
acceptable to Agent, which shall become operative on or prior to the Closing
Date.  Each such blocked account
agreement shall provide, among other things, that (i) all Collections
deposited in account and proceeds thereof deposited in the applicable Blocked
Account or Concentration Account are held by such bank as agent or
bailee-in-possession for Agent, on behalf of itself and Lenders, (ii) the
bank executing such agreement has no rights of setoff or recoupment or any
other claim against such account, as the case may be, other than for payment of
its service fees and other charges directly related to the administration of
such account and for returned checks or other items of payment, and
(iii) from and after the Closing Date (A) with respect to the banks at
which a Blocked Account of Borrower is maintained, such bank agrees to forward
immediately all amounts in each such Blocked Account (other than the
Export-Related Blocked Account) to Borrower’s Concentration Account Bank and to
commence the process of daily sweeps from such Blocked Account (other than the
Export-Related Blocked Account) into the Concentration Account (or if no
Concentration Account has been established directly to the Collection Account),
(B) with respect to the Blocked Account established at Royal Bank of Canada
bearing Account Number 102-628-5 (the “AET Canada Account”), such bank
agrees that at any time following three (3) Business Days after Agent delivers
an activation notice thereunder (which activation notice may be given by Agent
at any time at which a Default or Event of Default has occurred and is
continuing), to forward immediately all amounts in the AET Canada Account and,
to the extent requested by Agent, the Disbursement Accounts of AET Canada to a
Blocked Account of Borrower (or, if established, the Concentration Account) or
to such other account designated by Agent, and (C) with respect to each
Concentration Account Bank and the Export-Related Account Bank, such bank
agrees to immediately forward all amounts received in the Concentration Account
or the Export-Related Blocked Account, respectively, to the Collection Account
through daily sweeps from such Concentration Account or Export-Related Blocked
Account, as applicable, into the Collection Account.  Borrower and AET Canada shall transfer or
cause to be transferred prior to the end of each Business Day from the AET
Canada Account and/or the Disbursement Accounts of AET Canada the aggregate
balance in (or held for the benefit of) AET Canada in the AET Canada Account
and such Disbursement Accounts in excess of CDN$3,000,000 to a Blocked Account
of Borrower (or, if established, the Concentration Account).


 


(d)                                 So
long as no Default or Event of Default has occurred and is continuing, Borrower
may amend Disclosure Schedule (3.19) to add or replace a
Relationship Bank, Lock Box or Blocked Account or to replace any Concentration
Account or any Disbursement Account; provided, that (i) Agent shall have
consented in writing in advance to the opening of such account or Lock Box with
the relevant bank and (ii) prior to the time of the opening of such account or
Lock Box, Borrower or its Subsidiaries, as applicable, and such bank shall have
executed and delivered to Agent a tri-party blocked account agreement, in form
and substance reasonably satisfactory to Agent. Borrower shall close any of
their accounts (and establish replacement accounts in accordance with the
foregoing sentence) promptly and in any event within thirty (30) days following
notice from Agent that the creditworthiness of any bank holding an account is
no longer acceptable in Agent’s reasonable judgment, or as promptly as
practicable and in any event within sixty (60) days following notice from Agent
that the operating performance, funds transfer or availability procedures or
performance with respect to accounts or Lock Boxes of the bank holding such
accounts or Agent’s liability under any


 


C-2





















 


tri-party
blocked account agreement with such bank is no longer acceptable in Agent’s
reasonable judgment.


 


(e)                                  The
Lock Boxes, Blocked Accounts, Disbursement Accounts and the Concentration
Accounts shall be cash collateral accounts, with all cash, checks and other
similar items of payment in such accounts securing payment of the Loans and all
other Obligations, and in which Borrower and each Subsidiary thereof shall have
granted a Lien to Agent, on behalf of itself and Lenders, pursuant to the
Security Agreement.


 


(f)                                    All
amounts deposited in the Collection Account shall be deemed received by Agent
in accordance with Section 1.10 and shall be applied (and
allocated) by Agent in accordance with Section 1.11.  In no event shall any amount be so applied
unless and until such amount shall have been credited in immediately available
funds to the Collection Account.


 


(g)                                 Borrower
shall and shall cause its Subsidiaries, officers, employees, agents, directors
or other Persons acting for or in concert with Borrower (each a “Related
Person”) to (i) hold in trust for Agent, for the benefit of itself and
Lenders, all checks, cash and other items of payment payable to or for the
benefit of Borrower or any of its Subsidiaries, and (ii) within one (1) Business
Day after receipt by Borrower, any Subsidiary or any such Related Person of any
checks, cash or other items of payment, deposit the same into a Blocked Account
of Borrower or Subsidiary, as applicable (and with respect to any payments in
respect of Export-Related Accounts, the Export-Related Blocked Account).  Borrower, each Subsidiary and each Related
Person thereof acknowledges and agrees that all cash, checks or other items of
payment constituting proceeds of Collateral are part of the Collateral.  All proceeds of the sale or other disposition
of any Collateral, shall be deposited directly into
the applicable Blocked Accounts.


 


(h)                                 Borrower
shall not and shall not permit or cause its Subsidiaries to establish or permit
to exist any bank accounts other than (i) the Blocked Accounts, the
Concentration Accounts, and the Disbursement Accounts, and (ii) the other
Accounts listed on Disclosure Schedule (3.19) provided that as the
close of business for any two (2) consecutive Business Days amounts on deposit
in such Accounts shall not exceed the following: (A) all Accounts of AET
Limited - $50,000, (B) the Borrower’s Account at First Virginia Bank -$300,000,
(C) the Borrower’s Account at Old National Bank - $600,000, (D) all other
Disbursement Accounts of the Borrower - $300,000, (E) Borrower’s government
account with Merrill Lynch - $75,000, and (F) Borrower’s inactive account with
UBS (#05520 21)-$0.  Borrower shall not,
and shall not cause or permit any Subsidiary thereof to accumulate or maintain
cash in Disbursement Accounts or payroll accounts as of any date of
determination in excess of checks outstanding against such accounts as of that
date and amounts necessary to meet minimum balance requirements.


 


C-3





















 


ANNEX D (SECTION 2.1(A))

TO

CREDIT AGREEMENT


 


CLOSING CHECKLIST


 


In addition to, and not
in limitation of, the conditions described in Section 2.1 of the
Agreement, pursuant to Section 2.1(a), the following items must be
received by Agent in form and substance satisfactory to Agent on or prior to
the Closing Date (each capitalized term used but not otherwise defined herein
shall have the meaning ascribed thereto in Annex A to the Agreement):


 


A.                                   Appendices.  All Appendices to the
Agreement, in form and substance satisfactory to Agent.


 


B.                                     Revolving
Notes, Export-Related Loan Note, Swing Line Notes, Last Out Term Notes and Term
Notes.  Duly executed originals of
the Revolving Notes, Export-Related Loan Note, Swing Line Notes, Last Out Term Notes and Term Notes for each applicable Lender,
dated the Closing Date.


 


C.                                     Security
Agreement.  Duly executed originals
of the Security Agreement, dated the Closing Date, and all instruments,
documents and agreements executed pursuant thereto.


 


D.                                    Insurance.  Satisfactory evidence that the insurance
policies required by Section 5.4 are in full force and effect,
together with appropriate evidence showing loss payable and/or additional
insured clauses or endorsements, as requested by Agent, in favor of Agent, on
behalf of Lenders.


 


E.                                      Security
Interests and Code Filings.


 


(a)                                  Evidence
satisfactory to Agent that Agent (for the benefit of itself and Lenders) has a
valid and perfected first priority security interest in the Collateral,
including (i) such documents duly executed by each Credit Party (including
financing statements under the Code and other applicable documents under the
laws of any jurisdiction with respect to the perfection of Liens) as Agent may
request in order to perfect its security interests in the Collateral and (ii)
copies of Code search reports listing all effective financing statements that
name any Credit Party as debtor, together with copies of such financing
statements, none of which shall cover the Collateral, except for those relating
to the Prior Lender Obligations.


 


(b)                                 Evidence
satisfactory to Agent, including copies, of all UCC-1 and other financing
statements filed in favor of any Credit Party with respect to each location, if
any, at which Inventory may be consigned.


 


(c)                                  Control
Letters from (i) all issuers of uncertificated securities and financial assets
held by Borrower, (ii) all securities intermediaries with respect to all
securities accounts and securities entitlements of Borrower, and (iii) all
futures commission agents and clearing houses with respect to all commodities
contracts and commodities accounts held by Borrower.


 


D-1





















 


F.                                      Intentionally
Omitted.


 


G.                                     Intellectual
Property Security Agreements.  Duly
executed originals of Intellectual Property Security Agreement, dated the
Closing Date and signed by each Credit Party which owns Trademarks, Copyrights
and/or Patents, as applicable, all in form and substance reasonably
satisfactory to Agent, together with all instruments, documents and agreements
executed pursuant thereto.


 


H.                                    Intentionally
Omitted.


 


I.                                         Subsidiary
Guaranties.  Guaranties executed by
and each direct and indirect Subsidiary of Borrower (other than AET Limited) in
favor of Agent, for the benefit of Lenders.


 


J.                                        Initial
Borrowing Base Certificate.  Duly
executed originals of an initial Borrowing Base Certificate from Borrower,
dated the Closing Date, reflecting information concerning Eligible Accounts,
Eligible Inventory and Eligible Export-Related Accounts of Borrower and, as
applicable, AET Canada as of a date acceptable to Agent.


 


K.                                    Initial
Notice of Revolving Credit Advance. 
Duly executed originals of a Notice of Revolving Credit Advance, dated
the Closing Date, with respect to the initial Revolving Credit Advance to be
requested by Borrower on the Closing Date.


 


L.                                      Letter
of Direction.  Duly executed
originals of a letter of direction from Borrower addressed to Agent, on behalf
of itself and Lenders, with respect to the disbursement on the Closing Date of
the proceeds of the Term Loan, the Last Out Term Loan
and the initial Revolving Credit Advance.


 


M.                                 Cash
Management System; Blocked Account Agreements.  Evidence satisfactory to Agent that, as of
the Closing Date, Cash Management Systems complying with Annex C to the
Agreement have been established and are currently being maintained in the
manner set forth in such Annex C, together with copies of duly executed
tri-party blocked account and lock box agreements, reasonably satisfactory to
Agent, with the banks as required by Annex C or on or prior to the
Closing Date, the Interim Order shall have been entered by the Bankruptcy Court
providing the Agent, on behalf of the Lenders, with a first priority priming
security interest in Borrower’s cash receipts and bank accounts.


 


N.                                    Charter
and Good Standing.  For each Credit
Party, such Person’s (a) charter and all amendments thereto, (b) good standing
certificates in its state of incorporation and (c) good standing certificates
and certificates of qualification to conduct business in each jurisdiction
where its ownership or lease of property or the conduct of its business
requires such qualification, each dated a recent date prior to the Closing Date
and certified by the applicable Secretary of State or other authorized Governmental
Authority.


 


O.                                    Bylaws
and Resolutions.  For each Credit
Party, (a) such Person’s bylaws, together with all amendments thereto and (b)
resolutions of such Person’s Board of Directors, approving and authorizing the
execution, delivery and performance of the Loan Documents to which such Person
is a party and the transactions to be consummated in connection therewith,


 


D-2





















 


each
certified as of the Closing Date by such Person’s corporate secretary or an assistant
secretary as being in full force and effect without any modification or
amendment.


 


P.                                      Incumbency
Certificates.  For each Credit Party,
signature and incumbency certificates of the officers of each such Person
executing any of the Loan Documents, certified as of the Closing Date by such
Person’s corporate secretary or an assistant secretary as being true, accurate,
correct and complete.


 


Q.                                    Opinions
of Counsel.  Duly executed originals
of opinions of (i) Shearman & Sterling LLP and (ii) Ogilvy Renault, counsel for the Credit Parties, together with
any other local counsel opinions reasonably requested by Agent, each in form
and substance reasonably satisfactory to Agent and its counsel, dated the
Closing Date.


 


R.                                     Pledge
Agreements.  Duly executed originals
of each of the Pledge Agreements accompanied by (as applicable) (a) share
certificates representing all of the outstanding Stock being pledged pursuant
to such Pledge Agreement and stock powers for such share certificates executed
in blank and (b) the original Intercompany Notes and other instruments
evidencing Indebtedness being pledged pursuant to such Pledge Agreement, duly
endorsed in blank.


 


S.                                      Accountants’
Letters.  A letter from the Credit
Parties to their independent auditors authorizing the independent certified
public accountants of the Credit Parties to communicate with Agent and Lenders
in accordance with Section 4.2.


 


T.                                     Net
Cash Flow Forecast.  A copy of a Borrower’s Net Cash Flow Forecast.


 


U.                                    Fee
Letter.  Duly
executed originals of the GE Capital Fee Letter.


 


V.                                     Officer’s
Certificate.  Agent shall have
received duly executed originals of a certificate of the President and
Principal Financial Officer of Borrower, dated the Closing Date, stating that,
except for circumstances relating to the commencement of the Chapter 11 Cases
and as disclosed in the Credit Agreement, since June 30, 2004 (a) no event
or condition has occurred or is existing which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect; (b)
there has been no material adverse change in the industry in which any Credit
Party operates; (c) no Litigation has been commenced which, if successful,
would have a Material Adverse Effect or could challenge any of the transactions
contemplated by the Agreement and the other Loan Documents; (d) there have been
no Restricted Payments made by any Credit Party; and (e) there has been no
material increase in liabilities, liquidated or contingent, and no material
decrease in assets of the Credit Parties, taken as a whole.


 


W.                                Waivers.  Agent, on behalf of Lenders, shall have
received landlord waivers and consents, bailee letters and mortgagee agreements
in form and substance reasonably satisfactory to Agent, in each case as
required pursuant to Section 5.9.


 


X.                                    Mortgages.  The Borrower shall deliver Mortgages covering
the Real Estate identified on Annex D-1 to the Agreement (each a “Mortgaged
Property,” and collectively, the “Mortgaged Properties”) together
with: (a) title insurance policies, current


 


D-3





















 


as-built surveys, zoning letters and certificates of
occupancy, in each case reasonably satisfactory in form and substance to Agent
in its sole discretion; (b) evidence that counterparts of the Mortgages have
been recorded in all places to the extent necessary or desirable, in the
judgment of Agent, to create a valid and enforceable first priority Lien
(subject only to Permitted Encumbrances) on each Mortgaged Property in favor of
Agent for the benefit of itself and Lenders (or in favor or such other trustee
as may be required or desired under local law); and (c) an opinion of counsel
in each state in which any Mortgaged Property is located in form and substance
and from counsel reasonably satisfactory to Agent.  On or prior to the Closing Date, the Interim
Order shall have been entered by the Bankruptcy Court providing the Agent, on
behalf of the Lenders, with a first priority priming security interest in the
Mortgaged Properties.


 


Y.                                     Subordination
and Intercreditor Agreements.  Agent
and Lenders shall have received any and all subordination and/or intercreditor
agreements, all in form and substance reasonably satisfactory to Agent, in its
sole discretion, as Agent shall have deemed necessary or appropriate with
respect to any Indebtedness of any Credit Party.


 


Z.                                     Intentionally
omitted.


 


AA.                         Intentionally
omitted.


 


BB.                             Audited Financials;
Financial Condition.  Agent shall
have received the Financial Statements, Projections and other materials set
forth in Section 3.4, certified by Borrower’s Principal Financial
Officer, in each case in form and substance reasonably satisfactory to Agent,
and Agent shall be satisfied, in its sole discretion, with all of the
foregoing.  Agent shall have further
received a certificate of the President and/or the Principal Financial Officer
of Borrower, based on such Pro Forma and Projections, to the effect that (a)
the Pro Forma fairly presents the financial condition of Borrower as of the
date thereof after giving effect to the transactions contemplated by the Loan
Documents; and (b) the Projections are based upon estimates and assumptions
stated therein, all of which Borrower believes to be reasonable and fair in
light of current conditions and current facts known to Borrower and, as of the
Closing Date, reflect Borrower’s good faith and reasonable estimates of its
future financial performance and of the other information projected therein for
the period set forth therein.


 


CC.                             Master
Standby Agreement.  A Master Agreement for Standby Letters of Credit among Borrower and
GE Capital.


 


DD.                           Master
Documentary Agreement.  A Master Agreement for Documentary Letters of Credit among Borrower
and GE Capital.


 


EE.                               Other
Documents.  Such other
certificates, documents and agreements respecting any Credit Party as Agent
may, in its sole discretion, request.


 


D-4





















 


ANNEX D-1


 


MORTGAGED PROPERTIES


 


	
  Property Name

  	
   

  	
  Owner

  	
   

  	
  Address

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Terre Haute, Indiana

  	
   

  	
  Borrower

  	
   

  	
  3600 East Head Road,
  Terre Haute, Indiana

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Varennes, Canada

  	
   

  	
  Borrower

  	
   

  	
  3362 Chemin de la
  Baronnie, Varennes, Quebec J3X 1T2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Covington, Virginia

  	
   

  	
  Borrower

  	
   

  	
  901 West Edgemont
  Drive, Covington, Virginia

  



 


D-1-1





















 


ANNEX E (SECTION 4.1(A))

TO

CREDIT AGREEMENT


 


FINANCIAL STATEMENTS AND PROJECTIONS — REPORTING


 


Borrower shall deliver or cause to be delivered to
Agent (with sufficient copies for each Lender other than Black Diamond
International Funding Ltd. (“Black Diamond”)) and Agent shall forward to
each Lender, as indicated, the following:


 


(a)                                  Net
Cash Flow Forecast.  To Agent and
Black Diamond, on or prior to 10:00 a.m. (New York time) on each Monday, an
updated net cash flow forecast showing Borrower’s cumulative actual and forecasted
cash receipts and cash disbursements for the period from the Closing Date,
together with the actual variance for such period and such other information as
may be reasonably requested by Agent and Black Diamond, in form and
satisfactory reasonably satisfactory to Agent and Black Diamond.


 


(b)                                 Monthly
Financials.  To Agent and Black
Diamond, within thirty (30) days after the end of each Fiscal Month, financial
information regarding Borrower and its Subsidiaries, certified by the Principal
Financial Officer of Borrower, consisting of consolidated (i) unaudited balance
sheets as of the close of such Fiscal Month and the related statements of
income and cash flows for that portion of the Fiscal Year ending as of the
close of such Fiscal Month; (ii) unaudited statements of income and cash flows
for such Fiscal Month, setting forth in comparative form the figures for the
corresponding period in the prior year and the figures contained in the
Projections for such Fiscal Year, all prepared in accordance with GAAP (subject
to normal year-end adjustments); and (iii) a summary of the outstanding balance
of all Intercompany Notes as of the last day of that Fiscal Month.  Such financial information shall be
accompanied by (A) a statement in reasonable detail (each, a “Compliance
Certificate” showing the calculations used in determining compliance with
each of the Financial Covenants that is tested on a monthly basis and (B) the
certification of the Principal Financial Officer of Borrower that (i) such
financial information presents fairly in all material respects in accordance
with GAAP (subject to normal year-end adjustments) the financial position and
results of operations of Borrower and its Subsidiaries, on a consolidated
basis, in each case as at the end of such Fiscal Month and for that portion of
the Fiscal Year then ended and (ii) any other information presented is true,
correct and complete in all material respects and that to his knowledge there
was no Default or Event of Default in existence as of such time or, if a
Default or Event of Default has occurred and is continuing, describing the
nature thereof and all efforts undertaken to cure such Default or Event of
Default.


 


(c)                                  Quarterly
Financials.  To Agent and Black
Diamond, within forty-five (45) days after the end of each Fiscal Quarter,
consolidated financial information regarding Borrower and its Subsidiaries,
certified by the Principal Financial Officer of Borrower, including (i)
unaudited balance sheets as of the close of such Fiscal Quarter (including a
balance sheet for each Credit Party) and the related statements of income and
cash flow for that portion of the Fiscal Year ending as of the close of such
Fiscal Quarter and (ii) unaudited statements of income and cash flows for such
Fiscal Quarter, in each case setting forth in comparative form the figures for
the corresponding period in the prior year and the figures contained in the
Projections for


 


E-1





















 


such
Fiscal Year, all prepared in accordance with GAAP (subject to normal year-end
adjustments).  Such financial information
shall be accompanied by the certification of the Principal Financial Officer of
Borrower that (A) such financial information presents fairly in all material
respects in accordance with GAAP (subject to normal year-end adjustments) the
financial position, results of operations and statements of cash flows of
Borrower and its Subsidiaries, on a consolidated basis, as at the end of such
Fiscal Quarter and for that portion of the Fiscal Year then ended and (B) any
other information presented is true, correct and complete in all material
respects and that there was no Default or Event of Default in existence as of
such time or, if a Default or Event of Default has occurred and is continuing,
describing the nature thereof and all efforts undertaken to cure such Default
or Event of Default.  In addition,
Borrower shall deliver to Agent and Black Diamond, within forty-five (45) days
after the end of each Fiscal Quarter, a management discussion and analysis that
includes a comparison to budget for that Fiscal Quarter and a comparison of
performance for that Fiscal Quarter to the corresponding period in the prior
year.


 


(d)                                 Operating
Plan. To Agent and Black Diamond, as soon as available, but not later than
thirty (30) days prior to the beginning of each Fiscal Year, an annual
operating plan for Borrower, on a consolidated and consolidating basis approved
by the Board of Directors of Borrower, for such Fiscal Year, which
(i) includes a statement of all of the material assumptions on which such
plan is based, (ii) includes monthly balance sheets, income statements and
statements of cash flows for the following year and (iii) integrates
sales, gross profits, operating expenses, operating profit, cash flow
projections and Borrowing Availability and Export-Related Borrowing
Availability projections, all prepared on the same basis and in similar detail
as that on which operating results are reported (and in the case of cash flow
projections, representing management’s good faith estimates of future financial
performance based on historical performance), and including plans for
personnel, Capital Expenditures and facilities.


 


(e)                                  Annual
Audited Financials. To Agent and Black Diamond, within ninety (90) days
after the end of each Fiscal Year, audited Financial Statements for Borrower
and its Subsidiaries on a consolidated basis, consisting of balance sheets and
statements of income and retained earnings and cash flows, setting forth in
comparative form in each case the figures for the previous Fiscal Year, which
Financial Statements shall be prepared in accordance with GAAP and certified
without qualification, by Deloitte and Touche, LLP or another independent
certified public accounting firm of national standing or otherwise reasonably
acceptable to Agent and Black Diamond. 
Such Financial Statements shall be accompanied by (i) a statement
prepared by the Principal Financial Officer in reasonable detail showing the
calculations used in determining compliance with each of the Financial
Covenants, (ii) a report from such accounting firm to the effect that, in
connection with their audit examination, nothing has come to their attention to
cause them to believe that a Default or Event of Default has occurred (or specifying
those Defaults and Events of Default that they became aware of), it being
understood that such audit examination extended only to accounting matters and
that no special investigation was made with respect to the existence of
Defaults or Events of Default, (iii) the annual letters to such accountants in
connection with their audit examination detailing contingent liabilities and
material litigation matters, and (iv) the certification of the President or
Principal Financial Officer of Borrower that all such Financial Statements
present fairly in all material respects in accordance with GAAP the financial
position, results of operations and statements of cash flows of Borrower and
its Subsidiaries on a consolidated basis, as at the end of such Fiscal Year and


 


E-2





















 


for the period then ended, and that to his knowledge
there was no Default or Event of Default in existence as of such time or, if a
Default or Event of Default has occurred and is continuing, describing the
nature thereof and all efforts undertaken to cure such Default or Event of
Default.


 


(f)                                    Management
Letters.  To Agent and Black Diamond,
within five (5) Business Days after receipt thereof by any Credit Party, copies
of all management letters, exception reports or similar letters or reports
received by such Credit Party from its independent certified public
accountants.


 


(g)                                 Default
Notices.  To Agent and Black Diamond,
as soon as practicable, and in any event within five (5) Business Days after an
executive officer of Borrower has actual knowledge of the existence of any
Default, Event of Default or other event that has had a Material Adverse
Effect, telephonic or telecopied notice specifying the nature of such Default
or Event of Default or other event, including the anticipated effect thereof,
which notice, if given telephonically, shall be promptly confirmed in writing
on the next Business Day.


 


(h)                                 SEC
Filings and Press Releases.  To Agent
and Black Diamond, promptly upon their becoming available, copies of:  (i) all Financial Statements, reports,
notices and proxy statements made publicly available by any Credit Party to its
security holders; (ii) all regular and periodic reports and all registration
statements and prospectuses, if any, filed by any Credit Party with any
securities exchange or with the Securities and Exchange Commission or any
governmental or private regulatory authority; and (iii) all press releases and
other statements made available by any Credit Party to the public concerning
material changes or developments in the business of any such Person.


 


(i)                                     Senior
Note Documents and Equity Notices. 
To Agent and Black Diamond, as soon as practicable, copies of all
material written notices given or received by any Credit Party with respect to
the Senior Note Documents or Stock of such Person, and, within two (2) Business
Days after any Credit Party obtains knowledge of any matured or unmatured event
of default or termination event with respect to any Senior Note Document,
notice of such event of default or termination event.


 


(j)                                     Supplemental
Schedules.  From time to time as may
be reasonably requested by Agent (which request will not be made more
frequently than once each year absent the occurrence and continuance of a
Default or an Event of Default), supplements to each Disclosure Schedule hereto,
or any representation herein or in any other Loan Document, with respect to any
matter hereafter arising that, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in such
Disclosure Schedule or as an exception to such representation or that is
necessary to correct any information in such Disclosure Schedule or
representation which has been rendered inaccurate thereby (and, in the case of
any supplements to any Disclosure Schedule, such Disclosure Schedule shall
be appropriately marked to show the changes made therein); provided that
(a) no such supplement to any such Disclosure Schedule or representation
shall amend, supplement or otherwise modify the term “Disclosure Schedule” as
used herein or any representation with respect thereto, or be or be deemed a
waiver of any Default or Event of Default resulting from the matters disclosed
therein, except as consented to by Agent and Requisite Lenders in writing, and
(b) no


 


E-3





















 


supplement
shall be required or permitted as to representations and warranties that relate
solely to the Closing Date.


 


(k)                                  Litigation.  To Agent and Black Diamond in writing,
promptly upon obtaining knowledge thereof, notice of any Litigation commenced
or threatened in writing against any Credit Party that (i) seeks damages in
excess of $100,000, (ii) seeks injunctive relief, (iii) is asserted or
instituted against any Plan, its fiduciaries or its assets or against any
Credit Party or ERISA Affiliate in connection with any Plan, (iv) alleges
criminal misconduct by any Credit Party, (v) alleges the violation of any law
regarding, or seeks remedies in connection with, any Environmental Liabilities
or (vi) involves any product recall.


 


(l)                                     Insurance
Notices.  To Agent,
disclosure of losses or casualties required by Section 5.4.


 


(m)                               Lease
Default Notices.  To Agent, within
two (2) Business Days after receipt thereof, copies of (i) any and all default
notices received under or with respect to any leased location or public
warehouse where Collateral is located, and (ii) such other notices or documents
as Agent may reasonably request.


 


(n)                                 Lease
Amendments.  To Agent, within two (2)
Business Days after receipt thereof, copies of all material amendments to any
real estate leases.


 


(o)                                 Other
Documents.  To Agent and Lenders,
such other financial and other information respecting any Credit Party’s
business or financial condition as Agent or any Lender shall from time to time
reasonably request.


 


(p)                                 Bankruptcy
Matters.  Copies of all monthly
reports, projections, or other information respecting Borrower’s or any
Subsidiary of Borrower’s business or financial condition or prospects as well
as all pleadings, motions, applications and judicial information filed by or on
behalf of Borrower or any other Credit Party filing a Chapter 11 Case with the
Bankruptcy Court or provided by or to the U.S. Trustee (or any monitor or
interim receiver, if any, appointed in the Chapter 11 Cases) or the Committee,
at the time such document is filed with the Bankruptcy Court, or provided by
or, to the U.S. Trustee (or any monitor or interim receiver, if any, appointed
in the Chapter 11 Cases) or the Committee.


 


E-4





















 


ANNEX F (SECTION 4.1(B))

TO

CREDIT AGREEMENT


 


COLLATERAL REPORTS


 


Borrower shall deliver or cause to be delivered the
following:


 


(a)                                  To
Agent and Black Diamond, upon their request, and in any event no less
frequently than ten (10) Business Days after the end of each Fiscal Month
(together with a copy of all or any part of the following reports requested by
any Lender in writing after the Closing Date), each of the following reports,
each of which shall be prepared by Borrower as of the last day of the
immediately preceding Fiscal Month or the date two (2) days prior to the date
of any such request:


 


(i)                                     with
respect to Borrower and AET Canada, a summary of Inventory by location and type
with a supporting perpetual Inventory report, in each case accompanied by such
supporting detail and documentation as shall be requested by Agent in its
reasonable discretion; and


 


(ii)                                 with
respect to Borrower and AET Canada, a monthly trial balance showing Accounts
outstanding aged by due date as follows: 
one (1) to thirty (30) days past due, thirty one (31) to sixty (60) days
past due, sixty one (61) to ninety (90) days and ninety one (91) days or more
past due, accompanied by such supporting detail and documentation as shall be
requested by Agent in its reasonable discretion.


 


(b)                                 To
Agent and Black Diamond, promptly following their request therefor, and in any
event no less frequently than by 3:00 p.m. (New York time) on Friday of
every other week, a Borrowing Base Certificate with respect to Borrower and AET
Canada accompanied by such supporting detail and documentation as shall be
requested by Agent in its reasonable discretion and prepared by Borrower as of
such Friday or the date which is two (2) days prior to the date of any such
request, as the case may be.


 


(c)                                  To
Agent and Black Diamond, at the time of delivery of each of the monthly
Financial Statements delivered pursuant to Annex E:


 


(i)                                     a
reconciliation of the Accounts trial balance of Borrower to Borrower’s most
recent Borrowing Base Certificate, general ledger and monthly Financial
Statements delivered pursuant to Annex E, in each case accompanied by
such supporting detail and documentation as shall be requested by Agent in its
reasonable discretion;


 


(ii)                                  a
reconciliation of the perpetual inventory by location of Borrower to Borrower’s
most recent Borrowing Base Certificate, general ledger and monthly Financial
Statements delivered pursuant to Annex E, in each case accompanied
by such supporting detail and documentation as shall be requested by Agent in
its reasonable discretion; and


 


F-1





















 


(iii)                               a
reconciliation of the outstanding Loans as set forth in the monthly Loan
Account statement provided by Agent to Borrower’s general ledger and monthly
Financial Statements delivered pursuant to Annex E, in each case
accompanied by such supporting detail and documentation as shall be requested
by Agent in its reasonable discretion;


 


(d)                                 To
Agent and Black Diamond, at the time of delivery of each of the quarterly
Financial Statements delivered pursuant to Annex E, an aging of accounts
payable, in each case accompanied by such supporting detail and documentation
as shall be requested by Agent in its reasonable discretion;


 


(e)                                  To
Agent and Black Diamond, at the time of delivery of each of the annual
Financial Statements delivered pursuant to Annex E, (i) a listing of
government contracts of Borrower subject to the Federal Assignment of Claims
Act of 1940; and (ii) a list of any applications for the registration of any
Patent, Trademark or Copyright filed by any Credit Party with the United States
Patent and Trademark Office, the United States Copyright Office or any similar
office or agency in the prior Fiscal Quarter;


 


(f)                                    Borrower,
at its own expense, shall deliver to Agent the results of each physical
verification, if any, that Borrower or any of its Subsidiaries may in their
discretion have made, or caused any other Person to have made on their behalf,
of all or any portion of their Inventory (and, if a Default or an Event of
Default has occurred and is continuing, Borrower shall, upon the request of
Agent, conduct, and deliver the results of, such physical verifications as
Agent may require);


 


(g)                                 Borrower,
at its own expense, shall deliver to Agent such appraisals of its assets as
Agent may request such appraisals to be conducted by an appraiser, and in form
and substance reasonably satisfactory to Agent; provided that Borrower shall
not be liable for the cost of more than one appraisal per year from the date of
this Agreement unless there exists a Default or an Event of Default; and


 


(h)                                 Such
other reports, statements and reconciliations with respect to the Borrowing
Base, Collateral or Obligations of any or all Credit Parties as Agent shall
from time to time request in its reasonable discretion.


 


F-2





















 


ANNEX G (SECTION 6.10)

TO

CREDIT AGREEMENT


 


FINANCIAL COVENANTS


 


Borrower shall not breach or fail to comply with any of
the following financial covenants, each of which shall be calculated in
accordance with GAAP consistently applied:


 


(a)                                  Maximum
Senior Leverage Ratio.  Borrower and
its Subsidiaries shall have on a consolidated basis at the end of each Fiscal
Month set forth below, a Senior Leverage Ratio for the 12-month period then
ended of not more than the following:


 


	
  Fiscal Month ending

  	
   

  	
  Maximum Senior Leverage
  Coverage Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2004

  	
   

  	
  5.50:1.00

  	
   

  
	
  January 31, 2005

  	
   

  	
  5.50:1.00

  	
   

  
	
  February 28, 2005

  	
   

  	
  5.50:1.00

  	
   

  
	
  March 31, 2005

  	
   

  	
  5.50:1.00

  	
   

  
	
  April 30, 2005

  	
   

  	
  5.50:1.00

  	
   

  
	
  May 31, 2005

  	
   

  	
  5.50:1.00

  	
   

  
	
  June 30, 2005

  	
   

  	
  5.50:1.00

  	
   

  
	
  July 31, 2005

  	
   

  	
  5.50:1.00

  	
   

  
	
  August 31, 2005

  	
   

  	
  5.50:1.00

  	
   

  
	
  September 30, 2005

  	
   

  	
  5.50:1.00

  	
   

  



 


(b)                                 Minimum
Fixed Charge Coverage Ratio. 
Borrower and its Subsidiaries shall have on a consolidated basis at the
end of each Fiscal Month set forth below, a Fixed Charge Coverage Ratio for the
12-month period then ended of not less than the following:


 


	
  Fiscal Month ending

  	
   

  	
  Minimum Fixed Charge Coverage
  Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2004

  	
   

  	
  1.72:1.00

  	
   

  
	
  January 31, 2005

  	
   

  	
  1.45:1.00

  	
   

  
	
  February 28, 2005

  	
   

  	
  1.36:1.00

  	
   

  
	
  March 31, 2005

  	
   

  	
  1.32:1.00

  	
   

  
	
  April 30, 2005

  	
   

  	
  1.25:1.00

  	
   

  
	
  May 31, 2005

  	
   

  	
  1.24:1.00

  	
   

  
	
  June 30, 2005

  	
   

  	
  1.19:1.00

  	
   

  
	
  July 31, 2005

  	
   

  	
  1.24:1.00

  	
   

  
	
  August 31, 2005

  	
   

  	
  1.32:1.00

  	
   

  
	
  September 30, 2005

  	
   

  	
  1.64:1.00

  	
   

  



 


(c)                                  Minimum
EBITDA.   Borrower and its
Subsidiaries on a consolidated basis shall have, at the end of each Fiscal
Month set forth below, EBITDA for the 12-month period then ended of not less
than the following:


 


G-1





















 


	
  Fiscal Month ending

  	
   

  	
  Minimum EBITDA

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2004

  	
   

  	
  $

  	
  21,303,000

  	
   

  
	
  January 31, 2005

  	
   

  	
  $

  	
  18,928,000

  	
   

  
	
  February 28, 2005

  	
   

  	
  $

  	
  18,264,000

  	
   

  
	
  March 31, 2005

  	
   

  	
  $

  	
  18,228,000

  	
   

  
	
  April 30, 2005

  	
   

  	
  $

  	
  18,451,000

  	
   

  
	
  May 31, 2005

  	
   

  	
  $

  	
  19,185,000

  	
   

  
	
  June 30, 2005

  	
   

  	
  $

  	
  19,586,000

  	
   

  
	
  July 31, 2005

  	
   

  	
  $

  	
  20,244,000

  	
   

  
	
  August 31, 2005

  	
   

  	
  $

  	
  21,221,000

  	
   

  
	
  September 30, 2005

  	
   

  	
  $

  	
  23,426,000

  	
   

  



 


(d)                                 Net
Cash Flow.  For any month, on a
cumulative basis for the period commencing on November 29, 2004 and ending
on the date set forth in the table below, Borrower and its Subsidiaries on a
consolidated basis shall have “Net Cash Flow” (as such term is referenced for
such period in the Net Cash Flow Forecast), of not less than the following:


 


	
  Month ending

  	
   

  	
  Net Cash Flow

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31, 2004

  	
   

  	
  $

  	
  (4,336,000

  	
  )

  
	
  January 28, 2005

  	
   

  	
  $

  	
  (3,899,000

  	
  )

  
	
  February 25, 2005

  	
   

  	
  $

  	
  (8,512,000

  	
  )

  
	
  March 31, 2005

  	
   

  	
  $

  	
  (6,313,000

  	
  )

  
	
  April 30, 2005

  	
   

  	
  $

  	
  (12,412,000

  	
  )

  
	
  May 31, 2005

  	
   

  	
  $

  	
  (9,812,000

  	
  )

  
	
  June 30, 2005

  	
   

  	
  $

  	
  (5,012,000

  	
  )

  
	
  July 31, 2005

  	
   

  	
  $

  	
  (5,912,000

  	
  )

  
	
  August 31, 2005

  	
   

  	
  $

  	
  1,016,000

  	
   

  
	
  September 30, 2005

  	
   

  	
  $

  	
  4,302,000

  	
   

  



 


(e)                                  Minimum
Borrowing Availability.  From and
after the date of entry of the Final Order, Borrower shall have Borrowing
Availability of at least (i) $2,500,000 on the date of entry of the Final Order
and at any time the Applicable Margins are at Level V as set forth in the grid
in Section 1.5 of the Agreement and (ii) $5,000,000 at any time the
Applicable Margins are at Level VI as set forth in the grid in Section 1.5
of the Agreement.


 


Unless
otherwise specifically provided herein, any accounting term used in the
Agreement shall have the meaning customarily given such term in accordance with
GAAP, and all financial computations hereunder shall be computed in accordance
with GAAP consistently applied.  That
certain items or computations are explicitly modified by the phrase ‘in
accordance with GAAP’ shall in no way be construed to limit the foregoing.  If any ‘Accounting Changes’ (as defined
below) occur and such changes result in a change in the calculation of the
financial covenants, standards or terms used in the Agreement or any other Loan
Document, then Borrower, Agent and Lenders agree to enter into negotiations in
order to amend such provisions of the Agreement so as to equitably reflect such
Accounting Changes with the desired result that


 


G-2





















 


the criteria for
evaluating Borrower’s and its Subsidiaries’ financial condition shall be the same
after such Accounting Changes as if such Accounting Changes had not been made; provided,
however, that the agreement of Requisite Lenders to any required
amendments of such provisions shall be sufficient to bind all Lenders.  ‘Accounting Changes’ means (i) changes
in accounting principles required by the promulgation of any rule, regulation,
pronouncement or opinion by the Financial Accounting Standards Board of the
American Institute of Certified Public Accountants (or successor thereto or any
agency with similar functions), (ii) changes in accounting principles concurred
in by Borrower’s certified public accountants; (iii) purchase accounting
adjustments under A.P.B. 16 or 17 and EITF 88-16, and the application of the
accounting principles set forth in FASB 109, including the establishment of
reserves pursuant thereto and any subsequent reversal (in whole or in part) of
such reserves; and (iv) the reversal of any reserves established as a result of
purchase accounting adjustments.  All
such adjustments resulting from expenditures made subsequent to the Closing
Date (including capitalization of costs and expenses or payment of pre-Closing
Date liabilities) shall be treated as expenses in the period the expenditures
are made and deducted as part of the calculation of EBITDA in such period.  If Agent, Borrower and Requisite Lenders
agree upon the required amendments, then after appropriate amendments have been
executed and the underlying Accounting Change with respect thereto has been
implemented, any reference to GAAP contained in the Agreement or in any other
Loan Document shall, only to the extent of such Accounting Change, refer to
GAAP, consistently applied after giving effect to the implementation of such
Accounting Change.  If Agent, Borrower
and Requisite Lenders cannot agree upon the required amendments within 30 days
following the date of implementation of any Accounting Change, then all
Financial Statements delivered and all calculations of financial covenants and
other standards and terms in accordance with the Agreement and the other Loan
Documents shall be prepared, delivered and made without regard to the
underlying Accounting Change.  For
purposes of Section 8.1, a breach of a Financial Covenant contained
in this Annex G shall be deemed to have occurred as of any date of
determination by Agent or as of the last day of any specified measurement
period, regardless of when the Financial Statements reflecting such breach are
delivered to Agent.


 


G-3





















 


ANNEX H (SECTION 9.9(A))

TO

CREDIT AGREEMENT


 


WIRE TRANSFER INFORMATION


 


	
  Name:

  	
  General Electric
  Capital Corporation

  
	
  Bank:

  	
  Deutsche Bank
  Trust Company Americas

  
	
   

  	
  New York, New
  York

  
	
  ABA #:

  	
  021001033

  
	
  Account #:

  	
  50232854

  
	
  Account Name:

  	
  GECC/CAF
  Depository

  
	
  Reference:

  	
  Applied
  Extrusion Technologies

  



 


H-1





















 


ANNEX I (SECTION 11.10)

TO

CREDIT AGREEMENT


 


NOTICE ADDRESSES


 


(A)                              If
to Agent or GE Capital, at


General
Electric Capital Corporation


401
Merritt Seven, 2nd Floor


Norwalk,
Connecticut 06856


Attention:
Jim Kaufman, Applied Extrusion Technologies, Inc, Account Manager


Telecopier
No.: 203-229-1992


Telephone
No.: 203-229-1832


 


and to:


 


General
Electric Capital Corporation


335
Madison Avenue


12th
Floor


New
York, New York 10017


Attention:  Applied Extrusion Technologies, Inc, Account
Manager


Telecopier
No.: 212-309-8798


Telephone
No.: 212-370-8035


 


and, with respect to any Default
or Event of Default, to:


 


Paul,
Hastings, Janofsky & Walker LLP


600
Peachtree Street N.E.,


Atlanta,
GA 30308


Attention:
Jesse H. Austin, III


Telecopier
No.: 404-815-2424


Telephone
No.: 404-815-2400


 


and


 


Paul,
Hastings, Janofsky & Walker LLP


1055
Washington Boulevard


Stamford,
Connecticut 06901


Attention:
Leslie A. Plaskon


Telecopier
No.: 203-674-7620


Telephone
No.: 203-961-7420


 


and


 


General
Electric Capital Corporation


 


I-1





















 


401
Merritt Seven, 2nd Floor


Norwalk,
Connecticut 06856


Attention:  Corporate Counsel – Commercial Industrial
Finance


Telecopier
No.: 203-229-1991


Telephone
No.: 203-229-1923


 


and


 


General
Electric Capital Corporation


401
Merritt Seven, 2nd Floor


Norwalk,
Connecticut 06856


Attention:  Corporate Counsel - Commercial Finance


Telecopier
No.: 203-373-3008


Telephone
No.:  203-956-4383


 


(B)                                If
to Borrower, at


Applied Extrusion Technologies, Inc.


15
Read’s Way


New
Castle, Delaware 19720


Attention:
Brian Crescenzo


Telecopier
No.: (302) 326-5561


Telephone
No.: (302) 326-5525


 


and, with respect to any Default
or Event of Default, to:


 


Shearman
& Sterling LLP


599
Lexington Avenue


New
York, New York 10022


Attention:
Douglas P. Bartner


Telecopier
No.: 646-848-8190


Telephone
No.: 212-848-4000


 


and


 


Sutherland
Asbill & Brennan LLP


153
East 53rd Street


New
York, New York 10022


Attention:
Jeffrey L. Dunetz


Telecopier
No.: 212-389-5040


Telephone
No.: 212-389-5099


 


I-2





















 


ANNEX J (FROM ANNEX A - COMMITMENTS DEFINITION)

TO

CREDIT AGREEMENT


 


	
   

  	
   

  	
  Lender(s)

  	
   

  
	
  Revolving Loan
  Commitment

  	
   

  	
   

  	
   

  
	
  (including a Swing
  Line Commitment

  	
   

  	
   

  	
   

  
	
  of $5,000,000 an
  Export-Related

  	
   

  	
   

  	
   

  
	
  Loan Commitment
  of $5,000,000

  	
   

  	
   

  	
   

  
	
  and a Letter of
  Credit Commitment

  	
   

  	
   

  	
   

  
	
  of up to
  $10,000,000):

  	
   

  	
   

  	
   

  
	
  $55,000,000

  	
   

  	
  General Electric
  Capital Corporation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Term Loan
  Commitment:

  $42,500,000

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Last Out Term
  Loan Commitment:

  $20,000,000

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Term Loan Commitment:

  $7,500,000

  	
   

  	
  Merrill Lynch Capital, a division of Merrill Lynch Business Financial
  Services, Inc.

  	
   

  



 


J-1