**Exhibit 10.1**

 

# **CREDIT AGREEMENT**

 

# **DATED AS OF AUGUST 15,2003**

 

# **AMONG**

 

 

**MAGNETEK, INC.,MAGNETEK ADS POWER, INC., AND**

**MAXTEC INTERNATIONALCORP.**

 

**AS BORROWERS,**

 

**THE LOAN PARTIESPARTY HERETO,**

 

 

# **BANK ONE, NA,**

 

**AS LENDER**

 

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**TABLE OF CONTENTS**

 
| ARTICLE I.   DEFINITIONS; CONSTRUCTION      |
|-------------------------------------------------------|
|                                                  |
| 1.1                                                   | Defined  Terms |
| 1.2                                                   | Other Definitional Provisions; Construction |
|                                                  |   |
| ARTICLE II.  THE FACILITY                   |
|                                                  |
| 2.1.                                                  | The  Facility |
| 2.1.1.                                                | Revolving Loans |
| 2.1.2.                                                | Facility  LCs |
| 2.2.                                                  | Payment of the Obligations |
| 2.3.                                                  | Minimum Amount of Each Loan |
| 2.4.                                                  | Funding Accounts; Controlled Disbursement  Accounts; C; |
| 2.5.                                                  | Reliance Upon Authority; No Liability |
| 2.6.                                                  | Conversion and Continuation of Outstanding  Loans |
| 2.7.                                                  | Telephonic Notices |
| 2.8.                                                  | Fees |
| 2.9.                                                  | Interest  Rates. |
| 2.10.                                                 | Eurodollar Loans Post Default; Default  Rates |
| 2.11.                                                 | Interest Payment Dates; Interest and Fee  Basis |
| 2.12.                                                 | Voluntary Prepayments |
| 2.13.                                                 | Mandatory Prepayments |
| 2.14.                                                 | Termination of the Facility |
| 2.15.                                                 | Method of Payment |
| 2.16.                                                 | Collection of Accounts; Lock Box; Cash  Collateral Account; Application of Payments |
| 2.17.                                                 | Indemnity for Returned Payments |
| 2.18.                                                 | Noteless Agreement; Evidence of  Indebtedness |
| 2.19.                                                 | Lending Installations |
| 2.20.                                                 | Limitation of Interest |
| 2.21                                                  | One General Obligation;  Cross-Collateralized; Joint, Several and Primary Obligations |
|                                                  |   |
| ARTICLE III.  YIELD  PROTECTION; TAXES      |
|                                                  |
| 3.1.                                                  | Yield  Protection |
| 3.2.                                                  | Changes in Capital Adequacy Regulations |
| 3.3.                                                  | Availability of Types of Loans |
| 3.4.                                                  | Funding Indemnification |
| 3.5.                                                  | Taxes |
| 3.6.                                                  | Lender Statements; Survival of Indemnity |
|                                                  |   |
| ARTICLE IV.  CONDITIONS  PRECEDENT          |
|                                                  |
| 4.1.                                                  | Effectiveness; Initial Loan Advance |
| 4.2.                                                  | Each Credit Extension |
|                                                  |   |
| ARTICLE V.   REPRESENTATIONS AND WARRANTIES |
|                                                  |
| 5.1.                                                  | Existence and Standing |
| 5.2.                                                  | Authorization and Validity |
| 5.3.                                                  | No Conflict; Government Consent |
| 5.4.                                                  | Security Interest in Collateral |
| 5.5.                                                  | Financial Statements |
| 5.6.                                                  | Material Adverse Change |
| 5.7.                                                  | Taxes |
| 5.8.                                                  | Litigation and Contingent Obligations |
| 5.9.                                                  | Subsidiaries |
| 5.10.                                                 | ERISA |
| 5.11.                                                 | Accuracy of Information |

 

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| 5.12.                            | Names; Prior Transactions                               |
|----------------------------------|---------------------------------------------------------|
| 5.13.                            | Regulation  U                                           |
| 5.14.                            | Material Agreements                                     |
| 5.15.                            | Compliance With Laws                                    |
| 5.16.                            | Ownership of Properties                                 |
| 5.17.                            | Plan Assets; Prohibited Transactions                    |
| 5.18.                            | Environmental Matters                                   |
| 5.19.                            | Investment Company Act                                  |
| 5.20.                            | Public Utility Holding Company Act                      |
| 5.21.                            | Bank  Accounts                                          |
| 5.22.                            | Indebtedness                                            |
| 5.23.                            | Affiliate Transactions                                  |
| 5.24.                            | Real Property; Leases                                   |
| 5.25.                            | Intellectual Property Rights                            |
| 5.26.                            | Insurance                                               |
| 5.27.                            | Solvency                                                |
| 5.28.                            | Subordinated Indebtedness                               |
| 5.29.                            | Post-Retirement Benefits                                |
| 5.30.                            | Common  Enterprise                                      |
| 5.31.                            | Reportable Transactions                                 |
| 5.32.                            | Labor  Disputes                                         |
|                             |                                                    |
| ARTICLE VI.  COVENANTS |
|                             |
| 6.1.                             | Financial and Collateral Reporting                      |
| 6.2.                             | Use  of Proceeds                                        |
| 6.3.                             | Notices                                                 |
| 6.4.                             | Conduct of Business                                     |
| 6.5.                             | Taxes                                                   |
| 6.6.                             | Payment of Indebtedness and Other  Liabilities          |
| 6.7.                             | Insurance                                               |
| 6.8.                             | Compliance  with Laws                                   |
| 6.9.                             | Maintenance of Properties                               |
| 6.10.                            | Inspection                                              |
| 6.11.                            | Appraisals                                              |
| 6.12.                            | Communications with Accountants                         |
| 6.13.                            | Collateral Waiver Agreements and Real  Estate Purchases |
| 6.14.                            | Deposit Account Control Agreements                      |
| 6.15.                            | Additional Collateral; Further Assurances               |
| 6.16.                            | Dividends                                               |
| 6.17.                            | Indebtedness                                            |
| 6.18.                            | Capital  Structure                                      |
| 6.19.                            | Merger                                                  |
| 6.20.                            | Sale  of Assets                                         |
| 6.21.                            | Investments and Acquisitions                            |
| 6.22.                            | Liens                                                   |
| 6.23                             | Change of Name or Location; Change of  Fiscal Year      |
| 6.24.                            | Affiliate Transactions                                  |
| 6.25.                            | Amendments to Agreements                                |
| 6.26.                            | Prepayment of Indebtedness; Subordinated  Indebtedness  |
| 6.27.                            | Letters  of Credit                                      |
| 6.28.                            | Financial Contracts                                     |
| 6.29.                            | Financial Covenants                                     |
| 6.29.1.                          | Capital Expenditures                                    |
| 6.29.2.                          | Minimum Fixed Charge Coverage Ratio                     |
| 6.29.3.                          | Minimum  EBITDA                                         |
| 6.29.4.                          | Minimum Availability                                    |
| 6.30.                            | Depository  Banks                                       |
| 6.31.                            | Sale  of Accounts                                       |

 

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| 6.32.                                                                                 | Required Rate Management Transactions             |
|---------------------------------------------------------------------------------------|---------------------------------------------------|
| 6.33.                                                                                 | Holding Companies                                 |
| 6.34.                                                                                 | Operating  Profit                                 |
|                                                                                  |                                              |
| ARTICLE VII.  DEFAULTS                                                      |
|                                                                                  |
| 7.1                                                                                   | Defaults                                          |
| 7.2                                                                                   | Continuing Default                                |
|                                                                                  |                                              |
| ARTICLE VIII.  REMEDIES; WAIVERS AND AMENDMENTS                             |
|                                                                                  |
| 8.1.                                                                                  | Remedies                                          |
| 8.2.                                                                                  | Waivers by Loan Parties                           |
| 8.3.                                                                                  | Amendments                                        |
| 8.4.                                                                                  | Preservation of Rights                            |
|                                                                                  |                                              |
| ARTICLE IX.  GENERAL  PROVISIONS                                            |
|                                                                                  |
| 9.1.                                                                                  | Survival of Representations                       |
| 9.2.                                                                                  | Governmental Regulation                           |
| 9.3.                                                                                  | Headings                                          |
| 9.4.                                                                                  | Entire  Agreement                                 |
| 9.5.                                                                                  | Several Obligations; Benefits of this  Agreement  |
| 9.6.                                                                                  | Expenses; Indemnification                         |
| 9.7.                                                                                  | Accounting                                        |
| 9.8.                                                                                  | Severability of Provisions                        |
| 9.9.                                                                                  | Non-liability of Lender                           |
|                                                                                  |                                              |
| ARTICLE X.  BENEFIT OF  AGREEMENT; ASSIGNMENTS; PARTICIPATIONS              |
|                                                                                  |
| 10.1.                                                                                 | Successors and Assigns                            |
| 10.2.                                                                                 | Participations                                    |
|                                                                                  |                                              |
| ARTICLE XI.  NOTICES                                                        |
|                                                                                  |
| 11.1.                                                                                 | Notices; Effectiveness; Electronic  Communication |
| 11.2.                                                                                 | Change  of Address                                |
|                                                                                  |                                              |
| ARTICLE XII.   COUNTERPARTS                                                 |
|                                                                                  |
| ARTICLE XIII.  GUARANTY                                                     |
|                                                                                  |
| 13.1.                                                                                 | Guaranty                                          |
| 13.2.                                                                                 | Guaranty of Payment                               |
| 13.3.                                                                                 | No Discharge or Diminishment of Guaranty          |
| 13.4.                                                                                 | Defenses  Waived                                  |
| 13.5.                                                                                 | Rights of Subrogation                             |
| 13.6.                                                                                 | Reinstatement; Stay of Acceleration               |
| 13.7.                                                                                 | Information                                       |
| 13.8.                                                                                 | Termination                                       |
| 13.9.                                                                                 | Taxes                                             |
| 13.10.                                                                                | Severability                                      |
| 13.11.                                                                                | Contribution                                      |
| 13.12.                                                                                | Lending  Installations                            |
| 13.13.                                                                                | Liability Cumulative                              |
|                                                                                  |                                              |
| ARTICLE XIV.  CHOICE OF  LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL |
|                                                                                  |
| 14.1.                                                                                 | CHOICE  OF LAW                                    |
| 14.2.                                                                                 | CONSENT TO JURISDICTION                           |
| 14.3.                                                                                 | WAIVER OF JURY TRIAL                              |

 

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ATTACHMENTS

 

PRICING GRID

 

EXHIBITS

 
| EXHIBIT A. |   | FORM OF BORROWING NOTICE               |
|------------|--------|----------------------------------------|
| EXHIBIT B. |   | FORM OF CONVERSION/CONTINUATION NOTICE |
| EXHIBIT C. |   | REVOLVING NOTE                         |
| EXHIBIT D. |   | FORM OF OPINION                        |
| EXHIBIT E. |   | COMPLIANCE CERTIFICATE                 |
| EXHIBIT F. |   | JOINDER AGREEMENT                      |
| EXHIBIT G. |   | BORROWING BASE CERTIFICATE             |

 

SCHEDULES

 
| SCHEDULE 1    |   | BORROWER  FACILITIES                                                                      |
|--------------------|--------|-------------------------------------------------------------------------------------------|
| SCHEDULE 2    |   | FUNDING  ACCOUNTS; CONTROLLED DISBURSEMENT ACCOUNTS; LOCK BOXES; CASH COLLATERAL  ACCOUNT |
| SCHEDULE 3    |   | EQUIPMENT  LEASES                                                                         |
| SCHEDULE 5.1  |   | FOREIGN  QUALIFICATIONS                                                                   |
| SCHEDULE 5.8  |   | LITIGATION  AND CONTINGENT OBLIGATIONS                                                    |
| SCHEDULE 5.9  |   | CAPITALIZATION  AND SUBSIDIARIES                                                          |
| SCHEDULE 5.12 |   | NAMES;  PRIOR TRANSACTIONS                                                                |
| SCHEDULE 5.14 |   | MATERIAL  AGREEMENTS                                                                      |
| SCHEDULE 5.16 |   | OWNERSHIP  OF PROPERTIES                                                                  |
| SCHEDULE 5.22 |   | INDEBTEDNESS                                                                              |
| SCHEDULE 5.23 |   | AFFILIATE  TRANSACTIONS                                                                   |
| SCHEDULE 5.24 |   | REAL  PROPERTY; LEASES                                                                    |
| SCHEDULE 5.25 |   | INTELLECTUAL  PROPERTY RIGHTS                                                             |
| SCHEDULE 5.26 |   | INSURANCE                                                                                 |
| SCHEDULE 5.32 |   | LABOR  MATTERS                                                                            |
| SCHEDULE 6.21 |   | OTHER  INVESTMENTS                                                                        |
| SCHEDULE 6.22 |   | LIENS                                                                                     |

 

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**CREDIT AGREEMENT**

 

This Credit Agreement (this “Agreement”), dated as ofAugust 15, 2003, is among MAGNETEK, INC., a Delaware corporation (“MagneTek”),MAGNETEK ADS POWER, INC., a Delaware corporation and Subsidiary of MagneTek (“ADS”),and MAXTEC INTERNATIONAL CORP., a Delaware corporation and Subsidiary ofMagneTek (“Maxtec”) as Borrowers, the Loan Parties, and BANK ONE, NA, anational banking association having its principal office in Chicago, Illinois,as Lender (the “Lender”).

 

**RECITALS**

 

WHEREAS, theBorrowers have requested that the Lender make available to the Borrowers loansand other extensions of credit in an aggregate amount not to exceed$19,000,000, which extensions of credit will be used by the Borrowers for thepurposes set forth in Section 6.2;

 

WHEREAS, theBorrowers and the other Loan Parties have agreed to secure all of their obligationsunder the Loan Documents by granting to the Lender a security interest in andlien upon the Collateral as set forth in the Collateral Documents; and

 

WHEREAS, theGuarantors have agreed to guarantee all of the Obligations of the Borrowersunder the Loan Documents to the Lender as set forth in the Guaranty;

 

NOW THEREFORE,in consideration of these premises and the terms and conditions set forth inthis Agreement, and for other good and valuable consideration, the receipt ofwhich is hereby acknowledged, the parties hereto hereby agree as follows:

 

**ARTICLE I**

 

**DEFINITIONS;CONSTRUCTION**

 

1.1                                 DefinedTerms.  In addition to the otherterms defined in this Agreement, whenever the following capitalized terms(whether or not underscored) are used, they shall be defined as follows:

 

“Account” shall have the meaning given to such term in theSecurity Agreements.

 

“Account Debtor” means any Person obligated on an Account.

 

“Acquisition” means any transaction, or any series of relatedtransactions, consummated on or after the Closing Date, by which any Loan Party(a) acquires any going business or all or substantially all of the assets ofany Person or the assets comprising any line of business or business unit ordivision of such Person, whether through purchase of assets, merger orotherwise or (b) directly or indirectly acquires (in one transaction or as themost recent transaction in a series of transactions) at least a majority (innumber of votes) of the Capital Stock of a Person which has ordinary votingpower for the election of directors or other similar management personnel of aPerson (other than Capital Stock having such power only by reason of thehappening of a contingency) or a majority of the outstanding Capital Stock of aPerson.

 

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“Affiliate” of any Person means any other Person directly orindirectly controlling, controlled by or under common control with suchPerson.  A Person shall be deemed tocontrol another Person if the controlling Person owns 10% or more of any classof the voting Capital Stock of the controlled Person or possesses, directly orindirectly, the power to direct or cause the direction of the management orpolicies of the controlled Person, whether through ownership of Capital Stock,by contract or otherwise.

 

“Alternate Base Rate” means, for any day, a rate of interest perannum equal to the higher of (a) the Prime Rate for such day and (b) the sum ofthe Federal Funds Effective Rate for such day *plus* 1/2% per annum.

 

“Applicable LC Fee Rate” means, at any time, the percentage rateper annum payable in respect of standby Facility LCs as set forth in the PricingSchedule.

 

“Applicable Margin” means, with respect to Loans of any Type atany time, the percentage rate per annum which is applicable at such time withrespect to Loans of such Type as set forth in the Pricing Schedule.

 

“Article” means an article of this Agreement unless anotherdocument is specifically referenced.

 

“Authorized Officer” means any of the Chief Financial Officer orthe Vice President and Controller of a Borrower, acting singly.

 

“Availability” means, at any time, an amount equal to the lesserof (a) the Commitment and (b) the Borrowing Base, in each case, *minus*the Credit Exposure.

 

“Available Commitment” means, at any time, the Commitment thenin effect *minus* the Credit Exposure at such time.

 

“Available Funds” is defined in Section 2.16.2.

 

“BankingServices” means each and any of the following bank services provided to anyLoan Party by the Lender or any of its Affiliates: (a) commercial credit cards,(b) stored value cards and (c) treasury management services (includingcontrolled disbursement, automated clearinghouse transactions, return items,overdrafts and interstate depository network services).

 

“BankingServices Obligations” of the Loan Parties means any and all obligations ofthe Loan Parties, whether absolute or contingent and howsoever and whensoevercreated, arising, evidenced or acquired (including all renewals, extensions andmodifications thereof and substitutions therefor) in connection with BankingServices.

 

“Banking Services Reserves” means all Reserves which the Lenderfrom time to time establishes in its Permitted Discretion for Banking Servicesthen provided or outstanding.

 

“Bankruptcy Code” means Title 11 of the U.S. Code (11 U.S.C.§ 101 *etseq*.) and any rule or regulation issued thereunder.

 

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“Borrower”means each of MagneTek, ADS, Maxtec, and their respective successors andassigns, and “Borrowers” means, collectively, MagneTek, ADS, Maxtec, andtheir respective successors and assigns. To the extent a term or provision of this Agreement or any of the otherLoan Documents is applicable to a “Borrower”, it is applicable to each andevery Borrower unless the context expressly indicates otherwise.

 

“BorrowerFacility” means, collectively, those facilities described on Schedule 1which are owned or leased by a Borrowing Base Group Member, other thanADS.  “Borrower’s Facility” meanseach of the foregoing facilities.

 

“BorrowerRepresentative” shall mean MagneTek in its capacity as the BorrowerRepresentative pursuant to the provisions of Section 2.5.

 

“Borrowing Base” means, at any time, the sum of:

 

(a)                                  (i)85% of the Eligible Accounts of each Borrowing Base Group Member, other thanADS *plus*(ii) the lesser of (A) 85% of the Eligible Accounts of ADS or (B)$1,000,000;

 

*plus*                         (b)                                 theleast of:

 

(i)                                     the sum of:(A) 55% of ESI Inventory which at such time is Eligible Inventory; (B) 25% ofTelemotive Inventory which at such time is Eligible Inventory; (C) 25% ofElevator Inventory which at such time is Eligible Inventory; (D) 20% of PEG RawMaterials which at such time are Eligible Inventory; (E) 10% of PEG Rectifierswhich at such time are Eligible Inventory; (F) 35% of PEG Finished Goods whichat such time are Eligible Inventory; and (G) the lesser of (1) $350,000or (2) the sum of (x) 10% of Mondel Canada Inventory which at such time isEligible Inventory and (y) 10% of Power Inventory which at such time isEligible Inventory;

 

(ii)                                  80% of the NetOrderly Liquidation Value, as of any date, of the then aggregate amount ofBorrowers’ Eligible Inventory; and

 

(iii)                               $4,000,000;

 

*plus*                         (c)                                  $1,500,000(the “Equipment Availability”); *provided* that the Equipment Availabilitydescribed in this subparagraph (c) shall be automatically and permanentlyreduced by $75,000.00 per calendar quarter (“Scheduled EquipmentAvailability Reduction”) commencing on October 1, 2003 and continuingon the first day of each calendar quarter thereafter occurring, and such availabilityshall be automatically and permanently reduced to zero upon the earliestto occur of (A) the Facility Termination Date; (B) the date upon which demandfor repayment of the Loans is made by the Lender; and (3) the date upon whichthis Agreement terminates pursuant to its provisions including Section 2.14;and

 

*minus*                (d)                                 Reserves.

 

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All Inventory will, as of any time, be valued at the lower ofcost or market value, determined on a FIFO basis.  No specified category of Inventory in subparagraph (c) may beconstrued to include, and is deemed to exclude, any Inventory specified to bein another category of Inventory such that all specified categories ofInventory are at all times mutually exclusive for all purposes of thisAgreement.  The Lender may, in itsPermitted Discretion, reduce the advance rates set forth above or reduce one ormore of the other elements used in computing the Borrowing Base with 15 days advancewritten notice of such change given to the Borrower Representative unless aDefault or an Unmatured Default then exists, in which case Lender will give theBorrower Representative contemporaneous telephone or written notice of suchchange.

 

“Borrowing Base Certificate” means a certificate, signed by anAuthorized Officer of the Borrower Representative, in the form of Exhibit Gor another form which is acceptable to the Lender in its sole discretion.

 

“Borrowing Base Group Members” means, collectively, MagneTek,Maxtec, ADS and Mondel Canada, and “Borrowing Base Group Member” meanseach of MagneTek, Maxtec, ADS and Mondel Canada.

 

“Borrowing Date” means a date on which a Loan is made hereunder.

 

“Borrowing Notice” is defined in Section 2.1.1(b).

 

“Business Day” means (a) with respect to any borrowing, paymentor rate selection of Eurodollar Loans, a day (other than a Saturday or Sunday)on which banks generally are open in Chicago and New York City for the conductof substantially all of their commercial lending activities, interbank wire transferscan be made on the Fedwire system and dealings in U.S. dollars are carried onin the London interbank market and (b) for all other purposes, a day (otherthan a Saturday or Sunday) on which banks generally are open in Chicago for theconduct of substantially all of their commercial lending activities andinterbank wire transfers can be made on the Fedwire system.

 

“Business Group” means, collectively, ICG, PEG, and TPG.

 

“Business Group Member” means each of ICG, PEG, and TPG.

 

“CapitalExpenditures” means, without duplication, any expenditure or commitment toexpend money for any purchase or other acquisition of any asset which would beclassified as a fixed or capital asset on a balance sheet of the ConsolidatedGroup prepared in accordance with GAAP.

 

“Capital Stock” means any and all corporate stock, units,shares, partnership interests, membership interests, equity interests, rights,securities, or other equivalent evidences of ownership (howsoever designated)in or issued by any Person.

 

“Capitalized Lease” of a Person means any lease of Property bysuch Person as lessee which would be capitalized on a balance sheet of suchPerson prepared in accordance with GAAP.

 

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“Capitalized Lease Obligations” of a Person means the aggregateamount of the obligations of such Person under Capitalized Leases which wouldbe shown as a liability on a balance sheet of such Person prepared inaccordance with GAAP.

 

“Cash Collateral Account” is defined in Section 2.16.2.

 

“Cash Equivalent Investments” means (a) short-term obligationsof, or fully guaranteed by, the U.S., (b) commercial paper rated A-1 or betterby S&P or P-1 or better by Moody’s, (c) demand deposit accounts maintainedin the ordinary course of business with any domestic office of any commercialbank organized under the laws of the U.S. or any State thereof that has acombined capital and surplus and undivided profits of not less than$500,000,000, and (d) certificates of deposit issued by and time deposits withany domestic office of any commercial bank organized under the laws of the U.S.or any State thereof that has a combined capital and surplus and undividedprofits of not less than $500,000,000; *provided that*, in each case, the sameprovides for payment of both principal and interest (and not principal alone orinterest alone) and is not subject to any contingency regarding the payment ofprincipal or interest.

 

“Change in Control” means any of the following (or anycombination of the following) whether arising from any single transaction orevent or any series of transactions or events (whether as the most recenttransaction in a series of transactions) which, individually or in theaggregate, results in: (a) the acquisition by any Person or two or more Personsacting in concert (including a “group” as defined in Section 13(d)(3) ofthe Securities Exchange Act of 1934), of beneficial ownership (within themeaning of Rule 13d-3 of the Securities and Exchange Commission under theSecurities Exchange Act of 1934) of 25% or more of the outstanding votingCapital Stock of MagneTek; (b) the election of a director of MagneTek as aresult of which at least a majority of MagneTek’s Board of Directors does notconsist of Continuing Directors; (c) MagneTek’s ceasing to own, free and clearof all Liens (except for Permitted Liens and Liens in favor of the Lender) orother adverse claims, 100% of the outstanding voting Capital Stock of ADS(except as contemplated by Section 6.34), MXT, or Mondel Holding ona fully diluted basis; (d) MXT’s ceasing to own, free and clear of all Liens(except for Permitted Liens and Liens in favor of the Lender) or other adverseclaims, 100% of the outstanding voting Capital Stock of Maxtec on a fullydiluted basis; or (e) Mondel Holding’s ceasing to own, free and clear of allLiens (except in favor of the Lender) or other adverse claims, 100% of theoutstanding voting Capital Stock of Mondel Canada on a fully diluted basis.

 

“Closing Date” means August 15, 2003 or such later datewhen the initial Revolving Loans are made hereunder.

 

“Code” means the Internal Revenue Code of 1986 and any rule orregulation issued thereunder.

 

“Collateral” means any and all Property covered by theCollateral Documents and any and all other Property of any Loan Party or otherPerson, now existing or hereafter acquired, that may at any time be or becomesubject to a security interest or Lien in favor of the Lender, to secure theSecured Obligations.

 

“CollateralAccess Agreement” means any landlord waiver or other agreement, in form andsubstance satisfactory to the Lender, between the Lender and any third party(including any bailee,

 

5

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consignee, customs broker, orother similar Person) in possession of any Collateral or any landlord of anyLoan Party for any real Property where any Collateral is located.

 

“Collateral Documents” means, collectively, the SecurityAgreements and any other documents granting a Lien upon the Collateral assecurity for payment of the Secured Obligations.

 

“Collateral Monitoring Fee” is defined in Section 2.8(d).

 

“Collateral Shortfall Amount” is defined in Section 2.1.2(i).

 

“Commitment” means the obligation of the Lender to make Loansto, and issue Facility LCs upon the application of, the Borrower Representativein an aggregate amount not exceeding $19,000,000, as such amount may bemodified from time to time pursuant to the terms hereof.

 

“Compliance Certificate” is defined in Section 6.1(e).

 

“Consolidated Capital Expenditures” means, with reference to anyTest Period, the Capital Expenditures of the Consolidated Group calculated on aconsolidated basis for such period.

 

“Consolidated EBITDA” means, with reference to any Test Period,Consolidated Net Income *plus*, to the extent deducted fromrevenues in determining Consolidated Net Income, (a) Consolidated InterestExpense, (b) expense for taxes paid or accrued, (c) depreciation, (d)amortization, and (e) non-cash or cash pension expense attributable to any Plan(*e.g.*,exclusive of attorneys’ and accountants’ fees and actuarial fees and expenses),all calculated for the Consolidated Group on a consolidated basis in accordancewith GAAP.  Consolidated EBITDA will (i)be calculated utilizing a FIFO method of cost accounting for Inventory, (ii)not include the results from operations of J-Tec for the period ofJuly 28, 2003 to August 31, 2003; and (iii) not include any (A) gainor non-cash loss arising from the sale of capital assets, (B) gain arising fromany write-up of assets, (C) gain or non-cash loss arising from the acquisitionof debt securities or Capital Stock of a Consolidated Group member or fromcancellation or forgiveness of indebtedness, (D) gain or income arising fromaccretion of any negative goodwill, (E) gain or non-cash loss recognized by aConsolidated Group member as earnings which relate to any extraordinaryaccounting adjustments or non-recurring items of income or non-cash loss orinclude any amounts attributable to extraordinary gains or non-cash losses orextraordinary items of income or non-cash loss or any other non-operating,non-recurring gain or non-cash loss from time to time occurring; (F) income ofany other Person (other than a wholly-owned Subsidiary) in which a ConsolidatedGroup member has an ownership interest, except to the extent any such incomehas actually been received by such Consolidated Group member in the form ofcash dividends or distributions; (G) undistributed earnings of any Subsidiaryof a Consolidated Group member to the extent that the declaration or payment ofdividends or similar distributions by such Subsidiary is not at the timepermitted by the terms of any contractual obligation or requirement of lawapplicable to such Subsidiary; (H) income of any other Person accrued prior tothe date it became a Subsidiary of, or was merged or consolidated into, aConsolidated Group member or a Subsidiary of a Consolidated Group member; or(I) in the case of a successor to a Consolidated Group member by consolidationor merger or as a transferee of its assets, any earnings of such successorprior to such consolidation, merger or transfer of assets.

 

“Consolidated Fixed Charges” means, with reference to any TestPeriod, without duplication, cash Consolidated Interest Expense, *plus*scheduled principal payments on Debt For

 

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Borrowed Money(other than intercompany Indebtedness permitted by clause (e) of Section 6.17)made during such period (including all Scheduled Equipment AvailabilityReductions which occurred during such Test Period), *plus* CapitalizedLease payments, *plus* cash contributions to any Plan,all calculated for the Consolidated Group on a consolidated basis in accordancewith GAAP.

 

“Consolidated Group” means, collectively, MagneTek, ADS, MXT,Maxtec, Mondel Holding, and Mondel Canada. All other Subsidiaries of MagneTek are excluded from the ConsolidatedGroup unless expressly made a Loan Party after the Closing Date pursuant to theterms of this Agreement.

 

“Consolidated Interest Expense” means, with reference to anyTest Period, the interest expense of the Consolidated Group calculated on aconsolidated basis for such period.

 

“Consolidated Net Income” means, with reference to any TestPeriod, the net income (or loss) of the Consolidated Group, after the provisionfor all taxes, calculated on a consolidated basis for such period.

 

“Contingent Obligation” of a Person means any agreement,undertaking or arrangement by which such Person assumes, guarantees, endorses,contingently agrees to purchase or provide funds for the payment of, orotherwise becomes or is contingently liable upon, the obligation or liabilityof any other Person, or agrees to maintain the net worth or working capital orother financial condition of any other Person, or otherwise assures anycreditor of such other Person against loss, including any comfort letter,operating agreement, take-or-pay contract or the obligations of any such Personas general partner of a partnership with respect to the liabilities of the partnership.

 

“Continuing Directors” means those directors on a Person’s Boardof Directors as of the Closing Date (“Current Board”) or those directorswho are recommended or endorsed for election to the Board of Directors of thatPerson by a majority of the Current Board or their successors so recommended orendorsed.

 

“Controlled Disbursement Accounts” means the accounts set forthon Schedule 2 established at the Lender, which will be structuredand utilized as a non-interest bearing, controlled disbursement account inaccordance with the Lender’s controlled disbursement account policies andprocedures from time to time in effect.

 

“Controlled Group” means all members of a controlled group ofcorporations or other business entities and all trades or businesses (whetheror not incorporated) under common control which, together with the Borrowers orany of their respective Subsidiaries, are treated as a single employer underSection 414 of the Code.

 

“Conversion/Continuation Notice” is defined in Section 2.6.

 

“Copyrights” shall have the meaning given to such term in theSecurity Agreements.

 

“Credit Exposure” means, as at any time, the sum of (a) theaggregate principal amount of the Loans outstanding at such time, *plus*(b) an amount equal to the LC Obligations at such time.

 

“Credit Extension” means the making of a Loan or the issuance ofa Facility LC hereunder.

 

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“Credit Extension Date” means the Borrowing Date for a Loan orthe issuance date for a Facility LC.

 

“Customer List” means a list of a Borrower’s customers,specifying each customer’s name, mailing address and phone number.

 

“Debt ForBorrowed Money” means (a) indebtedness arising from the lending ofmoney; (b) Indebtedness, whether or not in any such case arising from thelending of money, (i) which is represented by notes payable or draftsaccepted that evidence extensions of credit, (ii) which constitutesobligations evidenced by bonds, debentures, notes or similar instruments, (iii)whether or not assumed, is secured by Liens on, or payable out of the proceedsor production from, Property now or hereafter owned or acquired by a Person, or(iv) upon which interest charges are customarily paid (other than accountspayable) or that was issued or assumed as full or partial payment for Propertyor services; (c) Capitalized Lease Obligations; (d) the maximum availablestated amount of all letters of credit or bankers’ acceptances and, withoutduplication, all reimbursement obligations with respect to letters of credit;(e) indebtedness for the deferred and unpaid purchase price of any Property orbusiness or any services (other than trade accounts payable incurred in theordinary course of business and constituting current liabilities); (f)Off-Balance Sheet Liabilities of the type set forth in clause (d) of thedefinition of Off-Balance Sheet Liabilities; (g) indebtedness under anyguaranty of obligations that would constitute Debt For Borrowed Money underclauses (a) through (c) hereof, if owed directly by a Person; or (h)any other obligation for borrowed money which in accordance with GAAP would beshown as a liability on the consolidated balance sheet of a Person.  “Debt For Borrowed Money” will not includetrade payables or accrued expenses.

 

“Default” means an event described in Section 7.1.

 

“DepositAccount Control Agreement” means an agreement, in form and substancesatisfactory to the Lender, among any Loan Party, a banking institution holdingsuch Loan Party’s funds, and the Lender with respect to collection and controlof all deposits and balances held in a deposit account maintained by any LoanParty with such banking institution.

 

“DesignatedConsolidating Basis” means any financial information of the Borrowers andtheir Subsidiaries which is required by the terms of this Agreement or any ofthe other Loan Documents and which will be presented to the Lender on aconsolidating basis for (a) each Business Group Member, (b) the Business Group(as consolidated with all Business Group Members), and (c) SPA (as consolidatedwith its consolidated Subsidiaries).

 

“Document”shall have the meaning given to such term in the Security Agreements.

 

“Domestic Subsidiary” means any Subsidiary which is organizedunder the laws of the U.S. or any state of the U.S.

 

“EBITDA Covenant” is defined in Section 6.29.3.

 

“EffectiveDate” means the date that the conditions precedent set forth in Section 4.1of Article IV are satisfied.

 

“ElevatorInventory” means (a) raw material Inventory owned and held by MagneTek atan ICG Facility that will be converted or fabricated into Elevator FinishedGoods in the ordinary

 

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course of MagneTek’s businessas presently conducted by it exclusive of raw materials which are comprised ofhazardous substances under applicable Environmental Laws and (b) finished goods(“Elevator Finished Goods”) Inventory manufactured, owned, and held byMagneTek at an ICG Facility for sale in the ordinary course of MagneTek’sbusiness as presently conducted by it which is comprised of electrical powerdrives for elevators, including complete systems or repair, replacement oradd-on units thereof.

 

“EligibleAccounts” means, at any time, the Accounts of a Borrowing Base Group Memberwhich the Lender determines in its Permitted Discretion are eligible as thebasis for Credit Extensions hereunder. Without limiting the Lender’s discretion provided herein, EligibleAccounts shall not include any Account:

 

(a)                                  whichis not subject to a first priority perfected security interest in favor of theLender;

 

(b)                                 whichis subject to any Lien other than (i) a Lien in favor of the Lender and (ii) aPermitted Lien which does not have priority over the Lien in favor of theLender;

 

(c)                                  withrespect to which more than 90 days have elapsed since the date of the originalinvoice therefor;

 

(d)                                 whichis owing by an Account Debtor for which more than 50% of the Accounts owingfrom such Account Debtor and its Affiliates are ineligible hereunder;

 

(e)                                  whichis owing by an Account Debtor to the extent the aggregate amount of Accountsowing from such Account Debtor and its Affiliates to the Borrowing Base GroupMembers exceeds 20% of the aggregate Eligible Accounts of the Borrowing BaseGroup Members;

 

(f)                                    withrespect to which any covenant, representation, or warranty contained in thisAgreement or in a Security Agreement has been breached or is not true;

 

(g)                                 which(i) does not arise from the sale of goods or performance of services in theordinary course of business, (ii) is not evidenced by an invoice or otherdocumentation satisfactory to the Lender which has been sent to the AccountDebtor, (iii) represents a progress billing, (iv) is contingent upon aBorrowing Base Group Member’s completion of any further performance, or (v) representsa sale on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval,consignment, cash-on-delivery or any other repurchase or return basis;

 

(h)                                 forwhich the goods giving rise to such Account have not been shipped to theAccount Debtor or for which the services giving rise to such Account have notbeen performed by the applicable Borrower;

 

(i)                                     withrespect to which any check or other instrument of payment has been returneduncollected for any reason;

 

(j)                                     whichis owed by an Account Debtor which has (i) applied for, suffered, or consentedto the appointment of any receiver, custodian, trustee, or liquidator of itsassets,

 

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(ii) has hadpossession of all or a material part of its property taken by any receiver,custodian, trustee or liquidator, (iii) filed, or had filed against it, anyrequest or petition for liquidation, reorganization, arrangement, adjustment ofdebts, adjudication as bankrupt, winding-up, or voluntary or involuntary caseunder any state or federal bankruptcy laws, (iv) has admitted in writing itsinability, or is generally unable to, pay its debts as they become due, (v)become insolvent, or (vi) ceased operation of its business;

 

(k)                                  whichis owed by any Account Debtor which has sold all or a substantially all of itsassets;

 

(l)                                     whichis owed by an Account Debtor which (i) does not maintain its chief executiveoffice in the U.S. or Canada (other than the Province of Quebec) or (ii) is notorganized under applicable law of the U.S., any state of the U.S., Canada, orany province of Canada (other than the Province of Quebec) unless, in eithercase, such Account is backed by a Letter of Credit acceptable to the Lenderwhich is in the possession of the Lender and in which the Lender as firstpriority security interest;

 

(m)                               whichis owed in any currency other than U.S. dollars;

 

(n)                                 whichis owed by (i) the government (or any department, agency, public corporation,or instrumentality thereof) of any country other than the U.S. unless suchAccount is backed by a Letter of Credit acceptable to the Lender which is inthe possession of the Lender and in which the Lender as first priority securityinterest, (ii) the government of the U.S., or any department, agency, publiccorporation, or instrumentality thereof, unless the Federal Assignment ofClaims Act of 1940, as amended (31 U.S.C. § 3727 *et seq*. and 41 U.S.C.§ 15 *etseq*.), and any other steps necessary to perfect the Lien of theLender in such Account and obtain directly the payment thereof have beencomplied with to the Lender’s satisfaction, or (iii) any State of the U.S. (orother political subdivision thereof) unless any assignment of claims (orcomparable law) law and any other steps necessary to perfect the Lien of theLender in such Account and obtain directly the payment thereof have beencomplied with to the Lender’s satisfaction;

 

(o)                                 whichis owed by any Affiliate, employee, or director of any Loan Party;

 

(p)                                 which,for any Account Debtor, exceeds a credit limit determined by the Lender, to theextent of such excess;

 

(q)                                 whichis owed by an Account Debtor or any Affiliate of such Account Debtor to whichany Loan Party is indebted, but only to the extent of such indebtedness;

 

(r)                                    whichis subject to any counterclaim, deduction, defense, setoff or dispute but onlyto the extent of any such counterclaim, deduction, defense, setoff or dispute;

 

(s)                                  whichis evidenced by any promissory note, chattel paper, or instrument or withrespect to which the terms or conditions prohibit or restrict assignment orcollection rights;

 

(t)                                    whichis owed by an Account Debtor located in any jurisdiction which requires filingof a “Notice of Business Activities Report” or other similar report in order to

 

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permit theaffected Borrowers to seek judicial enforcement in such jurisdiction of paymentof such Account, unless such Borrowers has filed such report or qualified to dobusiness in such jurisdiction;

 

(u)                                 withrespect to which a Borrowing Base Group Member has made any agreement with theAccount Debtor for any reduction thereof, other than discounts and adjustmentsgiven in the ordinary course of business;

 

(v)                                 which(i) consists (or to the extent consisting) of deposits, (ii) consists (or tothe extent consisting) of vendor warranty claims, (iii) consists (or to theextent consisting) of finance charges, service charges, or interest ondelinquent accounts, (iv) is proceeds of consigned Inventory, or (vi) are debitmemoranda;

 

(w)                               withrespect to which an invoice for the agreed-on purchase price has been issued tothe Account Debtor five or more Business Days after the services coveredthereby have been rendered or the goods covered thereby have been (or wereoriginally) delivered to the account debtor or its designee; or

 

(x)                                   whichthe Lender determines may not be paid by reason of the Account Debtor’sinability to pay or which the Lender otherwise determines is unacceptable forany reason whatsoever.

 

In the event that an Accountwhich was previously an Eligible Account ceases to be an Eligible Accounthereunder, the Borrowers Representative shall notify the Lender thereof (i)within five (5) Business Days of the date a Borrowing Base Group Member hasobtained knowledge thereof if any such Account is in excess of $250,000 in theaggregate and (ii) on and at the time of submission to the Lender of the nextBorrowing Base Certificate in all other cases.

 

“EligibleInventory” means, at any time, the Inventory owned by a Borrowing BaseGroup Member (other than ADS) and held at a Borrower’s Facility which theLender determines in its Permitted Discretion is eligible as the basis forCredit Extensions hereunder.  Withoutlimiting the Lender’s discretion provided herein, Eligible Inventory shall notinclude any Inventory:

 

(a)                                  whichis not subject to a first priority perfected Lien in favor of the Lender;

 

(b)                                 whichis subject to any Lien other than (i) a Lien in favor of the Lender and (ii) aPermitted Lien which does not have priority over the Lien in favor of theLender;

 

(c)                                  whichis, in the Lender’s opinion, slow moving, obsolete, unmerchantable, defective,unfit for sale, not salable at prices approximating at least the cost of suchInventory in the ordinary course of business or unacceptable due to age, type,category and/or quantity;

 

(d)                                 withrespect to which any covenant, representation, or warranty contained in thisAgreement or a Security Agreement has been breached or is not true;

 

(e)                                  whichdoes not conform to all standards imposed by any governmental authority;

 

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(f)                                    whichconstitutes work-in-process, packaging and shipping material, manufacturingsupplies, display items, bill-and-hold goods, returned or repossessed goods,defective goods, goods held on consignment, or goods which are not of a typeheld for sale in the ordinary course of business;

 

(g)                                 whichis not located in the U.S. (exclusive of the Mondel Canada Facility) or is intransit with a common carrier from vendors and suppliers;

 

(h)                                 whichis located in any location leased by a Borrowing Base Group Member (other thanADS) unless (i) the lessor has delivered to the Lender a Collateral AccessAgreement or (ii) a Reserve for rent, charges, and other amounts due or tobecome due with respect to such facility has been established by the Lender inits Permitted Discretion;

 

(i)                                     whichis located in any third party warehouse or is in the possession of a bailee andis not evidenced by a Document, unless (i) such warehouseman or bailee has deliveredto the Lender a Collateral Access Agreement and such other documentation as theLender may require or (ii) an appropriate Reserve has been established by theLender in its Permitted Discretion;

 

(j)                                     whichis the subject of a consignment by a Borrowing Base Group Member (other thanADS) as consignor;

 

(k)                                  whichis perishable;

 

(l)                                     which(i) contains or bears any Intellectual Property Rights licensed to a Loan Partyunless the Lender is satisfied that it may sell or otherwise dispose of suchInventory without (A) infringing the rights of such licensor, (B) violating anycontract with such licensor, or (C) incurring any liability with respect topayment of royalties other than royalties incurred pursuant to sale of suchInventory under the current licensing agreement or (ii) is subject to anycontractual arrangement or any law, rule or regulation that could, in anyinstance in the Lender’s Permitted Discretion, limit or impair the ability ofthe Lender to promptly exercise any of its rights with respect thereto;

 

(m)                               whichis not reflected in a current perpetual Inventory report of the Borrowing BaseGroup Members, other than ADS (unless such Inventory is reflected in a reportto the Lender as “in transit” Inventory);

 

(n)                                 whichis custom made for a particular customer of a Borrowing Base Group Member(other than ADS) for which such Borrower’s customer did not issue a purchaseorder to such Borrower; or

 

(o)                                 whichthe Lender otherwise determines is unacceptable for any reason whatsoever.

 

In the event that Inventorywhich was previously Eligible Inventory ceases to be Eligible Inventoryhereunder, the Borrower Representative shall notify the Lender thereof (i)within five (5) Business Days of the date a Borrowing Base Group Member (otherthan ADS) has obtained knowledge thereof if any such Inventory has a value(based on the lower of cost, determined on a first-in, first-

 

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out basis, or market) in excessof $500,000 in the aggregate and (ii) on and at the time of submission to theLender of the next Borrowing Base Certificate in all other cases.

 

“Environmental Laws” means any and all federal, state, local andforeign statutes, laws, judicial decisions, regulations, ordinances, rules,judgments, orders, decrees, plans, injunctions, permits, concessions, grants,franchises, licenses, agreements and other governmental restrictions relatingto (a) the protection of the environment, (b) the effect of the environment onhuman health, (c) emissions, discharges or releases of pollutants,contaminants, hazardous substances or wastes into surface water, ground wateror land, or (d) the manufacture, processing, distribution, use, treatment,storage, disposal, transport or handling of pollutants, contaminants, hazardoussubstances or wastes or the clean-up or other remediation thereof.

 

“Equipment” has the meaning specified in the SecurityAgreements.

 

“Equipment Availability” is defined in subparagraph (c) of thedefinition of Borrowing Base.

 

“Equipment Leases” means the leases attached as Schedule 3,whether or not a Borrower is the primary obligor or a guarantor thereunder.

 

“ERISA” means the Employee Retirement Income Security Act of1974, as amended from time to time, and any rule or regulation issuedthereunder.

 

“ESI Inventory” means (a) raw material Inventory owned and heldby MagneTek at an ICG Facility that will be converted or fabricated into ESIFinished Goods in the ordinary course of MagneTek’s business as presentlyconducted by it exclusive of raw materials which are comprised of hazardoussubstances under applicable Environmental Laws and (b) finished goods (“ESIFinished Goods”) Inventory manufactured, owned, and held by MagneTek at anICG Facility for sale in the ordinary course of MagneTek’s business aspresently conducted by it which is comprised of electrical control panels andpower drives for the overhead crane and material handling industry, includingcomplete systems or repair, replacement or add-on units thereof.

 

“Eurodollar Loan” means a Loan which, except as otherwiseprovided in Section 2.10, bears interest at the applicableEurodollar Rate.

 

“Eurodollar Base Rate” means, with respect to a Eurodollar Loanfor the relevant Interest Period, the applicable British Bankers’ AssociationLIBOR rate for deposits in U.S. dollars as reported by any generally recognizedfinancial information service as of 11:00 a.m. (London time) two Business Daysprior to the first day of such Interest Period, and having a maturity equal tosuch Interest Period, *provided that*, if no such British Bankers’Association LIBOR rate is available to the Lender, the applicable EurodollarBase Rate for the relevant Interest Period shall instead be the rate determinedby the Lender to be the rate at which the Lender or one of its Affiliate banksoffers to place deposits in U.S. dollars with first-class banks in theinterbank market at approximately 11:00 a.m. (London time) two Business Daysprior to the first day of such Interest Period, in the approximate amount ofthe Lender’s relevant Eurodollar Loan and having a maturity equal to suchInterest Period.

 

“Eurodollar Loan” means a Loan which, except as otherwiseprovided in Section 2.10, bears interest at the applicableEurodollar Rate.

 

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“Eurodollar Rate” means, with respect to a Eurodollar Loan forthe relevant Interest Period, the sum of (a) the quotient of (i) the EurodollarBase Rate applicable to such Interest Period, *divided by* (ii) one *minus*the Reserve Requirement (expressed as a decimal) applicable to such InterestPeriod, *plus*(b) the Applicable Margin.

 

“Excluded Foreign Stock” means, as of the Closing Date, theCapital Stock of any Foreign Subsidiary of MagneTek or Mondel Holding.

 

“Excluded Taxes” means, in the case of the Lender or itsapplicable Lending Installation, taxes imposed on its overall revenue or netincome, and franchise taxes imposed on it, by (a) the jurisdiction under thelaws of which the Lender is incorporated or organized or any politicalsubdivision thereof or (b) the jurisdiction in which the Lender’s principalexecutive office or the Lender’s applicable Lending Installation is located orany political subdivision thereof.

 

“Exhibit” refers to an exhibit to this Agreement, unless anotherdocument is specifically referenced.

 

“Existing LCs” means the outstanding Letters of Credit issuedprior to the Closing Date under the Prior Agreement.

 

“Facility” means the credit facility described in Section 2.1hereof to be provided to the Borrowers on the terms and conditions set forth inthis Agreement.

 

“Facility LC” is defined in Section 2.1.2(a).

 

“Facility LC Application” is defined in Section 2.1.2(b).

 

“Facility LC Collateral Account” is defined in Section 2.1.2(h).

 

“Facility Termination Date” means July 15, 2006 or anyearlier date on which the  Commitment isreduced to zero or otherwise terminated pursuant to the terms hereof.

 

“Federal Funds Effective Rate” means, for any day, an interestrate per annum equal to the weighted average of the rates on overnight Federalfunds transactions with members of the Federal Reserve System arranged byFederal funds brokers on such day, as published for such day (or, if such dayis not a Business Day, for the immediately preceding Business Day) by theFederal Reserve Bank of New York, or, if such rate is not so published for anyday which is a Business Day, the average of the quotations at approximately11:00 a.m. (Chicago time) on such day on such transactions received by theLender from three Federal funds brokers of recognized standing selected by theLender in its sole discretion.

 

“FIFO” means a first in-first-out method of cost accounting forInventory in accordance GAAP.

 

“Financial Contract” of a Person means (a) any exchange-tradedor over-the-counter futures, forward, swap or option contract or otherfinancial instrument with similar characteristics, or (b) any Rate ManagementTransaction.

 

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“FiscalMonth” means any of the monthly accounting periods of the ConsolidatedGroup.

 

“FiscalQuarter” means any of the quarterly accounting periods of the ConsolidatedGroup, ending on the Sunday closest to September 30th, December 31st,March 31st, and June 30th of each year.

 

“Fiscal Year” means any of the annual accounting periods of theConsolidated Group ending on the Sunday closest to June 30 of each year.

 

“Fixed Charge Coverage Ratio” means, the ratio, determined forany Test Period, of (a) Consolidated EBITDA for such Test Period *minus*(i) the unfinanced portion of Consolidated Capital Expenditures (for purposesof this clause (a) “unfinanced” will not include funds borrowed from the Lenderas a Loan), (ii) expense for income taxes paid in cash, and (iii) dividends ordistributions paid in cash for such Test Period (exclusive of dividends ordistributions from a Subsidiary to a Borrower) to (b) Consolidated FixedCharges for such Test Period, all calculated for the Consolidated Group on aconsolidated basis.

 

“Fixtures” has the meaning specified in the Security Agreements.

 

“Floating Rate” means, for any day, a rate per annum equal to(a) the Alternate Base Rate for such day *plus* (b) the Applicable Margin, ineach case changing when and as the Alternate Base Rate changes.

 

“Floating Rate Loan” means a Loan which, except as otherwiseprovided in Section 2.10, bears interest at the Floating Rate.

 

“Foreign Subsidiary” means any Subsidiary which is not aDomestic Subsidiary.

 

“Funding Account” is defined in Section 2.4.

 

“GAAP” means generally accepted accounting principles as ineffect from time to time, applied in a manner consistent with that used inpreparing the financial statements referred to in Section 5.5.

 

“Guaranteed Obligations” is defined in Section 13.1.

 

“Guarantor” each Loan Party and any other Person who becomes aLoan Party pursuant to a Joinder Agreement and their successors and assigns.

 

 “Guaranty” means Article XIIIof this Agreement and each separate guaranty, in form and substancesatisfactory to the Lender, delivered by each Guarantor that is a ForeignSubsidiary.

 

 “Highest Lawful Rate”shall mean, on any day, the maximum non-usurious rate of interest permitted forthat day by applicable federal or State law stated as a rate per annum.

 

“ICG” means MagneTek’s Industrial Power Controls business unitwhich is comprised of the operations of MagneTek, Maxtec, and Mondel Canada atthe ICG Facilities.

 

“ICG Facility” means a Borrower Facility designated as an ICGFacility on Schedule 1.

 

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“InactiveCompanies” means Magnetek Leasing Corporation, a Delaware corporation,Magnetek National Electric Coil, Inc., a Delaware Corporation, and theirrespective successors and assigns.

 

“Indebtedness”of a Person means such Person’s: (a) Debt For Borrowed Money, (b) obligationsof such Person to purchase securities or other Property arising out of or inconnection with the sale of the same or substantially similar securities orProperty or any other Off-Balance Sheet Liabilities, (c) Contingent Obligationsfor which the underlying transaction constitutes Indebtedness under thisdefinition, (d) Net Mark-to-Market Exposure under all Rate ManagementTransactions**,** (e) obligations of such Person under any Sale and LeasebackTransaction, and (f) obligations under any liquidated earn-out.

 

“IntellectualProperty Rights” means, with respect to any Person, all of such Person’sPatents, Copyrights, Trademarks, and Licenses, all other rights under any ofthe foregoing, all extensions, renewals, reissues, divisions, continuations andcontinuations-in-part of any of the foregoing, and all rights to sue for past,present, and future infringement of any of the foregoing.

 

“Interest Period” means, with respect to a Eurodollar Loan, aperiod of one, two, or three months commencing on a Business Day selected bythe Borrower Representative pursuant to this Agreement.  Such Interest Period shall end on the daywhich corresponds numerically to such date one, two, or three monthsthereafter, *provided,however,*that if there is no such numerically corresponding day insuch next, second, or third succeeding month, such Interest Period shall end onthe last Business Day of such next, second, or third succeeding month.  If an Interest Period would otherwise end ona day which is not a Business Day, such Interest Period shall end on the nextsucceeding Business Day, *provided, further,*that if said nextsucceeding Business Day falls in a new calendar month, such Interest Periodshall end on the immediately preceding Business Day.

 

“Inventory” has the meaning specified in the SecurityAgreements.

 

“Investment” of a Person means any (a) loan, advance, extensionof credit (other than accounts receivable arising in the ordinary course ofbusiness on terms customary in the trade) or contribution of capital by suchPerson, (b) stocks, bonds, mutual funds, partnership interests, notes,debentures, securities or other Capital Stock owned by such Person, (c) anydeposit accounts and certificate of deposit owned by such Person, and (d)structured notes, derivative financial instruments and other similarinstruments or contracts owned by  suchPerson.

 

“J-Tec” means J-Tec, Inc., an Ohio corporation.

 

“Joinder Agreement” is defined in Section 6.15(a).

 

“LC Fee” is defined in Section 2.8(b).

 

“LC Obligations” means, at any time, the sum, withoutduplication, of (a) the aggregate undrawn stated amount under all Facility LCsoutstanding at such time, after giving effect to reinstatements of the faceamount effected, pursuant to the terms of the Facility LCs, prior to such time *plus*(b) the aggregate unpaid amount at such time of all Reimbursement Obligations.

 

“LC Payment Date” is defined in Section 2.1.2(c).

 

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“Lending Installation” means the office, branch, subsidiary orAffiliate of the Lender listed on the signature pages hereof or on aSchedule or otherwise selected by the Lender pursuant to Section 2.19.

 

“Letter of Credit” of a Person means a letter of credit orsimilar instrument which is issued upon the application of such Person or uponwhich such Person is an account party or for which such Person is in any wayliable.

 

“Lien” means any lien (statutory or other), mortgage, pledge,hypothecation, assignment, deposit arrangement, adverse claim, encumbrance orpreference, priority or other security agreement or preferential arrangement ofany kind or nature whatsoever (including the interest of a vendor or lessorunder any conditional sale, Capitalized Lease or other title retentionagreement).

 

“Licenses” shall have the meaning given to such term in theSecurity Agreements.

 

“Loans” means the loans made pursuant to Article II(or any conversion or continuation thereof).

 

“Loan Documents” means this Agreement, the Note, the Facility LCApplications, the Collateral Documents, the Guaranty, and all other agreements,instruments, documents and certificates identified in Section 4.1executed and delivered to, or in favor of, the Lender and including all otherpledges, powers of attorney, consents, assignments, contracts, notices, letterof credit agreements and all other written matter whether heretofore, now orhereafter executed by or on behalf of any Loan Party, or any employee of anyLoan Party, and delivered to the Lender or its Affiliates in connection withthe Agreement, the Banking Services, the Rate Management Obligations or thetransactions contemplated hereby and thereby. Any reference in the Agreement or any other Loan Document to a LoanDocument shall include all appendices, exhibits or schedules thereto, and allamendments, restatements, supplements or other modifications thereto, and shallrefer to the Agreement or such Loan Document as the same may be in effect atany and all times such reference becomes operative.

 

“Loan Parties” means MagneTek, ADS, MXT, Maxtec, Mondel Holding,Mondel Canada, the Inactive Companies and any other Person who becomes a partyto this Agreement pursuant to a Joinder Agreement.

 

“Lock Box” is defined in Section 2.16.1.

 

“MagneTek Pension Plan” means the Magnetek FlexCare Plus RetirementPension Plan.

 

“Material Adverse Effect” means a material adverse effect on (a)the business, Property, condition (financial or otherwise), results ofoperations, or prospects of the Consolidated Group taken as a whole, (b) theability of any Loan Party to perform its obligations under the Loan Documentsto which it is a party, (c) the Collateral, or the Lender’s Liens on theCollateral or the priority of such Liens, or (d) the validity or enforceabilityof any of the Loan Documents or the rights or remedies of the Lenderthereunder.

 

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“Material Indebtedness” means Debt For Borrowed Money (exclusiveof the Credit Exposure) in an outstanding principal amount of $500,000 or morein the aggregate (or the equivalent thereof in any currency other than U.S.dollars).

 

“Material Indebtedness Agreement” means any agreement underwhich any Material Indebtedness was created or is governed or which providesfor the incurrence of Indebtedness in an amount which would constitute MaterialIndebtedness (whether or not an amount of Indebtedness constituting MaterialIndebtedness is outstanding thereunder).

 

“Modify” and “Modification” aredefined in Section 2.1.2(a).

 

“Mondel Holding” means Magnetek MondelHolding, Inc., a Delaware corporation, its successors and assigns.

 

“Mondel Canada” means Mondel ULC, an unlimited liability corporationorganized under the laws of Nova Scotia, Canada, its successor andassigns.

 

“Mondel Canada Facility” means aBorrower Facility designated as the Mondel Canada Facility on Schedule 1.

 

“Mondel Canada Inventory” means (a) raw material Inventory ownedand held by Mondel Canada at the Mondel Canada Facility that will be convertedor fabricated into Mondel Finished Goods in the ordinary course of MondelCanada’s business as presently conducted by it exclusive of raw materials whichare comprised of hazardous substances under applicable Environmental Laws and(b) finished goods (“Mondel Finished Goods”) Inventory manufactured,owned, and held by Mondel Canada at the Mondel Canada Facility for sale in theordinary course of Mondel Canada’s business as presently conducted by it whichis comprised of brakes and brake-type systems for the overhead crane andmaterial handling industry, including complete systems or repair, replacementor add-on units thereof.

 

“Moody’s” means Moody’s Investors Service, Inc., its successorsand assigns

 

“MXT” means MXT Holdings, Inc., an Illinois corporation, itssuccessors and assigns.

 

“Multiemployer Plan” means a Plan maintained pursuant to acollective bargaining agreement or any other arrangement to which a Loan Partyor any member of the Controlled Group is a party to which more than oneemployer is obligated to make contributions.

 

“Net Cash Proceeds” means, if in connection with (a) an assetdisposition, cash proceeds net of (i) commissions and other reasonable andcustomary transaction costs, fees and expenses properly attributable to suchtransaction and payable by such Loan Party in connection therewith which are onan arms-length basis in the ordinary course of business, (ii) transfer taxes,(iii) amounts payable to holders of senior Liens on such asset (to the extentsuch Liens constitute Permitted Liens hereunder), if any, and (iv) anappropriate reserve for income taxes in accordance with GAAP established inconnection therewith, (b) the issuance or incurrence of Debt For BorrowedMoney, cash proceeds net of attorneys’ fees, investment banking fees,accountants’ fees, underwriting discounts and commissions and other customaryfees and expenses actually incurred in connection therewith and fees associatedwith retiring any refinanced Debt For Borrowed Money, or (c) an equityissuance, cash proceeds net of underwriting discounts and commissions and other

 

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reasonablecosts, attorneys’ fees, accountants’ fees and other reasonable and customarytransaction costs, fees and expenses properly attributable to such transactionwhich are on an arms-length basis in the ordinary course of business.

 

“Net Mark-to-Market Exposure” of a Person means, as of any dateof determination, the excess (if any) of all unrealized losses over allunrealized profits of such Person arising from Rate ManagementTransactions.  As used in thisdefinition, “unrealized losses” means the fair market value of the cost to suchPerson of replacing such Rate Management Transaction as of the date ofdetermination (assuming the Rate Management Transaction were to be terminatedas of that date), and “unrealized profits” means the fair market value of thegain to such Person of replacing such Rate Management Transaction as of thedate of determination (assuming such Rate Management Transaction were to beterminated as of that date).

 

“NetOrderly Liquidation Value” means, as of any date, with respect to Inventoryof any Person, the orderly liquidation value thereof as determined in a manneracceptable to the Lender by an appraiser acceptable to the Lender, net of allcosts of liquidation thereof, pursuant to then current appraisal.

 

“Note” means the Revolving Note.

 

“Obligations” means all unpaid principal of and accrued andunpaid interest on present and future Loans, all LC Obligations, all BankingServices Obligations, all Rate Management Obligations owing to the Lender orits Affiliates, all indebtedness under all Equipment Leases, all accrued andunpaid fees and all expenses, reimbursements, indemnities and other obligationsof the Loan Parties to the Lender or its Affiliates or any indemnified partyarising under the Loan Documents, including the Existing LCs, whether or notevidenced by any note or other instrument, or any other document, whetherarising from an extension of credit, opening of a letter of credit, creditcard, acceptance (including a bankers’ acceptance), lease, loan, guaranty,indemnification or otherwise, whether direct or indirect (including thoseacquired by assignment from others, and any participation by the Lender or anyAffiliate of the Lender in a Borrower’s or any other Loan Party’s debts owingto others), absolute or contingent, related or unrelated, due or to become due,primary or secondary, whether arising out of overdrafts on checking, deposit orother accounts or electronic funds transfers (whether through automaticclearing houses or otherwise) or out of the Lender’s or any of the Lender’sAffiliate’s non-receipt of, or inability to collect, funds or otherwise notbeing made whole in connection with wire transfers or depository transferchecks or other similar arrangements, and including all principal, interest,charges, expenses, fees, attorneys’ fees, filing fees and any other sumschargeable to a Borrower or any other Loan Party under any of the LoanDocuments.

 

“Off-Balance Sheet Liability” of a Person means (a) anyrepurchase obligation or liability of such Person with respect to accounts ornotes receivable sold by such Person, (b) any indebtedness, liability orobligation under any Sale and Leaseback Transaction which is not a CapitalizedLease, (c) any indebtedness, liability or obligation under any so-called“synthetic lease” transaction entered into by such Person, or (d) anyindebtedness, liability or obligation arising with respect to any othertransaction which is the functional equivalent of or takes the place ofborrowing but which does not constitute a liability on the balance sheets ofsuch Person, but excluding from this clause (d) Operating Leases.

 

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“Operating Lease” of a Person means any lease of Property (otherthan a Capitalized Lease) by such Person as lessee which has an original term(including any required renewals and any renewals effective at the option ofthe lessor) of one year or more.

 

“Operating Lease Obligations” means, as at any date ofdetermination, the amount obtained by aggregating the present values,determined in the case of each particular Operating Lease by applying adiscount rate (which discount rate shall equal the discount rate which would beapplied under GAAP if such Operating Lease were a Capitalized Lease) from thedate on which each fixed lease payment is due under such Operating Lease tosuch date of determination, of all fixed lease payments due under all OperatingLeases of the Borrowers and its Subsidiaries.

 

“Operating Profit” means, for any Test Period, the total(without duplication), in Dollars (all as determined in accordance with GAAPconsistently applied) of each Business Group Member’s earnings before interest,income taxes, and general and administrative overhead expenses of MagneTek forthe applicable Test Period.  “OperatingProfit” of TPG will not include the results from operations of J-Tec for theperiod of July 28, 2003 to August 31, 2003.

 

“Operating Profit Covenant” is defined in Section 6.34.

 

“Other Taxes” is defined in Section 3.5(b).

 

 “Participants” isdefined in Section 10.2(a).

 

“Patents” shall have the meaning given to such term in theSecurity Agreements.

 

“Payment Date” means (a) with respect to interest payments dueon any Floating Rate Loan, the first day of each calendar month and theFacility Termination Date, (b) with respect to interest payments due on anyEurodollar Loan, (i) the last day of the applicable Interest Period and (ii)the Facility Termination Date, (c) with respect to the Collateral MonitoringFee or the Unused Commitment Fee, the first day of each calendar month and theFacility Termination Date, and (d) with respect to the LC Fee: (i) for anycommercial Facility LCs, a one-time payment on the date of issuance of the commercialFacility LC and (ii) for any standby Facility LCs, in advance on the first dayof each calendar month and the Facility Termination Date.

 

“PBGC” means the Pension Benefit Guaranty Corporation, or anysuccessor thereto.

 

“PEG” means MagneTek’s Power Electronic Group business unitwhich is comprised of the operations of MagneTek at the PEG Facilities.

 

“PEG Facility” means a Borrower Facility designated as a PEGFacility on Schedule 1.

 

“PEG Finished Goods” means finished goods Inventorymanufactured, owned, and held by MagneTek at a PEG Facility for sale in theordinary course of MagneTek’s business as presently conducted by each of themwhich is comprised of AC/DC power supply and AC/DC power converters servicingthe data storage, telecommunications, semi-conductor, medical, and industrialmarkets, including complete systems or repair, replacement or add-on unitsthereof.

 

“PEG Raw Materials” means raw material Inventory owned and heldby MagneTek or Mondel Canada at a PEG Facility that will be converted orfabricated into PEG Finished Goods in

 

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the ordinarycourse of MagneTek’s and Mondel Canada’s business as presently conducted byeach of them exclusive of (a) PEG Rectifiers and (b) raw materials which arecomprised of hazardous substances under applicable Environmental Laws.

 

“PEG Rectifiers” means raw material Inventory owned and held byMagneTek at a PEG Facility that will be converted or fabricated into PEGFinished Goods in the ordinary course of MagneTek’s and Mondel Canada’sbusiness as presently conducted by each of them which is comprised solely ofrectifiers.

 

“Permitted Discretion” means a determination made in good faithand in the exercise of reasonable (from the perspective of a secured asset-basedlender) business judgment.

 

“Permitted Liens” is defined in Section 6.22.

 

“Permitted Obligations” means all obligations permitted under Section 6.17.

 

“Person” means any natural person, corporation, firm, jointventure, partnership, limited liability company, association, enterprise, trustor other entity or organization, or any government or political subdivision orany agency, department or instrumentality thereof.

 

“Plan” means an employee pension benefit plan which is coveredby Title IV of ERISA or subject to the minimum funding standards underSection 412 of the Code as to which a Loan Party or any member of theControlled Group may have any liability.

 

“Power Inventory” means (a) raw material Inventory owned andheld by MagneTek at an ICG Facility that will be converted or fabricated intoPower Finished Goods in the ordinary course of MagneTek’s business as presentlyconducted by it exclusive of raw materials which are comprised of hazardoussubstances under applicable Environmental Laws and (b) finished goods (“PowerFinished Goods”) Inventory manufactured, owned, and held by MagneTek at anICG Facility for sale in the ordinary course of MagneTek’s business aspresently conducted by it which is comprised of power supply units foralternative energy sources and fuel cells, including complete systems orrepair, replacement or add-on units thereof.

 

“Prepayment Fee” is defined in Section 2.14(b).

 

“Presentments” is defined in Section 2.4.

 

“Pricing Schedule” means the Schedule attached hereto identifiedas such.

 

“Prior Agreement” is defined in Section 4.1(j).

 

“Prime Rate” means a rate per annum equal to the prime rate ofinterest announced from time to time by the Lender or its parent (which is notnecessarily the lowest rate charged to any customer), changing when and as saidprime rate changes.

 

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“Problem Financing Statements” means the following financingstatements:

 
| **Secured Party**                           |   | **Filing  Office**              |   | **Filing #** |   | **Filing  Date** |
|---------------------------------------------|--------|---------------------------------|--------|--------------|--------|------------------|
| ASARCO,  Incorporated                       |   | Tennessee  Secretary of State   |   | 940369087    |   | 11-09-94         |
| ASARCO,  Incorporated                       |   | Davidson  County, Tennessee     |   | E0061503     |   | 06-22-99         |
| ASARCO,  Incorporated                       |   | Mississippi  Secretary of State |   | 844846       |   | 11-10-94         |
| ASARCO,  Incorporated                       |   | Copiah  County, Mississippi     |   | 52718        |   | 06-14-99         |
| Mississippi  Business Finance Corporation   |   | Delaware  Secretary of State    |   | 22219016     |   | 08-27-02         |
| Toshiba  American Information Systems, Inc. |   | Delaware  Secretary of State    |   | 22223620     |   | 08-28-02         |

 

“Projections” is defined in Section 6.1(d).

 

“Property” of a Person means any and all property, whether real,personal, tangible, intangible, or mixed, of such Person, or other assetsowned, leased or operated by such Person.

 

“Rate Management Obligations” of a Person means any and allobligations of such Person, whether absolute or contingent and howsoever andwhensoever created, arising, evidenced or acquired (including all renewals,extensions and modifications thereof and substitutions therefor), under (a) anyand all Rate Management Transactions, and (b) any and all cancellations, buybacks, reversals, terminations or assignments of any Rate ManagementTransactions.

 

“Rate Management Transaction” means any transaction (includingan agreement with respect thereto) now existing or hereafter entered by anyLoan Party which is a rate swap, basis swap, forward rate transaction,commodity swap, commodity option, equity or equity index swap, equity or equityindex option, bond option, interest rate option, foreign exchange transaction,cap transaction, floor transaction, collar transaction, forward transaction,currency swap transaction, cross-currency rate swap transaction, currencyoption or any other similar transaction (including any option with respect toany of these transactions) or any combination thereof, whether linked to one ormore interest rates, foreign currencies, commodity prices, equity prices orother financial measures.

 

“Regulation D” means Regulation D of the Board of Governors ofthe Federal Reserve System or other regulation or official interpretation ofsaid Board of Governors relating to reserve requirements applicable to memberbanks of the Federal Reserve System.

 

“Regulation U” means Regulation U of the Board of Governors ofthe Federal Reserve System or other regulation or official interpretation ofsaid Board of Governors relating to the extension of credit by banks for thepurpose of purchasing or carrying margin stocks applicable to member banks ofthe Federal Reserve System.

 

“Reimbursement Obligations” means, at any time, the aggregate ofall obligations of the Borrowers then outstanding under Section 2.1.2to reimburse the Lender for amounts paid by the Lender in respect of any one ormore drawings under Facility LCs.

 

“Remittances” is defined in Section 2.16.1.

 

“Reportable Event” means a reportable event as defined inSection 4043 of ERISA and the regulations issued under such section, withrespect to a Plan, excluding, however, such events as to which the PBGC has byregulation waived the requirement of Section 4043(a) of ERISA that it be

 

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notifiedwithin thirty days of the occurrence of such event, *provided however,*that afailure to meet the minimum funding standard of Section 412 of the Codeand of Section 302 of ERISA shall be a Reportable Event regardless of theissuance of any such waiver of the notice requirement.

 

“Reports” is defined in Section 9.6(a)(i).

 

“Reserves”means any and all reserves which the Lender deems necessary, in its PermittedDiscretion, to maintain (including reserves for cost testing, aged credits,accrued and unpaid interest on the Secured Obligations, Banking ServicesReserves, reserves for rent at locations leased by any Loan Party and forwarehousemen’s and bailee’s charges, reserves for dilution of Accounts, reservesfor Inventory shrinkage, reserves for customs charges and shipping chargesrelated to any Inventory in transit, reserves for Rate Management Transactions,reserves for contingent liabilities of any Loan Party, reserves for uninsuredlosses of any Loan Party and reserves for taxes, fees, assessments, and othergovernmental charges) with respect to the Collateral or any Loan Party.

 

 “Revolving Loans” meansthe revolving loans extended by the Lender to the Borrowers pursuant to Section 2.1.1.

 

“Revolving Note” is defined in Section 2.18(d).

 

“Reserve Requirement” means, with respect to an Interest Period,the maximum aggregate reserve requirement (including all basic, supplemental,marginal and other reserves) which is imposed under Regulation D on Eurocurrencyliabilities.

 

“S&P” means Standard and Poor’s Ratings Services, a divisionof The McGraw Hill Companies, Inc., its successors and assigns.

 

“Sale and Leaseback Transaction” means any sale or othertransfer of Property by any Person with the intent to lease such Property aslessee.

 

“Schedule” refers to a specific schedule to this Agreement,unless another document is specifically referenced.

 

“Scheduled Equipment Availability Reduction” is defined insubparagraph (c) of the definition of Borrowing Base.

 

“Section” means a numbered section of this Agreement,unless another document is specifically referenced.

 

“Secured Obligations” means, collectively, (i) the Obligations;(ii) all Banking Services Obligations; (iii) all Rate Management Obligations owingto the Lender or its Affiliates; and (iv) all indebtedness under all EquipmentLeases.

 

“Security Agreement” means each Pledge and Security Agreement,dated as of the date hereof, between each Loan Parties and the Lender, and anyother pledge or security agreement entered into, after the Closing Date by anyother Loan Party (as required by this Agreement or any other Loan Document), orany other Person, as the same may be amended, restated or otherwise modifiedfrom time to time.

 

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“Single Employer Plan” means a Plan maintained by a Loan Partyor any member of the Controlled Group for employees of the Loan Parties or anymember of the Controlled Group.

 

“SPA” means Magnetek S.p.A., a corporation organized andexisting under the laws of Italy and a subsidiary of MagneTek, its successorsand assigns.

 

“SPA Indebtedness” means all existing or future Debt ForBorrowed Money owed by a Loan Party to SPA.

 

“Stated Rate” is defined in Section 2.20.

 

“Subordinated Indebtedness” of a Person means any Indebtednessof such Person the payment of which is subordinated to payment of the SecuredObligations to the written satisfaction of the Lender.

 

“Subsidiary” of a Person means, any corporation, partnership,limited liability company, association, joint venture or similar businessorganization more than 50% of the outstanding Capital Stock having ordinaryvoting power of which shall at the time be owned or controlled by suchPerson.  Unless otherwise expresslyprovided, all references herein to a “Subsidiary” shall mean a Subsidiary of aBorrower.

 

“Substantial Portion” means Property which represents more than10% of the consolidated assets of the Consolidated Group or property which isresponsible for more than 10% of the consolidated net sales or of theconsolidated net income of the Consolidated Group, in each case, as would beshown in the consolidated financial statements of the Consolidated Group as atthe beginning of the twelve-month period ending with the month in which suchdetermination is made (or if financial statements have not been deliveredhereunder for that month which begins the twelve-month period, then thefinancial statements delivered hereunder for the quarter ending immediatelyprior to that month).

 

“Supporting Letter of Credit” is defined in Section 2.1.2(i).

 

“Taxes”means any and all present or future taxes, duties, levies, imposts, deductions,charges or withholdings, and any and all liabilities with respect to theforegoing, but *excluding* Excluded Taxes and Other Taxes.

 

“Telemotive Inventory” finished goods Inventory manufactured,owned, and held by MagneTek or Maxtec at an ICG Facility for sale in theordinary course of MagneTek’s or Maxtec’s business as presently conducted by itwhich is comprised of radio frequency power systems for the overhead crane andmaterial handling industry.

 

“Test Period” means, for any determination of the Fixed ChargeCoverage Ratio, the EBITDA Covenant, or the Operating Profit Covenant theperiod of four consecutive Fiscal Quarters of the Consolidated Group ended oneach Fiscal Quarter ending during the term of this Agreement (*i.e.*,a rolling four Fiscal Quarter  period); *provided**that*,with respect to determining the Fixed Charge Coverage Ratio at the end of eachof the Fiscal Quarters of the Consolidated Group beginning onSeptember 29, 2003 and ending on December 28, 2003 and beginning onDecember 29, 2003 and ending on March 28, 2004, “Test Period” means,respectively, the period of one Fiscal Quarter beginning on September 29,2003 and ending on December 28, 2003 and the period of two

 

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FiscalQuarters beginning on September 29, 2003 and ending on March 28,2004;*provided,**further that*, with respect to determiningthe EBITDA Covenant at the end of the Fiscal Quarter of the Consolidated Groupending on September 28, 2003 and the EBITDA Covenant and the OperatingProfit Covenant at the end of each of the Fiscal Quarters of the ConsolidatedGroup ending on December 28, 2003 and on March 28, 2004, “TestPeriod” means, respectively, the period of one Fiscal Quarter beginning onJune 30, 2003 and ending on September 29, 2003, the period of twoFiscal Quarters beginning on June 30, 2003 and ending on December 28,2003, and the period of three Fiscal Quarters beginning on June 30, 2003and ending March 28, 2004.

 

“TPG” means MagneTek’s Telco Power Group business unit which iscomprised of the operations of ADS at the TPG Facilities.

 

“TPG Facility” means a Borrower Facility designated as a TPGFacility on Schedule 1.

 

“Trademarks” shall have the meaning given to such term in theSecurity Agreement.

 

“Type” means, with respect to any Loan, its nature as a FloatingRate Loan or a Eurodollar Loan.

 

“UCC” means the Uniform Commercial Code as in effect from timeto time in the State of Ohio or any other state the laws of which are requiredto be applied in connection with the issue of perfection of security interests.

 

“Unfunded Liabilities” means the amount (if any) by which thepresent value of all vested and unvested accrued benefits under all SingleEmployer Plans exceeds the fair market value of all such Plan assets allocableto such benefits, all determined under Financial Accounting Statement 87 as ofthe end of the most recent Fiscal Year end or any date otherwise required to bedetermined under applicable law.

 

“Unliquidated Secured Obligations” means, at any time, anySecured Obligations (or portion thereof) that is contingent in nature orunliquidated at such time, including any Secured Obligation that is: (i) anobligation to reimburse a bank for drawings not yet made under a Letter ofCredit issued by it; (ii) any other obligation (including any guarantee) thatis contingent in nature at such time; or (iii) an obligation to providecollateral to secure any of the foregoing types of obligations.

 

“Unmatured Default” means an event which but for the lapse oftime or the giving of notice, or both, would constitute a Default.

 

“Unused Commitment Fee” is defined in Section 2.8(a).

 

“U.S.” means the United States of America.

 

“Wholly-Owned Subsidiary” of a Person means, any Subsidiary allof the outstanding Capital Stock of which shall at the time be owned orcontrolled, directly or indirectly, by such Person or one or more Wholly-OwnedSubsidiaries of such Person, or by such Person and one or more Wholly-OwnedSubsidiaries of such Person.

 

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1.2                                 Other Definitional Provisions;Construction. Unless otherwise specified,

 

## ***(a)***                                  All terms defined in thisAgreement, whether or not defined in this Section 1, have the definedmeanings provided in this Agreement when used in this Agreement, in any otherof the Loan Documents, or any other certificate, instrument or other documentmade or delivered pursuant to this Agreement or any other Loan Document, unlessotherwise defined therein.

 

## ***(b)***                                 References to the UniformCommercial Code, or UCC, mean as enacted in the particular jurisdiction(s)encompassed by the reference.

 

## ***(c)***                                  Thedefinition of any agreement, document or instrument includes all schedules,attachments and exhibits thereto and all renewals, extensions, supplements,modifications, restatements and amendments thereof but only to the extent suchrenewals, extensions, supplements, modifications, restatements or amendmentsthereof are not prohibited by the terms of any Loan Document.  All references to statutes include (i) allregulations promulgated thereunder, (ii) any amendments of such statutes orregulations promulgated thereunder, and (iii) any successor statutes andregulations, including any comparable provision of the applicable statute,ordinance, code, regulation or other law as amended or superseded after thedate of this Agreement.

 

## ***(d)***                                 “Hereunder,”“herein,” “hereto,” “this Agreement” and words of similar import refer to thisentire document; “including” is used by way of illustration and not by way oflimitation, unless the context clearly indicates the contrary; the singularincludes the plural and conversely; and any action required to be taken by aPerson is to be taken promptly, unless the context clearly indicates thecontrary.

 

## ***(e)***                                  All ofthe uncapitalized terms contained in the Loan Documents which are now orhereafter defined under the UCC will, unless defined in the Loan Documents orthe context indicates otherwise, have the meanings now or hereafter providedfor in the UCC.

 

## ***(f)***                                    The term “good faith” meanshonesty in fact in the conduct or transaction concerned.

 

## ***(g)***                                 AllExhibits and Schedules attached to this Agreement are incorporated into, madeand form an integral part of, this Agreement for all purposes.

 

## ***(h)***                                 Theexistence of references to a Borrower’s Subsidiaries throughout this Agreementis for a matter of convenience only. Any references to Subsidiaries of a Borrower set forth herein shall notin any way be construed as consent by the Lender to the establishment,maintenance or acquisition of any Subsidiary.

 

## ***(i)***                                     Wheneverthe sense of this Agreement or any of the other Loan Documents so require, themasculine or feminine gender will be substituted for, or be deemed to include,the neuter, the feminine gender will be substituted for the masculine, or themasculine will be deemed to include the feminine, and the neuter gender will besubstituted for, or be deemed to include, the masculine or, as applicable,feminine gender.

 

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ARTICLE II

 

THE FACILITY

 

2.1.                              The Facility. The Lender agrees, on the terms and conditions set forth in thisAgreement, to (a) make Revolving Loans to the Borrowers as set forth below and(b) issue Facility LCs upon the request of the Borrower Representative, *providedthat*, after giving effect to the making of each such Revolving Loanand the issuance of each such Facility LC, the Credit Exposure shall not exceedthe Commitment.  The Facility shall becomposed of Revolving Loans and Facility LCs as set forth below:

## *** ***

## ***2.1.1.***                     Revolving Loans.

## *** ***

## ***(a)***                                  Amount. Fromand including the Effective Date and prior to the Facility Termination Date, theLender agrees, on the terms and conditions set forth in this Agreement, to makerevolving loans to the Borrowers and issue Facility LCs as set forth in Section 2.1.2below on the request of the Borrower Representative.  If any advance of a Revolving Loan or issuance of a Facility LCwould exceed Availability, the Lender will refuse to make or may otherwiserestrict the making of Revolving Loans or the issuance of Facility LCs as theLender determines until such excess has been eliminated. The Revolving Loansmay consist of Floating Rate Loans or Eurodollar Loans, or a combinationthereof, selected by the Borrower Representative in accordance with Sections2.1.1(b) and 2.6.  Subject tothe terms of this Agreement, the Borrowers may borrow, repay and reborrowRevolving Loans at any time prior to the Facility Termination Date.  The Commitment to extend credit under this Section 2.1.1(a)shall expire on the Facility Termination Date.

## *** ***

## ***(b)***                                 BorrowingProcedures.  The BorrowerRepresentative shall (i) select the Type of Loan and, in the case of eachEurodollar Loan, the Interest Period applicable thereto, from time to time and(ii) give the Lender irrevocable notice (a “Borrowing Notice”) not laterthan 11:00 a.m. (Chicago, Illinois time) on each Borrowing Date of eachFloating Rate Loan and three Business Days before the Borrowing Date for eachEurodollar Loan, specifying (in the form of Exhibit A for EurodollarLoans): (1) the Borrowing Date, which shall be a Business Day, of such Loan,(2) the aggregate amount of such Loan, (3) the Type of Loan selected; providedthat, if the Borrower Representative fails to specify the Type of Loanrequested, such request shall be deemed a request for a Floating Rate Loan; and(4) the duration of the Interest Period if the Type of Loan requested is aEurodollar Loan; provided that, if the Borrower Representative fails to select theduration of the Interest Period for the requested Eurodollar Loan, theBorrowers shall be deemed to have requested that such Eurodollar Loan be made withan Interest Period of one month.

 

2.1.2.                     FacilityLCs.

 

(a)                                  Issuance.  The Lender  issued  the Existing LCs and the Lender herebyagrees, on the terms and conditions set forth in this Agreement, to issuestandby and commercial Letters of Credit (each, including each “Existing LC”,a “Facility LC”) and to renew, extend, increase, decrease or otherwisemodify each Facility LC (“Modify,” and each such action a “Modification”),from time to time from and including the Effective Date and prior to the FacilityTermination Date upon the request and for the account of the Borrower

 

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Representative;*providedthat*, the maximum face amount of the Facility LC to be issued orModified, does not exceed the lesser of (i) an amount equal to $10,000,000 minusthe sum of (1) the aggregate undrawn amount of all outstanding Facility LCs atsuch time *plus*, without duplication, (2) the aggregate unpaidReimbursement Obligations with respect to all Facility LCs outstanding at suchtime and (ii) Availability.  No FacilityLC shall have an expiry date later than the earlier of (x) the thirtieth (30th)Business Day prior to the Facility Termination Date and (y) one year after itsissuance; *provided*that any Letter of Credit with a one-year tenor may provide for the renewalthereof for additional one-year periods (which shall in no event extend beyondthe date referred to in clause (x) above).

 

(b)                                 Notice.  Subject to Section 2.1.2(a), theBorrower Representative shall give the Lender notice prior to 11:00 a.m.(Chicago, Illinois time) at least three Business Days prior to the proposeddate of issuance or Modification of each Facility LC, specifying thebeneficiary, the proposed date of issuance (or Modification) and the expiry dateof such Facility LC, and describing the proposed terms of such Facility LC andthe nature of the transactions proposed to be supported thereby.  The issuance or Modification by the Lenderof any Facility LC shall, in addition to the conditions precedent set forth in Article IV(the satisfaction of which the Lender shall have no duty to ascertain), besubject to the conditions precedent that such Facility LC shall be satisfactoryto the Lender and that the Borrowers shall have executed and delivered such applicationagreement and/or such other instruments and agreements relating to suchFacility LC as the Lender shall have reasonably requested (each, a “FacilityLC Application”).  In the event ofany conflict between the terms of this Agreement and the terms of any FacilityLC Application, the terms of this Agreement shall control.

 

(c)                                  Administration.  Upon receipt from the beneficiary of anyFacility LC of any demand for payment under such Facility LC, the Lender shallnotify the Borrower Representative as to the amount to be paid by the Lender asa result of such demand and the proposed payment date (the “LC Payment Date”).  The responsibility of the Lender to theBorrowers shall be only to determine that the documents (including each demandfor payment) delivered under each Facility LC in connection with suchpresentment shall be in conformity in all material respects with such FacilityLC.

 

(d)                                 Reimbursementby the Borrowers.  The Borrowersshall be irrevocably and unconditionally obligated to reimburse the Lender onor before the applicable LC Payment Date for any amounts to be paid by theLender upon any drawing under any Facility LC, without presentment, demand,protest or other formalities of any kind; *provided that*, neither the Borrowers northe Lender shall hereby be precluded from asserting any claim for direct (butnot consequential) damages suffered by a Borrower or the Lender to the extent,but only to the extent, caused by (i) the willful misconduct or grossnegligence of the Lender in determining whether a request presented under anyFacility LC issued by it complied with the terms of such Facility LC or (ii)the Lender’s failure to pay under any Facility LC issued by it after thepresentation to it of a request strictly complying with the terms andconditions of such Facility LC.  Allsuch amounts paid by the Lender and remaining unpaid by the Borrowers shallbear interest, payable on demand, for each day until paid at a rate per annumequal to (x) the rate applicable to Floating Rate Loans for such day if suchday falls on or before the applicable LC Payment Date and (y) the sum of 2% *plus*the rate applicable to Floating Rate Loans for such day if such day falls aftersuch LC Payment Date.  Subject to theterms and conditions of this Agreement (including  the submission of a Borrowing

 

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Notice incompliance with Section 2.1.1(b) and the satisfaction of theapplicable conditions precedent set forth in Article IV), theBorrower Representative may request a Floating Rate Loan hereunder for thepurpose of satisfying any Reimbursement Obligation.

 

(e)                                  ObligationsAbsolute.  The Borrower’sobligations under this Section 2.1.2 shall be absolute andunconditional under any and all circumstances and irrespective of any setoff,counterclaim or defense to payment which any Borrower may have or have hadagainst the Lender or any beneficiary of a Facility LC.  The Borrowers further agree with the Lenderthat the Lender shall not be responsible for, and the Borrower’s ReimbursementObligation in respect of any Facility LC shall not be affected by, among otherthings, the validity or genuineness of documents or of any endorsementsthereon, even if such documents should in fact prove to be in any or allrespects invalid, fraudulent or forged, or any dispute between or among anyBorrower, any of any Borrower’s Affiliates, the beneficiary of any Facility LCor any financing institution or other party to whom any Facility LC may betransferred or any claims or defenses whatsoever of any Borrower or of any ofits Affiliates against the beneficiary of any Facility LC or any suchtransferee.  The Lender shall not beliable for any error, omission, interruption or delay in transmission, dispatchor delivery of any message or advice, however transmitted, in connection withany Facility LC.  The Borrowers agreethat any action taken or omitted by the Lender under or in connection with eachFacility LC and the related drafts and documents, if done without grossnegligence or willful misconduct, shall be binding upon the Borrowers and shallnot put the Lender under any liability to any Borrower.  Nothing in this Section 2.1.2(e)is intended to limit the right of the Borrowers to make a claim against theLender for damages as contemplated by the proviso to the first sentence of Section 2.1.2(d).

 

(f)                                    Actionsof the Lender.  The Lender shall beentitled to rely, and shall be fully protected in relying, upon any FacilityLC, draft, writing, resolution, notice, consent, certificate, affidavit,letter, cablegram, email, telegram, telecopy, telex or teletype message,statement, order or other document believed by it to be genuine and correct andto have been signed, sent or made by the proper Person or Persons, and uponadvice and statements of legal counsel, independent accountants and otherexperts selected by the Lender.

 

(g)                                 Indemnification.  The Borrowers hereby agree to indemnify andhold harmless the Lender and its directors, officers, agents and employees fromand against any and all claims and damages, losses, liabilities, costs orexpenses which the Lender may incur (or which may be claimed against the Lenderby any Person whatsoever) by reason of or in connection with the issuance,execution and delivery or transfer of or payment or failure to pay under anyFacility LC or any actual or proposed use of any Facility LC, including anyclaims, damages, losses, liabilities, costs or expenses which the Lender mayincur by reason of, in connection with or on account of the Lender issuing anyFacility LC which specifies that the term “Beneficiary” included thereinincludes any successor by operation of law of the named Beneficiary, but whichFacility LC does not require that any drawing by any such successor Beneficiarybe accompanied by a copy of a legal document, satisfactory to the Lender,evidencing the appointment of such successor Beneficiary; *provided that*, the Borrowersshall not be required to indemnify the Lender for any claims, damages, losses,liabilities, costs or expenses to the extent, but only to the extent, caused by(x) the willful misconduct or gross negligence of the Lender in determiningwhether a request presented under any Facility LC complied with the terms ofsuch Facility LC, (y) the Lender’s failure to pay under any Facility LC afterthe presentation to it of a request strictly complying with

 

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the terms andconditions of such Facility LC or (z) the breach by the Lender of itsresponsibilities under Section 2.1.2(c). Nothing in this Section 2.1.2(g)is intended to limit the obligations of the Borrowers under any other provisionof this Agreement.

 

(h)                                 FacilityLC Collateral Account.  TheBorrowers agree that it will, upon the request of the Lender and until the finalexpiration date of any Facility LC and thereafter as long as any amount ispayable to the Lender in respect of any Facility LC, maintain a specialcollateral account pursuant to arrangements satisfactory to the Lender (the “FacilityLC Collateral Account”) at the Lender’s office at the address specifiedpursuant to Article XI, in the name of the Borrowers but under thesole dominion and control of the Lender and in which the Borrowers shall haveno interest other than as set forth in Section 8.1.  Nothing in this Section 2.1.2(h)shall either obligate the Lender to require the Borrowers to deposit any fundsin the Facility LC Collateral Account or limit the right of the Lender torelease any funds held in the Facility LC Collateral Account in each case otherthan as required by Section 8.1. The Borrowers hereby pledge, assign and grant to the Lender a securityinterest in all of the Borrower’s right, title and interest in and to all fundswhich may from time to time be on deposit in the Facility LC Collateral Accountto secure the prompt and complete payment and performance of the SecuredObligations.  The Lender will invest anyfunds on deposit from time to time in the Facility LC Collateral Account incertificates of deposit of the Lender having a maturity not exceeding thirtydays.

 

(i)                                     Terminationof the Facility.  If,notwithstanding the provisions of this Section 2.1.2, any FacilityLC is outstanding upon the earlier of (x) the termination of this Agreement and(y) the Facility Termination Date, then upon such termination the Borrowersshall deposit with the Lender, with respect to all LC Obligations, as theLender in its discretion shall specify, either (i) a standby letter of credit(a “Supporting Letter of Credit”), in form and substance satisfactory tothe Lender, issued by an issuer satisfactory to the Lender, in a stated amount,in immediately available funds (which funds shall be held in the Facility LCCollateral Account), equal to 105% of the difference of (x) the amount of LCObligations at such time, less (y) the amount on deposit in the Facility LCCollateral Account at such time which is free and clear of all rights andclaims of third parties and has not been applied against the Obligations (suchdifference, the “Collateral Shortfall Amount”), under which SupportingLetter of Credit the Lender is entitled to draw amounts necessary to reimbursethe Lender for payments to be made by the Lender under any such Facility LC andany fees and expenses associated with such Facility LC, or (ii) cash in an amount equal to 105% of the CollateralShortfall Amount.  Such SupportingLetter of Credit or deposit of cash shall be held by the Lender, as securityfor, and to provide for the payment of, the aggregate undrawn amount of suchFacility LC remaining outstanding.

 

2.2.                              Payment of the Obligations. TheBorrowers shall repay the outstanding principal balance of the Loans, togetherwith all other Obligations, including all accrued and unpaid interest thereon,on the Facility Termination Date.

 

2.3.                              Minimum Amount of Each Loan.  Each Eurodollar Loan shall be in the minimumamount of $500,000 and in multiples of $100,000 if in excess thereof.  Floating Rate Loans may be in any amount.  After giving effect to any Loan,continuation, or conversion of any Eurodollar Loan, there may not be more thanfour (4) different Interest Periods in effect hereunder.

 

2.4.                              Funding Accounts; ControlledDisbursement Accounts.  Alldisbursements of

 

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Revolving Loans will initiallybe made into the disbursement funding accounts set forth on Schedule 2maintained at the (collectively, the “Funding Account”) structured andutilized for that purpose in accordance with the Lender’s policies andprocedures as Floating Rate Loans.  Withrespect to advances requested by the Borrower Representative in the BorrowingNotice to cover Presentments in the Controlled Disbursement Accounts, theBorrowers hereby irrevocably authorize the Lender, without any further writtenor oral request of a Borrower, to transfer funds automatically from the FundingAccount to the Controlled Disbursement Accounts in amounts necessary for thepayment of checks and other items drawn on the Controlled Disbursement Accountsas such checks and other items (“Presentments”) are presented to theLender for payment.  If any Presentmentsin the Controlled Disbursement Accounts are paid by the Lender in excess offunds available in the Funding Account for any reason, including the failure ofthe Borrowers to determine the correct amount of Presentments in its BorrowingNotice, the amounts so paid by the Lender will be deemed to be an advance ofthe Revolving Loans as a Floating Rate Loan for all purposes of this Agreementand are hereby ratified and approved by the Borrowers; *however*, under nocircumstances will the Lender have any obligation to pay any Presentments inthe Controlled Disbursement Accounts in excess of funds available in theFunding Account.  Notwithstandinganything to the contrary in this Section 2.4, the Lender may, atany time hereafter on telephone or written notice to the BorrowerRepresentative, elect to discontinue the automatic sweeping of funds from theFunding Account to the Controlled Disbursement Accounts, but the Lender insteadmay disburse proceeds of the Revolving Loans made by the Lender by creditingonly the Funding Account.  Furthermore,the Lender reserves the right to discontinue providing controlled disbursementaccounts to its customers, including the Borrowers.  In addition to advances of Revolving Loans made pursuant to theLender’s controlled disbursement account system, the Lender will, from time totime prior to the Facility Termination Date and subject to the other terms andconditions of this Agreement, advance Revolving Loans via wire transfer offunds on the written request of the Borrower Representative therefor incompliance with the Lender’s wire transfer policies and procedures.  Each request submitted by the BorrowerRepresentative for a new advance of a Revolving Loan via wire transfer of fundsmust be in accordance with Section 2.1.1(b) and the Lender’s wiretransfer policies and procedures.

 

2.5.                              Reliance Upon Authority; NoLiability; Borrower Representative. The Lender is entitled to rely conclusively on any individual’s requestfor Loans hereunder, so long as the proceeds thereof are to be transferred tothe Funding Account.  The Lender shallhave no duty to verify the identity of any individual representing himself orherself as a person authorized by a Borrower to make such requests on itsbehalf.  The Lender shall not incur anyliability to the Borrowers as a result of acting upon any notice referred to inSection 2.1 which the Lender reasonably believes to have been givenby an officer or other person duly authorized by a Borrower to request Loans onits behalf or for otherwise acting under this Agreement.  The crediting of Loans to the FundingAccount shall conclusively establish the obligation of the Borrowers to repaysuch Loans as provided herein. Each Borrower hereby irrevocably designatesMagneTek as its representative and agent (“Borrower Representative”) onits behalf for the purposes of issuing Borrowing Notices, giving instructionswith respect to the disbursement of the proceeds of the Loans, selectinginterest rate options, requesting Facility LCs, giving and receiving all othernotices and consents hereunder or under any of the other Loan Documents andtaking all other actions (including in respect of compliance with covenants) onbehalf of any Borrower or Borrowers under the Loan Documents.  The Borrower Representative hereby acceptssuch appointment.  The Lender may regardany notice or other communication pursuant to any Loan Document from theBorrower Representative as a notice or communication from all Borrowers, andmay give any notice or communication required or permitted to be given to anyBorrower or Borrowers hereunder to the

 

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Borrower Representative onbehalf of such Borrower or Borrowers. Each Borrower agrees that each notice, election, representation andwarranty, covenant, agreement and undertaking made on its behalf by theBorrower Representative shall be deemed for all purposes to have been made bysuch Borrower and shall be binding upon and enforceable against such Borrowerto the same extent as if the same had been made directly by such Borrower.

 

2.6.                              Conversion and Continuation ofOutstanding Loans.  FloatingRate Loans shall continue as Floating Rate Loans unless and until such FloatingRate Loans are converted into Eurodollar Loans pursuant to this Section 2.6or are repaid in accordance with this Agreement.  Each Eurodollar Loan shall continue as a Eurodollar Loan untilthe end of the then applicable Interest Period therefor, at which time suchEurodollar Loan shall be automatically converted into a Floating Rate Loanunless (x) such Eurodollar Loan is or was repaid in accordance with thisAgreement or (y) the Borrower Representative shall have given the Lender aConversion/Continuation Notice (as defined below) requesting that, at the endof such Interest Period, such Eurodollar Loan continue as a Eurodollar Loan forthe same or another Interest Period. Subject to the terms of Section 2.3, the BorrowerRepresentative may elect from time to time to convert all or any part of aFloating Rate Loan into a Eurodollar Loan. The Borrower Representative shall give the Lender irrevocable notice inthe form of Exhibit B (a “Conversion/Continuation Notice”) ofeach conversion of a Floating Rate Loan into a Eurodollar Loan or continuationof a Eurodollar Loan not later than 11:00 a.m. (Chicago, Illinois time) atleast three Business Days prior to the date of the requested conversion orcontinuation, specifying (i) the requested date, which shall be a Business Day,of such conversion or continuation, (ii) the aggregate amount and Type of theLoan which is to be converted or continued, and (iii) the amount of such Loanwhich is to be converted into or continued as a Eurodollar Loan and theduration of the Interest Period applicable thereto.

 

2.7.                              Telephonic Notices.  The Borrowers hereby authorize the Lender to extend, convert orcontinue Loans, effect selections of Types of Loans and to transfer funds basedon telephonic notices made by any person or persons the Lender in good faithbelieves to be acting on behalf of the Borrowers, it being understood that theforegoing authorization is specifically intended to allow Borrowing Notices andConversion/Continuation Notices to be given telephonically.  The Borrowers agree to deliver promptly tothe Lender a written confirmation, if such confirmation is requested by theLender, of each telephonic notice signed by an Authorized Officer. If thewritten confirmation differs in any material respect from the action taken bythe Lender, the records of the Lender shall govern absent manifest error.

 

2.8.                              Fees.

 

(a)                                  Unused CommitmentFee.  The Borrowers agree to pay tothe Lender an unused commitment fee at a per annum rate equal to 0.50% on theaverage daily Available Commitment, payable on each Payment Date hereafter andon the Facility Termination Date (the “Unused Commitment Fee”).

 

(b)                                 LC Fees.  The Borrowers shall pay to the Lender (i)(collectively, the “LC Fee”): (A) with respect to each standby FacilityLC, a fee at a per annum rate equal to the Applicable LC Fee Rate on theaverage daily undrawn stated amount under each Facility LC, such fee to bepayable in arrears on each Payment Date and (B) with respect to each commercialFacility LC a fee at a rate per annum equal to 1% of the initial stated amount(or, with respect to a Modification of any such commercial Facility LC whichincreases the

 

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stated amount thereof, such increase in the stated amount), such fee tobe paid upon the issuance of such commercial Facility LC and (ii) documentaryand processing charges in connection with the issuance or Modification of anddraws under Facility LCs in accordance with the Lender’s standardschedule for such charges as in effect from time to time.  The LC Fee will be calculated on the basisof the actual number of days elapsed in a 360-day year.  If any Facility LC is cancelled for anyreason before the stated expiry date thereof, any LC Fee paid in advance willnot be refunded and will be retained by the Lender solely for its account.

 

(c)                                  Closing Fee.  The Borrowers will pay to the Lender anon-refundable, fully-earned closing fee in the total amount of $225,000 on theClosing Date.

 

(d)                                 CollateralMonitoring Fee.  The Borrowers shallpay to the Lender for its account a collateral monitoring fee of $1,000 permonth, payable in advance on each Payment Date hereafter and on the FacilityTermination Date (the “Collateral Monitoring Fee”).  The Collateral Monitoring Fee shall be fullyearned and non-refundable for any reason upon payment thereof.

 

2.9.                              InterestRates.  Each Floating Rate Loanshall bear interest on the outstanding principal amount thereof, for each dayfrom and including the date such Loan is made or is automatically convertedfrom a Eurodollar Loan into a Floating Rate Loan pursuant to Section 2.6,to but excluding the date it is paid or is converted into a Eurodollar Loanpursuant to Section 2.6 hereof, at a rate per annum equal to theFloating Rate for such day.  Changes inthe rate of interest on that portion of any Loan maintained as a Floating RateLoan will take effect simultaneously with each change in the Alternate BaseRate.  Each Eurodollar Loan shall bearinterest on the outstanding principal amount thereof from and including thefirst day of the Interest Period applicable thereto to (but not including) thelast day of such Interest Period at the interest rate determined by the Lenderas applicable to such Eurodollar Loan based upon the Borrower’s selectionsunder Sections 2.1.1 and 2.6 and otherwise in accordance with theterms hereof.  No Interest Period mayend after the Facility Termination Date. If at any time Loans are outstanding with respect to which the BorrowerRepresentative has not delivered a notice to the Lender specifying the basisfor determining the interest rate applicable thereto, those Loans shall bearinterest at the Floating Rate.

 

2.10.                        Eurodollar Loans Post Default;Default Rates.  Notwithstandinganything to the contrary contained hereunder, during the continuance of aDefault or Unmatured Default the Lender may, at its option, by notice to theBorrower Representative, declare that no Loan may be made as, converted into orcontinued as a Eurodollar Loan.  Duringthe continuance of a Default the Lender may, at its option, by notice to theBorrower Representative, declare that****(i) each Eurodollar Loan shall bearinterest for the remainder of the applicable Interest Period at the rateotherwise applicable to such Interest Period *plus* 2% per annum,(ii) each Floating Rate Loan shall bear interest at a rate per annum equal tothe Floating Rate in effect from time to time *plus* 2% per annum and(iii) the LC Fee shall be increased by 2% per annum, *provided that*, during thecontinuance of a Default under subsection (f) or (g) of Section 7.1,the interest rates set forth in clauses (i) and (ii) above and the increase inthe LC Fee set forth in clause (iii) above shall be applicable to all CreditExtensions without any election or action the part of the Lender.

 

2.11.                        Interest Payment Dates; Interest andFee Basis.  Interest accrued oneach Floating Rate Loan shall be payable on each Payment Date, commencing withthe first such date to occur after the date hereof and at maturity.  Interest accrued on each Eurodollar Loanshall be payable on

 

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the last dayof its applicable Interest Period, on any date on which the Eurodollar Loan isprepaid, whether by acceleration or otherwise, and at maturity.  Interest accrued on each Eurodollar Loanhaving an Interest Period longer than three months shall also be payable on thelast day of each three-month interval during such Interest Period.  Interest on all Loans, unused commitmentfees and LC Fees shall be calculated for actual days elapsed on the basis of a360-day year.  Interest shall be payablefor the day a Loan is made but not for the day of any payment on the amountpaid if payment is received prior to noon (local time) at the place ofpayment.  If any payment of principal ofor interest on a Loan shall become due on a day which is not a Business Day,such payment shall be made on the next succeeding Business Day and, in the caseof a principal payment, such extension of time shall be included in computinginterest in connection with such payment.

 

2.12.**                       **Voluntary Prepayments.  The Borrowers may also from time to timeprepay, subject to the payment of any funding indemnification amounts requiredby Section 3.4 but without penalty or premium, all outstandingEurodollar Loans, or, in a minimum aggregate amount of $500,000 or any integralmultiple of $100,000 in excess thereof, any portion of the outstandingEurodollar Loans upon three Business Days’ prior notice to the Lender.

###  

### 2.13.                        Mandatory Prepayments.

 

### (a)                                  BorrowingBase Compliance.** **TheBorrowers shall immediately repay the Revolving Loans or ReimbursementObligations if, at any time, the Credit Exposure exceeds the lesser of (i) theCommitment and (ii) the Borrowing Base, to the extent required to eliminatesuch excess.  If any such excess remainsafter repayment in full of all outstanding Revolving Loans and ReimbursementObligations, the Borrowers shall provide cash collateral or a Supporting Letterof Credit for the LC Obligations in the manner set forth in Section 2.1.2(i)to the extent required to eliminate such excess.

###  

### (b)                                 Sale ofAssets.  Immediately uponreceipt by any Loan Party of the Net Cash Proceeds of any asset disposition(other than sales of Inventory in the ordinary course of business; *however*,a sale in the ordinary course of business will not include a transfer in totalor partial satisfaction of indebtedness), the Borrowers shallprepay the Obligations in an amount equal to all such Net Cash Proceeds.  Any such prepayment shall be applied first,to pay the principal of the Revolving Loans with the then EquipmentAvailability being reduced dollar-for-dollar by the amount of any Availabilityattributed to the Equipment included in such asset disposition and second,to cash collateralize outstanding Facility LCs; *provided further*, subject tothe Lender’s rights and remedies exercisable upon the occurrence of a Defaultor an Unmatured Default, if there are no Revolving Loans outstanding, and noDefault or Unmatured Default exists, the Net Cash Proceeds will not be requiredto cash collateralize outstanding Facility LCs.

###  

### (c)                                  Issuanceof Debt or Equity.  If MagneTekissues Capital Stock or any Loan Party issues any Debt For Borrowed Money(other than the type set forth in clauses (c), (d), (e), (f) or (g) of thedefinition of Debt For Borrowed Money) or if any Loan Party receives anydividend or distribution from a Person other than a Loan Party, no later thanthe Business Day following the date of receipt of any Net Cash Proceeds of suchissuance or receipt of such dividend, distribution, loan or advance, theBorrowers shall prepay the Obligations in an amount equal to all such Net CashProceeds or such dividends, distributions, loans or advances.  Any such prepayment shall be applied first,to pay the

###  

### 34

### 

###  

### principal of the Revolving Loans,and second, to cash collateralize outstanding Facility LCs in no morethan the Reimbursement Obligations related thereto;*provided further*, subjectto the Lender’s rights and remedies exercisable upon the occurrence of aDefault or an Unmatured Default, if there are no Revolving Loans outstanding,and no Default or Unmatured Default exists, the Net Cash Proceeds will not berequired to cash collateralize outstanding Facility LCs.

###  

### (d)                                 Insurance/CondemnationProceeds. Any insurance or condemnation proceeds to be appliedto the Obligations in accordance with Section 6.7(c) shall beapplied as follows: (i) insurance proceeds from casualties or losses to cash orInventory shall be applied, first, to the Revolving Loans and second,to cash collateralize outstanding Facility LCs in no more than theReimbursement Obligations related thereto; and (ii) insurance or condemnationproceeds from casualties or losses to Equipment, Fixtures and real Propertyshall be applied first, to pay the principal of the Revolving Loans withthe then Equipment Availability being reduced dollar-for-dollar by the amountof any Availability, if any, attributed to the Equipment affected by suchcasualty or loss, and second, to cash collateralize outstanding FacilityLCs in no more than the Reimbursement Obligations related thereto.  The Commitment (other than EquipmentAvailability) shall not be permanently reduced by the amount of any suchprepayments.  If the precise amount ofinsurance or condemnation proceeds allocable to Inventory as compared toEquipment, Fixtures and real Property is not otherwise determined, theallocation and application of those proceeds shall be determined by the Lender,in its Permitted Discretion.

###  

### (e)                                  Tax Refund.  On the date of receipt thereof by any LoanParty of a Tax Refund, an amount equal to 100% of the Tax Refund shall be paidto the Lender and applied first, to pay the principal of the RevolvingLoans, and second, to cash collateralize outstanding Facility LCs.  “Tax Refund” means any refund of anytaxes, fees or interest which (i) are paid to MagneTek by any GovernmentalAuthority and are attributable to losses, deductions, credits, or payments of,or by, any Loan Party or (ii) are paid directly to any Loan Party by anyGovernmental Authority.

 

### (f)                                    General.  Without in any way limiting the foregoing,immediately upon receipt by any Loan Party of proceeds of any sale of anyCollateral, the Borrowers shall cause such Loan Party to deliver such proceedsto the Lender, or deposit such proceeds in a deposit account subject to aDeposit Account Control Agreement.  Allof such proceeds shall be applied as set forth above or otherwise as providedin Section 2.16.  Nothing inthis Section 2.13 shall be construed to constitute the Lender’sconsent to any transaction that is not permitted by other provisions of thisAgreement or the other Loan Documents.

 

## ***2.14.***                        Termination of the Facility.

 

### (a)                                  Withoutlimiting Section 2.2 or Section 8.1, (a) the Commitmentshall expire on the Facility Termination Date and (b) the Credit Exposure andall other unpaid Obligations shall be paid in full by the Borrowers on theFacility Termination Date.

###  

### (b)                                 TheBorrowers may terminate this Agreement upon at least 10 Business Days’ priorwritten notice thereof from the Borrowing Representative to the Lender, upon(i) the payment in full of all outstanding Loans, together with accrued andunpaid interest thereon, (ii) the cancellation and return of all outstandingFacility LCs (or alternatively, with

###  

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### 

###  

### respect to each such Facility LC,the furnishing to the Lender of a cash deposit or Supporting Letter of Creditas required by Section 2.1.2(i)), (iii) the payment in full of theearly termination fee set forth in the following sentence (the “PrepaymentFee”), (iv) the payment in full of all reimbursable expenses and otherObligations together with accrued and unpaid interest thereon, and (v) thepayment in full of any amount due under Section 3.4.  Subject to Section 2.20, if thisAgreement is terminated at any time prior to the Facility Termination Date,other than by virtue of a refinancing by the Lender, or by a group of lendersagented by the Lender, whether pursuant to this Section 2.14 orpursuant to Section 8.1, the Borrowers shall pay to the Lender anearly termination fee determined in accordance with the following table:

 
| **Period during which  early termination occurs**                                                              |   | **Prepayment  Fee** |    |
|----------------------------------------------------------------------------------------------------------------|--------|---------------------|---------|
| On or prior to the first anniversary of the  Closing Date                                                      |   | $                   | 500,000 |   |
|                                                                                                           |   |                |    |
| After the first anniversary of the Closing  Date but on or prior to the second anniversary of the Closing Date |   | $                   | 300,000 |   |
|                                                                                                           |   |                |    |
| After the second anniversary of the Closing  Date but on or prior to the third anniversary of the Closing Date |   | $                   | 100,000 |   |

 

### 2.15.                        Method of Payment.

###  

### (a)                                  Allpayments of the Obligations hereunder shall be made, without setoff, deduction,or counterclaim, in immediately available funds to the Lender at its addressspecified pursuant to Article XI, or at any other LendingInstallation of the Lender specified in writing by the Lender to the BorrowerRepresentative, by noon (Chicago, Illinois time) on the date when due. Anypayment received by the Lender after such time shall be deemed to have beenreceived on the following Business Day and any applicable interest or fee shallcontinue to accrue.

## *** ***

## ***(b)***                                 At theelection of the Lender, all payments of principal, interest, reimbursementobligations in connection with Facility LCs, fees, premiums, reimbursableexpenses (including all reimbursement for fees and expenses pursuant to Section 9.6),and other sums payable under the Loan Documents, may be paid from the proceedsof Loans made hereunder whether made following a request by the BorrowerRepresentative pursuant to Section 2.1 or a deemed request asprovided in this Section 2.15 or may be deducted from the FundingAccount or any other deposit account of any Borrower maintained with theLender.  The Borrowers herebyirrevocably authorize (i) the Lender to make a Floating Rate Loan for thepurpose of paying each payment of principal, interest and fees as it becomesdue hereunder or any other amount due under the Loan Documents and agrees thatall such amounts charged shall constitute Loans and that all such Loans shallbe deemed to have been requested pursuant to Section 2.1 and (ii)the Lender to charge the Funding Account or any other deposit account of a LoanParty maintained with the Lender for each payment of 

## *** ***

## ***36***

## ******

## *** ***

## ***principal, interest and fees as it becomes due hereunder orany other amount due under the Loan Documents.***

## *** ***

## ***2.16.***                        Collection of Accounts; Lock Box; CashCollateral Account; Application of Payments.

## *** ***

## ***2.16.1. Lock Box.  The Borrowershave established and will continue to maintain through the Lender the post office boxes at the U.S. PostOffice bearing the addresses set forth in Schedule 2 or such otheraddress or addresses as the Lender may notify the Borrowers from time to time(collectively, the “Lock Box”). The Borrowers will notify all of their customers and account debtors toforward all checks, drafts, money orders, and other items, cash and otherremittances of every kind due the Borrowers (“Remittances”) to the LockBox (such notices to be in such form and substance as the Lender may requirefrom time to time).  The Lender willhave sole access to the Lock Box at all times, and the Borrowers will take allaction necessary to grant the Lender such sole access.  At no time will the Borrowers remove anyitem from Lock Box without the Lender’s prior written consent, and theBorrowers will not notify any customer or account debtor to pay any Remittanceto any other place or address without the Lender’s prior written consent.  If a Borrower should neglect or refuse tonotify any customer or account debtor to pay any Remittance to the Lock Box,the Lender will be entitled to make such notification.***

## *** ***

## ***2.16.2. Cash Collateral Account. Upon retrieval of Remittances and otherproceeds of Accounts and other Collateral from the Lock Box, the Lender willdeposit the same in a non-interest bearing account in the Lender’s name as setforth on Schedule 2 at the Lender “Cash Collateral Account”.  Any Remittance or other proceeds of Accountsor other Collateral received by the Borrowers shall be deemed held by theBorrowers in trust and as fiduciary for the Lender, and the Borrowersimmediately shall deliver the same, in its original form, to the Lender byovernight delivery for deposit into the Lock Box or shall immediately depositthe same into the Cash Collateral Account. Pending such deposit, the Borrowers will not commingle any suchRemittance or other proceeds of Accounts or other Collateral with any of theBorrowers’ other funds or property, but the Borrowers will hold it separate andapart therefrom in trust for the Lender until delivery is made to the Lender byovernight delivery carrier as described above. All deposits to the Cash Collateral Account and the Lock Box will be theLender’s property and will be subject only to the signing authority designatedfrom time to time by the Lender, and the Borrowers shall have no interesttherein or control over such deposits or funds.  The Lender will have sole access to the Cash Collateral Account,and the Borrowers shall have no access thereto.  The Lender shall have, and the Borrowers hereby grants to theLender, a Lien on all funds held in the Funding Account, the Controlled DisbursementAccounts, and the Cash Collateral Account as security for the Obligations.  None of the Funding Account, the ControlledDisbursement Accounts, or the Cash Collateral Account will be subject to anydeduction, set-off, banker’s lien or any other right in favor or any Personother than the Lender.  Deposits to theCash Collateral Account will be applied to the Obligations (including to cashcollateralize outstanding Facility LCs) in such order and method of applicationas may be elected by the Lender in its discretion exercised in good faith;*** however, unlessso directed by the Borrower Representative, or unless a Default is inexistence, the Lender shall not apply funds in the Cash Collateral Account toany Eurodollar Loan, except (a) on the expiration date of the Interest Periodapplicable to any such Eurodollar Loan or (b) in the event, and only to theextent, that there are no outstanding Floating Rate Loans and, in any event,the Borrowers

## *** ***

## ***37***

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## *** ***

## ***shall pay the Eurodollar breakage losses in accordance with Section 3.4.  Any funds in the Cash Collateral Accountremaining after the applications set forth in the preceding sentence (“AvailableFunds”) will be deposited into the Borrowers’ Funding Account with theLender;***however, if a Default is in existence, allAvailable Funds may, at the Lender’s option, be retained in the Cash CollateralAccount as continuing security for the Obligations.  If any Remittance deposited in the Cash Collateral Account isdishonored or returned unpaid for any reason, the Lender, in its discretion,may charge the amount of such dishonored or returned Remittance directlyagainst the Borrowers and any account maintained by the Borrowers with theLender and such amount shall be deemed part of the Obligations.  The Lender shall not be liable for any lossor damage resulting from any error, omission, failure or negligence on the partof the Lender with respect to the operation of the Funding Account, theControlled Disbursement Accounts, the Cash Collateral Account, the Lock Box, orthe services to be provided by the Lender under this Agreement, except to theextent, but only to the extent, of any direct (as opposed to any consequential,special or lost profit) damages suffered by the Borrowers from the Lender’sgross negligence or willful misconduct. Until a payment is received by the Lender for the Lender’s account infinally collected funds, all risks associated with such payment will be bornesolely by the Borrowers.  The Lendershall have the continuing and exclusive right to apply and reverse and reapplyany and all such proceeds and payments to any portion of the SecuredObligations at any time on and after the occurrence of a Default or anUnmatured Default.

## *** ***

## ***2.16.3. Crediting of Remittances. All Remittances and other proceeds of Accounts and other Collateraldeposited into the Cash Collateral Account shall be credited against the thenCredit Exposure and Eligible Accounts on the Business Day immediately followingthe Business Day on which such deposit is made into the Cash Collateral Account(conditional upon final collection and the Lender’s funds availabilitypolicies);***provided, however, to the extent that such fundsapplied by the Lender are not available funds under the Lender’s fundsavailability policies on the date of deposit into the Cash Collateral Account,then such funds will constitute a negative collected balance and will bearinterest at the Floating Rate until such funds become available under theLender’s funds availability polices. From time to time, the Lender may adopt such regulations and proceduresas it may deem reasonable and appropriate with respect to the operation of theCash Collateral Account and the Lock Box and the services to be provided by theLender under this Agreement.

## *** ***

## ***2.16.4. Cost of Collection.  All(a) reasonable costs of collection of the Borrowers’ Accounts, includingattorneys’ fees and other out-of-pocket expenses, (b) of the Lender’sadministrative and recordkeeping costs, and (c) of the Lender’s service chargesand costs related to the establishment and maintenance of the Lock Box, theFunding Account, the Controlled Disbursement Accounts, and the Cash CollateralAccount shall be the sole responsibility of the Borrowers, whether the same areincurred by the Lender or the Borrowers, and the Lender, at its discretion, maycharge the same against the Borrowers and any account maintained by theBorrowers with the Lender and the same shall be deemed part of the Obligations.***

## *** ***

## ***2.17.***                        Indemnity for Returned Payments.  If after receipt of any payment which isapplied to the payment of all or any part of the Obligations, the Lender is forany reason compelled to surrender such payment or proceeds to any Personbecause such payment or application of proceeds is invalidated, declared fraudulent,set aside, determined to be void or voidable as a preference, impermissiblesetoff, or a diversion of trust funds, or for any other reason, then theObligations or

## *** ***

## ***38***

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## *** ***

## ***part thereofintended to be satisfied shall be revived and continued and this Agreementshall continue in full force as if such payment or proceeds had not beenreceived by the Lender, and the Borrowers shall be liable to pay to the Lender,and the Borrowers hereby indemnify the Lender and hold the Lender harmless forthe amount of such payment or proceeds surrendered.  The provisions of this Section 2.17 shall be andremain effective notwithstanding any contrary action which may have been takenby the Lender in reliance upon such payment or application of proceeds, and anysuch contrary action so taken shall be without prejudice to the Lender’s rightsunder this Agreement and shall be deemed to have been conditioned upon suchpayment or application of proceeds having become final and irrevocable.  The provisions of this Section 2.17shall survive the termination of this Agreement.***

 

2.18.                        Noteless Agreement; Evidence ofIndebtedness.

 

(a)                                  The Lender shallmaintain in accordance with its usual practice an account or accountsevidencing the Obligations of the Borrowers to the Lender resulting from eachLoan made from time to time, including the amounts of principal and interestpayable and paid to the Lender from time to time hereunder.

 

(b)                                 The Lender shall alsomaintain accounts in which it will record (a) the amount of each Loan extendedhereunder, the Type thereof and the Interest Period with respect thereto, (b)the amount of any principal or interest due and payable or to become due andpayable from the Borrowers to the Lender hereunder, (c) the original statedamount of each Facility LC and the amount of LC Obligations outstanding at anytime, and (d) the amount of any sum received by the Lender hereunder from theBorrowers.

 

(c)                                  The entriesmaintained in the accounts maintained pursuant to paragraphs (i) and (ii) aboveshall be *primafacie* evidence of the existence and amounts of the Obligationstherein recorded; *provided however,*that the failure of the Lender to maintainsuch accounts or any error therein shall not in any manner affect theobligation of the Borrowers to repay the Obligations in accordance with theirterms.

 

(d)                                 The Lender may requestthat its Revolving Loans be evidenced by a promissory note in substantially theform of Exhibit C (a “Revolving Note”).  In such event, the Borrowers shall prepare, execute and deliverto the Lender such Note payable to the order of the Lender.  Thereafter, the Revolving Loans evidenced bysuch Revolving Note and interest thereon shall at all times be represented byone or more promissory notes payable to the order of the payee named therein,except to the extent that the Lender subsequently returns any such Note forcancellation and requests that such Revolving Loans once again be evidenced asdescribed in paragraphs (a) and (b) above.

 

2.19.                        LendingInstallations.  The Lender maybook its Loans and the Facility LCs at any Lending Installation selected by theLender and may change its Lending Installation from time to time.  All terms of this Agreement shall apply toany such Lending Installation and the Loans, Facility LCs, and the Note issuedhereunder shall be deemed held by the Lender for the benefit of any suchLending Installation.  The Lender may,by written notice to the Borrower Representative in accordance with Article XI,designate replacement or additional Lending Installations through which Loanswill be made by it or Facility LCs will be issued by it and for whose accountLoan payments or payments with respect to Facility LCs are to be made.

 

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2.20.                        Limitationof Interest. The Borrowers and the Lender intend to strictly complywith all applicable laws, including applicable usury laws.  Accordingly, the provisions of this Section 2.20shall govern and control over every other provision of this Agreement or anyother Loan Document which conflicts or is inconsistent with this Section 2.20,even if such provision declares that it controls.  As used in this Section 2.20, the term “interest”includes the aggregate of all charges, fees, benefits or other compensationwhich constitute interest under applicable law, *provided that*, to themaximum extent permitted by applicable law, (a) any non-principal payment shallbe characterized as an expense or as compensation for something other than theuse, forbearance or detention of money and not as interest, and (b) allinterest at any time contracted for, reserved, charged or received shall beamortized, prorated, allocated and spread, in equal parts during the full termof the Obligations.  In no event shallthe Borrowers or any other Person be obligated to pay, or the Lender have anyright or privilege to reserve, receive or retain, (a) any interest in excess ofthe maximum amount of non-usurious interest permitted under the applicable laws(if any) of the U.S. or of any other applicable state, or (b) total interest inexcess of the amount which the Lender could lawfully have contracted for,reserved, received, retained or charged had the interest been calculated forthe full term of the Obligations at the Highest Lawful Rate.  On each day, if any, that the interest rate(the “Stated Rate”) called for under this Agreement or any other LoanDocument exceeds the Highest Lawful Rate, the rate at which interest shallaccrue shall automatically be fixed by operation of this sentence at theHighest Lawful Rate for that day, and shall remain fixed at the Highest LawfulRate for each day thereafter until the total amount of interest accrued equalsthe total amount of interest which would have accrued if there were no suchceiling rate as is imposed by this sentence. Thereafter, interest shall accrue at the Stated Rate unless and untilthe Stated Rate again exceeds the Highest Lawful Rate when the provisions ofthe immediately preceding sentence shall again automatically operate to limitthe interest accrual rate.  The dailyinterest rates to be used in calculating interest at the Highest Lawful Rateshall be determined by dividing the applicable Highest Lawful Rate per annum bythe number of days in the calendar year for which such calculation is beingmade.  None of the terms and provisionscontained in this Agreement or in any other Loan Document which directly orindirectly relate to interest shall ever be construed without reference to thisSection 2.20, or be construed to create a contract to pay for theuse, forbearance or detention of money at an interest rate in excess of theHighest Lawful Rate.  If the term of anyObligation is shortened by reason of acceleration of maturity as a result ofany Default or by any other cause, or by reason of any required or permittedprepayment, and if for that (or any other) reason the Lender at any time,including the stated maturity, is owed or receives (and/or has received)interest in excess of interest calculated at the Highest Lawful Rate, then andin any such event all of any such excess interest shall be canceledautomatically as of the date of such acceleration, prepayment or other eventwhich produces the excess, and, if such excess interest has been paid to theLender, it shall be credited *pro tanto* against the then-outstandingprincipal balance of the Borrower’s obligations to the Lender, effective as ofthe date or dates when the event occurs which causes it to be excess interest,until such excess is exhausted or all of such principal has been fully paid andsatisfied, whichever occurs first, and any remaining balance of such excessshall be promptly refunded to its payor.

 

2.21.                        One General Obligation;Cross-Collateralized; Joint, Several and Primary Obligations.  All advances of credit by the Lender to, orfor the benefit of, a Borrower under this Agreement and under any other LoanDocument constitute one loan, and all of the Obligations constitute oneobligation.  The Loans and all otheradvances or extensions of credit to, or for the benefit of, Borrowers underthis Agreement or the other Loan Documents are made on the security of all ofthe Collateral.  The Obligations ofBorrowers under this Agreement and the other Loan

 

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Documents are joint, severaland primary.  No Borrower will be or bedeemed to be an accommodation party with respect to any of the LoanDocuments.  The limits on outstanding advancesagainst the Borrowing Base are not intended and shall not be deemed to limit inany way the Lender’s security interest in, or other Liens on, the Accounts,Inventory, Equipment, General Intangibles, or any other Collateral.

 

**ARTICLE III**

 

**YIELD PROTECTION;TAXES**

 

3.1.                              YieldProtection.  If, on or after theClosing Date, the adoption of any law or any governmental or quasi-governmentalrule, regulation, policy, guideline or directive (whether or not having theforce of law), or any change in the interpretation or administration thereof byany governmental or quasi-governmental authority, central bank or comparableagency charged with the interpretation or administration thereof, or complianceby the Lender or its applicable Lending Installation with any request ordirective (whether or not having the force of law) of any such authority,central bank or comparable agency:

 

(a)                                  subjects the Lenderor any Lending Installation of the Lender to any Taxes, or changes the basis oftaxation of payments (other than with respect to Excluded Taxes) to the Lenderin respect of its Eurodollar Loans or Facility LCs, or

 

(b)                                 imposes or increasesor deems applicable any reserve, assessment, insurance charge, special depositor similar requirement against assets of, deposits with or for the account of,or credit extended by, the Lender or any applicable Lending Installation of theLender (other than reserves and assessments taken into account in determiningthe interest rate applicable to Eurodollar Loans), or

 

(c)                                  imposes any othercondition the result of which is to increase the cost to the Lender or anyapplicable Lending Installation of the Lender of making, funding or maintainingits Eurodollar Loans, of issuing Facility LCs, or reduces any amount receivableby the Lender or any applicable Lending Installation of the Lender inconnection with its Eurodollar Loans or Facility LCs, or requires the Lender orany applicable Lending Installation of the Lender to make any paymentcalculated by reference to the amount of Eurodollar Loans or Facility LCstherein held or interest or LC Fees received by it, by an amount deemedmaterial by the Lender,

 

and the resultof any of the foregoing is to increase the cost to the Lender or applicableLending Installation of the Lender, as the case may be, of making ormaintaining its Eurodollar Loans or Commitment or of issuing Facility LCs or toreduce the return received by the Lender or applicable Lending Installation ofthe Lender, in connection with such Eurodollar Loans, Commitment, or FacilityLCs therein, then, within fifteen days of demand by the Lender, the Borrowersshall pay the Lender such additional amount or amounts as will compensate theLender for such increased cost or reduction in amount received.

 

3.2.                              Changes in Capital AdequacyRegulations.  If the Lenderdetermines the amount of capital required or expected to be maintained by it,any Lending Installation of the Lender, or any

 

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corporationcontrolling the Lender is increased as a result of a Change, then, withinfifteen days of demand by the Lender, the Borrowers shall pay the Lender theamount necessary to compensate for any shortfall in the rate of return on theportion of such increased capital which the Lender determines is attributableto this Agreement, the Credit Exposure or the Commitment to make Loans andissue Facility LCs, as the case may be, hereunder (after taking into accountthe Lender’s policies as to capital adequacy). “Change” means (i) any change after the date of this Agreement inthe Risk-Based Capital Guidelines (as defined below) or (ii) any adoption of orchange in any other law, governmental or quasi-governmental rule, regulation,policy, guideline, interpretation, or directive (whether or not having theforce of law) after the date of this Agreement which affects the amount ofcapital required or expected to be maintained by the Lender or any LendingInstallation or any corporation controlling the Lender.  “Risk-Based Capital Guidelines” means(i) the risk-based capital guidelines in effect in the U.S. on the date of thisAgreement, including transition rules, and (ii) the corresponding capitalregulations promulgated by regulatory authorities outside the U.S. implementingthe July 1988 report of the Basle Committee on Banking Regulation andSupervisory Practices Entitled “International Convergence of CapitalMeasurements and Capital Standards,” including transition rules, and anyamendments to such regulations adopted prior to the date of this Agreement.

 

3.3.                              Availability of Types of Loans.  If the Lender determines that (a)maintenance of the Eurodollar Loans (or any portion thereof) at a suitableLending Installation would violate any applicable law, rule, regulation, ordirective, whether or not having the force of law or (b)(i) deposits of a typeand maturity appropriate to match fund Eurodollar Loans are not available or(ii) the interest rate applicable to Eurodollar Loans does not accuratelyreflect the cost of making or maintaining Eurodollar Loans, then the Lendershall suspend the availability of Eurodollar Loans and require any affectedEurodollar Loans to be repaid or converted to Floating Rate Loans, subject tothe payment of any funding indemnification amounts required by Section 3.4.

 

3.4.                              Funding Indemnification.  If any payment of a Eurodollar Loanoccurs on a date which is not the last day of the applicable Interest Period,whether because of acceleration, prepayment or otherwise, or a Eurodollar Loanis not made on the date specified by the Borrower Representative for any reasonother than default by the Lender, the Borrowers will indemnify the Lender forany loss or cost incurred by it resulting therefrom, including any loss or costin liquidating or employing deposits acquired to fund or maintain suchEurodollar Loan.

 

3.5.                              Taxes.

 

(a)                                  All payments by theBorrowers to or for the account of the Lender hereunder or under the Note orFacility LC Application shall be made free and clear of and without deductionfor any and all Taxes.  If the Borrowersshall be required by law to deduct any Taxes (other than Excluded Taxes) fromor in respect of any sum payable hereunder to the Lender, (a) the sum payableshall be increased as necessary so that after making all required deductions(including deductions applicable to additional sums payable under this Section 3.5)the Lender receives an amount equal to the sum it would have received had nosuch deductions been made, (b) the Borrowers shall make such deductions, (c)the Borrowers shall pay the full amount deducted to the relevant authority inaccordance with applicable law, and (d) the Borrowers shall furnish to theLender the original copy of a receipt evidencing payment thereof within thirtydays after such payment is made.

 

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(b)                                 In addition, theBorrowers hereby agrees to pay any present or future stamp or documentary taxesand any other excise or property taxes, charges or similar levies which arisefrom any payment made hereunder or under the Note or Facility LC Application orfrom the execution or delivery of, or otherwise with respect to, this Agreementor the Note or Facility LC Application (“Other Taxes”).

 

(c)                                  The Borrowers herebyagrees to indemnify the Lender for the full amount of Taxes or Other Taxes(including any Taxes or Other Taxes imposed on amounts payable under this Section 3.5)paid by the Lender as a result of the Commitment, any Loans made by ithereunder, any Facility LC issued hereunder or otherwise in connection with itsparticipation in this Agreement and any liability (including penalties,interest and expenses) arising therefrom or with respect thereto.  Payments due under this indemnificationshall be made within thirty days of the date the Lender makes demand thereforpursuant to Section 3.6.

 

3.6.                              Lender Statements; Survival ofIndemnity. To the extent reasonably possible, the Lender shalldesignate an alternate Lending Installation with respect to its EurodollarLoans to reduce any liability of the Borrowers to the Lender under Sections3.1, 3.2 and 3.5 or to avoid the unavailability of EurodollarLoans under Section 3.3, so long as such designation is not, in thejudgment of the Lender, disadvantageous to the Lender.  The Lender shall deliver its writtenstatement to the Borrower Representative as to the amount due, if any, under Section 3.1,3.2, 3.4 or 3.5. Such written statement shall set forth in reasonable detail thecalculations upon which such Lender determined such amount and shall be final,conclusive and binding on the Borrowers in the absence of manifest error.  Determination of amounts payable under suchSections in connection with a Eurodollar Loan shall be calculated as though theLender funded the Eurodollar Loan through the purchase of a deposit of the typeand maturity corresponding to the deposit used as a reference in determiningthe Eurodollar Rate applicable to such Loan, whether in fact that is the caseor not.  Unless otherwise providedherein, the amount specified in the written statement of the Lender (showingthe calculation of such amount in reasonable detail) shall be payable on demandafter receipt by the Borrower Representative of such written statement.  The obligations of the Borrowers under Sections3.1, 3.2, 3.4 and 3.5 shall survive payment of theObligations and termination of this Agreement.

 

**ARTICLE IV**

 

**CONDITIONS PRECEDENT**

 

4.1.                              Effectiveness; Initial Loan Advance.This Agreement will not become effective unless the Loan Parties have satisfiedeach of the following conditions in a manner satisfactory to the Lender.

 

(a)                                  This Agreement orcounterparts hereof shall have been duly executed by each  Loan Party, the Lender; and the Lender shallhave received duly executed copies of the Loan Documents and such otherdocuments, instruments, agreements and legal opinions as the Lender shall reasonablyrequest in connection with the transactions contemplated by this Agreement andthe other Loan Documents, each in form and substance reasonably satisfactory tothe Lender.

 

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(b)                                 Each Loan Party shallhave delivered copies of its articles or certificate of incorporation ororganization, together with all amendments, and a certificate of good standing,each certified by the appropriate governmental officer in its jurisdiction ofincorporation or organization.

 

(c)                                  Each Loan Party shallhave delivered copies, certified by its Secretary or Assistant Secretary, ofits by-laws or operating, management or partnership agreement and of its Boardof Directors’ resolutions or the resolutions of its members and of resolutionsor actions of any other body authorizing the execution of the Loan Documents towhich such Loan Party is a party.

 

(d)                                 Each Loan Party shallhave delivered an incumbency certificate, executed by its Secretary orAssistant Secretary, which shall identify by name and title and bear thesignatures of the Authorized Officers and any other officers such Loan Partyauthorized to sign the Loan Documents to which such Loan Party is a party, uponwhich certificate the Lender shall be entitled to rely until informed of anychange in writing by such Loan Party.

 

(e)                                  The Borrowers and theLoan Parties shall have delivered a certificate, signed by the chief financialofficer of the Borrowers and each other Loan Party, on the initial CreditExtension Date (i) stating that no Default or Unmatured Default has occurredand is continuing, (ii) stating that the representations and warrantiescontained in Article V are true and correct as of such CreditExtension Date, (iii) specifying the deposit account at the Lender which shallbe used as the Funding Account, and (iv) certifying any other factual mattersas may be reasonably requested by the Lender.

 

(f)                                    The Loan Partiesshall have delivered a written opinion of the Loan Parties’ counsel, addressedto the Lender in substantially the form of Exhibit D.

 

(g)                                 The Borrowers shallhave delivered the Note requested by the Lender pursuant to Section 2.18payable to the order of the Lender.

 

(h)                                 The Borrowers shallhave delivered money transfer authorizations as the Lender may have reasonablyrequested.

 

(i)                                     Each Loan Partyshall have delivered duly executed copies of this Agreement and the other LoanDocuments to which it is a party.

 

### (j)                                     The Lendershall have received a fully executed original of a pay-off letter reasonablysatisfactory to the Lender confirming that all of the Loan Parties’ obligationsunder that certain Credit Agreement dated June 17, 2002 between the LoanParties, Bank One, NA, as agent and the lenders party thereto (as amended, the“Prior Agreement”) will be repaid in full from the proceeds the initialCredit Extension, all Liens upon any of the property of the Loan Partiesconstituting Collateral will be terminated immediately upon such payment.

###  

### (k)                                  The Lendershall have received all Lien and other searches that the Lender deemsnecessary, the Loan Parties shall have delivered UCC termination statements oramendments to existing UCC financing statements with respect to any filingsagainst the 

###  

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### 

###  

### Collateral as may be requested bythe Lender and shall have authorized the filing of such termination statementsor amendments, the Lender shall have been authorized to file any UCC financingstatements that the Lender deems necessary to perfect its Liens in theCollateral and Liens creating a first priority security interest in theCollateral  in favor of the Lender shallhave been perfected.

###  

### (l)                                     TheBorrowers shall have delivered a Borrowing Base Certificate which calculatesthe Borrowing Base as of the Closing Date.

###  

### (m)                               TheBorrowers shall have delivered to the Lender the unaudited financial statementsof the Consolidated Group on a consolidated basis and the DesignatedConsolidating Basis with respect thereto for the period ending on June 29,2003.

###  

### (n)                                 The Lendershall have completed its business due diligence and the Loan Parties’ corporatestructure, capital structure, material accounts and governing documents shallbe acceptable to the Lender.  Inaddition, the terms and conditions of all Indebtedness of each Loan Party shallbe acceptable to the Lender.

###  

### (o)                                 All legal(including tax implications) and regulatory matters, including compliance withapplicable requirements of Regulations U, T and X of the Board of Governors ofthe Federal Reserve System, shall be satisfactory to the Lender.

###  

### (p)                                 The LoanParties shall have delivered (i) Collateral audits, satisfactory to the Lender,and (ii) appraisals, prepared by an independent appraiser engaged directly bythe Lender, of Eligible Inventory and Equipment, which audits and appraisalsshall be satisfactory to the Lender.

###  

### (q)                                 The LoanParties shall have delivered any requested environmental review reports fromfirm(s) satisfactory to the Lender, which review reports shall be acceptable tothe Lender. Any environmental hazards or liabilities identified in any suchenvironmental review reports shall indicate the Loan Parties’ plans withrespect thereto.

###  

### (r)                                    TheBorrowers shall have delivered evidence of insurance coverage in form, scope,and substance reasonably satisfactory to the Lender and otherwise in compliancewith the terms of Section 6.7.

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### (s)                                  TheBorrowers shall have delivered each Collateral Access Agreement required to beprovided pursuant to Section 6.13.

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### (t)                                    TheBorrowers shall have delivered each Deposit Account Control Agreement requiredto be provided pursuant to Section 6.14.

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### (u)                                 TheBorrowers shall have delivered a properly completed Facility LC Application ifthe initial Credit Extension will include the issuance of a Facility LC.

###  

### (v)                                 After givingeffect to all Credit Extensions to be made on the Effective Date and payment ofall fees and expenses due hereunder, and with all of the Loan Parties’Indebtedness current, the Borrower’s Availability shall not be less than$2,250,000.

 

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### (w)                               TheBorrowers shall have paid all of the fees and expenses owing to the Lenderpursuant to Section 2.8, and Section 9.6(a).

###  

(x)                                   TheBorrowers shall have delivered to the Lender its most recent statement of the UnfundedLiabilities of each Single Employer Plan, certified as correct by an actuaryenrolled under ERISA.

 

### (y)**                                **The Lendershall have received confirmation, satisfactory to it, of completion of realestate term financing by SPA and the status of certain loans by SPA to MagneTekof at least $9,000,000 on terms acceptable to the Lender.

###  

### (z)**                                  **TheEffective Date shall occur on or before August 15, 2003.

###  

### (aa)                            The LoanParties shall have delivered such other documents as the Lender or its counselmay have reasonably requested.

###  

4.2.                              Each Credit Extension. Except as otherwiseexpressly provided herein, the Lender shall not be required to make any CreditExtension if on the applicable Credit Extension Date:

 

(a)                                  The BorrowerRepresentative has not delivered a duly completed Borrowing Notice incompliance with the terms of this Agreement;

 

(b)                                 There exists anyDefault or Unmatured Default or any Default or Unmatured Default shall resultfrom any such Credit Extension and the Lender shall have determined not to makeany Credit Extension as a result of such Default or Unmatured Default;

 

(c)                                  Any representation orwarranty (other than a representation or warranty that is stated to relatesolely to an earlier date) contained in Article V is untrue orincorrect as of such Credit Extension Date except to the extent any suchrepresentation or warranty is stated to relate solely to an earlier date, andthe Lender shall have determined not to make any Credit Extension as a resultof the fact that such representation or warranty is untrue or incorrect;

 

(d)                                 After giving effect toany Credit Extension, Availability would be less than zero;

 

(e)                                  No law or regulationprohibits, and no order, judgment or decree of any arbitrator or governmentalauthority enjoins or restrains the Lender, from making such requested CreditExtension;

 

(f)                                    Unless, on orbefore October 15, 2003, the Borrowers shall have delivered to the Lendera true and complete Customer List;

 

(g)                                 Unless, on or beforeOctober 15, 2003, the Borrowers cause the Problem Financing Statements tobe terminated; or

 

(h)                                 Unless, on or beforeOctober 15, 2003, the Borrowers deliver to the Lender the original stockcertificates required to be pledged under the Loan Documents together with thestock powers related thereto, that were not delivered on or before the ClosingDate, or replacement certificates if the originals have been lost or destroyed.

 

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Each Borrowing Notice or request for issuance of Facility LC withrespect to each such Credit Extension shall constitute a representation andwarranty by the Borrowers that the conditions contained in Sections 4.2(a)and (b) have been satisfied.  TheLender may require a duly completed Compliance Certificate as a condition tomaking a Credit Extension.

 

**ARTICLE V**

 

**REPRESENTATIONS ANDWARRANTIES**

 

Each Loan Party represents and warrants to the Lender as follows:

 

5.1.                              Existence and Standing.  Each Loan Party is a corporation or, in thecase of Mondel Canada, an unlimited liability company, duly and properlyincorporated or organized, as the case may be, validly existing and (to theextent such concept applies to such entity) in good standing under the laws ofits jurisdiction of incorporation or organization, has all requisite authority toconduct its business in each jurisdiction in which its business is conducted,and is and shall remain qualified to do business as a foreign corporation or,in the case of Mondel Canada, an unlimited liability company, in the case of  under the laws of the jurisdictions listedon Schedule 5.1 and under the laws of each other jurisdiction inwhich the failure to be so qualified and in good standing would have a MaterialAdverse Effect.

 

5.2.                              Authorization and Validity. Each LoanParty has the corporate power and authority (or as it relates to Mondel Canada,unlimited limited company power and authority) and legal right to execute anddeliver the Loan Documents to which it is a party and to perform itsobligations thereunder.  The executionand delivery by each Loan Party of the Loan Documents to which it is a partyand the performance of its obligations thereunder have been duly authorized byproper proceedings, and the Loan Documents to which such Loan Party is a partyconstitute legal, valid and binding obligations of such Loan Party enforceableagainst such Loan Party in accordance with their terms, except asenforceability may be limited by bankruptcy, insolvency or similar lawsaffecting the enforcement of creditors’ rights generally.

 

5.3.                              No Conflict; Government Consent.  Neither the execution and delivery by anyLoan Party of the Loan Documents to which it is a party, nor the consummationof the transactions therein contemplated, nor compliance with the provisionsthereof will violate (i) any law, rule, regulation, order, writ, judgment,injunction, decree or award binding on such Loan Party or (ii) any Loan Party’sarticles or certificate of incorporation, partnership agreement, certificate ofpartnership, articles or certificate of organization, by-laws, or operating orother management agreement, as the case may be, or (iii) the provisions of anyindenture, instrument or agreement to which any Loan Party is a party or issubject, or by which it, or its Property, is bound, or conflict with orconstitute a default thereunder, or result in, or require, the creation orimposition of any Lien in, of or on the Property of such Loan Party pursuant tothe terms of any such indenture, instrument or agreement.  No order, consent, adjudication, approval,license, authorization, or validation of, or filing, recording or registrationwith, or exemption by, or other action in respect of any governmental or publicbody or authority, or any subdivision thereof, which has not been obtained by aLoan Party, is required to be obtained by any Loan Party in connection with theexecution and delivery of the Loan Documents, the borrowings under thisAgreement, the payment and performance by the Loan Parties of the Obligationsor the legality, validity, binding effect or enforceability of any of the LoanDocuments.

 

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## ***5.4.***                              Security Interest in Collateral.  The provisions of this Agreement and theother Loan Documents create legal and valid Liens on all the Collateral infavor of the Lender, and such Liens constitute perfected and continuing Lienson the Collateral, securing the Obligations, enforceable against the applicableLoan Party and all third parties, and having priority over all other Liens onthe Collateral except in the case of (a) Permitted Liens, to the extent anysuch Permitted Liens would have priority over the Liens in favor of the Lenderpursuant to any applicable law and (b) Liens perfected only by possession(including possession of any certificate of title) to the extent the Lender hasnot obtained or does not maintain possession of such Collateral.

 

### 5.5                                 Financial Statements.

###  

### (a)                                  Theaudited consolidated and consolidating financial statements of the Borrowersand its Subsidiaries for the period ending on June 30, 2002 heretoforedelivered to the Lender were prepared in accordance with GAAP (as in effect onthe date such statements were prepared) and fairly present the consolidatedfinancial condition and operations of the Borrowers and its Subsidiaries atsuch date and the consolidated results of their operations for the period thenended.  The unaudited consolidatedfinancial statements of the Borrowers and its Subsidiaries for the  fiscal periods ended on or beforeJune 29, 2003 heretofore delivered by the Borrowers to the Lender wereprepared in accordance with GAAP (as in effect on the date such statements wereprepared except for the presentation of footnotes and for applicable normalyear-end audit adjustments) and fairly present the consolidated financial conditionand operations of the Borrowers and its Subsidiaries at such date and theconsolidated results of their operations for the period then ended.

 

(b)                                 The Projectionsreceived by the Lender on August 1, 2003 represent the Borrowers’ goodfaith estimate of the future financial performance of the Consolidated Groupfor the period set forth therein.

 

5.6.                              Material Adverse Change.  As of the Closing Date, since June 29,2003 there has been no change in the business, Property, prospects, condition(financial or otherwise) or results of operations of the Loan Parties whichcould reasonably be expected to have a Material Adverse Effect.

 

5.7.                              Taxes.  The Loan Parties have filed all U.S. federaltax returns and all other tax returns which are required to be filed and havepaid all taxes due pursuant to said returns or pursuant to any assessmentreceived by any Loan Party, except such taxes, if any, as are being contestedin good faith and as to which adequate reserves have been provided inaccordance with GAAP and as to which no Lien exists.  The U.S. income tax returns of the Loan Parties have been auditedby the Internal Revenue Service through the Fiscal Year ended June 29,1997.  No tax liens have been filed andno claims are being asserted with respect to any such taxes.  The charges, accruals and reserves on thebooks of the Loan Parties in respect of any taxes or other governmental chargesare adequate.  There are not in effectany waivers of applicable statutes of limitations for federal, foreign, stateor local taxes for any period.  No LoanParty is a party to any tax-sharing agreement or arrangement.

 

5.8.                              Litigation and ContingentObligations.  Except as setforth on Schedule 5.8, there is no litigation, arbitration,governmental investigation, proceeding or inquiry pending or, to the knowledgeof any of their officers, threatened against or affecting any Loan Party whichcould reasonably be expected to have a Material Adverse Effect or which seeksto prevent, enjoin or delay

 

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the making ofany Credit Extensions.  Other than anyliability incident to any litigation, arbitration or proceeding which (i) couldnot reasonably be expected to have a Material Adverse Effect or (ii) is setforth on Schedule 5.8, no Loan Party has any material contingentobligations not provided for or disclosed in the financial statements referredto in Section 5.5.

 

5.9.                              Capitalization and Subsidiaries.  Schedule 5.9 sets forth (a) acorrect and complete list of the name and relationship to the Borrowers of eachand every Subsidiary of a Loan Party and each and every Person for which a LoanParty has any ownership interest, (b) the location of the chief executiveoffice of the Borrowers and each of its Subsidiaries and each other locationwhere any of them have maintained their chief executive office in the past fiveyears, (c) a true and complete listing of each class of each of the LoanParties’ authorized Capital Stock and, with respect to all Loan Parties otherthan MagneTek, is owned beneficially and of record by the Persons identified onSchedule 5.9, and (d) the type of entity of each of the LoanParties.  With respect to each LoanParty, Schedule 5.9 also sets forth the employer or taxpayeridentification number of each Loan Party and the organizational identificationnumber issued by each Loan Party’s jurisdiction of organization or a statementthat no such number has been issued. All of the issued and outstanding Capital Stock owned by any Loan Partyhas been duly authorized and issued and is fully paid and non-assessable.

 

5.10.                        ERISA.  TheUnfunded Liabilities of the MagneTek Pension Plan do not in the aggregateexceed $51,356,000.  With respect to theMagneTek Pension Plan, (a) effective June 29, 2003, participants shall accrueno future benefits thereunder; (b) on or before September 15, 2003,MagneTek shall make a stock contribution of $2,250,000 thereto; and (c) as ofthe Closing Date, provided the contribution described in (b) above is made, noannual contribution is projected to be made to the MagneTek Pension Plan forits Fiscal Years ending the Sunday ending the closest to June 30, 2004;June 30, 2005; June 30, 2006; and June 30, 2007.  Neither any Loan Party nor any ControlledGroup member is currently sponsoring, maintaining or contributing (or becomingobligated to sponsor, maintain, or contribute) to any Multiemployer Plan.  Each Plan complies in all material respectswith all applicable requirements of law and regulations.  No Reportable Event or “prohibited transaction”(as defined under ERISA) has occurred with respect to any Plan.  Neither any Loan Party nor any other memberof the Controlled Group has withdrawn from any Plan or initiated steps to doso, and no steps have been taken to reorganize or terminate any Plan.  Each Plan that is intended to meet therequirements of qualified pension benefit plans under Sections 401(a) and501(a) of the Code has received a current favorable determination letter tothat effect under the Code.  The LoanParties and each Controlled Group has satisfied the minimum funding standardsunder ERISA with respect to its respective Plans.

 

5.11.                        Accuracyof Information.  No information,exhibit or report furnished by any Loan Party to the Lender in connection withthe negotiation of, or compliance with, the Loan Documents contained anymaterial misstatement of fact or omitted to state a material fact or any factnecessary to make the statements contained therein not misleading.

 

5.12.                        Names;Prior Transactions.  Except asset forth on Schedule 5.12, the Loan Parties have not, during thepast five years, been known by or used any other corporate or fictitious name,or been a party to any merger or consolidation, or been a party to anyAcquisition.

 

5.13.                        RegulationU.  No Loan Party is engaged,nor will it engage, principally or as one of its important activities, in thebusiness of extending credit for the purpose of “purchasing” or “carrying” any“margin stock” as such terms are defined in Regulation U of the Federal Reserve

 

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Board as nowand from time to time hereafter in effect (such securities being referred toherein as “Margin Stock”).  NoLoan Party owns any Margin Stock, and none of the proceeds of the Loans orother extensions of credit under this Agreement will be used, directly orindirectly, for the purpose of purchasing or carrying any Margin Stock, for thepurpose of reducing or retiring any Indebtedness that was originally incurredto purchase or carry any Margin Stock or for any other purpose that might causeany of the Loans or other extensions of credit under this Agreement to beconsidered a “purpose credit” within the meaning of Regulations T, U or X ofthe Federal Reserve Board.  No LoanParty will take or permit to be taken any action that might cause any LoanDocument to violate any regulation of the Federal Reserve Board.

 

5.14.                        MaterialAgreements.  Schedule 5.14hereto sets forth as of the Closing Date all material agreements and contractsto which any Loan Party is a party or is bound as of the date hereof.  No Loan Party is subject to any charter orother corporate restriction which could reasonably be expected to have aMaterial Adverse Effect.  No Loan Partyis in default in the performance, observance or fulfillment of any of theobligations, covenants or conditions contained in (i) any material agreement towhich it is a party or (ii) any agreement or instrument evidencing or governingany material Indebtedness.

 

5.15.                        ComplianceWith Laws.  The Loan Parties havecomplied with all applicable statutes, rules, regulations, orders andrestrictions of any domestic or foreign government or any instrumentality oragency thereof having jurisdiction over the conduct of their respectivebusinesses or the ownership of their respective Property except for any failureto comply with any of the foregoing which could not reasonably be expected tohave a Material Adverse Effect.

 

5.16.                        Ownershipof Properties.  Except as setforth on Schedule 5.16, on the date of this Agreement, the LoanParties will have good title, free of all Liens other than those permitted by Section 6.22,to all of the Property and assets reflected in the Loan Parties’ most recentconsolidated financial statements provided to the Lender as owned by the LoanParties.  None of the equipment includedin the appraisal which the Lender has made eligible for purposes of the CreditExposure is the subject of any Lien or capitalized lease of any Person.

 

5.17.                        Plan Assets; Prohibited Transactions.  No Borrower is an entity deemed to hold“plan assets” within the meaning of 29 C.F.R. § 2510.3-101 of an employeebenefit plan (as defined in Section 3(3) of ERISA) which is subject toTitle I of ERISA or any plan (within the meaning of Section 4975 of theCode), and neither the execution of this Agreement nor the making of CreditExtensions hereunder gives rise to a prohibited transaction within the meaningof Section 406 of ERISA or Section 4975 of the Code.  Each Loan Party, determined exclusive ofMagneTek, is an “operating company” as defined in 29 C.F.R 2510-101(c).

 

5.18.                        EnvironmentalMatters.  In the ordinary courseof its business, the officers of each Loan Party consider the effect ofEnvironmental Laws on the business of such Loan Party, in the course of whichthey identify and evaluate potential risks and liabilities accruing to suchLoan Party due to Environmental Laws. On the basis of this consideration, the Loan Parties have concluded thatEnvironmental Laws cannot reasonably be expected to have a Material AdverseEffect.  No Loan Party has received anynotice to the effect that its operations are not in material compliance withany of the requirements of applicable Environmental Laws or are the subject ofany federal or state investigation evaluating whether any remedial action isneeded to respond to a release of any toxic or hazardous waste or substanceinto the environment.

 

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5.19.                        InvestmentCompany Act.  No Loan Party isan “investment company” or a company “controlled” by an “investment company”,within the meaning of the Investment Company Act of 1940, as amended.

 

5.20.                        Public Utility Holding Company Act.  No Loan Party is a “holding company” or a“subsidiary company” of a “holding company”, or an “Affiliate” of a “holdingcompany” or of a “subsidiary company” of a “holding company”, within themeaning of the Public Utility Holding Company Act of 1935, as amended.

 

## ***5.21.***                        Bank Accounts.  As of the Closing Date, Schedule 5.21to the Security Agreement contains a complete and accurate list of all bankaccounts maintained by each Loan Party with any bank or other financialinstitution.

## *** ***

## ***5.22.***                        Indebtedness.  As of the Closing Date and after givingeffect to the Credit Extensions to be made on the Closing Date (if any), theLoan Parties have no Indebtedness, except for (a) the Obligations, (b) anyIndebtedness described on Schedule 5.22, and (c) PermittedObligations.

## *** ***

## ***5.23.***                        Affiliate Transactions. Except as set forth on Schedule 5.23, as of the Closing Date,there are no existing or proposed agreements, arrangements, understandings, ortransactions between any Loan Party and any of the officers, members, managers,directors, stockholders, parents, other interest holders, employees, orAffiliates (other than Subsidiaries) of any Loan Party or any members of theirrespective immediate families, any of which matters would be required to bedisclosed in a proxy statement of MagneTek, other than matters which aredisclosed in its 2002 proxy statement.  For the FiscalYear of the Borrowers ending in June, 2004 and each Fiscal Year endingthereafter, the Borrowers will allocate corporate and other overheadexpenses of MagneTek to SPA.  The amountallocated to SPA (“Allocated Overhead Amount”) will be at least $1,000,000per Fiscal Quarter.  SPA will beginpaying the quarterly Allocated Overhead Amount on October 1, 2003 and willcontinue paying the quarterly Allocated Overhead Amount on the first day ofeach calendar quarter thereafter occurring. All of the Capital Stock of J-Tec was sold, and the proceeds of suchsale were received by MagneTek, on or before the Closing Date.

## *** ***

## ***5.24.***                        Real Property; Leases. As of the Closing Date, Schedule 5.24 sets forth a correctand complete list of all real Property owned by each Loan Party, all leases andsubleases of real Property by each Loan Party as lessee or sublessee, and allleases and subleases of real Property by each Loan Party as lessor orsublessor.  Each of such leases and subleasesis valid and enforceable in accordance with its terms and is in full force andeffect, and no default by any party to any such lease or sublease exists.  Each Loan Party has good and indefeasibletitle in fee simple to the real Property identified on Schedule 5.24as owned by such Loan Party, or valid leasehold interests in all real Propertydesignated therein as “leased” by such Loan Party.

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## ***5.25.***                        Intellectual Property Rights. As of the Closing Date: (a) Schedule 5.25 sets forth acorrect and complete list of all Intellectual Property Rights of each LoanParty; (b) none of the Intellectual Property Rights listed in Schedule 5.25is subject to any licensing agreement or similar arrangement except as setforth in Schedule 5.25; (c) the Intellectual Property Rightsdescribed in Schedule 5.25 constitute all of the property of suchtype necessary to the current and anticipated future conduct of the LoanParties’ business; (d) to the best of each Loan Party’s knowledge, no slogan orother advertising device, product, process, method, substance, part, or othermaterial now employed, or now contemplated to be employed, by any Loan Partyinfringes in any material respect upon any rights held by any other Person; and(e) no claim or litigation regarding any of the

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## ***foregoing ispending or threatened, and no patent, invention, device, application, principleor any statute, law, rule, regulation, standard, or code is pending or, to theknowledge of any Loan Party, proposed, which, in either case, could reasonablybe expected to have a Material Adverse Effect. To any Borrower’s knowledge, after due inquiry, no key employee of aBorrower is subject to any agreement in favor of anyone other than a Borrowerwhich restricts or limits that individual’s right to engage in the type ofbusiness activity conducted by such Borrower in any manner which couldmaterially impair the ability of such individual to carry out his or her dutieswith such Borrower or to use any property or confidential information or whichgrants to any Person, other than a Borrower, any rights to inventions or otherideas susceptible to legal protection developed or conceived by any such keyemployee of a Borrower.***

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## ***5.26.***                        Insurance. Schedule 5.26 listsall insurance policies of any nature maintained, as of the Closing Date, byeach Loan Party, as well as a summary of the terms of each such policy.

## *** ***

5.27.                        Solvency.

 

(a)                                  Immediatelyafter the consummation of the transactions to occur on the date hereof andimmediately following the making of each Credit Extension, if any, made on thedate hereof and after giving effect to the application of the proceeds of suchCredit Extensions, (a) the fair value of the assets of each Loan Party, at afair valuation, will exceed the debts and liabilities, subordinated, contingentor otherwise, of each Loan Party; (b) the present fair saleable value of theProperty of each Loan Party will be greater than the amount that will berequired to pay the probable liability of each Loan Party on its debts andother liabilities, subordinated, contingent or otherwise, as such debts andother liabilities become absolute and matured; (c) each Loan Party will be ableto pay its debts and liabilities, subordinated, contingent or otherwise, assuch debts and liabilities become absolute and matured; and (d) each Loan Partywill not have unreasonably small capital with which to conduct the businessesin which it is engaged as such businesses are now conducted and are proposed tobe conducted after the date hereof.

 

(b)                                 NoBorrower intends to, or will permit any of its Subsidiaries to, and does notbelieve that it or any of its Subsidiaries will, incur debts beyond its abilityto pay such debts as they mature, taking into account the timing of and amountsof cash to be received by it or any such Subsidiary and the timing of theamounts of cash to be payable on or in respect of its Indebtedness or theIndebtedness of any such Subsidiary.

 

5.28.                        Subordinated Indebtedness.  The Obligations constitute seniorindebtedness which is entitled to the benefits of the subordination provisionsof all outstanding Subordinated Indebtedness.

 

5.29.                        Post-RetirementBenefits.  The present value ofthe expected cost of post-retirement medical and insurance benefits payable byeach Loan Party to its employees and former employees, as estimated by suchLoan Party in accordance with procedures and assumptions deemed reasonable bythe Lender, does not exceed $100,000.

 

5.30                           CommonEnterprise.  The successfuloperation and condition of each of  theLoan Parties is dependent on the continued successful performance of thefunctions of the group of the Loan Parties as a whole and the successfuloperation of each of the Loan Parties is dependent on the successfulperformance and operation of each other Loan Party.  Each Loan Party expects to derive benefit (and its board ofdirectors or other governing body has determined that it may reasonably be

 

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expected toderive benefit), directly and indirectly, from (i) successful operations ofeach of the other Loan Parties and (ii) the credit extended by the Lender tothe Borrowers hereunder, both in their separate capacities and as members ofthe group of companies.  Each Loan Partyhas determined that execution, delivery, and performance of this Agreement andany other Loan Documents to be executed by such Loan Party is within itspurpose, will be of direct and indirect benefit to such Loan Party, and is inits best interest.  Each Loan Partystates to the Lender that the Loan Parties desire to utilize their borrowingpotential on a consolidated basis, to the extent(s) possible as if they weremerged into a single corporate entity and, consistent with realizing suchpotential, to make available to the Lender commensurate with the amount andnature of their aggregate borrowings, and the Loan Parties have requested andbargained for the structure and terms of and security for the advancescontemplated by this Agreement.

 

5.31.                        Reportable Transaction.  No Loan Party intends to treat the Loans andrelated transactions as being a “reportable transaction” (within the meaning ofTreasury Regulation Section 1.6011-4). In the event any Loan Party determines to take any action inconsistentwith such intention, it will promptly notify the Lender thereof.

 

5.32.                        Labor Disputes. Except as set forth on Schedule 5.32, as of the ClosingDate, (a) there is no collective bargaining agreement or other labor contractcovering employees of any Borrower or any of its Subsidiaries, (b) no such collectivebargaining agreement or other labor contract is scheduled to expire during theterm of this Agreement, (c) no union or other labor organization is seeking toorganize, or to be recognized as, a collective bargaining unit of employees ofany Borrower or any of its Subsidiaries or for any similar purpose, and(d) there is no pending or (to the best of each Borrower’s knowledge)threatened, strike, work stoppage, material unfair labor practice claim, orother material labor dispute against or affecting any Borrower or itsSubsidiaries or their employees.

 

**ARTICLE VI**

 

**COVENANTS**

 

Each LoanParty executing this Agreement jointly and severally agrees as to all LoanParties that from and after the date hereof and until the Facility TerminationDate:

 

6.1.                              Financial and Collateral Reporting.  Each Loan Party will maintain, for itselfand each Subsidiary, a system of accounting established and administered inaccordance with GAAP, and will furnish to the Lender:

 

(a)                                  (i) within 90 daysafter the close of each Fiscal Year of the Borrowers and their  Subsidiaries, audited financial statementsof the Borrowers and their Subsidiaries as of the end of such Fiscal Year, on aconsolidated basis and prepared in accordance with GAAP, certified, withoutqualification or exception, by a firm of independent certified publicaccountants acceptable to the Lender (“Auditors”), including balancesheets as of the end of such Fiscal Year, related profit and loss andreconciliation of surplus statements, and a statement of cash flows,accompanied by (A) any management letter prepared by such Auditors and (B) forFiscal Years ending in and after June, 2004, a certificate of such Auditorsthat, in the course of their examination necessary for their certification ofthe foregoing, they have obtained no knowledge of any Default or UnmaturedDefault, or if, in

 

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the opinion of such Auditors, any Default orUnmatured Default shall exist, stating the nature and status thereof and (ii) within90 days after the close of each Fiscal Year of the Borrowers and their  Subsidiaries ending in and after June, 2004,financial statements of the Borrowers and their Subsidiaries as of the end ofeach such Fiscal Year, on a Designated Consolidating Basis with respect theretoand prepared in accordance with GAAP, including balance sheets as of the end ofsuch Fiscal Year, related profit and loss and reconciliation of surplusstatements, and a statement of cash flows, accompanied by the report of such Auditorswith respect to such consolidating statements satisfactory to the Lender;

 

(b)                                 within 45 days afterthe close of the first three quarterly periods of each Fiscal Year of theBorrowers and their Subsidiaries, (i) unaudited balance sheets as at the closeof each such Fiscal Quarter on a consolidated basis and the DesignatedConsolidating Basis with respect thereto and (ii) profit and loss andreconciliation of surplus statements and a statement of cash flows, each on aconsolidated basis and the Designated Consolidating Basis with respect thereto,for such Fiscal Quarter and the period from the beginning of the applicableFiscal Year to the end of such Fiscal Quarter, all certified by its chieffinancial officer and prepared in accordance with GAAP (except for exclusion offootnotes and subject to normal year-end audit adjustments);

 

(c)                                  within 30 days afterthe close of each Fiscal Month of the Borrowers and their Subsidiaries, (i)unaudited balance sheets as at the close of each such Fiscal Month on a consolidatedbasis and the Designated Consolidating Basis with respect thereto and (ii)profit and loss and reconciliation of surplus statements and a statement ofcash flows, each on a consolidated basis and the Designated Consolidating Basiswith respect thereto, for such Fiscal Month and the period from the beginningof the applicable Fiscal Year to the end of such Fiscal Month, all certified byits chief financial officer and prepared in accordance with GAAP (except forexclusion of footnotes and subject to normal year-end audit adjustments);

 

(d)                                 as soon as available,but in any event not more than 90 days prior to the end of each Fiscal Year ofthe Consolidated Group, but not less than 30 days prior to the end of suchFiscal Year, a copy of the plan and forecast (including a projected balancesheet, income statement and funds flow statement) of the Consolidated Group foreach month of such Fiscal Year (the “Projections”) on a consolidatedbasis and the Designated Consolidating Basis with respect thereto in formreasonably satisfactory to the Lender;

 

(e)                                  together with each ofthe financial statements required under Sections 6.1(a), (b) and (c),a compliance certificate in substantially the form of Exhibit E (a “ComplianceCertificate”) signed by the chief financial officer of the BorrowerRepresentative showing the calculations necessary to determine compliance withthis Agreement and stating that no Default or Unmatured Default exists, or ifany Default or Unmatured Default exists, stating the nature and status thereof.

 

(f)                                    not less frequentlythan weekly, and more frequently if the Lender shall require or the BorrowerRepresentative shall so elect, the Borrower Representative shall deliver to theLender:  (i) a Borrowing Base Certificateby no later than Tuesday of each week (which is based on values as of theimmediately preceding Friday), (ii) reports of the Borrowers’ sales, credits tosales or credit memoranda applicable to sales, collections and non-cash charges(from whatever source, including sales and noncash journals or other

 

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credits to Accounts) for the applicableperiod, and acceptable supporting documentation thereto (including, a reportindicating the dollar value of the Borrowers’ Eligible Accounts, and all otherinformation deemed necessary by the Lender to determine levels of that which isand is not Eligible Accounts), and (iii) reporting the value of the Borrowers’Inventory as of the immediately preceding month;

 

(g)                                 as soon as availablebut in any event within 15 days of the end of each calendar month and at suchother times as may be requested by the Lender, as of the period then ended:

 

#### (i)                                     a detailedaged trial balance of the Borrowers’ Accounts (1) specifying the name, address,and balance due for each Account Debtor and (2) reconciled to the BorrowingBase Certificate delivered as of such date prepared in a manner reasonablyacceptable to the Lender;

####  

#### (ii)                                  aschedule detailing the Borrowers’ Inventory, in form satisfactory to the Lender,(1) by location (including any Inventory located with a third party under anyconsignment, bailee arrangement, or warehouse agreement), product type, volumeon hand, which Inventory shall be valued at the lower of cost (determined on afirst-in, first-out basis) or market and adjusted for Reserves as the Lenderhas previously indicated to the Borrower Representative are deemed by theLender to be appropriate, (2) including a report of any variances or otherresults of Inventory counts performed by the Borrowers since the last Inventoryschedule (including information regarding sales or other reductions,additions, returns, credits issued by a Borrower and complaints and claims madeagainst a Borrower), and (3) reconciled to the Borrowing Base Certificatedelivered as of such date;

####  

#### (iii)                               aworksheet of calculations prepared by the Borrower Representative to determineEligible Accounts and Eligible Inventory, such worksheets detailing theAccounts and Inventory excluded from Eligible Accounts and Eligible Inventoryand the reason for such exclusion; and

####  

#### (iv)                              areconciliation of the Borrower’s Accounts and Inventory between the amountsshown in the Borrower’s books and financial statements and the reportsdelivered pursuant to clauses (i) and (ii) above;

 

(h)                                 as soon as availablebut in any event within 15 days of the end of each calendar month and at suchother times as may be requested by the Lender, as of the month then ended, aschedule and aging of the Borrower’s accounts payable;

###  

### (i)                                     promptlyupon the Lender’s request:

####  

#### (i)                                     copies ofinvoices in connection with the invoices issued by the Borrowers in connectionwith any Accounts, credit memos, shipping and delivery documents, and otherinformation related thereto;

####  

#### (ii)                                  copies ofpurchase orders, invoices, and shipping and delivery documents in connectionwith any Inventory or Equipment purchased by any Loan Party; and

 

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#### (iii)                               aschedule detailing the balance of all intercompany accounts of the LoanParties;

 

(j)                                     on the firstBusiness Day of the month of March and September, a certificate of goodstanding for each Loan Party from the appropriate governmental officer in itsjurisdiction of incorporation, formation, or organization;

 

(k)                                  as soon as possibleand in any event within 15 days of filing thereof, copies of all tax returnsfiled by any Loan Party with the U.S. Internal Revenue Service;

 

(l)                                     as soon aspossible and in any event within 90 days after the close of the Fiscal Year ofthe Borrowers, a statement of the Unfunded Liabilities and the required annualcontribution of each Single Employer Plan, certified as correct by an actuaryenrolled under ERISA;

 

(m)                               as soon as possible andin any event within ten days after any Borrower knows that any Reportable Eventhas occurred with respect to any Plan, a statement, signed by the chieffinancial officer of the Borrower Representative, describing said ReportableEvent and the action which the Borrowers propose to take with respect thereto;

 

(n)                                 as soon as possibleand in any event within 15 days of filing therewith with the PBGC, the U.S.Internal Revenue Service or any other governmental entity, a copy of eachannual report or other filing with respect to any Plan;

 

(o)                                 as soon as possibleand in any event within ten days after receipt by any Loan Party, a copy of (i)any notice or claim to the effect that any Loan Party is or may be liable toany Person as a result of the release by any Loan Party, or any other Person ofany toxic or hazardous waste or substance into the environment, and (ii) anynotice alleging any violation of any federal, state or local environmental,health or safety law or regulation by the any Loan Party;

 

(p)                                 within 30 days aftereach March 31 and September 30, an updated Customer List, certifiedas true and correct by an Authorized Officer of the Borrower Representative;

 

(q)                                 promptly upon thefiling thereof and in any event within 10 days after filing therewith, copiesof all registration statements and other reports on Form 8-K which any LoanParty files with the Securities and Exchange Commission;

 

(r)                                    promptly uponincurrence thereof until the applicable Problem Financing Statement shall beterminated in accordance with applicable law, notice of the amount of allpayables to any of the secured parties, or their assignees, listed on theProblem Financing Statements; and

 

### (s)                                  such otherinformation (including non-financial information) as the Lender may from timeto time reasonably request.

 

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6.2.                              Useof Proceeds.

 

(a)                                  The Borrowers willuse the proceeds of the Credit Extensions (i) to repay the outstandingindebtedness, liabilities and obligations under the Prior Agreement, and (ii)for general corporate purposes (not otherwise prohibited by this Agreement).

 

(b)                                 No Borrower will, norwill it permit any Loan Party to, use any of the proceeds of the CreditExtensions to (i) purchase or carry any Margin Stock in violation of RegulationU, (ii) repay or refinance any Indebtedness of any Person incurred to buy orcarry any Margin Stock, (iii) acquire any security in any transaction that issubject to Section 13 or Section 14 of the Securities Exchange Act of1934 (and the regulations promulgated thereunder), or (iv) make any Acquisition.

 

6.3.                              Notices.  Each Loan Party will give prompt notice inwriting to the Lender of:

 

(a)                                        the occurrenceof any Default or Unmatured Default;

 

(b)                                       any otherdevelopment, financial or otherwise, which could reasonably be expected to havea Material Adverse Effect;

 

(c)                                        the assertionby the holder of any Capital Stock of any Loan Party or the holder of anyIndebtedness of any Loan Party in excess of $500,000 that any default existswith respect thereto or that any Loan Party is not in compliance therewith;

 

(d)                                       receipt of anywritten notice that any Loan Party is subject to any investigation by anygovernmental entity with respect to any potential or alleged violation of anyapplicable Environmental Law or of imposition of any Lien against any Property ofany Loan Party for any liability with respect to damages arising from, or costsresulting from, any violation of any Environmental Laws;

 

(e)                                  receipt of any noticeof litigation commenced or threatened against any Loan Party that (i) seeksdamages in excess of $250,000, (ii) seeks injunctive relief that may bematerial to the business of a Loan Party, (iii) is asserted or institutedagainst any Plan, its fiduciaries or its assets, (iv) alleges criminalmisconduct by any Loan Party, (v) alleges the violation of any law regarding,or seeks remedies in connection with, any Environmental Laws; or (vi) involvesany product recall;

 

(f)                                    any Lien (otherthan Permitted Liens) or claim made or asserted against any of the Collateral;

 

(g)                                       its decision tochange, (i) such Loan Party’s name or type of entity, (ii) such Loan Party’sarticles or certificate of incorporation, partnership agreement, certificate ofpartnership, articles or certificate of organization, by-laws, or operating orother management agreement, and (iii) the location where any Collateral is heldor maintained; *provided that*, in no event shall the Lender receive noticeof such change less than thirty days prior thereto;

 

(h)                                       commencement ofany proceedings contesting any tax, fee, assessment, or other governmentalcharge in excess of $100,000;

 

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(i)                                           the openingof any new deposit account by any Loan Party with any bank or other financialinstitution;

 

(j)                                     any loss, damage,or destruction to the Collateral in the amount of $500,000 or more, whether ornot covered by insurance;

 

(k)                                  any and all defaultnotices received under or with respect to any leased location or publicwarehouse where Collateral is located (which shall be delivered within twoBusiness Days after receipt thereof);

 

(l)                                     all materialamendments to real estate leases, together with a copy of each such amendment;

 

(m)                               immediately afterbecoming aware of any pending or threatened strike, work stoppage, unfair laborpractice claim, or other labor dispute affecting any Borrower or any of itsSubsidiaries in a manner;

 

(n)                                 upon request by theLender, evidence of payment of monthly lease or rental payments as to eachleased or rented location for which a Collateral Access Agreement has not beenobtained (which shall be delivered within three Business Days after paymentthereof);

 

(o)                                 the fact that suchLoan Party has entered into a Rate Management Transaction or an amendment to aRate Management Transaction, together with copies of all agreements evidencingsuch Rate Management Transactions or amendments thereto (which shall bedelivered within two Business Days); and

 

(p)                                 any other matter asthe Lender may reasonably request.

 

6.4.                              Conduct of Business.  Each Loan Party will:

 

(a)                                  carryon and conduct its business in substantially the same manner and insubstantially the same fields of enterprise as it is presently conducted;

 

(b)                                 do all thingsnecessary to remain duly incorporated or organized, validly existing and (tothe extent such concept applies to such entity) in good standing as a domesticcorporation, partnership or limited liability company in its jurisdiction ofincorporation or organization, as the case may be, and maintain all requisiteauthority to conduct its business in each jurisdiction in which its business isconducted;

 

(c)                                  keep adequate booksand records with respect to its business activities in which proper entries,reflecting all financial transactions, are made in accordance with GAAP and ona basis consistent with the Financial Statements delivered to the Lenderpursuant to Section 4.1(m);

 

(d)                                 at all times maintain,preserve and protect all of its assets and properties used or useful in theconduct of its business, and keep the same in good repair, working order andcondition in all material respects (taking into consideration ordinary wear andtear) and from

 

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time to time make, or cause to be made, all necessary or appropriaterepairs, replacements and improvements thereto consistent with industrypractices; and

 

(e)                                  transact businessonly in such corporate and trade names as are set forth in Schedule 5.12.

 

6.5.                              Taxes.  Each Loan Party will timely file completeand correct U.S. federal and applicable foreign, state and local tax returnsrequired by law and pay when due all taxes, assessments and governmentalcharges and levies upon it or its income, profits, Property or Collateralexcept those which are being contested in good faith by appropriate proceedingsso long as (a) adequate reserves have been set aside in accordance with GAAPwith respect to such taxes, (b) the continuation of any such contest does notresult in any part of the Collateral or any other property of a Loan Partybeing made the subject of (i) any proceeding in foreclosure, (ii) any levy orexecution (which shall not have been stayed or dismissed), (iii) anyforfeiture, seizure or other loss, or (iv) any Lien other than a PermittedLien, and (c) such Loan Party shall promptly pay or discharge such contestedtaxes, if any, and shall deliver to the Lender evidence reasonably acceptableto the Lender of such compliance, payment or discharge, if such contest isterminated or discontinued adversely to such Loan Party or the conditions setforth in this proviso are no longer met. No Loan Party will file or consent to the filing of any consolidatedincome tax return with any Person other than the Borrowers and theirSubsidiaries.

 

6.6.                              Payment of Indebtedness and OtherLiabilities.  Each Loan Partywill pay or discharge when due (a) all Material Indebtedness permitted by Section 6.17owed by such Loan Party and (b) all other indebtedness due to materialmen,mechanics, carriers, warehousemen, and landlords (“Other Liabilities”)except that the Loan Parties may in good faith contest, by appropriateproceedings diligently pursued, any such Other Liabilities; *provided*that:(i) adequate reserves have been set aside for such contested Other Liabilitiesin accordance with GAAP, (ii) such contested Other Liabilities do not exceed$250,000 in the aggregate as of any date, (iii) no Lien, other than a PermittedLien, shall be imposed or exist with respect to any contested OtherLiabilities, (iv) none of the Collateral becomes subject to any forfeiture,seizure or other loss as a result of the contest of such Other Liabilities, and(v) such Loan Party shall promptly pay or discharge such contested OtherLiabilities, if any, and shall deliver to the Lender evidence reasonablyacceptable to the Lender of such compliance, payment or discharge, if suchcontest is terminated or discontinued adversely to such Loan Party or theconditions set forth in this proviso are no longer met.

## *** ***

## ***6.7.***                              Insurance.

###  

### (a)                                  Each LoanParty shall at all times maintain, with financially sound and reputablecarriers having a Financial Strength rating of at least A+ by A.M. BestCompany, insurance against: (i) loss or damage by fire and loss in transit;(ii) theft, burglary, pilferage, larceny, embezzlement, and other criminalactivities; (iii) business interruption; (iv) general liability and (v) andsuch other hazards, as is customary in the business of such Loan Party.  All such insurance shall be in amounts,cover such assets and be under policies acceptable to the Lender in itsPermitted Discretion.  In the event anyCollateral is located in any area that has been designated by the FederalEmergency Management Agency as a “Special Flood Hazard Area”, the applicableLoan Party shall purchase and maintain flood insurance on such Collateral(including any personal Property which is located on any real Property leasedby such Loan Party within a “Special Flood Hazard Area”).  The amount of all insurance required by thisSection shall at a minimum comply with applicable law, including

###  

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### the Flood Disaster Protection Act of 1973, asamended.  All premiums on such insuranceshall be paid when due by the applicable Loan Party, and copies of the policiesdelivered to the Lender.  If any LoanParty fails to obtain any insurance as required by this Section, the Lender mayobtain such insurance at the Borrowers’ expense.  By purchasing such insurance, the Lender shall not be deemed tohave waived any Default or Unmatured Default arising from any Loan Party’sfailure to maintain such insurance or pay any premiums therefor.   No Loan Party will use or permit anyProperty to be used in violation of applicable law or in any manner which mightrender inapplicable any insurance coverage.

###  

### (b)                                 Allinsurance policies required under Section 6.7(a) shall name theLender (for the benefit of the Lender and its Affiliates) as an additionalinsured or as loss payee, as applicable, and shall provide that, or containloss payable clauses or mortgagee clauses, in form and substance satisfactoryto the Lender, which provide that:

####  

#### (iv)                              allproceeds thereunder with respect to any Collateral shall be payable to theLender;

####  

#### (v)                                 no suchinsurance shall be affected by any act or neglect of the insured or owner ofthe Property described in such policy; and

####  

#### (vi)                              suchpolicy and loss payable clauses may be canceled, amended, or terminated onlyupon at least thirty days prior written notice given to the Lender.

 

(c)                                  Notwithstandingthe foregoing, any insurance or condemnation proceeds received by the LoanParties shall be immediately forwarded to the Lender and the Lender may, at itsoption, apply any such proceeds to the reduction of the Obligations inaccordance with Section 2.13(d), *provided that* in the case ofinsurance proceeds pertaining to any Loan Party other than a Borrower, suchinsurance proceeds shall be applied to the Loans owing by the Borrowers.  The Lender may permit or require any LoanParty to use such money, or any part thereof, to replace, repair, restore orrebuild the Collateral in a diligent and expeditious manner with materials andworkmanship of substantially the same quality as existed before the loss,damage or destruction. Notwithstanding the foregoing, if the casualty givingrise to such insurance proceeds could not reasonably be expected to have aMaterial Adverse Effect and such insurance proceeds do not exceed $500,000 inthe aggregate, upon the applicable Loan Party’s request, the Lender shallpermit such Loan Party to replace, restore, repair or rebuild the property; *providedthat*, if such Loan Party has not completed or entered into bindingagreements to complete such replacement, restoration, repair or rebuildingwithin 30 days of such casualty, the Lender may apply such insurance proceedsto the Obligations in accordance with Section 2.13.  All insurance proceeds that are to be madeavailable to a Borrower to replace, repair, restore or rebuild the Collateralshall be applied by the Lender to reduce the outstanding principal balance ofthe Revolving Loans (which application shall not result in a permanentreduction of the Commitment) and upon such application, the Lender shallestablish a Reserve against the Borrowing Base in an amount equal to the amountof such proceeds so applied.  Allinsurance proceeds made available to any Loan Party that is not a Borrower toreplace, repair, restore or rebuild Collateral shall be deposited in a cashcollateral account.  In either case,thereafter, such funds shall be made available to the applicable Loan Party toprovide funds to replace, repair, restore or rebuild the Collateral as follows:

 

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(i)                                     TheBorrower Representative shall request a Revolving Loan or the applicable LoanParty shall request a release from the cash collateral account be made in theamount needed;

 

(ii)                                  solong as the conditions set forth in Section 4.2 have been met, theLender shall make such Revolving Loan or Lender shall release funds from thecash collateral account; and

 

(iii)                               inthe case of insurance proceeds applied against the Revolving Loan, the Reserveestablished with respect to such insurance proceeds shall be reduced by theamount of such Revolving Loan.

 

6.8.                              Compliancewith Laws.  Each LoanParty will comply with all laws, rules, regulations, orders, writs, judgments,injunctions, decrees or awards to which it may be subject including allEnvironmental Laws.

 

6.9.                              Maintenance of Properties andIntellectual Property Rights. Each Loan Party will do all things necessary to (i) maintain, preserve,protect and keep its Property in good repair, working order and condition, andmake all necessary and proper repairs, renewals and replacements so that itsbusiness carried on in connection therewith may be properly conducted at alltimes and (ii) obtain and maintain in effect at all times all materialfranchises, governmental authorizations, Intellectual Property Rights, licensesand permits, which are necessary for it to own its Property or conduct itsbusiness as conducted on the Closing Date.

 

6.10.                        Inspection.  Each Loan Party will permit the Lender, byits employees, representatives and agents, from time to time upon two BusinessDays’ prior notice as frequently as the Lender reasonably determines to beappropriate, to (a) inspect any of the Property, the Collateral, and the booksand financial records of such Loan Party, (b) examine, audit and make extractsor copies of the books of accounts and other financial records of such LoanParty, (c) have access to its properties, facilities, the Collateral and itsadvisors, officers, directors and employees to discuss the affairs, financesand accounts of such Loan Party, and (d) review, evaluate and make testverifications and counts of the Accounts, Inventory and other Collateral ofsuch Loan Party.  If a Default or anUnmatured Default has occurred and is continuing, each Loan Party shall providesuch access to the Lender at all times and without advance notice.  Furthermore, so long as any Default hasoccurred and is continuing, each Loan Party shall provide the Lender withaccess to its suppliers.  Each LoanParty shall promptly make available to the Lender and its counsel originals orcopies of all books and records that the Lender may reasonably request.

## *** ***

## ***6.11.***                        Appraisals.  Whenever a Default or Unmatured Defaultexists (and at such other times not more frequently than once per calendaryear) as the Lender requests, the Lender may, at the sole expense of theBorrowers, obtain appraisals or updates thereof of the Borrowers’ Inventoryfrom an appraiser, and prepared on a basis, satisfactory to the Lender, suchappraisals and updates to include, without limitation, information required byapplicable law and regulations and by the internal policies of the Lender.  The appraisers performing the appraisal andthe methods of appraisal used by the appraisers doing the appraisal are subjectto the Lender’s approval in its discretion exercised in good faith.  From and after the date the Lender receivesand approves the most recent appraisal undertaken pursuant to this Section 6.11,the Net Orderly Liquidation Value of the Borrowers’ Inventory will, forpurposes of determining the Borrowing Base, equal the Net Orderly LiquidationValue of then Eligible Inventory established by the most recent appraisal.  The

## *** ***

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## ***Lender willprovide the Borrower Representative a copy of the most recent appraisalpromptly on the receipt of it by the Lender.***

## *** ***

## ***6.12.***                        Communications with Accountants.  Each Loan Party executing this Agreement authorizesthe Lender to communicate directly with its independent certified publicaccountants and authorizes and shall instruct those accountants and advisors tocommunicate to the Lender information relating to any Loan Party with respectto the business, results of operations and financial condition of any LoanParty.

## *** ***

## ***6.13.***                        Collateral Access Agreements andReal Estate Purchases.  Each Loan Party shall use commerciallyreasonable efforts to obtain a Collateral Access Agreement, from the lessor ofeach leased property, mortgagee of owned property or bailee with respect to anywarehouse, processor or converter facility or other location where Collateralis stored or located, which agreement or letter shall provide access rights,contain a waiver or subordination of all Liens or claims that the landlord,mortgagee or bailee may assert against the Collateral at that location, andshall otherwise be satisfactory in form and substance to the Lender. Withrespect to such locations or warehouse space leased or owned as of the ClosingDate and thereafter, if Lender has not received a Collateral Access Agreementas of the Effective Date (or, if later, as of the date such location isacquired or leased), Borrower’s Eligible Inventory or Equipment at thatlocation shall, in the Lender’s discretion, be excluded from the Borrowing Baseor be subject to such Reserves as may be established by the Lender.  After the Closing Date, no real property orwarehouse space shall be leased by any Loan Party and no Inventory shall be shippedto a processor or converter under arrangements established after the ClosingDate without the prior written consent of the Lender (which consent, in theLender’s discretion, may be conditioned upon the exclusion from the BorrowingBase of Eligible Inventory at that location or the establishment of Reservesacceptable to the Lender) or, unless and until a satisfactory Collateral AccessAgreement shall first have been obtained with respect to such location.  Each Loan Party shall timely and fully pay andperform its obligations under all leases and other agreements with respect toeach leased location or third party warehouse where any Collateral is or may belocated.  To the extent permittedhereunder, if any Loan Party proposes to acquire a fee ownership interest inreal Property after the Closing Date, it shall first provide to the Lender amortgage or deed of trust granting Lender a first priority Lien on such realProperty, together with environmental audits, mortgage title insurancecommitment, real property survey, local counsel opinion(s), and, if required bythe Lender, supplemental casualty insurance and flood insurance, and such otherdocuments, instruments or agreements reasonably requested by Lender, in eachcase, in form and substance reasonably satisfactory to the Lender.

 

6.14.                        Deposit Account Control Agreements.  The Loan Parties will provide to the Lenderupon the Lender’s request, a Deposit Account Control Agreement duly executed onbehalf of each financial institution holding a deposit account of a Loan Partyas set forth in the Security Agreements.

 

6.15.                        Additional Collateral; FurtherAssurances.

 

### (a)                                  Subject to applicable law, each LoanParty shall, unless the Lender otherwise consents, (i) cause each of itsSubsidiaries existing on the Closing Date (excluding any Foreign Subsidiaryexisting on the Closing Date other than Mondel Canada) to become or remain aLoan Party and a Guarantor and (ii) cause each of its Subsidiaries (excludingany Foreign Subsidiary formed after the Closing Date with the Lender’s priorconsent) formed or acquired after the Closing Date in accordance with the termsof this Agreement to (1)

###  

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### become a party to this Agreement by executing the JoinderAgreement set forth as Exhibit F hereto (the “Joinder Agreement”),and (2) guarantee payment and performance of the Guaranteed Obligationspursuant to the Guaranty; *provided* that no Subsidiary party to aJoinder Agreement shall be a Borrower under this Agreement unless the Lenderhas designated such Subsidiary to be a Borrower.

###  

### (b)                                 Upon therequest of the Lender, each Loan Party shall (i) grant Liens to the Lender,pursuant to such documents as the Lender may reasonably deem necessary anddeliver such property, documents, and instruments as the Lender may request toperfect the Liens of the Lender in any Property of such Loan Party whichconstitutes Collateral, including any parcel of real Property located in theU.S. owned by any Loan Party, and (ii) in connection with the foregoingrequirements, or either of them, deliver to the Lender all items of the typerequired by Section 4.1 (as applicable).  Upon execution and delivery of such Loan Documents and otherinstruments, certificates, and agreements, each such Person shall automaticallybecome a Guarantor hereunder and thereupon shall have all of the rights,benefits, duties, and obligations in such capacity under the Loan Documents.

###  

### (c)                                  Each LoanParty will cause (i) 100% of the issued and outstanding Capital Stock of eachof its Domestic Subsidiaries and (ii) 65% (or such greater percentage that, dueto a change in an applicable law after the date hereof, (1) could notreasonably be expected to cause the undistributed earnings of such ForeignSubsidiary as determined for U.S. federal income tax purposes to be treated asa deemed dividend to such Foreign Subsidiary’s U.S. parent and (2) could notreasonably be expected to cause any material adverse tax consequences) of theissued and outstanding Capital Stock entitled to vote (within the meaning ofTreas. Reg. Section 1.956-2(c)(2)) (exclusive of any ExcludedForeign Stock) and 100% of the issued and outstanding Capital Stock notentitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)in each Foreign Subsidiary directly owned by any Loan Party (exclusive of any ExcludedForeign Stock) or any Domestic Subsidiary to be subject at all times to afirst priority, perfected Lien in favor of the Lender pursuant to the terms andconditions of the Loan Documents or other security documents as the Lendershall reasonably request.

###  

### (d)                                 Withoutlimiting the foregoing, each Loan Party shall, and shall cause each of itsSubsidiaries which is required to become a Loan Party pursuant to the terms ofthis Agreement to, execute and deliver, or cause to be executed and delivered,to the Lender such documents and agreements, and shall take or cause to betaken such actions as the Lender may, from time to time, reasonably request tocarry out the terms and conditions of this Agreement and the other LoanDocuments.

 

6.16.                        Dividends.

 

(a)                                  No Loan Party willdeclare or pay any dividends or make any distributions on its Capital Stock(other than dividends or distributions payable in its own common stock) orredeem, repurchase or otherwise acquire or retire any of its Capital Stock atany time outstanding, except that any Subsidiary may declare and pay dividendsor make distributions to a Borrower.

 

(b)                                 No Loan Party shalldirectly or indirectly enter into or become bound by any agreement, instrument,indenture or other obligation (other than this Agreement and the

 

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other Loan Documents) that could directly or indirectly restrict,prohibit or require the consent of any Person with respect to the payment ofdividends or distributions or the making or repayment of intercompany loans bya Loan Party to a Loan Party.

 

6.17.                        Indebtedness.  No Loan Party will create, incur or sufferto exist any Indebtedness, except:

 

(a)                                  the Obligations;

 

(b)                                 Indebtedness existingon the date hereof and described in Schedule 5.22, including theSPA Indebtedness;

 

(c)                                  purchase moneyIndebtedness or Capitalized Lease Obligations incurred in connection with thepurchase of any Equipment; *provided that*, (i) such Indebtedness isnot secured by any of the Collateral other than the property so acquired andany identifiable proceeds, (ii) any Liens relating to such Indebtedness do notextend to or cover any property of a Loan Party other than the property so acquiredand any identifiable proceeds therefrom, (iii) the principal amount of suchCapitalized Lease Obligations or purchase money Indebtedness will not, at thetime of the incurrence thereof, exceed the value of the property so acquired,and (iv) the aggregate of all such purchase money Indebtedness and CapitalizedLease Obligations incurred in any Fiscal Year shall not exceed the amountpermitted during such period for capital expenditures pursuant to Section 6.29.1;

 

(d)                                 Indebtedness whichrepresents an extension, refinancing, or renewal of any of the Indebtednessdescribed in clauses (b) and (c) of this Section 6.17;*provided*that,(i) the principal amount or interest rate of such Indebtedness is notincreased, (ii) any Liens securing such Indebtedness are not extended to anyadditional Property of any Loan Party, (iii) no Loan Party that is notoriginally obligated with respect to repayment of such Indebtedness is requiredto become obligated with respect thereto, (iv) such extension, refinancing orrenewal does not result in a shortening of the average weighted maturity of theIndebtedness so extended, refinanced, renewed, (v) the terms of any suchextension, refinancing, or renewal are not less favorable to the obligorthereunder than the original terms of such Indebtedness, and (vi) if theIndebtedness that is refinanced, renewed, or extended was subordinated in rightof payment to the Obligations, then the terms and conditions of therefinancing, renewal, or extension Indebtedness must include subordinationterms and conditions that are at least as favorable to the Lender as those thatwere applicable to the refinanced, renewed, or extended Indebtedness;

 

(e)                                  Indebtedness owing byany Borrowing Base Group Member to any other Loan Party with respect to intercompanyloans, *provided,further, that*:

 

(i)                                     Each BorrowingBase Group Member shall record all intercompany transactions on its books andrecords in a manner reasonably satisfactory to the Lender;

 

(ii)                                  at the time any suchintercompany loan or advance is made by the Loan Party and after giving effectthereto, such Loan Party shall be Solvent; and

 

(iii)                               no Default or UnmaturedDefault then exists.

 

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(f)                                    ContingentObligations (i) by indorsement of instruments for deposit or collection in theordinary course of business, (ii) consisting of the Reimbursements Obligations,and (iii) consisting of the Guaranty and guarantees of Indebtedness incurredfor the benefit of any Borrowing Base Group Member if the primary obligation isexpressly permitted elsewhere in this Section 6.17;

 

(g)                                 Indebtedness arisingunder Rate Management Transactions related to the Loans as required by Section 6.32;

 

(h)                                 unsecured Indebtednessincurred after the Closing Date from SPA; and

 

(i)                                     unsecuredSubordinated Indebtedness incurred to comply with the requirements ofSection 6.29.4 with respect to an Availability Condition.

 

6.18.                        CapitalStructure.  (a) If all or anypart of a Loan Party’s Capital Stock has been pledged to the Lender, that LoanParty shall not issue additional Capital Stock, and (b) no Loan Party will (i)make any change in its capital structure or (ii) engage in any business otherthan the businesses currently engaged in by it or businesses reasonably relatedthereto.

 

6.19.                        Merger.  No Loan Party will merge or consolidate withor into any other Person, except that, with the prior consent of the Lender,(a) any Subsidiary of a Borrower may merge into a Borrower or a Wholly-OwnedSubsidiary of a Borrower which is a Domestic Subsidiary and a Loan Party and(b) any Loan Party (other than a Borrower) may merge with any other Loan Partyso long as the surviving Loan Party is a Domestic Subsidiary.

 

6.20.                        Sale ofAssets.  No Loan Party willlease, sell or otherwise dispose of its Property (including any Capital Stockowned by it) to any other Person, except:

 

(a)                                  sales of Inventory inthe ordinary course of business; *however*, a sale in the ordinary course ofbusiness will not include a transfer in total or partial satisfaction ofindebtedness; and

 

(b)                                 the sale or otherdisposition of Equipment that is obsolete or no longer useful in such LoanParty’s business and having a net book value not exceeding $250,000 in theaggregate in any Fiscal Year.

 

The Net Cash Proceeds of any sale or disposition permitted pursuant tothis Section shall be delivered to the Lender as required by Section 2.13and applied to the Obligations as set forth therein.

 

6.21.                        Investments and Acquisitions.  No Loan Party will (a) make or suffer toexist any Investments (including loans and advances to, and other Investmentsin, Subsidiaries), or commitments therefor, (b) create any Subsidiary, (c)become or remain a partner in any partnership or joint venture, or (d) make anyAcquisition, except:

 

(a)                                  Cash EquivalentInvestments, subject to control agreements in favor of the Lender or otherwisesubject to a perfected security interest in favor of the Lender, so long asafter making such Cash Equivalent Investment, no Loans are then outstanding;

 

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(b)                                 Investments inSubsidiaries existing as of the Closing Date;

 

(c)                                  other Investmentsdescribed in Schedule 6.21;

 

(d)                                 Investments consistingof loans or advances made to employees of such Loan Party on an arms-lengthbasis in the ordinary course of business consistent with past practices fortravel and entertainment expenses, and similar purposes up to a maximum of$25,000 to any employee and up to a maximum of $150,000 in the aggregate at anyone time outstanding, except for loans for relocation purposes which may bemade up to $200,000 at any time outstanding in the aggregate; and

 

(e)                                  subject to Sections4.2(a) and 4.4 of the Security Agreements, Investments comprised ofnotes payable, or stock or other securities issued by Account Debtors to suchLoan Party pursuant to negotiated agreements with respect to settlement of suchAccount Debtor’s Accounts in the ordinary course of business, consistent withpast practices.

## *** ***

## ***6.22.***                        Liens.

 

### (e)                                  No Loan Party will create, incur, orsuffer to exist any Lien in, of, or on the Property of such Loan Party, exceptthe following (collectively, “Permitted Liens”):

####  

#### (i)                                     Liens fortaxes, fees, assessments, or other governmental charges or levies on theProperty of such Loan Party if such Liens (A) shall not at the time bedelinquent or (B)(1) do not secure amounts in excess of $50,000 in theaggregate as of any date, (2) are being contested in accordance with Section 6.5and with respect to which the other terms of Section 6.5 are thenbeing complied with by such Loan Party, and (3) do not prevent theLender from having a perfected first priority security interest in, or asapplicable, mortgage Lien on, the Collateral or with respect to future advancesmade hereunder;

####  

#### (ii)                                  Liens imposedby law, such as carrier’s, warehousemen’s, and mechanic’s Liens and othersimilar Liens arising in the ordinary course of business which (A) securepayment of indebtedness not more than ten days past due or (B) (1) are beingcontested in good faith in accordance with Section 6.6 and withrespect to which the other terms of Section 6.6 are then beingcomplied with by such Loan Party, (2) do not secure indebtedness in excess of$250,000 in the aggregate as of any date, and (3) do not prevent theLender from having a perfected first priority security interest in, or asapplicable, mortgage Lien on, the Collateral or with respect to future advancesmade hereunder;

####  

#### (iii)                               statutoryLiens in favor of landlords of real Property leased by such Loan Party for eachBorrower Facility for which there is not in effect a Collateral AccessAgreement; *provided*that (A) such Loan Party is current with respect to payment of allrent and other amounts due to such landlord under any lease of such realProperty and (B) do not secure indebtedness in excess of any aggregate Reservestherefor as of any date;

####  

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#### (iv)                              Liensarising out of pledges or deposits under worker’s compensation laws,unemployment insurance, old age pensions, or other social security orretirement benefits, or similar legislation or to secure the performance ofbids, tenders, or contracts (other than for the repayment of indebtedness) orto secure indemnity, performance, or other similar bonds for the performance ofbids, tenders, or contracts (other than for the repayment of indebtedness) orto secure statutory obligations (other than Liens arising under ERISA orEnvironmental Laws) or surety or appeal bonds, or to secure indemnity,performance, or other similar bonds up to a maximum aggregate amount not toexceed, as of any date, $250,000;

####  

#### (v)                                 utilityeasements, building restrictions, and such other encumbrances or chargesagainst real Property as are of a nature generally existing with respect toproperties of a similar character and which do not in any material way affectthe marketability of such real Property or interfere with the use thereof inthe business of such Loan Party;

####  

#### (vi)                              Liensexisting on the Closing Date and described in Schedule 6.22*provided*that such Liens shall secure only that Indebtedness which they secure on theClosing Date subject to extension, refinancing, or renewal of that Indebtednessas permitted pursuant to Section 6.17(d); *provided that*, the Liensevidenced thereby are not increased to cover any additional Property notoriginally covered thereby;

####  

#### (vii)                           Liensresulting from any extension, refinancing, or renewal of the relatedIndebtedness as permitted pursuant to Section 6.17(d); *providedthat*, the Liens evidenced thereby are not increased to cover anyadditional Property not originally covered thereby;

####  

#### (viii)                        Lienssecuring purchase money Indebtedness or Capital Lease Obligations of such LoanParty permitted pursuant to Section 6.17(c); *provided that*, such Liensattach only to the Property which was purchased with the proceeds of suchpurchase money Indebtedness or Capital Lease Obligations; and

####  

#### (ix)                                Liens infavor of the Lender granted pursuant to any Loan Document.

###  

### (f)                                    Notwithstandingthe foregoing, none of the Liens permitted pursuant to this Section 6.22,other than (1) clauses (i) and (viii) above, may at any timeattach to any Accounts of any Loan Party and (2) clauses (i)through (iii) above, may at any time attach to any Inventory of any LoanParty.

###  

### (g)                                 Other thanas provided in the Loan Documents or in connection with the creation orincurrence of any Indebtedness under Section 6.17(c), no Loan Partywill enter into or become subject to any negative pledge or other restrictionthe right of such Loan Party to grant Liens to the Lender on any of itsProperty; *providedthat*, any such negative pledge or other restriction entered into inconnection with the creation of Indebtedness under Section 6.17(c)shall be limited to the Property securing such purchase money Indebtedness.

 

6.23.                        Change of Corporate Name or Location;Change of Fiscal Year.  No LoanParty shall (a) change its name as it appears in official filings in the stateof its incorporation or organization, (b) change its chief executive office,principal place of business, mailing address, corporate offices or warehousesor locations at which Collateral is held or stored, or the location of itsrecords

 

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concerning the Collateral as set forth in the Security Agreement, (c)change the type of entity that it is, (d) change its organizationidentification number, if any, issued by its state of incorporation or otherorganization, or (e) change its state of incorporation or organization, in eachcase, without at least thirty days prior written notice to the Lender and theLender shall have either (1) determined that such event or occurrence will notadversely affect the validity, perfection or priority of the Lender’s securityinterest in the Collateral, or (2) after the Lender’s written acknowledgmentthat any reasonable action requested by the Lender in connection therewith,including to continue the perfection of any Liens in favor of the Lender in anyCollateral, has been completed or taken, and, *provided that*, any newlocation shall be in the continental U.S.. No Loan Party shall change itsFiscal Year.

 

6.24.                        AffiliateTransactions.  No LoanParty will (a) enter into any transaction (including the purchase or sale ofany Property or service) with any Affiliate or (b) make any payment or transfer(including any payment or transfer with respect to any fees or expenses formanagement services) to, any Affiliate except (i) in the ordinary course ofbusiness and pursuant to the reasonable requirements of such Loan Party’sbusiness and upon fair and reasonable terms no less favorable to such LoanParty than such Loan Party would obtain in a comparable arms-length transactionand (ii) MagneTek may pay management fees pursuant to that certain ExecutiveManagement Agreement dated as of July 1, 1994 between MagneTek and TheSpectrum Group, Inc. as in effect on the Closing Date, and any increases to theamounts set forth therein and any bonuses payable thereunder, in each case asmay be approved by of the Board of Directors of MagneTek, so long as suchincreases and bonuses are solely for executive compensation; *provided*that no Loan Party will extend credit to, or have Indebtedness owing from, itsAffiliates or pay in whole or in part any Indebtedness of any Affiliate exceptas permitted by Section 6.17(e) and Section 6.26(a).

 

6.25.                        Amendmentsto Agreements.  No Loan Partywill, nor will any Loan Party permit its Subsidiary to, amend or terminate itsarticles of incorporation, charter, certificate of formation, by-laws, operating,management or partnership agreement or other organizational document.

 

6.26.                        Prepayment of Indebtedness;Subordinated Indebtedness. 

 

(a)                                  No Loan Party shall,directly or indirectly, voluntarily purchase, redeem, defease or prepay anyprincipal of, premium, if any, interest or other amount payable in respect ofany Debt For Borrowed Money prior to its scheduled maturity, other than (i) theObligations; (ii) Indebtedness secured by a Permitted Lien if the assetsecuring such Indebtedness has been sold or otherwise disposed of in accordancewith Section 6.20; (iii) Indebtedness permitted by Section 6.17(d)upon any refinancing thereof in accordance therewith; and (iv) Indebtednesspermitted by Section 6.17(e).

 

(b)                                 No Loan Party shallmake any amendment or modification to the indenture, note or other agreementevidencing or governing any Subordinated Indebtedness, or directly orindirectly voluntarily prepay, defease or in substance defease, purchase,redeem, retire or otherwise acquire, any Subordinated Indebtedness.

 

(c)                                  No Loan Party shallmake any payments of interest, fees or principal on the SPA Indebtedness.

 

6.27.                        Lettersof Credit.  No Loan Party willapply for or become liable upon or in respect of any Letter of Credit otherthan Facility LCs.

 

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6.28.                        FinancialContracts.  No Loan Party shallenter into or remain liable upon any Financial Contract except for RateManagement Transactions required by Section 6.32.

 

6.29.                        FinancialCovenants.

 

6.29.1.  CapitalExpenditures.  No Loan Partyshall expend, or be committed to expend, for Capital Expenditures in theaggregate for the Consolidated Group, in excess of (a) $1,750,000 for theFiscal Year ending in June, 2004, (b) $2,500,000 for the Fiscal Year ending inJune, 2005, or (c) $3,000,000 for the Fiscal Year ending in June, 2006.

 

6.29.2.  MinimumFixed Charge Coverage Ratio. The Borrowers will not permit the Fixed Charge Coverage Ratio for anyTest Period ending on the dates set forth below to be less than the ratio setforth below opposite such Test Period ending on such date:

 
| **Test Period**                                                                                                   |   | **Minimum  Fixed Charge Coverage Ratio** |   |
|-------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------|--------|
|                                                                                                              |   |                                     |   |
| Fiscal Quarter beginning September 29, 2003 and ending on  December 28, 2003                            |   | 1.250:1.0                           |   |
|                                                                                                              |   |                                     |   |
| Two Fiscal  Quarters beginning September 29, 2003 and ending on March 28, 2004                          |   | 1.250:1.0                           |   |
|                                                                                                              |   |                                     |   |
| Four  Consecutive Fiscal Quarters ending June 27, 2004                                                       |   | 1.250:1.0                           |   |
|                                                                                                              |   |                                     |   |
| Four  Consecutive Fiscal Quarters ending September 26, 2004                                                  |   | 1.250:1.0                           |   |
|                                                                                                              |   |                                     |   |
| Four  Consecutive Fiscal Quarters ending December 26, 2004                                                   |   | 1.250:1.0                           |   |
|                                                                                                              |   |                                     |   |
| Four  Consecutive Fiscal Quarters ending March 27, 2005                                                      |   | 1.250:1.0                           |   |
|                                                                                                              |   |                                     |   |
| Four  Consecutive Fiscal Quarters ending June 26, 2005 and each Four  Consecutive Fiscal Quarters thereafter |   | 1.300:1.0                                |   |

 

6.29.3.  Minimum EBITDA.  The Borrowers shall not permit ConsolidatedEBITDA (“EBITDA Covenant”) to be less than the amounts set opposite theTest Periods set forth below (or, as applicable, in the case of negativeamounts, the Borrowers will not permit Consolidated EBITDA to be more negativethan the negative amounts set opposite the Test Periods ending on the followingdates):

 

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| **Test Period**                                                                                                   |   | **Minimum  EBITDA** |      |
|-------------------------------------------------------------------------------------------------------------------|--------|---------------------|-----------|
|                                                                                                              |   |                |      |
| Fiscal  Quarter beginning June 30, 2003 and ending on September 28, 2003                                |   | $                   | (750,000  | ) |
|                                                                                                              |   |                |      |
| Two Fiscal  Quarters beginning June 30, 2003 and ending on December 28, 2003                            |   | $                   | 150,000   |   |
|                                                                                                              |   |                |      |
| Three Fiscal  Quarters beginning June 30, 2003 and ending on March 28, 2004                             |   | $                   | 1,100,000 |   |
|                                                                                                              |   |                |      |
| Four  Consecutive Fiscal Quarters ending June 27, 2004                                                       |   | $                   | 2,750,000 |   |
|                                                                                                              |   |                |      |
| Four  Consecutive Fiscal Quarters ending September 26, 2004                                                  |   | $                   | 3,400,000 |   |
|                                                                                                              |   |                |      |
| Four  Consecutive Fiscal Quarters ending December 26, 2004                                                   |   | $                   | 4,125,000 |   |
|                                                                                                              |   |                |      |
| Four  Consecutive Fiscal Quarters ending March 27, 2005                                                      |   | $                   | 4,800,000 |   |
|                                                                                                              |   |                |      |
| Four  Consecutive Fiscal Quarters ending June 26, 2005 and each Four  Consecutive Fiscal Quarters thereafter |   | $                   | 5,500,000 |   |

 

6.29.4.  MinimumAvailability.  The Borrowersshall maintain, at all times and under all circumstances, Availability of notless than $500,000 in the aggregate; *provided**that* if Availability is lessthan $1,000,000 in the aggregate for two consecutive Business Days (“AvailabilityCondition”), then, within 30 days after each Availability Condition, theBorrowers will incur additional unsecured Subordinated Indebtedness, unsecuredDebt For Borrowed Money from SPA, or cause equity to be contributed to MagneTekin cash in an aggregate amount at least equal to $1,000,000 with respect to theoccurrence of each such Availability Condition.

 

6.30.                        DepositoryBanks.  Each Loan Party shallmaintain the Lender as such Loan Party’s principal depository bank, includingfor the maintenance of operating, administrative, cash management, collectionactivity, and other deposit accounts for the conduct of its business.

 

6.31.                        Saleof Accounts. No Loan Party will, nor will any Loan Party permit itsSubsidiary to, sell or otherwise dispose of any notes receivable or accountsreceivable, with or without recourse.

 

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6.32.                        Required Rate ManagementTransactions.  Within 60 days ofthe initial Loans, the Borrowers will enter into one or more transactions ofthe type described in the definition of “Rate Management Transactions” with theLender in its reasonable discretion, providing for a fixed rate of interest ona notional amount of at least $3,000,000 and an average weighted maturity of atleast 3 years.

 

6.33.                        Holding Companies; Inactive Companies.  None of MXT, Mondel Holding or the InactiveCompanies shall engage in any trade or business, or own any assets (other thanthe Capital Stock of its Subsidiaries) or incur any Indebtedness (other thanthe Secured Obligations).

 

6.34.                        OperatingProfit.  The Borrowers shall notpermit Operating Profit for any Business Group Member (“Operating ProfitCovenant”) to be less than the amounts set opposite the Test Periods setforth below (or, as applicable, in the case of negative amounts, the Borrowerswill not permit Operating Profit for any Business Group Member to be morenegative than the negative amounts set opposite the Test Periods ending on thefollowing dates):

 

(a)                                  ICG:

 
| **Test Period**                                                                                                          |   | **Minimum  Operating Profit of ICG** |      |
|--------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|-----------|
|                                                                                                                     |   |                                 |      |
| Two Fiscal  Quarters beginning June 30, 2003 and ending on December 28, 2003                                   |   | $                                    | 2,800,000 |   |
|                                                                                                                     |   |                                 |      |   |
| Three Fiscal  Quarters beginning June 30, 2003 and ending on March 28, 2004                                    |   | $                                    | 4,500,000 |   |
|                                                                                                                     |   |                                 |      |   |
| Four  Consecutive Fiscal Quarters ending June 27, 2004 and each Four  Consecutive Fiscal Quarters ending thereafter |   | $                                    | 7,000,000 |   |

 

(b)                                 PEG:

 
| **Test Period**                                                                                                          |   | **Minimum  Operating Profit of PEG** |     |
|--------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------|----------|
|                                                                                                                     |   |                                 |     |
| Two Fiscal  Quarters beginning June 30, 2003 and ending on December 28, 2003                                   |   | $                                    | (350,000 | ) |
|                                                                                                                     |   |                                 |     |   |
| Three Fiscal  Quarters beginning June 30, 2003 and ending on March 28, 2004                                    |   | $                                    | 25,000   |   |
|                                                                                                                     |   |                                 |     |   |
| Four  Consecutive Fiscal Quarters ending June 27, 2004 and each Four  Consecutive Fiscal Quarters ending thereafter |   | $                                    | 400,000  |   |

 

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(c)                                  TPG:

 
| **Test Period**                                                                        |   | **Minimum  Operating Profit of TPG** |       |
|----------------------------------------------------------------------------------------|--------|--------------------------------------|------------|
|                                                                                   |   |                                 |       |
| Two Fiscal Quarters  beginning June 30, 2003 and ending on December 28, 2003 |   | $                                    | (2,000,000 | ) |
|                                                                                   |   |                                 |       |
| Three Fiscal  Quarters beginning June 30, 2003 and ending on March 28, 2004  |   | $                                    | (1,900,000 | ) |
|                                                                                   |   |                                 |       |
| Four  Consecutive Fiscal Quarters ending June 27, 2004                            |   | $                                    | (1,700,000 | ) |
|                                                                                   |   |                                 |       |
| Each Four  Consecutive Fiscal Quarters ending after June 27, 2004                 |   | $                                    | (1,250,000 | ) |

 

**ARTICLE VII**

 

**DEFAULTS**

 

7.1                                 Defaults.  The occurrence of any one or more of thefollowing events or conditions, whether or not caused by or within the controlof a Loan Party, shall constitute a “Default” hereunder:

 

(a)                                  any representation orwarranty made or deemed made by or on behalf of any Loan Party to the Lenderunder or in connection with this Agreement, any other Loan Document, any CreditExtension, or any certificate or information delivered in connection with anyof the foregoing shall be materially false on the date as of which made;

 

(b)                                 nonpayment, when due(whether upon demand or otherwise), of any principal, interest, fee,Reimbursement Obligation or any other Obligation owing under any of the LoanDocument;

 

(c)                                  the breach by anyLoan Party of any of the terms or provisions of Section 6.2, 6.3(a),6.10, 6.16 through 6.23 or 6.25 through 6.34;

 

(d)                                 (i) the breach by anyLoan Party (other than a breach which constitutes a Default under anothersubsection of this Section 7.1) of any of the terms orprovisions of (i) Sections 6.1(f) or 6.7(a) (insofar asmaintenance of applicable insurance coverage is concerned) which is notremedied within five (5) days after the earlier of such breach or writtennotice from the Lender; (ii) Section 6.1 (other than Section 6.1(f)),6.3 (other than Section 6.3(a)), 6.4 through 6.15(other than Sections 6.7(a) or 6.10), or 6.24 of this

 

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Agreement which is not remedied within ten(10) days after the earlier of such breach or written notice from the Lender;or (iii) any other Section of this Agreement which is not remedied withintwenty (20) days after the earlier of such breach or written notice from theLender;

 

(e)                                  failure of any LoanParty to pay when due any Material Indebtedness or a default, breach or otherevent occurs under any term, provision or condition contained in any MaterialIndebtedness Agreement of any Loan Party, the effect of which default, event orcondition is to cause, or to permit the holder(s) of such Material Indebtednessor the lender(s) under any Material Indebtedness Agreement to cause, suchMaterial Indebtedness to become due prior to its stated maturity or anycommitment to lend under any Material Indebtedness Agreement to be terminatedprior to its stated expiration date; any Material Indebtedness of any LoanParty shall be declared to be due and payable or required to be prepaid orrepurchased (other than by a regularly scheduled payment) prior to the statedmaturity thereof; or any Loan Party shall not pay, or admit in writing itsinability to pay, its debts generally as they become due;

 

(f)                                    any Loan Partyshall (i) have an order for relief entered with respect to it under theBankruptcy Code as now or hereafter in effect, (ii) make an assignment for thebenefit of creditors, (iii) apply for, seek, consent to, or acquiesce in, theappointment of a receiver, custodian, trustee, examiner, liquidator or similarofficial for it or any Substantial Portion of its Property, (iv) institute anyproceeding seeking an order for relief under the Bankruptcy Code as now orhereafter in effect or seeking to adjudicate it a bankrupt or insolvent, orseeking dissolution, winding up, liquidation, reorganization, arrangement,adjustment or composition of it or its debts under any law relating tobankruptcy, insolvency or reorganization or relief of debtors or fail to filean answer or other pleading denying the material allegations of any suchproceeding filed against it, (v) take any corporate or partnership action toauthorize or effect any of the foregoing actions set forth in this subsection (f),(vi) fail to contest in good faith any appointment or proceeding described in subsection (g)below, or (vii) voluntarily dissolve or cease to exist or any final andnonappealable order or judgment shall be entered against a Loan Party decreeingits involuntary dissolution;

 

(g)                                 a receiver, trustee,examiner, liquidator or similar official shall be appointed for any Loan Partyor any Substantial Portion of its Property, or a proceeding described in subsection (f)(iv)of Section 7.1 shall be instituted against any Loan Party and suchappointment continues undischarged or such proceeding continues undismissed orunstayed for a period of sixty consecutive days;

 

(h)                                 any court, governmentor governmental agency shall condemn, seize or otherwise appropriate, or takecustody or control of, all or any portion of the Property of any Loan Partywhich, when taken together with all other Property of any Loan Party socondemned, seized, appropriated, or taken custody or control of, during thetwelve-month period ending with the month in which any such action occurs,constitutes a Substantial Portion;

 

(i)                                     any loss, theft,damage or destruction of any item or items of Collateral or other property ofany Loan Party occurs which could reasonably be expected to cause a MaterialAdverse Effect and is not adequately covered by insurance;

 

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(j)                                     any Loan Partyshall fail within thirty days to pay, bond or otherwise discharge one or more(i) judgments or orders for the payment of money in excess of $250,000 (or theequivalent thereof in currencies other than U.S. Dollars) in the aggregate, or(ii) nonmonetary judgments or orders which, individually or in the aggregate,could reasonably be expected to have a Material Adverse Effect, which judgmentsor orders, in any such case, are not stayed on appeal or otherwise beingappropriately contested in good faith by proper proceedings diligently pursuedor result any Lien;

 

(k)                                  any Change in Controlshall occur;

 

(l)                                     (i) the UnfundedLiabilities of the MagneTek Pension Plan shall exceed in the aggregate$51,356,000 as of any Fiscal Year end or any date otherwise required to bedetermined under applicable law, (ii) any Reportable Event that can be expectedto result in a Material Adverse Effect shall occur in connection with any Plan,(iii) a cash contribution is required to be made to the MagneTek Pension Plan,(iv) a contribution failure occurs with respect to any Plan sufficient to giverise to a Lien under Section 302(f) of ERISA, (v) a Loan Party or the PBGCtakes any action to terminate a Plan, or (vi) liability is imposed on any LoanParty or any Control Group Member pursuant to Section  4069 of ERISA;

 

(m)                               any Loan Party shall (i)be the subject of any proceeding or investigation pertaining to the release bythe any Loan Party or any other Person of any toxic or hazardous waste orsubstance into the environment, or (ii) violate any Environmental Law, which,in the case of an event described in clause (i) or clause (ii), couldreasonably be expected to have a Material Adverse Effect;

 

(n)                                 the occurrence of any “default”,as defined in any Loan Document (other than this Agreement) or the breach ofany of the terms or provisions of any Loan Document (other than thisAgreement), which default or breach continues beyond any period of gracetherein provided;

 

(o)                                 the Guaranty shallfail to remain in full force or effect or any action shall be taken todiscontinue or to assert the invalidity or unenforceability of the Guaranty, orany Guarantor shall fail to comply with any of the terms or provisions of theGuaranty to which it is a party, or any Guarantor shall deny that it has anyfurther liability under the Guaranty to which it is a party, or shall givenotice to such effect;

 

(p)                                 any CollateralDocument shall for any reason fail to create a valid and perfected firstpriority security interest in any Collateral purported to be covered thereby,except as permitted by the terms of any Collateral Document, or any CollateralDocument shall fail to remain in full force or effect or any action shall betaken to discontinue or to assert the invalidity or unenforceability of anyCollateral Document, or any Loan Party shall fail to comply with any of theterms or provisions of any Collateral Document;

 

(q)                                 (other than a breachwhich constitutes a Default under Section 7.1(p)), any materialprovision of any Loan Document for any reason ceases to be valid, binding andenforceable in accordance with its terms (or any Loan Party shall challenge theenforceability of any Loan Document or shall assert in writing, or engage inany action or

 

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inaction based on any such assertion, thatany provision of any of the Loan Documents has ceased to be or otherwise is notvalid, binding and enforceable in accordance with its terms);

 

(r)                                    (other than abreach which constitutes a Default under Section 7.1(a)), therepresentations and warranties set forth in Section 5.17 shall atany time not be true and correct;

 

(s)                                  nonpayment by aBorrower or any of its Subsidiary of any Rate Management Obligation when due orthe breach by a Borrower or any of its Subsidiary of any term, provision orcondition contained in any Rate Management Transaction or any transaction ofthe type described in the definition of “Rate Management Transactions,” whetheror not the Lender or Affiliate of the Lender is a party thereto; or

 

(t)                                    any Loan Party iscriminally indicted or convicted under any law that may reasonably be expectedto lead to a forfeiture of any Property of such Loan Party having a fair marketvalue in excess of $100,000.

 

7.2                                 Continuing Default.  Each Default will be deemed continuing until it is waived inwriting by, or cured to the written satisfaction of, the Lender.

 

**ARTICLE VIII**

 

**REMEDIES;WAIVERS AND AMENDMENTS**

 

8.1.                              Remedies.

 

### (h)                                 If any Default occurs, the Lendermay in its discretion (i) reduce the Commitment, (ii) terminate or suspend theobligations of the Lender to make Loans hereunder and the obligation and powerof the LC Issuer to issue Facility LCs, (iii) declare all or any portion of theObligations to be due and payable, whereupon such Obligations shall becomeimmediately due and payable, without presentment, demand, protest or notice ofany kind, all of which the Borrowers hereby expressly waive, (iv) upon noticeto the Borrower Representative and in addition to the continuing right todemand payment of all amounts payable under this Agreement, the Lender mayeither (1) make demand on the Borrowers to pay, and the Borrowers will,forthwith upon such demand and without any further notice or act, pay to theLender an amount, in immediately available funds (which funds shall be held inthe Facility LC Collateral Account), equal to 105% of the Collateral ShortfallAmount or (2) deliver a Supporting Letter of Credit as required by Section 2.1.2(i),whichever the Lender may specify in its sole discretion, (v) increase the rateof interest applicable to the Loans and the LC Fees as set forth in thisAgreement and (vi) exercise any rights and remedies provided to the Lenderunder the Loan Documents or at law or equity, including all remedies providedunder the UCC.

###  

### (i)                                     If anyDefault described in subsections (f) or (g) of Section 7.1occurs with respect to any Loan Party, the obligations of the Lender to makeLoans hereunder and the obligation and power of the LC Issuer to issue FacilityLCs shall automatically terminate and all Obligations shall immediately becomedue and payable without any election or action the part of the Lender and theLoan Parties will be and become thereby

###  

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### unconditionally obligated, withoutany further notice, act or demand, to pay to the Lender an amount equal to 105%of the Collateral Shortfall Amount, which funds shall be deposited in theFacility LC Collateral Account.

###  

### (j)                                     If, withinthirty days after acceleration of the maturity of the Obligations ortermination of the obligations of the Lender to make Loans and the obligationand power of the LC Issuer to issue Facility LCs hereunder as a result of anyDefault (other than any Default as described in subsections (f) or (g)of Section 7.1 with respect to the Borrower) and before anyjudgment or decree for the payment of the Obligations due shall have beenobtained or entered, the Lender (in its sole discretion) shall so direct, the Lender shall, by notice to theBorrower Representative, rescind and annul such acceleration and/ortermination.

 

### (k)                                  If at anytime while any Default is continuing, the Lender determines that the CollateralShortfall Amount at such time is greater than zero, the Lender may make demandon the Borrowers to pay, and the Borrowers will, forthwith upon such demand andwithout any further notice or act, pay to the Lender an amount equal to 105% ofthe Collateral Shortfall Amount, which funds shall be deposited in the FacilityLC Collateral Account. The Borrowers hereby pledge, assign, and grant to theLender a security interest in all of the Borrowers’ right, title, and interest(individually and collectively) in and to all funds which may from time to timebe on deposit in the Facility LC Collateral Account to secure the prompt andcomplete payment and performance of the Obligations.

###  

### (l)                                     The Lendermay at any time or from time to time after funds are deposited in the FacilityLC Collateral Account, apply such funds to the payment of the Obligations andany other amounts as shall from time to time have become due and payable by theBorrowers to the Lender under the Loan Documents.

###  

### (m)                               At anytime while any Default is continuing, neither any Borrower nor any Personclaiming on behalf of or through a Borrower shall have any right to withdrawany of the funds held in the Facility LC Collateral Account.  After all of the Secured Obligations havebeen indefeasibly paid in full and the Commitment has been terminated, anyfunds remaining in the Facility LC Collateral Account shall be returned by theLender to the Borrowers or paid to whomever may be legally entitled thereto atsuch time.

###  

### (n)                                 Inaddition to, and without limitation of, any rights of the Lender underapplicable law, if any Loan Party becomes insolvent, however evidenced, or anyDefault occurs, any and all deposits (including all account balances, whetherprovisional or final and whether or not collected or available) and any otherIndebtedness at any time held or owing by the Lender or any Affiliate of theLender to or for the credit or account of any Borrower may be offset andapplied toward the payment of the Secured Obligations owing to such Lender,whether or not the Secured Obligations, or any part thereof, shall then be due.

 

8.2.                              Waivers by Loan Parties.  Except as otherwise provided for in this Agreement or byapplicable law, each Loan Party waives: (a) presentment, demand and protest andnotice of presentment, dishonor, notice of intent to accelerate, notice ofacceleration, protest, default, nonpayment, maturity, release, compromise,settlement, extension or renewal of any or all commercial paper, accounts,contract rights, documents, instruments, chattel paper and guaranties at anytime held by the Lender on which any Loan Party may in any way be liable, andhereby ratifies

 

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and confirms whatever theLender may do in this regard, (b) all rights to notice and a hearing prior tothe Lender’s taking possession or control of, or to the Lender’s replevy,attachment or levy upon, the Collateral or any bond or security that might berequired by any court prior to allowing the Lender to exercise any of itsremedies, and (c) the benefit of all valuation, appraisal, marshaling andexemption laws.

 

8.3.                              Amendments.  No amendment, waiver or modification of anyprovision of this Agreement or any other Loan Document, and no consent withrespect to any departure by any Loan Party therefrom, shall be effective unlessthe same shall be in writing and signed by the Lender and the Loan Parties andthen any such waiver or consent shall be effective only in the specificinstance and for the specific purpose for which given.

 

8.4.                              Preservation of Rights.  No delay or omission of the Lender toexercise any right under the Loan Documents shall impair such right or beconstrued to be a waiver of any Default or an acquiescence therein, and themaking of a Credit Extension notwithstanding the existence of a Default or theinability of the Borrowers to satisfy the conditions precedent to such CreditExtension shall not constitute any waiver or acquiescence.  Any single or partial exercise of any suchright shall not preclude other or further exercise thereof or the exercise ofany other right, and no waiver, amendment or other variation of the terms,conditions or provisions of the Loan Documents whatsoever shall be valid unlessin writing signed by the Lender as required pursuant to Section 8.3,and then only to the extent in such writing specifically set forth.  All remedies contained in the Loan Documentsor by law afforded shall be cumulative and all shall be available to the Lenderuntil the Obligations have been paid in full.

 

**ARTICLE IX**

 

**GENERAL PROVISIONS**

 

9.1.                              Survival of Representations.  All representations and warranties of theLoan Parties contained in this Agreement and the other Loan Documents shallsurvive the execution and delivery of the Loan Documents and the making of theCredit Extensions herein contemplated.

 

9.2.                              Governmental Regulation.  Anything contained in this Agreement to thecontrary notwithstanding, the Lender shall not be obligated to extend credit toany Borrower in violation of any limitation or prohibition provided by anyapplicable statute or regulation.

 

9.3.                              Headings.  Section headings in the Loan Documentsare for convenience of reference only, and shall not govern the interpretationof any of the provisions of the Loan Documents.

 

9.4.                              EntireAgreement.  The Loan Documentsembody the entire agreement and understanding among the Loan Parties and theLender and supersede all prior agreements and understandings among the LoanParties and the Lender relating to the subject matter thereof.

 

9.5.                              Several Obligations; Benefits ofthis Agreement.  This Agreementshall not be construed so as to confer any right or benefit upon any Personother than the parties to this Agreement and their respective successors andassigns.

 

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9.6.                              Expenses; Indemnification.

 

(a)                                  The Borrowers shallreimburse the Lender for any costs, internal charges and out-of-pocket expenses(including attorneys’ fees and time charges of attorneys for the Lender, whichattorneys may be employees of the Lender) paid or incurred by the Lender nconnection with the preparation, negotiation, execution, delivery, distribution(including via the internet or through a service such as Intralinks), review,amendment, modification, and administration of the Loan Documents.  The Borrowers also agree to reimburse theLender for any costs, internal charges and out-of-pocket expenses (includingattorneys’ fees and time charges of attorneys for the Lender, which attorneysmay be employees of the Lender) paid or incurred by the Lender in connection withthe collection and enforcement of the Loan Documents.  Expenses being reimbursed by the Borrowers under thisSection include, without limitation, costs and expenses incurred inconnection with:

 

(i)                                     appraisals of allor any portion of the Collateral, each parcel of real Property or interest inreal Property described in any Collateral Document, which appraisals shall bein conformity with the applicable requirements of any law or any governmentalrule, regulation, policy, guideline or directive (whether or not having theforce of law), or any interpretation thereof, including the provisions of TitleXI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989,as amended, reformed or otherwise modified from time to time, and any rules promulgatedto implement such provisions (including travel, lodging, meals and other out ofpocket expenses for inspections of the Collateral and the Borrower’s operationsby the Lender) *plus* the Lender’s then customary charge for fieldexaminations and audits and the preparation of certain audit reports (the “Reports”)(such charge is currently $850 per day (or portion thereof) for each Personretained or employed by the Lender with respect to each field examination oraudit);

 

(ii)                                  any amendment,modification, supplement, consent, waiver or other documents prepared withrespect to any Loan Document and the transactions contemplated thereby;

 

(iii)                               lien and title searchesand title insurance;

 

(iv)                              taxes, fees and othercharges for recording the Mortgages, filing financing statements andcontinuations, and other actions to perfect, protect, and continue the Lender’sLiens (including costs and expenses paid or incurred by the Lender inconnection with the consummation of the Agreement);

 

(v)                                 sums paid or incurredto take any action required of any Loan Party under the Loan Documents thatsuch Loan Party fails to pay or take;

 

(vi)                              any litigation, contest,dispute, proceeding or action (whether instituted by the Lender, any Loan Partyor any other Person and whether as to party, witness or otherwise) in any wayrelating to the Collateral, the Loan Documents or the transactions contemplatedthereby; and

 

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(vii)                           costs and expenses offorwarding loan proceeds, collecting checks and other items of payment, andestablishing and maintaining the Funding Account and lock boxes, and costs andexpenses of preserving and protecting the Collateral.

 

The foregoing shall not be construed to limitany other provisions of the Loan Documents regarding costs and expenses to bepaid by the Borrowers.  All of theforegoing costs and expenses may be charged to the Borrower’s Loan Account asRevolving Loans or to another deposit account, all as described in Section 2.15(b).

 

The Borrowershereby further agree to indemnify the Lender, its Affiliates, and each of theirdirectors, officers and employees against all losses, claims, damages,penalties, judgments, liabilities and expenses (including all expenses oflitigation or preparation therefor whether or not the Lender or any Affiliateis a party thereto) which any of them may pay or incur arising out of orrelating to this Agreement, the other Loan Documents, the transactionscontemplated hereby or the direct or indirect application or proposedapplication of the proceeds of any Credit Extension hereunder except to theextent that they are determined in a final non-appealable judgment by a courtof competent jurisdiction to have resulted from the gross negligence or willfulmisconduct of the party seeking indemnification.   The obligations of the Borrowers under this Section 9.6shall survive the termination of this Agreement.

 

9.7.                              Accounting.  Except as provided to the contrary herein,all accounting terms used herein shall be interpreted and all accountingdeterminations hereunder shall be made in accordance with GAAP in a mannerconsistent with that used in preparing the financial statements referred to in Section 5.5,except that any calculation or determination which is to be made on aconsolidated basis shall be made for the Consolidated Group.  If at any time any change in GAAP wouldaffect the computation of any financial ratio or requirement set forth in anyLoan Document, and the Borrower Representative, the Lender and the Loan Partiesshall negotiate in good faith to amend such ratio or requirement to preservethe original intent thereof in light of such change in GAAP, *providedthat*, until so amended, such ratio or requirement shall continue tobe computed in accordance with GAAP prior to such change therein and theBorrower Representative shall provide to the Lender reconciliation statementsshowing the difference in such calculation, together with the delivery ofmonthly, quarterly and annual financial statements required hereunder.

 

9.8.                              Severability of Provisions.  Any provision in any Loan Document that isheld to be inoperative, unenforceable, or invalid in any jurisdiction shall, asto that jurisdiction, be inoperative, unenforceable, or invalid withoutaffecting the remaining provisions in that jurisdiction or the operation,enforceability, or validity of that provision in any other jurisdiction, and tothis end the provisions of all Loan Documents are declared to be severable.

 

9.9.                              Non-liability of Lender.  The relationship between any Loan Party onthe one hand and the Lender on the other hand shall be solely that of debtorand creditor.  The Lender shall not haveany fiduciary responsibilities to any Loan Party.  The Lender does not undertake any responsibility to any LoanParty to review or inform such Loan Party of any matter in connection with anyphase of any Loan Party’s business or operations.  The Loan Parties agree that the Lender shall have no liability toany Loan Party (whether sounding in tort, contract or otherwise) for lossessuffered by any Loan Party in connection with, arising out of, or in any wayrelated to, the transactions contemplated and the relationship established bythe Loan Documents, or any act, omission or event occurring in connectiontherewith, unless it is determined in a final non-appealable judgment by acourt of competent jurisdiction that such losses resulted from the gross

 

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negligence orwillful misconduct of the party from which recovery is sought.  The Lender shall not have any liability withrespect to, and each Loan Party hereby waives, releases and agrees not to suefor, any special, indirect, consequential or punitive damages suffered by anyLoan Party in connection with, arising out of, or in any way related to theLoan Documents or the transactions contemplated thereby.

 

**ARTICLE X**

 

**BENEFITOF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS**

 

10.1.                        Successorsand Assigns.  The terms andprovisions of the Loan Documents shall be binding upon and inure to the benefitof the Loan Parties and the Lender and their respective successors and assignspermitted hereby, except that the Loan Parties shall not have the right toassign its rights or obligations under the Loan Documents without the prior writtenconsent of the Lender.  The Lender shallhave the right to assign this Agreement and the other Loan Documents to anyPerson at any time without the consent of any of the Loan Parties.  The Lender may from time to time provide anyinformation the Lender may have about any Loan Party, the Collateral or aboutany matter relating to this Agreement or the other Loan Documents to anyassignee or prospective assignee of the Lender or to Bank One Corporation orany of its Affiliates or their successors.

 

10.2.                        Participations.

 

(a)                                  TheLender, in the ordinary course of its commercial banking business and inaccordance with applicable law, may at any time sell to one or more banks orother entities (“Participants”) participating interests in theCommitment, the Credit Exposure, the Collateral or other security provided tothe Lender, or any other interests of the Lender under this Agreement or theother Loan Documents.

 

(b)                                 TheLoan Parties acknowledge that Participants have or will have certain rightsunder their respective participation agreements with the Lender that may,subject to the terms of the participation agreements, require the Lender toobtain the consent (collectively, “Participant Consents”) of some or allof the Participants before the Lender takes or refrains from taking certainactions (other than as expressly required by the Loan Documents) or grantscertain waivers, consents or approvals in respect of the Commitment, the CreditExposure, the Loan Documents or the Collateral.  None of the Participants, however, will have Participant Consentrights which are greater than those rights and remedies the Lender has underthe Loan Documents.  In addition, fromtime to time, the Lender may request instructions from the Participants inrespect of the actions, waivers, consents or approvals which by the terms ofany of the Loan Documents the Lender is permitted or required to take or togrant or to not take or grant (“Participant Instructions”).  If the Participant Consents are, pursuant tothe terms of the respective participation agreements, required or ParticipantInstructions are requested, the Lender will (i) be absolutely empowered to takeor refrain from taking any action (other than as expressly required by the LoanDocuments) or withhold any waiver, consent or approval and (ii) not be underany liability whatsoever to any Person, including any Loan Party and anyParticipant, from taking or refraining from taking any action or withholdingany waiver, consent or approval under any of the Loan Documents until it hasreceived the requisite Participant Consents or, as applicable, the ParticipantInstructions.

 

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(c)                                  TheLoan Parties authorize the Lender to disclose to any Participant or prospectiveParticipant any information the Lender may have about any Loan Party, theCollateral or about any matter relating to this Agreement or the other LoanDocuments; *provided,however,* the Lender will cause each Participant or prospectiveparticipant to enter into an agreement to hold any confidential informationwhich it may receive from the Lender with respect to any Loan Party inconnection with this Agreement in confidence on customary terms and conditionsexcept for disclosure (i) to such Participant’s Affiliates, (ii) to legalcounsel, accountants, and other professional advisors to such Participant,(iii) to regulatory officials, (iv) to any Person as requested pursuant to oras required by law, regulation, or legal process, (v) to any Person inconnection with any legal proceeding to which such Participant is a party, (vi)to such Participant’s direct or indirect contractual counterparties in swapagreements or to legal counsel, accountants and other professional advisors tosuch counterparties, and (vii) to rating agencies if requested or required bysuch agencies in connection with a rating relating to the Credit Extensionshereunder;

 

(d)                                 Nothingin the Loan Documents will prohibit the Lender from pledging or assigning itsinterests in the Loans to any Federal Reserve the Lender in accordance withapplicable law.

 

(e)                                  EachLoan Party agrees that each Participant shall be deemed to have the right ofsetoff provided in Section 8.1(g) in respect of its participatinginterest in amounts owing under the Loan Documents to the same extent as if theamount of its participating interest were owing directly to it as a Lenderunder the Loan Documents, *provided that*, the Lender shall retain theright of setoff provided in Section 8.1(g) with respect to theamount of participating interests sold to each Participant.

 

**ARTICLE XI**

 

**NOTICES**

 

# **11.1.**                        Notices; Effectiveness; Electronic Communication

 

(a)                                  NoticesGenerally.  Except in the case ofnotices and other communications expressly permitted to be given by telephone(and except as provided in paragraph (b) below), all notices and othercommunications provided for herein shall be in writing and shall be deliveredby hand or overnight courier service, mailed by certified or registered mail orsent by telecopier as follows:

 

(i)                                     ifto any Loan Party, at its address or telecopier number set forth on thesignature page hereof; and

 

(ii)                                  ifto the Lender, at its address or telecopier number set forth on the signaturepage hereof.

 

Notices sent by hand or overnight courier service, or mailed bycertified or registered mail, shall be deemed to have been given when received;notices sent by telecopier shall be deemed to have been given when sent (exceptthat, if not given during normal business hours for the recipient, shall bedeemed to have been given at the opening of business on the next Business Dayfor the recipient).  Notices deliveredthrough electronic communications

 

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to the extentprovided in paragraph (b) below, shall be effective as provided in saidparagraph (b).

 

(b)                                 ElectronicCommunications.  The Lender or anyLoan Party may, in its respective discretion, agree to accept notices and othercommunications to it hereunder by electronic communications pursuant toprocedures approved by it or as it otherwise determines, provided that suchdetermination or approval may be limited to particular notices orcommunications. Notwithstanding the foregoing, in every instance, the BorrowerRepresentative shall be required to provide paper copies of the ComplianceCertificates required by Section 6.1(e) to the Lender.

 

Unless the Lender otherwise prescribes, (i)notices and other communications sent to an e-mail address shall be deemedreceived upon the sender’s receipt of an acknowledgement from the intendedrecipient (such as by the “return receipt requested” function, as available,return e-mail or other written acknowledgement), *provided that* if such noticeor other communication is not given during the normal business hours of therecipient, such notice or communication shall be deemed to have been given atthe opening of business on the next Business Day for the recipient, and (ii)notices or communications posted to an Internet or intranet website shall bedeemed received upon the deemed receipt by the intended recipient at its e-mailaddress as described in the foregoing clause (i) of notification that suchnotice or communication is available and identifying the website addresstherefor.

 

11.2.                        Changeof Address, Etc.  Anyparty hereto may change its address or telecopier number for notices and othercommunications hereunder by notice to the other parties hereto.

 

**ARTICLE XII**

 

**COUNTERPARTS**

 

This Agreementmay be executed in any number of counterparts, all of which taken togethershall constitute one agreement, and any of the parties hereto may execute thisAgreement by signing any such counterpart. This Agreement shall be effective when it has been executed by the LoanParties and the Lender and each party has notified the Lender by facsimiletransmission or telephone that it has taken such action.

 

**ARTICLE XIII**

 

# **GUARANTY**

 

## ***13.1.***                        Guaranty. EachGuarantor (other than the Foreign Subsidiaries; each to be referred to in this Article XIIIas a Guarantor and collectively as the Guarantors) hereby agrees that it isjointly and severally liable for, and, as primary obligor and not merely assurety, absolutely and unconditionally guarantees to the Lender the promptpayment when due, whether at stated maturity, upon acceleration or otherwise,and at all times thereafter, of the Secured Obligations and all costs andexpenses including all court costs and attorneys’ and paralegals’ fees(including allocated costs

## *** ***

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## ***of in-housecounsel and paralegals) and expenses paid or incurred by the Lender inendeavoring to collect all or any part of the Secured Obligations from, or inprosecuting any action against, any Borrower, any Guarantor or any otherguarantor of all or any part of the Secured Obligations (such costs andexpenses, together with the Secured Obligations, collectively the “GuaranteedObligations”). Each Guarantor further agrees that the GuaranteedObligations may be extended or renewed in whole or in part without notice to orfurther assent from it, and that it remains bound upon its guaranteenotwithstanding any such extension or renewal.***

 

13.2.                        Guaranty of Payment.  This Guaranty is a guaranty of payment andnot of collection. Each Guarantor waives any right to require the Lender to sueany Borrower, any Guarantor, any other guarantor, or any other person obligatedfor all or any part of the Guaranteed Obligations, or otherwise to enforce itspayment against any collateral securing all or any part of the GuaranteedObligations.

 

13.3.                        No Discharge or Diminishment ofGuaranty.

 

### (o)                                 Except as otherwise provided forherein and to the extent provided for herein, the obligations of each Guarantorhereunder are unconditional and absolute and not subject to any reduction,limitation, impairment or termination for any reason (other than theindefeasible payment in full in cash of the Guaranteed Obligations), including:

####  

#### (i)                                     any claimof waiver, release, extension, renewal, settlement, surrender, alteration, orcompromise of any of the Guaranteed Obligations, by operation of law orotherwise;

####  

#### (ii)                                  any changein the corporate existence, structure or ownership of any Borrower or any otherguarantor of or other person liable for any of the Guaranteed Obligations;

####  

#### (iii)                               anyinsolvency, bankruptcy, reorganization or other similar proceeding affectingany Borrower, any Guarantor, or any other guarantor of or other person liablefor any of the Guaranteed Obligations, or their assets or any resulting releaseor discharge of any obligation of any Borrower, any Guarantor, or any otherguarantor of or other person liable for any of the Guaranteed Obligations; or

####  

#### (iv)                              theexistence of any claim, setoff or other rights which any Guarantor may have atany time against any Borrower, any Guarantor, any other guarantor of theGuaranteed Obligations, the Lender, or any other person, whether in connectionherewith or in any unrelated transactions.

###  

### (p)                                 Theobligations of each Guarantor hereunder are not subject to any defense orsetoff, counterclaim, recoupment, or termination whatsoever by reason of theinvalidity, illegality, or unenforceability of any of the GuaranteedObligations or otherwise, or any provision of applicable law or regulationpurporting to prohibit payment by any Borrower, any Guarantor or any other guarantorof or other person liable for any of the Guaranteed Obligations, of theGuaranteed Obligations or any part thereof.

###  

### (q)                                 Further,the obligations of any Guarantor hereunder are not discharged or impaired orotherwise affected by:

####  

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#### (i)                                     thefailure of the Lender to assert any claim or demand or to enforce any remedywith respect to all or any part of the Guaranteed Obligations;

####  

#### (ii)                                  any waiveror modification of or supplement to any provision of any agreement relating tothe Guaranteed Obligations;

####  

#### (iii)                               anyrelease, non-perfection, or invalidity of any indirect or direct security forthe obligations of the Borrowers (or any one or more of them) for all or anypart of the Guaranteed Obligations or any obligations of any other guarantor ofor other person liable for any of the Guaranteed Obligations;

####  

#### (iv)                              any actionor failure to act by the Lender with respect to any collateral securing anypart of the Guaranteed Obligations; or

####  

#### (v)                                 anydefault, failure or delay, willful or otherwise, in the payment or performanceof any of the Guaranteed Obligations, or any other circumstance, act, omissionor delay that might in any manner or to any extent vary the risk of suchGuarantor or that would otherwise operate as a discharge of any Guarantor as amatter of law or equity (other than the indefeasible payment in full in cash ofthe Guaranteed Obligations).

 

13.4.                        Defenses Waived.  To the fullest extent permitted by applicable law, each Guarantorhereby waives any defense based on or arising out of any defense of anyBorrower or any Guarantor or the unenforceability of all or any part of theGuaranteed Obligations from any cause, or the cessation from any cause of theliability of any Borrower or any Guarantor, other than the indefeasible paymentin full in cash of the Guaranteed Obligations. Without limiting the generalityof the foregoing, each Guarantor irrevocably waives acceptance hereof,presentment, demand, protest and, to the fullest extent permitted by law, anynotice not provided for herein, as well as any requirement that at any time anyaction be taken by any person against any Borrower, any Guarantor, any otherguarantor of any of the Guaranteed Obligations, or any other person.  The Lender may, at its election, forecloseon any Collateral held by it by one or more judicial or nonjudicial sales,accept an assignment of any such Collateral in lieu of foreclosure or otherwiseact or fail to act with respect to any collateral securing all or a part of theGuaranteed Obligations, compromise or adjust any part of the GuaranteedObligations, make any other accommodation with any Borrower, any Guarantor, anyother guarantor or any other person liable on any part of the GuaranteedObligations or exercise any other right or remedy available to it against anyBorrower, any Guarantor, any other guarantor or any other person liable on anyof the Guaranteed Obligations, without affecting or impairing in any way theliability of such Guarantor under this Guaranty except to the extent theGuaranteed Obligations have been fully and indefeasibly paid in cash.  To the fullest extent permitted byapplicable law, each Guarantor waives any defense arising out of any suchelection even though that election may operate, pursuant to applicable law, toimpair or extinguish any right of reimbursement or subrogation or other rightor remedy of any Guarantor against any Borrower, any other guarantor or anyother person liable on any of the Guaranteed Obligations, as the case may be, orany security.

 

13.5.                        Rightsof Subrogation.  No Guarantorwill assert any right, claim or cause of action, including a claim ofsubrogation, contribution or indemnification that it has against any Borrower,any Guarantor, any person liable on the Guaranteed Obligations, or anycollateral, until the Loan Parties and the Guarantors have fully performed alltheir obligations to the Lender.

 

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13.6.                        Reinstatement; Stay of Acceleration.  If at any time any payment of any portion ofthe Guaranteed Obligations is rescinded or must otherwise be restored orreturned upon the insolvency, bankruptcy, or reorganization of any Borrower orotherwise, each Guarantor’s obligations under this Guaranty with respect tothat payment shall be reinstated at such time as though the payment had notbeen made and whether or not the Lender are in possession of thisGuaranty.  If acceleration of the timefor payment of any of the Guaranteed Obligations is stayed upon the insolvency,bankruptcy or reorganization of any Borrower, all such amounts otherwisesubject to acceleration under the terms of any agreement relating to theGuaranteed Obligations shall nonetheless be payable by the Guarantors forthwithon demand by the Lender.

 

13.7.                        Information. Each Guarantor assumes all responsibility for being and keeping itselfinformed of the Borrower’s financial condition and assets, and of all othercircumstances bearing upon the risk of nonpayment of the Guaranteed Obligationsand the nature, scope and extent of the risks that each Guarantor assumes andincurs under this Guaranty, and agrees that the Lender shall not have any dutyto advise any Guarantor of information known to it regarding thosecircumstances or risks.

 

13.8.                        Termination. The Lender may continue to make loans or extend credit to the Borrowersbased on this Guaranty until five days after it receives written notice oftermination from any Guarantor. Notwithstanding receipt of any such notice, each Guarantor will continueto be liable to the Lender for any Guaranteed Obligations created, assumed orcommitted to prior to the fifth day after receipt of the notice, and allsubsequent renewals, extensions, modifications and amendments with respect to,or substitutions for, all or any part of that Guaranteed Obligations.

 

13.9.                        Taxes.  Allpayments of the Guaranteed Obligations will be made by each Guarantor free andclear of and without deduction for or on account of any and all present orfuture taxes, levies, imposts, duties, charges, deductions or withholdings ofwhatever nature imposed by any governmental authority with respect to suchpayments, and any and all liabilities with respect to the foregoing, butexcluding franchise taxes and taxes imposed on overall net income of the Lenderby the U.S. or the jurisdiction in which the Lender’s applicable LendingInstallation is located (collectively, “Taxes”).  If any Guarantor is required by law todeduct any Taxes from or in respect of any sum payable to the Lender under thisGuaranty, (a) the sum payable must be increased as necessary so that aftermaking all required deductions (including deductions applicable to additionalsums payable under this provision) the Lender receive an amount equal to thesum it would have received had no such deductions been made, (b) the Guarantorsmust then make such deductions, and must pay the full amount deducted to therelevant authority in accordance with applicable law, and (c) the Guarantorsmust furnish to the Lender within forty-five days after their due datecertified copies of all official receipts evidencing payment thereof.

 

13.10.                  Severability.  The provisions of this Guaranty areseverable, and in any action or proceeding involving any state corporate law,or any state, federal or foreign bankruptcy, insolvency, reorganization orother law affecting the rights of creditors generally, if the obligations ofany Guarantor under this Guaranty would otherwise be held or determined to beavoidable, invalid or unenforceable on account of the amount of suchGuarantor’s liability under this Guaranty, then, notwithstanding any otherprovision of this Guaranty to the contrary, the amount of such liability shall,without any further action by the Guarantors or the Lender, be automaticallylimited and reduced to the highest amount that is valid and enforceable asdetermined in such action or proceeding (such highest amount determinedhereunder being the relevant Guarantor’s “Maximum

 

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Liability”.  This Section with respect to theMaximum Liability of each Guarantor is intended solely to preserve the rightsof the Lender to the maximum extent not subject to avoidance under applicablelaw, and no Guarantor nor any other person or entity shall have any right orclaim under this Section with respect to such Maximum Liability, except tothe extent necessary so that the obligations of any Guarantor hereunder shallnot be rendered voidable under applicable law. Each Guarantor agrees that theGuaranteed Obligations may at any time and from time to time exceed the MaximumLiability of each Guarantor without impairing this Guaranty or affecting therights and remedies of the Lender hereunder, *provided that*, nothing inthis sentence shall be construed to increase any Guarantor’s obligationshereunder beyond its Maximum Liability.

 

13.11.                  Contribution. In the event any Guarantor (a “Paying Guarantor”) shall make anypayment or payments under this Guaranty or shall suffer any loss as a result ofany realization upon any collateral granted by it to secure its obligationsunder this Guaranty, each other Guarantor (each a “Non-Paying Guarantor”)shall contribute to such Paying Guarantor an amount equal to such Non-PayingGuarantor’s “Pro Rata Share” of such payment or payments made, or lossessuffered, by such Paying Guarantor.  Forpurposes of this Article XIII, each Non-Paying Guarantor’s “ProRata Share” with respect to any such payment or loss by a Paying Guarantorshall be determined as of the date on which such payment or loss was made byreference to the ratio of (i) such Non-Paying Guarantor’s Maximum Liability asof such date (without giving effect to any right to receive, or obligation tomake, any contribution hereunder) or, if such Non-Paying Guarantor’s Maximum Liabilityhas not been determined, the aggregate amount of all monies received by suchNon-Paying Guarantor from a Borrower after the date hereof (whether by loan,capital infusion or by other means) to (ii) the aggregate Maximum Liability ofall Guarantors hereunder (including such Paying Guarantor) as of such date(without giving effect to any right to receive, or obligation to make, anycontribution hereunder), or to the extent that a Maximum Liability has not beendetermined for any Guarantor, the aggregate amount of all monies received bysuch Guarantors from a Borrower after the date hereof (whether by loan, capitalinfusion or by other means).  Nothing inthis provision shall affect any Guarantor’s several liability for the entireamount of the Guaranteed Obligations (up to such Guarantor’s MaximumLiability).  Each of the Guarantorscovenants and agrees that its right to receive any contribution under thisGuaranty from a Non-Paying Guarantor shall be subordinate and junior in rightof payment to the payment in full in cash of the Guaranteed Obligations.  This provision is for the benefit of boththe Lender and the Guarantors and may be enforced by any one, or more, or allof them in accordance with the terms hereof.

 

13.12.                  Lending Installations.  The Guaranteed Obligations may be booked atany Lending Installation.  All terms ofthis Guaranty apply to and may be enforced by or on behalf of any LendingInstallation.

 

13.13.                  Liability Cumulative.  The liability of each Loan Party as aGuarantor under this Article XIII is in addition to and shall becumulative with all liabilities of each Loan Party to the Lender under thisAgreement and the other Loan Documents to which such Loan Party is a party orin respect of any obligations of liabilities of the other Loan Parties, withoutany limitation as to amount, unless the instrument or agreement evidencing orcreating such other liability specifically provides to the contrary.

 

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**ARTICLE XIV**

 

# **CHOICE OF LAW; CONSENT TOJURISDICTION; WAIVER OF JURY TRIAL**

## *** ***

## ***14.1.***                     CHOICEOF LAW. THE LOAN DOCUMENTS (OTHERTHAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BECONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (BUT OTHERWISE WITHOUT REGARD TOTHE CONFLICT OF LAWS PROVISIONS) OF THE STATE OF OHIO, BUT GIVING EFFECT TOFEDERAL LAWS APPLICABLE TO NATIONAL BANKS.

 

**14.2.****                     CONSENT TO JURISDICTION.  EACH LOAN PARTY HEREBY IRREVOCABLY SUBMITSTO THE NON-EXCLUSIVE JURISDICTION OF ANY U.S. FEDERAL OR ILLINOIS STATE COURTSITTING IN CINCINNATI, OHIO IN ANY ACTION OR PROCEEDING ARISING OUT OF ORRELATING TO ANY LOAN DOCUMENTS AND EACH LOAN PARTY HEREBY IRREVOCABLY AGREESTHAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD ANDDETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION ITMAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION ORPROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENTFORUM.  NOTHING HEREIN SHALL LIMIT THERIGHT OF THE LENDER TO BRING PROCEEDINGS AGAINST ANY LOAN PARTY IN THE COURTSOF ANY OTHER JURISDICTION.  ANY JUDICIALPROCEEDING BY ANY LOAN PARTY AGAINST THE LENDER INVOLVING, DIRECTLY ORINDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTIONWITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CINCINNATI, OHIO.**

 

**14.3.****                     WAIVER OF JURY TRIAL.  EACH LOAN PARTY AND THE LENDER HEREBY WAIVETRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANYMATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUTOF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIPESTABLISHED THEREUNDER.**

 

**[**SignaturePages Follow**]**

 

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IN WITNESS WHEREOF, the Loan Parties and the Lender have executed thisAgreement as of the date first above written.

 
|   | **BORROWERS:**                            |
|--------|-------------------------------------------|
|   |                                      |
|   | MAGNETEK,  INC.                           |
|   |                                      |
|   |                                      |
|   | By:                                       |  /s/ David P. Reiland |   |
|   |                                      | David P.  Reiland, Executive Vice President  and Chief Financial Officer |
|   |                                      |
|   | MAGNETEK ADS  POWER, INC.                 |
|   |                                      |
|   |                                      |
|   | By:                                       |  /s/ David P. Reiland |   |
|   |                                      | David P.  Reiland, President |
|   |                                      |
|   | MAXTEC  INTERNATIONAL CORP.               |
|   |                                      |
|   |                                      |
|   | By:                                       |  /s/ David P. Reiland |   |
|   |                                      | David P.  Reiland, President |
|   |                                      |
|   | **LOAN PARTIES (OTHER THAN  BORROWERS):** |
|   |                                      |
|   | MXT  HOLDINGS, INC.                       |
|   |                                      |
|   |                                      |
|   | By:                                       |  /s/ David P. Reiland |   |
|   |                                      | David P.  Reiland, President |
|   |                                      |
|   | MONDEL ULC                                |
|   |                                      |
|   |                                      |
|   | By:                                       |  /s/ John P. Colling, Jr. |   |
|   |                                      | John P.  Colling, Jr., Chief Financial Officer |
|   |                                      |
|   | MAGNETEK  MONDEL HOLDING, INC.            |
|   |                                      |
|   |                                      |
|   | By:                                       |  /s/ David P. Reiland |   |
|   |                                      | David P.  Reiland, President |

 

88

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|   | MAGNETEK  LEASING CORPORATION             |
|--------|-------------------------------------------|
|   |                                      |
|   |                                      |
|   | By:                                       |  /s/ David P. Reiland |   |
|   |                                      | David P.  Reiland, President |
|   |                                      |
|   | MAGNETEK  NATIONAL ELECTRIC COIL, INC.    |
|   |                                      |
|   |                                      |
|   | By:                                       |  /s/ David P. Reiland |   |
|   |                                      | David P.  Reiland, President |
|   |                                      |
|   | **NOTICE ADDRESS FOR ALL LOAN  PARTIES:** |
|   |                                      |
|   | Address:                                  | MagneTek,  Inc. |
|   |                                      | 10900  Wilshire Blvd., Suite 850 |
|   |                                      | Los Angeles,  California 90024 |
|   | Attention:                                | David P.  Reiland |
|   | Telephone:                                | (310)  689-1613 |
|   | Facsimile:                                | (310)  208-1322 |
|   |                                      |
|   | **THE LENDER:**                           |
|   |                                      |
|   | BANK ONE, NA                              |
|   |                                      |
|   |                                      |
|   | By:                                       |  /s/ David L. Carey |   |
|   |                                      | David L.  Carey, Director |
|   |                                      |
|   | **NOTICE ADDRESS FOR LENDER:**            |
|   |                                      |
|   | Address:  8044 Montgomery Road, 3rd Floor |
|   | Mail Code  OH3-4103                       |
|   | Cincinnati,  Ohio 45236                   |
|   | Attention:  Mr. Jeffrey W. Swartz         |
|   |                                      |
|   |                                      | Telephone: | (513)  985-5732 |
|   |                                      | Facsimile: | (513)  985-5030 |
|        |                                           |  |  |  |  |  |  |  |

 

89

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**PRICINGSCHEDULE**

 
|               |   |                                                  |   | **Applicable Margin**              |   | **Applicable  LC Fee Rate** |   |
|--------------------|--------|-------------------------------------------------------|--------|------------------------------------|--------|-----------------------------|--------|
| **PRICING  LEVEL** |   | **Fixed Charge  Coverage Ratio****(Fiscal year end)** |   | **Revolver****Eurodollar  Margin** |   | **Revolver****ABRMargin**   |   | **LC Fee** |   |
| I                  |   | < 1.150 to 1.0                                     |   | 3.50                               | %      | 1.25                        | %      | 3.250 | % |
| II                 |   | <  1.350 to 1.0 but  > 1.150 to 1.0             |   | 3.25                               | %      | 1.0                         | %      | 3.0 | % |
| III                |   | <  1.500 to 1.0 but  > 1.350 to 1.0             |   | 3.00                               | %      | 0.75                        | %      | 2.75 | % |
| IV                 |   | > 1.500 to 1.0                                     |   | 2.75                               | %      | 0.50                        | %      | 2.50 | % |

 

“Financials” means the annualfinancial statements of the Consolidated Group delivered pursuant to Section 6.1of the Credit Agreement.

 

For purposes of determining the ApplicableMargin and the Applicable LC Fee Rate, the Fixed Charge Coverage Ratio will,after the Closing Date, be determined as of the end of each Fiscal Yearoccurring during the term of this Agreement (each such date being a “DeterminationDate”).  The first DeterminationDate after the Closing Date is June 27, 2004.  On the Lender’s receipt of the Borrowers’ Financials, theApplicable Margin and the Applicable LC Fee Rate will be subject to adjustmentin accordance with the table set forth in this Pricing Schedule based onthe then Fixed Charge Coverage Ratio so long as no Default or Unmatured Defaultis existing as of applicable Determination Date or as of the effective date ofadjustment.  The foregoing adjustment,if applicable, to the Applicable Margin and the Applicable LC Fee Rate willbecome effective for Eurodollar Loans made, the unpaid principal balance ofFloating Rate Loans outstanding, and LC Fees due with respect to Facility LCsissued or renewed on and after the first day of the first calendar monthfollowing delivery to the Lender of the Financials until the next succeedingeffective date of adjustment pursuant to this Pricing Schedule.  Each of the Financials must be delivered tothe Lender in compliance with Section 6.1.  If the Borrowers, however, have not timelydelivered its Financials, then, at the Lender’s option, commencing on the dateupon which such Financials should have been delivered in accordance with Section 6.1and continuing until such Financials are actually delivered in accordance with Section 6.1,it shall be assumed for purposes of determining the Applicable Margin and theApplicable LC Fee Rate that the Fixed Charge Coverage Ratio was less than 1.150to 1.0 and pricing Level I will be applicable on the then applicableDetermination Date.  As of the ClosingDate, pricing Level II will be in effect.

 

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**EXHIBIT A**

**BORROWING NOTICE**

 

Date:                                         ,20     

 

To:                              Bank One, NA

 

This Borrowing Notice is furnished pursuant to Section 2.1.1(b)(i)of that certain Credit Agreement dated as of August 15, 2003 (as amended,modified, renewed or extended from time to time, the “Agreement”) among  MagneTek, Inc., Magnetek ADS Power, Inc.,and Maxtec International Corp. (the “Borrowers”), the other Loan Parties, andBank One, NA (the “Lender”).  Unlessotherwise defined herein, capitalized terms used in this Borrowing Notice havethe meanings ascribed thereto in the Agreement.

 

The Borrowers hereby notify the Lender of their request of an advanceof the Revolving Loans pursuant to Section 2.1.1 of theAgreement.  The Borrowers hereby requestthat:

 

[FOR FLOATING RATE LOANS:]

 

(1)                                  ARevolving Loan in the total amount of$                   (the “Advance”), which Advance shall be made by transferring the amountof the Advance to the Funding Account of the Borrowers at the Lender ascontemplated by the Agreement;

 

(2)                                  TheAdvance is to be made as a Floating Rate Loan; and

 

(3)                                  The Borrowing Datefor the requested Advance is                       ,          [INSERT] (must be aBusiness Day).

 

[FOREURODOLLAR LOANS:]

 

(1)                                  Borrowing Date ofEurodollar Loan (must be a Business Day and given three days prior to theBorrowingDate):                            

 

(2)                                  Aggregate Amount ofthe Eurodollar Loan:$                                                     (minimum of $500,000 and increments of $100,000)

 

(3)                                  Duration of InterestPeriod:

 

One Month                            

 

Two Months                            

 

Three Months                            

 

(4)                                  There are no morethan 4 Interest Periods outstanding after giving effect to the Interest Periodselected by this Borrowing Notice.

 

----

 

The Borrowers hereby represent that, as of the date of this BorrowingNotice:

 

(a)                                  There exists noDefault or Unmatured Default and no Default or Unmatured Default shall resultfrom this Credit Extension.

 

(b)                                 The representationsand warranties contained in Article V of the Agreement are true andcorrect, except to the extent any such representation or warranty is stated torelate solely to an earlier date.

 

(c)                                  the person signingthis Borrowing Notice is duly authorized to execute and deliver it to the Lenderon behalf of the Borrowers;

 

(d)                                 this Credit Extensionis made in accordance with the Agreement; and

 

(e)                                  this Credit Extensionis not revocable by the Borrowers.

 
|   | MAGNETEK,  INC. |
|--------|-----------------|
|   |            |
|   |            |
|   | By:             |   |   |
|   |            | Name: |   |   |
|   |            | Title: |   |   |
|        |                 |  |  |  |  |  |

 

----

 

**EXHIBIT B**

**CONVERSION/CONTINUATIONNOTICE**

 

Date:                                         ,20     

 

To:                              Bank One, NA

 

This Conversion/Continuation Notice is furnished pursuant to Section 2.6of that certain Credit Agreement dated as of August 15, 2003 (as amended,modified, renewed or extended from time to time, the “Agreement”) amongMagneTek, Inc., Magnetek ADS Power, Inc., and Maxtec International Corp. (the“Borrowers”), the other Loan Parties and Bank One, NA, (the “Lender”).  Unless otherwise defined herein, capitalizedterms used in this Borrowing Notice have the meanings ascribed thereto in theAgreement.

 

The Borrowers hereby notify the Lender of its request to [SELECT ONE]:

 

(1)                                  convert the FloatingRate Loan in the amount of$             intoa Eurodollar Loan with an Interest Period durationof:             month(s) (1, 2, or 3 months)

 

(2)                                  continue theEurodollar Loan described below:

 

(a)     Date of Continuation (must be a Business Day andgiven three days prior to the requested conversion/continuation Date):                              

 

(b)    Aggregate Amount of the Eurodollar Loan:$                                               (minimum of $500,000 and increments of $100,000)

 

(c)     The duration of the Interest Period applicablethereto:                   month(s) (1, 2, or 3 months)

 

(d)    There are no more than 4 Interest Periodsoutstanding after giving effect to the Interest Period selected byConversion/Continuation Notice.

 

The Borrowers hereby represent that, as of the date of thisConversion/Continuation Notice:

 

(a)                                  There exists noDefault or Unmatured Default and no Default or Unmatured Default shall resultfrom this Credit Extension;

 

(b)                                 The representationsand warranties contained in Article V of the Agreement are true andcorrect, except to the extent any such representation or warranty is stated torelate solely to an earlier date;

 

(c)                                  thisConversion/Continuation Notice is made in accordance with the Agreement;

 

(d)                                 thisConversion/Continuation Notice is not revocable by the Borrowers; and

 

 

----

(e)                                  theperson signing this Conversion/Continuation Notice is duly authorized toexecute and deliver it to the Lender on behalf of the Borrowers.

 

 
|   | MAGNETEK,  INC. |
|--------|-----------------|
|   |            |
|   |            |
|   | By:             |   |   |
|   |            | Name: |   |   |
|   |            | Title: |   |   |
|        |                 |  |  |  |  |  |

 

----

 

**EXHIBIT C**

**REVOLVING NOTE**

 

----

 

**EXHIBIT D**

**FORM OF OPINIONS**

 

----

 

**EXHIBIT E**

 

**COMPLIANCECERTIFICATE**

 

 

To:                              Bank One, NA

 

This Compliance Certificate is furnished pursuant to that certainCredit Agreement dated as of August 15, 2003 (as amended, modified,renewed or extended from time to time, the “Agreement”) among  MagneTek, Inc., Magnetek ADS Power, Inc.,and Maxtec International Corp. (the “Borrowers”), the other Loan Parties, andBank One, NA.  Unless otherwise definedherein, capitalized terms used in this Compliance Certificate have the meaningsascribed thereto in the Agreement.

 

THE UNDERSIGNED HEREBY CERTIFIES THAT:

 

1.               I am the duly elected                         of MagneTek, Inc.;

 

2.  Ihave reviewed the terms of the Agreement and I have made, or have caused to bemade under my supervision, a detailed review of the transactions and conditionsof the Borrowers and their Subsidiaries during the accounting period covered bythe attached financial statements;

 

3.         The examinations described in paragraph 2 didnot disclose, and I have no knowledge of, the existence of any condition orevent which constitutes a Default or Unmatured Default during or at the end ofthe accounting period covered by the attached financial statements or as of thedate of this Certificate, except as set forth below;

 

4.         I hereby certify that no Loan Party haschanged (i) its name, (ii) its chief executive office, (iii) principal place ofbusiness, (iv) the type of entity it is or (v) its state of incorporation ororganization without having given the Lender the notice required by Section 6.23;

 

5. Schedule I attached hereto sets forth financial data andcomputations evidencing the Borrower’s compliance with certain covenants of theAgreement, all of which data and computations are true, complete and correct;

 

6.         Schedule II hereto sets forth thedetermination of the interest rates to be paid for Credit Extensions and thecommitment fee rates commencing on the fifth day following the delivery hereof;and

 

7.         Schedule III attached hereto setsforth the various reports and deliveries which are required at this time underthe Credit Agreement and the other Loan Documents and the status of compliance.

 

Described below are the exceptions, if any, to paragraph 3 by listing,in detail, the nature of the condition or event, the period during which it hasexisted and the action which the Borrowers have taken, are taking, or proposeto take with respect to each such condition or event:

 

 

 

----

 

 

 

The foregoing certifications, together with the computations set forthin Schedule I and Schedule II hereto and the financial statementsdelivered with this Certificate in support hereof, are made and delivered this     day of            ,      .

 

 
|   | MAGNETEK,  INC. |
|--------|-----------------|
|   |            |
|   |            |
|   | By:             |   |   |
|   |            | Name: |   |   |
|   |            | Title: |   |   |
|        |                 |  |  |  |  |  |

 

----

 

**SCHEDULE I TOCOMPLIANCE CERTIFICATE**

 

Compliance as of            ,       withProvisions of     and       ofthe Agreement

 

----

 

**SCHEDULE II TOCOMPLIANCE CERTIFICATE**

 

Borrower’s Applicable Margin Calculation

 

----

 

**SCHEDULE III TOCOMPLIANCE CERTIFICATE**

 

Reports and Deliveries Currently Due

 

----

 

**EXHIBIT F**

 

**JOINDER AGREEMENT**

 

THIS JOINDERAGREEMENT (this “Agreement”), dated as of                 ,       , 200  , is entered intobetween                                                                    ,a                              (the “New Subsidiary”) and BANK ONE, NA (the “Lender”) under that certainCredit Agreement, dated as of August 15, 2003 among MagneTek, Inc.,Magnetek ADS Power, Inc., and Maxtec International Corp. (the “Borrowers”), theLoan Parties party thereto, and the Lender (as the same may be amended,modified, extended or restated from time to time, the “Credit Agreement”).  All capitalized terms used herein and nototherwise defined shall have the meanings set forth in the Credit Agreement.

 

The NewSubsidiary and the Lender hereby agree as follows:

 

1.                                       TheNew Subsidiary hereby acknowledges, agrees and confirms that, by its executionof this Agreement, the New Subsidiary will be deemed to be a Loan Party underthe Credit Agreement and a “Guarantor” for all purposes of the Credit Agreementand shall have all of the obligations of a Loan Party and a Guarantorthereunder as if it had executed the Credit Agreement.  The New Subsidiary hereby ratifies, as ofthe date hereof, and agrees to be bound by, all of the terms, provisions andconditions contained in the Credit Agreement, including  (a) all of the representations andwarranties of the Loan Parties set forth in Article V of the CreditAgreement, and (b) all of the covenants set forth in Article VI of theCredit Agreement, and (c) all of the guaranty obligations set forth inArticle XIII of the Credit Agreement. Without limiting the generality of the foregoing terms of this paragraph1, the New Subsidiary, subject to the limitations set forth in Section 13.10of the Credit Agreement, hereby guarantees, jointly and severally with theother Guarantors, to the Lender, as provided in Article XIII of the CreditAgreement, the prompt payment and performance of the Guaranteed Obligations infull when due (whether at stated maturity, as a mandatory prepayment, byacceleration or otherwise) strictly in accordance with the terms thereof andagrees that if any of the Guaranteed Obligations are not paid or performed infull when due (whether at stated maturity, as a mandatory prepayment, byacceleration or otherwise), the New Subsidiary will, jointly and severallytogether with the other Guarantors, promptly pay and perform the same, withoutany demand or notice whatsoever, and that in the case of any extension of timeof payment or renewal of any of the Guaranteed Obligations, the same will bepromptly paid in full when due (whether at extended maturity, as a mandatoryprepayment, by acceleration or otherwise) in accordance with the terms of suchextension or renewal. The New Subsidiary has delivered to the Lender anexecuted Guaranty.

 

2.                                       Ifrequired, the New Subsidiary is, simultaneously with the execution of thisAgreement, executing and delivering such Collateral Documents (and such otherdocuments and instruments) as requested by the Lender in accordance with theCredit Agreement.

 

3.                                       Theaddress of the New Subsidiary for purposes of Article XIII of the CreditAgreement is as follows:

 

|   |
|--------|
|   |
|   |
|   |
|   |

 

----

 

 

4.                                       TheNew Subsidiary hereby waives acceptance by the Lender of the guaranty by theNew Subsidiary upon the execution of this Agreement by the New Subsidiary.

 

5.                                       ThisAgreement may be executed in any number of counterparts, each of which when soexecuted and delivered shall be an original, but all of which shall constituteone and the same instrument.

 

6.                                       THISAGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BEGOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THESTATE OF ILLINOIS.

 

IN WITNESSWHEREOF, the New Subsidiary has caused this Agreement to be duly executed byits authorized officer, and the Lender has caused the same to be accepted byits authorized officer, as of the day and year first above written.

 
|   | [NEW  SUBSIDIARY]           |
|--------|-----------------------------|
|   |                        |
|   |                        |
|   | By:                         |   |   |
|   | Name:                       |   |   |
|   | Title:                      |   |   |
|   |                        |
|   | Acknowledged  and accepted: |
|   |                        |
|   | BANK ONE, NA                |
|   |                        |
|   | By:                         |   |   |
|   | Name:                       |   |   |
|   | Title:                      |   |   |
|        |                             |  |  |  |  |  |

 

----

 

**EXHIBIT G**

 

**BORROWING BASECERTIFICATE**

 

----

 

**SCHEDULE 5.8**

 

**LITIGATION ANDCONTINGENT OBLIGATIONS**

 

----

 

**SCHEDULE 5.9**

 

**CAPITALIZATION ANDSUBSIDIARIES**

 

----

 

**SCHEDULE 5.12**

 

**NAMES; PRIORTRANSACTIONS**

 

----

 

**SCHEDULE 5.14**

 

**MATERIAL AGREEMENTS**

 

----

 

**SCHEDULE 5.16**

 

**OWNERSHIP OFPROPERTIES**

 

----

 

**SCHEDULE 5.22**

 

**INDEBTEDNESS**

 

----

 

**SCHEDULE 5.23**

 

**AFFILIATETRANSACTIONS**

 

----

 

**SCHEDULE 5.24**

 

**REAL PROPERTY; LEASES**

 

----

 

**SCHEDULE 5.25**

 

**INTELLECTUAL PROPERTYRIGHTS**

 

----

 

**SCHEDULE 5.26**

 

**INSURANCE**

 

----

 

**SCHEDULE 5.32**

 

**LABOR MATTERS**

 

----

 

**SCHEDULE 6.21**

 

**OTHER INVESTMENTS**

 

 
| **Investment  In** |   | **Jurisdiction  of  Organization** |   | **Owned  By** |   | **Amount of  Investment** |   | **Percent  Ownership** |   |
|--------------------|--------|------------------------------------|--------|---------------|--------|---------------------------|--------|------------------------|--------|
|               |   |                               |   |          |   |                      |   |                   |   |
|               |   |                               |   |          |   |                      |   |                   |   |

 

----

 

**SCHEDULE 6.22**

 

**LIENS**

 

----