exv10w2



 





Exhibit 10.2




REVOLVING CREDIT




AND




SECURITY AGREEMENT




PNC BANK, NATIONAL ASSOCIATION



(AS LENDER AND AS AGENT)




WITH




RESEARCH PHARMACEUTICAL SERVICES, INC.



(BORROWER)




November 1, 2006




 









 





Table Of Contents




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	I.	 	DEFINITIONS	 	 	1	 
	 
	 	1.1.	 	Accounting Terms	 	 	1	 
	 
	 	1.2.	 	General Terms	 	 	1	 
	 
	 	1.3.	 	Uniform Commercial Code Terms	 	 	20	 
	 
	 	1.4.	 	Certain Matters of Construction	 	 	21	 
	 
	 	 	 	 	 	 	 	 
	II.	 	ADVANCES, PAYMENTS	 	 	22	 
	 
	 	2.1.	 	Revolving Advances	 	 	22	 
	 
	 	2.2.	 	Procedure for Revolving Advances Borrowing	 	 	22	 
	 
	 	2.3.	 	Disbursement of Advance Proceeds	 	 	24	 
	 
	 	2.4.	 	Intentionally Omitted	 	 	25	 
	 
	 	2.5.	 	Maximum Advances	 	 	25	 
	 
	 	2.6.	 	Repayment of Advances	 	 	25	 
	 
	 	2.7.	 	Repayment of Excess Advances	 	 	25	 
	 
	 	2.8.	 	Statement of Account	 	 	26	 
	 
	 	2.9.	 	Letters of Credit	 	 	26	 
	 
	 	2.10.	 	Issuance of Letters of Credit	 	 	26	 
	 
	 	2.11.	 	Requirements For Issuance of Letters of Credit	 	 	27	 
	 
	 	2.12.	 	Disbursements, Reimbursement	 	 	27	 
	 
	 	2.13.	 	Repayment of Participation Advances	 	 	28	 
	 
	 	2.14.	 	Documentation	 	 	29	 
	 
	 	2.15.	 	Determination to Honor Drawing Request	 	 	29	 
	 
	 	2.16.	 	Nature of Participation and Reimbursement Obligations	 	 	29	 
	 
	 	2.17.	 	Indemnity	 	 	31	 
	 
	 	2.18.	 	Liability for Acts and Omissions	 	 	31	 
	 
	 	2.19.	 	Additional Payments	 	 	32	 
	 
	 	2.20.	 	Manner of Borrowing and Payment	 	 	32	 
	 
	 	2.21.	 	Intentionally Omitted	 	 	34	 
	 
	 	2.22.	 	Use of Proceeds	 	 	34	 
	 
	 	2.23.	 	Defaulting Lender	 	 	34	 
	 
	 	 	 	 	 	 	 	 
	III.	 	INTEREST AND FEES	 	 	35	 
	 
	 	3.1.	 	Interest	 	 	35	 
	 
	 	3.2.	 	Letter of Credit Fees	 	 	36	 
	 
	 	3.3.	 	Closing Fee and Facility Fee	 	 	36	 
	 
	 	3.4.	 	Collateral Evaluation Fee, Collateral Monitoring Fee and Fee Letter	 	 	37	 
	 
	 	3.5.	 	Computation of Interest and Fees	 	 	37	 
	 
	 	3.6.	 	Maximum Charges	 	 	37	 
	 
	 	3.7.	 	Increased Costs	 	 	37	 
	 
	 	3.8.	 	Basis For Determining Interest Rate Inadequate or Unfair	 	 	38	 
	 
	 	3.9.	 	Capital Adequacy	 	 	39	 
	 
	 	3.10.	 	Gross Up for Taxes	 	 	39	 
	 
	 	3.11.	 	Withholding Tax Exemption	 	 	40	 








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	 	 	 	 	 	 	Page	 
	IV.	 	COLLATERAL: GENERAL TERMS	 	 	40	 
	 
	 	4.1.	 	Security Interest in the Collateral	 	 	40	 
	 
	 	4.2.	 	Perfection of Security Interest	 	 	41	 
	 
	 	4.3.	 	Disposition of Collateral	 	 	41	 
	 
	 	4.4.	 	Preservation of Collateral	 	 	41	 
	 
	 	4.5.	 	Ownership of Collateral	 	 	42	 
	 
	 	4.6.	 	Defense of Agent’s and Lenders’ Interests	 	 	42	 
	 
	 	4.7.	 	Books and Records	 	 	43	 
	 
	 	4.8.	 	Financial Disclosure	 	 	43	 
	 
	 	4.9.	 	Compliance with Laws	 	 	43	 
	 
	 	4.10.	 	Inspection of Premises	 	 	43	 
	 
	 	4.11.	 	Insurance	 	 	44	 
	 
	 	4.12.	 	Failure to Pay Insurance	 	 	44	 
	 
	 	4.13.	 	Payment of Taxes	 	 	45	 
	 
	 	4.14.	 	Payment of Leasehold Obligations	 	 	45	 
	 
	 	4.15.	 	Receivables	 	 	45	 
	 
	 	4.16.	 	Inventory	 	 	47	 
	 
	 	4.17.	 	Maintenance of Equipment	 	 	47	 
	 
	 	4.18.	 	Exculpation of Liability 	 	 	48	 
	 
	 	4.19.	 	Environmental Matters	 	 	48	 
	 
	 	4.20.	 	Financing Statements	 	 	50	 
	 
	 	 	 	 	 	 	 	 
	V.	 	REPRESENTATIONS AND WARRANTIES	 	 	50	 
	 
	 	5.1.	 	Authority	 	 	50	 
	 
	 	5.2.	 	Formation and Qualification	 	 	51	 
	 
	 	5.3.	 	Survival of Representations and Warranties	 	 	51	 
	 
	 	5.4.	 	Tax Returns	 	 	51	 
	 
	 	5.5.	 	Financial Statements	 	 	51	 
	 
	 	5.6.	 	Entity Name	 	 	51	 
	 
	 	5.7.	 	O.S.H.A. and Environmental Compliance	 	 	51	 
	 
	 	5.8.	 	Solvency; No Litigation, Violation, Indebtedness or Default	 	 	52	 
	 
	 	5.9.	 	Patents, Trademarks, Copyrights and Licenses	 	 	53	 
	 
	 	5.10.	 	Licenses and Permits	 	 	54	 
	 
	 	5.11.	 	Default of Indebtedness	 	 	54	 
	 
	 	5.12.	 	No Default	 	 	54	 
	 
	 	5.13.	 	No Burdensome Restrictions	 	 	54	 
	 
	 	5.14.	 	No Labor Disputes	 	 	54	 
	 
	 	5.15.	 	Margin Regulations	 	 	54	 
	 
	 	5.16.	 	Investment Company Act	 	 	54	 
	 
	 	5.17.	 	Disclosure	 	 	54	 
	 
	 	5.18.	 	Delivery of Subordinated Loan Documentation	 	 	55	 
	 
	 	5.19.	 	Swaps	 	 	55	 
	 
	 	5.20.	 	Conflicting Agreements	 	 	55	 
	 
	 	5.21.	 	Application of Certain Laws and Regulations	 	 	55	 
	 
	 	5.22.	 	Business and Property of Borrower	 	 	55	 
	 
	 	5.23.	 	Section 20 Subsidiaries	 	 	55	 
	 
	 	5.24.	 	Anti-Terrorism Laws	 	 	56	 






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	 	 	 	 	 	 	Page	 
	 
	 	5.25.	 	Trading with the Enemy	 	 	56	 
	 
	 	5.26.	 	Federal Securities Laws	 	 	56	 
	 
	 	 	 	 	 	 	 	 
	VI.	 	AFFIRMATIVE COVENANTS	 	 	57	 
	 
	 	6.1.	 	Payment of Fees	 	 	57	 
	 
	 	6.2.	 	Conduct of Business and Maintenance of Existence and Assets	 	 	57	 
	 
	 	6.3.	 	Violations	 	 	57	 
	 
	 	6.4.	 	Government Receivables	 	 	57	 
	 
	 	6.5.	 	Fixed Charge Coverage Ratio	 	 	57	 
	 
	 	6.6.	 	Execution of Supplemental Instruments	 	 	57	 
	 
	 	6.7.	 	Payment of Indebtedness	 	 	58	 
	 
	 	6.8.	 	Standards of Financial Statements	 	 	58	 
	 
	 	6.9.	 	Federal Securities Laws	 	 	58	 
	 
	 	6.10.	 	Matters Relating to Borrower’s Foreign Subsidiaries	 	 	58	 
	 
	 	 	 	 	 	 	 	 
	VII.	 	NEGATIVE COVENANTS	 	 	58	 
	 
	 	7.1.	 	Merger, Consolidation, Acquisition and Sale of Assets	 	 	58	 
	 
	 	7.2.	 	Creation of Liens	 	 	59	 
	 
	 	7.3.	 	Guarantees	 	 	59	 
	 
	 	7.4.	 	Investments	 	 	59	 
	 
	 	7.5.	 	Loans	 	 	59	 
	 
	 	7.6.	 	Capital Expenditures	 	 	60	 
	 
	 	7.7.	 	Dividends	 	 	60	 
	 
	 	7.8.	 	Indebtedness	 	 	60	 
	 
	 	7.9.	 	Nature of Business	 	 	60	 
	 
	 	7.10.	 	Transactions with Affiliates	 	 	60	 
	 
	 	7.11.	 	Leases 	 	 	60	 
	 
	 	7.12.	 	Subsidiaries	 	 	60	 
	 
	 	7.13.	 	Fiscal Year and Accounting Changes	 	 	61	 
	 
	 	7.14.	 	Pledge of Credit	 	 	61	 
	 
	 	7.15.	 	Amendment of Articles of Incorporation, By-Laws	 	 	61	 
	 
	 	7.16.	 	Compliance with ERISA	 	 	61	 
	 
	 	7.17.	 	Prepayment of Indebtedness	 	 	61	 
	 
	 	7.18.	 	Anti-Terrorism Laws	 	 	62	 
	 
	 	7.19.	 	Membership/Partnership Interests	 	 	62	 
	 
	 	7.20.	 	Trading with the Enemy Act	 	 	62	 
	 
	 	7.21.	 	Subordinated Note	 	 	62	 
	 
	 	7.22.	 	Other Agreements	 	 	62	 
	 
	 	7.23.	 	Limitation on Foreign Subsidiaries	 	 	62	 
	 
	 	7.24.	 	Limitation on Negative Pledge	 	 	62	 
	 
	 	7.25.	 	Limitation on Transfer of Possession of Subsidiary Stock	 	 	63	 
	 
	 	 	 	 	 	 	 	 
	VIII.	 	CONDITIONS PRECEDENT	 	 	63	 
	 
	 	8.1.	 	Conditions to Initial Advances	 	 	63	 
	 
	 	8.2.	 	Conditions to Each Advance	 	 	66	 






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	 	 	 	 	 	 	Page	 
	IX.	 	INFORMATION AS TO BORROWERS	 	 	66	 
	 
	 	9.1.	 	Disclosure of Material Matters	 	 	66	 
	 
	 	9.2.	 	Schedules	 	 	66	 
	 
	 	9.3.	 	Environmental Reports	 	 	67	 
	 
	 	9.4.	 	Litigation	 	 	67	 
	 
	 	9.5.	 	Material Occurrences	 	 	67	 
	 
	 	9.6.	 	Government Receivables	 	 	68	 
	 
	 	9.7.	 	Annual Financial Statements	 	 	68	 
	 
	 	9.8.	 	Quarterly Financial Statements	 	 	68	 
	 
	 	9.9.	 	Monthly Financial Statements	 	 	68	 
	 
	 	9.10.	 	Other Reports	 	 	68	 
	 
	 	9.11.	 	Additional Information	 	 	68	 
	 
	 	9.12.	 	Projected Operating Budget	 	 	69	 
	 
	 	9.13.	 	Variances From Operating Budget  	 	 	69	 
	 
	 	9.14.	 	Notice of Suits, Adverse Events	 	 	69	 
	 
	 	9.15.	 	ERISA Notices and Requests	 	 	69	 
	 
	 	9.16.	 	Additional Documents	 	 	70	 
	 
	 	 	 	 	 	 	 	 
	X.	 	EVENTS OF DEFAULT	 	 	70	 
	 
	 	10.1.	 	Nonpayment	 	 	70	 
	 
	 	10.2.	 	Breach of Representation	 	 	70	 
	 
	 	10.3.	 	Financial Information	 	 	70	 
	 
	 	10.4.	 	Judicial Actions	 	 	70	 
	 
	 	10.5.	 	Noncompliance	 	 	70	 
	 
	 	10.6.	 	Judgments	 	 	70	 
	 
	 	10.7.	 	Bankruptcy	 	 	71	 
	 
	 	10.8.	 	Inability to Pay	 	 	71	 
	 
	 	10.9.	 	Subsidiary Bankruptcy	 	 	71	 
	 
	 	10.10.	 	Material Adverse Effect	 	 	71	 
	 
	 	10.11.	 	Lien Priority	 	 	71	 
	 
	 	10.12.	 	Subordinated Loan Default	 	 	71	 
	 
	 	10.13.	 	Cross Default	 	 	71	 
	 
	 	10.14.	 	Change of Ownership	 	 	71	 
	 
	 	10.15.	 	Invalidity	 	 	71	 
	 
	 	10.16.	 	Licenses	 	 	72	 
	 
	 	10.17.	 	Seizures	 	 	72	 
	 
	 	10.18.	 	Operations	 	 	72	 
	 
	 	10.19.	 	Pension Plans	 	 	72	 
	 
	 	 	 	 	 	 	 	 
	XI.	 	LENDERS’ RIGHTS AND REMEDIES AFTER DEFAULT	 	 	72	 
	 
	 	11.1.	 	Rights and Remedies	 	 	72	 
	 
	 	11.2.	 	Agent’s Discretion	 	 	74	 
	 
	 	11.3.	 	Setoff	 	 	74	 
	 
	 	11.4.	 	Rights and Remedies not Exclusive	 	 	74	 
	 
	 	11.5.	 	Allocation of Payments After Event of Default	 	 	74	 






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	 	 	 	 	 	 	Page	 
	XII.	 	WAIVERS AND JUDICIAL PROCEEDINGS	 	 	75	 
	 
	 	12.1.	 	Waiver of Notice	 	 	75	 
	 
	 	12.2.	 	Delay	 	 	75	 
	 
	 	12.3.	 	Jury Waiver	 	 	75	 
	 
	 	 	 	 	 	 	 	 
	XIII.	 	EFFECTIVE DATE AND TERMINATION	 	 	76	 
	 
	 	13.1.	 	Term	 	 	76	 
	 
	 	13.2.	 	Termination	 	 	76	 
	 
	 	 	 	 	 	 	 	 
	XIV.	 	REGARDING AGENT	 	 	77	 
	 
	 	14.1.	 	Appointment	 	 	77	 
	 
	 	14.2.	 	Nature of Duties	 	 	77	 
	 
	 	14.3.	 	Lack of Reliance on Agent and Resignation	 	 	77	 
	 
	 	14.4.	 	Certain Rights of Agent	 	 	78	 
	 
	 	14.5.	 	Reliance	 	 	78	 
	 
	 	14.6.	 	Notice of Default	 	 	78	 
	 
	 	14.7.	 	Indemnification	 	 	79	 
	 
	 	14.8.	 	Agent in its Individual Capacity	 	 	79	 
	 
	 	14.9.	 	Delivery of Documents	 	 	79	 
	 
	 	14.10.	 	Borrower’s Undertaking to Agent	 	 	79	 
	 
	 	14.11.	 	No Reliance on Agent’s Customer Identification Program	 	 	79	 
	 
	 	14.12.	 	Other Agreements	 	 	80	 
	 
	 	 	 	 	 	 	 	 
	XV.	 	MISCELLANEOUS	 	 	80	 
	 
	 	15.1.	 	Governing Law	 	 	80	 
	 
	 	15.2.	 	Entire Understanding	 	 	80	 
	 
	 	15.3.	 	Successors and Assigns; Participations; New Lenders	 	 	83	 
	 
	 	15.4.	 	Application of Payments	 	 	85	 
	 
	 	15.5.	 	Indemnity	 	 	85	 
	 
	 	15.6.	 	Notice	 	 	85	 
	 
	 	15.7.	 	Survival	 	 	87	 
	 
	 	15.8.	 	Severability	 	 	87	 
	 
	 	15.9.	 	Expenses	 	 	87	 
	 
	 	15.10.	 	Injunctive Relief	 	 	88	 
	 
	 	15.11.	 	Damages	 	 	88	 
	 
	 	15.12.	 	Captions	 	 	88	 
	 
	 	15.13.	 	Counterparts; Facsimile Signatures	 	 	88	 
	 
	 	15.14.	 	Construction	 	 	88	 
	 
	 	15.15.	 	Confidentiality; Sharing Information	 	 	88	 
	 
	 	15.16.	 	Publicity	 	 	89	 
	 
	 	15.17.	 	Certifications From Banks and Participants; US PATRIOT Act	 	 	89	 








 









 





List of Exhibits and Schedules




	 	 	 
	Exhibits
	 	 
	 
	 	 
	Exhibit 1.2

	 	Borrowing Base Certificate
	Exhibit 2.1(a)

	 	Revolving Credit Note
	Exhibit 8. l(k)

	 	Financial Condition Certificate
	Exhibit 15.3

	 	Commitment Transfer Supplement
	 
	 	 
	Schedules
	 	 
	 
	 	 
	Schedule 1.2

	 	Permitted Encumbrances
	Schedule 4.5

	 	Equipment and Inventory Locations
	Schedule 15(c)

	 	Location of Executive Offices
	Schedule 4.15(h)

	 	Deposit and Investment Accounts
	Schedule 4.19

	 	Real Property
	Schedule 5.1

	 	Consents
	Schedule 5.2(a)

	 	States of Qualification and Good Standing
	Schedule 5.2(b)

	 	Subsidiaries
	Schedule 5.4

	 	Federal Tax Identification Number
	Schedule 5.6

	 	Prior Names
	Schedule 5.8(b)

	 	Litigation
	Schedule 5.8(d)

	 	Plans
	Schedule 5.9

	 	Intellectual Property, Source Code Escrow Agreements
	Schedule 5.10

	 	Licenses and Permits
	Schedule 5.14

	 	Labor Disputes






1









 






REVOLVING CREDIT

AND

SECURITY AGREEMENT




     Revolving Credit and Security Agreement dated as of November 1, 2006 among RESEARCH
PHARMACEUTICAL SERVICES, INC., a corporation organized under the laws of the Commonwealth of
Pennsylvania (“Borrower”), the financial institutions which are now or which hereafter become a
party hereto (collectively, the “Lenders” and individually a “Lender”) and PNC BANK, NATIONAL
ASSOCIATION (“PNC”), as agent for Lenders (PNC, in such capacity, the “Agent”).



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



I. DEFINITIONS.




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



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



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



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



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



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



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



1









 





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



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



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



     “Applicable Margin” shall mean the percentage per annum set forth below in the column
entitled Domestic Rate Loans or Eurodollar Rate Loans, as appropriate, opposite the Fixed Charge
Coverage Ratio set forth below as shown on the last Compliance Certificate delivered by Borrower to
Agent for any of the first three quarters of Borrower’s fiscal year pursuant to Section 9.8 or with
Borrower’s annual audited financial statements as required pursuant to Section 9.7, as the case may
be:



	 	 	 	 	 	 	 
	 	 	 	 	Applicable	 	Applicable
	 	 	 	 	Margin for	 	Percentage for
	 	 	 	 	Domestic Rate	 	Eurodollar Rate
	Level	 	Fixed Charge Coverage Ratio	 	Loans	 	Loans
	I
	 	Less than 1.15 to 1.00	 	0%	 	2.75%
	 
	 	 	 	 	 	 
	II
	 	Greater than or equal to 1.15 to
1.00, but less than 1.30 to 1.00	 	0%	 	2.50%
	 
	 	 	 	 	 	 
	III
	 	Greater than or equal to 1.30 to
1.00, but less than 1.50 to 1.00	 	0%	 	2.25%
	 
	 	 	 	 	 	 
	IV
	 	Greater than or equal to 1.50 to 1.00	 	0%	 	2.00%





; provided, however, that (a) adjustments, if any, to such percentage resulting from a
change in the Fixed Charge Coverage Ratio shall be effective five (5) Business Days after Agent has
received a Compliance Certificate for the first three quarters of the Borrower’s fiscal year in
accordance with Section 9.8 or a Compliance Certificate that is delivered with Borrower’s annual
audited financial statements in accordance with Section 9.7, as the case may be, (b) in the event
that no Compliance Certificate has been delivered in accordance with the Section 9.7 or 9.8, as the
case may be, such percentage from such date until such Compliance Certificate is actually delivered
shall be that applicable under Level I (c) in the event that the actual Fixed Charge Coverage Ratio
for any fiscal period is subsequently determined to be greater than that set forth on the in the
Compliance Certificate for such fiscal period, the Applicable Margin shall be




2









 






recalculated for the applicable period based on such actual Fixed Charge Coverage Ratio and (d)
anything in this definition to the contrary notwithstanding, until receipt by Agent of the annual
audited financial statements required by subsection 9.7 for the fiscal year ending December 31,
2007 together with the accompanying Compliance Certificate, the Applicable Margin for Eurodollar
Rate Loans shall be two and one-half percent (2.5%). Any additional interest resulting from the
operation of clause (c) above, shall be due and payable to Lenders with five (5) after receipt of
written demand therefor from Agent.




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



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



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



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



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



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



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



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



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



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



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



3









 







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



     “Change of Control” shall mean the occurrence of any event (whether in one or more
transactions) which results in a transfer of control of Borrower to a Person who is not an Original
Owner or controlling, under the control of or under common control with an Original Owner. For
purposes of this definition, “control” shall mean the power, direct or indirect (x) to vote 51% or
more of the Equity Interests having ordinary voting power for the election of directors (or the
individuals performing similar functions) of Borrower or (y) to direct or cause the direction of
the management and policies of Borrower by contract or otherwise.



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



     “Closing Date” shall mean November 1, 2006 or such other date as may be agreed to by the
parties hereto.



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



     “Collateral” shall mean and include:



          (a) all Receivables;




          (b) all Equipment;




          (c) all General Intangibles;




          (d) all Inventory;




          (e) all Investment Property;




          (f) all Subsidiary Stock;




          (g) the Leasehold Interests;




          (h) all of Borrower’s right, title and interest in and to, whether now owned or
hereafter acquired and wherever located, (i) its respective goods and other property including, but
not limited to, all merchandise returned or rejected by Customers, relating to or securing any of
the Receivables; (ii) all of Borrower’s rights as a consignor, a consignee, an unpaid vendor,
mechanic, artisan, or other lienor, including stoppage in transit, setoff, detinue, replevin,




4









 




reclamation
and repurchase; (iii) all additional amounts due to Borrower from any Customer relating to the
Receivables; (iv) other property, including warranty claims, relating to any goods securing the
Obligations; (v) all of Borrower’s contract rights, rights of payment which have been earned under
a contract right, instruments (including promissory notes), documents, chattel paper (including
electronic chattel paper), warehouse receipts, deposit accounts, letters of credit and money; (vi)
all commercial tort claims (whether now existing or hereafter arising); (vii) if and when obtained
by Borrower, all real and personal property of third parties in which Borrower has been granted a
lien or security interest as security for the payment or enforcement of Receivables; (viii) all
letter of credit rights (whether or not the respective letter of credit is evidenced by a writing);
(ix) all supporting obligations; and (x) any other goods, personal property or real property now
owned or hereafter acquired in which Borrower has expressly granted a security interest or may in
the future grant a security interest to Agent hereunder, or in any amendment or supplement hereto
or thereto, or under any other agreement between Agent and Borrower;




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




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



; provided, however, this definition of Collateral shall specifically exclude any and all
funds to a “project investigator”, escrow or other funds which Borrower may hold from time to time
in a fiduciary capacity on behalf of one or more of its Customers, with such funds tendered by
Customers to Borrower with the intention that Borrower make and/or process payments on behalf of
such Customers to third parties.




     “Commitment Percentage” of any Lender shall mean the percentage set forth below such
Lender’s name on the signature page hereof as same may be adjusted upon any assignment by a
Lender pursuant to Section 15.3(c) or (d) hereof.



     “Commitment Transfer Supplement” shall mean a document in the form of Exhibit 15.3
hereto, properly completed and otherwise in form and substance satisfactory to Agent by which the
Purchasing Lender purchases and assumes a portion of the obligation of Lenders to make Advances
under this Agreement.



     “Compliance Certificate” shall mean a compliance certificate to be signed by the Chief
Financial Officer or Controller of Borrower, which shall state that, based on an examination
sufficient to permit such officer to make an informed statement, no Default or Event of Default
exists, or if such is not the case, specifying such Default or Event of Default, its nature, when
it occurred, whether it is continuing and the steps being taken by Borrower with respect to such



5









 




default and, such certificate shall have appended thereto calculations which set forth Borrower’s
compliance with the requirements or restrictions imposed by Sections 6.5, 7.4, 7.5, 7.6, 7.7, 7.8
and 7.11.




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



     “Consigned Inventory” shall mean Inventory of Borrower that is in the possession
of another Person on a consignment, sale or return, or other basis that does not constitute a
final sale and acceptance of such Inventory.



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



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



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



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



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



     “Dilution Rate” shall mean, as determined pursuant to the most recently completed field
examination of Borrower conducted by Agent, the average of the ratio of (a) the amount of credits
issued to or deductions taken by Customers on account of Borrower’s Receivables (exclusive of (i)
credits for cash payments made on account of such Receivables and (ii) amounts subsequently
“re-billed” to Customers in connection with one or more such credits to the extent such
“re-billing” occurs within 30 days following the date of the issuance of the original invoice for
such Receivable) to (b) the amount of Borrower’s gross sales (expressed as a percentage), in each
case during the Dilution Rate Test Period.



     “Dilution Rate Increase” shall mean, at any time, the amount by which the Dilution
Rate exceeds the Dilution Threshold Rate.



     “Dilution Rate Test Period” shall mean the twelve consecutive month period or such
other period Agent may deem relevant in its reasonable credit judgment ending on the last day of



6









 







the month immediately preceding the most recently completed field examination of Borrower
conducted by Agent.




     “Dilution Threshold Rate” shall mean five percent (5%).



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



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



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



     “Domestic Subsidiary” shall mean any Subsidiary other than a Foreign
Subsidiary.



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



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



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



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



     “Eligible Receivables” shall mean and include with respect to Borrower, each
Receivable of Borrower arising in the Ordinary Course of Business; provided, that, a Receivable
shall not be deemed an Eligible Receivable unless such Receivable is subject to Agent’s first
priority perfected security interest and no other Lien (other than Permitted Encumbrances), and is
evidenced by an invoice or other documentary evidence satisfactory to Agent and provided
further that no Receivable shall be an Eligible Receivable if:



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




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




          (c) to the extent such Receivable has accrued but not yet been invoiced, it has
not been (i) documented to the satisfaction of Agent in its sole reasonable discretion in the
monthly accrued unbilled accounts receivable report in accordance with subsection 9.2(b)
hereof and (ii) invoiced within forty-five days after being generated;




          (d) fifty percent (50%) or more of the Receivables from such Customer are
not deemed Eligible Receivables hereunder;




7









 






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




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




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




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




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




          (j) the goods giving rise to such Receivable have not been delivered to and accepted by
the Customer or the services giving rise to such Receivable have not been performed by Borrower
and accepted by the Customer or the Receivable otherwise does not represent a final sale;
provided, however, such Receivable shall not be deemed an ineligible Receivable solely because the
contract giving rise to such Receivable has not been completed so long as such Receivable has been
earned in accordance with such contract and is due and payable by the Customer;




          (k) after giving effect to such Receivable, or any portion thereof, the aggregate
amount of all Receivables of the Customer and its Affiliates exceeds 35% of all of Borrower’s
Receivables, provided that only the portion of such Receivable that would result in the aggregate
amount of all such Receivables exceeding such 35% threshold shall be ineligible pursuant to this
clause (k);




          (1) the Receivable is subject to any offset, deduction, defense, dispute, or
counterclaim, the Customer is also a creditor or supplier of Borrower or the Receivable is
contingent in any respect or for any reason;




          (m) Borrower has made any agreement with any Customer for any deduction therefrom (but
only to the extent of such deduction), except for discounts or allowances made in




8









 







the Ordinary Course of Business for prompt payment, all of which discounts or allowances are
reflected in the calculation of the face value of each respective invoice related thereto;




          (n) any return, rejection or repossession of the merchandise has occurred or the
rendition of services has been disputed;




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




          (p) Agent has determined that the creditworthiness of the Customer is uncertain based
upon unsatisfactory past experiences of Borrower or Agent with such Customer or unsatisfactory
reputation of such Customer or because Agent otherwise makes a determination that the collateral
value of the Receivable to Agent is impaired or that Agent’s ability to realize such value is
insecure.



Notwithstanding anything to the contrary in this definition, the classification of all or a portion
of any Receivable which is otherwise an Eligible Receivable as a deferred revenue liability for
accounting purposes on the books of Borrower shall not result in such Receivable or portion thereof
being deemed other than an Eligible Receivable.




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



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



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



     “Equity Interests” of any Person shall mean any and all shares, rights to purchase,
options, warrants, general, limited or limited liability partnership interests, member interests,
participation or other equivalents of or interest in (regardless of how designated) equity of such
Person, whether voting or nonvoting, including common stock, preferred stock, convertible
securities or any other “equity security” (as such term is defined in Rule 3al1-1 of the General
Rules and Regulations promulgated by the SEC under the Exchange Act).



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



     “Eurodollar Rate” shall mean for any Eurodollar Rate Loan for the then current Interest Period
relating thereto the interest rate per annum determined by Agent by dividing (the resulting
quotient rounded upwards, if necessary, to the nearest 1/100th of 1% per annum) (i) the rate of
interest determined by Agent in accordance with its usual procedures (which determination shall be
conclusive absent manifest error) to be the average of the London interbank offered rates for



9









 




U.S. Dollars quoted by the British Bankers’ Association as set forth on Moneyline Telerate (or
appropriate successor or, if British Banker’s Association or its successor ceases to provide such
quotes, a comparable replacement determined by Agent) display page 3750 (or such other display page
on the Moneyline Telerate system as may replace display page 3750) two (2) Business Days prior to
the first day of such Interest Period for an amount comparable to such Eurodollar Rate Loan and
having a borrowing date and a maturity comparable to such Interest Period by (ii) a number equal to
1.00 minus the Reserve Percentage. The Eurodollar Rate may also be expressed by the following
formula:




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

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

1.00 - Reserve Percentage.




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



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



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



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



     “Existing Credit Facility” shall mean that certain Letter Agreement between the
Borrower and PNC Bank, National Association dated as of April 30, 2004, as heretofore amended.



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



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



     “Federal Funds Open Rate” shall mean the rate per annum determined by the Agent in
accordance with its usual procedures (which determination shall be conclusive absent manifest
error) to be the “open” rate for federal funds transactions as of the opening of business for



10









 




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




     “Fee Letter” shall mean the fee letter dated September 11, 2006 between Borrower and PNC.



     “Fixed Charge Coverage Ratio” shall mean and include, with respect to any fiscal
period, the ratio of (a) EBITDA, minus Unfunded Capitalized Expenditures made during such
period minus cash taxes paid during such period, minus cash dividends and
distributions paid during such period to (b) all Senior Debt Payments, plus all
Subordinated Debt Payments made during such period, in each case determined for Borrower and its
Subsidiaries on a consolidated basis.



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



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



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



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



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



     “Governmental Body” shall mean any nation or government, any state or other political
subdivision thereof or any entity, authority, agency, division or department exercising the
legislative, judicial, regulatory or administrative functions of or pertaining to a government.



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



     “Hazardous Substance” shall mean, without limitation, any flammable explosives, radon,
radioactive materials, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls,
petroleum and petroleum products, methane, hazardous materials, Hazardous Wastes, hazardous



11









 




or Toxic Substances or related materials as defined in CERCLA, the Hazardous Materials
Transportation Act, as amended (49 U.S.C. Sections 1801, et seq.) and RCRA.




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



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



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



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



     “Intellectual Property” shall mean property constituting under any Applicable
Law a patent, patent application, copyright, trademark, service mark, trade name, mask work,
trade secret or license or other right to use any of the foregoing.



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



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



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



     “Inventory” shall mean and include all of Borrower’s now owned or hereafter acquired goods,
merchandise and other personal property, wherever located, to be furnished under any consignment
arrangement, contract of service or held for sale or lease, all raw materials, work in




12











 




process, finished goods and materials and supplies of any kind, nature or description which are or
might be used or consumed in Borrower’s business or used in selling or furnishing such goods,
merchandise and other personal property, and all documents of title or other documents representing
them.




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



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



     “Leasehold Interests” shall mean all of Borrower’s right, title and interest in and to
the premises located at 610 West Germantown Pike, Plymouth Meeting, PA 19462.



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



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



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



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



     “Letter of Credit Sublimit” shall mean $3,000,000.



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



     “License Agreement” shall mean any agreement between Borrower and a Licensor pursuant
to which Borrower is authorized to use any Intellectual Property in connection with the
manufacturing, marketing, sale or other distribution of any Inventory of Borrower or otherwise in
connection with Borrower’s business operations.



     “Licensor” shall mean any Person from whom Borrower obtains the right to use (whether on an
exclusive or non-exclusive basis) any Intellectual Property in connection with Borrower’s
manufacture, marketing, sale or other distribution of any Inventory or otherwise in connection
with Borrower’s business operations.



13









 





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



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



     “Material Adverse Effect” shall mean a material adverse effect on (a) the condition
(financial or otherwise), results of operations, assets, business and properties of Borrower taken
as a whole, (b) Borrower’s ability to duly and punctually pay or perform the Obligations in
accordance with the terms thereof, (c) the value of the Collateral, or Agent’s Liens on the
Collateral or the priority of any such Lien or (d) the practical realization of the benefits of
Agent’s and each Lender’s rights and remedies under this Agreement and the Other Documents.



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



     “Maximum Revolving Advance Amount” shall mean $15,000,000.



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



     “Modified Commitment Transfer Supplement” shall have the meaning set forth in
Section 15.3(d).



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



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



     “Note” shall mean the Revolving Credit Note.



     “Obligations” shall mean and include any and all loans, advances, debts, liabilities,
obligations, covenants and duties owing by the Borrower to Lenders or Agent or to any other direct
or indirect subsidiary or affiliate of Agent or any Lender of any kind or nature, present or



14









 




future (including any interest or other amounts accruing thereon after maturity, or after the
filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding relating to the Borrower, whether or not a claim for post-filing or post-petition
interest or other amounts is allowed in such proceeding), whether or not evidenced by any note,
guaranty or other instrument, whether arising under any agreement, instrument or document,
(including this Agreement and the Other Documents) whether or not for the payment of money, whether
arising by reason of an extension of credit, opening of a letter of credit, loan, equipment lease
or guarantee, under any interest or currency swap, future, option or other similar agreement, or in
any other manner, whether arising out of overdrafts or deposit or other accounts or electronic
funds transfers (whether through automated clearing houses or otherwise) or out of the Agent’s or
any Lenders non-receipt of or inability to collect funds or otherwise not being made whole in
connection with depository transfer check or other similar arrangements, whether direct or indirect
(including those acquired by assignment or participation), absolute or contingent, joint or
several, due or to become due, now existing or hereafter arising, contractual or tortious,
liquidated or unliquidated, regardless of how such indebtedness or liabilities arise or by what
agreement or instrument they may be evidenced or whether evidenced by any agreement or instrument,
including, but not limited to, any and all of Borrower’s Indebtedness and/or liabilities under this
Agreement, the Other Documents or under any other agreement between Agent or Lenders and Borrower
and any amendments, extensions, renewals or increases and all costs and expenses of Agent and any
Lender incurred in the documentation, negotiation, modification, enforcement, collection or
otherwise in connection with any of the foregoing, including but not limited to reasonable
attorneys’ fees and expenses and all obligations of Borrower to Agent or Lenders to perform acts or
refrain from taking any action.




     “Ordinary Course of Business” shall mean the ordinary course of Borrower’s business as
conducted on the Closing Date.



     “Original Owners” shall mean the Argentum Group, First Analysis Corporation and
Daniel Perlman.



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



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



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



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



15









 





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



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



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



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



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



     “Permitted Encumbrances” shall mean (a) Liens in favor of Agent for the benefit of
Agent and Lenders; (b) Liens for taxes, assessments or other governmental charges not delinquent or
being contested in good faith and by appropriate proceedings and with respect to which proper
reserves have been taken by Borrower; provided, that, the Lien shall have no effect on the priority
of the Liens in favor of Agent or the value of the assets in which Agent has such a Lien and a stay
of enforcement of any such Lien shall be in effect; (c) Liens disclosed in the financial statements
referred to in Section 5.5, the existence of which Agent has consented to in writing; (d) deposits
or pledges to secure obligations under worker’s compensation, social security or similar laws, or
under unemployment insurance; (e) deposits or pledges to secure bids, tenders, contracts (other
than contracts for the payment of money), leases, statutory obligations, surety and appeal bonds
and other obligations of like nature arising in the Ordinary Course of Business; (f) Liens arising
by virtue of the rendition, entry or issuance against Borrower or any Subsidiary, or any property
of Borrower or any Subsidiary, of any judgment, writ, order, or decree for so long as each such
Lien (a) is in existence for less than 30 consecutive days after it first arises or is being
Properly Contested and (b) is at all times junior in priority to any Liens in favor of Agent; (g)
mechanics’, workers’, materialmen’s or other like Liens arising in the Ordinary Course of Business
with respect to obligations which are not due or which are being contested in good faith by
Borrower; (h) Liens placed upon fixed assets hereafter acquired to secure a portion of the purchase
price thereof, provided that (x) any such lien shall not encumber any other property of Borrower
and (y) the aggregate amount of Indebtedness secured by such Liens incurred as a result of such
purchases during any fiscal year shall not exceed the amount provided for in Section 7.6; and (i)
Liens disclosed on Schedule 1.2.



     “Person” shall mean any individual, sole proprietorship, partnership, corporation,
business trust, joint stock company, trust, unincorporated organization, association, limited
liability company, limited liability partnership, institution, public benefit corporation,
joint



16









 




venture, entity or Governmental Body (whether federal, state, county, city, municipal or
otherwise, including any instrumentality, division, agency, body or department thereof).




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



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



     “Properly Contested” shall mean, in the case of any Indebtedness of any Person
(including any taxes) that is not paid as and when due or payable by reason of such Person’s bona
fide dispute concerning its liability to pay same or concerning the amount thereof, (i) such
Indebtedness is being properly contested in good faith by appropriate proceedings promptly
instituted and diligently conducted; (ii) such Person has established appropriate reserves as shall
be required in conformity with GAAP; (iii) the non-payment of such Indebtedness will not have a
Material Adverse Effect and will not result in the forfeiture of any assets of such Person; (iv) no
Lien is imposed upon any of such Person’s assets with respect to such Indebtedness unless such Lien
is at all times junior and subordinate in priority to the Liens in favor of the Agent (except only
with respect to property taxes that have priority as a matter of applicable state law) and
enforcement of such Lien is stayed during the period prior to the final resolution or disposition
of such dispute; (v) if such Indebtedness results from, or is determined by the entry, rendition or
issuance against a Person or any of its assets of a judgment, writ, order or decree, enforcement of
such judgment, writ, order or decree is stayed pending a timely appeal or other judicial review;
and (vi) if such contest is abandoned, settled or determined adversely (in whole or in part) to
such Person, such Person forthwith pays such Indebtedness and all penalties, interest and other
amounts due in connection therewith.



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



     “Purchasing CLO” shall have the meaning set forth in Section 15.3(d) hereof.



     “Purchasing Lender” shall have the meaning set forth in Section 15.3(c) hereof.



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



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



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



     “Receivables” shall mean and include, as to Borrower, all of Borrower’s accounts,
contract rights, instruments (including those evidencing indebtedness owed to Borrower by its
Affiliates), documents, chattel paper (including electronic chattel paper), general intangibles
relating to accounts, drafts and acceptances, credit card receivables and all other forms of




17









 







obligations owing to Borrower arising out of or in connection with the sale or lease of Inventory
or the rendition of services, all supporting obligations, guarantees and other security therefor,
whether secured or unsecured, now existing or hereafter created, and whether or not specifically
sold or assigned to Agent hereunder.




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



     "Register” shall have the meaning set forth in Section 15.3(e).



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



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



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



     “Required Lenders” shall mean Lenders holding at least sixty-six and two-thirds
percent (66 2/3%) of the Advances and, if no Advances are outstanding, shall mean Lenders holding
sixty-six and two-thirds percent (66 2/3%) of the Commitment Percentages; provided that at any time
that there are only two Lenders party hereto, Required Lenders will mean both such Lenders.




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



     “Revolving Advances” shall mean Advances made other than Letters of Credit.



     “Revolving Credit Note” shall mean the promissory note referred to in Section 2.1 (a)
hereof.



     “Revolving Interest Rate” shall mean an interest rate per annum equal to (a) the sum
of the Alternate Base Rate plus the Applicable Margin with respect to Domestic Rate Loans and (b)
the Eurodollar Rate plus the Applicable Margin with respect to any Eurodollar Rate Loan.



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



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



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



18









 





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



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



     “Subordinated Debt Payments” shall mean and include all cash actually expended to
make payments of principal and interest on the Subordinated Note.



     “Subordinated Lender” shall mean Merion Investment Partners L.P.



     “Subordinated Loan” shall mean the loan evidenced by the Subordinated
Note.



     “Subordinated Loan Documentation” shall mean the Investment Agreement dated December
29, 2003 between Borrower and Subordinated Lender, as amended by the First Amendment dated November
15, 2004, the Second Amendment dated March 21, 2005 and the Third Amendment dated March 1, 2006.



     “Subordinated Note” shall mean the subordinated promissory note issued by Borrower in
favor of Subordinated Lender dated December 29,2003 in the principal sum of $4,500,000, as amended
by the First Amendment dated March 21, 2005 and the Second Amendment dated March 1,2006.



     “Subordination Agreement” shall mean the Subordination Agreement dated as of the date
hereof among Agent, Borrower and Subordinated Lender.



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



     “Subsidiary Stock” shall mean all of the issued and outstanding Equity Interests of
any Domestic Subsidiary owned by the Borrower and up to 65% of all of the issued and outstanding
the Equity Interests of any first-tier Foreign Subsidiary of Borrower.



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



     “Termination Event” shall mean (i) a Reportable Event with respect to any Plan or
Multiemployer Plan; (ii) the withdrawal of Borrower or any member of the Controlled Group from a
Plan or Multiemployer Plan during a plan year in which such entity was a “substantial employer” as
defined in Section 4001(a)(2) of ERISA; (iii) the providing of notice of intent to terminate a Plan
in a distress termination described in Section 404 l(c) of ERISA; (iv) the institution by the PBGC
of proceedings to terminate a Plan or Multiemployer Plan; (v) any event



19









 




or condition (a) which might constitute grounds under Section 4042 of ERISA for the termination of,
or the appointment of a trustee to administer, any Plan or Multiemployer Plan, or (b) that may
result in termination of a Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi) the
partial or complete withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of Borrower
or any member of the Controlled Group from a Multiemployer Plan.




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



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



     “Transferee” shall have the meaning set forth in Section 15.3(d) hereof.



     “Undrawn Availability” at a particular date shall mean an amount equal to (a) the
lesser of (i) the Formula Amount and (ii) the Maximum Revolving Advance Amount, minus (b) the sum
of (i) the outstanding amount of Advances, plus (ii) all amounts due and owing to Borrower’s trade
creditors which are outstanding beyond sixty (60) days past the due date, plus (iii) fees and
expenses for which Borrower is liable but which have not been paid or charged to Borrower’s
Account, plus (iv) to the extent the determination date is a date that is five (5) or less days
prior to a date on which Borrower must make payroll, the amount due by Borrower on such date on
account of such payroll.



     “Unfunded Capital Expenditure” shall mean Capital Expenditures made from Borrower’s
funds other than funds borrowed as term debt or capital leases to finance such Capital
Expenditures.



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



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



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



     1.3. Uniform Commercial Code Terms. All terms used herein and defined in the
Uniform Commercial Code as adopted in the Commonwealth of Pennsylvania from time to time (the
“Uniform Commercial Code”) shall have the meaning given therein unless otherwise defined
herein. Without limiting the foregoing, the terms “accounts”, “chattel paper”, “instruments”,
“general intangibles”, “payment intangibles”, “supporting obligations”, “securities”, “investment
property”, “documents”, “deposit accounts”, “software”, “letter of credit rights”, “inventory”,
“equipment” and “fixtures”, as and when used in the description of



20









 




Collateral shall have the meanings given to such terms in Articles 8 or 9 of the Uniform Commercial
Code. To the extent the definition of any category or type of collateral is expanded by any
amendment, modification or revision to the Uniform Commercial Code, such expanded definition will
apply automatically as of the date of such amendment, modification or revision.




     1.4. Certain Matters of Construction. The terms “herein”, “hereof” and “hereunder”
and other words of similar import refer to this Agreement as a whole and not to any particular
section, paragraph or subdivision. All references herein to Articles, Sections, Exhibits and
Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement. Any pronoun used shall be deemed to cover all genders. Wherever appropriate in the
context, terms used herein in the singular also include the plural and vice versa. All references
to statutes and related regulations shall include any amendments of same and any successor statutes
and regulations. Unless otherwise provided, all references to any instruments or agreements to
which Agent is a party, including references to any of the Other Documents, shall include any and
all modifications or amendments thereto and any and all extensions or renewals thereof. All
references herein to the time of day shall mean the time in New York, New York. Whenever the words
“including” or “include” shall be used, such words shall be understood to mean “including, without
limitation” or “include, without limitation”. A Default or Event of Default shall be deemed to
exist at all times during the period commencing on the date that such Default or Event of Default
occurs to the date on which such Default or Event of Default is waived in writing pursuant to this
Agreement or, in the case of a Default, is cured within any period of cure expressly provided for
in this Agreement; and an Event of Default shall “continue” or be “continuing” until such Event of
Default has been waived in writing by the Required Lenders. Any Lien referred to in this Agreement
or any of the Other Documents as having been created in favor of Agent, any agreement entered into
by Agent pursuant to this Agreement or any of the Other Documents, any payment made by or to or
funds received by Agent pursuant to or as contemplated by this Agreement or any of the Other
Documents or any act taken or omitted to be taken by Agent, shall, unless otherwise expressly
provided, be created, entered into, made or received, or taken or omitted, for the benefit or
account of Agent and Lenders. Wherever the phrase “to the best of Borrower’s knowledge” or words of
similar import relating to the knowledge or the awareness of Borrower are used in this Agreement or
Other Documents, such phrase shall mean and refer to (i) the actual knowledge of a senior officer
of Borrower or (ii) the knowledge that a senior officer would have obtained if he had engaged in
good faith and diligent performance of his duties, including the making of such reasonably specific
inquiries as may be necessary of the employees or agents of Borrower and a good faith attempt to
ascertain the existence or accuracy of the matter to which such phrase relates. All covenants
hereunder shall be given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an exception to, or
otherwise within the limitations of, another covenant shall not avoid the occurrence of a default
if such action is taken or condition exists. In addition, all representations and warranties
hereunder shall be given independent effect so that if a particular representation or warranty
proves to be incorrect or is breached, the fact that another representation or warranty concerning
the same or similar subject matter is correct or is not breached will not affect the incorrectness
of a breach of a representation or warranty hereunder.



21









 





II. ADVANCES, PAYMENTS.




     2.1. Revolving Advances.



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





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




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




          (iii) such reserves as Agent may reasonably deem proper and necessary in its
reasonable credit judgment and consistent with practices and procedures generally applied
to its similarly situated borrowers to take into account subsequent events or occurrences
which are likely to jeopardize the collectibility of all or a material portion of
Borrower’s Eligible Receivables or to provide availability for payment of contingent
liabilities of the Borrower not otherwise reserved.



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



          (b) Discretionary Rights. The Receivables Advance Rate may be (i) increased
by Agent at any time or from time to time in its sole discretion or (ii) decreased by Agent at
any time and from time to time on account of any Dilution Rate Increase but in no event by more
than the same percentage as such Dilution Rate Increase. If, at any time after Agent’s
reduction of the Receivables Advance Rate, it is determined that there is no longer a Dilution Rate
Increase, the Receivables Advance Rate shall be automatically restored to eighty-five percent
(85%) so long as no Default or Event of Default is then existing, subject to further
adjustment as
provided above. Borrower consents to any such increases or decreases and acknowledges that
decreasing the Receivables Advance Rate or increasing or imposing reserves may limit or
restrict
Advances requested by Borrower. Agent shall give Borrower five (5) days prior written notice
of its intention to decrease the Receivables Advance Rate. The rights of Agent under this
subsection are subject to the provisions of Section 15.2(b).




     2.2. Procedure for Revolving Advances Borrowing.



          (a) Borrower may notify Agent prior to 1:00 p.m. on a Business Day of Borrower’s request
to incur, on that day, a Revolving Advance hereunder. Should any amount required to be paid as
interest hereunder, or as fees or other charges under this Agreement or any





22












 




other agreement with Agent or Lenders, or with respect to any other Obligation, become due, same
shall be deemed a request for a Revolving Advance as of the date such payment is due, in the amount
required to pay in full such interest, fee, charge or Obligation under this Agreement or any other
agreement with Agent or Lenders, and such request shall be irrevocable.




          (b) Notwithstanding the provisions of subsection (a) above, in the event
Borrower desires to obtain a Eurodollar Rate Loan, Borrower shall give Agent written notice by
no later than 10:30 a.m. on the day which is three (3) Business Days prior to the date such
Eurodollar Rate Loan is to be borrowed, specifying (i) the date of the proposed borrowing
(which shall be a Business Day), (ii) the type of borrowing and the amount on the date of such
Advance to be borrowed, which amount shall be in a minimum amount equal to $1,000,000 or in
integral multiples of $100,000 in excess thereof, and (iii) the duration of the first Interest
Period
therefor. Interest Periods for Eurodollar Rate Loans shall be for one, two or three months;
provided, if an Interest Period would end on a day that is not a Business Day, it shall end on
the
next succeeding Business Day unless such day falls in the next succeeding calendar month in
which case the Interest Period shall end on the next preceding Business Day. No Eurodollar
Rate Loan shall be made available to Borrower during the continuance of a Default or an Event
of Default. After giving effect to each requested Eurodollar Rate Loan, including those which
are converted from a Domestic Rate Loan under Section 2.2(d), there shall not be outstanding
more than five (5) Eurodollar Rate Loans, in the aggregate.




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




     Borrower shall elect the initial Interest Period applicable to a Eurodollar Rate Loan by its
notice of borrowing given to Agent pursuant to Section 2.2(b) or by its notice of conversion given
to Agent pursuant to Section 2.2(d), as the case may be. Borrower shall elect the duration of each
succeeding Interest Period by giving irrevocable written notice to Agent of such duration not later
than 10:30 a.m. on the day which is three (3) Business Days prior to the last day of the then
current Interest Period applicable to such Eurodollar Rate Loan. If Agent does not receive timely
notice of the Interest Period elected by Borrower, Borrower shall be deemed to have elected to
convert to a Domestic Rate Loan subject to Section 2.2(d) hereinbelow.



          (d) Provided that no Event of Default shall have occurred and be continuing,
Borrower may, on the last Business Day of the then current Interest Period applicable to any
outstanding Eurodollar Rate Loan, or on any Business Day with respect to Domestic Rate Loans,
convert any such loan into a loan of another type in the same aggregate principal amount
provided that any conversion of a Eurodollar Rate Loan shall be made only on the last Business
Day of the then current Interest Period applicable to such Eurodollar Rate Loan. If Borrower
desires to convert a loan, Borrower shall give Agent written notice by no later than (i) 10:30
a.m.
on the day which is three (3) Business Days’ prior to the date on which such conversion is to
occur with respect to a conversion from a Domestic Rate Loan to a Eurodollar Rate Loan, or
(ii)
1:00 p.m. on the day which is one (1) Business Day prior to the date on which such conversion
is
to occur with respect to a conversion from a Eurodollar Rate Loan to a Domestic Rate Loan,


23









 







specifying, in each case, the date of such conversion, the loans to be converted and if the
conversion is from a Domestic Rate Loan to any other type of loan, the duration of the first
Interest Period therefor.




          (e) At its option and upon written notice given prior to 10:30 a.m. (New York
time) at least three (3) Business Days’ prior to the date of such prepayment, Borrower may
prepay the Eurodollar Rate Loans in whole at any time or in part from time to time with
accrued
interest on the principal being prepaid to the date of such repayment. Borrower shall specify
the
date of prepayment of Advances which are Eurodollar Rate Loans and the amount of such
prepayment. In the event that any prepayment of a Eurodollar Rate Loan is required or
permitted
on a date other than the last Business Day of the then current Interest Period with respect
thereto,
Borrower shall indemnify Agent and Lenders therefor in accordance with Section 2.2(f) hereof.




          (f) Borrower shall indemnify Agent and Lenders and hold Agent and Lenders
harmless from and against any and all losses and reasonable expenses that Agent and Lenders
may sustain or incur as a consequence of any prepayment, conversion of or any default by
Borrower in the payment of the principal of or interest on any Eurodollar Rate Loan or failure
by
Borrower to complete a borrowing of, a prepayment of or conversion of or to a Eurodollar Rate Loan
after notice thereof has been given, including, but not limited to, any interest payable by Agent
or Lenders to lenders of funds obtained by it in order to make or maintain its Eurodollar Rate
Loans hereunder. A certificate as to any additional amounts payable pursuant to the foregoing
sentence submitted by Agent or any Lender to Borrower shall be conclusive absent manifest error.




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




     2.3. Disbursement of Advance Proceeds. All Advances shall be disbursed from
whichever office or other place Agent may designate from time to time and, together with any and
all other Obligations of Borrower to Agent or Lenders, shall be charged to Borrower’s Account on
Agent’s books. During the Term, Borrower may use the Revolving Advances by borrowing, prepaying and
reborrowing, all in accordance with the terms and conditions hereof.



24









 




The proceeds of each Revolving Advance requested by Borrower or deemed to have been requested by
Borrower under Section 2.2(a) hereof shall, with respect to requested Revolving Advances to the
extent Lenders make such Revolving Advances, be made available to Borrower on the day so requested
by way of credit to Borrower’s operating account at PNC, or such other bank as Borrower may
designate following notification to Agent, in immediately available federal funds or other
immediately available funds or, with respect to Revolving Advances deemed to have been requested by
Borrower, be disbursed to Agent to be applied to the outstanding Obligations giving rise to such
deemed request.




     2.4. Intentionally Omitted.



     2.5. Maximum Advances. The aggregate balance of Revolving Advances outstanding
at any time shall not exceed the lesser of (a) the Maximum Revolving Advance Amount and
(b) the Formula Amount less, in each case, the aggregate Maximum Undrawn Amount of all issued and
outstanding Letters of Credit.



     2.6. Repayment of Advances. The Revolving Advances shall be due and payable in
full on the last day of the Term subject to earlier prepayment as herein, provided.



          (a) Borrower recognizes that the amounts evidenced by checks, notes, drafts
or any other items of payment relating to and/or proceeds of Collateral may not be collectible
by
Agent on the date received. In consideration of Agent’s agreement to conditionally credit
Borrower’s Account as of the Business Day on which Agent receives those items of payment,
Borrower agrees that, in computing the charges under this Agreement, all items of payment
shall
be deemed applied by Agent on account of the Obligations one (1) Business Day after (i) the

Business Day Agent receives such payments via check wire transfer or electronic depository
check or (ii) in the case of payments received by Agent in any other form, the Business Day
such
payment constitutes good funds in Agent’s account. Agent is not, however, required to credit
Borrower’s Account for the amount of any item of payment which is unsatisfactory to Agent and
Agent may charge Borrower’s Account for the amount of any item of payment which is returned
to Agent unpaid.




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




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




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



25









 





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



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



     2.10. Issuance of Letters of Credit.



          (a) Borrower may request Agent to issue or cause the issuance of a Letter of
Credit by delivering to Agent, at the Payment Office, prior to 1:00 p.m. (New York time), at
least
five (5) Business Days’ prior to the proposed date of issuance, Agent’s form of Letter of
Credit
Application (the “Letter of Credit Application”) completed to the satisfaction of
Agent; and, such
other certificates, documents and other papers and information as Agent may reasonably
request.
Borrower also has the right to give instructions and make agreements with respect to any
application, any applicable letter of credit and security agreement, any applicable letter of
credit
reimbursement agreement and/or any other applicable agreement, any letter of credit and the
disposition of documents, disposition of any unutilized funds, and to agree with Agent upon
any
amendment, extension or renewal of any Letter of Credit.




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


26









 







Issuer (“UCP 500”) or the International Standby Practices (ISP98-International Chamber of
Commerce Publication Number 590) (“ISP98 Rules”), as determined by Agent, and each trade
Letter of Credit shall be subject to UCP 500.




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




     2.11. Requirements For Issuance of Letters of Credit.



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




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




     2.12. Disbursements, Reimbursement.



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




          (b) In the event of any request for a drawing under a Letter of Credit by the
beneficiary or transferee thereof, Agent will promptly notify Borrower. Provided that it shall
have received such notice, Borrower shall reimburse (such obligation to reimburse Agent shall
sometimes be referred to as a “Reimbursement Obligation”) Agent prior to 12:00 Noon,
New
York time on each date that an amount is paid by Agent under any Letter of Credit (each such
date, a “Drawing Date”) in an amount equal to the amount so paid by Agent. In the event
Borrower fails to reimburse Agent for the full amount of any drawing under any Letter of
Credit
by 12:00 Noon, New York time, on the Drawing Date, Agent will promptly notify each Lender


27









 







thereof, and Borrower shall be deemed to have requested that a Domestic Rate Loan be made by the
Lenders to be disbursed on the Drawing Date under such Letter of Credit, subject to the amount of
the unutilized portion of the lesser of Maximum Revolving Advance Amount or the Formula Amount and
subject to Section 8.2 hereof. Any notice given by Agent pursuant to this Section 2.12(b) may be
oral if immediately confirmed in writing; provided that the lack of such an immediate confirmation
shall not affect the conclusiveness or binding effect of such notice.




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




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




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




     2.13. Repayment of Participation Advances.



          (a) Upon (and only upon) receipt by Agent for its account of immediately available funds
from Borrower (i) in reimbursement of any payment made by the Agent under the Letter of Credit with
respect to which any Lender has made a Participation Advance to Agent, or (ii) in payment of
interest on such a payment made by Agent under such a Letter of


28









 







Credit, Agent will pay to each Lender, in the same funds as those received by Agent, the amount of
such Lender’s Commitment Percentage of such funds, except Agent shall retain the amount of the
Commitment Percentage of such funds of any Lender that did not make a Participation Advance in
respect of such payment by Agent.




          (b) If Agent is required at any time to return to Borrower, or to a trustee, receiver,
liquidator, custodian, or any official in any insolvency proceeding, any portion of the payments
made by Borrower to Agent pursuant to Section 2.13(a) in reimbursement of a payment made under the
Letter of Credit or interest or fee thereon, each Lender shall, on demand of Agent, forthwith
return to Agent the amount of its Commitment Percentage of any amounts so returned by Agent plus
interest at the Federal Funds Effective Rate.




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



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



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




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




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



29









 






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




          (iv) any claim of breach of warranty that might be made by Borrower or any Lender against
the beneficiary of a Letter of Credit, or the existence of any claim, set-off, recoupment,
counterclaim, crossclaim, defense or other right which Borrower or any Lender may have at any time
against a beneficiary, any successor beneficiary or any transferee of any Letter of Credit or the
proceeds thereof (or any Persons for whom any such transferee may be acting), Agent or any Lender
or any other Person, whether in connection with this Agreement, the transactions contemplated
herein or any unrelated transaction (including any underlying transaction between Borrower or any
Subsidiaries of Borrower and the beneficiary for which any Letter of Credit was procured);




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




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




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




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




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




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




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




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




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



30









 






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



     2.17. Indemnity. In addition to amounts payable as provided in Section 15.5, the
Borrower hereby agrees to protect, indemnify, pay and save harmless Agent and any of Agent’s
Affiliates that have issued a Letter of Credit from and against any and all claims, demands,
liabilities, damages, taxes, penalties, interest, judgments, losses, costs, charges and
expenses
(including reasonable fees, expenses and disbursements of counsel and allocated costs of
internal
counsel) which the Agent or any of Agent’s Affiliates may incur or be subject to as a
consequence, direct or indirect, of the issuance of any Letter of Credit, other than as a
result of
(A) the gross negligence or willful misconduct of the Agent as determined by a final and non-
appealable judgment of a court of competent jurisdiction or (b) the wrongful dishonor by the
Agent or any of Agent’s Affiliates of a proper demand for payment made under any Letter of
Credit, except if such dishonor resulted from any act or omission, whether rightful or
wrongful,
of any present or future de jure or de facto Governmental Body (all such acts or omissions
herein
called “Governmental Acts”).



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



31









 





     Without limiting the generality of the foregoing, Agent and each of its Affiliates (i) may
rely on any oral or other communication believed in good faith by Agent or such Affiliate to have
been authorized or given by or on behalf of the applicant for a Letter of Credit, (ii) may honor
any presentation if the documents presented appear on their face substantially to comply with the
terms and conditions of the relevant Letter of Credit; (iii) may honor a previously dishonored
presentation under a Letter of Credit, whether such dishonor was pursuant to a court order, to
settle or compromise any claim of wrongful dishonor, or otherwise, and shall be entitled to
reimbursement to the same extent as if such presentation had initially been honored, together with
any interest paid by Agent or its Affiliates; (iv) may honor any drawing that is payable upon
presentation of a statement advising negotiation or payment, upon receipt of such statement (even
if such statement indicates that a draft or other document is being delivered separately), and
shall not be liable for any failure of any such draft or other document to arrive, or to conform in
any way with the relevant Letter of Credit; (v) may pay any paying or negotiating bank claiming
that it rightfully honored under the laws or practices of the place where such bank is located; and
(vi) may settle or adjust any claim or demand made on Agent or its Affiliate in any way related to
any order issued at the applicant’s request to an air carrier, a letter of guarantee or of
indemnity issued to a carrier or any similar document (each an
“Order”) and honor any drawing in
connection with any Letter of Credit that is the subject of such Order, notwithstanding that any
drafts or other documents presented in connection with such Letter of Credit fail to conform in any
way with such Letter of Credit.



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



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



     2.20. Manner of Borrowing and Payment.



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




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





32










 





          (c) (i) Notwithstanding anything to the contrary contained in Sections 2.20(a) and (b)
hereof, commencing with the first Business Day following the Closing Date, each borrowing of
Revolving Advances shall be advanced by Agent and each payment by Borrower on account of Revolving
Advances shall be applied first to those Revolving Advances advanced by Agent. On or before 1:00
P.M., New York time, on each Settlement Date commencing with the first Settlement Date following
the Closing Date, Agent and Lenders shall make certain payments as follows: (I) if the aggregate
amount of new Revolving Advances made by Agent during the preceding Week (if any) exceeds the
aggregate amount of repayments applied to outstanding Revolving Advances during such preceding
Week, then each Lender shall provide Agent with funds in an amount equal to its applicable
Commitment Percentage of the difference between (w) such Revolving Advances and (x) such repayments
and (II) if the aggregate amount of repayments applied to outstanding Revolving Advances during
such Week exceeds the aggregate amount of new Revolving Advances made during such Week, then Agent
shall provide each Lender with funds in an amount equal to its applicable Commitment Percentage of
the difference between (y) such repayments and (z) such Revolving Advances.




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



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



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




          (e) Unless Agent shall have been notified by telephone, confirmed in writing, by any Lender
that such Lender will not make the amount which would constitute its applicable Commitment
Percentage of the Advances available to Agent, Agent may (but shall not be obligated to) assume
that such Lender shall make such amount available to Agent on the next Settlement Date and, in
reliance upon such assumption, make available to Borrower a corresponding amount. Agent will
promptly notify Borrower of its receipt of any such notice from a Lender. If such amount is made
available to Agent on a date after such next Settlement




33









 







Date, such Lender shall pay to Agent on demand an amount equal to the product of (i) the daily
average Federal Funds Rate (computed on the basis of a year of 360 days) during such period as
quoted by Agent, times (ii) such amount, times (iii) the number of days from and including such
Settlement Date to the date on which such amount becomes immediately available to Agent. A
certificate of Agent submitted to any Lender with respect to any amounts owing under this
paragraph (e) shall be conclusive, in the absence of manifest error. If such amount is not in
fact made available to Agent by such Lender within three (3) Business Days after such Settlement
Date, Agent shall be entitled to recover such an amount, with interest thereon at the rate per
annum then applicable to such Revolving Advances hereunder, on demand from Borrower; provided,
however, that Agent’s right to such recovery shall not prejudice or otherwise adversely affect
Borrower’s rights (if any) against such Lender.




     2.21.
Intentionally Omitted.



     2.22.
Use of Proceeds.



          (a) Borrower shall apply the proceeds of Advances to (i) repay existing
indebtedness owed under the Existing Credit Facility, (ii) pay fees and expenses relating to
this transaction, and (iii) provide for its and, subject to the terms of this Agreement,
its Subsidiaries working capital needs and reimburse drawings under Letters of Credit.




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




     2.23.
Defaulting Lender.



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




          (b) Advances shall be incurred pro rata from Lenders (the “Non-Defaulting Lenders”)
which are not Defaulting Lenders based on their respective Commitment Percentages, and no
Commitment Percentage of any Lender or any pro rata share of any Advances required to be advanced
by any Lender shall be increased as a result of such Lender Default. Amounts received in respect
of principal of any type of Advances shall be applied to reduce the applicable Advances of each
Lender (other than any Defaulting Lender) pro rata based on the aggregate of the outstanding
Advances of that type of all Lenders at the time of such application; provided, that, Agent shall
not be obligated to transfer to a Defaulting Lender any payments received by Agent for the
Defaulting Lender’s benefit, nor shall a Defaulting Lender be entitled to the




34









 







sharing of any payments hereunder (including any principal, interest or fees). Amounts payable to a
Defaulting Lender shall instead be paid to or retained by Agent. Agent may hold and, in its
discretion, re-lend to Borrower the amount of such payments received or retained by it for the
account of such Defaulting Lender.




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




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




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




III. INTEREST AND FEES.




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



35









 





     3.2.
Letter of Credit Fees.



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




     On demand, Borrower will cause cash to be deposited and maintained in an account with Agent,
as cash collateral, in an amount equal to one hundred and five percent (105%) of the Maximum
Undrawn Amount of all outstanding Letters of Credit, and Borrower hereby irrevocably authorizes
Agent, in its discretion, on Borrower’s behalf and in Borrower’s name, to open such an account and
to make and maintain deposits therein, or in an account opened by Borrower, in the amounts required
to be made by Borrower, out of the proceeds of Receivables or other Collateral or out of any other
funds of Borrower coming into any Lender’s possession at any time. Agent will invest such cash
collateral (less applicable reserves) in such short-term money-market items as to which Agent and
Borrower mutually agree and the net return on such investments shall be credited to such account
and constitute additional cash collateral. Borrower may not withdraw amounts credited to any such
account except upon the occurrence of all of the following: (x) payment and performance in full of
all Obligations, (y) the expiration of all Letters of Credit and (z) the termination of this
Agreement.




     3.3.
Closing Fee and Facility Fee.



          (a)
Closing Fee. Upon the execution of this Agreement, Borrower shall pay to Agent for
the ratable benefit of Lenders a closing fee of $56,250 less that portion of the commitment deposit
fees aggregating $50,000 heretofore paid by Borrower to Agent remaining after application of such
fee to out of pocket expenses.




          (b)
Facility Fee. If, for any calendar quarter during the Term, the average daily
unpaid balance of the Revolving Advances and undrawn amount of any outstanding Letters of Credit
for each day of such calendar quarter does not equal the Maximum Revolving Advance




36









 







Amount, then Borrower shall pay to Agent for the ratable benefit of Lenders a fee at a rate equal
to one quarter of one percent (0.25%) per annum on the amount by which the Maximum Revolving
Advance Amount exceeds such average daily unpaid balance. Such fee shall be payable to Agent in
arrears on the first day of each calendar quarter with respect to the previous calendar quarter.




     3.4.
Collateral Evaluation Fee, Collateral Monitoring Fee and Fee Letter.



          (a) Collateral Evaluation Fee. Borrower shall pay Agent a collateral evaluation fee
equal to $750 per month commencing on the first day of the month following the Closing Date and on
the first day of each month thereafter during the Term. The collateral evaluation fee shall be
deemed earned in full on the date when same is due and payable hereunder and shall not be subject
to rebate or proration upon termination of this Agreement for any reason.




          (b) Collateral Monitoring Fee. Borrower shall pay to Agent on the first day of each
month following any month in which Agent performs any collateral monitoring — namely any field
examination, collateral analysis or other business analysis, the need for which is to be determined
by Agent and which monitoring is undertaken by Agent or for Agent’s benefit — a collateral
monitoring fee in an amount equal to $750 per day for each person employed to perform such
monitoring, plus all costs and disbursements incurred by Agent in the performance of such
examination or analysis. Agent shall not conduct on-site collateral monitoring of the nature
described in this Section 3.4(b) more frequently than four (4) times per calendar year; provided,
that, if an Event of Default shall have occurred and be continuing, there shall be no limit on the
frequency of on-site collateral monitoring of the nature described in this Section 3.4(b).




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



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



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



37









 




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




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




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




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



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




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



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




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



then Agent shall give Borrower prompt written, telephonic or telegraphic notice of such
determination. If such notice is given, (i) any such requested Eurodollar Rate Loan shall be made
as a Domestic Rate Loan, unless Borrower shall notify Agent no later than 10:30 a.m. (New York City
time) two (2) Business Days prior to the date of such proposed borrowing, that its request for such
borrowing shall be cancelled or made as an unaffected type of Eurodollar Rate Loan, (ii) any
Domestic Rate Loan or Eurodollar Rate Loan which was to have been converted to an affected type of
Eurodollar Rate Loan shall be continued as or converted into a Domestic Rate Loan, or, if Borrower
shall notify Agent, no later than 10:30 a.m. (New York City time) two (2) Business Days prior to
the proposed conversion, shall be maintained as an




38









 







unaffected type of Eurodollar Rate Loan, and (iii) any outstanding affected Eurodollar Rate Loans
shall be converted into a Domestic Rate Loan, or, if Borrower shall notify Agent, no later than
10:30 a.m. (New York City time) two (2) Business Days prior to the last Business Day of the then
current Interest Period applicable to such affected Eurodollar Rate Loan, shall be converted into
an unaffected type of Eurodollar Rate Loan, on the last Business Day of the then current Interest
Period for such affected Eurodollar Rate Loans. Until such notice has been withdrawn, Lenders shall
have no obligation to make an affected type of Eurodollar Rate Loan or maintain outstanding
affected Eurodollar Rate Loans and Borrower shall not have the right to convert a Domestic Rate
Loan or an unaffected type of Eurodollar Rate Loan into an affected type of Eurodollar Rate Loan.




     3.9. Capital Adequacy.



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




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




     3.10. Gross Up for Taxes. If Borrower shall be required by Applicable Law to withhold
or deduct any taxes from or in respect of any sum payable under this Agreement or any of the Other
Documents to Agent, or any Lender, assignee of any Lender, or Participant (each, individually, a
“Payee” and collectively, the “Payees”), (a) the sum payable to such Payee or Payees, as the case
may be, shall be increased as may be necessary so that, after making all required withholding or
deductions, the applicable Payee or Payees receives an amount equal to the sum it would have
received had no such withholding or deductions been made (the “Gross- Up Payment”), (b) Borrower
shall make such withholding or deductions, and (c) Borrower shall pay the full amount withheld or
deducted to the relevant taxation authority or other authority in accordance with Applicable Law.
Notwithstanding the foregoing, Borrower shall not be



39









 




obligated to make any portion of the Gross-Up Payment that is attributable to any withholding or
deductions that would not have been paid or claimed had the applicable Payee or Payees properly
claimed a complete exemption with respect thereto pursuant to Section 3.11 hereof.




     3.11. Withholding Tax Exemption.



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




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




          (c) Notwithstanding the submission of a Withholding Certificate claiming a reduced rate of or
exemption from U.S. withholding tax required under Section 3.11(b) hereof, Agent shall be entitled
to withhold United States federal income taxes at the full 30% withholding rate if in its
reasonable judgment it is required to do so under the due diligence requirements imposed upon a
withholding agent under §1.1441-7(b) of the Regulations. Further, Agent is indemnified under
§1.1461-l(e) of the Regulations against any claims and demands of any Payee for the amount of any
tax it deducts and withholds in accordance with regulations under §1441 of the Code.




IV. COLLATERAL: GENERAL TERMS.




     4.1. Security Interest in the Collateral. To secure the prompt payment and
performance to Agent and each Lender of the Obligations, Borrower hereby assigns, pledges and



40









 




grants to Agent for its benefit and for the ratable benefit of each Lender a continuing security
interest in and to and Lien on all of its Collateral, whether now owned or existing or hereafter
acquired or arising and wheresoever located. Borrower shall mark its books and records as may be
necessary or appropriate to evidence, protect and perfect Agent’s security interest and shall cause
its financial statements to reflect such security interest. Borrower shall promptly provide Agent
with written notice of all commercial tort claims, such notice to contain the case title together
with the applicable court and a brief description of the claim(s). Upon delivery of each such
notice, Borrower shall be deemed to hereby grant to Agent a security interest and lien in and to
such commercial tort claims and all proceeds thereof.




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



     4.3. Disposition of Collateral. Borrower will safeguard and protect all Collateral for
Agent’s general account and make no disposition thereof whether by sale, lease or otherwise except
the disposition or transfer of obsolete and/or worn-out Equipment in the Ordinary Course of
Business during any fiscal year having an aggregate fair market value of not more than $500,000.



     4.4. Preservation of Collateral. Following Default or Event of Default, in addition to
the rights and remedies set forth in Section 11.1 hereof, Agent: (a) may at any time take such
steps as Agent deems necessary to protect Agent’s interest in and to preserve the Collateral,
including the hiring of such security guards or the placing of other security protection measures
as Agent may deem appropriate; (b) may employ and maintain at any of Borrower’s premises a
custodian who shall have full authority to do all acts necessary to protect Agent’s interests in
the Collateral; (c) may lease warehouse facilities to which Agent may move all or part of the



41









 




Collateral; (d) may use Borrower’s owned or leased lifts, hoists, trucks and other facilities or
equipment for handling or removing the Collateral; and (e) shall have, and is hereby granted, a
right of ingress and egress to the places where the Collateral is located, and may proceed over and
through any of Borrower’s owned or leased property. Borrower shall cooperate fully with all of
Agent’s efforts to preserve the Collateral and will take such actions to preserve the Collateral as
Agent may direct. All of Agent’s expenses of preserving the Collateral, including any expenses
relating to the bonding of a custodian, shall be charged to Borrower’s Account as a Revolving
Advance and added to the Obligations.




     4.5. Ownership of Collateral.



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




          (b) (i) There is no location at which Borrower has any material Inventory (except for
Inventory in transit, laptop computers and related equipment that Borrower permits employees to use
at an off-site location) other than those locations listed on Schedule 4.5;
(ii) Schedule 4.5 hereto contains a correct and complete list, as of the Closing Date, of the legal
names and addresses of each warehouse at which Inventory of Borrower is stored; (iii) Schedule 4.5
hereto sets forth a correct and complete list as of the Closing Date of (A) each place of business
of Borrower and (B) the chief executive office of Borrower; and (iv) Schedule 4.5 hereto sets forth
a correct and complete list as of the Closing Date of the location, by state and street address, of
all Real Property owned or leased by Borrower, together with the names and addresses of any
landlords.




     4.6. Defense of Agent’s and Lenders’ Interests. Until (a) payment and performance in
full of all of the Obligations and (b) termination of this Agreement, Agent’s interests in the
Collateral shall continue in full force and effect. During such period Borrower shall not, without
Agent’s prior written consent, pledge, sell (except Equipment to the extent permitted in Section
4.3 hereof), assign, transfer, create or suffer to exist a Lien upon or encumber or allow or suffer
to be encumbered in any way except for Permitted Encumbrances, any part of the Collateral. Borrower
shall defend Agent’s interests in the Collateral against any and all Persons whatsoever. At any
time following demand by Agent for payment of all Obligations, Agent shall have the right to take
possession of the indicia of the Collateral and the Collateral in whatever physical form contained,
including: labels, stationery, documents, instruments and advertising materials. If Agent exercises
this right to take possession of the Collateral, Borrower shall, upon demand, assemble it in the
best manner possible and make it available to Agent at a place reasonably



42









 




convenient to Agent. In addition, with respect to all Collateral, Agent and Lenders shall be
entitled to all of the rights and remedies set forth herein and further provided by the Uniform
Commercial Code or other Applicable Law. Borrower shall, and Agent may, at its option, instruct all
suppliers, carriers, forwarders, warehousers or others receiving or holding cash, checks,
Inventory, documents or instruments in which Agent holds a security interest to deliver same to
Agent and/or subject to Agent’s order and if they shall come into Borrower’s possession, they, and
each of them, shall be held by Borrower in trust as Agent’s trustee, and Borrower will immediately
deliver them to Agent in their original form together with any necessary endorsement.




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



     4.8. Financial Disclosure. Borrower hereby irrevocably authorizes and directs all
accountants and auditors employed by Borrower, at any time during the Term after Agent and/or any
Lender obtains the consent of Borrower, to disclose and exhibit and deliver to Agent and each
Lender copies of Borrower’s financial statements and such other information Agent may reasonably
request from time to time. Borrower hereby authorizes all Governmental Bodies to furnish to Agent
and each Lender copies of reports or examinations relating to Borrower, whether made by Borrower or
otherwise; however, Agent and each Lender will attempt to obtain such information or materials
directly from Borrower prior to obtaining such information or materials from such accountants or
Governmental Bodies.



     4.9. Compliance with Laws. Borrower shall comply in all material respects with all
Applicable Laws with respect to the Collateral or any part thereof or to the operation of
Borrower’s business the non-compliance with which could reasonably be expected to have a Material
Adverse Effect. Borrower may, however, contest or dispute any Applicable Laws in any reasonable
manner, provided that any related Lien is inchoate or stayed and sufficient reserves are
established to the reasonable satisfaction of Agent to protect Agent’s Lien on or security interest
in the Collateral. The assets of Borrower at all times shall be maintained in accordance with the
requirements of all insurance carriers which provide insurance with respect to the assets of
Borrower so that such insurance shall remain in full force and effect.



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



43









 




and from time to time, for the purpose of inspecting the Collateral and any and all records
pertaining thereto and the operation of Borrower’s business.




     4.11. Insurance. The assets and properties of Borrower at all times shall be
maintained in accordance with the requirements of all insurance carriers which provide insurance
with respect to the assets and properties of Borrower so that such insurance shall remain in full
force and effect. Borrower shall bear the full risk of any loss of any nature whatsoever with
respect to the Collateral. At Borrower’s own cost and expense in amounts and with carriers
acceptable to Agent, Borrower shall (a) keep all its insurable properties and properties in which
Borrower has an interest insured against the hazards of fire, flood, those hazards covered by
extended coverage insurance and such other hazards, and for such amounts, as is customary in the
case of companies engaged in businesses similar to Borrower’s including business interruption
insurance; (b) maintain a bond in such amounts as is customary in the case of companies engaged in
businesses similar to Borrower insuring against larceny, embezzlement or other criminal
misappropriation of insured’s officers and employees who may either singly or jointly with others
at any time have access to the assets or funds of Borrower either directly or through authority to
draw upon such funds or to direct generally the disposition of such assets; (c) maintain public and
product liability insurance against claims for personal injury, death or property damage suffered
by others; (d) maintain all such worker’s compensation or similar insurance as may be required
under the laws of any state or jurisdiction in which Borrower is engaged in business; (e) furnish
Agent with (i) copies of all policies and evidence of the maintenance of such policies by the
renewal thereof at least thirty (30) days before any expiration date, and (ii) appropriate loss
payable endorsements in form and substance satisfactory to Agent, naming Agent as a co-insured and
loss payee as its interests may appear with respect to all insurance coverage referred to in
clauses (a) and (c) above, and providing
(A) that all proceeds thereunder shall be payable to Agent, (B) no such insurance shall be affected
by any act or neglect of the insured or owner of the property described in such policy, and (C)
that such policy and loss payable clauses may not be cancelled, amended or terminated unless at
least thirty (30) days’ prior written notice is given to Agent. In the event of any loss
thereunder, the carriers named therein hereby are directed by Agent and Borrower to make payment
for such loss to Agent and not to Borrower and Agent jointly. If any insurance losses are paid by
check, draft or other instrument payable to Borrower and Agent jointly, Agent may endorse
Borrower’s name thereon and do such other things as Agent may deem advisable to reduce the same to
cash. Agent is hereby authorized to adjust and compromise claims under insurance coverage referred
to in clauses (a) and (b) above. All loss recoveries received by Agent upon any such insurance may
be applied to the Obligations, in such order as Agent in its sole discretion shall determine. Any
surplus shall be paid by Agent to Borrower or applied as may be otherwise required by law. Any
deficiency thereon shall be paid by Borrower to Agent, on demand.



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



44









 





     4.13. Payment of Taxes. Borrower will pay, when due, all taxes, assessments and other
Charges lawfully levied or assessed upon Borrower or any of the Collateral including real and
personal property taxes, assessments and charges and all franchise, income, employment, social
security benefits, withholding, and sales taxes. If any tax by any Governmental Body is or may be
imposed on or as a result of any transaction between Borrower and Agent or any Lender which Agent
or any Lender may be required to withhold or pay or if any taxes, assessments, or other Charges
remain unpaid after the date fixed for their payment, or if any claim shall be made which, in
Agent’s or any Lender’s reasonable judgment, may possibly create a valid Lien on the Collateral,
Agent may, but only during such periods after an Event of Default has occurred and is continuing,
without notice to Borrower pay the taxes, assessments or other Charges and Borrower hereby
indemnifies and holds Agent and each Lender harmless in respect thereof. Agent will not pay any
taxes, assessments or Charges to the extent that Borrower has contested or disputed those taxes,
assessments or Charges in good faith, by expeditious protest, administrative or judicial appeal or
similar proceeding provided that any related tax lien is stayed and sufficient reserves are
established to the reasonable satisfaction of Agent to protect Agent’s security interest in or Lien
on the Collateral. The amount of any payment by Agent under this Section 4.13 shall be charged to
Borrower’s Account as a Revolving Advance and added to the Obligations and, until Borrower shall
furnish Agent with an indemnity therefor (or supply Agent with evidence satisfactory to Agent that
due provision for the payment thereof has been made), Agent may hold without interest any balance
standing to Borrower’s credit and Agent shall retain its security interest in and Lien on any and
all Collateral held by Agent.



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



     4.15. Receivables.



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




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




          (c) Location of Borrower. Borrower’s chief executive office is located at 610 West
Germantown Pike, Plymouth Meeting, Pennsylvania 19462. Until written notice is given




45









 







to Agent by Borrower of any other office at which Borrower keeps its records pertaining to
Receivables, all such records shall be kept at such executive office.




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




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




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




46









 







right at any time to change the address for delivery of mail addressed to Borrower to such
address as Agent may designate and to receive, open and dispose of all mail addressed to
Borrower.




          (g) No Liability. Neither Agent nor any Lender shall, under any
circumstances or in any event whatsoever, have any liability for any error or omission or delay of
any kind occurring in the settlement, collection or payment of any of the Receivables or any
instrument received in payment thereof, or for any damage resulting therefrom. Following the
occurrence of an Event of Default or Default Agent may, without notice or consent from Borrower,
sue upon or otherwise collect, extend the time of payment of, compromise or settle for cash, credit
or upon any terms any of the Receivables or any other securities, instruments or insurance
applicable thereto and/or release any obligor thereof. Agent is authorized and empowered to accept
following the occurrence of an Event of Default or Default the return of the goods represented by
any of the Receivables, without notice to or consent by Borrower, all without discharging or in any
way affecting Borrower’s liability hereunder.




          (h) Establishment of a Lockbox Account, Dominion Account. All proceeds of
Collateral (not including those investigator and/or escrow funds set forth in the proviso of the
definition of “Collateral”) shall be deposited by Borrower into either (i) a lockbox account,
dominion account or such other “blocked account” (“Blocked Accounts”) established at a bank or
banks (each such bank, a “Blocked Account Bank”) pursuant to an arrangement with such Blocked
Account Bank as may be selected by Borrower and be acceptable to Agent or (ii) depository accounts
(“Depository Accounts”) established at the Agent for the deposit of such proceeds. Borrower, Agent
and each Blocked Account Bank shall enter into a deposit account control agreement in form and
substance satisfactory to Agent directing such Blocked Account Bank to transfer such funds so
deposited to Agent, either to any account maintained by Agent at said Blocked Account Bank or by
wire transfer to appropriate account(s) of Agent. All funds deposited in such Blocked Accounts
shall immediately become the property of Agent and Borrower shall obtain the agreement by such
Blocked Account Bank to waive any offset rights against the funds so deposited. Neither Agent nor
any Lender assumes any responsibility for such blocked account arrangement, including any claim of
accord and satisfaction or release with respect to deposits accepted by any Blocked Account Bank
thereunder. All deposit accounts and investment accounts of Borrower and its Subsidiaries are set
forth on Schedule 4.15(h).




          (i) Adjustments. Borrower will not, without Agent’s consent, compromise or
adjust any material amount of the Receivables (or extend the time for payment thereof) or accept
any material returns of merchandise or grant any additional discounts, allowances or credits
thereon except for those compromises, adjustments, returns, discounts, credits and allowances as
have been heretofore customary in the business of Borrower.




     4.16. Inventory. To the extent Inventory held for sale or lease has been produced by
Borrower, it has been and will be produced by Borrower in accordance with the Federal Fair Labor
Standards Act of 1938, as amended, and all rules, regulations and orders thereunder.



     4.17. Maintenance of Equipment. The Equipment shall be maintained in good operating
condition and repair (reasonable wear and tear excepted) and all necessary replacements of and
repairs thereto shall be made so that the value and operating efficiency of



47









 




the Equipment shall be maintained and preserved. Borrower shall not use or operate the Equipment in
violation of any law, statute, ordinance, code, rule or regulation. Borrower shall have the right
to sell Equipment to the extent set forth in Section 4.3 hereof.




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



     4.19. Environmental Matters.



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




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




          (c) Borrower shall (i) employ in connection with the use of the Real Property
appropriate technology necessary to maintain compliance with any applicable Environmental Laws and
(ii) dispose of any and all Hazardous Waste generated at the Real Property only at facilities and
with carriers that maintain valid permits under RCRA and any other applicable Environmental Laws.
Borrower shall use its best efforts to obtain certificates of disposal, such as hazardous waste
manifest receipts, from all treatment, transport, storage or disposal facilities or operators
employed by Borrower in connection with the transport or disposal of any Hazardous Waste generated
at the Real Property.




          (d) In the event Borrower obtains, gives or receives notice of any Release or threat of
Release of a reportable quantity of any Hazardous Substances at the Real Property (any such event
being hereinafter referred to as a “Hazardous Discharge”) or receives any notice of violation,
request for information or notification that it is potentially responsible for investigation or
cleanup of environmental conditions at the Real Property, demand letter or complaint, order,
citation, or other written notice with regard to any Hazardous Discharge or violation of
Environmental Laws affecting the Real Property or Borrower’s interest therein (any of the foregoing
is referred to herein as an “Environmental Complaint”) from any Person, including any state agency
responsible in whole or in part for environmental matters in the state in which the Real Property
is located or the United States Environmental Protection Agency (any such person or entity
hereinafter the “Authority”), then Borrower shall, within five (5) Business Days, give written
notice of same to Agent detailing facts and circumstances of which Borrower is aware giving rise to
the Hazardous Discharge or Environmental Complaint. Such information is to be provided to allow
Agent to protect its security interest in and Lien on the Real Property and the




48









 







Collateral and is not intended to create nor shall it create any obligation upon Agent or any
Lender with respect thereto.




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




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




          (g) Promptly upon the written request of Agent from time to time, Borrower shall provide
Agent, at Borrower’s expense, with an environmental site assessment or environmental audit report
prepared by an environmental engineering firm acceptable in the reasonable opinion of Agent, to
assess with a reasonable degree of certainty the existence of a Hazardous Discharge and the
potential costs in connection with abatement, cleanup and removal of any Hazardous Substances found
on, under, at or within the Real Property. Any report or investigation of such Hazardous Discharge
proposed and acceptable to an appropriate Authority that is charged to oversee the clean-up of such
Hazardous Discharge shall be acceptable to Agent. If such estimates, individually or in the
aggregate, exceed $100,000, Agent shall have the right to require Borrower to post a bond, letter
of credit or other security reasonably satisfactory to Agent to secure payment of these costs and
expenses.




          (h) Borrower shall defend and indemnify Agent and Lenders and hold Agent, Lenders and
their respective employees, agents, directors and officers harmless from and against all loss,
liability, damage and expense, claims, costs, fines and penalties, including attorney’s fees,
suffered or incurred by Agent or Lenders under or on account of any Environmental Laws,




49









 







including the assertion of any Lien thereunder, with respect to any Hazardous Discharge, the
presence of any Hazardous Substances affecting the Real Property, whether or not the same
originates or emerges from the Real Property or any contiguous real estate, including any loss of
value of the Real Property as a result of the foregoing except to the extent such loss,
liability, damage and expense is attributable to any Hazardous Discharge resulting from actions
on the part of Agent or any Lender. Borrower’s obligations under this Section 4.19 shall arise
upon the discovery of the presence of any Hazardous Substances at the Real Property, whether or
not any federal, state, or local environmental agency has taken or threatened any action in
connection with the presence of any Hazardous Substances. Borrower’s obligation and the
indemnifications hereunder shall survive the termination of this Agreement.




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




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



V. REPRESENTATIONS AND WARRANTIES.




     Borrower represents and warrants as follows:



     5.1. Authority. Borrower has full power, authority and legal right to enter
into this Agreement and the Other Documents and to perform all its respective Obligations
hereunder and thereunder. This Agreement, the Subordination Agreement and the Other Documents
have been duly executed and delivered by Borrower, and this Agreement, the Subordination
Agreement and the Other Documents constitute the legal, valid and binding obligation of Borrower
enforceable in accordance with their terms, except as such enforceability may be limited by any
applicable bankruptcy, insolvency, moratorium or similar laws affecting creditors’ rights
generally. The execution, delivery and performance of this Agreement and of the Other Documents
(a) are within Borrower’s corporate powers, have been duly authorized by all necessary corporate
action, are not in contravention of law or the terms of Borrower’s by-laws, certificate of
incorporation of other applicable documents relating to Borrower’s formation or to the conduct of
Borrower’s business or of any material agreement or undertaking to which Borrower is a party or
by which Borrower is bound, including the Subordinated Loan Documentation, (b) will not conflict
with or violate any law or regulation, or any judgment, order or decree of any Governmental Body,
(c) will not require the Consent of any Governmental Body or any other Person, except those
Consents set forth on Schedule 5.1 hereto, all of which will have been duly obtained, made or
compiled prior to the Closing Date and which are in full force and effect and (d) will not
conflict with, nor result in any breach in any of the provisions of or constitute a default under
or result in the creation of any Lien except Permitted Encumbrances upon any asset of Borrower
under the provisions of any agreement, charter document, instrument, by-law or other instrument
to which Borrower is a party or by which it or its property is bound, including under the
provisions of the Subordinated Loan Documentation.



50









 





     5.2. Formation and Qualification.



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




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




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



     5.4. Tax Returns. Borrower’s federal tax identification number is set forth on
Schedule 5.4. Borrower has filed all federal, state and local tax returns and other reports it is
required by law to file and has paid all taxes, assessments, fees and other governmental charges
that are due and payable. To the best of Borrower’s knowledge, the provision for taxes on the books
of Borrower is adequate for all years not closed by applicable statutes, and for its current fiscal
year, and Borrower has no knowledge of any deficiency or additional assessment in connection
therewith not provided for on its books.



     5.5. Financial Statements. The consolidated balance sheets of Borrower, its
Subsidiaries and such other Persons described therein as of June 30, 2006, and the related
statements of income and changes in cash flow for the period ended on such date, copies of which
have been delivered to Agent, have been prepared in accordance with GAAP, consistently applied
(except for changes in application in which such accountants concur, ordinary year-end adjustments
and footnotes) and present fairly the financial position of Borrower and its Subsidiaries at such
date and the results of their operations for such period. Since June 30, 2006 there has been no
change in the condition, financial or otherwise, of Borrower or its Subsidiaries as shown on the
consolidated balance sheet as of such date and no change in the aggregate value of the assets owned
by Borrower and its Subsidiaries, except changes in the Ordinary Course of Business, none of which
individually or in the aggregate has been materially adverse.



     5.6. Entity Name. Borrower has not been known by any other corporate name in the past
five years and does not conduct business under any other name except as set forth on Schedule 5.6,
nor has Borrower been the surviving corporation of a merger or consolidation or acquired all or
substantially all of the assets of any Person (other than with regard to the Subsidiaries listed on
Schedule 5.2(b)) during the preceding five (5) years.



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



          (a) Borrower has duly complied with, and its facilities, business, assets,
property, leaseholds, Real Property and Equipment are in compliance in all material respects




51









 







with, the provisions of the Federal Occupational Safety and Health Act, the Environmental
Protection Act, RCRA and all other Environmental Laws; there have been no outstanding
citations, notices or orders of non-compliance issued to Borrower or relating to its business,
assets, property, leaseholds or Equipment under any such laws, rules or regulations.




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




          (c) (i) There are no visible signs of releases, spills, discharges, leaks or disposal
(collectively referred to as “Releases”) of Hazardous Substances at, upon, under or within any Real
Property or any premises leased by Borrower; (ii) to the best of Borrower’s knowledge, there are no
underground storage tanks or polychlorinated biphenyls on the Real Property or any premises leased
by Borrower; (iii) to the best of Borrower’s knowledge, neither the Real Property nor any premises
leased by Borrower has ever been used as a treatment, storage or disposal facility of Hazardous
Waste; and (iv) no Hazardous Substances are present on the Real Property or any premises leased by
Borrower, excepting such quantities as are handled in accordance with all applicable manufacturer’s
instructions and governmental regulations and in proper storage containers and as are necessary for
the operation of the commercial business of Borrower or of its tenants.




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



          (a) Borrower is solvent, able to pay its debts as they mature, has capital sufficient to carry
on its business and all businesses in which it is about to engage, and (i) as of the Closing Date,
the fair present saleable value of its assets, calculated on a going concern basis, is in excess of
the amount of its liabilities and (ii) subsequent to the Closing Date, the fair saleable value of
its assets (calculated on a going concern basis) will be in excess of the amount of its
liabilities.




          (b) Except as disclosed in Schedule 5.8(b), Borrower has no (i) pending or threatened
litigation, arbitration, actions or proceedings which involve the possibility of having a Material
Adverse Effect, and (ii) liabilities or indebtedness for borrowed money other than the Obligations.




          (c) Borrower is not in violation of any applicable statute, law, rule, regulation or ordinance
in any respect which could reasonably be expected to have a Material Adverse Effect, nor is
Borrower in violation of any order of any court, Governmental Body or arbitration board or
tribunal.




          (d) Neither Borrower nor any member of the Controlled Group maintains or contributes to any
Plan other than those listed on Schedule 5.8(d) hereto: (i) No Plan has incurred any “accumulated
funding deficiency,” as defined in Section 302(a)(2) of ERISA and Section 412(a) of the Code,
whether or not waived, and Borrower and each member of the Controlled Group has met all applicable
minimum funding requirements under Section 302 of ERISA in respect of each Plan; (ii) each Plan
which is intended to be a qualified plan under Section 401 (a) of the Code as currently in effect
has been determined by the Internal Revenue Service to be qualified under Section 401 (a) of the
Code and the trust related thereto is exempt from federal





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income tax under Section 501(a) of the Code; (iii) neither Borrower nor any member of the
Controlled Group has incurred any liability to the PBGC other than for the payment of premiums, and
there are no premium payments which have become due which are unpaid; (iv) no Plan has been
terminated by the plan administrator thereof nor by the PBGC, and there is no occurrence which
would cause the PBGC to institute proceedings under Title IV of ERISA to terminate any Plan; (v) at
this time, the current value of the assets of each Plan exceeds the present value of the accrued
benefits and other liabilities of such Plan and neither Borrower nor any member of the Controlled
Group knows of any facts or circumstances which would materially change the value of such assets
and accrued benefits and other liabilities; (vi) neither Borrower nor any member of the Controlled
Group has breached any of the responsibilities, obligations or duties imposed on it by ERISA with
respect to any Plan; (vii) neither Borrower nor any member of a Controlled Group has incurred any
liability for any excise tax arising under Section 4972 or 4980B of the Code, and no fact exists
which could give rise to any such liability; (viii) neither Borrower nor any member of the
Controlled Group nor any fiduciary of, nor any trustee to, any Plan, has engaged in a “prohibited
transaction” described in Section 406 of the ERISA or Section 4975 of the Code nor taken any action
which would constitute or result in a Termination Event with respect to any such which is subject
to ERISA; (ix) Borrower and each member of the Controlled Group has made all contributions due and
payable with respect to each Plan; (x) there exists no event described in Section 4043(b) of ERISA,
for which the thirty (30) day notice period has not been waived; (xi) neither Borrower nor any
member of the Controlled Group has any fiduciary responsibility for investments with respect to any
plan existing for the benefit of persons other than employees or former employees of Borrower and
any member of the Controlled Group; (xii) neither Borrower nor any member of the Controlled Group
maintains or contributes to any Plan which provides health, accident or life insurance benefits to
former employees, their spouses or dependents, other than in accordance with Section 4980B of the
Code; (xiii) neither Borrower nor any member of the Controlled Group has withdrawn, completely or
partially, from any Multiemployer Plan so as to incur liability under the Multiemployer Pension
Plan Amendments Act of 1980 and there exists no fact which would reasonably be expected to result
in any such liability; and (xiv) no Plan fiduciary (as defined in Section 3(21) of ERISA) has any
liability for breach of fiduciary duty or for any failure in connection with the administration or
investment of the assets of a Plan.




     5.9. Patents, Trademarks, Copyrights and Licenses. All patents, patent
applications, trademarks, trademark applications, service marks, service mark applications,
material copyrights, copyright applications, design rights, tradenames, assumed names, material
trade secrets and licenses owned or utilized by Borrower are set forth on Schedule 5.9, are valid
and have been duly registered or filed with all appropriate Governmental Bodies and constitute all
of the intellectual property rights which are necessary for the operation of its business; there is
no objection to or pending challenge to the validity of any such patent, trademark, copyright,
design rights, tradename, trade secret or license and Borrower is not aware of any grounds for any
challenge, except as set forth in Schedule 5.9 hereto. Each patent, patent application, patent
license, trademark, trademark application, trademark license, service mark, service mark
application, service mark license, design rights, copyright, copyright application and copyright
license owned or held by Borrower and all trade secrets used by Borrower consist of original
material or property developed by Borrower or was lawfully acquired by Borrower from the proper and
lawful owner thereof. Each of such items has been maintained so as to preserve the value thereof
from the date of creation or acquisition thereof. With respect to all software used



53









 




by Borrower, to the extent usual or customary, Borrower is in possession of all source and object
codes related to each piece of software or is the beneficiary of a source code escrow agreement,
each such source code escrow agreement being listed on Schedule 5.9 hereto.




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



     5.11. Default of Indebtedness. Borrower is not in default in the payment of the
principal of or interest on any Indebtedness or under any instrument or agreement under or
subject to which any Indebtedness has been issued and no event has occurred under the
provisions of any such instrument or agreement which with or without the lapse of time or the
giving of notice, or both, constitutes or would constitute an event of default thereunder.



     5.12. No Default. Borrower is not in default in the payment or performance of any of
its contractual obligations and no Default has occurred.



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



     5.14. No Labor Disputes. Borrower is not involved in any labor dispute; there are no
strikes or walkouts or union organization of Borrower’s employees threatened or in existence
and no labor contract is scheduled to expire during the Term other than as set forth on
Schedule 5.14 hereto.



     5.15. Margin Regulations. Borrower is not engaged, nor will it engage, principally or
as one of its important activities, in the business of extending credit for the purpose of
“purchasing” or “carrying” any “margin stock” within the respective meanings of each of the
quoted terms under Regulation U of the Board of Governors of the Federal Reserve System as
now and from time to time hereafter in effect. No part of the proceeds of any Advance will be
used for “purchasing” or “carrying” “margin stock” as defined in Regulation U of such Board of
Governors.



     5.16. Investment Company Act. Borrower is not an “investment company” registered
or required to be registered under the Investment Company Act of 1940, as amended, nor is it
controlled by such a company.



     5.17. Disclosure. No representation or warranty made by Borrower in this Agreement,
the Subordinated Loan Documentation or in any financial statement, report, certificate or any
other document furnished in connection herewith or therewith contains any untrue statement of a



54









 




material fact or omits to state any material fact necessary to make the statements herein or
therein not misleading. There is no fact known to Borrower or which reasonably should be known to
Borrower which Borrower has not disclosed to Agent in writing with respect to the transactions
contemplated by the Subordinated Loan Documentation or this Agreement which could reasonably be
expected to have a Material Adverse Effect.




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



     5.19. Swaps. Borrower is not a party to, nor will it be a party to, any swap agreement
whereby Borrower has agreed or will agree to swap interest rates or currencies unless same
provides that damages upon termination following an event of default thereunder are payable on
an unlimited “two-way basis” without regard to fault on the part of either party.



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



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



     5.22. Business and Property of Borrower. Upon and after the Closing Date, neither
Borrower nor any Domestic Subsidiary of Borrower proposes to engage or engages in any
business other than pharmaceutical research services and activities necessary to conduct the
foregoing, and no Foreign Subsidiary proposes to engage or engages in business other than
providing services in support of Borrower’s business or conducting business on its own behalf
in lines of businesses similar to those of Borrower. On the Closing Date, Borrower and each of
its Subsidiaries will own all the property and possess all of the rights and Consents necessary
for the conduct of the business of Borrower or such Subsidiary.



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



55









 





     5.24.Anti-Terrorism Laws.



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




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





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




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




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




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




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




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



     Neither Borrower or to the knowledge of Borrower, any of its agents acting in any
capacity in connection with the Advances or other transactions hereunder (i) conducts any
business or engages in making or receiving any contribution of funds, goods or services
to or for the benefit of any Blocked Person, or (ii) deals in, or otherwise engages in
any transaction relating to, any property or interests in property blocked pursuant to
the Executive Order No. 13224.



     5.25. Trading with the Enemy. Borrower has not engaged, nor does it intend
to engage, in any business or activity prohibited by the Trading with the Enemy Act.



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



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VI. AFFIRMATIVE COVENANTS.




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



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




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




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



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



     6.5. Fixed Charge Coverage Ratio. Cause to be maintained as of the end of each fiscal
quarter, for the period of four consecutive fiscal quarters then ending, a Fixed Charge
Coverage Ratio of not less than 1.10 to 1.0; provided, however, in the case of the fiscal quarter
ending (a) December 31, 2006, the Fixed Charge Coverage Ratio shall be calculated for that fiscal quarter
then ending, (b) March 31, 2007, the Fixed Charge Coverage Ratio shall be calculated only for the
two (2) consecutive fiscal quarters then ending, and (c) June 30, 2007, the Fixed Charge Coverage
Ratio shall be calculated for the three (3) consecutive quarters then ending.



     6.6. Execution of Supplemental Instruments. Execute and deliver to Agent from time
to time, upon demand, such supplemental agreements, statements, assignments and transfers, or




57









 







instructions or documents relating to the Collateral, and such other instruments as Agent may
request, in order that the full intent of this Agreement may be carried into effect.




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



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



     6.9. Federal Securities Laws. Promptly notify Agent in writing if Borrower or any of
its Subsidiaries (i) is required to file periodic reports under the Exchange Act, (ii)
registers any securities under the Exchange Act or (iii) files a registration statement under the Securities
Act.



     6.10. Matters Relating to Borrower’s Foreign Subsidiaries. In connection with each
field audit of Borrower conducted by Agent or at such other times as Agent shall reasonably
request, deliver to Agent an accounting of (i) Borrower’s capital contributions, loans or
advances in or to any of its Foreign Subsidiaries and (ii) the aggregate capitalization requirements
and operating expenses of such Foreign Subsidiaries.



VII. NEGATIVE COVENANTS.




     Until satisfaction in full of the Obligations and termination of this Agreement, Borrower
shall not, and shall not permit any of its Domestic Subsidiaries and, in the case of Sections 7.1,
7.3, 7.9 and 7.23, its Foreign Subsidiaries, to:



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



          (a) Enter into any merger, consolidation or other reorganization with or into any other
Person or acquire all or a substantial portion of the assets or Equity Interests of any Person or
permit any other Person to consolidate with or merge with it; provided, however, (i) any
Subsidiary of Borrower is permitted to merge or consolidate with or into Borrower or any other
Domestic Subsidiary of Borrower, (ii) Borrower or any Domestic Subsidiary of Borrower is permitted
to acquire all or a substantial portion of the assets or Equity Interests of any other Subsidiary,
(iii) any Foreign Subsidiary of Borrower is permitted to merge or consolidate with or into another
Foreign Subsidiary of Borrower, and (iv) any Foreign Subsidiary of Borrower is permitted to acquire
all or a substantial portion of the assets or Equity Interests of any other




58









 




Foreign Subsidiary of Borrower, and (v) any Foreign Subsidiary of Borrower may merge or
consolidate with another Person so long as such Foreign Subsidiary is the surviving entity.




          (b) Sell, lease, transfer or otherwise dispose of any of its properties or assets,
except (i) dispositions of Equipment to the extent expressly permitted by Section 4.3, (ii) any
sale or dispositions of such properties or assets of (A) a Domestic Subsidiary of Borrower to
Borrower of another Domestic Subsidiary of Borrower, (B) a Foreign Subsidiary of Borrower to
Borrower or another Subsidiary of Borrower and (C) a Foreign Subsidiary of Borrower to another
Person so long as the proceeds in excess of $250,000 arising from such sale or disposition of
properties or assets are used by such Foreign Subsidiary to repay any outstanding loans or advances
made by Borrower to such Foreign Subsidiary and/or to fund such Foreign Subsidiary’s operating
expenses and (ii) any other sales or dispositions expressly permitted by this Agreement.




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



     7.3. Guarantees. Become liable upon the obligations or liabilities of any Person by
assumption, endorsement or guaranty thereof or otherwise (other than to Lenders) except the
endorsement of checks in the Ordinary Course of Business.



     7.4. Investments. Purchase or acquire obligations or Equity Interests of, or any other
interest in, any Person, except (a) obligations issued or guaranteed by the United States of
America or any agency thereof, (b) commercial paper with maturities of not more than 180 days
and a published rating of not less than A-l or P-l (or the equivalent rating), (c)
certificates of time deposit and bankers’ acceptances having maturities of not more than 180 days and
repurchase agreements backed by United States government securities of a commercial bank if
(i) such bank has a combined capital and surplus of at least $500,000,000, or (ii) its debt
obligations, or those of a holding company of which it is a Subsidiary, are rated not less
than A (or the equivalent rating) by a nationally recognized investment rating agency, (d) U.S. money
market funds that invest solely in obligations issued or guaranteed by the United States of
America or an agency thereof, (e) its Domestic Subsidiaries or (f) its Foreign Subsidiaries to
the extent that the aggregate amount of capital contributions made in such Foreign Subsidiaries by
Borrower and any of its Domestic Subsidiaries are not in excess of the aggregate amount of
capital contributions necessary to adequately capitalize such Foreign Subsidiaries and fund
their ongoing operating expenses.



     7.5. Loans. Make or have outstanding advances, loans or extensions of credit to any
Person except (a) with respect to the extension of commercial trade credit in the Ordinary
Course of Business, (b) loans to employees of Borrower in the Ordinary Course of Business not to
exceed the aggregate amount of $100,000 at any time outstanding loans from Borrower to a Domestic Subsidiary of Borrower and (c) loans by Borrower to its Foreign Subsidiaries in an
aggregate amount outstanding at any time not to exceed the aggregate amount of loans or
advances necessary to adequately fund the ongoing operating expenses of such Foreign
Subsidiaries.



59









 





     7.6. Capital Expenditures. Contract for, purchase or make any expenditure or
commitments for Capital Expenditures in any fiscal year in an aggregate amount in excess of
$4,000,000.



     7.7.Dividends. Declare, pay or make any dividend or distribution on any Equity
Interests of Borrower or any Subsidiary thereof (other than dividends or distributions payable
in its stock, or split-ups or reclassifications of its stock or dividends or distributions
payable from Borrower’s Subsidiaries to Borrower or from one Subsidiary of Borrower to another) or apply
any of its funds, property or assets to the purchase, redemption or other retirement of any
Equity Interests of Borrower.



     7.8. Indebtedness. Create, incur, assume or suffer to exist any Indebtedness
(exclusive of trade debt) except in respect of (i) Indebtedness to Lenders; (ii) Indebtedness incurred
for Capital Expenditures permitted under Section 7.6 hereof; (iii) Indebtedness due under the
Subordinated Loan Documentation and (iv) Indebtedness due to Borrower pursuant to Section
7.5(c) above.



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



     7.10. Transactions with Affiliates. Directly or indirectly, purchase, acquire or lease
any property from, or sell, transfer or lease any property to, or otherwise enter into any
transaction or deal with, any Affiliate, except transactions disclosed to the Agent, which are in the
Ordinary Course of Business, on an arm’s-length basis on terms and conditions no less favorable than
terms and conditions which would have been obtainable from a Person other than an Affiliate,
provided that transactions with Foreign Subsidiaries shall be permitted to the extent such
transactions are in the Ordinary Course of Business on terms and conditions that on a net
basis are no less favorable to Borrower than terms and conditions which would have been obtainable
from a Person other than an Affiliate.



     7.11. Leases. Enter as lessee into any lease arrangement for real or personal property
(unless capitalized and permitted under Section 7.6 hereof) if after giving effect thereto,
aggregate annual rental payments for all leased property would exceed $5,000,000 in any one
fiscal year in the aggregate.



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



          (b) Form or acquire any Foreign Subsidiary unless (i) Borrower executes and delivers, or
causes the Domestic Subsidiary owning such first-tier Foreign Subsidiary to execute




60









 




and deliver to Agent, a pledge agreement in form and substance satisfactory to Agent pursuant to
which sixty-five percent (65%) of the voting Equity Interests of such Foreign Subsidiary (to the
extent owned by Borrower or a Domestic Subsidiary of Borrower) shall be pledged to Agent for the
benefit of Lenders as security for the Obligations, (ii) such Foreign Subsidiary is to be engaged
in providing services in support of Borrower’s business or will be conducting business for its own
account in lines of businesses similar to those of Borrower, and (iii) Agent shall have received
all other documents, including legal opinions, it may reasonably require to establish compliance
with each of the foregoing conditions.




             (c) Enter into any partnership, joint venture or similar arrangement without the consent
of Agent which consent shall not be unreasonably withheld.




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



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



     7.15. Amendment of Articles of Incorporation, By-Laws. Amend, modify or waive any
term or material provision of its Articles of Incorporation or By-Laws in a manner that would
materially impact a Lender or Agent unless required by law or with consent of Agent.



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



     7.17. Prepayment of Indebtedness. Except as permitted pursuant to Section 7.21
hereof, at any time, directly or indirectly, prepay any Indebtedness (other than to Lenders or to



61









 




Borrower or a Domestic Subsidiary thereof), or repurchase, redeem, retire or otherwise acquire
any Indebtedness of Borrower.




     7.18. Anti-Terrorism Laws. Borrower shall not, until satisfaction in full of the
Obligations and termination of this Agreement, nor shall it permit any Affiliate or agent
to:



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




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




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




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



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



     7.21. Subordinated Note. At any time, directly or indirectly, pay, prepay, repurchase,
redeem, retire or otherwise acquire, or make any payment on account of any principal of,
interest on or premium payable in connection with the repayment or redemption of the Subordinated
Note, except as expressly permitted in the Subordination Agreement.



     7.22. Other Agreements. Enter into any material amendment, waiver or modification of
the Subordinated Loan Documentation or any related agreements that negatively impacts Agent
or a Lender.



     7.23. Limitation on Foreign Subsidiaries. Permit the Foreign Subsidiaries of Borrower
which have outstanding loans and advances from Borrower or any Domestic Subsidiary thereof
to have cash and cash equivalents on hand in excess of $250,000 above the aggregate amount
necessary to adequately fund ongoing operating expenses of such Foreign Subsidiaries.



     7.24. Limitation on Negative Pledge. Enter into any agreement with any Person other
than Agent and Lenders which prohibits or limits the ability of Borrower or any Domestic
Subsidiary thereof to create, incur, assume or suffer to exist any lien upon their properties,
assets (including Subsidiary Stock) or revenues, whether now owned or hereafter acquired.



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     7.25. Limitation on Transfer of Possession of Subsidiary Stock. At any time
deliver physical possession of any certificates representing or evidencing Subsidiary Stock to any
Person other than Agent.



VIII. CONDITIONS PRECEDENT.




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



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




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




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




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




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




          (f) Good Standing Certificates. Agent shall have received good standing
certificates for Borrower dated not more than thirty (30) days prior to the Closing Date,
issued by the Secretary of State or other appropriate official of Borrower’s jurisdiction of
incorporation




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and each jurisdiction where the conduct of Borrower’s business activities or the ownership of its
properties necessitates qualification;




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




          (h) No Litigation. (i) No litigation, investigation or proceeding before or by
any arbitrator or Governmental Body shall be continuing or threatened against Borrower or against
the officers or directors of Borrower (A) in connection with this Agreement, the Other Documents,
the Subordinated Loan Documents or any of the transactions contemplated thereby and which, in the
reasonable opinion of Agent, is deemed material or (B) which could, in the reasonable opinion of
Agent, have a Material Adverse Effect; and (ii) no injunction, writ, restraining order or other
order of any nature materially adverse to Borrower or the conduct of its business or inconsistent
with the due consummation of the Transactions shall have been issued by any Governmental Body;




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




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




          (k) Fees. Agent shall have received all fees payable to Agent and Lenders on or
prior to the Closing Date hereunder, including pursuant to Article III hereof;




          (1) Subordinated Loan Documents. Agent shall have received final executed
copies of the Subordinated Loan Documentation, and all related agreements, documents and
instruments as in effect on the Closing Date all of which shall be satisfactory in form and
substance to Agent;




          (m) Subordination Agreements. Agent shall have entered into a Subordination
Agreement with Borrower and Subordinated Lender which shall set forth the basis upon which the
“Subordinated Noteholder” may receive, and Borrower may make, payments under the Subordinated Note,
which basis shall be satisfactory in form and substance to Agent in its sole discretion;




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




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




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




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




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




          (s) Leasehold Agreements. Agent shall have received landlord, mortgagee or
warehouseman agreements satisfactory to Agent with respect to all premises leased by Borrower at
which Inventory and books and records are located;




          (t) Subordinated Note Documentation. Agent shall have received final executed
copies of the Subordinated Note and all other Subordinated Loan Documentation which shall contain
such terms and provisions including subordination terms, satisfactory to Agent;




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




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




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




          (x) Undrawn Availability. After giving effect to the initial Advances
hereunder, Borrower shall have Undrawn Availability of at least $ 1,500,000;




          (y) Compliance with Laws. Agent shall be reasonably satisfied that Borrower is in
compliance with all pertinent federal, state, local or territorial regulations, including those




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with respect to the Federal Occupational Safety and Health Act, the Environmental Protection Act,
ERISA and the Trading with the Enemy Act; and




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




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



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




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




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




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



IX. INFORMATION AS TO BORROWERS.




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



     9.1. Disclosure of Material Matters. Immediately upon learning thereof, report to
Agent all matters materially affecting the value, enforceability or collectibility of any
portion of the Collateral, including Borrower’s reclamation or repossession of, or the return to Borrower
of, a material amount of goods or claims or disputes asserted by any Customer or other obligor.



     9.2. Schedules. Deliver to Agent on or before the fifteenth (15th) day of each month
(or first Business Day following the fifteenth (15th) day of each month if such
fifteenth (15th) day is not a Business Day) (a) as and for the prior month (i) accounts receivable agings inclusive
of reconciliations to the general ledger and (ii) a Borrowing Base Certificate in form and
substance satisfactory to Agent (which shall be calculated as of the last day of the prior month and
which shall not be binding upon Agent or restrictive of Agent’s rights under this Agreement) and (b)as



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of such delivery date for the six full weeks then ended, a monthly unbilled accounts receivable
report documenting such unbilled accounts receivable of Borrower. In addition, Borrower will
deliver to Agent at such intervals as Agent may require: (i) confirmatory assignment schedules,
(ii) copies of Customer’s invoices, (iii) evidence of shipment or delivery, and (iv) such further
schedules, documents and/or information regarding the Collateral as Agent may reasonably require
including trial balances and test verifications. Agent shall have the right to confirm and verify
all Receivables by any reasonable manner and through any medium it considers advisable and do
whatever it may deem reasonably necessary to protect its interests hereunder. The items to be
provided under this Section are to be in form satisfactory to Agent and executed by Borrower and
delivered to Agent from time to time solely for Agent’s convenience in maintaining records of the
Collateral, and Borrower’s failure to deliver any of such items to Agent shall not affect,
terminate, modify or otherwise limit Agent’s Lien with respect to the Collateral.




     9.3. Environmental Reports. Furnish Agent, concurrently with the delivery of the
financial statements referred to in Sections 9.7 and 9.8, with a certificate signed by the
President of Borrower stating, to the best of his knowledge, that Borrower is in compliance in all
material respects with all federal, state and local Environmental Laws. To the extent Borrower is not
in compliance with the foregoing laws, the certificate shall set forth with specificity all areas
of non-compliance and the proposed action Borrower will implement in order to achieve full
compliance.



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



     9.5. Material Occurrences. Promptly notify Agent in writing upon the occurrence of
(a) any Event of Default or Default; (b) any event of default under the Subordinated Loan
Documentation; (c) any event which with the giving of notice or lapse of time, or both, would
constitute an event of default under the Subordinated Loan Documentation; (d) any event,
development or circumstance whereby any financial statements or other reports furnished to
Agent fail in any material respect to present fairly, in accordance with GAAP consistently
applied, the financial condition or operating results of Borrower as of the date of such
statements; (e) any accumulated retirement plan funding deficiency which, if such deficiency
continued for two plan years and was not corrected as provided in Section 4971 of the Code,
could subject Borrower to a tax imposed by Section 4971 of the Code; (f) each and every
default by Borrower which might result in the acceleration of the maturity of any Indebtedness,
including the names and addresses of the holders of such Indebtedness with respect to which
there is a default existing or with respect to which the maturity has been or could be
accelerated, and the amount of such Indebtedness; (g) any event, with respect to any Foreign Subsidiary of
Borrower, of the type described in Section 10.7 hereof; and (h) any other development in the
business or affairs of Borrower which could reasonably be expected to have a Material Adverse
Effect; in each case describing the nature thereof and the action Borrower propose to take
with respect thereto.



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



     9.7. Annual Financial Statements. Furnish Agent and Lenders within one hundred
twenty (120) days after the end of each fiscal year of Borrower, financial statements of
Borrower and its Subsidiaries on a consolidated basis including, but not limited to, statements of
income and stockholders’ equity and cash flow from the beginning of the current fiscal year to the
end of such fiscal year and the balance sheet as at the end of such fiscal year, all prepared in
accordance with GAAP applied on a basis consistent with prior practices, and in reasonable detail and
reported upon without qualification by an independent certified public accounting firm
selected by Borrower and satisfactory to Agent (the “Accountants”). In addition, the financial
statements shall be accompanied by a Compliance Certificate.



     9.8. Quarterly Financial Statements. Furnish Agent and Lenders within sixty (60)
days after the end of each fiscal quarter, an unaudited balance sheet of Borrower and its
Subsidiaries on a consolidated basis and unaudited statements of income and cash flow of
Borrower and its Subsidiaries on a consolidated basis reflecting results of operations from
the beginning of the fiscal year to the end of such quarter and for such quarter, prepared on a
basis consistent with prior practices and complete and correct in all material respects, subject
to normal and recurring year end adjustments that individually and in the aggregate are not
material to the business of Borrower and its Subsidiaries. The reports shall be accompanied by a
Compliance Certificate.



     9.9. Monthly Financial Statements. Furnish Agent and Lenders within forty-five (45)
days after the end of each month (or in the case of any month ending on the last day of any
fiscal quarter, sixty (60) days after the end of such month), an unaudited balance sheet of
Borrower and its Subsidiaries on a consolidated basis and unaudited statements of income and cash flow of
Borrower reflecting results of operations from the beginning of the fiscal year to the end
of such month and for such month, prepared on a basis consistent with prior practices and complete
and correct in all material respects, subject to normal and recurring year end adjustments that
individually and in the aggregate are not material to the business of Borrower and its
Subsidiaries.



     9.10. Other Reports. Furnish Agent as soon as available, but in any event within ten
(10) days after the issuance thereof, (i) with copies of such financial statements, reports
and returns as Borrower shall send to its stockholders and (ii) copies of all notices, reports,
financial statements and other materials sent pursuant to the Subordinated Loan Documentation.



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



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may become a party, any strikes or walkouts relating to any of its plants or other facilities, and
the expiration of any labor contract to which Borrower is a party or by which Borrower is bound.




     9.12. Projected Operating Budget. Furnish Agent and Lenders, no later than sixty (60)
days after the beginning of Borrower’s fiscal years commencing with fiscal year 2007, a month
by month projected operating budget and cash flow of Borrower and its Subsidiaries on a
consolidated basis for such fiscal year (including an income statement for each month and a
balance sheet as at the end of the last month in each fiscal quarter).



     9.13. Variances From Operating Budget. Furnish Agent the financial statements
referred to in Section 9.7 with quarterly comparisons to the budgets submitted by Borrower
pursuant to Section 9.12 and, to the extent requested by Agent, make management available to
Agent to discuss any such variances.



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



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



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under Section 412 of the Code on or before the due date for such installment or payment; (ix)
Borrower or any member of the Controlled Group knows that (a) a Multiemployer Plan has been
terminated, (b) the administrator or plan sponsor of a Multiemployer Plan intends to terminate a
Multiemployer Plan, or (c) the PBGC has instituted or will institute proceedings under Section 4042
of ERISA to terminate a Multiemployer Plan.




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



X. EVENTS OF DEFAULT.




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



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



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



     10.3. Financial Information. Failure by Borrower to (i) furnish financial information
when due or when requested which is unremedied for a period of fifteen (15) days, or (ii)
permit the inspection of its books or records;



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



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



     
10.6. Judgments. Any judgment or judgments are rendered against Borrower for an
aggregate amount in excess of $500,000 and (i) enforcement proceedings shall have been
commenced by a creditor upon such judgment, (ii) there shall be any period of forty-five (45)
consecutive days during which a stay of enforcement of such judgment, by reason of a pending



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appeal or otherwise, shall not be in effect, or (iii) any such judgment results in the creation of
a Lien upon any of the Collateral (other than a Permitted Encumbrance);




     10.7. Bankruptcy. Borrower shall (i) apply for, consent to or suffer the appointment
of, or the taking of possession by, a receiver, custodian, trustee, liquidator or similar
fiduciary of itself or of all or a substantial part of its property, (ii) make a general assignment for the
benefit of creditors, (iii) commence a voluntary case under any state or federal bankruptcy laws (as
now or hereafter in effect), (iv) be adjudicated a bankrupt or insolvent, (v) file a petition
seeking to take advantage of any other law providing for the relief of debtors, (vi) acquiesce to, or
fail to have dismissed, within thirty (30) days, any petition filed against it in any involuntary case
under such bankruptcy laws, or (vii) take any action for the purpose of effecting any of the
foregoing;



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



     10.9. Subsidiary Bankruptcy. Any Domestic Subsidiary of Borrower shall (i) apply for,
consent to or suffer the appointment of, or the taking of possession by, a receiver,
custodian, trustee, liquidator or similar fiduciary of itself or of all or a substantial part of its property,
(ii) admit in writing its inability, or be generally unable, to pay its debts as they become due or
cease operations of its present business, (iii) make a general assignment for the benefit of
creditors, (iv) commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (v) be adjudicated a bankrupt or insolvent, (vi) file a petition seeking to
take advantage of any other law providing for the relief of debtors, (vii) acquiesce to, or fail to
have dismissed, within thirty (30) days, any petition filed against it in any involuntary case
under such bankruptcy laws, or (viii) take any action for the purpose of effecting any of the
foregoing;



     10.10. Material Adverse Effect. The existence of a Material Adverse Effect;



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



     10.12. Subordinated Loan Default. An event of default has occurred under the
Subordinated Loan Documentation or the Subordination Agreement, which default shall not have
been cured or waived within any applicable grace period;



     10.13. Cross Default. A default of the obligations of Borrower under any other
agreement to which it is a party shall occur which adversely and materially affects its
condition, affairs or prospects (financial or otherwise) which default is not cured within any applicable
grace period;



     10.14. Change of Ownership. Any Change of Control shall occur;


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



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     10.16. Licenses. (i) Any Governmental Body shall revoke, terminate, suspend or
adversely modify any license, permit, patent trademark or tradename of Borrower, the
continuation of which is material to the continuation of Borrower’s business; (ii) any
agreement which is necessary or material to the operation of Borrower’s business shall be revoked or
terminated and not replaced by a substitute acceptable to Agent within thirty (30) days after
the date of such revocation or termination, and such revocation or termination and non-replacement
would reasonably be expected to have a Material Adverse Effect;



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



     10.18. Operations. The operations of Borrower are interrupted at any time for more
than fifteen (15) consecutive days, unless Borrower shall (i) be entitled to receive for such
period of interruption, proceeds of business interruption insurance sufficient to assure that its per
diem cash needs during such period is at least equal to its average per diem cash needs for the
consecutive three month period immediately preceding the initial date of interruption and (ii)
receive such proceeds in the amount described in clause (i) preceding not later than ninety
(90) days following the initial date of any such interruption; provided, however, that
notwithstanding the provisions of clauses (i) and (ii) of this section, an Event of Default shall be deemed to
have occurred if Borrower shall be receiving the proceeds of business interruption insurance for a
period of sixty (60) consecutive days; or



     10.19. Pension Plans. An event or condition specified in Sections 7.16 or 9.15 hereof
shall occur or exist with respect to any Plan and, as a result of such event or condition,
together with all other such events or conditions, Borrower or any member of the Controlled Group shall
incur, or in the opinion of Agent be reasonably likely to incur, a liability to a Plan or the
PBGC (or both) which, in the reasonable judgment of Agent, would have a Material Adverse Effect.



XI LENDERS’RIGHTS AND REMEDIES AFTER DEFAULT.




     11.1. Rights and Remedies.



          (a) Upon the occurrence of (i) an Event of Default pursuant to Section 10.7 all
Obligations shall be immediately due and payable and this Agreement and the obligation of Lenders
to make Advances shall be deemed terminated; and, (ii) any of the other Events of Default and at
any time thereafter (such default not having previously been cured), at the option of Required
Lenders all Obligations shall be immediately due and payable and Lenders shall have the right to
terminate this Agreement and to terminate the obligation of Lenders to make Advances and (iii) a
filing of a petition against Borrower in any involuntary case under any state or federal bankruptcy
laws, all Obligations shall be immediately due and payable and the obligation of Lenders to make
Advances hereunder shall be terminated other than as may be required by an appropriate order of the
bankruptcy court having jurisdiction over Borrower. Upon the occurrence of any Event of Default,
Agent shall have the right to exercise any and all





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rights and remedies provided for herein, under the Other Documents, under the Uniform Commercial
Code and at law or equity generally, including the right to foreclose the security interests
granted herein and to realize upon any Collateral by any available judicial procedure and/or to
take possession of and sell any or all of the Collateral with or without judicial process. Agent
may enter any of Borrower’s premises or other premises without legal process and without incurring
liability to Borrower therefor, and Agent may thereupon, or at any time thereafter, in its
discretion without notice or demand, take the Collateral and remove the same to such place as Agent
may deem advisable and Agent may require Borrower to make the Collateral available to Agent at a
convenient place. With or without having the Collateral at the time or place of sale, Agent may
sell the Collateral, or any part thereof, at public or private sale, at any time or place, in one
or more sales, at such price or prices, and upon such terms, either for cash, credit or future
delivery, as Agent may elect. Except as to that part of the Collateral which is perishable or
threatens to decline speedily in value or is of a type customarily sold on a recognized market,
Agent shall give Borrower reasonable notification of such sale or sales, it being agreed that in
all events written notice mailed to Borrower at least ten (10) days prior to such sale or sales is
reasonable notification. At any public sale Agent or any Lender may bid for and become the
purchaser, and Agent, any Lender or any other purchaser at any such sale thereafter shall hold the
Collateral sold absolutely free from any claim or right of whatsoever kind, including any equity of
redemption and all such claims, rights and equities are hereby expressly waived and released by
Borrower. In connection with the exercise of the foregoing remedies, including the sale of
Inventory, Agent is granted a perpetual nonrevocable, royalty free, nonexclusive license and Agent
is granted permission to use all of Borrower’s (a) trademarks, trade styles, trade names, patents,
patent applications, copyrights, service marks, licenses, franchises and other proprietary rights
which are used or useful in connection with Inventory for the purpose of marketing, advertising for
sale and selling or otherwise disposing of such Inventory and (b) Equipment for the purpose of
completing the manufacture of unfinished goods. The cash proceeds realized from the sale of any
Collateral shall be applied to the Obligations in the order set forth in Section 11.5 hereof.
Noncash proceeds will only be applied to the Obligations as they are converted into cash. If any
deficiency shall arise, Borrower shall remain liable to Agent and Lenders therefor.




          (b) To the extent that Applicable Law imposes duties on the Agent to exercise remedies
in a commercially reasonable manner, Borrower acknowledges and agrees that it is not commercially
unreasonable for the Agent (i) to fail to incur expenses reasonably deemed significant by the Agent
to prepare Collateral for disposition or otherwise to complete raw material or work in process into
finished goods or other finished products for disposition, (ii) to fail to obtain third party
consents for access to Collateral to be disposed of, or to obtain or, if not required by other law,
to fail to obtain governmental or third party consents for the collection or disposition of
Collateral to be collected or disposed of, (iii) to fail to exercise collection remedies against
Customers or other Persons obligated on Collateral or to remove Liens on or any adverse claims
against Collateral, (iv) to exercise collection remedies against Customers and other Persons
obligated on Collateral directly or through the use of collection agencies and other collection
specialists, (v) to advertise dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (vi) to contact other
Persons, whether or not in the same business as the Borrower, for expressions of interest in
acquiring all or any portion of such Collateral, (vii) to hire one or more professional auctioneers
to assist in the disposition of Collateral, whether or not the Collateral is of a specialized
nature,





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(viii) to dispose of Collateral by utilizing internet sites that provide for the auction of assets
of the types included in the Collateral or that have the reasonable capacity of doing so, or that
match buyers and sellers of assets, (ix) to dispose of assets in wholesale rather than retail
markets, (x) to disclaim disposition warranties, such as title, possession or quiet enjoyment, (xi)
to purchase insurance or credit enhancements to insure the Agent against risks of loss, collection
or disposition of Collateral or to provide to the Agent a guaranteed return from the collection or
disposition of Collateral, or (xii) to the extent deemed appropriate by the Agent, to obtain the
services of other brokers, investment bankers, consultants and other professionals to assist the
Agent in the collection or disposition of any of the Collateral. Borrower acknowledges that the
purpose of this Section 11.1(b) is to provide non-exhaustive indications of what actions or
omissions by the Agent would not be commercially unreasonable in the Agent’s exercise of remedies
against the Collateral and that other actions or omissions by the Agent shall not be deemed
commercially unreasonable solely on account of not being indicated in
this Section 11.1(b).
Without limitation upon the foregoing, nothing contained in this
Section 11.1(b) shall be
construed to grant any rights to Borrower or to impose any duties on Agent that would not have been
granted or imposed by this Agreement or by Applicable Law in the
absence of this Section 11.1(b).




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



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



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



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



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



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



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



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



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



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



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



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



XII. WAIVERS AND JUDICIAL PROCEEDINGS.




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



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



     12.3. Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH, OR (B) IN ANY WAY CONNECTED WITH OR RELATED



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




XIII. EFFECTIVE DATE AND TERMINATION.




     13.1. Term. This Agreement, which shall inure to the benefit of and shall be
binding upon the respective successors and permitted assigns of Borrower, Agent and each Lender,
shall become effective on the date hereof and shall continue in full force and effect until the
earlier of (a) October 31, 2009 and (b) the date that is ninety (90) days prior to maturity date of
the Indebtedness due under the Subordinated Loan Documentation (the “Term”) unless sooner
terminated as herein provided. Borrower may terminate this Agreement at any time upon ninety (90)
days’ prior written notice upon payment in full of the Obligations. In the event the Obligations
are prepaid in full prior to the last day of the Term (the date of such prepayment hereinafter
referred to as the “Early Termination Date”), Borrower shall pay to Agent for the benefit of
Lenders an early termination fee in an amount equal to (x) $37,500 if the Early Termination Date
occurs on or after the Closing Date to and including the date immediately preceding the second
anniversary of the Closing Date, and (y) $0 if the Early Termination Date occurs on or after the
second anniversary of the Closing Date to and including the date immediately preceding the third
anniversary of the Closing Date.



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



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XIV. REGARDING AGENT.




     14.1. Appointment. Each Lender hereby designates PNC to act as Agent for such
Lender under this Agreement and the Other Documents. Each Lender hereby irrevocably
authorizes Agent to take such action on its behalf under the provisions of this Agreement and the
Other Documents and to exercise such powers and to perform such duties hereunder and
thereunder as are specifically delegated to or required of Agent by the terms hereof and
thereof
and such other powers as are reasonably incidental thereto and Agent shall hold all
Collateral,
payments of principal and interest, fees (except the fees set forth in Sections 3.3(a) and
3.4),
charges and collections (without giving effect to any collection days) received pursuant to
this
Agreement, for the ratable benefit of Lenders. Agent may perform any of its duties hereunder
by
or through its agents or employees. As to any matters not expressly provided for by this
Agreement (including collection of the Note) Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from acting (and
shall be
fully protected in so acting or refraining from acting) upon the instructions of the Required
Lenders, and such instructions shall be binding; provided, however, that Agent shall not be
required to take any action which exposes Agent to liability or which is contrary to this
Agreement or the Other Documents or Applicable Law unless Agent is furnished with an
indemnification reasonably satisfactory to Agent with respect thereto.



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



     14.3. Lack of Reliance on Agent and Resignation. Independently and without reliance
upon Agent or any other Lender, each Lender has made and shall continue to make (i) its own
independent investigation of the financial condition and affairs of Borrower in connection
with
the making and the continuance of the Advances hereunder and the taking or not taking of any
action in connection herewith, and (ii) its own appraisal of the creditworthiness of Borrower.
Agent shall have no duty or responsibility, either initially or on a continuing basis, to
provide any
Lender with any credit or other information with respect thereto, whether coming into its



77









 




possession before making of the Advances or at any time or times thereafter except as shall be
provided by Borrower pursuant to the terms hereof. Agent shall not be responsible to any Lender
for any recitals, statements, information, representations or warranties herein or in any
agreement, document, certificate or a statement delivered in connection with or for the execution,
effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this
Agreement or any Other Document, or of the financial condition of Borrower, or be required to make
any inquiry concerning either the performance or observance of any of the terms, provisions or
conditions of this Agreement, the Note, the Other Documents or the financial condition of
Borrower, or the existence of any Event of Default or any Default.




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



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



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



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



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



78









 




from taking such action, with respect to such Default or Event of Default as it shall deem
advisable in the best interests of Lenders.




     14.7. Indemnification. To the extent Agent is not reimbursed and indemnified by
Borrower, each Lender will reimburse and indemnify Agent in proportion to its respective
portion of the Advances (or, if no Advances are outstanding, according to its Commitment
Percentage), from and against any and all liabilities, obligations, losses, damages,
penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever
which may be imposed on, incurred by or asserted against Agent in performing its duties
hereunder, or in any way relating to or arising out of this Agreement or any Other Document;
provided that, Lenders shall not be liable for any portion of such liabilities, obligations,
losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from
Agent’s gross (not mere) negligence or willful misconduct (as determined by a court of
competent jurisdiction in a final non-appealable judgment).



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



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



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



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



79









 




procedures,
(2) any record-keeping, (3) comparisons with government lists, (4) customer notices or
(5) other procedures required under the CIP Regulations or such other laws.




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



XV. MISCELLANEOUS.




     15.1. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania applied to contracts to be
performed wholly within the Commonwealth of Pennsylvania. Any judicial proceeding brought
by or against Borrower with respect to any of the Obligations, this Agreement, the Other
Documents or any related agreement may be brought in any court of competent jurisdiction in
the Commonwealth of Pennsylvania, United States of America, and, by execution and delivery
of this Agreement, Borrower accepts for itself and in connection with its properties,
generally
and unconditionally, the non-exclusive jurisdiction of the aforesaid courts, and irrevocably
agrees to be bound by any judgment rendered thereby in connection with this Agreement.
Borrower hereby waives personal service of any and all process upon it and consents that all
such service of process may be made by registered mail (return receipt requested) directed to
Borrower at its address set forth in Section 15.6 and service so made shall be deemed
completed
five (5) days after the same shall have been so deposited in the mails of the United States of
America. Nothing herein shall affect the right to serve process in any manner permitted by law
or
shall limit the right of Agent or any Lender to bring proceedings against Borrower in the
courts
of any other jurisdiction. Borrower waives any objection to jurisdiction and venue of any
action
instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue
or
based upon forum non conveniens. Borrower waives the right to remove any judicial proceeding
brought against Borrower in any state court to any federal court. Any judicial proceeding by
Borrower against Agent or any Lender involving, directly or indirectly, any matter or claim in
any way arising out of, related to or connected with this Agreement or any related agreement,
shall be brought only in a federal or state court located in the County of Philadelphia,
Commonwealth of Pennsylvania.



     15.2. Entire Understanding.



          (a) This Agreement and the documents executed concurrently herewith contain the entire
understanding between Borrower, Agent and each Lender and supersedes all prior agreements and
understandings, if any, relating to the subject matter hereof. Any promises, representations,
warranties or guarantees not herein contained and hereinafter made shall have no force and effect
unless in writing, signed by Borrower’s, Agent’s and each Lender’s respective





80









 







officers. Neither this Agreement nor any portion or provisions hereof may be changed, modified,
amended, waived, supplemented, discharged, cancelled or terminated orally or by any course of
dealing, or in any manner other than by an agreement in writing, signed by the party to be charged.
Borrower acknowledges that it has been advised by counsel in connection with the execution of this
Agreement and Other Documents and is not relying upon oral representations or statements
inconsistent with the terms and provisions of this Agreement.




          (b) The Required Lenders, or Agent with the consent in writing of the Required Lenders,
and Borrower may, subject to the provisions of this Section 15.2 (b), from time to time enter into
written supplemental agreements to this Agreement or the Other Documents executed by Borrower, for
the purpose of adding or deleting any provisions or otherwise changing, varying or waiving in any
manner the rights of Lenders, Agent or Borrower thereunder or the conditions, provisions or terms
thereof or waiving any Event of Default thereunder, but only to the extent specified in such
written agreements; provided, however, that no such supplemental agreement shall, without the
consent of all Lenders:





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




          (ii) extend the maturity of any Note or the due date for any amount payable
hereunder, or decrease the rate of interest or reduce any fee payable by Borrower to Lenders
pursuant to this Agreement;




          (iii) alter the definition of the term Required Lenders or alter, amend or modify
this Section 15.2(b);




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




          (v) change the rights and duties of Agent;




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




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



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



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     In the event that Agent requests the consent of a Lender pursuant to this Section 15.2 and
such Lender shall not respond or reply to Agent in writing within five (5) days of delivery of such
request, such Lender shall be deemed to have consented to the matter that was the subject of the
request. In the event that Agent requests the consent of a Lender pursuant to this Section 15.2 and
such consent is denied, then PNC may, at its option, require such Lender to assign its interest in
the Advances to PNC or to another Lender or to any other Person designated by the Agent (the
“Designated Lender”), for a price equal to the then outstanding principal amount thereof plus
accrued and unpaid interest and fees due such Lender, which interest and fees shall be paid when
collected from Borrower. In the event PNC elects to require any Lender to assign its interest to
PNC or to the Designated Lender, PNC will so notify such Lender in writing within forty five (45)
days following such Lender’s denial, and such Lender will assign its interest to PNC or the
Designated Lender no later than five (5) days following receipt of such notice pursuant to a
Commitment Transfer Supplement executed by such Lender, PNC or the Designated Lender, as
appropriate, and Agent.



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



     In addition to (and not in substitution of) the discretionary Revolving Advances permitted
above in this Section 15.2, the Agent is hereby authorized by Borrower and the Lenders, from time
to time in the Agent’s sole discretion, (A) after the occurrence and during the continuation of a
Default or an Event of Default, or (B) at any time that any of the other applicable conditions
precedent set forth in Section 8.2 hereof have not been satisfied, to make Revolving Advances to
Borrower on behalf of the Lenders which the Agent, in its reasonable business judgment, deems
necessary or desirable (a) to preserve or protect the Collateral, or any portion thereof, (b) to
enhance the likelihood of, or maximize the amount of, repayment of the Advances and other
Obligations, or (c) to pay any other amount chargeable to Borrower pursuant to the terms of this




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Agreement; provided, that at any time after giving effect to any such Revolving Advances the
outstanding Revolving Advances do not exceed one hundred and ten percent (110%) of the Formula
Amount.




     15.3. Successors and Assigns: Participations: New Lenders.



          (a) This Agreement shall be binding upon and inure to the benefit of
Borrower, Agent, each Lender, all future holders of the Obligations and their respective
successors and assigns, except that Borrower may not assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of Agent and each Lender.




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




          (c) Any Lender, with the consent of Agent which shall not be unreasonably
withheld or delayed, may sell, assign or transfer all or any part of its rights and
obligations under
or relating to Revolving Advances under this Agreement and the Other Documents to one or
more additional banks or financial institutions and one or more additional banks or financial
institutions may commit to make Advances hereunder (each a “Purchasing Lender”), in
minimum amounts of not less than $5,000,000, pursuant to a Commitment Transfer Supplement,
executed by a Purchasing Lender, the transferor Lender, and Agent and delivered to Agent for
recording. Upon such execution, delivery, acceptance and recording, from and after the
transfer
effective date determined pursuant to such Commitment Transfer Supplement, (i) Purchasing
Lender thereunder shall be a party hereto and, to the extent provided in such Commitment
Transfer Supplement, have the rights and obligations of a Lender thereunder with a Commitment
Percentage as set forth therein, and (ii) the transferor Lender thereunder shall, to the
extent
provided in such Commitment Transfer Supplement, be released from its obligations under this
Agreement, the Commitment Transfer Supplement creating a novation for that purpose. Such
Commitment Transfer Supplement shall be deemed to amend this Agreement to the extent, and
only to the extent, necessary to reflect the addition of such Purchasing Lender and the
resulting
adjustment of the Commitment Percentages arising from the purchase by such Purchasing
Lender of all or a portion of the rights and obligations of such transferor Lender under this
Agreement and the Other Documents. Borrower hereby consents to the addition of such
Purchasing Lender and the resulting adjustment of the Commitment Percentages arising from the




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purchase by such Purchasing Lender of all or a portion of the rights and obligations of such
transferor Lender under this Agreement and the Other Documents. Borrower shall execute and deliver
such further documents and do such further acts and things in order to effectuate the foregoing.




          (d) Any Lender, with the consent of Agent which shall not be unreasonably
withheld or delayed, may directly or indirectly sell, assign or transfer all or any portion of
its rights and obligations under or relating to Revolving Advances under this Agreement and the
Other Documents to an entity, whether a corporation, partnership, trust, limited liability
company or other entity that (i) is engaged in making, purchasing, holding or otherwise investing in
bank loans and similar extensions of credit in the ordinary course of its business and (ii) is
administered, serviced or managed by the assigning Lender or an Affiliate of such Lender (a
“Purchasing CLO” and together with each Participant and Purchasing Lender, each a
“Transferee” and collectively the “Transferees”), pursuant to a Commitment Transfer
Supplement modified as appropriate to reflect the interest being assigned (“Modified
Commitment Transfer Supplement”), executed by any intermediate purchaser, the Purchasing
CLO, the transferor Lender, and Agent as appropriate and delivered to Agent for recording.
Upon-such execution and delivery, from and after the transfer effective date determined
pursuant
to such Modified Commitment Transfer Supplement, (i) Purchasing CLO thereunder shall be a
party hereto and, to the extent provided in such Modified Commitment Transfer Supplement,
have the rights and obligations of a Lender thereunder and (ii) the transferor Lender
thereunder
shall, to the extent provided in such Modified Commitment Transfer Supplement, be released
from its obligations under this Agreement, the Modified Commitment Transfer Supplement
creating/a novation for that purpose. Such Modified Commitment Transfer Supplement shall be
deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the
addition of such Purchasing CLO. Borrower hereby consents to the addition of such Purchasing
CLO. Borrower shall execute and deliver such further documents and do such further acts and
things in order to effectuate the foregoing.




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




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




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



     15.5.
Indemnity. Borrower shall indemnify Agent, each Lender and each of their
respective officers, directors, Affiliates, attorneys, employees and agents from and against
any
and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,
expenses and disbursements of any kind or nature whatsoever (including fees and disbursements
of counsel) which may be imposed on, incurred by, or asserted against Agent or any Lender in
any claim, litigation, proceeding or investigation instituted or conducted by any Governmental
Body or instrumentality or any other Person with respect to any aspect of, or any transaction
contemplated by, or referred to in, or any matter related to, this Agreement or the Other
Documents, whether or not Agent or any Lender is a party thereto, except to the extent that
any
of the foregoing arises out of the willful misconduct or gross negligence of the party being
indemnified (as determined by a court of competent jurisdiction in a final and non-appealable
judgment). Without limiting the generality of the foregoing, this indemnity shall extend to
any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and
disbursements of any kind or nature whatsoever (including fees and disbursements of counsel)
asserted against or incurred by any of the indemnitees described above in this Section 15.5 by
any Person under any Environmental Laws or similar laws by reason of Borrower’s or any other
Person’s failure to comply with laws applicable to solid or hazardous waste materials,
including
Hazardous Substances and Hazardous Waste, or other Toxic Substances. Additionally, if any
taxes (excluding taxes imposed upon or measured solely by the net income of Agent and
Lenders, but including any intangibles taxes, stamp tax, recording tax or franchise tax) shall
be payable by Agent, Lenders or Borrower on account of the execution or delivery of this
Agreement, or the execution, delivery, issuance or recording of any of the Other Documents, or
the creation or repayment of any of the Obligations hereunder, by reason of any Applicable Law
now or hereafter in effect, Borrower will pay (or will promptly reimburse Agent and Lenders
for payment of) all such taxes, including interest and penalties thereon, and will indemnify and
hold the indemnitees described above in this Section 15.5 harmless from and against all liability
in connection therewith.



     15.6. Notice. Any notice or request hereunder may be given to Borrower or to Agent or
any Lender at their respective addresses set forth below or at such other address as may
hereafter
be specified in a notice designated as a notice of change of address under this Section. Any
notice, request, demand, direction or other communication (for purposes of this Section 15.6
only, a “Notice”) to be given to or made upon any party hereto under any provision of this
Loan
Agreement shall be given or made in writing (which includes by means of electronic
transmission (i.e., “e-mail”) or facsimile transmission in accordance with this Section 15.6.
Any
such Notice must be delivered to the applicable parties hereto at the addresses and numbers
set
forth under their respective names on Section 15.6 hereof or in accordance with any subsequent




85












 




unrevoked Notice from any such party that is given in accordance with this Section 15.6. Any Notice
shall be effective:




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




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




          (c) In the case of a facsimile transmission, when sent to the applicable party’s
facsimile machine’s telephone number, if the party sending such Notice receives confirmation of the
delivery thereof from its own facsimile machine, provided an email or telephonic notice of the
existence of such facsimile is sent on a substantially concurrent basis;




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




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




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


(A) If to Agent or PNC at:



PNC Bank, National Association 

1600 Market Street 

Philadelphia, PA 19103

Attention: Craig Sheets

Telephone: (215)585-5231

Facsimile: (215)585-4771



with a copy to:



PNC Bank, National Association 

PNC Agency Services 

PNC Firstside Center

500 First Avenue, 4th Floor

Pittsburgh, Pennsylvania 15219

Attention: Lisa Pierce

Telephone: (412)762-6442

Facsimile: (412) 762-8672



with an additional copy to:



Ballard Spahr Andrews & Ingersoll, LLP

1735 Market Street, 51st Floor

Philadelphia, PA 19103 

Attention: Carl H. Fridy





86









 







Telephone: (215)864-8726

Facsimile: (215) 864-9178



(B)  if to a Lender other than Agent, as specified on the



  signature pages hereof



(C)  If to Borrower:



Research Pharmaceutical Services, Inc. 
610 West Germantown Pike, Suite 200 

Plymouth Meeting, PA 19462 

Attention: Steven Bell 

Telephone: (215)540-0700

Facsimile: (484)533-2018



with a copy to:



Pepper Hamilton, LLP “ 

400 Berwyn Park 

899 Casset Road 

Berwyn, PA 19312-1183 

Attention: Christopher S. Miller 

Telephone: (610)640-7837 

Facsimile: (610)640-7835




     15.7. Survival. The obligations of Borrower under Sections 2.2(f), 3.7, 3.8, 3.9,
4.19(h), and 15.5 and the obligations of Lenders under Section 14.7, shall survive termination
of this Agreement and the Other Documents and payment in full of the Obligations.



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



     15.9. Expenses. All reasonable costs and expenses including reasonable attorneys’ fees (including the allocated costs of in house counsel) and disbursements incurred by Agent on its
behalf or on behalf of Lenders and Lenders (a) in all efforts made to enforce payment of any Obligation or effect collection of any Collateral, or (b) in connection with the entering
into, modification, amendment, administration and enforcement of this Agreement, the Subordination Agreement or any consents or waivers hereunder or thereunder and all related agreements,
documents and instruments (save those performed solely for the benefit of Lender(s) or Agent
because of changes in applicable banking rules and regulations), or (c) in instituting,
maintaining, preserving, enforcing and foreclosing on Agent’s security interest in or Lien on
any of the Collateral, or maintaining, preserving or enforcing any of Agent’s or any Lender’s
rights hereunder, under the Subordination Agreement and under all related agreements, documents and
instruments, whether through judicial proceedings or otherwise, or (d) in defending or



87









 




prosecuting any actions or proceedings arising out of or relating to Agent’s or any Lender’s
transactions with Borrower or any Subordinated Lender or (e) in connection with any advice given to
Agent or any Lender with respect to its rights and obligations under this Agreement, the
Subordination Agreement and all related agreements, documents and instruments, may be charged to
Borrower’s Account and shall be part of the Obligations.




     15.10.
Injunctive Relief. Borrower recognizes that, in the event Borrower fails to
perform, observe or discharge any of its obligations or liabilities under this Agreement, or
threatens to fail to perform, observe or discharge such obligations or liabilities, any remedy
at law may prove to be inadequate relief to Lenders; therefore, Agent, if Agent so requests,
shall be entitled to temporary and permanent injunctive relief in any such case without the necessity
of proving that actual damages are not an adequate remedy.



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



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



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



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



     15.15. Confidentiality; Sharing Information. Agent, each Lender and each Transferee
shall hold all non-public information obtained by Agent, such Lender or such Transferee
pursuant to the requirements of this Agreement in accordance with Agent’s, such Lender’s and
such Transferee’s customary procedures for handling confidential information of this nature;
provided, however, Agent, each Lender and each Transferee may disclose such confidential
information (a) to its examiners, Affiliates, outside auditors, counsel and other professional
advisors, (b) to Agent, any Lender or to any prospective Transferees, and (c) as required or
requested by any Governmental Body or representative thereof or pursuant to legal process;
provided, further that (i) unless specifically prohibited by Applicable Law or court order,
Agent, each Lender and each Transferee shall use its reasonable best efforts prior to disclosure
thereof, to notify Borrower of the applicable request for disclosure of such non-public information (A)
by a Governmental Body or representative thereof (other than any such request in connection with
an examination of the financial condition of a Lender or a Transferee by such Governmental
Body) or (B) pursuant to legal process and (ii) in no event shall Agent, any Lender or any



88









 




Transferee be obligated to return any materials furnished by Borrower other than those documents
and instruments in possession of Agent or any Lender in order to perfect its Lien on the Collateral
once the Obligations have been paid in full and this Agreement has been terminated. Borrower
acknowledges that from time to time financial advisory, investment banking and other services may
be offered or provided to Borrower or one or more of its Affiliates (in connection with this
Agreement or otherwise) by any Lender or by one or more Subsidiaries or Affiliates of such Lender
and Borrower hereby authorizes each Lender to share any information delivered to such Lender by
Borrower and its Subsidiaries pursuant to this Agreement, or in connection with the decision of
such Lender to enter into this Agreement, to any such Subsidiary or Affiliate of such Lender, it
being understood that any such Subsidiary or Affiliate of any Lender receiving such information
shall be bound by the provisions of this Section 15.15 as if it were a Lender hereunder. Such
authorization shall survive the repayment of the other Obligations and the termination of this
Agreement.




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



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



89









 





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



	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	RESEARCH PHARMACEUTICALS, INC.  
	 
	 	 	 	 	 	 
	 

	 	By	 	/s/ Steven Bell	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Steven Bell	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	CFO	 	 
	 

	 	 	 	 	 	 





	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	PNC BANK, NATIONAL ASSOCIATION,
	 	 	as Lender and as Agent
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Craig T. Sheets	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Craig T. Sheets	 	 
	 

	 	 	 	 	 	 
	 

	 	Title:	 	V/P	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	Commitment Percentage: 100%