exv10w20






Exhibit
10.20




EXECUTION VERSION




INTERCREDITOR AND LIEN SUBORDINATION AGREEMENT




among



JPMORGAN CHASE BANK, N.A.,

as Senior Agent,



THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,

as Trustee and Collateral Agent,



ALTRA HOLDINGS, INC.,

ALTRA INDUSTRIAL MOTION, INC.,

and certain of their SUBSIDIARIES,



Dated as of November 25, 2009








 









 








INTERCREDITOR AND LIEN SUBORDINATION AGREEMENT




     THIS INTERCREDITOR AND LIEN SUBORDINATION AGREEMENT dated as of November 25, 2009 (this
“Agreement”) is made by and among JPMORGAN CHASE BANK, N.A., as senior agent (the
“Original Senior Agent”) under and pursuant to the Original Credit Agreement (as
hereinafter defined), THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A. (“BNY Mellon”), in
its capacity as collateral agent under the Indenture Agreements (as hereinafter defined) (in such
capacity, the “Collateral Agent”), BNY Mellon, as Trustee under the Indenture Agreements
(in such capacity, the “Trustee”), Altra Holdings, Inc., a Delaware corporation
(“Parent”), Altra Industrial Motion, Inc., a Delaware corporation (“Company”),
those certain subsidiaries of Company identified as Borrowers on the signature pages hereto
(collectively with Company, the “Borrowers”) and those certain subsidiaries of Company
identified as Guarantors on the signature pages hereto (collectively with Parent, the
“Guarantors”).



RECITALS




     A. Parent, the Borrowers, the Guarantors, the Collateral Agent and the Trustee have entered
into an Indenture, dated as of November 25, 2009 (the “Indenture”), pursuant to which
Parent has incurred or will incur indebtedness for certain 8.125% Senior Secured Notes due 2016
(such notes, together with all other notes issued after the date hereof and exchange notes issued
in exchange therefore, the “Notes”) in an aggregate principal amount at maturity of
$210,000,000 under the Indenture. The repayment of the Indenture Secured Obligations (as
hereinafter defined) is secured by security interests in and liens on the assets and properties of
Parent, the Borrowers and the Guarantors (the “Collateral”) as described in (i) the Pledge
and Security Agreement dated as of the date hereof (the “Indenture Security Agreement”)
made by Parent, the Borrowers and the Guarantors in favor of the Collateral Agent for the benefit
of the Collateral Agent, the Trustee, and the Noteholders (as hereinafter defined), and (ii) the
other Indenture Agreements (as hereinafter defined).



     B. Parent, the Borrowers, the Guarantors, the Original Senior Agent and the Senior Lenders (as
hereinafter defined) have entered into a Credit Agreement dated as of November 25, 2009 (the
“Original Credit Agreement”) pursuant to which the Senior Lenders have agreed, upon the
terms and conditions stated therein, to make loans and advances to, and to issue letters of credit
for the accounts of, the Borrowers up to the initial maximum principal amount of $50,000,000
(subject to increase as provided therein). The repayment of the Credit Agreement Secured
Obligations (as hereinafter defined) is secured by first priority security interests in and liens
on the Collateral as described in (i) the Pledge and Security Agreement dated as of the date hereof
(the “Senior Security Agreement”) made by Parent, the Borrowers and the Guarantors in favor
of the Original Senior Agent for the benefit of the Original Senior Agent, the Senior Lenders and
the other holders of Credit Agreement Secured Obligations and (ii) the other Senior Credit
Documents (as hereinafter defined).



     C. One of the conditions of the Original Credit Agreement is that the priority of the security
interests in and liens on the Collateral to secure the Credit Agreement Secured Obligations be
senior to the security interests in and liens on the Collateral to secure the Indenture Secured
Obligations, in the manner and to the extent provided in this Agreement.



     D. The Original Senior Agent and the Collateral Agent desire to enter into this Agreement
concerning the respective rights of the Senior Agent and the Collateral Agent with respect to the
priority of their respective security interests in and liens on the Collateral.



 









 





     E. The terms of the Indenture permit Parent, the Borrowers and the Guarantors to enter into
the Senior Credit Documents, subject to compliance with certain conditions, and in connection
therewith authorize and direct the Collateral Agent to enter into this Agreement.



     F. In order to induce the Original Senior Agent and the Senior Lenders to extend credit to the
Borrowers and the Guarantors and for purposes of certain conditions precedent and covenants of the
Original Credit Agreement, the Original Senior Agent and the Collateral Agent hereby agree as
follows:



ARTICLE I.




DEFINITIONS



     Section 1.01 Terms Defined Above and in the Recitals. As used in this Agreement, the
following terms shall have the respective meanings indicated in the opening paragraph hereof and in
the above Recitals:




“Agreement”

“BNY Mellon”

“Borrowers”

“Collateral”

“Collateral Agent”

“Guarantors”

“Indenture”

“Indenture Security Agreement”

“Original Senior Agent”

“Original Credit Agreement”

“Parent”

“Senior Security Agreement”

“Trustee”



     Section 1.02 Other Definitions. As used in this Agreement, the following terms shall
have the meanings set forth below:



     “Banking Services” means each and any of the following bank services provided to the
Borrowers or the Guarantors by any Senior Lender or any of affiliate of any Senior Lender: (a)
credit cards for commercial customers (including, without limitation, “commercial credit cards” and
purchasing cards), (b) stored value cards and (c) treasury management services (including, without
limitation, controlled disbursement, automated clearinghouse transactions, return items, overdrafts
and interstate depository network services).



     “Banking Services Obligations” of the Borrowers and the Guarantors means any and all
obligations of the Borrowers or the Guarantors, whether absolute or contingent and howsoever and
whensoever created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor) in connection with Banking Services.



     “Cash Collateral” means any Collateral consisting of cash or cash equivalents, any
security entitlement (as defined in the UCC) and any financial assets (as defined in the UCC).



     “Commitment” means, with respect to each Senior Lender, such Senior Lender’s
commitment to make loans and acquire participations in Letters of Credit issued and other
extensions of credit made or advances under a Credit Agreement.



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     “Control Agreement” means an agreement, in form and substance reasonably satisfactory
to the Senior Agent, among (a) the applicable Borrower or Guarantor, (b) a banking institution,
securities broker or securities intermediary at which such Borrower or Guarantor maintains a
Deposit Account or a Securities Account, and (c) the Senior Agent, providing for the Senior Agent
to have control over the funds or securities and other financial assets held in such Deposit
Account or Securities Account.



     “Control Collateral” means any Collateral consisting of a certificated security (as
defined in the UCC), investment property (as defined in the UCC), a deposit account (as defined in
the UCC) and any other Collateral as to which a Lien may be perfected through possession or control
by a secured party, or any agent therefor.



     “Credit Agreement” means the Original Credit Agreement and any other Credit Agreement
(as defined in the Indenture), in each case, as amended, restated, modified, renewed, refunded,
replaced, or refinanced in whole or in part from time to time, including (a) any agreement
extending the maturity of, consolidating, otherwise restructuring (including adding Subsidiaries or
affiliates of Parent or the Borrowers or any other Persons as parties thereto) or refinancing the
Commitments or all or any portion of the obligations of the Borrowers or the Guarantors under the
Original Credit Agreement, (b) any New Credit Facility and (c) any other agreement that itself is a
Credit Agreement hereunder and whether by the same or any other agent, lender, group of lenders or
institutional investors and whether or not increasing the amount of indebtedness that may be
incurred thereunder.



     “Credit Agreement Secured Obligations” means (a) all unpaid principal of and accrued
and unpaid interest on all loans outstanding under the Original Credit Agreement, all amounts
payable under any Letter of Credit issued pursuant to the Original Credit Agreement, all accrued
and unpaid fees and all expenses, reimbursements, indemnities and other obligations of the
Borrowers and the Guarantors to the Senior Agent or any Senior Lender or to the issuer of Letters
of Credit under the Original Credit Agreement, (b) all Banking Services Obligations owing to any
Senior Lender or any affiliate of any Senior Lender, (c) all Swap Obligations owing to any Senior
Lender or any affiliate of any Senior Lender, (d) all other amounts owing or due under the terms of
any Credit Agreement or any other Senior Credit Document, including any and all amounts payable
under or in respect of the Senior Credit Documents, as amended, restated, modified, renewed,
refunded, replaced, or refinanced in whole or in part from time to time, including principal,
premium, interest, fees, attorneys’ fees, costs, charges, expenses, reimbursement obligations, any
obligation to post cash collateral in respect of letters of credit or indemnities in respect
thereof, indemnities, guarantees, and all other amounts payable thereunder or in respect thereof,
and (e) all amounts accruing in respect of any of the obligations or other amounts described in
clauses (a) – (d) above on or after the commencement of any Insolvency Proceeding relating to
Parent, any Borrower, any Guarantor or any other Person irrespective of whether a claim for all or
any portion of such amounts is allowable or allowed in any such Insolvency Proceeding.



     “Deposit Account” has the meaning assigned to such term in Article 9 of the UCC.



     “Discharge in Full of Credit Agreement Secured Obligations” means payment in full in
cash (or in the case of Letters of Credit, Banking Services Obligations and Swap Obligations, the
cash collateralization as required by the Senior Credit Documents) of all Credit Agreement Secured
Obligations (other than Credit Agreement Secured Obligations consisting solely of contingent
indemnification obligations under the Senior Credit Documents) after or concurrently with
termination of all commitments to extend credit under any Credit Agreement.



     “Discharge of First Priority Credit Agreement Secured Obligations” means payment in
full in cash (or in the case of Letters of Credit, Banking Services Obligations and Swap
Obligations, the cash collateralization as required by the Senior Credit Documents) of Credit
Agreement Secured Obligations



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(other than Credit Agreement Secured Obligations consisting solely of contingent
indemnification obligations under the Senior Credit Documents) in an aggregate amount up to but not
exceeding the Maximum Priority Debt Amount, after or concurrently with termination of all
commitments to extend credit under any Credit Agreement.




     “Equity Interests” means shares of capital stock, partnership interests, membership
interests in a limited liability company, beneficial interests in a trust or other equity ownership
interests in a Person, and any warrants, options or other rights entitling the holder thereof to
purchase or acquire any such equity interest.



     “Excess Credit Agreement Secured Obligations” means, at any time, the aggregate amount
of Credit Agreement Secured Obligations at such time that exceed the Maximum Priority Debt Amount
at such time.



     “Exercise Any Secured Creditor Remedies” or “Exercise of Secured Creditor
Remedies” means (a) the taking of any action to enforce or realize upon any Lien, including the
institution of any foreclosure proceedings or the noticing of any public or private sale or other
disposition pursuant to Article 9 of the applicable Uniform Commercial Code, (b) the exercise of
any right or remedy provided to a secured creditor or otherwise on account of a Lien under the
Senior Credit Documents, the Indenture Agreements, applicable law, in an Insolvency Proceeding or
otherwise, including the election to retain Collateral in satisfaction of a Lien, (c) the taking of
any action or the exercise of any right or remedy in respect of the collection on, set off against,
marshaling of, or foreclosure on the Collateral or the Proceeds of Collateral, (d) the sale, lease,
license, or other disposition of all or any portion of the Collateral, by private or public sale,
other disposition or any other means permissible under applicable law, (e) the solicitation of bids
from third parties to conduct the liquidation of all or a material portion of Collateral to the
extent undertaken and being diligently pursued in good faith to consummate the sale of such
Collateral within a commercially reasonable time, (f) the engagement or retention of sales brokers,
marketing agents, investment bankers, accountants, appraisers, auctioneers or other third parties
for the purposes of valuing, marketing, promoting and selling the Collateral to the extent
undertaken and being diligently pursued in good faith to consummate the sale of such Collateral
within a commercially reasonable time, and (g) the exercise of any other enforcement right relating
to the Collateral (including the exercise of any voting rights relating to any Equity Interests and
including any right of recoupment or set-off) whether under the Senior Credit Documents, the
Indenture Agreements, applicable law, in an Insolvency Proceeding or otherwise.



     “Gross Borrowing Base” shall mean , at any time, an amount equal to the sum of (a) 85%
of the face amount of all accounts receivable owing to the Guarantors as of the end of most recent
calendar month preceding such date, plus (b) 60% of the book value of all inventory owned
by the Borrowers and the Guarantors as of the end of the most recent calendar month preceding such
date.



     “Indenture Agreements” shall mean (a) the Indenture, the Notes, the Indenture Security
Agreement, all other Note Documents (as defined in the Indenture Security Agreement), and all
mortgages, other security agreements and Control Agreements made by Parent, any Borrower or any
Guarantor in favor of the Collateral Agent for the benefit of the Collateral Agent, the Trustee and
the Noteholders, as any such document may be amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time in accordance with this Agreement, and
(b) all other agreements, instruments and certificates executed and delivered in connection with
any of the document described in clause (a) above, as any such agreement, instrument or certificate
may be amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part
from time to time in accordance with this Agreement.



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     “Indenture Secured Obligations” means (a) all indebtedness, obligations, liabilities
and other amounts owing or due from Parent, the Borrowers or the Guarantors under or in respect of
the Indenture, the Notes or any of the other Indenture Agreements, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time, including
principal, premium, interest, fees, attorneys’ fees, costs, charges, expenses, reimbursement
obligations, any obligation to post cash collateral in respect of indemnities in respect thereof,
indemnities, guarantees, and all other amounts payable thereunder or in respect thereof, and (b)
all amounts accruing in respect of any of the indebtedness, obligations, liabilities and other
amounts described in clause (a) above on or after the commencement of any Insolvency Proceeding
relating to Parent, any Borrower, any Guarantor or any other Person irrespective of whether a claim
for all or any portion of such amounts is allowable or allowed in any such Insolvency Proceeding.



     “Insolvency Proceeding” means any proceeding commenced by or against any Person under
any provision of the Bankruptcy Code or under any other state or federal bankruptcy or insolvency
law, assignments for the benefit of creditors, formal or informal moratoria, compositions,
extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other
similar relief.



     “Letter of Credit” means any letter of credit issued pursuant to a Credit Agreement.



     “Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien,
pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the
interest of a vendor or a lessor under any conditional sale agreement, capital lease or title
retention agreement (or any financing lease having substantially the same economic effect as any of
the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call
or similar right of a third party with respect to such securities; in each case, irrespective of
whether (i) such lien, pledge, hypothecation, encumbrance, charge, security interest, other
interest, option, call or other right is based on common law, applicable statutes, or contract,
(ii) such lien, pledge, hypothecation, encumbrance, charge, security interest, other interest,
option, call or other right is recorded or perfected, and (iii) such lien, pledge, hypothecation,
encumbrance, charge, security interest, other interest, option, call or other right is contingent
upon the occurrence of some future event or events or the existence of some future circumstance or
circumstances.



     “Lien Priority” means with respect to any Lien of the Senior Agent or the Collateral
Agent in the Collateral, the order of priority of such Lien as specified in Section 2.01.



     “Loan Documents” means the Senior Credit Documents and the Indenture Agreements.



     “Maximum Priority Debt Amount” means, as of any date of determination, (a) the greater
of (i) $65,000,000 minus the amount of all permanent reductions in revolving facility
commitments made from and after the date hereof, all permanent repayments of term loans and any
permanent cash collateralization of any Letters of Credit made from and after the date hereof under
the effective Credit Agreement (but to be reinstated to the full $65,000,000 amount at the time of
entering into any New Credit Facility) and (ii) the Gross Borrowing Base, plus (b) the
aggregate amount of all Banking Services Obligations incurred by Parent, the Borrowers or the
Guarantors in the ordinary course of business and owing to any Senior Lender, plus (c) all
Swap Obligations incurred by Parent, the Borrowers or the Guarantors in the ordinary course of
business and owing to any Senior Lender, plus (d) all interest, fees, disbursements, costs,
expenses and indemnities payable under the Senior Credit Documents or in respect thereof
(including, in each case, all amounts accruing on or after the commencement of any Insolvency
Proceeding relating to Parent, any Borrower, any Guarantor or any other Person irrespective of
whether a claim for all or any portion of such amounts is allowable or allowed in any such
Insolvency Proceeding.



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     “New Credit Facility” means one or more debt facilities entered into by Parent, any
Borrower or any of their Subsidiaries following or in connection with a Discharge in Full of Credit
Agreement Secured Obligations under the then effective Credit Agreement, providing for revolving
credit loans or letters of credit, in each case, as amended, restated, modified, renewed, refunded,
replaced, or refinanced in whole or in part from time to time; provided that such debt
facility qualifies as a Credit Agreement (as defined in the Indenture).



     “Noteholders” means each of the holders of the Notes.



     “Party” means either the Senior Agent or the Collateral Agent, and “Parties”
means both the Senior Agent and the Collateral Agent.



     “Payment Collateral” means all accounts, instruments, chattel paper, letters of
credit, deposit accounts, securities accounts, and payment intangibles, together with all
supporting obligations (as those terms are defined in the UCC), in each case composing a portion of
the Collateral.



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



     “Proceeds” means (i) all “proceeds” as defined in Article 9 of the UCC with respect to
the Collateral, and (ii) whatever is recoverable or recovered when Collateral is sold, exchanged,
collected, or disposed of, whether voluntarily or involuntarily.



     “Recovery” has the meaning set forth in Section 5.03.



     “Securities Account” has the meaning assigned to such term in Article 8 of the UCC.



     “Senior Agent” means (a) the Original Senior Agent, together with its successors,
assigns and transferees, and (b) any Person designated as the “Administrative Agent” or the
“Collateral Agent” under any New Credit Facility (provided that if two or more Persons shall be
designated as “Administrative Agent” or “Collateral Agent” under any New Credit Facility, the
“Senior Agent” shall mean the Person specified in the documents governing such New Credit Facility
as being the “Senior Agent” under this Agreement; provided, that for purposes of this
Agreement prior to the Collateral Agent’s receipt of written notice from the Senior Agent that
either (i) the Original Credit Agreement has been terminated or (ii) another Person has succeeded
to the rights and interests of the Original Senior Agent under the Original Credit Agreement, the
Collateral Agent shall be entitled to deal only with the Original Senior Agent and until receipt of
such written notice, the Collateral Agent shall not be liable for any such dealings (including the
turning over of any Collateral or proceeds thereof to the Original Senior Agent at a time when any
other “Agent” and not the Original Senior Agent was entitled thereto).



     “Senior Credit Documents” means (a) the Original Credit Agreement, the Senior Security
Agreement, all other “Loan Documents” as such term is defined in the Original Credit Agreement, all
Letter of Credit applications, all mortgages, deeds of trust, security agreements and other
documents or agreements granting a Lien upon the Collateral as security for the payment of and all
liabilities and obligations of the Borrowers or the Guarantors under the Original Credit Agreement,
as any such document may be amended, restated, modified, renewed, refunded, replaced, or refinanced
in whole or in part from time to time, in accordance with this Agreement, (b) any other Credit
Agreement and all security, collateral, ancillary or other documents entered into in connection
with or related to any agreement that is a Credit Agreement, as any such document may be amended,
restated, modified, renewed, refunded, replaced, or refinanced in whole or in part from time to
time, in accordance with this Agreement, and (c) all other agreements, instruments and certificates
executed and delivered in connection with any of the agreements or other documents described in
clauses (a) and (b) above, as any



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such document may be amended, restated, modified, renewed, refunded, replaced, or refinanced
in whole or in part from time to time, in accordance with this Agreement.




     “Senior Lenders” means the lenders from time to time party to a Credit Agreement.



     “Standstill Notice” means a written notice from the Senior Agent to the Collateral
Agent stating that an Event of Default has occurred under the Senior Credit Documents and stating
that such written notice is a “Standstill Notice”.



     “Standstill Period” has the meaning set forth in Section 2.03.



     “Swap Agreement” means any agreement with respect to any swap, forward, future or
derivative transaction or option or similar agreement involving, or settled by reference to, one or
more rates, currencies, commodities, equity or debt instruments or securities, or economic,
financial or pricing indices or measures of economic, financial or pricing risk or value or any
similar transaction or any combination of these transactions; provided that no phantom
stock or similar plan providing for payments only on account of services provided by current or
former directors, officers, employees or consultants of the Borrowers or the Subsidiaries shall be
a Swap Agreement.



     “Swap Obligations” of a Person means any and all obligations of such Person, whether
absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired
(including all renewals, extensions and modifications thereof and substitutions therefor), under
(a) any and all Swap Agreements, and (b) any and all cancellations, buy backs, reversals,
terminations or assignments of any Swap Agreement transaction.



     “UCC” means the Uniform Commercial Code as in effect from time to time in the State of
New York or any other state the laws of which are required to be applied in connection with the
issuance or perfection of security interests.



     Section 1.03 Rules of Construction. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, references to the singular
include the plural, the term “including” is not limiting, and the term “or” has, except where
otherwise indicated, the inclusive meaning represented by the phrase “and/or.” The words “hereof,”
“herein,” “hereby,” “hereunder,” and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. Article, section, subsection, clause,
schedule, and exhibit references herein are to this Agreement unless otherwise specified. Any
reference in this Agreement to any agreement, instrument, or document shall include all
alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements thereto and thereof, as applicable (subject to any restrictions on such
alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements set forth herein). Any reference herein to any Person shall be construed
to include such Person’s successors and assigns.



ARTICLE II.




LIEN PRIORITY



     Section 2.01 Agreement to Subordinate. Notwithstanding the date, time, method, manner
or order of grant, attachment, or perfection of any Liens granted to the Collateral Agent, the
Trustee, or the Noteholders in respect of all or any portion of the Collateral or of any Liens
granted to the Senior Agent or any Senior Lender in respect of all or any portion of the
Collateral, or the order or time of filing or recordation of any document or instrument for
perfecting the Liens in favor of Senior Agent (or any



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Senior Lender) or the Collateral Agent (or the Trustee or any Noteholder) in any Collateral or
any provision of the applicable UCC, any other applicable law, the Indenture Agreements, the Senior
Credit Documents or any other circumstance whatsoever, each of (i) the Collateral Agent, on behalf
of itself, the Trustee, and the Noteholders and (ii) the Senior Agent, on behalf of itself and the
Senior Lenders, hereby agrees that:





          (a) any Lien in respect of all or any portion of the Collateral now or hereafter held by or
on behalf of the Collateral Agent, the Trustee, or any Noteholder that secures all or any portion
of the Indenture Secured Obligations, shall in all respects be junior and subordinate to all
Liens granted to the Senior Agent and the Senior Lenders in the Collateral to secure all or any
portion of the Credit Agreement Secured Obligations up to (but not in excess of) the Maximum
Priority Debt Amount;




          (b) any Lien in respect of all or any portion of the Collateral now or hereafter held by or
on behalf of the Senior Agent or any Senior Lender that secures all or any portion of the Credit
Agreement Secured Obligations in excess of the Maximum Priority Debt Amount, shall in all
respects be junior and subordinate to all Liens granted to the Collateral Agent, the Trustee or
any Noteholder in the Collateral to secure all or any portion of the Indenture Secured
Obligations;




          (c) any Lien in respect of all or any portion of the Collateral now or hereafter held by or
on behalf of the Senior Agent (or any Senior Lender) that secures all or any portion of the
Credit Agreement Secured Obligations up to (but not in excess of) the Maximum Priority Debt
Amount, shall in all respects be senior and prior to all Liens granted to the Collateral Agent
(or the Trustee or any Noteholder) in the Collateral to secure all or any portion of the
Indenture Secured Obligations; and




          (d) any Lien in respect of all or any portion of the Collateral now or hereafter held by or
on behalf of the Collateral Agent, the Trustee, or any Noteholder that secures all or any portion
of the Indenture Secured Obligations, shall in all respects be senior and prior to all Liens
granted to the Senior Agent and the Senior Lenders in the Collateral to secure all or any portion
of the Credit Agreement Secured Obligations in excess of the Maximum Priority Debt Amount.


The Collateral Agent, for and on behalf of itself, the Trustee and the Noteholders, acknowledges
and agrees that, concurrently herewith, the Senior Agent, for the benefit of itself and the Senior
Lenders, has been granted Liens upon all of the Collateral in which the Collateral Agent has been
granted Liens and the Collateral Agent hereby consents thereto. The Senior Agent acknowledges and
agrees that the Collateral Agent, for the benefit of itself, the Trustee, and the Noteholders, has
been granted Liens upon all of the Collateral and the Senior Agent hereby consents thereto. The
subordination of Liens (up to the Maximum Priority Debt Amount) by the Collateral Agent, on behalf
of itself, the Trustee, and the Noteholders in favor of the Senior Agent and the Senior Lenders
herein shall not be deemed to subordinate the Collateral Agent’s Liens to the Liens of any other
Person. The subordination of Liens (in excess of the Maximum Priority Debt Amount) in favor of the
Collateral Agent, for the benefit of itself, the Trustee and the Noteholders herein shall not be
deemed to subordinate the Senior Agent’s Liens to the Liens of any other Person.




     Section 2.02 Waiver of Right to Contest Liens. The Collateral Agent agrees, on behalf
of itself, the Trustee and the Noteholders, that it and they shall not (and hereby waives, on
behalf of itself the Trustee and the Noteholders any right to) take any action to contest or
challenge (or assist or support any other Person in contesting or challenging), directly or
indirectly, whether or not in any proceeding (including in any Insolvency Proceeding), the
validity, priority, enforceability, or perfection of the Liens of the Senior Agent in respect of
the Collateral. The Collateral Agent, for itself, the Trustee, and on behalf of the Noteholders,
agrees that neither the Collateral Agent nor the Trustee will take any action that would hinder any
exercise of remedies undertaken by the Senior Agent under the Senior Credit



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Documents, including any public or private sale, lease, exchange, transfer, or other
disposition of the Collateral, whether by foreclosure or otherwise. The Collateral Agent, for
itself, the Trustee, and on behalf of the Noteholders, hereby waives any and all rights it, the
Trustee, or the Noteholders may have as a junior lien creditor or otherwise to contest, protest,
object to, interfere with the manner in which the Senior Agent seeks to enforce the Liens in any
portion of the Collateral (it being understood and agreed that the terms of this Agreement shall
govern with respect to the Collateral even if any portion of the Liens securing the Credit
Agreement Secured Obligations are avoided, disallowed, set aside, or otherwise invalidated in any
judicial proceeding or otherwise). The Senior Agent, for itself and the Senior Lenders, agrees
that it shall not (and hereby waives any right to) take any action to contest or challenge (or
assist or support any other Person in contesting or challenging), directly or indirectly, whether
or not in any proceeding (including in any Insolvency Proceeding), the validity, priority,
enforceability, or perfection of the Liens of the Collateral Agent in respect of the Collateral.
Following the Discharge of First Priority Credit Agreement Secured Obligations, the Senior Agent,
on behalf of itself and the Senior Lenders, agrees that it will not take any action that would
hinder any exercise of remedies undertaken by the Collateral Agent, the Trustee, or any Noteholder
under the Indenture Agreements, including any public or private sale, lease, exchange, transfer, or
other disposition of the Collateral, whether by foreclosure or otherwise. Following the Discharge
of First Priority Credit Agreement Secured Obligations, the Senior Agent, on behalf of itself and
the Senior Lenders, hereby waives any and all rights it may have as a junior lien creditor or
otherwise to contest, protest, object to, interfere with the manner in which the Collateral Agent,
the Trustee or any Noteholder seeks to enforce the Liens in any portion of the Collateral (it being
understood and agreed that the terms of this Agreement shall govern with respect to the Collateral
even if any portion of the Liens securing the Indenture Secured Obligations are avoided,
disallowed, set aside, or otherwise invalidated in any judicial proceeding or otherwise).




     Section 2.03 Remedies Standstill. At any time after the occurrence and during the
continuation of an Event of Default under any of the Loan Documents, the Senior Agent may send a
Standstill Notice to the Collateral Agent. The Collateral Agent, on behalf of itself, the Trustee,
and the Noteholders, agrees that from and after the date of the Collateral Agent’s receipt of any
Standstill Notice, none of the Collateral Agent, the Trustee or any Noteholder may Exercise Any
Secured Creditor Remedies (other than its rights under Section 2.04(d)) unless and until (a) the
Senior Agent has expressly waived or acknowledged the cure of the applicable Event of Default in
writing or the Discharge of First Priority Credit Agreement Secured Obligations shall have
occurred, or (b) 120 days shall have elapsed from the date of the Collateral Agent’s receipt of
such Standstill Notice. From and after the earlier to occur of (i) the Collateral Agent’s receipt
of such waiver or cure notice, or (ii) the elapsing of such 120th day period, any of the Collateral
Agent, the Trustee, or any Noteholder may commence to Exercise Any Secured Creditor Remedies
(subject to the provisions of this Agreement, including the immediately succeeding sentence,
Section 4.02 hereof and except with respect to any such Collateral as to which the Senior Agent is
diligently effecting the collection, foreclosure, sale or other realization upon or disposition
of). NOTWITHSTANDING ANY OTHER PROVISION IN THIS AGREEMENT, NONE OF THE COLLATERAL AGENT, THE
TRUSTEE OR ANY NOTEHOLDER MAY EXERCISE ANY SECURED CREDITOR REMEDIES PRIOR TO THE DISCHARGE OF
FIRST PRIORITY CREDIT AGREEMENT SECURED OBLIGATIONS (X) WITH RESPECT TO ANY ITEM OF COLLATERAL SO
LONG AS SENIOR AGENT HAS COMMENCED AND IS DILIGENTLY PURSUING ITS EXERCISE OF SECURED CREDITOR
REMEDIES IN RESPECT OF SUCH ITEMS OF COLLATERAL, AND (Y) WITHOUT FIRST PROVIDING SENIOR AGENT AT
LEAST FIVE (5) BUSINESS DAYS’ PRIOR WRITTEN NOTICE. The Senior Agent may only send three (3)
Standstill Notices following the date hereof (it being understood and agreed as clarification to
the foregoing that no more than three (3) Standstill Notices may be provided whether delivered
hereunder or under any corresponding provision of any other agreement similar hereto that may be
delivered pursuant to Section 7.17 hereof) and no more than one (1) Standstill Notice may be given
by the Senior Agent in any consecutive 365-day period. The time period during which the Collateral
Agent is not permitted to



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Exercise Any Secured Creditor Remedies under this section is referred to herein as the
“Standstill Period”.




     Section 2.04 Exercise of Rights.




          (a) No Other Restrictions. Except as expressly set forth in this Agreement, each of
the Collateral Agent, the Trustee, the Noteholders, the Senior Agent and the Senior Lenders shall
have any and all rights and remedies it may have as a creditor under applicable law, including
the rights to exercise all rights and remedies in foreclosure or otherwise with respect to any of
the Collateral; provided, however, that any such exercise by the Collateral
Agent, the Trustee or the Noteholders, and any collection or sale of all or any portion of the
Collateral by the Collateral Agent, the Trustee or the Noteholders, shall be subject to the Liens
of the Senior Agent on the Collateral to the extent provided in Section 2.01 and to the
provisions of this Agreement including Section 4.02 hereof. In exercising rights and remedies
with respect to the Collateral, the Senior Agent may enforce the provisions of the Senior Credit
Documents and exercise remedies thereunder, all in such order and in such manner as it may
determine in the exercise of its sole discretion. Such exercise and enforcement shall include the
sale, lease, license, or other disposition of all or any portion of the Collateral by private or
public sale or any other means permissible under applicable law or any agreement;
provided, that the Senior Agent agrees to provide copies of any notices that it is
required under applicable law to deliver to Parent, any Borrower or any Guarantor to the
Collateral Agent; provided further, that the failure to provide any such copies
to the Collateral Agent shall not impair any of the Senior Agent’s rights hereunder. In
exercising rights and remedies with respect to the Collateral, the Collateral Agent may enforce
the provisions of the Indenture Agreements and exercise remedies thereunder, all in such order
and in such manner as it may determine in the exercise of its sole discretion. Such exercise and
enforcement shall include the sale, lease, license, or other disposition of all or any portion of
the Collateral by private or public sale or any other means permissible under applicable law or
any agreement; provided, that the Collateral Agent agrees to provide copies of any
notices that it is required under applicable law to deliver to Parent, any Borrower or any
Guarantor to the Senior Agent until the Discharge in Full of Credit Agreement Secured Obligations
has occurred; provided further, that the failure to provide any such copies to
the Senior Agent shall not impair any of the Collateral Agent’s rights hereunder.




          (b) Release of Liens.




          (i) In the event of any such private or public sale by the Senior Agent or its
designee, the Collateral Agent agrees, on behalf of itself, the Trustee, and the
Noteholders, that, until the Discharge of First Priority Credit Agreement Secured
Obligations has occurred, such sale will be free and clear of the Liens securing the
Indenture Secured Obligations and, if the sale or other disposition includes the Equity
Interests in any Borrower or any Guarantor, agrees to release the entities whose Equity
Interests are sold from all Indenture Secured Obligations so long as the Senior Agent and
the Senior Lenders also release the entities whose Equity Interests are sold from all Credit
Agreement Secured Obligations. In furtherance thereof, the Collateral Agent agrees that it
will execute any and all Lien releases or other documents reasonably requested by the Senior
Agent in connection therewith, so long as the proceeds from such sale or other disposition
of the Collateral are applied in accordance with the terms of this Agreement.




          (ii) If and to the extent that the Senior Agent or its designee releases any of its
Liens on any Collateral in connection with the sale, lease, exchange, transfer or other
disposition of the Collateral in accordance with the terms of this Agreement, until the
Discharge of First Priority Credit Agreement Secured Obligations has occurred, the Liens, if
any, of the Collateral Agent, for itself and for the benefit of the Trustee and the
Noteholders, on such



10









 







Collateral shall be automatically, unconditionally and simultaneously released and the
Collateral Agent, for itself and for each of the Trustee and the Noteholders, promptly shall
execute and deliver to the Senior Agent such termination statements, releases and other
documents as the Senior Agent may request to effectively confirm such release in respect of
such payments. Notwithstanding the foregoing, the obligation of the Collateral Agent to
release its Lien on such Collateral shall arise only if such sale, lease, exchange, transfer
or other disposition of the Collateral is effected in connection with an exercise of
remedies or is permitted by (or permitted pursuant to a waiver of or consent to a
transaction otherwise prohibited by) the Senior Credit Documents and the terms hereof.




          (iii) In the event of any private or public sale by the Collateral Agent permitted by
the terms of this Agreement following the Discharge of First Priority Credit Agreement
Secured Obligations, the Senior Agent agrees, on behalf of itself and the Senior Lenders,
that such sale will be free and clear of the Liens securing the Credit Agreement Secured
Obligations and, if the sale or other disposition includes the Equity Interests in any
Borrower or any Guarantor, agrees to release the entities whose Equity Interests are sold
from all Credit Agreement Secured Obligations so long as the Collateral Agent, the Trustee
and the Noteholders also release the entities whose Equity Interests are sold from all
Indenture Secured Obligations. In furtherance thereof, the Senior Agent agrees that it will
execute any and all Lien releases or other documents reasonably requested by the Collateral
Agent in connection therewith, so long as the proceeds from such sale or other disposition
of the Collateral are applied in accordance with the terms of this Agreement.




          (iv) If and to the extent that the Collateral Agent or its designee releases any of its
Liens on any Collateral in connection with the sale, lease, exchange, transfer or other
disposition of the Collateral in accordance with the terms of this Agreement following the
Discharge of First Priority Credit Agreement Secured Obligations, the Liens, if any, of the
Senior Agent, for itself or for the benefit of the Senior Lenders, on such Collateral shall
be automatically, unconditionally and simultaneously released and the Senior Agent, for
itself and for the Senior Lenders, promptly shall execute and deliver to the Collateral
Agent such termination statements, releases and other documents as the Collateral Agent may
request to effectively confirm such release in respect of such payments. Notwithstanding
the foregoing, the obligation of the Senior Agent to release its Lien on such Collateral
shall arise only if such sale, lease, exchange, transfer or other disposition of the
Collateral is effected in connection with an exercise of remedies or is permitted by (or
permitted pursuant to a waiver of or consent to a transaction otherwise prohibited by) the
Indenture Agreements and the terms hereof.




          (c) Except as provided in Section 3.01, the Collateral Agent, the Trustee and the
Noteholders may exercise, and nothing herein shall constitute a waiver of, any right it may have
at law or equity to receive notice of, or to commence or join with any creditor in commencing any
Insolvency Proceeding or to join or participate in, any action or proceeding or other activity
described in Section 3.01; provided, however, that exercise of any such right by
the Collateral Agent shall be subject to all of the terms and conditions of this Agreement,
including the obligation to turn over Collateral and Proceeds to the Senior Agent for application
to the Credit Agreement Secured Obligations as provided in Section 4.02.




          (d) The Collateral Agent may make such demands or file such claims in respect of the
Indenture Secured Obligations as may be necessary to prevent the waiver or bar of such claims
under applicable statutes of limitations or other statutes, court orders or rules of procedure
(including, without limitation, the filing of any proofs of claim in any Insolvency Proceeding),
but except as provided in this Section 2.04 or otherwise in this Agreement, the Collateral Agent
shall not take any



11









 







actions restricted by this Agreement until the Discharge of First Priority Credit Agreement
Secured Obligations shall have occurred.




          (e) Following the Discharge of First Priority Credit Agreement Secured Obligations, the
other provisions of this Section 2.04 shall apply to the Collateral Agent, for the benefit of
itself, the Trustee and the Noteholders as if it were the Senior Agent and the Senior Agent was
the Collateral Agent, mutatis mutandis.



     Section 2.05 Insurance. The parties acknowledge that at the time of execution of this
Agreement the Senior Agent shall be named as loss payee and/or mortgagee under all insurance
policies of Parent, the Borrowers and the Guarantors insuring the Collateral. The parties agree
that following the execution of this Agreement, the Collateral Agent may seek to be named as
subordinate loss payee and/or subordinate mortgagee on all such insurance policies;
provided that until the Discharge of First Priority Credit Agreement Secured Obligations
has occurred (i) all such certificates and endorsements to such insurance policies that name the
Collateral Agent as loss payee or mortgage shall include a legend or statement indicating that (x)
the rights of the Collateral Agent to receive amounts payable under such policies are subordinate
and junior to the rights of the Senior Agent to the extent set forth herein and (y) the Senior
Agent shall have the exclusive right to the extent set forth herein to provide instructions to each
insurer under each such policy, and (ii) the Collateral Agent shall, or shall cause the Borrowers
to, provide the Senior Agent with copies of all such certificates and endorsements to such
insurance policies that name the Collateral Agent as loss payee or mortgagee. Until such time as
the Collateral Agent shall have obtained certificates and endorsements to all such insurance
policies that name the Collateral Agent as subordinate loss payee and/or subordinate mortgagee, the
Senior Agent agrees that the designation of the Senior Agent as loss payee and/or mortgagee on all
such policies shall be as agent for both the holders of the Credit Agreement Secured Obligations
and the Indenture Secured Obligations. Until the Discharge of First Priority Credit Agreement
Secured Obligations has occurred, subject to the terms of the Senior Credit Documents, the Senior
Agent shall have the sole and exclusive right to adjust settlement for any insurance policy
covering the Collateral in the event of any loss thereunder and to approve any award granted in any
condemnation or similar proceeding (or any deed in lieu of condemnation) affecting the Collateral.
Unless and until the Discharge of First Priority Credit Agreement Secured Obligations has occurred,
and subject to the terms of the Loan Documents, all proceeds of any such policy and any such award
(or any payments with respect to a deed in lieu of condemnation) with respect to the Collateral
shall be paid to the Senior Agent and shall be disbursed by the Senior Agent as follows:
first, unless an Event of Default shall have occurred and be continuing under the Loan
Documents or unless otherwise provided in the Loan Documents, to Parent, Borrowers and Guarantors;
second, if an Event of Default shall have occurred and be continuing under the Loan
Documents or if otherwise required by the Loan Documents, in accordance with the provisions of
Section 4.02(c) of this Agreement; and third, to the extent no Indenture Secured
Obligations or Credit Agreement Secured Obligations are outstanding, to the owner of the subject
property, such other Person as may be entitled thereto or as a court of competent jurisdiction may
otherwise direct. Until the Discharge of First Priority Credit Agreement Secured Obligations has
occurred, if the Collateral Agent or any holder of Indenture Secured Obligations shall, at any
time, receive any proceeds of any such insurance policy or any such award or payment in
contravention of this Agreement, the Collateral Agent or such holder of Indenture Secured
Obligations shall segregate and hold in trust and forthwith pay such proceeds over to the Senior
Agent in accordance with the terms of this Agreement.



     Section 2.06 Collateral Access Agreements.




          (a) The Senior Agent and the Collateral Agent hereby acknowledge and agree that any
collateral access agreement, landlord waiver or other similar agreement (any such access
agreement, waiver or other agreement, a “Collateral Access Agreement”) by and among the
Senior



12









 







Agent, the Collateral Agent, Parent, any Borrower, any Guarantor and any landlord or
warehouse operator where any Collateral is stored or located or any other bailee, consignee
or other similar Person in possession of any Collateral (any such bailee, consignee or other
Person, a “Bailee”), shall be for the benefit of both (x) the Senior Agent and the Senior
Lenders, and (y) the Collateral Agent, the Trustee and the Noteholders. Unless and until the
Discharge of First Priority Credit Agreement Secured Obligations has occurred, the Senior Agent
(as agent for both the holders of the Credit Agreement Secured Obligations and the holders of the
Indenture Secured Obligations) shall have the sole and exclusive right to contact, provide
instructions, and deliver notices to, all landlords, warehouse operators and Bailees, to exercise
rights under Collateral Access Agreements, and to take possession of any Collateral in the
possession of any landlord, warehouse operator or Bailee. Following the Discharge of First
Priority Credit Agreement Secured Obligations, at the request of the Collateral Agent, the Senior
Agent shall (i) assign to the Collateral Agent all rights of the Senior Agent under all
Collateral Access Agreements and (ii) use commercially reasonable efforts to notify all
landlords, warehouse operators and Bailees that the Senior Agent has assigned its rights to the
Collateral Agent and that such landlords, warehouse operators and Bailees shall follow all
notices and instructions provided by the Collateral Agent with respect to any and all Collateral
in their possession (a “Notice of Assignment”).




          (b) Following the Discharge of First Priority Credit Agreement Secured Obligations
and until such time as the Collateral Agent shall have either (i) received an acknowledgement
from the landlords, warehouse operators and Bailees party to Collateral Access Agreements of
receipt of a Notice of Assignment or (ii) entered into new Collateral Access Agreements with all
applicable landlords, warehouse operators and Bailees, the Senior Agent agrees to continue to act
as the agent for the Collateral Agent, the Trustee and the Noteholders, and to follow all
instructions provided to the Senior Agent by the Collateral Agent with respect to the Collateral
in the possession of landlords, warehouse operators and Bailees; provided that, the Senior Agent
shall not be obligated to take any action that is, in its reasonable opinion, contrary to any
applicable law, rule or regulation, the terms of this Agreement or the terms of any Loan
Document. Following the Discharge of First Priority Credit Agreement Secured Obligations, the
Collateral Agent (to the extent that the Collateral Agent, in turn, is entitled to enforce a
right of reimbursement or indemnification against the Parent, Borrower or Guarantors pursuant to
any of the Indenture Agreements), for and on behalf of itself, the Trustee and the Noteholders,
agrees to indemnify Senior Agent and its officers, directors, agents and employees for and
against all claims, liabilities, and expenses arising out of any action taken by Senior Agent
with respect to Collateral in the possession of a landlord, warehouse operator or Bailee at the
request or in accordance with the instructions of the Collateral Agent, except to the extent the
claims, liabilities, or expenses are determined by a court of competent jurisdiction in a final
judgment to have resulted from the gross negligence or willful misconduct of the Senior Agent or
its officers, directors, agents or employees.



ARTICLE III.




ACTIONS OF THE PARTIES



     Section 3.01 Limitation on Certain Actions.




          (a) Notwithstanding any other provision hereof, during any Standstill Period prior to the
date that the Discharge of First Priority Credit Agreement Secured Obligations occurs, the
Collateral Agent will not:




          (i) commence receivership or foreclosure proceedings against Parent, any Borrower, any
Guarantor, or any Collateral;



13









 






          (ii) make demands or file claims in respect of the Indenture Secured Obligations except
as permitted under Section 2.04(d) hereof;




          (iii) sell, collect, transfer or dispose of any Collateral or Proceeds; or




          (iv) notify third party account debtors to make payment directly to it or any of its
agents or other Persons acting on its behalf.


The Collateral Agent, for and on behalf of the Collateral Agent, the Trustee and the Noteholders,
agrees that the Collateral Agent shall not take any action that would hinder any exercise of
remedies under the Senior Credit Documents (except as is permitted hereunder) or is otherwise
prohibited hereunder.




          (b) Notwithstanding any other provision hereof, following the date that the Discharge of First
Priority Credit Agreement Secured Obligations has occurred, the Senior Agent will not:





          (i) commence receivership or foreclosure proceedings against Parent, any Borrower, any
Guarantor, or any Collateral; or




          (ii) notify third party account debtors to make payment directly to it or any of its
agents or other Persons acting on its behalf.



     Section 3.02 Agent for Perfection. Each of the Senior Agent, on behalf of itself and
the Senior Lenders, and the Collateral Agent, for and on behalf of itself, the Trustee, and each
Noteholder, as applicable, agree to hold all Control Collateral and Cash Collateral that is part of
the Collateral in its respective possession, custody, or control (or in the possession, custody, or
control of agents or bailees for either, as applicable) as agent for the other solely for the
purpose of perfecting the security interest granted to each in such Control Collateral or Cash
Collateral subject to the terms and conditions of this Section 3.02. None of the Senior Agent, the
Senior Lenders, the Collateral Agent, the Trustee, or the Noteholders, as applicable, shall have
any obligation whatsoever to the others to assure that the Control Collateral is genuine or owned
by Parent, any Borrower, any Guarantor or any other Person or to preserve rights or benefits of any
Person. The duties or responsibilities of the Senior Agent and the Collateral Agent under this
Section 3.02 are and shall be limited solely to holding or maintaining control of the Control
Collateral and the Cash Collateral as agent for the other for purposes of perfecting the Lien held
by the Collateral Agent or the Senior Agent, as applicable. The Senior Agent is not and shall not
be deemed to be a fiduciary of any kind for the Collateral Agent, the Trustee, the Noteholders or
any other Person. The Collateral Agent is not and shall not be deemed to be a fiduciary of any
kind for the Senior Agent, any Senior Lender or any other Person. In the event that (a) any of the
Collateral Agent, the Trustee, or any Noteholder receives any Proceeds or Collateral in
contravention of the Lien Priority, or (b) the Senior Agent or any Senior Lender receives any
Proceeds or Collateral in contravention of the Lien Priority, it shall promptly pay over such
Proceeds or Collateral to (i) in the case of clause (a), the Senior Agent, or (ii) in the case of
clause (b), the Collateral Agent, in the same form as received with any necessary endorsements, for
application in accordance with the provisions of Section 4.02 of this Agreement.



ARTICLE IV.




NOTICES AND APPLICATION OF PROCEEDS



     Section 4.01 Notices of Exercise. Concurrently with any exercise by the Collateral
Agent of any of its rights and remedies under the Indenture Agreements following the occurrence of
any default



14









 




under the Indenture Agreements, the Collateral Agent shall give notice of such exercise to the
Senior Agent and shall only exercise such rights or remedies in a manner consistent with the terms
of this Agreement. Concurrently with any exercise by the Senior Agent of any of its rights and
remedies under the Senior Credit Documents following the occurrence of any default under the Senior
Credit Documents, the Senior Agent shall give notice of such exercise to the Collateral Agent and
shall only exercise such rights or remedies in a manner consistent with the terms of this
Agreement.




     Section 4.02 Application of Proceeds.




          (a) Revolving Nature of Credit Agreement Secured Obligations. As long as the Senior
Agent is not exercising any of its remedies as a secured creditor under the Senior Credit
Documents and including during any Standstill Period, the Senior Agent may apply any and all of
the proceeds of the Collateral consisting of accounts receivable, other rights to payment or Cash
Collateral in accordance with the provisions of the Senior Credit Documents, subject to the
provisions of this Agreement, including Sections 3.02 and 4.02 hereof. The Collateral Agent, for
and on behalf of itself, the Trustee, and the Noteholders, expressly acknowledges and agrees that
(a) any such application of the proceeds of accounts receivable, other rights to payment or Cash
Collateral or the release of any Lien by the Senior Agent upon any portion of the Collateral in
connection with any sale or other disposition of assets by the Borrowers or the Guarantors that
is permitted under the terms of the Senior Credit Documents shall not be considered to be the
exercise of remedies under this Agreement; and (b) all Proceeds of Cash Collateral received by
the Senior Agent in connection therewith may be applied, reversed, reapplied, credited or
reborrowed, in whole or in part, as Credit Agreement Secured Obligations without reducing the
Maximum Priority Debt Amount. The Collateral Agent, for and on behalf of itself, the Trustee and
the Noteholders, further acknowledges that the Credit Agreement Secured Obligations are revolving
in nature and that the amount thereof that may be outstanding at any time or from time to time
may be increased or reduced and subsequently reborrowed, and that the terms of the Credit
Agreement Secured Obligations may be modified, extended or amended from time to time (subject to
Section 5.02(a)), and that the aggregate amount of the Credit Agreement Secured Obligations may
be increased, replaced or refinanced from time to time, subject to the Maximum Priority Debt
Amount. The lien priorities provided in this Agreement shall not be altered or otherwise
affected by any amendment, modification, supplement, extension, repayment, reborrowing, increase,
replacement, renewal, restatement or refinancing of the Credit Agreement Secured Obligations.




          (b) Turnover of Cash Collateral After Payment. Upon the Discharge in Full of Credit
Agreement Secured Obligations, the Senior Agent shall deliver to the Collateral Agent or execute
such documents as the Collateral Agent may reasonably request to cause the Collateral Agent to
have control over any Cash Collateral or Control Collateral still in the Senior Agent’s or its
designee’s possession, custody or control in the same form as received, with any necessary
endorsements or as a court of competent jurisdiction may otherwise direct, to be applied by the
Collateral Agent to the Indenture Secured Obligations. Proceeds of any exercise by the Senior
Agent or the Collateral Agent, as applicable, of any of their respective secured creditor rights
or remedies under any of the Loan Documents, under applicable law, or otherwise with respect to
any Collateral or Proceeds, shall be applied as provided in Section 4.02(c) below.




          (c) Application of Proceeds. The Senior Agent and the Collateral Agent hereby agree
that all Collateral and all Proceeds received by either of them upon the Exercise Of Secured
Creditor Remedies shall be applied as follows:



          first, to the payment of costs and expenses of the Senior Agent or the Collateral
Agent, as applicable, in connection with such exercise;



15









 







          second, to the payment of the Credit Agreement Secured Obligations up to (but not in
excess of) the Maximum Priority Debt Amount;



          third, to the payment of the Indenture Secured Obligations; and



          fourth, to the payment of any Excess Credit Agreement Secured Obligations.


In exercising remedies, whether as a secured creditor or otherwise, the Senior Agent shall have no
obligation or liability to the Collateral Agent, the Trustee, or to any Noteholder and the
Collateral Agent shall have no obligation or liability to the Senior Agent or any Senior Lender
regarding the adequacy of any Proceeds or for any action or omission save and except solely an
action or omission that breaches the express obligations undertaken by each Party under the terms
of this Agreement.




     Section 4.03 Specific Performance. Each of the Senior Agent and the Collateral Agent
is hereby authorized to demand specific performance of this Agreement, whether or not Parent, any
Borrower or any Guarantor shall have complied with any of the provisions of any of the Loan
Documents, at any time when the other shall have failed to comply with any of the provisions of
this Agreement applicable to it; provided, however, the remedy of specific
performance shall not be available, and the asserting party shall be free to assert any and all
legal defenses it may possess, if such remedy would result in, or otherwise constitute, a violation
of the Employee Retirement Income Security Act of 1974, as amended. Each of the Senior Agent and
the Collateral Agent hereby irrevocably waives any defense based on the adequacy of a remedy at
law, which might be asserted as a bar to such remedy of specific performance.



ARTICLE V.




INTERCREDITOR ACKNOWLEDGEMENTS AND WAIVERS



     Section 5.01 Notice of Acceptance and Other Waivers.




          (a) All Credit Agreement Secured Obligations at any time made or incurred by Parent, any
Borrower or any Guarantor shall be deemed to have been made or incurred in reliance upon this
Agreement, and the Collateral Agent, on behalf of itself, the Trustee, and the Noteholders,
hereby waives (i) notice of acceptance, or proof of reliance, by the Senior Agent of this
Agreement, and (ii) notice of the existence, renewal, extension, accrual, creation, or
non-payment of all or any part of the Credit Agreement Secured Obligations. Neither the Senior
Agent, nor any Senior Lender, nor any of their respective affiliates, directors, officers,
employees, or agents shall be liable for failure to demand, collect, or realize upon any of the
Collateral or for any delay in doing so (other than in the case of gross negligence or willful
misconduct on the part of the Senior Agent or such Senior Lender, as determined by a court of
competent jurisdiction) or shall be under any obligation to sell or otherwise dispose of any
Collateral or to take any other action whatsoever with regard to the Collateral or any part
thereof. If the Senior Agent honors (or fails to honor) a request by a Borrower for an extension
of credit pursuant to the Credit Agreement or any of the Senior Credit Documents, whether the
Senior Agent has knowledge that the honoring of (or failure to honor) any such request would
constitute a default under the terms of the Indenture or any Indenture Agreement or an act,
condition, or event that, with the giving of notice or the passage of time, or both, would
constitute such a default, or if the Senior Agent otherwise should exercise any of its
contractual rights or remedies under the Senior Credit Documents (subject to the express terms
and conditions hereof), the Senior Agent shall not have any liability whatsoever to the
Collateral Agent, the Trustee or any Noteholder as a result of such action, omission, or exercise
(so long as any such exercise does not breach the express terms and provisions of this
Agreement). The Senior Agent will be entitled to manage and supervise its loans and



16









 







extensions of credit under the Credit Agreement and other Senior Credit Documents as the
Senior Agent may, in its sole discretion, deem appropriate, and the Senior Agent may manage its
loans and extensions of credit without regard to any rights or interests that the Collateral
Agent, the Trustee, or any of the Noteholders have in the Collateral or otherwise except as
otherwise expressly set forth in this Agreement. The Collateral Agent, on behalf of itself, the
Trustee, and the Noteholders, agrees that the Senior Agent shall not incur any liability as a
result of a sale, lease, license, or other disposition of the Collateral, or any part thereof,
pursuant to the Senior Credit Documents conducted in accordance with mandatory provisions of
applicable law.




          (b) None of the Collateral Agent, the Trustee, or any of the Noteholders nor any of their
affiliates, directors, officers, employees, or agents shall be liable for failure to demand,
collect, or realize upon any of the Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral or to take any other action whatsoever
with regard to the Collateral or any part thereof, except as specifically provided in this
Agreement. If the Collateral Agent, the Trustee, or any of the Noteholders should exercise any
of their contractual rights or remedies under the Indenture Agreements (subject to the express
terms and conditions hereof), none of the Collateral Agent, the Trustee, or any of the
Noteholders shall have any liability whatsoever to the Senior Agent as a result of such action,
omission, or exercise (so long as any such exercise does not breach the express terms and
provisions of this Agreement). The Collateral Agent, the Trustee, and the Noteholders will be
entitled to manage and supervise the Indenture Agreements as they may, in their sole discretion,
deem appropriate, subject to the terms of this Agreement. Subject to Section 2.03, the Senior
Agent agrees that none of the Collateral Agent, the Trustee, or the Noteholders shall incur any
liability as a result of a sale, lease, license, or other disposition of the Collateral, or any
part thereof, pursuant to the Indenture Agreements conducted in accordance with mandatory
provisions of applicable law.



     Section 5.02 Modifications to Senior Credit Documents and Indenture Agreements.




          (a) The Collateral Agent, on behalf of itself, the Trustee, and the Noteholders, hereby
agrees that, without affecting the obligations of the Collateral Agent, the Trustee and the
Noteholders hereunder, the Senior Agent, on behalf of itself and the Senior Lenders, may, at any
time and from time to time, in its sole discretion without the consent of or notice to the
Collateral Agent, the Trustee or any Noteholder (except to the extent such notice or consent is
required pursuant to the express provisions of this Agreement), and without incurring any
liability to the Collateral Agent, the Trustee or any Noteholder or impairing or releasing the
subordination provided for herein, amend, restate, supplement, replace, refinance, extend,
consolidate, restructure, or otherwise modify the Credit Agreement or any of the Senior Credit
Documents (except as otherwise provided herein) in any manner whatsoever, including, to




          (i) change the manner, place, time, or terms of payment or renew or alter, all or any
of the Credit Agreement Secured Obligations or otherwise amend, restate, supplement, or
otherwise modify in any manner, or grant any waiver or release with respect to, all or any
part of the Credit Agreement Secured Obligations or any of the Senior Credit Documents,




          (ii) retain or obtain a Lien on any property of any Person to secure any of the Credit
Agreement Secured Obligations, and in that connection to enter into any additional Senior
Credit Documents,




          (iii) amend, or grant any waiver, compromise or release with respect to, or consent to
any departure from, any guaranty or other obligations of any Person obligated in any manner
under or in respect of the Credit Agreement Secured Obligations,



17









 






          (iv) release its Lien on any Collateral or other property,




          (v) exercise or refrain from exercising any rights against Parent, any Borrower, any
Guarantor or any other Person,




          (vi) retain or obtain the primary or secondary obligation of any other Person with
respect to any of the Credit Agreement Secured Obligations, and




          (vii) otherwise manage and supervise the Credit Agreement Secured Obligations as the
Senior Agent shall deem appropriate;


provided, however, that unless the Collateral Agent, on behalf of itself, the
Trustee and the Noteholders agrees in advance in writing, no such amendment, restatement,
supplement, replacement, refinancing, extension, consolidation, restructuring, or other
modification of the Credit Agreement or any of the Senior Credit Documents shall:





          (A) subject Parent, the Borrowers or the Guarantors to any prohibition or limitation on
the making of (x) scheduled payments of interest (including default interest, if applicable)
in respect of the Indenture Secured Obligations as required under the Indenture Agreements
or (y) indemnification payments provided for under the Indenture Agreements, in each case
that are more restrictive to Parent, the Borrowers or the Guarantors than those set forth in
the Senior Credit Documents (as in effect on the date hereof);




          (B) contravene the provisions of this Agreement or impose any limitation or restriction
as contemplated by Section 5.02(d) below



          (b) The Senior Agent, on behalf of itself and the Senior Lenders, hereby agrees that
Collateral Agent, on behalf of itself, the Trustee, and the Noteholders may, at any time and from
time to time, in its sole discretion without the consent of or notice to the Senior Agent (except
to the extent any such notice or consent is required pursuant to the express provisions of this
Agreement), and without incurring any liability to the Senior Agent or impairing or releasing the
subordination provided for herein, amend, restate, supplement, replace, refinance, extend,
consolidate, restructure, or otherwise modify the Indenture Agreements in any manner whatsoever,
provided, however, that unless the Senior Agent otherwise agrees in advance in
writing, no such amendment, restatement, supplement, replacement, refinancing, extension,
consolidation, restructuring, or other modification of the Indenture Agreements shall:





          (i) provide for the Collateral Agent, the Trustee or any Noteholder to obtain a Lien on
any assets of Parent, any Borrower or any Guarantor not constituting Collateral unless (A)
the Senior Agent also obtains a Lien on such assets either before or at the same time as the
Collateral Agent, the Trustee or such Noteholder or (B) the Senior Agent declines in a
writing to Collateral Agent to obtain a Lien on such assets;




          (ii) subject Parent, the Borrowers or the Guarantors to any prohibition or limitation
on the making of any payments of principal, interest, fees or other amounts in respect of
the Credit Agreement Secured Obligations as and when the same shall be due under the Senior
Credit Documents;




          (iii) change (to earlier dates) any dates upon which payments of principal shall be due
under the Indenture Agreements; or



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          (iv) contravene the provisions of this Agreement.




          (c) Notwithstanding anything to the contrary herein, this Section 5.02 shall not be
construed to constitute a waiver by the Collateral Agent, the Trustee, or any Noteholder of any
provision of the Indenture.




          (d) To the extent the Senior Agent obtains a Lien on any assets of Parent, any Borrower or
any Guarantor not constituting Collateral, nothing herein shall be deemed to limit or restrict
the right of the Collateral Agent to seek a Lien on such assets on the same basis as the Lien
Priority.



     Section 5.03 Reinstatement and Continuation of Agreement.




          (a) If the Senior Agent is required in any Insolvency Proceeding or otherwise to turn over
or otherwise pay to the estate of Parent, any Borrower, any Guarantor or any other Person any
amount (a “Recovery”), then the Credit Agreement Secured Obligations shall be reinstated
to the extent of such Recovery. If this Agreement shall have been terminated prior to such
Recovery, this Agreement shall be reinstated in full force and effect, and such prior termination
shall not diminish, release, discharge, impair, or otherwise affect the obligations of the
parties hereto from such date of reinstatement. All rights, interests, agreements, and
obligations of the Collateral Agent, the Trustee, the Senior Agent, the Senior Lenders, and the
Noteholders under this Agreement shall remain in full force and effect and shall continue
irrespective of the commencement of, or any discharge, confirmation, conversion, or dismissal of
any Insolvency Proceeding by or against Parent, any Borrower or any Guarantor or any other
circumstance which otherwise might constitute a defense available to, or a discharge of Parent,
any Borrower or any Guarantor in respect of the Credit Agreement Secured Obligations. No
priority or right of the Senior Agent shall at any time be prejudiced or impaired in any way by
any act or failure to act on the part of Parent, any Borrower or any Guarantor or by the
noncompliance by any Person with the terms, provisions, or covenants of the Credit Agreement, the
Indenture or any of the other Loan Documents, regardless of any knowledge thereof which the
Senior Agent may have.




          (b) If the Collateral Agent, the Trustee, or any Noteholder is required in any Insolvency
Proceeding or otherwise to turn over or otherwise pay to the estate of Parent, any Borrower, any
Guarantor or any other Person a Recovery, then the Indenture Secured Obligations shall be
reinstated to the extent of such Recovery. No priority or right of the Collateral Agent, the
Trustee, or any Noteholder shall at any time be prejudiced or impaired in any way by any act or
failure to act on the part of Parent, any Borrower or any Guarantor or by the noncompliance by
any Person with the terms, provisions, or covenants of the Credit Agreement, the Indenture or any
of the other Indenture Agreements, regardless of any knowledge thereof which the Collateral
Agent, the Trustee, or any Noteholder may have.



     Section 5.04 New Credit Facility. If at any time Parent, any Borrower or any
Subsidiaries of Parent or any Borrower enters into a New Credit Facility in connection with a
Discharge in Full of Credit Agreement Secured Obligations under the Original Credit Agreement, this
Agreement shall be reinstated in full force and effect, and any prior termination thereof, if any,
as a result of a prior Discharge in Full of Credit Agreement Secured Obligations, shall not
diminish, release, discharge, impair, or otherwise affect the obligations of the parties hereto
(including the lender providing the New Credit Facility) from such date of reinstatement;
provided that in connection with any New Credit Facility, the Company and the lender
providing such New Credit Facility or its designee shall execute and deliver to the Collateral
Agent an acknowledgment, in substantially the form of Annex A. It is hereby agreed that the
entering into of



19









 




any new Credit Agreement would not constitute an amendment, modification or supplement to any
of the Indenture Agreements.




ARTICLE VI.




INSOLVENCY PROCEEDINGS



     Section 6.01 DIP Financing. If Parent, any Borrower or any Guarantor shall be subject
to any Insolvency Proceeding and the Senior Agent shall desire, prior to the Discharge of First
Priority Credit Agreement Secured Obligations, to permit the use of cash collateral or to permit
Parent, any Borrower or any Guarantor to obtain financing under Section 363 or Section 364 of Title
11 of the United States Code or any similar provision under the law applicable to any Insolvency
Proceeding (“DIP Financing”) to be secured by all or any portion of the Collateral, then
the Collateral Agent, on behalf of itself, the Trustee, and the Noteholders, agrees that it will
raise no objection to such use of cash collateral or DIP Financing and will not request adequate
protection or any other relief in connection with its or their interest in any such Collateral
except to the extent specified in this Section 6.01. To the extent the Liens securing the Credit
Agreement Secured Obligations are subordinated or pari passu with such DIP Financing, the
Collateral Agent, for and on behalf of itself, the Trustee, and the Noteholders, hereby agrees that
the Collateral Agent’s Liens in the Collateral shall be subordinated to such DIP Financing (and all
obligations relating thereto and any “carve-out” for professional fees and expenses and United
States Trustee fees agreed to by the Senior Agent) upon the terms and conditions specified in this
Agreement. Until the Discharge of First Priority Credit Agreement Secured Obligations has
occurred, the Collateral Agent, on behalf of itself, the Trustee, and the Noteholders, agrees that
none of them shall seek relief from the automatic stay or any other stay in any Insolvency
Proceeding in respect of the Collateral and will not provide or offer to provide any DIP Financing
secured by a Lien senior to or pari passu with the Liens securing the Credit Agreement Secured
Obligations, in each case unless the Senior Agent otherwise has provided its express written
consent.



     Section 6.02 No Contest. The Collateral Agent, on behalf of itself, the Trustee, and
the Noteholders, agrees that, prior to the Discharge of First Priority Credit Agreement Secured
Obligations, none of them shall contest (or support any other Person contesting) (a) any request by
the Senior Agent for adequate protection, or (b) any objection by the Senior Agent to any motion,
relief, action, or proceeding based on Senior Agent claiming that their interests in the Collateral
are not adequately protected or any other similar request under any law applicable to an Insolvency
Proceeding. Notwithstanding the foregoing, in any Insolvency Proceeding, if the Senior Agent is
granted adequate protection in the form of additional collateral in connection with any DIP
Financing or use of cash collateral under Section 363 or Section 364 of Title 11 of the United
States Code or any similar law applicable to any Insolvency Proceeding, then the Collateral Agent,
on behalf of itself, the Trustee, or any of the Noteholders, may seek or request adequate
protection in the form of a Lien on such additional collateral, which Lien hereby is and shall be
deemed to be subordinated to the Liens securing the Credit Agreement Secured Obligations on the
same basis as the Lien Priority up to (but not in excess of) the sum of (i) the Maximum Priority
Debt Amount and (ii) the amount of such DIP Financing (and all obligations relating thereto and any
“carve-out” for professional fees and expenses and United States Trustee fees agreed to by the
Senior Agent). In the event the Collateral Agent, on behalf of itself, the Trustee, and the
Noteholders, seeks or requests adequate protection and such adequate protection is granted in the
form of Liens in respect of additional collateral, then the Collateral Agent, on behalf of itself,
the Trustee, and each of the Noteholders, agrees that the Senior Agent also shall be granted a
senior Lien on such additional collateral as security for the Credit Agreement Secured Obligations
(and for any such DIP Financing) and that any Lien on such additional collateral securing the
Indenture Secured Obligations shall be subordinated to the Liens in respect of such additional
collateral securing the Credit Agreement Secured Obligations and any such DIP Financing and any
other Liens granted to the Senior Agent as



20









 




adequate protection on the same basis as the other Liens securing the Indenture Secured
Obligations are subordinated to the Credit Agreement Secured Obligations under this Agreement up to
the sum of (i) the Maximum Priority Debt Amount and (ii) the amount of such DIP Financing (and all
obligations related thereto and any “carve-out” for professional fees and expenses and United
States Trustee fees agreed to by the Senior Agent). Nothing contained herein shall prohibit or in
any way limit the Senior Agent, prior to the Discharge of First Priority Credit Agreement Secured
Obligations, from objecting in any Insolvency Proceeding or otherwise to any action taken by the
Collateral Agent, the Trustee or any of the Noteholders, including the seeking by the Collateral
Agent, the Trustee or any Noteholder of adequate protection or the asserting by the Collateral
Agent, the Trustee or any Noteholder of any of its rights and remedies under the Indenture
Agreements or otherwise.




     Section 6.03 Asset Sales. Until the Discharge of First Priority Credit Agreement
Secured Obligations has occurred, the Collateral Agent agrees, on behalf of itself, the Trustee,
and the Noteholders, that it will not oppose any sale consented to by the Senior Agent of
Collateral pursuant to Section 363 or 365 of Title 11 of the United States Code (or any similar
provision in any other applicable Bankruptcy Law) so long as (i) if the proceeds of such sale are
retained by the Senior Agent, the Senior Agent agrees to apply such proceeds in accordance with
this Agreement or (ii) if the Senior Agent agrees to permit any portion of such proceeds to be
retained by Parent, the Borrowers or the Guarantors to be used as cash collateral, the Parent, the
Borrowers or the Guarantors use such portion of such proceeds as cash collateral in accordance with
the agreement of the Senior Agent, subject to the rights of the Collateral Agent, the Trustee and
the Noteholders to seek or request adequate protection in accordance with the provisions of Section
6.02.



     Section 6.04 Enforceability. The provisions of this Agreement are intended to be and
shall be enforceable under Section 510 of Title 11 of the United States Code. The Collateral
Agent, on behalf of itself, the Trustee, and the Noteholders, agrees that all distributions that
the Collateral Agent, the Trustee, or any Noteholder receives in any Insolvency Proceeding on
account of the Collateral or Proceeds shall be held in trust by such Person and turned over to the
Senior Agent, on behalf of itself and the Senior Lenders, for application in accordance with
Section 4.02 of this Agreement. To the extent that any amounts received by the Collateral Agent,
the Trustee, or any Noteholder are paid over in connection with this provision, the obligations
owed by Parent, any Borrower or any Guarantor to such Person will be deemed to be reinstated to the
extent of the amounts so paid over.



ARTICLE VII.




MISCELLANEOUS



     Section 7.01 Rights of Subrogation. The Collateral Agent agrees that no payment or
distribution to the Senior Agent pursuant to the provisions of this Agreement shall entitle the
Collateral Agent, the Trustee, or any Noteholder to exercise any rights of subrogation in respect
thereof until the Discharge of First Priority Credit Agreement Secured Obligations shall have
occurred. Following the Discharge of First Priority Credit Agreement Secured Obligations, the
Senior Agent agrees to execute such documents, agreements, and instruments as the Collateral Agent,
the Trustee or any Noteholder may reasonably request to evidence the transfer by subrogation to any
such Person of an interest in the Credit Agreement Secured Obligations resulting from payments or
distributions to the Senior Agent by such Person, so long as all costs and expenses (including all
reasonable legal fees and disbursements) incurred in connection therewith by the Senior Agent are
paid by such Person upon request for payment thereof.



     Section 7.02 Further Assurances. The Parties will, at their own expense and at any
time and from time to time, promptly execute and deliver all further instruments and documents, and
take all further action, that may be necessary or desirable, or that either Party may reasonably
request, in order to



21









 




protect any right or interest granted or purported to be granted hereby or to enable the
Senior Agent or the Collateral Agent to exercise and enforce its rights and remedies hereunder;
provided, however, that no Party shall be required to pay over any payment or
distribution, execute any instruments or documents, or take any other action referred to in this
Section 7.02 to the extent that such action would contravene any law, order or other legal
requirement, and in the event of a controversy or dispute, such Party may interplead any payment or
distribution in any court of competent jurisdiction, without further responsibility in respect of
such payment or distribution under this Section 7.02.




     Section 7.03 Representations. The Original Senior Agent represents and warrants to
the Collateral Agent that it has the requisite power and authority under the Original Credit
Agreement to enter into, execute, deliver, and carry out the terms of this Agreement on behalf of
itself and the Senior Lenders. The Collateral Agent represents and warrants that it has the
requisite power and authority under the Indenture to enter into, execute, deliver, and carry out
the terms of this Agreement on behalf of itself, the Trustee, and the Noteholders.



     Section 7.04 Amendments. No amendment or waiver of any provision of this Agreement
nor consent to any departure by any Party hereto shall be effective unless it is in a written
agreement executed by the Collateral Agent and the Senior Agent, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose for which given.



     Section 7.05 Addresses for Notices. All demands, notices and other communications
provided for hereunder shall be in writing and, if to the Collateral Agent, mailed or sent by
telecopy or delivered to it, addressed to it as follows:




The Bank of New York Mellon Trust Company, N.A.

700 South Flower Street, Suite 500

Los Angeles, California 90017

Attention: Corporate Trust Department/Altra Industrial Motion, Inc.

Telephone: 213-630-6176

Facsimile: 213-630-6298


With a copy to:





Emmet, Marvin & Martin, LLP

120 Broadway 32nd Floor

New York, NY 10271

Attention: Patrick A. McCartney

Tel: 212-238-3030

Facsimile: 212-238-3100


if to the Senior Agent, mailed, sent or delivered thereto, addressed to it as follows:





JPMorgan Chase Bank, N.A.

270 Park Avenue, 44th Floor

Mail Code: NY1-K855

New York, NY 10017

Attention: Altra Portfolio Manager

Facsimile: 646-534-2274



22









 




With a copy to:





Edwards Angell Palmer & Dodge LLP
 111 Huntington Avenue

Boston, MA 02199

Attention: David L. Ruediger, Esq.

Facsimile: 617-227-4420


If to Parent or Administrative Borrower, mailed, sent or delivered thereto, addressed to it as
follows:





Altra Industrial Motion, Inc.

300 Granite Street, Suite 201

Braintree, MA 02184

Attention: Chief Financial Officer

Facsimile: 781-843-0709


With a copies to:





Holland and Knight LLP

701 Brickell Avenue, Suite 3000

Miami, FL 33131

Attention: Douglas F. Darbut, Esq.

Facsimile: 305-789-7799


or as to any party at such other address as shall be designated by such party in a written notice
to the other parties complying as to delivery with the terms of this Section 7.05. All such
demands, notices and other communications shall be effective, when mailed, two business days after
deposit in the mails, postage prepaid, when sent by telecopy, when receipt is acknowledged by the
receiving telecopy equipment (or at the opening of the next business day if receipt is after normal
business hours), or when delivered, as the case may be, addressed as aforesaid.




     Section 7.06 No Waiver, Remedies. No failure on the part of any Party to exercise,
and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further exercise thereof or
the exercise of any other right. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law.



     Section 7.07 Continuing Agreement, Transfer of Secured Obligations. This Agreement is
a continuing agreement and shall (i) remain in full force and effect until the Discharge in Full of
Credit Agreement Secured Obligations shall have occurred and the Indenture Secured Obligations
shall have been paid in full, (ii) be binding upon the Parties and their successors and assigns,
and (iii) inure to the benefit of and be enforceable by the Parties and their respective
successors, transferees and assigns. Without limiting the generality of the foregoing clause
(iii), the Senior Agent or any Senior Lender, or the Collateral Agent, the Trustee, or any
Noteholder may assign or otherwise transfer all or any portion of the Credit Agreement Secured
Obligations or the Indenture Secured Obligations, as applicable, to any other Person (other than
Parent, any Borrower, any Guarantor or any Affiliate of Parent, any Borrower or any Guarantor), and
such other Person shall thereupon become vested with all the rights and obligations in respect
thereof granted to the Senior Agent or any Senior Lender, or the Collateral Agent, the Trustee, or
any Noteholder, as the case may be, herein or otherwise.



     Section 7.08 Information Concerning Financial Condition.



23









 






          (a) The Collateral Agent hereby assumes responsibility for keeping itself informed of the
financial condition of Parent, the Borrowers and Guarantors and of all other circumstances
bearing upon the risk of nonpayment of the Indenture Secured Obligations, and agrees that the
Senior Agent has and shall have no duty to advise the Collateral Agent of information known to
the Senior Agent regarding such condition or any such circumstances. In the event the Senior
Agent, in its sole discretion, undertakes, at any time or from time to time, to provide any such
information to the Collateral Agent, the Senior Agent shall be under no obligation (i) to provide
any such information to the Collateral Agent on any subsequent occasion, (ii) to undertake any
investigation, or (iii) to disclose any information which, pursuant to its commercial finance
practices, the Senior Agent wishes to maintain confidential. The Collateral Agent acknowledges
and agrees that the Senior Agent has made no warranties or representations with respect to the
legality, validity, enforceability, collectability or perfection of the Credit Agreement Secured
Obligations or any liens or security interests held in connection therewith.




          (b) The Senior Agent hereby assumes responsibility for keeping itself informed of the
financial condition of Parent, the Borrowers and Guarantors and of all other circumstances
bearing upon the risk of nonpayment of the Credit Agreement Secured Obligations, and agrees that
the Collateral Agent has and shall have no duty to advise the Senior Agent of information known
to the Collateral Agent regarding such condition or any such circumstances. In the event the
Collateral Agent, in its sole discretion, undertakes, at any time or from time to time, to
provide any such information to the Senior Agent, the Collateral Agent shall be under no
obligation (i) to provide any such information to the Senior Agent on any subsequent occasion,
(ii) to undertake any investigation, or (iii) to disclose any information which, pursuant to its
commercial finance practices, the Collateral Agent wishes to maintain confidential. The Senior
Agent acknowledges and agrees that the Collateral Agent has made no warranties or representations
with respect to the legality, validity, enforceability, collectability or perfection of the
Indenture Secured Obligations or any liens or security interests held in connection therewith.



     Section 7.09 Governing Law: Entire Agreement. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of New York except as otherwise preempted
by applicable federal law. This Agreement constitutes the entire agreement and understanding among
the Parties with respect to the subject matter hereof and supersedes any prior agreements, written
or oral, with respect thereto.



     Section 7.10 Counterparts. This Agreement maybe executed in any number of
counterparts, and it is not necessary that the signatures of all Parties be contained on any one
counterpart hereof, each counterpart will be deemed to be an original, and all together shall
constitute one and the same document.



     Section 7.11 No Third Party Beneficiary. This Agreement is solely for the benefit of
the Parties (and their permitted assignees). No other Person (including Parent, any Borrower, any
Guarantor or any Affiliate of Parent, any Borrower or any Guarantor) shall be deemed to be a third
party beneficiary of this Agreement.



     Section 7.12 Headings. The headings of the articles and sections of this Agreement
are inserted for purposes of convenience only and shall not be construed to affect the meaning or
construction of any of the provisions hereof



     Section 7.13 Severability. If any of the provisions in this Agreement shall, for any
reason, be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement and shall not invalidate
the Lien Priority or any other priority set forth in this Agreement.



24









 





     Section 7.14 Collateral Agent Status. Nothing in this Agreement shall be construed to
operate as a waiver by the Collateral Agent, with respect to Parent, any Borrower, any Guarantor,
the Trustee, or any Noteholder, of the benefit of any exculpatory rights, privileges, immunities,
indemnities, or reliance rights contained in the Indenture or any of the other Indenture
Agreements. For all purposes of this Agreement, the Collateral Agent may (a) rely in good faith,
as to matters of fact, on any representation of fact believed by the Collateral Agent to be true
(without any duty of investigation) and that is contained in a written certificate of any
authorized representative of Parent, any Borrower or of the Senior Agent or any Senior Lender, and
(b) assume in good faith (without any duty of investigation), and rely upon, the genuineness, due
authority, validity, and accuracy of any certificate, instrument, notice, or other document
believed by it in good faith to be genuine and presented by the proper person. Each of Parent,
each Borrower, each Guarantor, the Senior Agent, and each Senior Lender expressly acknowledge that
the subordination and related agreements set forth herein by the Collateral Agent are made solely
in its capacity as Collateral Agent under the Indenture with respect to the Notes issued thereunder
and the other Indenture Agreements and are not made by the Collateral Agent in its individual
commercial capacity.



     Section 7.15 Acknowledgment. Parent, each Borrower and each Guarantor hereby
acknowledges that it has received a copy of this Agreement and consents thereto, and agrees to
recognize all rights granted thereby to the Senior Agent and the Collateral Agent and will not do
any act or perform any obligation which is not in accordance with the agreements set forth in this
Agreement. Parent, each Borrower and each Guarantor further acknowledges and agrees that it is not
an intended beneficiary or third party beneficiary under this Agreement.



     Section 7.16 VENUE; JURY TRIAL WAIVER.




          (a) THE PARTIES HERETO AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE CITY
OF NEW YORK OR THE SOUTHERN DISTRICT OF NEW YORK, PROVIDED, HOWEVER, THAT ANY
SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT THE SENIOR
AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE THE SENIOR AGENT ELECTS TO BRING SUCH
ACTION OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH PARTY HERETO WAIVES, TO THE
EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF
FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING
IS BROUGHT IN ACCORDANCE WITH THIS SECTION 7.16.




          (b) EACH PARTY HERETO HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. EACH PARTY HERETO REPRESENTS THAT IT HAS REVIEWED THIS WAIVER
AND IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT
TO A TRIAL BY THE COURT.



     Section 7.17 Reciprocal Rights. The parties agree that the provisions of Sections
2.02, 2.03, 2.04, 3.02, 4.02(a) and (b), 6.01, 6.02, 6.03, 6.04 and 7.01, including, as applicable,
the defined terms referenced therein (but only to the extent used therein), which govern the
relationship, and certain rights, restrictions, and agreements, between the Senior Agent and the
holders of Credit Agreement Secured



25









 




Obligations with respect to the Credit Agreement Secured Obligations, on the first hand, and
the Collateral Agent and the Trustee and the Noteholders with respect to the Indenture Secured
Obligations, on the second hand, shall, from and after the Discharge of First Priority Credit
Agreement Secured Obligations and until the payment in full of the Indenture Secured Obligations,
apply to and govern, mutatis mutandis, the relationship between the Collateral Agent and the
Trustee and Noteholders with respect to the Indenture Secured Obligations, on the first hand, and
the Senior Agent and the holders of Credit Agreement Secured Obligations with respect to the Excess
Credit Agreement Secured Obligations, on the second hand.




     Section 7.18 Intercreditor Agreement. This Agreement is the Intercreditor Agreement
referred to in the Indenture. If this Agreement or all or any portion of either Party’s rights or
obligations hereunder are assigned or otherwise transferred to any other Person, such other Person
shall execute and deliver an agreement containing terms substantially identical to those contained
in this Agreement.



     Section 7.19 Limitation on Liabilities of the Senior Agent and the Collateral Agent.




          (a) The Senior Agent shall not be liable to the Borrower, the Guarantors, the Collateral
Agent, the Trustee or the Noteholders for any action taken, suffered, or omitted to be taken by
the Senior Agent in good faith and reasonably believed by the Senior Agent to be authorized or
within the discretion or rights or powers conferred upon the Senior Agent by this Agreement. In
no event shall the Senior Agent be responsible or liable for special, indirect, or consequential
loss or damage of any kind whatsoever (including, but not limited to, loss of profit)
irrespective of whether the Senior Agent has been advised of the likelihood of such loss or
damage and regardless of the form of action. The Senior Agent shall not be deemed to have notice
of any Default or Event of Default under the Indenture Agreements unless written notice of such
Default or Event of Default from the Collateral Agent, the Borrowers or the Guarantors is
delivered to the Senior Agent in accordance with the notice provisions set forth in Section 7.05
of this Agreement. The rights, privileges, protections, immunities and benefits given to the
Senior Agent, including, without limitation, its right to be indemnified as set forth in the
Senior Credit Documents are extended to, and shall be enforceable by, the Senior Agent are
incorporated herein by reference. In no event shall the Senior Agent be responsible or liable
for any failure or delay in the performance of its obligations hereunder arising out of or caused
by, directly or indirectly, forces beyond its control, including, without limitation, strikes,
work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or
natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities,
communications or computer (software and hardware) services; it being understood that the Senior
Agent shall use reasonable efforts which are consistent with accepted practices in the banking
industry to resume performance as soon as practicable under the circumstances.




          (b) The Collateral Agent shall not be liable to the Borrower, the Guarantors, the Senior
Agent or the Senior Lenders for any action taken, suffered, or omitted to be taken by the
Collateral Agent in good faith and reasonably believed by the Collateral Agent to be authorized
or within the discretion or rights or powers conferred upon the Collateral Agent by this
Agreement. In no event shall the Collateral Agent be responsible or liable for special,
indirect, or consequential loss or damage of any kind whatsoever (including, but not limited to,
loss of profit) irrespective of whether the Collateral Agent has been advised of the likelihood
of such loss or damage and regardless of the form of action. The Collateral Agent shall not be
deemed to have notice of any Default or Event of Default under the Senior Credit Documents unless
written notice of such Default or Event of Default from the Senior Agent, the Borrowers or the
Guarantors is delivered to the Collateral Agent in accordance with the notice provisions set
forth in Section 7.05 of this Agreement. The rights, privileges, protections, immunities and
benefits given to the Collateral Agent, including, without limitation, its right to be
indemnified as set forth in the Indenture Agreements are extended to, and shall be enforceable
by, the



26









 







Collateral Agent are incorporated herein by reference. In no event shall the Collateral
Agent be responsible or liable for any failure or delay in the performance of its obligations
hereunder arising out of or caused by, directly or indirectly, forces beyond its control,
including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism,
civil or military disturbances, nuclear or natural catastrophes or acts of God, and
interruptions, loss or malfunctions of utilities, communications or computer (software and
hardware) services; it being understood that the Collateral Agent shall use reasonable efforts
which are consistent with accepted practices in the banking industry to resume performance as
soon as practicable under the circumstances.



     Section 7.20 Limitation on the Rights of Parent, the Borrowers and the Guarantors as
Noteholders. Notwithstanding anything to the contrary set forth herein, the parties
acknowledge and agree that to the extent the Parent, any Borrower or any Guarantor acquires any
interest in any of the Notes: (i) neither the Parent nor any Borrower or Guarantor, in its
capacity as a Noteholder, shall be entitled to exercise any rights under or receive any benefits
from this Intercreditor Agreement, (ii) neither the Parent nor any of the Borrower or Guarantors,
in its capacity as a Noteholder, shall be entitled to receive any payments or distributions in
respect of any proceeds of any Collateral, unless and until (x) the Discharge in Full of Credit
Agreement Obligations has occurred and (y) all Indenture Secured Obligations (other than Indenture
Secured Obligations owing to the Parent, any Borrower or any Guarantor in its capacity as a
Noteholder) shall have been paid in full, (iii) neither the Senior Agent nor the Collateral Agent
shall be obligated to provide any notice to, or to follow any direction or instruction delivered
by, the Parent, any Borrower any Guarantor in its capacity as a Noteholder, and (iv) for purposes
of this Agreement, at any time that any Notes are held by the Parent, any Borrower or any
Guarantor, such Notes shall be treated as if they had been fully repaid and not outstanding.



27









 




IN WITNESS WHEREOF, the Senior Agent, the Collateral Agent, Parent, each Borrower and each
Guarantor has caused this Agreement to be duly executed and delivered as of the date first above
written.




	 	 	 	 	 	 	 
	SENIOR AGENT:	 	JPMORGAN CHASE BANK, N.A.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Kathleen C. Maggi	 	 
	 

	 	 	 	 

	 	 
	 	 	Name: Kathleen C. Maggi	 	 
	 	 	Title: Senior Vice President	 	 











28









 







IN WITNESS WHEREOF, the Senior Agent, the Collateral Agent, Parent, each Borrower and each
Guarantor has caused this Agreement to be duly executed and delivered as of the date first above
written.




	 	 	 	 	 	 	 
	COLLATERAL AGENT AND TRUSTEE	 	THE BANK OF NEW YORK MELLON TRUST 
COMPANY, N.A.,
in its capacities as Collateral Agent 


and Trustee under the Indenture (and not individually)	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Raymond Torres	 	 
	 

	 	 	 	 

	 	 
	 	 	Name: Raymond Torres	 	 
	 	 	Title: Senior Associate	 	 






29









 





IN WITNESS WHEREOF, the Senior Agent, the Collateral Agent, Parent, each Borrower and each
Guarantor has caused this Agreement to be duly executed and delivered as of the date first above
written.




	 	 	 	 	 
	 	PARENT AND BORROWERS:



ALTRA HOLDINGS, INC.

ALTRA INDUSTRIAL MOTION, INC.

 	 
	 	By  	/s/ Glenn E. Deegan	 
	 	Name: Glenn E. Deegan	 
	 	Title:   Vice President, Legal and Human Resources,

          
 General Counsel and Secretary	 
	 
	 	 	 	 	 
	 	AMERICAN ENTERPRISES MPT CORP.

AMERICAN ENTERPRISES MPT HOLDINGS, LLC

AMERIDRIVES INTERNATIONAL, LLC

BOSTON GEAR LLC

FORMSPRAG LLC

INERTIA DYNAMICS LLC WARNER ELECTRIC LLC

KILIAN MANUFACTURING CORPORATION

NUTTALL GEAR LLC

WARNER ELECTRIC INTERNATIONAL HOLDING, INC.

TB WOOD’S CORPORATION

TB WOOD’S INCORPORATED

TB WOOD’S ENTERPRISES, INC.

 	 
	 	By  	/s/ Glenn E. Deegan	 
	 	 	Name: 	Glenn E. Deegan	 
	 	 	Title: 	Secretary	 
	 








30









 








Annex A





     This ACKNOWLEDGMENT, dated as of            , 20    , is delivered pursuant to Section
5.04 of the Intercreditor and Lien Subordination Agreement (the “Intercreditor Agreement”),
dated as of November 25, 2009 by and among JPMorgan Chase Bank, N.A., as “Original Senior Agent”,
The Bank of New York Mellon Trust Company, N.A., as “Collateral Agent and Trustee”, Altra Holdings,
Inc., as “Parent”, Altra Industrial Motion, Inc. and certain of its Subsidiaries as “Borrowers”,
and certain other direct and indirect Subsidiaries of Parent, as “Guarantors”. Capitalized terms
used herein but not defined herein are used with the meanings given them in the Intercreditor
Agreement.



     By executing and delivering this Acknowledgment, each of Parent, for and on behalf of itself,
the Borrowers and the other Guarantors, and ______, the [lender/agent] under the New
Credit Facility (the “New [Lender/Agent]”), hereby represents, warrants, acknowledges and
agrees that: (i) the New [Lender/Agent] has become a party to the Intercreditor Agreement as the
“Senior Agent” with the same force and effect as if originally named as the Original Senior Agent
therein; (ii) the New [Lender/Agent] shall be bound by all of the terms and provisions of the
Intercreditor Agreement; (iii) the New [Lender/Agent] has assumed all duties and responsibilities
of the Senior Agent set forth in the Intercreditor Agreement; (iv) all notices and other
correspondence required to be delivered to the Senior Agent under the Intercreditor Agreement shall
be delivered to the New [Lender/Agent] at its address set forth below under its signature to this
Acknowledgment; and (v) attached hereto are true and correct copies of all material agreements
executed and/or delivered in connection with the New Credit Facility. Parent, for and on behalf
of itself, the Borrowers and the other Guarantors, hereby further represents and warrants that the
Discharge in Full of the Credit Agreement Secured Obligations under the Original Credit Agreement
has occurred.



     IN WITNESS WHEREOF, the undersigned has caused this Acknowledgment to be duly executed and
delivered as of the date first above written.



	 	 	 	 	 
	 	ALTRA HOLDINGS, INC.,
	 

	 	 	
for and on behalf of itself , the Borrowers and the other Guarantors

 	 
	 	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 	 



	 	 	 	 	 
	 	[LENDER PROVIDING NEW CREDIT FACILITY]

 	 
	 	By:  	 	 
	 	Name:  	 	 
	 	Title:  	 
	 
	 	Address for Notices: