**LOAN AND SECURITY AGREEMENT**

 

**by and among**

 

**REPTRON ELECTRONICS, INC.,**

 

**as Borrower**

 

**and**

 

**CONGRESS FINANCIAL CORPORATION (FLORIDA),**

 

**asAgent**

 

**and**

 

**THE FINANCIAL INSTITUTIONS NAMED HEREIN,**

 

**as Lenders**

 

**Dated: February 3, 2004**

 

SECTION 1. DEFINITIONS
  1
SECTION 2. CREDIT FACILITIES
  24
2.1 Loans.
  24
2.2 Letter of Credit Accommodations.
  25
2.3 Commitments.
  29
SECTION 3. INTEREST AND FEES
  29
3.1 Interest.
  29
3.2 Fees.
  30
3.3 Changes in Laws and Increased Costs of Loans.
  31
SECTION 4. CONDITIONS PRECEDENT
  33
4.1 Conditions Precedent to Initial Loans and Letter of Credit Accommodations.
  33
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations.
  36
SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST
  36
5.1 Grant of Security Interest.
  36
5.2 Perfection of Security Interests.
  37
SECTION 6. COLLECTION AND ADMINISTRATION
  41
6.1 Borrower Loan Account.
  41
6.2 Statements.
  41
6.3 Collection of Accounts.
  41
6.4 Payments.
  42
6.5 Authorization to Make Loans.
  43
6.6 Use of Proceeds.
  44
6.7 Pro Rata Treatment.
  44
6.8 Sharing of Payments, Etc.
  44
6.9 Settlement Procedures.
  45
6.10 Obligations Several; Independent Nature of Lenders’ Rights.
  47
SECTION 7. COLLATERAL REPORTING AND COVENANTS
  47
7.1 Collateral Reporting.
  47
7.2 Accounts Covenants.
  48
7.3 Inventory Covenants.
  49
7.4 Equipment and Real Property Covenants.
  50
7.5 Power of Attorney.
  50
7.6 Right to Cure.
  51
7.7 Access to Premises.
  51
SECTION 8. REPRESENTATIONS AND WARRANTIES
  52
8.1 Corporate Existence, Power and Authority.
  52
8.2 Name; State of Organization; Chief Executive Office; Collateral Locations.
  52
8.3 Financial Statements; No Material Adverse Change.
  53
8.4 Priority of Liens; Title to Properties.
  53
 

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8.5 Tax Returns.
  53
8.6 Litigation.
  53
8.7 Compliance with Other Agreements and Applicable Laws.
  53
8.8 Environmental Compliance.
  54
8.9 Employee Benefits.
  55
8.10 Bank Accounts.
  55
8.11 Intellectual Property.
  55
8.12 Subsidiaries; Affiliates; Capitalization; Solvency.
  56
8.13 Labor Disputes.
  56
8.14 Restrictions on Subsidiaries.
  57
8.15 Material Contracts.
  57
8.16 Payable Practices.
  57
8.17 Confirmation Order.
  57
8.18 Accuracy and Completeness of Information.
  58
8.19 Survival of Warranties; Cumulative.
  58
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
  58
9.1 Maintenance of Existence.
  58
9.2 New Collateral Locations.
  58
9.3 Compliance with Laws, Regulations, Etc.
  59
9.4 Payment of Taxes and Claims.
  60
9.5 Insurance.
  60
9.6 Financial Statements and Other Information.
  60
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc.
  62
9.8 Encumbrances.
  64
9.9 Indebtedness.
  65
9.10 Loans, Investments, Etc.
  66
9.11 Dividends and Redemptions.
  67
9.12 Transactions with Affiliates.
  68
9.13 Compliance with ERISA.
  68
9.14 End of Fiscal Years; Fiscal Quarters.
  68
9.15 Change in Business.
  69
9.16 Limitation of Restrictions Affecting Subsidiaries.
  69
9.17 Debt Service Coverage Ratio.
  69
9.18 License Agreements.
  69
9.19 After Acquired Real Property.
  70
9.20 Costs and Expenses.
  71
9.21 Further Assurances.
  71
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
  72
10.1 Events of Default.
  72
10.2 Remedies.
  74
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
  77
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial Waiver.
  77
11.2 Waiver of Notices.
  79
 

 

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11.3 Amendments and Waivers.
  79
11.4 Waiver of Counterclaims.
  80
11.5 Indemnification.
  81
SECTION 12. THE AGENT
  81
12.1 Appointment, Powers and Immunities.
  81
12.2 Reliance by Agent.
  82
12.3 Events of Default.
  82
12.4 Congress in its Individual Capacity.
  82
12.5 Indemnification.
  83
12.6 Non-Reliance on Agent and Other Lenders.
  83
12.7 Failure to Act.
  83
12.8 Additional Loans.
  84
12.9 Concerning the Collateral and the Related Financing Agreements.
  84
12.10 Field Audit, Examination Reports and other Information; Disclaimer by Lenders.
  84
12.11 Collateral Matters.
  85
12.12 Agency for Perfection.
  86
12.13 Successor Agent.
  87
SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS
  87
13.1 Term.
  87
13.2 Interpretative Provisions.
  89
13.3 Partial Invalidity.
  91
13.4 Confidentiality.
  91
13.5 Successors.
  92
13.6 Assignments; Participations.
  92
13.7 Entire Agreement.
  94
13.8 Counterparts, Etc.
  94
 

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**INDEX TO**

**EXHIBITS AND SCHEDULES**

 

Exhibit A
  Form of Assignment and Acceptance
Exhibit B
  Information Certificate
Exhibit C
  Form of Compliance Certificate
Exhibit D
  Closing Cash Flow and Projections
Schedule 1.51
  Existing Lenders
Schedule 1.52
  Existing Letters of Credit
Schedule 8.17
  Payments in Respect of the Plan
 

 

i 

**LOAN AND SECURITY AGREEMENT**

 

This Loan and Security Agreement dated February 3, 2004 is entered into by and among REPTRON ELECTRONICS, INC., a Floridacorporation (“Borrower”), the financial institutions from time to time parties hereto as lenders, whether by execution of this Agreement or an Assignment and Acceptance (each individually, a “Lender” and collectively,“Lenders”) and CONGRESS FINANCIAL CORPORATION (FLORIDA), a Florida corporation, in its capacity as agent for Lenders (in such capacity, “Agent”). 

 

**W I T N E S S E T H:**

 

WHEREAS, Borrower has requested that Agent and Lenders enter into financing arrangements with Borrower for the funding of cash distributions under thePlan, the replacement or backstopping of outstanding letters of credit, the payment of related transaction expenses and for working capital and general corporate purposes; and for these purposes, Agent and Lenders are willing to make certain loansand other extensions of credit to Borrower upon the terms and conditions set forth herein; 

 

WHEREAS, the funding of the cash distributions under the Plan constitute enforceable debt obligations of Reptron Electronics, Inc. and the repayment of such obligations and the provision of working capital as providedfor herein will directly benefit Borrower and will permit Borrower to consummate the Plan; 

 

WHEREAS, each Lender is willing to agree (severally and not jointly) to make such loans and provide such financial accommodations to Borrower on a pro rata basis according to its Commitment (as defined below) on theterms and conditions set forth herein and Agent is willing to act as agent for Lenders on the terms and conditions set forth herein and the other Financing Agreements; 

 

NOW, THEREFORE, in consideration of the mutual conditions and agreements set forth herein, and for other good and valuableconsideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 

 

**SECTION 1. DEFINITIONS**

 

For purposes of this Agreement, the following terms shall have the respective meanings given to them below: 

 

1.1 “Accounts” shall mean, all present and future rights of Borrower to payment of a monetary obligation, whether or not earned by performance,which is not evidenced by chattel paper or an instrument, (a) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (b) for services rendered or to be rendered, (c) for a secondary 

obligation incurred or to be incurred, or (d) arising out of the use of a credit or charge card or information containedon or for use with the card. 

 

1.2 “Adjusted EurodollarRate” shall mean, with respect to each Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded upwards, if necessary, to the next one-sixteenth (1/16) of one percent (1%)) determined by dividing (a) the Eurodollar Rate forsuch Interest Period by (b) a percentage equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes hereof, “Reserve Percentage” shall mean the reserve percentage, expressed as a decimal, prescribed by any United States orforeign banking authority for determining the reserve requirement which is or would be applicable to deposits of United States dollars in a non-United States or an international banking office of Reference Bank used to fund a Eurodollar Rate Loan orany Eurodollar Rate Loan made with the proceeds of such deposit, whether or not the Reference Bank actually holds or has made any such deposits or loans. The Adjusted Eurodollar Rate shall be adjusted on and as of the effective day of any change inthe Reserve Percentage. 

 

1.3 “Affiliate” shall mean,with respect to a specified Person, any other Person which directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with such Person, and without limiting the generality of the foregoing,includes (i) any Person which beneficially owns or holds twenty percent (20%) or more of any class of Voting Stock of such Person or other equity interests in such Person, (a) any Person of which such Person beneficially owns or holds twenty percent(20%) or more of any class of Voting Stock or in which such Person beneficially owns or holds twenty percent (20%) or more of the equity interests and (b) any director or executive officer of such Person. For the purposes of this definition, theterm “control” (including with correlative meanings, the terms “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to director cause the direction of the management and policies of such Person, whether through the ownership of Voting Stock, by agreement or otherwise. 

 

1.4 “Agent” shall mean Congress Financial Corporation (Florida), in its capacity as agent on behalf of Lenders pursuant to the terms hereof andany replacement or successor agent hereunder. 

 

1.5 “AgentPayment Account” shall mean account no. 5000 0000 30334 of Agent at Wachovia Bank, National Association or such other account of Agent as Agent may from time to time designate to Borrower as the Agent Payment Account for purposes of thisAgreement and the other Financing Agreements. 

 

1.6“Applicable Margin” shall mean as to the Interest Rate for Prime Rate Loans and the Interest Rate for Eurodollar Rate Loans, for the period from the date hereof through and including July 31, 2004, and for each fiscal month thereafter(commencing August 1, 2004) in which the Debt Service Coverage Ratio is 1.2:1.0 or less, the Applicable Prime Rate Margin shall be equal to one percent (1.0%) and the Applicable Eurodollar Rate Margin shall be equal to three percent (3.0%);provided, however, that, commencing with the Borrower’s fiscal quarter ending June 30, 2004, if the Debt Service Coverage Ratio, as reflected in the quarterly financial statements required to be delivered pursuant to Section9.6(a)(ii) (the “Quarterly Financial 

 

2 

Statement”), is greater than 1.2:1.0, the Applicable Prime Rate Margin and the Applicable Eurodollar Rate Margin shall be, effective as of the first dayof the month immediately following the receipt of the applicable Quarterly Financial Statement (“Interest Adjustment Date”), the applicable percentage (on a per annum basis) set forth below set forth opposite the Excess Availability:

 
  **Excess Availability** 
**Applicable Prime**

**Rate Margin**
 
**Applicable**

**Eurodollar Rate**

**Margin**
(a) Greater than $12,000,000 .25% 2.25%(b) Greater than $8,000,000 and less than or equal to $12,000,000 .50% 2.50%(c) Greater than $5,000,000 and less than or equal to $8,000,000 .75% 2.75%(d) Less than or equal to $5,000,000 1.0% 3.00%
 

provided, that, the ApplicableMargin shall be the percentage set forth above based upon the lowest Excess Availability which existed at any time during the three (3) consecutive calendar month period immediately preceding the Interest Adjustment Date and such adjusted interestrate shall continue until the next Interest Adjustment Date; except that if Borrower shall fail to deliver the financial statements, certificates and/or other information required under Section 9.6(a)(ii) by the dates required pursuant tosuch section, each Applicable Margin shall be conclusively presumed to equal the highest Applicable Margin specified in the pricing table set forth above until the first day of the month immediately following the delivery of such financialstatements, certificates and/or other information. 

 

1.7“Assignment and Acceptance” shall mean an Assignment and Acceptance substantially in the form of Exhibit A attached hereto (with blanks appropriately completed) delivered to Agent in connection with an assignment of a Lender’sinterest hereunder in accordance with the provisions of Section 13.7 hereof. 

 

1.8 “Bankruptcy Code” shall mean the United States Bankruptcy Code, being Title 11 of the United States Code, as the same now exists or may from time to time hereafter be 

 

amended, modified, recodified or supplemented, together with all officialrules and regulations thereunder or related thereto. 

 

1.9“Bankruptcy Court” shall mean the United States Bankruptcy Court for the Southern District of Florida, West Palm Beach Division. 

 

1.10 “Blocked Accounts” shall have the meaning set forth in Section 6.3 hereof. 

 

1.11 “Borrowing Base” shall mean, at any time, the amount equal to: 

 

(a) the lesser of: 

 

3 

(i) the amount equal to: (A) eighty-five percent (85%) of the Net Amount of the EligibleAccounts, plus (B) the lesser of (1) the Inventory Loan Limit or (2) the lesser of (x) thirty-five percent (35%) multiplied by the Value of the Eligible Inventory of Borrower consisting of raw materials or finished goods or (y) eighty-five percent(85%) of the Net Recovery Percentage multiplied by the Value of such Eligible Inventory, plus (C) the lesser of (1) the Equipment Loan Limit or (2) up to fifty percent (50%) of the Net Liquidation Value of Eligible Equipment, or 

 

(ii) the Revolving Loan Limit; 

 

minus 

 

(b) Reserves. 

 

For purposes only of applying the Inventory Loan Limit, Agent may treat the then undrawnamounts of outstanding Letter of Credit Accommodations for the purpose of purchasing Eligible Inventory as Revolving Loans to the extent Agent is in effect basing the issuance of the Letter of Credit Accommodations on the Value of the EligibleInventory being purchased with such Letter of Credit Accommodations. In determining the actual amounts of such Letter of Credit Accommodations to be so treated for purposes of the sublimit, the outstanding Revolving Loans and Reserves shall beattributed first to any components of the lending formulas set forth above that are not subject to such sublimit, before being attributed to the components of the lending formulas subject to such sublimit. 

 

1.12 “Business Day” shall mean any day other than a Saturday,Sunday, or other day on which commercial banks are authorized or required to close under the laws of the State of New York, or the State of North Carolina, and a day on which Agent is open for the transaction of business, except that if adetermination of a Business Day shall relate to any Eurodollar Rate Loans, the term Business Day shall also exclude any day on which banks are closed for dealings in dollar deposits in the London interbank market or other applicable Eurodollar Ratemarket. 

 

1.13 “Capital Leases” shall mean, as appliedto any Person, any lease of (or any agreement conveying the right to use) any property (whether real, personal or mixed) by such Person as lessee which in accordance with GAAP, is required to be reflected as a liability on the balance sheet of suchPerson. 

 

1.14 “Capital Stock” shall mean, withrespect to any Person, any and all shares, interests, participations or other equivalents (however designated) of such Person’s capital stock or partnership, limited liability company or other equity interests at any time outstanding, and anyand all rights, warrants or options exchangeable for or convertible into such capital stock or other interests (but excluding any debt security that is exchangeable for or convertible into such capital stock). 

 

1.15 “Cash Equivalents” shall mean, at any time, (a) any evidenceof Indebtedness with a maturity date of ninety (90) days or less issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof; provided, that, the full faith and credit of the UnitedStates of America is pledged in support thereof; (b) certificates of deposit or bankers’ acceptances with a maturity of ninety (90) days or less of any financial 

 

4 

institution that is a member of the Federal Reserve System having combined capital and surplus and undivided profits of not less than $250,000,000; (c)commercial paper (including variable rate demand notes) with a maturity of ninety (90) days or less issued by a corporation (except an Affiliate of Borrower) organized under the laws of any State of the United States of America or the District ofColumbia and rated at least A-1 by Standard & Poor’s Ratings Service, a division of The McGraw-Hill Companies, Inc. or at least P-1 by Moody’s Investors Service, Inc.; (d) repurchase obligations with a term of not more than thirty (30)days for underlying securities of the types described in clause (a) above entered into with any financial institution having combined capital and surplus and undivided profits of not less than $250,000,000; (e) repurchase agreements and reverserepurchase agreements relating to marketable direct obligations issued or unconditionally guaranteed by the United States of America or issued by any governmental agency thereof and backed by the full faith and credit of the United States ofAmerica, in each case maturing within ninety (90) days or less from the date of acquisition; provided, that, the terms of such agreements comply with the guidelines set forth in the Federal Financial Agreements of Depository Institutions withSecurities Dealers and Others, as adopted by the Comptroller of the Currency on October 31, 1985; and (f) investments in money market funds and mutual funds which invest substantially all of their assets in securities of the types described inclauses (a) through (e) above. 

 

1.16 “Change ofControl” shall mean, from and after the effectiveness of the Plan: (a) the transfer (in one transaction or a series of transactions) of all or substantially all of the assets of Borrower or any Obligor to any Person or group (as such term isused in Section 13(d)(3) of the Exchange Act); (b) the liquidation or dissolution of Borrower or any Obligor or the adoption of a plan by the stockholders of Borrower or any Obligor relating to the dissolution or liquidation of Borrower or anyObligor; or (c) without the consent of Agent and Required Lenders, the acquisition or ownership, directly or indirectly, beneficially or of record, by any Person or group (as such term is used in Section 13(d)(3) of the Exchange Act), of a majorityof the voting power of the total outstanding Voting Stock of Borrower or any Obligor or the Board of Directors of Borrower or any Obligor. 

 

1.17 “Chapter 11 Case” shall mean the Chapter 11 Case of the Chapter 11 Company under the Bankruptcy Code referred to as In re ReptronElectronics, Inc., Case No. 03-35966-BKC-PGH, which is pending in the Bankruptcy Court. 

 

1.18 “Chapter 11 Company” shall mean Reptron Electronics, Inc., as debtor and debtor-in-possession, a Florida corporation (together with its successors and assigns). 

 

1.19 “Closing Cash Flow and Projections” shall mean the revised13-week cash flow and availability projections annexed hereto as Exhibit D. 

 

1.20 “Closing Excess Availability” shall mean, the amount, as determined by Agent, calculated at closing, equal to: (a) the lesser of: (i) the Borrowing Base (for the purposes of calculating the BorrowingBase for determining Closing Excess Availability, the Equipment Loan Limit shall be $0) and (ii) the Revolving Loan Limit (in each case under (i) or (ii) after giving effect to any Reserves other than any Reserves in respect of Letter of CreditAccommodations), minus (b) the sum of: (i) the amount of all then outstanding and unpaid Obligations (but not including for this purpose the then outstanding aggregate principal amount 

 

5 

of any outstanding Letter of Credit Accommodations), plus (ii) the amount of all Reserves then established in respect of Letter of Credit Accommodations,plus (iii) the aggregate amount of all payments to be made under the Plan on the Effective Date not previously funded prior to the date hereof or included in the Obligations at closing, plus (iv) the amount of all of Borrower’s book overdraftand            ,without duplication, the amount of checks issued by the Borrower but not yet sent. 

 

1.21 “Code” shall mean the Internal Revenue Code of 1986, as the same now exists or may from time to time hereafter be amended, modified,recodified or supplemented, together with all rules, regulations and interpretations thereunder or related thereto. 

 

1.22 “Collateral” shall have the meaning set forth in Section 5 hereof. 

 

1.23 “Collateral Access Agreement” shall mean an agreement in writing, in form and substance satisfactory toAgent, from any lessor of premises to Borrower, or any other person to whom any Collateral is consigned or who has custody, control or possession of any such Collateral or is otherwise the owner or operator of any premises on which any of suchCollateral is located, pursuant to which such lessor, consignee or other person, inter alia, acknowledges the first priority security interest of Agent in such Collateral, agrees to waive any and all claims such lessor, consignee or other personmay, at any time, have against such Collateral, whether for processing, storage or otherwise, and agrees to permit Agent access to, and the right to remain on, the premises of such lessor, consignee or other person so as to exercise Agent’srights and remedies and otherwise deal with such Collateral and in the case of any consignee or other person who at any time has custody, control or possession of any Collateral, acknowledges that it holds and will hold possession of the Collateralfor the benefit of Agent and Lenders and agrees to follow all instructions of Agent with respect thereto. 

 

1.24 “Commitment” shall mean, at any time, as to each Lender, the principal amount set forth below such Lender’s signature on thesignatures pages hereto designated as the Commitment or on Schedule 1 to the Assignment and Acceptance Agreement pursuant to which such Lender became a Lender hereunder in accordance with the provisions of Section 13.7 hereof, as the same may beadjusted from time to time in accordance with the terms hereof; sometimes being collectively referred to herein as “Commitments”. 

 

1.25 “Confirmation Order” shall mean the Order Confirming the Debtor’s Modified Second Amended Plan of Reorganization under Chapter 11 ofthe Bankruptcy Code entered on January 14, 2004 in the Chapter 11 Case. 

 

1.26 “Congress” shall mean Congress Financial Corporation (Florida), a Florida corporation, in its individual capacity, and its successors and assigns. 

 

1.27 “Consolidated Net Income” shall mean, with respect to any Person for any period, the aggregate of the netincome (loss) of such Person and its Subsidiaries, on a consolidated basis, for such period (excluding to the extent included therein any extraordinary or non-recurring gains and extraordinary non-cash charges) and after deducting all charges whichshould be deducted before arriving at the net income (loss) for such period and after deducting the Provision for Taxes for such period, all as determined in accordance with GAAP; provided, that, (a) the net income of any Person that is not awholly-owned Subsidiary or that is accounted for 

 

6 

by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid or payable to such Person or awholly-owned Subsidiary of such Person; (b) except to the extent included pursuant to the foregoing clause, the net income of any Person accrued prior to the date it becomes a wholly-owned Subsidiary of such Person or is merged into or consolidatedwith such Person or any of its wholly-owned Subsidiaries or that Person’s assets are acquired by such Person or by any of its wholly-owned Subsidiaries shall be excluded; and (c) the effect of any change in accounting principles adopted by suchPerson or its Subsidiaries after the date hereof shall be excluded. For the purposes of this definition, net income excludes any gain and non-cash loss (but not any cash loss) together with any related Provision for Taxes for such gain and non-cashloss (but not any cash loss) realized upon the sale or other disposition of any assets that are not sold in the ordinary course of business (including, without limitation, dispositions pursuant to sale and leaseback transactions) or of any capitalstock of such Person or a Subsidiary of such Person and any net income realized as a result of changes in accounting principles or the application thereof to such Person. 

 

1.28 “Credit Facility” shall mean the Loans and Letter of Credit Accommodations provided to or for the benefit ofBorrower pursuant to Sections 2.1 and 2.2 hereof. 

 

1.29“Debt Service Coverage Ratio” shall mean, with respect to Borrower and its Subsidiaries, on a consolidated basis, the ratio of (a) the amount equal to EBITDA during the three (3) months immediately preceding the determination date withrespect to the calculation of the Fixed Charges to (b) Fixed Charges of Borrower and its Subsidiaries for such three (3) month period. 

 

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

 

1.31 “Defaulting Lender” shall have the meaning setforth in Section 6.10 hereof. 

 

1.32 “Deposit AccountControl Agreement” shall mean an agreement in writing, in form and substance satisfactory to Agent, by and among Agent, Borrower or the Obligor with a deposit account at any bank and the bank at which such deposit account is at any timemaintained which provides that such bank will comply with instructions originated by Agent directing disposition of the funds in the deposit account without further consent by Borrower or such Obligor and such other terms and conditions as Agent mayrequire, including as to any such agreement with respect to any Blocked Account, providing that all items received or deposited in the Blocked Accounts are the property of Agent, that the bank has no lien upon, or right to setoff against, theBlocked Accounts, the items received for deposit therein, or the funds from time to time on deposit therein and that the bank will wire, or otherwise transfer, in immediately available funds, on a daily basis to the Agent Payment Account all fundsreceived or deposited into the Blocked Accounts. 

 

1.33“EBITDA” shall mean, as to any Person, with respect to any period, an amount equal to: (a) the Consolidated Net Income of such Person for such period, plus (b) depreciation and amortization for such period (to the extent deducted in thecomputation of Consolidated Net Income of such Person), all in accordance with GAAP, plus (c) Interest Expense for such period (to the extent deducted in the computation of Consolidated Net Income of such Person), plus (d) 

 

7 

the Provision of Taxes for such period (to the extent deducted in the computation of Consolidated Net Income of such Person). 

 

1.34 “Effective Date” shall mean the date after which theConfirmation Order shall have become a Final Order and that all of the conditions precedent to the effectiveness of the Plan shall have been satisfied. 

 

1.35 “Eligible Accounts” shall mean Accounts created by Borrower which are and continue to be acceptable to Agent based on the criteria setforth below. In general, Accounts shall be Eligible Accounts if: 

 

(a) such Accounts arise from the actual and bona fide sale and delivery of goods by such Borrower or rendition of services by such Borrower in the ordinary course of its business which transactions are completed inaccordance with the terms and provisions contained in any documents related thereto; 

 

(b) such Accounts are not unpaid more than the earlier of sixty (60) days after the original due date for them or ninety (90) days afterthe date of the original invoice date for them; 

 

(c) such Accounts comply with the terms and conditions contained in Section 7.2(b) of this Agreement; 

 

(d) such Accounts do not arise from sales on consignment, guaranteed sale, sale and return, sale on approval, or other terms under whichpayment by the account debtor may be conditional or contingent; 

 

(e) the chief executive office of the account debtor with respect to such Accounts is located in the United States of America or Canada (or in the case of Bayer Corporation or any foreign subsidiary of BayerCorporation, also located in Ireland, the United Kingdom or Germany, or in the case of Diebold, Incorporated or any foreign subsidiary of Diebold, Incorporated, also located in France or any other foreign jurisdiction, provided, that, with respectto such foreign jurisdiction, such Accounts have been guaranteed by Diebold, Incorporated) (provided, that, at any time promptly upon Agent’s request, Borrower shall execute and deliver, or cause to be executed and delivered, such otheragreements, documents and instruments as may be required by Agent to perfect the security interests of Agent in those Accounts of an account debtor with its chief executive office or principal place of business in Canada in accordance with theapplicable laws of the Province of Canada in which such chief executive office or principal place of business is located and take or cause to be taken such other and further actions as Agent may request to enable Agent as secured party with respectthereto to collect such Accounts under the applicable Federal or Provincial laws of Canada) or, at Agent’s option, if the chief executive office and principal place of business of the account debtor with respect to such Accounts is locatedother than in the United States of America or Canada, other than as to Diebold, Incorporated and Bayer Corporation, then if either: (i) the account debtor has delivered to such Borrower an irrevocable letter of credit issued or confirmed by a banksatisfactory to Agent and payable only in the United States of America and in U.S. dollars, sufficient to cover such Account, in form and substance satisfactory to Agent and if required 

 

8 

by Agent, the original of such letter of credit has been delivered to Agent or Agent’s agent and the issuer thereof, and such Borrower has complied withthe terms of Section 5.2(f) hereof with respect to the assignment of the proceeds of such letter of credit to Agent or naming Agent as transferee beneficiary thereunder, as Agent may specify, or (ii) such Account is subject to credit insurancepayable to Agent issued by an insurer and on terms and in an amount acceptable to Agent, or (iii) such Account is otherwise acceptable in all respects to Agent (subject to such lending formula with respect thereto as Agent may determine);

 

(f) such Accounts do not consist of progressbillings (such that the obligation of the account debtors with respect to such Accounts is conditioned upon Borrower’s satisfactory completion of any further performance under the agreement giving rise thereto), bill and hold invoices orretainage invoices, except as to bill and hold invoices, if Agent shall have received an agreement in writing from the account debtor, in form and substance satisfactory to Agent, confirming the unconditional obligation of the account debtor to takethe goods related thereto and pay such invoice; 

 

(g) the account debtor with respect to such Accounts has not asserted a counterclaim, defense or dispute and does not have, and does not engage in transactions which may give rise to any right of setoff or recoupment against such Accounts(but the portion of the Accounts of such account debtor in excess of the amount at any time and from time to time owed by such Borrower to such account debtor or claimed owed by such account debtor may be deemed Eligible Accounts), 

 

(h) there are no facts, events or occurrences which wouldimpair the validity, enforceability or collectability of such Accounts or reduce the amount payable or delay payment thereunder; 

 

(i) such Accounts are subject to the first priority, valid and perfected security interest of Agent and any goods giving rise thereto arenot, and were not at the time of the sale thereof, subject to any liens except those permitted in this Agreement (but not including for purposes of this exception (i) any purchase money security interests or liens that may be permitted under thisAgreement, or (ii) any other security interests or liens that may have priority over the security interests of Agent or (iii) any security interests or liens that are not subject to an intercreditor agreement in form and substance satisfactory toAgent between the holder of such security interest or lien and Agent); 

 

(j) neither the account debtor nor any officer or employee of the account debtor with respect to such Accounts is an officer, employee, agent or other Affiliate of Borrower or any Obligor; 

 

(k) the account debtors with respect to such Accounts arenot any foreign government, the United States of America, any State, political subdivision, department, agency or instrumentality thereof, unless, if the account debtor is the United States of America, any State, political subdivision, department,agency or instrumentality thereof, upon Agent’s request, the Federal Assignment of Claims Act of 1940, as amended or any similar State or local law, if applicable, has been complied with in a manner satisfactory to Agent; 

 

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(l) there are no proceedings or actions which are threatened or pending against theaccount debtors with respect to such Accounts which might result in any material adverse change in any such account debtor’s financial condition (including, without limitation, any bankruptcy, dissolution, liquidation, reorganization or similarproceeding); 

 

(m) such Accounts are notevidenced by or arising under any instrument or chattel paper; 

 

(n) the aggregate amount of such Accounts owing by a single account debtor do not constitute more than fifteen percent (15%) of the aggregate amount of all otherwise Eligible Accounts, provided that, in the case ofAccounts owing by Diebold, Incorporated, such Accounts do not constitute more than forty percent (40%) of the aggregate amount of all otherwise Eligible Accounts or such lesser percentage as Agent may deem appropriate in its judgment reasonablyexercised, provided, further, that, in the case of Bayer Corporation, Zoll Medical Corporation and Datascope Corp., each such Account does not constitute more than twenty-five percent (25%) of the aggregate amount of all otherwise Eligible Accountsor such lesser percentage as Agent may deem appropriate in its judgment reasonably exercised (but, in each case, with respect to all of the foregoing, the portion of the Accounts not in excess of the applicable percentages set forth above may bedeemed Eligible Accounts); 

 

(o) such Accountsare not owed by an account debtor who has Accounts unpaid more than the earlier of sixty (60) days after the original due date for them or ninety (90) days after the original invoice date for them which constitute more than fifty percent (50%) ofthe total Accounts of such account debtor; 

 

(p) the account debtor is not located in a state requiring the filing of a Notice of Business Activities Report or similar report in order to Borrower to seek judicial enforcement in such State of payment of such Account, unless Borrowerhas qualified to do business in such state or has filed a Notice of Business Activities Report or equivalent report for the then current year or such failure to file and inability to seek judicial enforcement is capable of being remedied without anymaterial delay or material cost; and 

 

(q) suchAccounts are owed by account debtors deemed creditworthy at all times by Agent. 

 

The criteria for Eligible Accounts set forth above may only be changed and any new criteria for Eligible Accounts may only be established by Agent in good faith based on either: (i) an event, condition or other circumstance arising afterthe date hereof, or (ii) an event, condition or other circumstance existing on the date hereof to the extent Agent has no written notice thereof from Borrower prior to the date hereof, in either case under clause (i) or (ii) which adversely affectsor could reasonably be expected to adversely affect the Accounts in the good faith determination of Agent. Any Accounts which are not Eligible Accounts shall nevertheless be part of the Collateral. 

 

1.36 “Eligible Equipment” shall mean Equipment that meets all ofthe following criteria: 

 

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(a) Borrower shall have delivered or caused to be delivered to Agent, written appraisalsas to the Equipment, in form, scope and methodology acceptable to Agent; except, that, if the most recent appraisal of the Equipment received and accepted by Agent should become more than twelve (12) months old and Borrower shall have not authorizedan update of such appraisal, then no Equipment shall be Eligible Equipment; 

 

(b) the Equipment shall be described (by model, make, manufacturer, serial number and/or such other identifying information as may be appropriate, as determined by Agent) in a schedule to be submitted by Borrower toAgent; 

 

(c) Agent shall have a perfected firstpriority lien on and security interest in such Equipment; 

 

(d) such Equipment shall be located at a premises owned or leased by Borrower provided, that, (i) as to locations which are leased by Borrower, Agent shall have received a Collateral Access Agreement from the ownerand operator with respect to such location, duly authorized, executed and delivered by such owner and operator; 

 

(e) such Equipment is acceptable to Agent in good faith as Collateral; and 

 

(f) The criteria for Eligible Equipment shall be subject to Agent’s continuing satisfaction and may berevised by Agent from time to time in the good faith judgment of Agent. Any Equipment that is not Eligible Equipment shall nevertheless be and remain at all times part of the Collateral. 

 

1.37 “Eligible Inventory” shall mean, Inventory consisting of finished goods held for resale in the ordinarycourse of the business of Borrower and raw materials for such finished goods, in each case which are acceptable to Agent based on the criteria set forth below. In general, Eligible Inventory shall not include (a) work-in-process; (b) spare parts forequipment; (c) packaging and shipping materials; (d) supplies used or consumed in Borrower’s business; (e) Inventory at premises other than those owned or leased and controlled by Borrower; provided, that, (i) as to locations which are leasedby Borrower, if Agent shall not have received a Collateral Access Agreement from the owner and operator with respect to such location, duly authorized, executed and delivered by such owner and operator (or Agent shall determine to accept aCollateral Access Agreement that does not include all required provisions or provisions in the form otherwise required by Agent), Agent may, at its option, establish such Reserves in respect of amounts at any time due or to become due to the ownerand lessor thereof as Agent shall determine, and (ii) as to locations owned and operated by a third person, if Agent shall not have received a Collateral Access Agreement from the owner and operator with respect to such location, duly authorized,executed and delivered by such owner and operator (or Agent shall determine to accept a Collateral Access Agreement that does not include all required provisions or provisions in the form otherwise required by Agent), Agent may, at its option,establish such Reserves in respect of amounts at any time due or to become due to the owner and operator thereof as Agent shall determine, provided that, in addition, if required by Agent, in order for such Inventory at locations owned and operatedby a third person to be Eligible Inventory, Agent shall have received: (A) UCC financing statements between the owner and operator, as consignee or bailee and Borrower, as consignor or bailor, in form and substance satisfactory to 

 

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Agent, which are duly assigned to Agent and (B) a written notice to any lender to the owner and operator of the first priority security interest in suchInventory of Agent; (f) Inventory subject to a security interest or lien in favor of any Person other than Agent except those permitted in this Agreement (but not including for purposes of this exception (i) any purchase money security interests orliens that may be permitted under this Agreement, or (ii) any other security interests or liens that may have priority over the security interests of Agent or (iii) any security interests or liens that are not subject to an intercreditor agreementin form and substance satisfactory to Agent between the holder of such security interest or lien and Agent); (g) bill and hold goods; (h) obsolete or slow moving Inventory; (i) Inventory which is not subject to the first priority, valid andperfected security interest of Agent; (j) returned, damaged and/or defective Inventory; (k) Inventory purchased or sold on consignment and (l) Inventory located outside the United States of America. The criteria for Eligible Inventory set forthabove may only be changed and any new criteria for Eligible Inventory may only be established by Agent in good faith based on either: (i) an event, condition or other circumstance arising after the date hereof, or (ii) an event, condition or othercircumstance existing on the date hereof to the extent Agent has no written notice thereof from Borrower prior to the date hereof, in either case under clause (i) or (ii) which adversely affects or could reasonably be expected to adversely affectthe Inventory in the good faith determination of Agent. Any Inventory which is not Eligible Inventory shall nevertheless be part of the Collateral. 

 

1.38 “Eligible Transferee” shall mean (a) any Lender; (b) the parent company of any Lender and/or any Affiliate of such Lender which is at leastfifty percent (50%) owned by such Lender or its parent company; (c) any person (whether a corporation, partnership, trust or otherwise) that is engaged in the business of making, purchasing, holding or otherwise investing in bank loans and similarextensions of credit in the ordinary course of its business and is administered or managed by a Lender or with respect to any Lender that is a fund which invests in bank loans and similar extensions of credit, any other fund that invests in bankloans and similar extensions of credit and is managed by the same investment advisor as such Lender or by an Affiliate of such investment advisor, and in each case is approved by Agent; and (d) any other commercial bank, financial institution or“accredited investor” (as defined in Regulation D under the Securities Act of 1933) approved by Agent, provided, that, (i) neither Borrower nor any Obligor or any Affiliate of Borrower or any Obligor shall qualify as an Eligible Transfereeand (ii) no Person to whom any Indebtedness which is in any way subordinated in right of payment to any other Indebtedness of Borrower or Obligor shall qualify as an Eligible Transferee, except as Agent may otherwise specifically agree. 

 

1.39 “Environmental Laws” shall mean all foreign, Federal, Stateand local laws (including common law), legislation, rules, codes, licenses, permits (including any conditions imposed therein), authorizations, judicial or administrative decisions, injunctions or agreements between Borrower and any GovernmentalAuthority, (a) relating to pollution and the protection, preservation or restoration of the environment (including air, water vapor, surface water, ground water, drinking water, drinking water supply, surface land, subsurface land, plant and animallife or any other natural resource), or to human health or safety, (b) relating to the exposure to, or the use, storage, recycling, treatment, generation, manufacture, processing, distribution, transportation, handling, labeling, production, releaseor disposal, or threatened release, of Hazardous Materials, or (c) relating to all laws with regard to recordkeeping, notification, disclosure and reporting requirements respecting Hazardous Materials. The term 

 

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“Environmental Laws” includes (i) the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Federal SuperfundAmendments and Reauthorization Act, the Federal Water Pollution Control Act of 1972, the Federal Clean Water Act, the Federal Clean Air Act, the Federal Resource Conservation and Recovery Act of 1976 (including the Hazardous and Solid WasteAmendments thereto), the Federal Solid Waste Disposal and the Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water Act of 1974, (ii) applicable state counterparts to suchlaws and (iii) any common law or equitable doctrine that may impose liability or obligations for injuries or damages due to, or threatened as a result of, the presence of or exposure to any Hazardous Materials. 

 

1.40 “Equipment” shall mean all of Borrower’s now owned andhereafter acquired equipment, wherever located, including machinery, data processing and computer equipment (whether owned or licensed and including embedded software), vehicles, tools, furniture, fixtures, all attachments, accessions and propertynow or hereafter affixed thereto or used in connection therewith, and substitutions and replacements thereof, wherever located. 

 

1.41 “Equipment Loan Limit” shall mean One Million Five Hundred Thousand ($1,500,000) Dollars; provided, that, commencing April 1, 2004 and onthe first (1st) day of each successive July, October, January and April thereafter, the Equipment Loan Limit shall be reduced by One Hundred Twenty-Five Thousand ($125,000) Dollars. 

 

1.42 “ERISA” shall mean the United States Employee Retirement Income Security Act of 1974, together with allrules, regulations and interpretations thereunder or related thereto. 

 

1.43 “ ERISA Plan” means an employee benefit plan (as defined in Section 3(3) of ERISA) which Borrower or any Obligor sponsors, maintains, or to which it makes, is making, or is obligated to make contributions, or in the case of aMultiemployer Plan has made contributions at any time during the immediately preceding six (6) plan years. 

 

1.44 “ERISA Affiliate” shall mean any person required to be aggregated with Borrower or any of its Subsidiaries under Sections 414(b), 414(c),414(m) or 414(o) of the Code. 

 

1.45 “ERISA Event”shall mean (a) any “reportable event”, as defined in Section 4043(c) of ERISA or the regulations issued thereunder, with respect to a ERISA Plan; (b) the adoption of any amendment to a ERISA Plan that would require the provision ofsecurity pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c) the existence with respect to any ERISA Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whetheror not waived; (d) the filing pursuant to Section 412 of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any ERISA Plan; (e) the occurrence of a “prohibited transaction”with respect to which Borrower or any Obligor, or any of its or their respective Subsidiaries is a “disqualified person” (within the meaning of Section 4975 of the Code) or with respect to which Borrower, any Obligor or any of its or theirrespective Subsidiaries could otherwise be liable; (f) a complete or partial withdrawal by Borrower, any Obligor or any ERISA Affiliate from a Multiemployer Plan or a cessation of operations which is treated as such a withdrawal or notification thata Multiemployer Plan is in reorganization; (g) the filing of a notice of intent to 

 

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terminate, the treatment of a ERISA Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PensionBenefit Guaranty Corporation to terminate a ERISA Plan; (h) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any ERISAPlan; (i) the imposition of any liability under Title IV of ERISA, other than the Pension Benefit Guaranty Corporation premiums due but not delinquent under Section 4007 of ERISA, upon Borrower, any Obligor or any ERISA Affiliate in excess of$25,000 and (j) any other event or condition with respect to a ERISA Plan including any ERISA Plan subject to Title IV of ERISA maintained, or contributed to, by any ERISA Affiliate that could reasonably be expected to result in liability ofBorrower in excess of $25,000. 

 

1.46 “EurodollarRate” shall mean with respect to the Interest Period for a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic average of the rates of interest per annum (rounded upwards, if necessary, to the next one-sixteenth of onepercent (.0625%)) at which Reference Bank is offered deposits of United States dollars in the London interbank market (or other Eurodollar Rate market selected by Borrower or and approved by Agent) on or about 9:00 a.m. (New York time) two (2)Business Days prior to the commencement of such Interest Period in amounts substantially equal to the principal amount of the Eurodollar Rate Loans requested by and available to Borrower in accordance with this Agreement, with a maturity ofcomparable duration to the Interest Period selected by or on behalf of Borrower. 

 

1.47 “Eurodollar Rate Loans” shall mean any Loans or portion thereof on which interest is payable based on the Adjusted Eurodollar Rate in accordance with the terms hereof. 

 

1.48 “Event of Default” shall mean the occurrence or existence ofany event or condition described in Section 10.1 hereof. 

 

1.49“Excess Availability” shall mean, the amount, as determined by Agent, calculated at any date, equal to: (a) the lesser of: (i) the Borrowing Base and (ii) the Revolving Loan Limit (in each case under (i) or (ii) after giving effect to anyReserves other than any Reserves in respect of Letter of Credit Accommodations), minus (b) the sum of: (i) the amount of all then outstanding and unpaid Obligations (but not including for this purpose the then outstanding aggregate principal amountof any outstanding Letter of Credit Accommodations), plus (ii) the amount of all Reserves then established in respect of Letter of Credit Accommodations, plus (iii) the aggregate amount of all then outstanding and unpaid trade payables and otherobligations of Borrower which are outstanding more than sixty (60) days past due as of such time (other than trade payables or other obligations being contested or disputed by Borrower in good faith). 

 

1.50 “Exchange Act” shall mean the Securities Exchange Act of 1934,together with all rules, regulations and interpretations thereunder or related thereto. 

 

1.51 “Existing Lenders” shall mean the lenders to Borrower listed on Schedule 1.51 hereto (and including The CIT Group/Business Credit, Inc. in its capacity as agent acting for such lenders) and theirrespective predecessors, successors and assigns. 

 

1.52“Existing Letters of Credit” shall mean, collectively, the letters of credit issued for the account of Borrower or any Obligor or for which Borrower is otherwise liable listed on 

 

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Schedule 1.52 hereto, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. 

 

1.53 “Final Order” shall mean a judgment, order, ruling or otherdecree issued and entered by the Bankruptcy Court or by any state or other federal court or other tribunal which judgment, order, ruling or other decree has not been reversed, stayed, modified or amended and as to which (a) the time to appeal orpetition for review, rehearing or certiorari has expired and as to which no appeal or petition for review, rehearing or certiorari is pending or (b) any appeal or petition for review, rehearing or certiorari has been finally decided and no furtherappeal or petition for review, review, rehearing or certiorari can be taken or granted. 

 

1.54 “Financing Agreements” shall mean, collectively, this Agreement and all notes, guarantees, security agreements, deposit account control agreements, investment property control agreements, intercreditoragreements and all other agreements, documents and instruments now or at any time hereafter executed and/or delivered by Borrower or any Obligor in connection with this Agreement. 

 

1.55 “Fixed Charges” for any period shall mean the sum of, without duplication, (a) all Interest Expense, plus (b)all regularly scheduled (as determined at the beginning of the respective period) principal payments of Indebtedness for borrowed money and Indebtedness with respect to Capital Leases (and without duplicating amounts in item (a) of this definition,the interest component with respect to Indebtedness under Capital Leases), plus (c) the Capital Expenditures for such period plus (d) cash taxes paid for such period. The foregoing shall not be construed to include principal payments on Indebtednessarising pursuant to revolving loans and advances. 

 

1.56“GAAP” shall mean generally accepted accounting principles in the United States of America as in effect from time to time as set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute ofCertified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board which are applicable to the circumstances as of the date of determination consistently applied, except that, for purposes of Section 9.17hereof, GAAP shall be determined on the basis of such principles in effect on the date hereof and consistent with those used in the preparation of the most recent audited financial statements delivered to Agent prior to the date hereof. 

 

1.57 “Governmental Authority” shall mean any nation orgovernment, any state, province, or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of orpertaining to government. 

 

1.58 “Hazardous Materials”shall mean any hazardous, toxic or dangerous substances, materials and wastes, including hydrocarbons (including naturally occurring or man-made petroleum and hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation, radioactivematerials, biological substances, polychlorinated biphenyls, pesticides, herbicides and any other kind and/or type of pollutants or contaminants (including materials which include hazardous constituents), sewage, sludge, industrial slag, solventsand/or any other similar substances, materials, or wastes and including any other substances, materials or wastes that are 

 

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or become regulated under any Environmental Law (including any that are or become classified as hazardous or toxic underany Environmental Law). 

 

1.59 “Indebtedness” shallmean, with respect to any Person, any liability, whether or not contingent, (a) in respect of borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof) evidenced by bonds,notes, debentures or similar instruments; (b) representing the balance deferred and unpaid of the purchase price of any property or services (except any such balance that constitutes an account payable to a trade creditor (whether or not anAffiliate) created, incurred, assumed or guaranteed by such Person in the ordinary course of business of such Person in connection with obtaining goods, materials or services that is not overdue by more than ninety (90) days, unless the tradepayable is being contested in good faith); (c) all obligations as lessee under leases which have been, or should be, in accordance with GAAP recorded as Capital Leases; (d) any contractual obligation, contingent or otherwise, of such Person to payor be liable for the payment of any indebtedness described in this definition of another Person, including, without limitation, any such indebtedness, directly or indirectly guaranteed, or any agreement to purchase, repurchase, or otherwise acquiresuch indebtedness, obligation or liability or any security therefor, or to provide funds for the payment or discharge thereof, or to maintain solvency, assets, level of income, or other financial condition; (e) all obligations with respect toredeemable stock and redemption or repurchase obligations under any Capital Stock or other equity securities issued by such Person; (f) all reimbursement obligations and other liabilities of such Person with respect to surety bonds (whether bid,performance or otherwise), letters of credit, banker’s acceptances, drafts or similar documents or instruments issued for such Person’s account; (g) all indebtedness of such Person in respect of indebtedness of another Person for borrowedmoney or indebtedness of another Person otherwise described in this definition which is secured by any consensual lien, security interest, collateral assignment, conditional sale, mortgage, deed of trust, or other encumbrance on any asset of suchPerson, whether or not such obligations, liabilities or indebtedness are assumed by or are a personal liability of such Person, all as of such time; (h) all obligations, liabilities and indebtedness of such Person (marked to market) arising underswap agreements, cap agreements and collar agreements and other agreements or arrangements designed to protect such person against fluctuations in interest rates or currency or commodity values; and (i) all obligations owed by such Person underLicense Agreements with respect to non-refundable, advance or minimum guarantee royalty payments. 

 

1.60 “Information Certificate” shall mean the Information Certificates of Borrower constituting Exhibit B hereto containing material informationwith respect to Borrower, its businesses and assets provided by or on behalf of Borrower to Agent in connection with the preparation of this Agreement and the other Financing Agreements and the financing arrangements provided for herein. 

 

1.61 “Intellectual Property” shall mean Borrower’s nowowned and hereafter arising or acquired: patents, patent rights, patent applications, copyrights, works which are the subject matter of copyrights, copyright registrations, trademarks, trade names, trade styles, trademark and service markapplications, and licenses and rights to use any of the foregoing; all extensions, renewals, reissues, divisions, continuations, and continuations-in-part of any of the foregoing; all rights to sue for past, present and future infringement of any ofthe foregoing; inventions, trade secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys, reports, 

 

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manuals, and operating standards; goodwill (including any goodwill associated with any trademark or the license of any trademark); customer and other listsin whatever form maintained; trade secret rights, copyright rights, rights in works of authorship, domain names and domain name registration; software and contract rights relating to computer software programs, in whatever form created ormaintained. 

 

1.62 “Intercreditor Agreement” shallmean that certain Intercreditor and Subordination Agreement dated as of the date hereof, by and between Agent and Senior Subordinated Indenture Trustee and acknowledged by Borrower. 

 

1.63 “Interest Expense” shall mean, for any period, as to any Person, as determined in accordance with GAAP, thetotal interest expense of such Person, whether paid or accrued during such period (including the interest component of Capital Leases for such period), including, without limitation, discounts in connection with the sale of any Accounts and bankfees, commissions, discounts and other fees and charges owed with respect to letters of credit, banker’s acceptances or similar instruments, but excluding interest paid in property other than cash and any other interest expense not payable incash. 

 

1.64 “Interest Period” shall mean for anyEurodollar Rate Loan, a period of approximately one (1), two (2), or three (3) months duration as Borrower may elect, the exact duration to be determined in accordance with the customary practice in the applicable Eurodollar Rate market; provided,that, Borrower may not elect an Interest Period which will end after the last day of the then-current term of this Agreement. 

 

1.65 “Interest Rate” shall mean, 

 

(a) Commencing as of the date of this Agreement and subject to clauses (b) and (c) of this definition below: 

 

(i) as to Prime Rate Loans, a rate equal to one percent(1.0%) per annum in excess of the Prime Rate, 

 

(ii) as to Eurodollar Rate Loans, a rate equal to three percent (3.0%) per annum in excess of the Adjusted Eurodollar Rate (in each case, based on the Eurodollar Rate applicable for the Interest Period selected by Borrower, as in effect two(2) Business Days prior to the commencement of such Interest Period, whether such rate is higher or lower than any rate previously quoted to Borrower). 

 

(b) Subject to clause (c) of this definition below, effective as of each Interest Adjustment Date (commencing with the Interest AdjustmentDate immediately following August 1, 2004), the Interest Rate payable by Borrower shall be increased or decreased, as the case may be, (i) as to Prime Rate Loans, to the rate equal to the Applicable Margin on a per annum basis in excess of the PrimeRate, and (ii) as to Eurodollar Rate Loans, to the rate equal to the Applicable Margin on a per annum basis in excess of the Adjusted Eurodollar Rate. 

 

(c) Notwithstanding anything to the contrary contained in clauses (a) and (b) of this definition, (i) from the date hereof up to the six(6) month anniversary of the date hereof, the Applicable Margin used to calculate the Interest Rate for Prime Rate Loans shall not be less 

 

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than one percent (1.0%) and the Applicable Margin used to calculate the Interest Rate for Eurodollar Rate Loans shall be not less than three percent (3.0%),and (ii) the Applicable Margin otherwise used to calculate the Interest Rate for Prime Rate Loans and Eurodollar Rate Loans shall be the highest percentage set forth in the definition of the term Applicable Margin for each category of Loans (withoutregard to the amount of Excess Availability or the Debt Service Coverage Ratio) plus two percent (2.0%) per annum, at Lender’s option, (A) for the period (1) from and after the effective date of termination or non-renewal hereof until Lenderhas received full and final payment of all outstanding and unpaid Obligations which are not contingent and cash collateral or letter of credit, as Lender may specify, in the amounts and on the terms required under Section 12.1 hereof for contingentObligations (notwithstanding entry of a judgment against Borrower or any Obligor) and (2) from and after the date of the occurrence of an Event of Default and for so long as such Event of Default is continuing, and (B) on Revolving Loans to Borrowerat any time outstanding in excess of the Borrowing Base or the Revolving Loan Limit (whether or not such excess(es) arise or are made with or without the knowledge or consent of Lender and whether made before or after an Event of Default).

 

1.66 “Inventory” shall mean all of Borrower’snow owned and hereafter existing or acquired goods, wherever located, which (a) are leased by Borrower as lessor; (b) are held by Borrower for sale or lease or to be furnished under a contract of service; (c) are furnished by Borrower under acontract of service; or (d) consist of raw materials, work in process, finished goods or materials used or consumed in its business. 

 

1.67 “Inventory Loan Limit” shall mean, the amount of Seven Million ($7,000,000) Dollars. 

 

1.68 “Investment Property Control Agreement” shall mean anagreement in writing, in form and substance satisfactory to Agent, by and among Agent, Borrower or any Obligor (as the case may be) and any securities intermediary, commodity intermediary or other person who has custody, control or possession of anyinvestment property of Borrower or such obligor acknowledging that such securities intermediary, commodity intermediary or other person has custody, control or possession of such investment property on behalf of Agent, that it will comply withentitlement orders originated by Agent with respect to such investment property, or other instructions of Agent, or (as the case may be) apply any value distributed on account of any commodity contract as directed by Agent, in each case, without thefurther consent of Borrower or such obligor and including such other terms and conditions as Agent may require. 

 

1.69 “Lenders” shall mean the financial institutions who are signatories hereto as Lenders and other persons made a party to this Agreement as aLender in accordance with Section 13.7 hereof, and their respective successors and assigns; each sometimes being referred to herein individually as a “Lender”. 

 

1.70 “Letter of Credit Accommodations” shall mean, collectively, the letters of credit, merchandise purchase orother guaranties which are from time to time either (a) issued or opened by Agent or any Lender for the account of Borrower or any Obligor or (b) with respect to which Agent or Lenders have agreed to indemnify the issuer or guaranteed to the issuerthe performance by Borrower or any Obligor of its obligations to such issuer; sometimes being referred to herein individually as “Letter of Credit Accommodation”. 

 

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1.71 “License Agreements” shall have the meaning set forth in Section 8.11 hereof. 

 

1.72 “Loans” shall mean the Revolving Loans. 

 

1.73 “Material Adverse Effect” shall mean a material adverse effecton (a) the financial condition, business, performance or operations of Borrower, or (b) the legality, validity or enforceability of this Agreement or any of the other Financing Agreements; (c) the legality, validity, enforceability, perfection orpriority of the security interests and liens of Agent upon the Collateral; (d) the Collateral or its value; (e) the ability of Borrower to repay the Obligations or of Borrower to perform its obligations under this Agreement or any of the otherFinancing Agreements as and when to be performed; or (f) the ability of Agent or any Lender to enforce the Obligations or realize upon the Collateral or otherwise with respect to the rights and remedies of Agent and Lenders under this Agreement orany of the other Financing Agreements. 

 

1.74 “MaterialContract” shall mean (a) any contract or other agreement (other than the Financing Agreements and assembly, distribution or supply agreements entered in the ordinary course of business), written or oral, of Borrower involving monetary liabilityof or to any Person in an amount in excess of $1,000,000 in any fiscal year and (b) any other contract or other agreement (other than the Financing Agreements), whether written or oral, to which Borrower is a party as to which the breach,nonperformance, cancellation or failure to renew by any party thereto would have a Material Adverse Effect. 

 

1.75 “Maximum Credit” shall mean the amount of Twenty-Five Million ($25,000,000) Dollars. 

 

1.76 “Mortgages” shall mean, individually and collectively, each ofthe following (as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced): each of the Mortgages, dated of even date herewith, by Borrower in favor of Agent with respect to the Real Propertyand related assets of Borrower located in each of Gaylord, Michigan, Hibbing, Minnesota, and Tampa, Florida. 

 

1.77 “Multiemployer Plan” shall mean a “multi-employer plan” as defined in Section 4001(a)(3) of ERISA which is or was at any timeduring the current year or the immediately preceding six (6) years contributed to by Borrower or any ERISA Affiliate. 

 

1.78 “Net Amount of Eligible Accounts” shall mean, the gross amount of the Eligible Accounts less (a) sales, excise or similar taxes included inthe amount thereof and (b) returns, discounts, claims, credits and allowances of any nature at any time issued, owing, granted, outstanding, available or claimed with respect thereto. 

 

1.79 “Net Liquidation Value” shall mean with respect to Eligible Equipment the amount equal to the amount of therecovery in respect of the Eligible Equipment at such time on a “net forced liquidation value” basis as set forth in the most recent acceptable appraisal of Equipment received by Agent in accordance with Section 7.4, net of liquidationexpenses and commissions. In the event Borrower elects, in its discretion, not to deliver an acceptable appraisal of the Equipment to Agent, the Net Liquidation Value of all Eligible Equipment shall be $0. 

 

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1.80 “Net Recovery Percentage” shall mean the fraction, expressed as a percentage, (a) thenumerator of which is the amount equal to the amount of the recovery in respect of the Inventory at such time a “net orderly liquidation value” basis as set forth in the most recent acceptable appraisal of Inventory received by Agent inaccordance with Section 7.3, net of operating expenses, liquidation expenses and commissions, and (b) the denominator of which is the applicable original cost of the aggregate amount of the Inventory subject to such appraisal. 

 

1.81 “Net Sales Proceeds” shall mean, with respect to any sale,transfer or other disposition of any asset, the aggregate amount of cash received from time to time (whether as initial consideration or through payment or disposition of deferred consideration) by or on behalf of such Person in connection with suchtransaction after deducting therefrom only (without duplication) reasonable out of pocket fees, costs and expenses, including, without limitation, reasonable attorney’s fees and/or broker’s fees incurred in connection with the sale of suchasset, unpaid taxes attributable to the asset being sold, pro-rated through the date of closing, in each case to the extent, but only to the extent, that the amounts so deducted are actually paid to a Person that is not an Affiliate of such Personor any Affiliate of Borrower and, in each case, are properly attributable to such transaction or to the asset that is the subject thereof. 

 

1.82 “Net Tampa Proceeds” shall mean the difference between the Net Sales Proceeds received by Borrower in connection with the Sale-LeasebackTransaction and the aggregate amount paid by Borrower to the first mortgage holder in connection with the satisfaction of such first mortgage holder’s existing mortgage on the Tampa Real Property. 

 

1.83 “Obligations” shall mean any and all Loans, Letter of CreditAccommodations and all other obligations, liabilities and indebtedness of every kind, nature and description owing by Borrower to Agent or any Lender and/or any of their Affiliates, including principal, interest, charges, fees, costs and expenses,however evidenced, whether as principal, surety, endorser, guarantor or otherwise, arising under this Agreement or any of the other Financing Agreements, whether now existing or hereafter arising, whether arising before, during or after the initialor any renewal term of this Agreement or after the commencement of any case with respect to Borrower under the United States Bankruptcy Code or any similar statute (including the payment of interest and other amounts which would accrue and becomedue but for the commencement of such case, whether or not such amounts are allowed or allowable in whole or in part in such case), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or secondary, liquidatedor unliquidated, or secured or unsecured. 

 

1.84“Obligor” shall mean any guarantor, endorser, acceptor, surety or other person liable on or with respect to the Obligations or who is the owner of any property which is security for the Obligations, other than Borrower. 

 

1.85 “Participant” shall mean any financial institution thatacquires and holds a participation in the interest of any Lender in any of the Loans and Letter of Credit Accommodations in conformity with the provisions of Section 13.7 of this Agreement governing participations. 

 

1.86 “Person” or “person” shall mean any individual, soleproprietorship, partnership, corporation (including any corporation which elects subchapter S status under the Code), limited 

 

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liability company, limited liability partnership, business trust, unincorporated association, joint stock corporation, trust, joint venture or other entityor any government or any agency or instrumentality or political subdivision thereof. 

 

1.87 “Plan” shall mean the Debtor’s Modified Second Amended Plan of Reorganization under Chapter 11 of the Bankruptcy Code dated January 14, 2004, as confirmed by order of the Bankruptcy Court onJanuary 14, 2004 and any amendments, supplements or modifications thereto. 

 

1.88 “Prime Rate” shall mean the rate from time to time publicly announced by Wachovia Bank, National Association, or its successors, as its prime rate, whether or not such announced rate is the best rateavailable at such bank. 

 

1.89 “Prime Rate Loans”shall mean any Loans or portion thereof on which interest is payable based on the Prime Rate in accordance with the terms thereof. 

 

1.90 “Pro Rata Share” shall mean as to any Lender, the fraction (expressed as a percentage) the numerator of which is such Lender’sCommitment and the denominator of which is the aggregate amount of all of the Commitments of Lenders, as adjusted from time to time in accordance with the provisions of Section 13.7 hereof; provided, that, if the Commitments have been terminated,the numerator shall be the unpaid amount of such Lender’s Loans and its interest in the Letter of Credit Accommodations and the denominator shall be the aggregate amount of all unpaid Loans and Letter of Credit Accommodations. 

 

1.91 “Provision for Taxes” shall mean an amount equal to all taxesimposed on or measured by net income, whether Federal, State, Provincial, county or local, and whether foreign or domestic, that are paid or payable by any Person in respect of any period in accordance with GAAP. 

 

1.92 “Real Property” shall mean all now owned and hereafteracquired real property of Borrower, including leasehold interests, together with all buildings, structures, and other improvements located thereon and all licenses, easements and appurtenances relating thereto, wherever located, including the realproperty and related assets more particularly described in the Mortgages. 

 

1.93 “Receivables” shall mean all of the following now owned or hereafter arising or acquired property of Borrower: (a) all Accounts; (b) all interest, fees, late charges, penalties, collection fees andother amounts due or to become due or otherwise payable in connection with any Account; (c) all payment intangibles of Borrower; (d) letters of credit, indemnities, guarantees, security or other deposits and proceeds thereof issued payable toBorrower or otherwise in favor of or delivered to Borrower in connection with any Account; or (e) all other accounts, contract rights, chattel paper, instruments, notes, general intangibles and other forms of obligations owing to Borrower, whetherfrom the sale and lease of goods or other property, licensing of any property (including Intellectual Property or other general intangibles), rendition of services or from loans or advances by Borrower or to or for the benefit of any third person(including loans or advances to any Affiliates or Subsidiaries of Borrower) or otherwise associated with any Accounts, Inventory or general intangibles of Borrower (including, without 

 

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limitation, choses in action, causes of action, tax refunds, tax refund claims, any funds which may become payable to Borrower in connection with thetermination of any ERISA Plan or other employee benefit plan and any other amounts payable to Borrower from any ERISA Plan or other employee benefit plan, rights and claims against carriers and shippers, rights to indemnification, businessinterruption insurance and proceeds thereof, casualty or any similar types of insurance and any proceeds thereof and proceeds of insurance covering the lives of employees on which Borrower is a beneficiary). 

 

1.94 “Records” shall mean all of Borrower’s present and futurebooks of account of every kind or nature, purchase and sale agreements, invoices, ledger cards, bills of lading and other shipping evidence, statements, correspondence, memoranda, credit files and other data relating to the Collateral or any accountdebtor, together with the tapes, disks, diskettes and other data and software storage media and devices, file cabinets or containers in or on which the foregoing are stored (including any rights of Borrower with respect to the foregoing maintainedwith or by any other person). 

 

1.95 “Reference Bank”shall mean Wachovia Bank, National Association, or such other bank as Agent may from time to time designate. 

 

1.96 “Register” shall have the meaning set forth in Section 13.7 hereof. 

 

1.97 “Required Lenders” shall mean, at any time, those Lenders whose Pro Rata Shares aggregate fifty-one percent(51%) or more of the aggregate of the Commitments of all Lenders, or if the Commitments shall have been terminated, Lenders to whom at least fifty-one percent (51%) of the then outstanding Obligations are owing. 

 

1.98 “Reserves” shall mean as of any date of determination, suchamounts as Agent may from time to time establish and revise in good faith reducing the amount of Revolving Loans and Letter of Credit Accommodations which would otherwise be available to Borrower under the lending formula(s) provided for herein: (a)to reflect events, conditions, contingencies or risks which, as determined by Agent in good faith, adversely affect, or would have a reasonable likelihood of adversely affecting, either (i) the Collateral or any other property which is security forthe Obligations or its value or (ii) the assets or business of Borrower or any Obligor or (iii)the security interests and other rights of Agent or any Lender in the Collateral (including the enforceability, perfection and priority thereof) or (b) toreflect Agent’s good faith belief that any collateral report or financial information furnished by or on behalf of Borrower or any Obligor to Agent is or may have been incomplete, inaccurate or misleading in any material respect or (c) toreflect outstanding Letter of Credit Accommodations as provided in Section 2.2 hereof or (d) in respect of any state of facts which Agent determines in good faith constitutes a Default or an Event of Default or (e) to reflect any increases from andafter the date of this Agreement in the percentage of Inventory on hand in excess of scheduled production or with no demand or in the percentage of Inventory owned by Borrower greater than 180 days from the date of purchase, in each case, as apercentage of total Inventory against the respective percentages as set forth in the most recent Inventory appraisal delivered to Agent or to reflect any increase from and after the date of this Agreement in the obsolete and slow moving inventoryreserves as set forth on Borrower’s general ledger. Without limiting the generality of the foregoing, Reserves may be established to reflect that dilution with respect to the Accounts 

 

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(based on the ratio of the aggregate amount of non-cash reductions in Accounts for any period to the aggregate dollar amount of the sales of Borrower forsuch period) as calculated by Agent for any period is or is reasonably anticipated to be greater than five percent (5%). To the extent Agent may revise the lending formulas used to determine the Borrowing Base or establish new criteria or reviseexisting criteria for Eligible Accounts or Eligible Inventory so as to address any circumstances, condition, event or contingency in a manner satisfactory to Agent, Agent shall not establish a Reserve for the same purpose. The amount of any Reserveestablished by Agent shall have a reasonable relationship to the event, condition or other matter which is the basis for such reserve as determined by Agent in good faith. Without limiting the generality of the foregoing, upon completion of theSale-Leaseback Transaction, Agent may, in its sole discretion, establish the Supplemental Reserve. 

 

1.99 “Revolving Loan Limit” shall mean, at any time, the amount equal to Twenty-Five Million ($25,000,000) Dollars. 

 

1.100 “Revolving Loans” shall mean the loans now or hereafter madeby or on behalf of any Lender or by Agent for the account of any Lender on a revolving basis pursuant to the Credit Facility (involving advances, repayments and readvances) as set forth in Section 2.1 hereof. 

 

1.101 “Sale-Leaseback Transaction” shall mean any arrangement withany Person providing for the leasing by Borrower of the Tampa Real Property, which property is to be sold or transferred by Borrower to such Person in contemplation of such leasing. 

 

1.102 “Senior Subordinated Indenture” shall mean the Indenture dated as of February 3, 2004 among Borrower andSenior Subordinated Indenture Trustee. 

 

1.103 “SeniorSubordinated Indenture Trustee” shall mean HSBC Bank USA, in its capacity as trustee under the Senior Subordinated Indenture for the holders of the Senior Subordinated Notes and any successor, replacement or additional trustee under the SeniorSubordinated Indenture, and their respective successors and assigns. 

 

1.104 “Senior Subordinated Notes” shall mean, collectively, the $30,000,000 Senior Secured Notes due 2009, pursuant to the Senior Subordinated Indenture, as the same now exist or may hereafter be amended, modified, supplemented,extended, renewed, restated or replaced, which Senior Subordinated Notes shall be in form and substance acceptable to Agent. 

 

1.105 “Solvent” shall mean, at any time with respect to any Person, that at such time such Person (a) is able to pay its debts as they matureand has (and has a reasonable basis to believe it will continue to have) sufficient capital (and not unreasonably small capital) to carry on its business consistent with its practices as of the date hereof, and (b) the assets and properties of suchPerson at a fair valuation (and including as assets for this purpose at a fair valuation all rights of subrogation, contribution or indemnification arising pursuant to any guarantees given by such Person) are greater than the Indebtedness of suchPerson, and including subordinated and contingent liabilities computed at the amount which, such person has a reasonable basis to believe, represents an amount which can reasonably be expected to become an actual or matured liability (and includingas to contingent liabilities arising pursuant to any guarantee the face amount of such liability as reduced to reflect the probability of it becoming a matured liability). 

 

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1.106 “Special Agent Advances” shall have the meaning set forth in Section 12.11 hereof.

 

1.107 “Subsidiary” or “subsidiary” shallmean, with respect to any Person, any corporation, limited liability company, limited liability partnership or other limited or general partnership, trust, association or other business entity of which an aggregate of at least a majority of theoutstanding Capital Stock or other interests entitled to vote in the election of the board of directors of such corporation (irrespective of whether, at the time, Capital Stock of any other class or classes of such corporation shall have or mighthave voting power by reason of the happening of any contingency), managers, trustees or other controlling persons, or an equivalent controlling interest therein, of such Person is, at the time, directly or indirectly, owned by such Person and/or oneor more subsidiaries of such Person. 

 

1.108 “SupplementalReserve” shall mean, a Reserve established by Agent, in Agent’s sole discretion, upon completion of the Sale-Leaseback Transaction, in an amount equal to the Net Tampa Proceeds. 

 

1.109 “Tampa Real Property” shall mean the Borrower’s real property commonly known as 13700 ReptronBoulevard, Tampa, Florida. 

 

1.110 “UCC” shall meanthe Uniform Commercial Code as in effect in the State of Florida, and any successor statute, as in effect from time to time (except that terms used herein which are defined in the Uniform Commercial Code as in effect in the State of Florida on thedate hereof shall continue to have the same meaning notwithstanding any replacement or amendment of such statute except as Agent may otherwise determine). 

 

1.111 “Value” shall mean, as determined by Agent in good faith, with respect to Inventory, the lower of (a) cost computed on a first-infirst-out basis in accordance with GAAP or (b) market value, provided, that, for purposes of the calculation of the Borrowing Base, (i) the Value of the Inventory shall not include: (A) the portion of the value of Inventory equal to the profitearned by any Affiliate on the sale thereof to Borrower or (B) write-ups or write-downs in value with respect to currency exchange rates and (ii) notwithstanding anything to the contrary contained herein, the cost of the Inventory shall be computedin the same manner and consistent with the most recent appraisal of the Inventory received and accepted by Agent prior to the date hereof, if any. 

 

1.112 “Voting Stock” shall mean with respect to any Person, (a) one (1) or more classes of Capital Stock of such Person having general votingpowers to elect at least a majority of the board of directors, managers or trustees of such Person, irrespective of whether at the time Capital Stock of any other class or classes have or might have voting power by reason of the happening of anycontingency, and (b) any Capital Stock of such Person convertible or exchangeable without restriction at the option of the holder thereof into Capital Stock of such Person described in clause (a) of this definition. 

 

**SECTION 2. CREDIT FACILITIES**

 

2.1 Loans. 

 

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(a) Subject to and upon the terms and conditions contained herein, each Lender severally(and not jointly) agrees to fund its Pro Rata Share of Revolving Loans to Borrower from time to time in amounts requested by Borrower up to the amount outstanding at any time equal to the lesser of: (i) the Borrowing Base at such time or (ii) theRevolving Loan Limit. 

 

(b) Agent may, in itsdiscretion, from time to time, upon not less than five (5) days prior notice to Borrower, reduce the lending formula(s) with respect to Eligible Inventory or Eligible Equipment to the extent that Agent determines in good faith that: (i) the numberof days of the turnover of the Inventory for any period has adversely changed or (ii) the liquidation value of the Eligible Inventory, or any category thereof, has decreased, including any decrease attributable to a change in the nature, quality ormix of the Inventory or (iii) the Net Liquidation Value of the Eligible Equipment or any category thereof has decreased. The amount of any decrease in the lending formulas shall have a reasonable relationship to the event, condition or circumstancewhich is the basis for such decrease as determined by Agent in good faith. In determining whether to reduce the lending formula(s), Agent may consider events, conditions, contingencies or risks which are also considered in determining EligibleAccounts, Eligible Inventory, Eligible Equipment or in establishing Reserves. 

 

(c) Except in Agent’s discretion, with the consent of all Lenders, or as otherwise provided herein, (i) the aggregate amount of the Loans and the Letter of Credit Accommodations outstanding at any time shall notexceed the Maximum Credit, (ii) the aggregate principal amount of the Revolving Loans and Letter of Credit Accommodations outstanding at any time to Borrower shall not exceed the lesser of the Borrowing Base or the Revolving Loan Limit, (iii) theaggregate principal amount of the Revolving Loans outstanding at any time to Borrower based on the Eligible Inventory shall not exceed the Inventory Loan Limit and (iv) the aggregate principal amount of the Revolving Loans outstanding at any time toBorrower based on Eligible Equipment shall not exceed the Equipment Loan Limit. 

 

(d) In the event that the aggregate principal amount of the Revolving Loans and Letter of Credit Accommodations outstanding to Borrowerexceed the Borrowing Base or the Revolving Loan Limit of Borrower, or the aggregate principal amount of Revolving Loans and Letter of Credit Accommodations based on the Eligible Inventory exceed the Inventory Loan Limit, or the aggregate amount ofthe outstanding Letter of Credit Accommodations exceed the sublimit for Letter of Credit Accommodations set forth in Section 2.2(e), or the aggregate amount of the Loans and Letter of Credit Accommodations exceed the Maximum Credit, such event shallnot limit, waive or otherwise affect any rights of Agent or Lenders in such circumstances or on any future occasions and Borrower shall, upon demand by Agent, which may be made at any time or from time to time, immediately repay to Agent the entireamount of any such excess(es) for which payment is demanded. 

 

2.2 Letter of Credit Accommodations. 

 

(a) Subject to and upon the terms and conditions contained herein, at the request of Borrower, Agent agrees, for the ratable risk of each Lender according to its Pro Rata Share, to provide or arrange for Letter of Credit Accommodations forthe account of Borrower containing terms and conditions acceptable to Agent and the issuer thereof. Any payments made 

 

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by or on behalf of Agent or any Lender to any issuer thereof and/or related parties in connection with the Letter of Credit Accommodations provided to or forthe benefit of Borrower shall constitute additional Revolving Loans to Borrower pursuant to this Section 2. 

 

(b) In addition to any charges, fees or expenses charged by any bank or issuer in connection with the Letter of Credit Accommodations,Borrower shall pay to Agent, for the benefit of Lenders, a letter of credit fee at a rate equal to two percent (2.0%) per annum, on the daily outstanding balance of the Letter of Credit Accommodations for the immediately preceding month (or partthereof), payable in arrears as of the first day of each succeeding month, except that Agent may, and upon the written direction of Required Lenders shall, require Borrower to pay to Agent for the ratable benefit of Lenders such letter of creditfee, at a rate equal to four percent (4.0%) per annum on such daily outstanding balance for: (i) the period from and after the date of termination hereof until Agent and Lenders have received full and final payment of all Obligations(notwithstanding entry of a judgment against Borrower) and (ii) the period from and after the date of the occurrence of an Event of Default for so long as such Event of Default is continuing as determined by Agent. Such letter of credit fee shall becalculated on the basis of a three hundred sixty (360) day year and actual days elapsed and the obligation of Borrower to pay such fee shall survive the termination of this Agreement. 

 

(c) Borrower shall give Agent two (2) Business Days’ prior written notice of Borrower’s requestfor the issuance of a Letter of Credit Accommodation. Such notice shall be irrevocable and shall specify the original face amount of the Letter of Credit Accommodation requested, the effective date (which date shall be a Business Day) of issuance ofsuch requested Letter of Credit Accommodation, whether such Letter of Credit Accommodations may be drawn in a single or in partial draws, the date on which such requested Letter of Credit Accommodation is to expire (which date shall be a BusinessDay), the purpose for which such Letter of Credit Accommodation is to be issued, and the beneficiary of the requested Letter of Credit Accommodation. Borrower shall attach to such notice the proposed terms of the Letter of Credit Accommodation.

 

(d) In addition to being subject to thesatisfaction of the applicable conditions precedent contained in Section 4 hereof and the other terms and conditions contained herein, no Letter of Credit Accommodations shall be available unless each of the following conditions precedent have beensatisfied in a manner satisfactory to Agent: (i) Borrower shall have delivered to the proposed issuer of such Letter of Credit Accommodation at such times and in such manner as such proposed issuer may require, an application, in form and substancesatisfactory to such proposed issuer and Agent, for the issuance of the Letter of Credit Accommodation and such other documents as may be required pursuant to the terms thereof, and the form and terms of the proposed Letter of Credit Accommodationshall be satisfactory to Agent and such proposed issuer, (ii) as of the date of issuance, no order of any court, arbitrator or other Governmental Authority shall purport by its terms to enjoin or restrain money center banks generally from issuingletters of credit of the type and in the amount of the proposed Letter of Credit Accommodation, and no law, rule or regulation applicable to money center banks generally and no request or directive (whether or not having the force of law) from anyGovernmental Authority with jurisdiction over money center banks generally shall prohibit, or request that the proposed issuer of such Letter of Credit Accommodation refrain from, the issuance of letters of credit generally or the issuance of suchLetters of Credit Accommodation; 

 

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and (iii) the Excess Availability, prior to giving effect to any Reserves with respect to such Letter of Credit Accommodations, on the date of the proposedissuance of any Letter of Credit Accommodations, shall be equal to or greater than: (A) if the proposed Letter of Credit Accommodation is for the purpose of purchasing Eligible Inventory and the documents of title with respect thereto are consignedto the issuer, the sum of (1) the percentage equal to one hundred percent (100%) minus the then applicable percentage with respect to Eligible Inventory set forth in the definition of the term Borrowing Base multiplied by the Value of such EligibleInventory, plus (2) freight, taxes, duty and other amounts which Agent estimates must be paid in connection with such Inventory upon arrival and for delivery to one of Borrower’s locations for Eligible Inventory within the United States ofAmerica and (B) if the proposed Letter of Credit Accommodation is for any other purpose or the documents of title are not consigned to the issuer in connection with a Letter of Credit Accommodation for the purpose of purchasing Inventory, an amountequal to one hundred percent (100%) of the face amount thereof and all other commitments and obligations made or incurred by Agent with respect thereto. Effective on the issuance of each Letter of Credit Accommodation, a Reserve shall be establishedin the applicable amount set forth in Section 2.2(d)(iii)(A) or Section 2.2(d)(iii)(B). 

 

(e) Except in Agent’s discretion, with the consent of all Lenders, the amount of all outstanding Letter of Credit Accommodations andall other commitments and obligations made or incurred by Agent or any Lender in connection therewith shall not at any time exceed Four Million ($4,000,000) Dollars. 

 

(f) Borrower shall indemnify and hold Agent and Lenders harmless from and against any and all losses,claims, damages, liabilities, costs and expenses which Agent or any Lender may suffer or incur in connection with any Letter of Credit Accommodations and any documents, drafts or acceptances relating thereto, including any losses, claims, damages,liabilities, costs and expenses due to any action taken by any issuer or correspondent with respect to any Letter of Credit Accommodation, except for such losses, claims, damages, liabilities, costs or expenses that are a direct result of the grossnegligence or wilful misconduct of Agent or any Lender as determined pursuant to a final non-appealable order of a court of competent jurisdiction. Borrower assumes all risks with respect to the acts or omissions of the drawer under or beneficiaryof any Letter of Credit Accommodation and for such purposes the drawer or beneficiary shall be deemed such Borrower’s agent. Borrower assumes all risks for, and agrees to pay, all foreign, Federal, State and local taxes, duties and leviesrelating to any goods subject to any Letter of Credit Accommodations or any documents, drafts or acceptances thereunder. Borrower hereby releases and holds Agent and Lenders harmless from and against any acts, waivers, errors, delays or omissions,whether caused by Borrower, by any issuer or correspondent or otherwise with respect to or relating to any Letter of Credit Accommodation, except for the gross negligence or wilful misconduct of Agent or any Lender as determined pursuant to a final,non-appealable order of a court of competent jurisdiction. The provisions of this Section 2.2(f) shall survive the payment of Obligations and the termination of this Agreement. 

 

(g) In connection with Inventory purchased pursuant to Letter of Credit Accommodations, Borrower shall, atAgent’s request, instruct all suppliers, carriers, forwarders, customs brokers, warehouses or others receiving or holding cash, checks, Inventory, documents or instruments in which Agent holds a security interest to deliver them to Agent and/orsubject to 

 

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Agent’s order, and if they shall come into Borrower’s possession, to deliver them, upon Agent’s request, to Agent in their original form.Borrower shall also, at Agent’s request, designate Agent as the consignee on all bills of lading and other negotiable and non-negotiable documents. 

 

(h) Borrower hereby irrevocably authorizes and directs any issuer of a Letter of Credit Accommodation to name Borrower as the accountparty therein and to deliver to Agent all instruments, documents and other writings and property received by issuer pursuant to the Letter of Credit Accommodations and to accept and rely upon Agent’s instructions and agreements with respect toall matters arising in connection with the Letter of Credit Accommodations or the applications therefor. Nothing contained herein shall be deemed or construed to grant Borrower any right or authority to pledge the credit of Agent or any Lender inany manner. Agent and Lenders shall have no liability of any kind with respect to any Letter of Credit Accommodation provided by an issuer other than Agent or any Lender unless Agent has duly executed and delivered to such issuer the application ora guarantee or indemnification in writing with respect to such Letter of Credit Accommodation. Borrower shall be bound by any reasonable interpretation made in good faith by Agent, or any other issuer or correspondent under or in connection with anyLetter of Credit Accommodation or any documents, drafts or acceptances thereunder, notwithstanding that such interpretation may be inconsistent with any instructions Borrower. Agent shall have the sole and exclusive right and authority to, andBorrower shall not: (i) at any time an Event of Default exists or has occurred and is continuing, (A) approve or resolve any questions of non-compliance of documents, (B) give any instructions as to acceptance or rejection of any documents or goodsor (C) execute any and all applications for steamship or airway guaranties, indemnities or delivery orders, and (ii) at all times (provided that if no Event of Default has occurred, Agent shall not exercise any of the following unless agreed to byor on behalf of Borrower), (A) grant any extensions of the maturity of, time of payment for, or time of presentation of, any drafts, acceptances, or documents, and (B) agree to any amendments, renewals, extensions, modifications, changes orcancellations of any of the terms or conditions of any of the applications, Letter of Credit Accommodations, or documents, drafts or acceptances thereunder or any letters of credit included in the Collateral. Agent may take such actions either inits own name or in Borrower’s name. 

 

(i)Any rights, remedies, duties or obligations granted or undertaken by Borrower to any issuer or correspondent in any application for any Letter of Credit Accommodation, or any other agreement in favor of any issuer or correspondent relating to anyLetter of Credit Accommodation, shall be deemed to have been granted or undertaken Borrower to Agent for the ratable benefit of Lenders. Any duties or obligations undertaken by Agent to any issuer or correspondent in any application for any Letterof Credit Accommodation, or any other agreement by Agent in favor of any issuer or correspondent to the extent relating to any Letter of Credit Accommodation, shall be deemed to have been undertaken by Borrower to Agent for the ratable benefit ofLenders and to apply in all respects to Borrower. 

 

(j) Immediately upon the issuance or amendment of any Letter of Credit Accommodation, each Lender shall be deemed to have irrevocably and unconditionally purchased and received, without recourse or warranty, an undivided interest andparticipation to the extent of such Lender’s Pro Rata Share of the liability with respect to such Letter of Credit Accommodation (including, without limitation, all Obligations with respect thereto). 

 

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(k) Borrower is irrevocably and unconditionally obligated, without presentment, demand orprotest, to pay to Agent any amounts paid by an issuer of a Letter of Credit Accommodation with respect to such Letter of Credit Accommodation (whether through the borrowing of Loans in accordance with Section 2.2(a) or otherwise). In the event thatBorrower fails to pay Agent on the date of any payment under a Letter of Credit Accommodation in an amount equal to the amount of such payment, Agent (to the extent it has actual notice thereof) shall promptly notify each Lender of the unreimbursedamount of such payment and each Lender agrees, upon one (1) Business Day’s notice, to fund to Agent the purchase of its participation in such Letter of Credit Accommodation in an amount equal to its Pro Rata Share of the unpaid amount. Theobligation of each Lender to deliver to Agent an amount equal to its respective participation pursuant to the foregoing sentence is absolute and unconditional and such remittance shall be made notwithstanding the occurrence or continuance of anyEvent of Default, the failure to satisfy any other condition set forth in Section 4 or any other event or circumstance. If such amount is not made available by a Lender when due, Agent shall be entitled to recover such amount on demand from suchLender with interest thereon, for each day from the date such amount was due until the date such amount is paid to Agent at the interest rate then payable by Borrower in respect of Loans that are Prime Rate Loans as set forth in Section 3.1(a)hereof. 

 

2.3 Commitments. The aggregate amount of eachLender’s Pro Rata Share of the Loans and Letter of Credit Accommodations shall not exceed the amount of such Lender’s Commitment, as the same may from time to time be amended in accordance with the provisions hereof. 

 

**SECTION 3. INTEREST AND FEES**

 

3.1 Interest. 

 

(a) Borrower shall pay to Agent, for the benefit of Lenders, interest on the outstanding principal amount ofthe Loans at the Interest Rate. All interest accruing hereunder on and after the date of any Event of Default or termination hereof shall be payable on demand. 

 

(b) Borrower may from time to time request Eurodollar Rate Loans or may request that Prime Rate Loans be converted to Eurodollar RateLoans or that any existing Eurodollar Rate Loans continue for an additional Interest Period. Such request from Borrower shall specify the amount of the Eurodollar Rate Loans or the amount of the Prime Rate Loans to be converted to Eurodollar RateLoans or the amount of the Eurodollar Rate Loans to be continued (subject to the limits set forth below) and the Interest Period to be applicable to such Eurodollar Rate Loans. Subject to the terms and conditions contained herein, three (3) BusinessDays after receipt by Agent of such a request from Borrower, such Eurodollar Rate Loans shall be made or Prime Rate Loans shall be converted to Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue, as the case may be, provided, that,(i) no Default or Event of Default shall exist or have occurred and be continuing, (ii) no party hereto shall have sent any notice of termination of this Agreement, (iii) Borrower shall have complied with such customary procedures as are establishedby Agent and specified by Agent to Borrower for Eurodollar Rate Loans, (iv) no more than four (4) Interest Periods may be in effect at any one time, (v) the aggregate amount of the Eurodollar Rate Loans must be in an amount not less than $2,000,000or 

 

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an integral multiple of $1,000,000 in excess thereof, and (vi)Agent and each Lender shall have determined that the Interest Period or Adjusted EurodollarRate is available to Agent and such Lender and can be readily determined as of the date of the request for such Eurodollar Rate Loan by Borrower. Any request by or on behalf of Borrower for Eurodollar Rate Loans or to convert Prime Rate Loans toEurodollar Rate Loans or to continue any existing Eurodollar Rate Loans shall be irrevocable. Notwithstanding anything to the contrary contained herein, Agent and Lenders shall not be required to purchase United States Dollar deposits in the Londoninterbank market or other applicable Eurodollar Rate market to fund any Eurodollar Rate Loans, but the provisions hereof shall be deemed to apply as if Agent and Lenders had purchased such deposits to fund the Eurodollar Rate Loans. 

 

(c) Any Eurodollar Rate Loans shall automatically convert toPrime Rate Loans upon the last day of the applicable Interest Period, unless Agent has received and approved a request to continue such Eurodollar Rate Loan at least three (3) Business Days prior to such last day in accordance with the terms hereof.Any Eurodollar Rate Loans shall, at Agent’s option, upon notice by Agent to Borrower, be subsequently converted to Prime Rate Loans in the event that this Agreement shall terminate or not be renewed. Borrower shall pay to Agent, for the benefitof Lenders, upon demand by Agent (or Agent may, at its option, charge any loan account Borrower) any amounts required to compensate any Lender or Participant for any loss (including loss of anticipated profits), cost or expense incurred by suchperson, as a result of the conversion of Eurodollar Rate Loans to Prime Rate Loans pursuant to any of the foregoing. 

 

(d) Interest shall be payable by Borrower to Agent, for the account of Lenders, monthly in arrears not later than the first day of eachcalendar month and shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed. The interest rate on non-contingent Obligations (other than Eurodollar Rate Loans) shall increase or decrease by an amount equal toeach increase or decrease in the Prime Rate effective on the first day of the month after any change in such Prime Rate is announced based on the Prime Rate in effect on the last day of the month in which any such change occurs. In no event shallcharges constituting interest payable by Borrower to Agent and Lenders exceed the maximum amount or the rate permitted under any applicable law or regulation, and if any such part or provision of this Agreement is in contravention of any such law orregulation, such part or provision shall be deemed amended to conform thereto. 

 

3.2 Fees. 

 

(a)Borrower shall pay to Agent, for its own account, monthly a servicing fee in an amount equal to Two Thousand Five Hundred ($2,500) Dollars in respect of the services of Agent for each month (or part thereof) while this Agreement remains in effectand for so long thereafter as any Obligations are outstanding. Such fee shall be fully earned as of and payable in advance on the date hereof and on the first day of each month hereafter. 

 

(b) Borrowers shall pay to Agent for the ratable benefit ofLenders monthly an unused line fee at a rate equal to the percentage (on a per annum basis) set forth below calculated upon the amount by which (i) from the date hereof up to and including August, 2005, Twenty Million ($20,000,000) Dollars and fromand after September, 2005, Twenty Five Million 

 

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($25,000,000) Dollars exceeds (ii) the average daily principal balance of the outstanding Loans and Letter of Credit Accommodations during the immediatelypreceding month (or part thereof) while this Agreement is in effect and for so long thereafter as any Obligations are outstanding. Such fee shall be payable on the first day of each month in arrears. The percentage used for determining the unusedline fee shall be three-eighths percent (.375%), provided, however, that, commencing with the Borrower’s fiscal quarter ending June 30, 2004, if the Debt Service Coverage Ratio, as reflected in the quarterly financial statementsrequired to be delivered pursuant to Section 9.6(a)(ii) (the “Quarterly Financial Statement”), is greater than 1.2:1.0, the unused line fee shall be, effective as of the first day of the month immediately following the receipt of theapplicable Quarterly Financial Statement (“Interest Adjustment Date”), the unused line fee shall be as set forth below opposite the applicable Excess Availability: 

 

 
  **Excess Availability** 
**Unused Line Fee**

**Percentage**
(a) Greater than $12,000,000 .25%(b) Greater than $8,000,000 and less than or equal to $12,000,000 .25%(c) Greater than $5,000,000 and less than or equal to $8,000,000 .375%(d) Less than or equal to $5,000,000 .375%
 

provided, that, the unused linefee shall be the percentage set forth above based upon the lowest Excess Availability which existed at any time during the three (3) consecutive calendar month period immediately preceding the Interest Adjustment Date and such the unused line feeshall continue until the next Interest Adjustment Date; exceptthat if Borrower shall fail to deliver the financial statements, certificates and/or other information required under Section 9.6(a)(ii) by the dates required pursuant tosuch section, the unused line fee shall be conclusively presumed to equal the highest unused line fee specified in the pricing table set forth above until the first day of the month immediately following the delivery of such financial statements,certificates and/or other information. 

 

**3.3 Changes in Laws and IncreasedCosts of Loans.**

 

(a) If after the date hereof, either (i)any change in, or in the interpretation of, any law or regulation is introduced, including, without limitation, with respect to reserve requirements, applicable to any Lender or any banking or financial institution from whom any Lender borrows fundsor obtains credit (a “Funding Bank”), or (ii) a Funding Bank or any Lender complies with any future guideline or request from any central bank or other Governmental Authority or (iii) a Funding Bank or any Lender determines that theadoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with theinterpretation or administration thereof has or would have the effect described below, or a Funding Bank or any Lender complies with any request or directive regarding capital adequacy (whether or not having the force of law) of any 

 

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such authority, central bank or comparable agency, and in the case of any event set forth in this clause (iii), such adoption, change or compliance has orwould have the direct or indirect effect of reducing the rate of return on any Lender’s capital as a consequence of its obligations hereunder to a level below that which such Lender could have achieved but for such adoption, change orcompliance (taking into consideration the Funding Bank’s or Lender’s policies with respect to capital adequacy) by an amount deemed by such Lender to be material, and the result of any of the foregoing events described in clauses (i), (ii)or (iii) is or results in an increase in the cost to any Lender of funding or maintaining the Loans, the Letter of Credit Accommodations or its Commitment, then Borrower shall from time to time upon demand by Agent pay to Agent additional amountssufficient to indemnify Lenders against such increased cost on an after-tax basis (after taking into account applicable deductions and credits in respect of the amount indemnified). A certificate as to the amount of such increased cost shall besubmitted to Borrower by Agent and shall be conclusive, absent manifest error. 

 

(b) If prior to the first day of any Interest Period, (i) Agent shall have determined in good faith (which determination shall be conclusive and binding upon Borrower) that, by reason of circumstances affecting therelevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, (ii) Agent has received notice from the Required Lenders that the Eurodollar Rate determined or to be determined for suchInterest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Eurodollar Rate Loans during such Interest Period, or (iii) Dollar deposits in the principal amounts of the Eurodollar Rate Loans to whichsuch Interest Period is to be applicable are not generally available in the London interbank market, Agent shall give telecopy or telephonic notice thereof to Borrower and Lenders as soon as practicable thereafter, and will also give prompt writtennotice to Borrower when such conditions no longer exist. If such notice is given (A) any Eurodollar Rate Loans requested to be made on the first day of such Interest Period shall be made as Prime Rate Loans, (B) any Loans that were to have beenconverted on the first day of such Interest Period to or continued as Eurodollar Rate Loans shall be converted to or continued as Prime Rate Loans and (C) each outstanding Eurodollar Rate Loan shall be converted, on the last day of the then-currentInterest Period thereof, to Prime Rate Loans. Until such notice has been withdrawn by Agent, no further Eurodollar Rate Loans shall be made or continued as such, nor shall Borrower have the right to convert Prime Rate Loans to Eurodollar Rate Loans.

 

(c) Notwithstanding any other provisionherein, if the adoption of or any change in any law, treaty, rule or regulation or final, non-appealable determination of an arbitrator or a court or other Governmental Authority or in the interpretation or application thereof occurring after thedate hereof shall make it unlawful for Agent or any Lender to make or maintain Eurodollar Rate Loans as contemplated by this Agreement, (i) Agent or such Lender shall promptly give written notice of such circumstances to Borrower and Agent (whichnotice shall be withdrawn whenever such circumstances no longer exist), (ii) the commitment of such Lender hereunder to make Eurodollar Rate Loans, continue Eurodollar Rate Loans as such and convert Prime Rate Loans to Eurodollar Rate Loans shallforthwith be canceled and, until such time as it shall no longer be unlawful for such Lender to make or maintain Eurodollar Rate Loans, such Lender shall then have a commitment only to make a Prime Rate Loan when a Eurodollar Rate Loan is requestedand (iii) such Lender’s Loans then outstanding as Eurodollar Rate Loans, if any, shall be converted automatically to Prime Rate Loans on the respective last 

 

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days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a EurodollarRate Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to Section 3.3(d) below. 

 

(d) Borrower shall indemnify Agent and each Lender and holdAgent and each Lender harmless from any loss or expense which Agent or such Lender may sustain or incur as a consequence of (i) default by Borrower in making a borrowing of, conversion into or extension of Eurodollar Rate Loans after Borrower hasgiven a notice requesting the same in accordance with the provisions of this Agreement, (ii) default by Borrower in making any prepayment of a Eurodollar Rate Loan after Borrower has given a notice thereof in accordance with the provisions of thisLoan Agreement, and (iii) the making of a prepayment of Eurodollar Rate Loans on a day which is not the last day of an Interest Period with respect thereto. With respect to Eurodollar Rate Loans, such indemnification may include an amount equal tothe excess, if any, of (A) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or extended, for the period from the date of such prepayment or of such failure to borrow, convert or extend to thelast day of the applicable Interest Period (or, in the case of a failure to borrow, convert or extend, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such EurodollarRate Loans provided for herein over (B) the amount of interest (as determined by Agent or such Lender) which would have accrued to Agent or such Lender on such amount by placing such amount on deposit for a comparable period with leading banks inthe interbank Eurodollar market. This covenant shall survive the termination or non-renewal of this Agreement and the payment of the Obligations. 

 

**SECTION 4. CONDITIONS PRECEDENT**

 

4.1 Conditions Precedent to Initial Loans and Letter of Credit Accommodations. Each of the following is a condition precedent to Agent and Lenders makingthe initial Loans and providing the initial Letter of Credit Accommodations hereunder: 

 

(a) Agent shall have received a copy of the Confirmation Order as duly entered by the Bankruptcy Court and entered on the docket of theClerk of the Bankruptcy Court in the Chapter 11 Case certified by the Clerk of the Bankruptcy Court, following due notice to such creditors and other parties-in-interest as required by the Bankruptcy Court, which order shall include such provisionswith respect to the Credit Facility as Agent may request and, providing, among other things, that Borrower shall be authorized to (i) enter into this Agreement and the other Financing Agreements, (ii) perform all of their respective obligationsunder this Agreement and the other Financing Agreements, and (iii) execute and deliver all documents, agreements and instruments necessary or appropriate to enter into and perform all obligations under this Agreement and the other FinancingAgreements and to take all other actions and execute, deliver, record and file all other such agreements, documents, instruments, financing statements, releases, applications, registration statements, reports and any changes, additions andmodifications thereto in connection with the consummation of the transactions contemplated by this Agreement and the other Financing Agreements, including, without limitation, the making of such filings or the recording of any security interests, asmay be required by this Agreement and the other Financing Agreements; 

 

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(b) Agent shall have received evidence, in form and substance satisfactory to Agent, thatprior to the date hereof or concurrently herewith, (i) the Effective Date shall have occurred, the Confirmation Order shall be valid, subsisting and continuing and a Final Order and all conditions precedent to the effectiveness of the Plan shallhave been fulfilled, or validly waived, including, without limitation, the execution, delivery and performance of all of the conditions thereof other than conditions that have been validly waived (but not including conditions consisting of theeffectiveness of this Agreement), and (ii) no motion, action or proceeding shall be pending or filed by any creditor or other party-in-interest to the Chapter 11 Case which could adversely affect the Plan, the consummation of the Plan, the businessor operations of Borrower or the transactions contemplated by the Financing Agreements, as determined by Agent in good faith; 

 

(c) Agent shall have received, in form and substance satisfactory to Agent, all releases, terminations and such other documents as Agentmay request to evidence and effectuate the termination by the Existing Lenders of their respective financing arrangements with Borrower and the termination and release by it or them, as the case may be, of any interest in and to any assets andproperties of Borrower, duly authorized, executed and delivered by it or each of them, including, but not limited to, (i) UCC termination statements for all UCC financing statements previously filed by it or any of them or their predecessors, assecured party and Borrower, as debtor; and (ii) satisfactions and discharges of any mortgages, deeds of trust or deeds to secure debt by Borrower in favor of it or any of them, in form acceptable for recording with the appropriate GovernmentalAuthority; 

 

(d) all requisite corporate actionand proceedings in connection with this Agreement and the other Financing Agreements shall be satisfactory in form and substance to Agent, and Agent shall have received all information and copies of all documents, including records of requisitecorporate action and proceedings which Agent may have requested in connection therewith, such documents where requested by Agent or its counsel to be certified by appropriate corporate officers or Governmental Authority (and including a copy of thecertificate of incorporation of Borrower certified by the Secretary of State (or equivalent Governmental Authority) which shall set forth the same complete corporate name of Borrower as is set forth herein and such document as shall set forth theorganizational identification number of Borrower, if one is issued in its jurisdiction of incorporation); 

 

(e) no material adverse change shall have occurred in the assets, business or prospects of Borrower since the date of Agent’s latestfield examination (not including for this purpose the field review referred to in clause (d) below) and no change or event shall have occurred which would impair the ability of Borrower or any Obligor to perform its obligations hereunder or underany of the other Financing Agreements to which it is a party or of Agent or any Lender to enforce the Obligations or realize upon the Collateral; 

 

(f) Agent shall have completed a field review of the Records and such other information with respect to the Collateral as Agent mayrequire to determine the amount of Loans available to Borrower (including, without limitation, current perpetual inventory records and/or roll-forwards of Accounts and Inventory through the date of closing and test counts of the Inventory in amanner satisfactory to Agent, together with such supporting documentation as may be necessary or appropriate, and other documents and information that will enable Agent to 

 

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accurately identify and verify the Collateral), the results of which in each case shall be satisfactory to Agent, not more than three (3) Business Days priorto the date hereof; 

 

(g) Agent shall havereceived, in form and substance satisfactory to Agent, all consents, waivers, acknowledgments and other agreements from third persons which Agent may deem necessary or desirable in order to permit, protect and perfect its security interests in andliens upon the Collateral or to effectuate the provisions or purposes of this Agreement and the other Financing Agreements, including, without limitation, Collateral Access Agreements by owners and lessors of leased premises of Borrower and byprocessors and warehouses at which Collateral is located; 

 

(h) the Closing Excess Availability as determined by Agent, as of the date hereof, shall be not less than Two Million Five Hundred Thousand ($2,500,000) Dollars after giving effect to the initial Loans made or to bemade and Letter of Credit Accommodations issued or to be issued in connection with the initial transactions hereunder; 

 

(i) Agent shall have received, in form and substance satisfactory to Agent, Deposit Account Control Agreements by and among Agent,Borrower, as the case and each bank where Borrower has a deposit account, in each case, duly authorized, executed and delivered by such bank and Borrower, as the case may be (or Agent shall be the bank’s customer with respect to such depositaccount as Agent may specify); 

 

(j) Agentshall have received evidence, in form and substance satisfactory to Agent, that Agent has a valid perfected first priority security interest in all of the Collateral; 

 

(k) Agent shall have received and reviewed lien and judgment search results for the jurisdiction ofincorporation of Borrower, the jurisdiction of the chief executive office of Borrower and all jurisdictions in which assets of Borrower is located, which search results shall be in form and substance satisfactory to Agent; 

 

(l) Agent shall have received, in form and substancesatisfactory to Agent, a valid and effective title insurance policy issued by a company and agent acceptable to Agent: (i) insuring the priority, amount and sufficiency of the Mortgages, (ii) insuring against matters that would be disclosed bysurveys and (iii) containing any legally available endorsements, assurances or affirmative coverage requested by Agent for protection of its interests; 

 

(m) Agent shall have received evidence of insurance and loss payee endorsements required hereunder and under the other FinancingAgreements, in form and substance satisfactory to Agent, and certificates of insurance policies and/or endorsements naming Agent as loss payee; 

 

(n) Agent shall have received, in form and substance satisfactory to Agent, the Intercreditor Agreement and any other intercreditor andsubordination agreements with any subordinated creditors; 

 

(o) Agent shall have received a written appraisal as to Inventory in form, scope and methodology acceptable to Agent and by an appraiser acceptable to Agent; provided, however, that, if such appraisal could not becompleted prior to the date hereof, Agent shall have 

 

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received evidence, in form and substance satisfactory to Agent, that the appraisal as to Inventory is in progress and could not be completed prior to thedate hereof; 

 

(p) Agent shall have received, inform and substance satisfactory to Agent, such opinion letters of counsel to Borrower with respect to the Confirmation Order, the Financing Agreements and the security interests and liens of Agent with respect to the Collateral and such othermatters as Agent may reasonably request; and 

 

(q) the other Financing Agreements and all instruments and documents hereunder and thereunder shall have been duly executed and delivered to Agent, in form and substance satisfactory to Agent. 

 

4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations.Each of the following is an additional condition precedent to the Loans and/or providing Letter of Credit Accommodations to Borrower, including the initial Loans and Letter of Credit Accommodations and any future Loans and Letter of CreditAccommodations: 

 

(a) all representations andwarranties contained herein and in the other Financing Agreements shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of the making of each suchLoan or providing each such Letter of Credit Accommodation and after giving effect thereto, except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warrantiesshall have been true and accurate on and as of such earlier date); 

 

(b) no law, regulation, order, judgment or decree of any Governmental Authority shall exist, and no action, suit, investigation, litigation or proceeding shall be pending or threatened in any court or before anyarbitrator or Governmental Authority, which (i) purports to enjoin, prohibit, restrain or otherwise affect (A) the making of the Loans or providing the Letter of Credit Accommodations, or (B) the consummation of the transactions contemplatedpursuant to the terms hereof or the other Financing Agreements or (ii) has or has a reasonable likelihood of having a Material Adverse Effect; and 

 

(c) no Default or Event of Default shall exist or have occurred and be continuing on and as of the date of the making of such Loan orproviding each such Letter of Credit Accommodation and after giving effect thereto. 

 

**SECTION 5. GRANT AND PERFECTION OF SECURITY INTEREST**

 

5.1 Grant of Security Interest. To secure payment and performance of all Obligations, Borrower hereby grants to Agent, for itself and the ratable benefit of Lenders, a continuing security interest in, a lien upon, anda right of set off against, and hereby assigns to Agent, for itself and the ratable benefit of Lenders, as security, all personal and real property and fixtures, and interests in property and fixtures, of Borrower, whether now owned or hereafteracquired or existing, and wherever located (together with all other collateral security for the Obligations at any time granted to or held or acquired by Agent or any Lender, collectively, the “Collateral”): 

 

(a) all Accounts; 

 

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(b) all general intangibles, including, without limitation, all Intellectual Property;

 

(c) all goods, including, without limitation,Inventory and Equipment; 

 

(d) all RealProperty and fixtures; 

 

(e) all chattel paper,including, without limitation, all tangible and electronic chattel paper; 

 

(f) all instruments, including, without limitation, all promissory notes; 

 

(g) all documents; 

 

(h) all deposit accounts; 

 

(i) all letters of credit, banker’s acceptances and similar instruments and including all letter-of-credit rights; 

 

(j) all supporting obligations and all present and futureliens, security interests, rights, remedies, title and interest in, to and in respect of Receivables and other Collateral, including (i) rights and remedies under or relating to guaranties, contracts of suretyship, letters of credit and credit andother insurance related to the Collateral, (ii) rights of stoppage in transit, replevin, repossession, reclamation and other rights and remedies of an unpaid vendor, lienor or secured party, (iii) goods described in invoices, documents, contracts orinstruments with respect to, or otherwise representing or evidencing, Receivables or other Collateral, including returned, repossessed and reclaimed goods, and (iv) deposits by and property of account debtors or other persons securing theobligations of account debtors; 

 

(k) all (i)investment property (including securities, whether certificated or uncertificated, securities accounts, security entitlements, commodity contracts or commodity accounts) and (ii) monies, credit balances, deposits and other property of Borrower nowor hereafter held or received by or in transit to Agent, any Lender or its Affiliates or at any other depository or other institution from or for the account of Borrower, whether for safekeeping, pledge, custody, transmission, collection orotherwise; 

 

(l) all commercial tort claims,including, without limitation, those identified in the Information Certificate; 

 

(m) to the extent not otherwise described above, all Receivables; 

 

(n) all Records; and 

 

(o) all products and proceeds of the foregoing, in any form, including insurance proceeds and all claimsagainst third parties for loss or damage to or destruction of or other involuntary conversion of any kind or nature of any or all of the other Collateral. 

 

**5.2 Perfection of Security Interests.**

 

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(a) Borrower irrevocably and unconditionally authorizes Agent (or its agent) to file atany time and from time to time such financing statements with respect to the Collateral naming Agent or its designee as the secured party and Borrower as debtor, as Agent may require, and including any other information with respect to Borrower orotherwise required by part 5 of Article 9 of the Uniform Commercial Code of such jurisdiction as Agent may determine, together with any amendment and continuations with respect thereto, which authorization shall apply to all financing statementsfiled on, prior to or after the date hereof. Borrower hereby ratifies and approves all financing statements naming Agent or its designee as secured party and Borrower, as debtor with respect to the Collateral (and any amendments with respect to suchfinancing statements) filed by or on behalf of Agent prior to the date hereof and ratifies and confirms the authorization of Agent to file such financing statements (and amendments, if any). Borrower hereby authorizes Agent to adopt on behalf ofBorrower any symbol required for authenticating any electronic filing. In the event that the description of the collateral in any financing statement naming Agent or its designee as the secured party and Borrower as debtor includes assets andproperties of Borrower that do not at any time constitute Collateral, whether hereunder, under any of the other Financing Agreements or otherwise, the filing of such financing statement shall nonetheless be deemed authorized by such Borrower to theextent of the Collateral included in such description and it shall not render the financing statement ineffective as to any of the Collateral or otherwise affect the financing statement as it applies to any of the Collateral. In no event shallBorrower at any time file, or permit or cause to be filed, any correction statement or termination statement with respect to any financing statement (or amendment or continuation with respect thereto) naming Agent or its designee as secured partyand Borrower as debtor. 

 

(b) Borrower does nothave any chattel paper (whether tangible or electronic) or instruments as of the date hereof, except as set forth in the Information Certificate. In the event that Borrower shall be entitled to or shall receive any chattel paper or instrument afterthe date hereof, Borrower shall promptly notify Agent thereof in writing. Promptly upon the receipt thereof by or on behalf of Borrower (including by any agent or representative), Borrower shall deliver, or cause to be delivered to Agent, alltangible chattel paper and instruments that such Borrower has or may at any time acquire, accompanied by such instruments of transfer or assignment duly executed in blank as Agent may from time to time specify, in each case except as Agent mayotherwise agree. At Agent’s option, Borrower shall, or Agent may at any time on behalf of Borrower, cause the original of any such instrument or chattel paper to be conspicuously marked in a form and manner acceptable to Agent with thefollowing legend referring to chattel paper or instruments as applicable: “This [chattel paper][instrument] is subject to the security interest of Congress Financial Corporation and any sale, transfer, assignment or encumbrance of this [chattelpaper][instrument] violates the rights of such secured party.” 

 

(c) In the event that Borrower shall at any time hold or acquire an interest in any electronic chattel paper or any “transferable record” (as such term is defined in Section 201 of the Federal ElectronicSignatures in Global and National Commerce Act or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction), Borrower shall promptly notify Agent thereof in writing. Promptly upon Agent’s request,Borrower shall take, or cause to be taken, such actions as Agent may request to give Agent control of such electronic chattel paper under Section 9-105 of the UCC and control of such transferable record under 

 

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Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or, as the case may be, Section 16 of the Uniform ElectronicTransactions Act, as in effect in such jurisdiction. 

 

(d) Borrower does not have any deposit accounts as of the date hereof, except as set forth in the Information Certificate. Borrower shall not, directly or indirectly, after the date hereof open, establish or maintain any deposit accountunless each of the following conditions is satisfied: (i) Agent shall have received not less than five (5) Business Days prior written notice of the intention of Borrower to open or establish such account which notice shall specify in reasonabledetail and specificity acceptable to Agent the name of the account, the owner of the account, the name and address of the bank at which such account is to be opened or established, the individual at such bank with whom Borrower is dealing and thepurpose of the account, (ii) the bank where such account is opened or maintained shall be acceptable to Agent, and (iii) on or before the opening of such deposit account, Borrower or shall as Agent may specify either (A) deliver to Agent a DepositAccount Control Agreement with respect to such deposit account duly authorized, executed and delivered by Borrower and the bank at which such deposit account is opened and maintained or (B) arrange for Agent to become the customer of the bank withrespect to the deposit account on terms and conditions acceptable to Agent. The terms of this subsection (d) shall not apply to deposit accounts specifically and exclusively used for payroll, payroll taxes and other employee wage and benefitpayments to or for the benefit of Borrower’s salaried employees. 

 

(e) Borrower does not own or hold, directly or indirectly, beneficially or as record owner or both, any investment property, as of the date hereof, or have any investment account, securities account, commodity accountor other similar account with any bank or other financial institution or other securities intermediary or commodity intermediary as of the date hereof, in each case except as set forth in the Information Certificate. 

 

(i) In the event that Borrower shall be entitled to or shallat any time after the date hereof hold or acquire any certificated securities, Borrower shall promptly endorse, assign and deliver the same to Agent, accompanied by such instruments of transfer or assignment duly executed in blank as Agent may fromtime to time specify. If any securities, now or hereafter acquired by Borrower is uncertificated and are issued to Borrower or its nominee directly by the issuer thereof, Borrower shall immediately notify Agent thereof and shall as Agent mayspecify, either (A) cause the issuer to agree to comply with instructions from Agent as to such securities, without further consent of Borrower or such nominee, or (B) arrange for Agent to become the registered owner of the securities. 

 

(ii) Borrower shall not, directly or indirectly, afterthe date hereof open, establish or maintain any investment account, securities account, commodity account or any other similar account (other than a deposit account) with any securities intermediary or commodity intermediary unless each of thefollowing conditions is satisfied: (A) Agent shall have received not less than five (5) Business Days prior written notice of the intention of Borrower to open or establish such account which notice shall specify in reasonable detail and specificityacceptable to Agent the name of the account, the owner of the account, the name and address of the securities intermediary or commodity intermediary at which such account is to be opened or established, the individual at such intermediary with whomBorrower is dealing and 

 

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the purpose of the account, (B) the securities intermediary or commodity intermediary (as the case may be) where such account is opened or maintained shallbe acceptable to Agent, and (C) on or before the opening of such investment account, securities account or other similar account with a securities intermediary or commodity intermediary, Borrower shall as Agent may specify either (1) execute anddeliver, and cause to be executed and delivered to Agent, an Investment Property Control Agreement with respect thereto duly authorized, executed and delivered by Borrower and such securities intermediary or commodity intermediary or (2) arrange forAgent to become the entitlement holder with respect to such investment property on terms and conditions acceptable to Agent. 

 

(f) Borrower is not the beneficiary or otherwise entitled to any right to payment under any letter of credit, banker’s acceptance orsimilar instrument as of the date hereof, except as set forth in the Information Certificate. In the event that Borrower shall be entitled to or shall receive any right to payment under any letter of credit, banker’s acceptance or any similarinstrument, whether as beneficiary thereof or otherwise after the date hereof, Borrower shall promptly notify Agent thereof in writing. Borrower shall immediately, as Agent may specify, either (i) deliver, or cause to be delivered to Agent, withrespect to any such letter of credit, banker’s acceptance or similar instrument, the written agreement of the issuer and any other nominated person obligated to make any payment in respect thereof (including any confirming or negotiating bank),in form and substance satisfactory to Agent, consenting to the assignment of the proceeds of the letter of credit to Agent by Borrower and agreeing to make all payments thereon directly to Agent or as Agent may otherwise direct or (ii) cause Agentto become, at Borrower’s expense, the transferee beneficiary of the letter of credit, banker’s acceptance or similar instrument (as the case may be). 

 

(g) Borrower does not have any commercial tort claims as of the date hereof, except as set forth in the Information Certificate. In theevent that Borrower shall at any time after the date hereof have any commercial tort claims, Borrower shall promptly notify Agent thereof in writing, which notice shall (i) set forth in reasonable detail the basis for and nature of such commercialtort claim and (ii) include the express grant by Borrower to Agent of a security interest in such commercial tort claim (and the proceeds thereof). In the event that such notice does not include such grant of a security interest, the sending thereofby Borrower to Agent shall be deemed to constitute such grant to Agent. Upon the sending of such notice, any commercial tort claim described therein shall constitute part of the Collateral and shall be deemed included therein. Without limiting theauthorization of Agent provided in Section 5.2(a) hereof or otherwise arising by the execution by Borrower of this Agreement or any of the other Financing Agreements, Agent is hereby irrevocably authorized from time to time and at any time to filesuch financing statements naming Agent or its designee as secured party and Borrower as debtor, or any amendments to any financing statements, covering any such commercial tort claim as Collateral. In addition, Borrower shall promptly uponAgent’s request, execute and deliver, or cause to be executed and delivered, to Agent such other agreements, documents and instruments as Agent may require in connection with such commercial tort claim. 

 

(h) Borrower does not have any goods, documents of title orother Collateral in the custody, control or possession of a third party as of the date hereof, except as set forth in the Information Certificate and except for goods located in the United States in transit to a location of Borrower permitted hereinin the ordinary course of business of Borrower in the 

 

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possession of the carrier transporting such goods. In the event that any goods, documents of title or other Collateral are at any time after the date hereofin the custody, control or possession of any other person not referred to in the Information Certificate or such carriers, Borrower shall promptly notify Agent thereof in writing. Promptly upon Agent’s request, Borrower shall deliver to Agent aCollateral Access Agreement duly authorized, executed and delivered by such person and Borrower. 

 

(i) Borrower shall take any other actions reasonably requested by Agent from time to time to cause the attachment, perfection and firstpriority of, and the ability of Agent to enforce, the security interest of Agent in any and all of the Collateral, including, without limitation, (i) executing, delivering and, where appropriate, filing financing statements and amendments relatingthereto under the UCC or other applicable law, to the extent, if any, that Borrower’s signature thereon is required therefor, (ii) causing Agent’s name to be noted as secured party on any certificate of title for a titled good if suchnotation is a condition to attachment, perfection or priority of, or ability of Agent to enforce, the security interest of Agent in such Collateral, (iii) complying with any provision of any statute, regulation or treaty of the United States as toany Collateral if compliance with such provision is a condition to attachment, perfection or priority of, or ability of Agent to enforce, the security interest of Agent in such Collateral, (iv) obtaining the consents and approvals of anyGovernmental Authority or third party, including, without limitation, any consent of any licensor, lessor or other person obligated on Collateral, and taking all actions required by any earlier versions of the UCC or by other law, as applicable inany relevant jurisdiction. 

 

**SECTION 6. COLLECTION AND ADMINISTRATION**

 

6.1 Borrower Loan Account. Agent shall maintain one ormore loan account(s) on its books in which shall be recorded (a) all Loans, Letter of Credit Accommodations and other Obligations and the Collateral, (b) all payments made by or on behalf of Borrower and (c) all other appropriate debits and creditsas provided in this Agreement, including fees, charges, costs, expenses and interest. All entries in the loan account(s) shall be made in accordance with Agent’s customary practices as in effect from time to time. 

 

6.2 Statements. Agent shall render to Borrower each month a statement settingforth the balance in the Borrower’s loan account(s) maintained by Agent for Borrower pursuant to the provisions of this Agreement, including principal, interest, fees, costs and expenses. Each such statement shall be subject to subsequentadjustment by Agent but shall, absent manifest errors or omissions, be considered correct and deemed accepted by Borrower and conclusively binding upon Borrower as an account stated except to the extent that Agent receives a written notice fromBorrower of any specific exceptions of Borrower thereto within thirty (30) days after the date such statement has been received by Borrower. Until such time as Agent shall have rendered to Borrower a written statement as provided above, the balancein Borrower’s loan account(s) shall be presumptive evidence of the amounts due and owing to Agent and Lenders by Borrower. 

 

6.3 Collection of Accounts. 

 

(a) Borrower shall establish and maintain, at their expense, blocked accounts or lockboxes and related blocked accounts (in either case,“Blocked Accounts”), as Agent may 

 

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specify, with such banks as are acceptable to Agent into which Borrower shall promptly deposit and direct their respective account debtors to directly remitall payments on Receivables and all payments constituting proceeds of Inventory or other Collateral in the identical form in which such payments are made, whether by cash, check or other manner. Borrower shall deliver, or cause to be delivered toAgent a Deposit Account Control Agreement duly authorized, executed and delivered by each bank where a Blocked Account is maintained as provided in Section 5.2 hereof or at any time and from time to time Agent may become the bank’s customerwith respect to any of the Blocked Accounts and promptly upon Agent’s request, Borrower shall execute and deliver such agreements and documents as Agent may require in connection therewith. Borrower agrees that all payments made to such BlockedAccounts or other funds received and collected by Agent or any Lender, whether in respect of the Receivables, as proceeds of Inventory or other Collateral or otherwise shall be treated as payments to Agent and Lenders in respect of the Obligationsand therefore shall constitute the property of Agent and Lenders to the extent of the then outstanding Obligations. 

 

(b) For purposes of calculating the amount of the Loans available to Borrower, such payments will be applied (conditional upon finalcollection) to the Obligations on the Business Day of receipt by Agent of immediately available funds in the Agent Payment Account provided such payments and notice thereof are received in accordance with Agent’s usual and customary practicesas in effect from time to time and within sufficient time to credit Borrower’s loan account on such day, and if not, then on the next Business Day. For the purposes of calculating interest on the Obligations, such payments or other fundsreceived will be applied (conditional upon final collection) to the Obligations one (1) Business Day following the date of receipt of immediately available funds by Agent in the Agent Payment Account provided such payments or other funds and noticethereof are received in accordance with Agent’s usual and customary practices as in effect from time to time and within sufficient time to credit Borrower’s loan account on such day, and if not, then on the next Business Day. 

 

(c) Borrower and its shareholders, directors, employees,agents, Subsidiaries or other Affiliates shall, acting as trustee for Agent, receive, as the property of Agent, any monies, checks, notes, drafts or any other payment relating to and/or proceeds of Accounts or other Collateral which come into theirpossession or under their control and immediately upon receipt thereof, shall deposit or cause the same to be deposited in the Blocked Accounts, or remit the same or cause the same to be remitted, in kind, to Agent. In no event shall the same becommingled with Borrower’s own funds. Borrower agrees to reimburse Agent on demand for any amounts owed or paid to any bank at which a Blocked Account or any other deposit account is established or any other bank or person involved in thetransfer of funds to or from the Blocked Accounts arising out of Agent’s payments to or indemnification of such bank or person. The obligations of Borrower to reimburse Agent for such amounts pursuant to this Section 6.3 shall survive thetermination of this Agreement. 

 

6.4 Payments. 

 

(a) All Obligations shall be payable to the Agent PaymentAccount as provided in Section 6.3 or such other place as Agent may designate from time to time. Agent shall apply payments received or collected from Borrower or any Obligor or for the account of Borrower (including the monetary proceeds ofcollections or of realization upon any Collateral) 

 

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as follows: first, to pay any fees, indemnities or expense reimbursements then due to Agent and Lenders from Borrower; second, to pay interest due in respectof any Loans (and including any Special Agent Advances); third, to pay or prepay principal in respect of Special Agent Advances; fourth, principal due in respect of the Loans; fifth, to pay or prepay any other Obligations whether or not then due, insuch order and manner as Agent determines. Notwithstanding anything to the contrary contained in this Agreement, (i) unless so directed by Borrower, or unless a Default or an Event of Default shall exist or have occurred and be continuing, Agentshall not apply any payments which it receives to any Eurodollar Rate Loans, except (A) on the expiration date of the Interest Period applicable to any such Eurodollar Rate Loans or (B) in the event that there are no outstanding Prime Rate Loans and(ii) to the extent Borrower uses any proceeds of the Loans or Letter of Credit Accommodations to acquire rights in or the use of any Collateral or to repay any Indebtedness used to acquire rights in or the use of any Collateral, payments in respectof the Obligations shall be deemed applied first to the Obligations arising from Loans and Letter of Credit Accommodations that were not used for such purposes and second to the Obligations arising from Loans and Letter of Credit Accommodations theproceeds of which were used to acquire rights in or the use of any Collateral in the chronological order in which Borrower acquired such rights in or the use of such Collateral. 

 

(b) At Agent’s option, all principal, interest, fees, costs, expenses and other charges provided for inthis Agreement or the other Financing Agreements may be charged directly to the loan account(s) of Borrower maintained by Agent. Borrower shall make all payments to Agent and Lenders on the Obligations free and clear of, and without deduction orwithholding for or on account of, any setoff, counterclaim, defense, duties, taxes, levies, imposts, fees, deductions, withholding, restrictions or conditions of any kind. If after receipt of any payment of, or proceeds of Collateral applied to thepayment of, any of the Obligations, Agent or any Lender is required to surrender or return such payment or proceeds to any Person for any reason, then the Obligations intended to be satisfied by such payment or proceeds shall be reinstated andcontinue and this Agreement shall continue in full force and effect as if such payment or proceeds had not been received by Agent or such Lender. Borrower shall be liable to pay to Agent, and does hereby indemnify and hold Agent and Lenders harmlessfor the amount of any payments or proceeds surrendered or returned. This Section 6.4(b) shall remain effective notwithstanding any contrary action which may be taken by Agent or any Lender in reliance upon such payment or proceeds. This Section 6.4shall survive the payment of the Obligations and the termination of this Agreement. 

 

6.5 Authorization to Make Loans. Agent and Lenders are authorized to make the Loans and provide the Letter of Credit Accommodations based upon telephonic or other instructions received from anyone purporting to be anofficer of Borrower or other authorized person or, at the discretion of Agent, if such Loans are necessary to satisfy any Obligations. All requests for Loans or Letter of Credit Accommodations hereunder shall specify the date on which the requestedadvance is to be made or Letter of Credit Accommodations established (which day shall be a Business Day) and the amount of the requested Loan. Requests received after 11:00 a.m. Miami, Florida time on any day shall be deemed to have been made as ofthe opening of business on the immediately following Business Day. All Loans and Letter of Credit Accommodations under this Agreement shall be conclusively presumed to have been made to, and at the request of and for the benefit of, Borrower or whendeposited to the credit of Borrower 

 

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or otherwise disbursed or established in accordance with the instructions of Borrower or in accordance with the terms and conditions of this Agreement.

 

6.6 Use of Proceeds. Borrower shall use the initial proceedsof the Loans provided by Agent to Borrower hereunder only for: (a) payments to each of the persons listed in the disbursement direction letter furnished by Borrower to Agent on or about the date hereof and (b) costs, expenses and fees in connectionwith the preparation, negotiation, execution and delivery of this Agreement and the other Financing Agreements. All other Loans made or Letter of Credit Accommodations provided to or for the benefit of Borrower pursuant to the provisions hereofshall be used by Borrower only for general operating, working capital and other proper corporate purposes of Borrower not otherwise prohibited by the terms hereof and in satisfying obligations under the Plan and Confirmation Order. None of theproceeds will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security or for the purposes of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or forany other purpose which might cause any of the Loans to be considered a “purpose credit” within the meaning of Regulation U of the Board of Governors of the Federal Reserve System, as amended. 

 

6.7 Pro Rata Treatment. Except to the extent otherwise provided in thisAgreement: (a) the making and conversion of Loans shall be made among the Lenders based on their respective Pro Rata Shares as to the Loans and (b) each payment on account of any Obligations to or for the account of one or more of Lenders in respectof any Obligations due on a particular day shall be allocated among the Lenders entitled to such payments based on their respective Pro Rata Shares and shall be distributed accordingly. 

 

6.8 Sharing of Payments, Etc. 

 

(a) Borrower agrees that, in addition to (and without limitation of) any right of setoff, banker’s lien or counterclaim Agent or anyLender may otherwise have, each Lender shall be entitled, at its option (but subject, as among Agent and Lenders, to the provisions of Section 12.3(b) hereof), to offset balances held by it for the account of Borrower at any of its offices, indollars or in any other currency, against any principal of or interest on any Loans owed to such Lender or any other amount payable to such Lender hereunder, that is not paid when due (regardless of whether such balances are then due to Borrower),in which case it shall promptly notify Borrower and Agent thereof; provided, that, such Lender’s failure to give such notice shall not affect the validity thereof. 

 

(b) If any Lender (including Agent) shall obtain from Borrower payment of any principal of or interest onany Loan owing to it or payment of any other amount under this Agreement or any of the other Financing Agreements through the exercise of any right of setoff, banker’s lien or counterclaim or similar right or otherwise (other than from Agent asprovided herein), and, as a result of such payment, such Lender shall have received more than its Pro Rata Share of the principal of the Loans or more than its share of such other amounts then due hereunder or thereunder by Borrower to such Lenderthan the percentage thereof received by any other Lender, it shall promptly pay to Agent, for the benefit of Lenders, the amount of such excess and simultaneously purchase from such other Lenders a participation in the Loans or such other amounts,respectively, owing to such other Lenders (or such interest due thereon, as the 

 

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case may be) in such amounts, and make such other adjustments from time to time as shall be equitable, to the end that all Lenders shall share the benefit ofsuch excess payment (net of any expenses that may be incurred by such Lender in obtaining or preserving such excess payment) in accordance with their respective Pro Rata Shares or as otherwise agreed by Lenders. To such end all Lenders shall makeappropriate adjustments among themselves (by the resale of participation sold or otherwise) if such payment is rescinded or must otherwise be restored. 

 

(c) Borrower agrees that any Lender purchasing a participation (or direct interest) as provided in this Section may exercise, in a manner consistent withthis Section, all rights of setoff, banker’s lien, counterclaim or similar rights with respect to such participation as fully as if such Lender were a direct holder of Loans or other amounts (as the case may be) owing to such Lender in theamount of such participation. 

 

(d) Nothing contained hereinshall require any Lender to exercise any right of setoff, banker’s lien, counterclaims or similar rights or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any otherIndebtedness or obligation of Borrower. If, under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section applies, such Lender shall, to the extent practicable, assignsuch rights to Agent for the benefit of Lenders and, in any event, exercise its rights in respect of such secured claim in a manner consistent with the rights of Lenders entitled under this Section to share in the benefits of any recovery on suchsecured claim. 

 

6.9 Settlement Procedures. 

 

(a) In order to administer the Credit Facility in an efficient manner and tominimize the transfer of funds between Agent and Lenders, Agent may, at its option, subject to the terms of this Section, make available, on behalf of Lenders, the full amount of the Loans requested or charged to Borrower’s loan account(s) orotherwise to be advanced by Lenders pursuant to the terms hereof, without requirement of prior notice to Lenders of the proposed Loans. 

 

(b) With respect to all Loans made by Agent on behalf of Lenders as provided in this Section, the amount of each Lender’s Pro Rata Share of theoutstanding Loans shall be computed weekly, and shall be adjusted upward or downward on the basis of the amount of the outstanding Loans as of 5:00 p.m. Miami, Florida time on the Business Day immediately preceding the date of each settlementcomputation; provided, that, Agent retains the absolute right at any time or from time to time to make the above described adjustments at intervals more frequent than weekly, but in no event more than twice in any week. Agent shall deliver to eachof the Lenders after the end of each week, or at such lesser period or periods as Agent shall determine, a summary statement of the amount of outstanding Loans for such period (such week or lesser period or periods being hereinafter referred to as a“Settlement Period”). If the summary statement is sent by Agent and received by a Lender prior to 12:00 p.m. Miami, Florida time, then such Lender shall make the settlement transfer described in this Section by no later than 3:00 p.m.Miami, Florida time on the same Business Day and if received by a Lender after 12:00 p.m. Miami, Florida time, then such Lender shall make the settlement transfer by not later than 3:00 p.m. Miami, Florida time on the next Business Day following thedate of receipt. If, as 

 

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of the end of any Settlement Period, the amount of a Lender’s Pro Rata Share of the outstanding Loans is more than such Lender’s Pro Rata Share ofthe outstanding Loans as of the end of the previous Settlement Period, then such Lender shall forthwith (but in no event later than the time set forth in the preceding sentence) transfer to Agent by wire transfer in immediately available funds theamount of the increase. Alternatively, if the amount of a Lender’s Pro Rata Share of the outstanding Loans in any Settlement Period is less than the amount of such Lender’s Pro Rata Share of the outstanding Loans for the previousSettlement Period, Agent shall forthwith transfer to such Lender by wire transfer in immediately available funds the amount of the decrease. The obligation of each of the Lenders to transfer such funds and effect such settlement shall be irrevocableand unconditional and without recourse to or warranty by Agent. Agent and each Lender agrees to mark its books and records at the end of each Settlement Period to show at all times the dollar amount of its Pro Rata Share of the outstanding Loans andLetter of Credit Accommodations. Each Lender shall only be entitled to receive interest on its Pro Rata Share of the Loans to the extent such Loans have been funded by such Lender. Because the Agent on behalf of Lenders may be advancing and/or maybe repaid Loans prior to the time when Lenders will actually advance and/or be repaid such Loans, interest with respect to Loans shall be allocated by Agent in accordance with the amount of Loans actually advanced by and repaid to each Lender andthe Agent and shall accrue from and including the date such Loans are so advanced to but excluding the date such Loans are either repaid by Borrower or actually settled with the applicable Lender as described in this Section. 

 

(c) To the extent that Agent has made any such amounts available and thesettlement described above shall not yet have occurred, upon repayment of any Loans by Borrower, Agent may apply such amounts repaid directly to any amounts made available by Agent pursuant to this Section. In lieu of weekly or more frequentsettlements, Agent may, at its option, at any time require each Lender to provide Agent with immediately available funds representing its Pro Rata Share of each Loan, prior to Agent’s disbursement of such Loan to Borrower. In such event, allLoans under this Agreement shall be made by the Lenders simultaneously and proportionately to their Pro Rata Shares. No Lender shall be responsible for any default by any other Lender in the other Lender’s obligation to make a Loan requestedhereunder nor shall the Commitment of any Lender be increased or decreased as a result of the default by any other Lender in the other Lender’s obligation to make a Loan hereunder. 

 

(d) If Agent is not funding a particular Loan to Borrower pursuant to this Section on any day, Agent may assume that eachLender will make available to Agent such Lender’s Pro Rata Share of the Loan requested or otherwise made on such day and Agent may, in its discretion, but shall not be obligated to, cause a corresponding amount to be made available to or forthe benefit of Borrower on such day. If Agent makes such corresponding amount available to Borrower and such corresponding amount is not in fact made available to Agent by such Lender, Agent shall be entitled to recover such corresponding amount ondemand from such Lender together with interest thereon for each day from the date such payment was due until the date such amount is paid to Agent at the Federal Funds Rate for each day during such period (as published by the Federal Reserve Bank ofNew York or at Agent’s option based on the arithmetic mean determined by Agent of the rates for the last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of the three leading brokers ofFederal funds transactions in New York City selected by Agent) and if such amounts are not paid within three (3) days of Agent’s demand, at the highest Interest Rate provided for in 

 

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Section 3.1 hereof applicable to Prime Rate Loans. During the period in which such Lender has not paid such corresponding amount to Agent, notwithstandinganything to the contrary contained in this Agreement or any of the other Financing Agreements, the amount so advanced by Agent to or for the benefit of Borrower shall, for all purposes hereof, be a Loan made by Agent for its own account. Upon anysuch failure by a Lender to pay Agent, Agent shall promptly thereafter notify Borrower of such failure and Borrower shall pay such corresponding amount to Agent for its own account within five (5) Business Days of Borrower’s receipt of suchnotice. A Lender who fails to pay Agent its Pro Rata Share of any Loans made available by the Agent on such Lender’s behalf, or any Lender who fails to pay any other amount owing by it to Agent, is a “Defaulting Lender”. Agent shallnot be obligated to transfer to a Defaulting Lender any payments received by Agent for the Defaulting Lender’s benefit, nor shall a Defaulting Lender be entitled to the sharing of any payments hereunder (including any principal, interest orfees). Amounts payable to a Defaulting Lender shall instead be paid to or retained by Agent. Agent may hold and, in its discretion, relend to Borrower the amount of all such payments received or retained by it for the account of such DefaultingLender. For purposes of voting or consenting to matters with respect to this Agreement and the other Financing Agreements and determining Pro Rata Shares, such Defaulting Lender shall be deemed not to be a “Lender” and such Lender’sCommitment shall be deemed to be zero (0). This Section shall remain effective with respect to a Defaulting Lender until such default is cured. The operation of this Section shall not be construed to increase or otherwise affect the Commitment ofany Lender, or relieve or excuse the performance by Borrower or any Obligor of their duties and obligations hereunder. 

 

(e) Nothing in this Section or elsewhere in this Agreement or the other Financing Agreements shall be deemed to require Agent to advance funds on behalfof any Lender or to relieve any Lender from its obligation to fulfill its Commitment hereunder or to prejudice any rights that Borrower may have against any Lender as a result of any default by any Lender hereunder in fulfilling its Commitment.

 

6.10 Obligations Several; Independent Nature of Lenders’Rights. The obligation of each Lender hereunder is several, and no Lender shall be responsible for the obligation or commitment of any other Lender hereunder. Nothing contained in this Agreement or any of the other Financing Agreements and no actiontaken by the Lenders pursuant hereto or thereto shall be deemed to constitute the Lenders to be a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time hereunder to each Lender shall be a separateand independent debt, and subject to Section 12.3 hereof, each Lender shall be entitled to protect and enforce its rights arising out of this Agreement and it shall not be necessary for any other Lender to be joined as an additional party in anyproceeding for such purpose. 

 

**SECTION 7. COLLATERAL REPORTING ANDCOVENANTS**

 

7.1 Collateral Reporting. 

 

(a) Borrower shall provide Agent with the following documents in a formsatisfactory to Agent: 

 

(i) on a weekly basis(or more frequently as Agent may request), schedules of sales made, credits issued and cash received; 

 

 

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(ii) as soon as possible after the end of each month (but in any event within ten (10)Business Days after the end thereof), on a monthly basis or more frequently as Agent may request, (A) perpetual inventory reports, (B) inventory reports by location and category (and including the amounts of Inventory and the value thereof at anyleased locations and at premises of warehouses, processors or other third parties), (C) reports setting forth Inventory on hand in excess of schedule production or with no demand and Inventory on hand greater than one hundred eighty (180) days fromthe date of purchase; (D) agings of accounts receivable (together with a reconciliation to the previous month’s aging and general ledger) and (E) agings of accounts payable (and including information indicating the amounts owing to owners andlessors of leased premises, warehouses, processors and other third parties from time to time in possession of any Collateral), provided, that, upon the occurrence of a Default or an Event of Default or if at any time Excess Availability is less thanThree Million ($3,000,000) Dollars, such inventory reporting shall be required on a weekly basis (or more frequently as Agent may request); 

 

(iii) upon Agent’s request, (A) copies of customer statements and credit memos, remittance advices and reports, and copies of depositslips and bank statements, (B) copies of shipping and delivery documents, and (C) copies of purchase orders, invoices and delivery documents for Inventory and Equipment acquired by Borrower; 

 

(iv) such other reports as to the Collateral as Agent shallrequest from time to time. 

 

(b) If Borrower’s records orreports of the Collateral are prepared or maintained by an accounting service, contractor, shipper or other agent, Borrower hereby irrevocably authorizes such service, contractor, shipper or agent to deliver such records, reports, and relateddocuments to Agent and to follow Agent’s instructions with respect to further services at any time that an Event of Default exists or has occurred and is continuing. 

 

7.2 Accounts Covenants. 

 

(a) Borrower shall notify Agent promptly of: (i) any material delay in Borrower’s performance of any of its material obligations to any accountdebtor or the assertion of any material claims, offsets, defenses or counterclaims by any account debtor, or any material disputes with account debtors, or any settlement, adjustment or compromise thereof, (ii) all material adverse information knownto Borrower relating to the financial condition of any account debtor and (iii) any event or circumstance which, to the best of Borrower’s knowledge, would cause Agent to consider any then existing Accounts as no longer constituting EligibleAccounts. No credit, discount, allowance or extension or agreement for any of the foregoing shall be granted to any account debtor without Agent’s consent, except in the ordinary course of Borrower’s business in accordance with practicesand policies previously disclosed in writing to Agent and except as set forth in the schedules delivered to Agent pursuant to Section 7.1(a) above. So long as no Event of Default exists or has occurred and is continuing, Borrower shall, in theordinary course of its business, settle, adjust or compromise to settle, adjust or compromise any claim, offset, counterclaim or dispute with any account debtor. At any time that an Event of Default exists or has occurred and is continuing, Agentshall, at its option, have the exclusive 

 

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right to settle, adjust or compromise any claim, offset, counterclaim or dispute with account debtors or grant any credits, discounts or allowances.

 

(b) With respect to each Account: (i) the amounts shown on anyinvoice delivered to Agent or schedule thereof delivered to Agent shall be true and complete, (ii) no payments shall be made thereon except payments immediately delivered to Agent pursuant to the terms of this Agreement, (iii) no credit, discount,allowance or extension or agreement for any of the foregoing shall be granted to any account debtor except as reported to Agent in accordance with this Agreement and except for credits, discounts, allowances or extensions made or given in theordinary course of Borrower’s business in accordance with practices and policies previously disclosed to Agent, (iv) there shall be no setoffs, deductions, contras, defenses, counterclaims or disputes existing or asserted with respect theretoexcept as reported to Agent in accordance with the terms of this Agreement, (v) none of the transactions giving rise thereto will violate any applicable foreign, Federal, State or local laws or regulations, all documentation relating thereto will belegally sufficient under such laws and regulations and all such documentation will be legally enforceable in accordance with its terms. 

 

(c) Agent shall have the right at any time or times, in Agent’s name or in the name of a nominee of Agent, to verify the validity, amount or anyother matter relating to any Receivables or other Collateral, by mail, telephone, facsimile transmission or otherwise. 

 

7.3 Inventory Covenants. With respect to the Inventory: (a) Borrower shall at all times maintain inventory records reasonably satisfactory to Agent,keeping correct and accurate records itemizing and describing the kind, type, quality and quantity of Inventory, Borrower’s cost therefor and daily withdrawals therefrom and additions thereto; (b) Borrower shall conduct a physical count of theInventory either through periodic cycle counts or otherwise at least once each year but at any time or times as Agent may request on or after an Event of Default, and promptly following such physical inventory (whether pursuant to periodic cyclecounts or otherwise) shall supply Agent with a report in the form and with such specificity as may be satisfactory to Agent concerning such physical count; (c) Borrower shall not remove any Inventory from the locations set forth or permitted herein,without the prior written consent of Agent, except for sales of Inventory in the ordinary course of its business and except to move Inventory directly from one location set forth or permitted herein to another such location and except for Inventoryshipped from the manufacturer thereof to Borrower which is in transit to the locations set forth or permitted herein; (d) upon Agent’s request, Borrower shall, at its expense, no more than two (2) times in any twelve (12) month period, but atany time or times as Agent may request on or after an Event of Default, or at any time, at Agent’s request if Excess Availability is less than Three Million (3,000,000) Dollars, provided, however, that Excess Availability will notbe tested for this purpose prior to the date which is six (6) months from the date hereof, deliver or cause to be delivered to Agent written appraisals as to the Inventory in form, scope and methodology acceptable to Agent and by an appraiseracceptable to Agent, addressed to Agent and Lenders and upon which Agent and Lenders are expressly permitted to rely; (e) Borrower shall produce, use, store and maintain the Inventory with all reasonable care and caution and in accordance withapplicable standards of any insurance and in conformity with applicable laws (including the requirements of the Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations and orders related thereto); (f) none of the Inventory orother Collateral constitutes farm products or the proceeds thereof; (g) Borrower assumes all 

 

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responsibility and liability arising from or relating to the production, use, sale or other disposition of the Inventory; (h) Borrower shall not sellInventory to any customer on approval, or any other basis which entitles the customer to return or may obligate Borrower to repurchase such Inventory; (i) Borrower shall keep the Inventory in good and marketable condition; and (j) Borrower shallnot, without prior written notice to Agent or the specific identification of such Inventory in a report with respect thereto provided by Borrower to Agent pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on consignment or approval.In addition to the foregoing, in the event that the Borrower, at any time, has Inventory on consignment having a value in excess of One Million ($1,000,000) Dollars in the aggregate, Borrower, at the request of Agent, shall obtain consignee waivers,which shall be in form and substance satisfactory to Agent, from any consignee in possession or control of Inventory having a value in excess of Three Hundred Thousand ($300,000) Dollars. 

 

7.4 Equipment and Real Property Covenants. With respect to the Equipment and Real Property: (a) at any time or times asAgent may request on or after an Event of Default, deliver or cause to be delivered to Agent, at Borrower’s sole cost and expense, written appraisals as to the Equipment and/or the Real Property in form, scope and methodology acceptable toAgent and by an appraiser acceptable to Agent, addressed to Agent and upon which Agent is expressly permitted to rely; (b) Borrower shall keep the Equipment in good order, repair, running and marketable condition (ordinary wear and tear excepted);(c) Borrower shall use the Equipment and Real Property with all reasonable care and caution and in accordance with applicable standards of any insurance and in conformity with all applicable laws; (d) the Equipment is and shall be used in thebusiness of Borrower and not for personal, family, household or farming use; (e) Borrower shall not remove any Equipment from the locations set forth or permitted herein, except to the extent necessary to have any Equipment repaired or maintained inthe ordinary course of its business or to move Equipment directly from one location set forth or permitted herein to another such location and except for the movement of motor vehicles used by or for the benefit of Borrower in the ordinary course ofbusiness; (f) the Equipment is now and shall remain personal property and Borrower shall not permit any of the Equipment to be or become a part of or affixed to real property; and (g) Borrower assumes all responsibility and liability arising fromthe use of the Equipment and Real Property. 

 

7.5 Power ofAttorney. Borrower hereby irrevocably designates and appoints Agent (and all persons designated by Agent) as Borrower’s true and lawful attorney-in-fact, and authorizes Agent, in Borrower’s, or Agent’s name, to: (a) at any time anEvent of Default exists or has occurred and is continuing (i) demand payment on Receivables or other Collateral, (ii) enforce payment of Receivables by legal proceedings or otherwise, (iii) exercise all of Borrower’s rights and remedies tocollect any Receivable or other Collateral, (iv) sell or assign any Receivable upon such terms, for such amount and at such time or times as the Agent deems advisable, (v) settle, adjust, compromise, extend or renew an Account, (vi) discharge andrelease any Receivable, (vii) prepare, file and sign Borrower’s name on any proof of claim in bankruptcy or other similar document against an account debtor or other obligor in respect of any Receivables or other Collateral, (viii) notify thepost office authorities to change the address for delivery of remittances from account debtors or other obligors in respect of Receivables or other proceeds of Collateral to an address designated by Agent, and open and dispose of all mail addressedto Borrower and handle and store all mail relating to the Collateral; and (ix) do all acts and things which are necessary, in Agent’s determination, to fulfill Borrower’s obligations 

 

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under this Agreement and the other Financing Agreements and (b) at any time to (i) take control in any manner of any item of payment in respect ofReceivables or constituting Collateral or otherwise received in or for deposit in the Blocked Accounts or otherwise received by Agent or any Lender, (ii) have access to any lockbox or postal box into which remittances from account debtors or otherobligors in respect of Receivables or other proceeds of Collateral are sent or received, (iii) endorse Borrower’s name upon any items of payment in respect of Receivables or constituting Collateral or otherwise received by Agent and any Lenderand deposit the same in Agent’s account for application to the Obligations, (iv) endorse Borrower’s name upon any chattel paper, document, instrument, invoice, or similar document or agreement relating to any Receivable or any goodspertaining thereto or any other Collateral, including any warehouse or other receipts, or bills of lading and other negotiable or non-negotiable documents, (v) clear Inventory the purchase of which was financed with Letter of Credit Accommodationsthrough U.S. Customs or foreign export control authorities in Borrower’s name, Agent’s name or the name of Agent’s designee, and to sign and deliver to customs officials powers of attorney in Borrower’s o name for such purpose,and to complete in Borrower’s or Agent’s name, any order, sale or transaction, obtain the necessary documents in connection therewith and collect the proceeds thereof, and (vi) sign such Borrower’s name on any verification ofReceivables and notices thereof to account debtors or any secondary obligors or other obligors in respect thereof. Borrower hereby releases Agent and Lenders and their respective officers, employees and designees from any liabilities arising fromany act or acts under this power of attorney and in furtherance thereof, whether of omission or commission, except as a result of Agent’s or any Lender’s own gross negligence or wilful misconduct as determined pursuant to a finalnon-appealable order of a court of competent jurisdiction. 

 

7.6Right to Cure. Agent may, at its option, upon notice to Borrower, (a) cure any default by Borrower under any material agreement with a third party that affects the Collateral, its value or the ability of Agent to collect, sell or otherwise disposeof the Collateral or the rights and remedies of Agent or any Lender therein or the ability of Borrower or any Obligor to perform its obligations hereunder or under any of the other Financing Agreements, (b) pay or bond on appeal any judgment enteredagainst Borrower, (c) discharge taxes, liens, security interests or other encumbrances at any time levied on or existing with respect to the Collateral and (d) pay any amount, incur any expense or perform any act which, in Agent’s judgment, isnecessary or appropriate to preserve, protect, insure or maintain the Collateral and the rights of Agent and Lenders with respect thereto. Agent may add any amounts so expended to the Obligations and charge Borrower’s account therefor, suchamounts to be repayable by Borrower on demand. Agent and Lenders shall be under no obligation to effect such cure, payment or bonding and shall not, by doing so, be deemed to have assumed any obligation or liability of Borrower or any Obligor. Anypayment made or other action taken by Agent or any Lender under this Section shall be without prejudice to any right to assert an Event of Default hereunder and to proceed accordingly. 

 

7.7 Access to Premises. From time to time as requested by Agent, at the cost and expense of Borrower, (a) Agent or itsdesignee shall have complete access to all of Borrower’s premises during normal business hours and after notice to, or at any time and without notice to Borrower if an Event of Default exists or has occurred and is continuing, for the purposesof inspecting, verifying and auditing the Collateral and all of Borrower’s books and records, including the Records, and (b) Borrower shall promptly furnish to Agent such copies of such 

 

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books and records or extracts therefrom as Agent may request, and (c) Agent or any Lender or Agent’s designee may use during normal business hours suchof Borrower’s personnel, equipment, supplies and premises as may be reasonably necessary for the foregoing and if an Event of Default exists or has occurred and is continuing for the collection of Receivables and realization of otherCollateral. 

 

**SECTION 8. REPRESENTATIONS AND WARRANTIES**

 

Borrower hereby represents and warrants to Agent andLenders the following (which shall survive the execution and delivery of this Agreement), the truth and accuracy of which are a continuing condition of the making of Loans and providing Letter of Credit Accommodations to Borrower: 

 

8.1 Corporate Existence, Power and Authority. Borrower is a corporation dulyorganized and in good standing under the laws of its state of incorporation and is duly qualified as a foreign corporation and in good standing in all states or other jurisdictions where the nature and extent of the business transacted by it or theownership of assets makes such qualification necessary, except for those jurisdictions in which the failure to so qualify would not have a material adverse effect on Borrower’s financial condition, results of operation or business or the rightsof Agent in or to any of the Collateral. The execution, delivery and performance of this Agreement, the other Financing Agreements and the transactions contemplated hereunder and thereunder (a) are all within Borrower’s corporate powers, (b)have been duly authorized, (c) are not in contravention of law or the terms of Borrower’s certificate of incorporation, by-laws, or other organizational documentation, or any indenture, agreement or undertaking to which Borrower is a party orby which Borrower or its property are bound and (d) will not result in the creation or imposition of, or require or give rise to any obligation to grant, any lien, security interest, charge or other encumbrance upon any property of Borrower. ThisAgreement and the other Financing Agreements to which Borrower is a party constitute legal, valid and binding obligations of Borrower enforceable in accordance with their respective terms. 

 

8.2 Name; State of Organization; Chief Executive Office; CollateralLocations. 

 

(a) The exact legal name of Borrower is as setforth on the signature page of this Agreement and in the Information Certificate. Borrower has not, during the past five years, been known by or used any other corporate or fictitious name or been a party to any merger or consolidation, or acquiredall or substantially all of the assets of any Person, or acquired any of its property or assets out of the ordinary course of business, except as set forth in the Information Certificate. 

 

(b) Borrower is an organization of the type and organized in the jurisdiction set forth in the Information Certificate. TheInformation Certificate accurately sets forth the organizational identification number of Borrower or accurately states that Borrower has none and accurately sets forth the federal employer identification number of Borrower. 

 

(c) The chief executive office and mailing address of Borrower andBorrower’s Records concerning Accounts are located only at the address identified as such in Schedule 8.2 to the Information Certificate and its only other places of business and the only 

 

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other locations of Collateral, if any, are the addresses set forth in Schedule 8.2 to the Information Certificate, subject to the rights of Borrower toestablish new locations in accordance with Section 9.2 below. The Information Certificate correctly identifies any of such locations which are not owned by Borrower and sets forth the owners and/or operators thereof. 

 

8.3 Financial Statements; No Material Adverse Change. All financialstatements relating to Borrower which have been or may hereafter be delivered by Borrower to Agent and Lenders have been prepared in accordance with GAAP (except as to any interim financial statements, to the extent such statements are subject tonormal year-end adjustments and do not include any notes) and fairly present in all material respects the financial condition and the results of operation of Borrower as at the dates and for the periods set forth therein. Except as disclosed in anyinterim financial statements furnished by Borrower to Agent prior to the date of this Agreement, there has been no act, condition or event which has had or is reasonably likely to have a Material Adverse Effect since the date of the most recentaudited financial statements of Borrower furnished by Borrower to Agent prior to the date of this Agreement. 

 

8.4 Priority of Liens; Title to Properties. The security interests and liens granted to Agent under this Agreement and the other Financing Agreementsconstitute valid and perfected first priority liens and security interests in and upon the Collateral subject only to the liens indicated on Schedule 8.4 to the Information Certificate and the other liens permitted under Section 9.8 hereof. Borrowerhas good and marketable fee simple title to or valid leasehold interests in all of its Real Property and good, valid and merchantable title to all of its other properties and assets subject to no liens, mortgages, pledges, security interests,encumbrances or charges of any kind, except those granted to Agent and such others as are specifically listed on Schedule 8.4 to the Information Certificate or permitted under Section 9.8 hereof. 

 

8.5 Tax Returns. Borrower has filed, or caused to be filed, in a timelymanner all tax returns, reports and declarations which are required to be filed by it. All information in such tax returns, reports and declarations is complete and accurate in all material respects. Borrower has paid or caused to be paid all taxesdue and payable or claimed due and payable in any assessment received by it, except taxes the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to Borrower and with respect to whichadequate reserves have been set aside on its books. Adequate provision has been made for the payment of all accrued and unpaid Federal, State, county, local, foreign and other taxes whether or not yet due and payable and whether or not disputed.

 

8.6 Litigation. Except as set forth on Schedule 8.6 to theInformation Certificate, (a) there is no investigation by any Governmental Authority pending, or to the best of Borrower’s knowledge threatened, against or affecting Borrower, its or their assets or business and (b) there is no action, suit,proceeding or claim by any Person pending, or to the best of Borrower’s knowledge threatened, against Borrower or its or their assets or goodwill, or against or affecting any transactions contemplated by this Agreement, in each case, which ifadversely determined against Borrower has or could reasonably be expected to have a Material Adverse Effect. 

 

8.7 Compliance with Other Agreements and Applicable Laws. 

 

 

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(a) Borrower is not in default in any respect under, or in violation in any respect of the terms of, anymaterial agreement, contract, instrument, lease or other commitment to which it is a party or by which it or any of its assets are bound. Borrower is in compliance with the requirements of all applicable laws, rules, regulations and orders of anyGovernmental Authority relating to their respective businesses, including, without limitation, those set forth in or promulgated pursuant to the Occupational Safety and Health Act of 1970, as amended, the Fair Labor Standards Act of 1938, asamended, ERISA, the Code, as amended, and the rules and regulations thereunder, and all Environmental Laws. 

 

(b) Borrower has obtained all material permits, licenses, approvals, consents, certificates, orders or authorizations of any Governmental Authorityrequired for the lawful conduct of its business (the “Permits”). All of the Permits are valid and subsisting and in full force and effect. There are no actions, claims or proceedings pending or to the best of Borrower’s knowledge,threatened that seek the revocation, cancellation, suspension or modification of any of the Permits. 

 

8.8 Environmental Compliance. 

 

(a) Except as set forth on Schedule 8.8 to the Information Certificate, Borrower and any Subsidiary of Borrower have not generated, used, stored, treated,transported, manufactured, handled, produced or disposed of any Hazardous Materials, on or off its premises (whether or not owned by it) in any manner which at any time violates in any material respect any applicable Environmental Law or Permit, andthe operations of Borrower and any Subsidiary of Borrower complies in all material respects with all Environmental Laws and all Permits. 

 

(b) Except as set forth on Schedule 8.8 to the Information Certificate, to the best of Borrower’s knowledge, there has been no investigation by anyGovernmental Authority or any proceeding, complaint, order, directive, claim, citation or notice by any Governmental Authority or any other person nor is any pending or to the best of Borrower’s knowledge threatened, with respect to anynon-compliance with or violation of the requirements of any Environmental Law by Borrower and any Subsidiary of Borrower or the release, spill or discharge, threatened or actual, of any Hazardous Material or the generation, use, storage, treatment,transportation, manufacture, handling, production or disposal of any Hazardous Materials or any other environmental, health or safety matter, which adversely affects or could reasonably be expected to adversely affect in any material respectBorrower or its or their business, operations or assets or any properties at which Borrower has transported, stored or disposed of any Hazardous Materials. 

 

(c) Except as set forth on Schedule 8.8 to the Information Certificate, Borrower and its Subsidiaries have no material liability (contingent or otherwise)in connection with a release, spill or discharge, threatened or actual, of any Hazardous Materials or the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials. 

 

(d) Borrower and its Subsidiaries have all Permits required to be obtained orfiled in connection with the operations of Borrower under any Environmental Law and all of 

 

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such licenses, certificates, approvals or similar authorizations and other Permits are valid and in full force and effect. 

 

8.9 Employee Benefits. 

 

(a) Each ERISA Plan is in compliance in all material respects with theapplicable provisions of ERISA, the Code and other Federal or State law. Each ERISA Plan which is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service and to the best ofBorrower’s knowledge, nothing has occurred which would cause the loss of such qualification. Borrower and its ERISA Affiliates have made all required contributions to any ERISA Plan subject to Section 412 of the Code, and no application for afunding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any ERISA Plan. 

 

(b) There are no pending, or to the best of Borrower’s knowledge, threatened claims, actions or lawsuits, or action by any Governmental Authority,with respect to any ERISA Plan. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any ERISA Plan. 

 

(c) (i) No ERISA Event has occurred or is reasonably expected to occur; (ii) the current value of each ERISA Plan’s assets (determined in accordancewith the assumptions used for funding such ERISA Plan pursuant to Section 412 of the Code) are not less than such ERISA Plan’s liabilities under Section 4001(a)(16) of ERISA; (iii) Borrower and its ERISA Affiliates, have not incurred and do notreasonably expect to incur, any liability under Title IV of ERISA with respect to any ERISA Plan (other than premiums due and not delinquent under Section 4007 of ERISA); (iv) Borrower and its ERISA Affiliates, have not incurred and do notreasonably expect to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (v)Borrower and its ERISA Affiliates, have not engaged in a transaction that would be subject to Section 4069 or 4212(c) of ERISA. 

 

8.10 Bank Accounts. All of the deposit accounts, investment accounts or other accounts in the name of or used by Borrower maintained at any bank or otherfinancial institution are set forth on Schedule 8.10 to the Information Certificate, subject to the right of Borrower to establish new accounts in accordance with Section 5.2 hereof. 

 

8.11 Intellectual Property. Borrower owns or licenses or otherwise has the right to use all Intellectual Property necessaryfor the operation of its business as presently conducted or proposed to be conducted. As of the date hereof, Borrower does not have any Intellectual Property registered, or subject to pending applications, in the United States Patent and TrademarkOffice or any similar office or agency in the United States, any State thereof, any political subdivision thereof or in any other country, other than those described in Schedule 8.11 to the Information Certificate and has not granted any licenseswith respect thereto other than as set forth in Schedule 8.11 to the Information Certificate. Except as set forth on Schedule 8.11, no event has occurred which permits or would permit after notice or passage of time or both, the revocation,suspension or termination of such rights. To the best of Borrower’s knowledge, no slogan or other advertising device, product, process, method, substance or other Intellectual 

 

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Property or goods bearing or using any Intellectual Property presently contemplated to be sold by or employed by Borrower infringes any patent, trademark,servicemark, tradename, copyright, license or other Intellectual Property owned by any other Person presently and no claim or litigation is pending or threatened against or affecting Borrower contesting its right to sell or use any such IntellectualProperty. Schedule 8.11 to the Information Certificate sets forth all of the agreements or other arrangements of Borrower pursuant to which Borrower has a license or other right to use any trademarks, logos, designs, representations or otherIntellectual Property owned by another person as in effect on the date hereof and the dates of the expiration of such agreements or other arrangements of Borrower as in effect on the date hereof (collectively, together with such agreements or otherarrangements as may be entered into by Borrower after the date hereof, collectively, the “License Agreements” and individually, a “License Agreement”). No trademark, servicemark, copyright or other Intellectual Property at anytime used by Borrower which is owned by another person, or owned by Borrower subject to any security interest, lien, collateral assignment, pledge or other encumbrance in favor of any person other than Agent, is affixed to any Eligible Inventory,except (a) to the extent permitted under the term of the license agreements listed on Schedule 8.11 to the Information Certificate and (b) to the extent the sale of Inventory to which such Intellectual Property is affixed is permitted to be sold byBorrower under applicable law (including the United States Copyright Act of 1976). 

 

8.12 Subsidiaries; Affiliates; Capitalization; Solvency. 

 

(a) Borrower does not have any direct or indirect Subsidiaries or Affiliates and is not engaged in any joint venture or partnership except as set forth in Schedule 8.12 to the Information Certificate. 

 

(b) Borrower is the record and beneficial owner of all of the issued andoutstanding shares of Capital Stock of each of the Subsidiaries listed on Schedule 8.12 to the Information Certificate as being owned by Borrower and there are no proxies, irrevocable or otherwise, with respect to such shares and no equitysecurities of any of the Subsidiaries are or may become required to be issued by reason of any options, warrants, rights to subscribe to, calls or commitments of any kind or nature and there are no contracts, commitments, understandings orarrangements by which any Subsidiary is or may become bound to issue additional shares of it Capital Stock or securities convertible into or exchangeable for such shares. 

 

(c) All of the issued and outstanding shares of Capital Stock of Borrower have been duly authorized and issued. 

 

(d) Borrower is Solvent and will continue to be Solvent after the creationof the Obligations, the security interests of Agent and the other transaction contemplated hereunder. 

 

8.13 Labor Disputes. 

 

(a) Set forth on Schedule 8.13 to the Information Certificate is a list (including dates of termination) of all collective bargaining or similaragreements between or applicable to Borrower and any union, labor organization or other bargaining agent in respect of the employees of Borrower on the date hereof. 

 

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(b) There is (i) no significant unfair labor practice complaint pending against Borrower or, to the bestof Borrower’s knowledge, threatened against it, before the National Labor Relations Board, and no significant grievance or significant arbitration proceeding arising out of or under any collective bargaining agreement is pending on the datehereof against Borrower or, to best of Borrower’s knowledge, threatened against it, and (ii) no significant strike, labor dispute, slowdown or stoppage is pending against Borrower or, to the best of Borrower’s knowledge, threatened againstBorrower. 

 

8.14 Restrictions on Subsidiaries. Except forrestrictions contained in this Agreement or any other agreement with respect to Indebtedness of Borrower permitted hereunder as in effect on the date hereof, there are no contractual or consensual restrictions on Borrower or any of its Subsidiarieswhich prohibit or otherwise restrict (a) the transfer of cash or other assets (i) between Borrower and any of its Subsidiaries or (ii) between any Subsidiaries of Borrower or (b) the ability of Borrower or any of its Subsidiaries to incurIndebtedness or grant security interests to Agent or any Lender in the Collateral. 

 

8.15 Material Contracts. Schedule 8.15 to the Information Certificate sets forth all Material Contracts to which Borrower is a party or is bound as of the date hereof. Borrower has delivered true, correct and completecopies of such Material Contracts to Agent on or before the date hereof. Borrower are not in breach or in default in any material respect of or under any Material Contract and have not received any notice of the intention of any other party theretoto terminate any Material Contract. 

 

8.16 Payable Practices.Borrower has not made any material change in the historical accounts payable practices from those in effect immediately prior to the date hereof. 

 

8.17 Confirmation Order. Borrower has delivered to Agent a complete and correct copy of the Plan and the Confirmation Order (including all schedules,exhibits, amendments, supplements, modifications, assignments and all other documents delivered pursuant thereto or in connection therewith). Borrower is not in default in the performance of or compliance with any provisions of the Plan. The Plan isin full force and effect as of the date hereof and has not been terminated, rescinded or withdrawn. The Confirmation Order is a Final Order and is in full force and effect, and has not been amended, modified or stayed and no appeal therefrom orrequest for hearing with respect thereto is pending. All conditions to confirmation and effectiveness of the Plan have been satisfied or validly waived pursuant to the Plan (other than conditions consisting of the effectiveness of this Agreement).Set forth on Schedule 8.17 hereto is a true and correct list of all payments that are required or are anticipated to be made by Borrower in respect of claims pursuant to the Plan, including those payments to be made on or within ninety (90) daysafter the Effective Date and whether such claims are or purport to be secured claims. Borrower covenants that it will make all payments required to be made under the Plan when due. No court of competent jurisdiction has issued any injunction,restraining order or other order which prohibits consummation of the transactions described in the Confirmation Order and no governmental or other action or proceeding has been commenced, seeking any injunction, restraining order or other orderwhich seeks to void or otherwise modify the transactions described in the Confirmation Order. 

 

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8.18 Accuracy and Completeness of Information. All information furnished by or on behalf of Borrower inwriting to Agent or any Lender in connection with this Agreement or any of the other Financing Agreements or any transaction contemplated hereby or thereby, including all information on the Information Certificate is true and correct in all materialrespects on the date as of which such information is dated or certified and does not omit any material fact necessary in order to make such information not misleading. No event or circumstance has occurred which has had or could reasonably beexpected to have a Material Adverse Affect, which has not been fully and accurately disclosed to Agent in writing prior to the date hereof. 

 

8.19 Survival of Warranties; Cumulative. All representations and warranties contained in this Agreement or any of the other Financing Agreements shallsurvive the execution and delivery of this Agreement and shall be deemed to have been made again to Agent and Lenders on the date of each additional borrowing or other credit accommodation hereunder and shall be conclusively presumed to have beenrelied on by Agent and Lenders regardless of any investigation made or information possessed by Agent or any Lender. The representations and warranties set forth herein shall be cumulative and in addition to any other representations or warrantieswhich Borrower shall now or hereafter give, or cause to be given, to Agent or any Lender. 

 

**SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS**

 

9.1 Maintenance of Existence. 

 

(a) Borrower shall at all times preserve, renew and keep in full force and effect its corporate existence and rights and franchises with respect theretoand maintain in full force and effect all licenses, trademarks, tradenames, approvals, authorizations, leases, contracts and Permits necessary to carry on the business as presently or proposed to be conducted. 

 

(b) Borrower shall not change its name unless each of the followingconditions is satisfied: (i) Agent shall have received not less than thirty (30) days prior written notice from Borrower of such proposed change in its corporate name, which notice shall accurately set forth the new name; and (ii) Agent shall havereceived a copy of the amendment to the Certificate of Incorporation of Borrower providing for the name change certified by the Secretary of State of the jurisdiction of incorporation or organization of Borrower as soon as it is available.

 

(c) Borrower shall not change its chief executive office orits mailing address or organizational identification number (or if it does not have one, shall not acquire one) unless Agent shall have received not less than thirty (30) days’ prior written notice from Borrower of such proposed change, whichnotice shall set forth such information with respect thereto as Agent may require and Agent shall have received such agreements as Agent may reasonably require in connection therewith. Borrower shall not change its type of organization, jurisdictionof organization or other legal structure. 

 

9.2 New CollateralLocations. Borrower may only open any new location within the continental United States provided Borrower (a) gives Agent thirty (30) days prior written notice of the intended opening of any such new location and (b) executes and delivers, or causesto be 

 

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executed and delivered, to Agent such agreements, documents, and instruments as Agent may deem reasonably necessary or desirable to protect its interests inthe Collateral at such location. 

 

9.3 Compliance with Laws,Regulations, Etc. 

 

(a) Borrower shall, and shall cause anySubsidiary to, at all times, comply in all material respects with all laws, rules, regulations, licenses, approvals, orders and other Permits applicable to it and duly observe all requirements of any foreign, Federal, State or local GovernmentalAuthority, including ERISA, the Code, the Occupational Safety and Health Act of 1970, as amended, the Fair Labor Standards Act of 1938, as amended, and all statutes, rules, regulations, orders, permits and stipulations relating to environmentalpollution and employee health and safety, including all of the Environmental Laws. 

 

(b) Borrower shall give written notice to Agent immediately upon Borrower’s receipt of any notice of, or Borrower’s otherwise obtaining knowledge of, (i) the occurrence of any event involving the release,spill or discharge, threatened or actual, of any Hazardous Material or (ii) any investigation, proceeding, complaint, order, directive, claims, citation or notice with respect to: (A) any non-compliance with or violation of any Environmental Law byBorrower or (B) the release, spill or discharge, threatened or actual, of any Hazardous Material other than in the ordinary course of business and other than as permitted under any applicable Environmental Law. Copies of all environmental surveys,audits, assessments, feasibility studies and results of remedial investigations shall be promptly furnished, or caused to be furnished, by Borrower to Agent. Borrower shall take prompt action to respond to any material non-compliance with any of theEnvironmental Laws and shall regularly report to Agent on such response. 

 

(c) Without limiting the generality of the foregoing, whenever Agent reasonably determines that there is non-compliance, or any condition which requires any action by or on behalf of Borrower in order to avoid anynon-compliance, with any Environmental Law, Borrower shall, at Agent’s request and Borrower’s expense: (i) cause an independent environmental engineer reasonably acceptable to Agent to conduct such tests of the site where non-compliance oralleged non-compliance with such Environmental Laws has occurred as to such non-compliance and prepare and deliver to Agent a report as to such non-compliance setting forth the results of such tests, a proposed plan for responding to anyenvironmental problems described therein, and an estimate of the costs thereof and (ii) provide to Agent a supplemental report of such engineer whenever the scope of such non-compliance, or Borrower’s response thereto or the estimated coststhereof, shall change in any material respect. 

 

(d) Borrowershall indemnify and hold harmless Agent and Lenders and their respective directors, officers, employees, agents, invitees, representatives, successors and assigns, from and against any and all losses, claims, damages, liabilities, costs, andexpenses (including reasonable attorneys’ fees and expenses) directly or indirectly arising out of or attributable to the use, generation, manufacture, reproduction, storage, release, threatened release, spill, discharge, disposal or presenceof a Hazardous Material, including the costs of any required or necessary repair, cleanup or other remedial work with respect to any property of Borrower and the preparation and implementation of any closure, remedial or other required 

 

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plans. All representations, warranties, covenants and indemnifications in this Section 9.3 shall survive the payment of the Obligations and the terminationof this Agreement. 

 

9.4 Payment of Taxes and Claims. Borrowershall, and shall cause each Subsidiary to, duly pay and discharge all taxes, assessments, contributions and governmental charges upon or against it or its properties or assets, except for taxes the validity of which are being contested in good faithby appropriate proceedings diligently pursued and available to Borrower or such Subsidiary, as the case may be, and with respect to which adequate reserves have been set aside on its books. Borrower shall be liable for any tax or penalties imposedon Agent or any Lender as a result of the financing arrangements provided for herein and Borrower agrees to indemnify and hold Agent harmless with respect to the foregoing, and to repay to Agent, for the benefit of Lenders, on demand the amountthereof, and until paid by Borrower such amount shall be added and deemed part of the Loans, provided, that, nothing contained herein shall be construed to require Borrower to pay any income or franchise taxes attributable to the income of Lendersfrom any amounts charged or paid hereunder to Lenders. The foregoing indemnity shall survive the payment of the Obligations and the termination of this Agreement. 

 

9.5 Insurance. Borrower shall, and shall cause each Subsidiary to, at all times, maintain with financially sound andreputable insurers insurance with respect to the Collateral against loss or damage and all other insurance of the kinds and in the amounts customarily insured against or carried by corporations of established reputation engaged in the same orsimilar businesses and similarly situated. Said policies of insurance shall be reasonably satisfactory to Agent as to form, amount and insurer. Borrower shall furnish certificates, policies or endorsements to Agent as Agent shall reasonably requireas proof of such insurance, and, if Borrower fails to do so, Agent is authorized, but not required, to obtain such insurance at the expense of Borrower. All policies shall provide for at least thirty (30) days prior written notice to Agent of anycancellation or reduction of coverage and that Agent may act as attorney for Borrower in obtaining, and at any time an Event of Default exists or has occurred and is continuing, adjusting, settling, amending and canceling such insurance. Borrowershall cause Agent to be named as a loss payee and an additional insured (but without any liability for any premiums) under such insurance policies and Borrower shall obtain non-contributory lender’s loss payable endorsements to all insurancepolicies in form and substance satisfactory to Agent. Such lender’s loss payable endorsements shall specify that the proceeds of such insurance shall be payable to Agent as its interests may appear and further specify that Agent and Lendersshall be paid regardless of any act or omission by Borrower or any of its or their Affiliates. Without limiting any other rights of Agent or Lenders, any insurance proceeds received by Agent at any time may be applied to payment of the Obligations,whether or not then due, in any order and in such manner as Agent may determine. Upon application of such proceeds to the Revolving Loans, Revolving Loans may be available subject and pursuant to the terms hereof to be used for the costs of repairor replacement of the Collateral lost or damages resulting in the payment of such insurance proceeds. 

 

9.6 Financial Statements and Other Information. 

 

(a) Borrower shall, and shall cause each Subsidiary to, keep proper books and records in which true and complete entries shall be made of all dealings ortransactions of or in relation to the Collateral and the business of Borrower and its Subsidiaries in accordance with 

 

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GAAP. Borrower shall promptly furnish to Agent and Lenders all such financial and other information as Agent shall reasonably request relating to theCollateral and the assets, business and operations of Borrower, and Borrower shall notify the auditors and accountants of Borrower that Agent is authorized to obtain such information directly from them. Without limiting the foregoing, Borrower shallfurnish or cause to be furnished to Agent, the following: (i) within thirty (30) days after the end of each fiscal month, monthly unaudited consolidated financial statements, and unaudited consolidating financial statements (including in each casebalance sheets, statements of income and loss, statements of cash flow, and statements of shareholders’ equity), all in reasonable detail, fairly presenting the financial position and the results of the operations of Borrower and itsSubsidiaries as of the end of and through such fiscal month, certified to be correct by the chief financial officer of Borrower, subject to normal year-end adjustments and no footnotes and accompanied by a compliance certificate substantially in theform of Exhibit C hereto, along with a schedule in a form satisfactory to Agent of the calculations used in determining, as of the end of such month, whether Borrower is in compliance with the covenants set forth in Section 9.17 of this Agreementfor such month; (ii) within forty (45) days after the end of each fiscal quarter, quarterly unaudited consolidated financial statements, and unaudited consolidating financial statements (including in each case balance sheets, statements of incomeand loss, statements of cash flow, and statements of shareholders’ equity), all in reasonable detail, fairly presenting the financial position and the results of the operations of Borrower and its Subsidiaries as of the end of and through suchfiscal quarter, certified to be correct by the chief financial officer of Borrower, subject to normal year-end adjustments and no footnotes and accompanied by a compliance certificate substantially in the form of Exhibit C hereto, along with aschedule in a form satisfactory to Agent of the calculations used in determining, as of the end of such month, whether Borrower is in compliance with the covenants set forth in Section 9.17 of this Agreement for such quarter; and (iii) within ninety(90) days after the end of each fiscal year, audited consolidated financial statements and unaudited consolidating financial statements of Borrower and its Subsidiaries (including in each case balance sheets, statements of income and loss,statements of cash flow, and statements of shareholders’ equity), and the accompanying notes thereto, all in reasonable detail, fairly presenting the financial position and the results of the operations of Borrower and its Subsidiaries as ofthe end of and for such fiscal year, together with the unqualified opinion of independent certified public accountants with respect to the audited consolidated financial statements, which accountants shall be an independent accounting firm selectedby Borrower and acceptable to Agent, that such audited consolidated financial statements have been prepared in accordance with GAAP, and present fairly the results of operations and financial condition of Borrower and its Subsidiaries as of the endof and for the fiscal year then ended. 

 

(b) Borrower shallpromptly notify Agent in writing of the details of (i) any loss, damage, investigation, action, suit, proceeding or claim relating to Collateral having a value of more than $250,000 or which if adversely determined would result in any materialadverse change in Borrower’s business, properties, assets, goodwill or condition, financial or otherwise, (ii) any Material Contract being terminated or amended or any new Material Contract entered into (in which event Borrower shall provideAgent with a copy of such Material Contract), (iii) any order, judgment or decree in excess of $250,000 shall have been entered against Borrower any of its properties or assets, (iv) any notification of a material violation of laws or regulationsreceived by Borrower, (v) any ERISA Event, and (vi) the occurrence of any Default or Event of Default. 

 

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(c) Borrower shall promptly after the sending or filing thereof furnish or cause to be furnished to Agentcopies of all reports which Borrower sends to its stockholders generally and copies of all reports and registration statements which Borrower files with the Securities and Exchange Commission, any national securities exchange or the NationalAssociation of Securities Dealers, Inc. 

 

(d) Borrower shallfurnish or cause to be furnished to Agent such budgets, forecasts, projections and other information respecting the Collateral and the business of Borrower, as Agent may, from time to time, reasonably request. Agent is hereby authorized to deliver acopy of any financial statement or any other information relating to the business of Borrower to any court or other Governmental Authority, or to any Lender or Participant or prospective Lender or Participant, or any Affiliate of any Lender orParticipant. Borrower hereby irrevocably authorizes and directs all accountants or auditors to deliver to Agent, at Borrower’s expense, copies of the financial statements of Borrower and any reports or management letters prepared by suchaccountants or auditors on behalf of Borrower and to disclose to Agent and Lenders such information as they may have regarding the business of Borrower. Any documents, schedules, invoices or other papers delivered to Agent or any Lender may bedestroyed or otherwise disposed of by Agent or such Lender one (1) year after the same are delivered to Agent or such Lender, except as otherwise designated by Borrower to Agent or such Lender in writing. 

 

9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Borrower shallnot, and shall not permit any Subsidiary to, directly or indirectly, 

 

(a) merge into or with or consolidate with any other Person or permit any other Person to merge into or with or consolidate with it; 

 

(b) sell, issue, assign, lease, license, transfer, abandon or otherwise dispose of any Capital Stock or Indebtedness to any other Person or any of itsassets to any other Person, except for 

 

(i)sales of Inventory in the ordinary course of business; 

 

(ii) the sale or other disposition of Equipment (including worn-out or obsolete Equipment or Equipment no longer used or useful in the business of Borrower) so long as such sales or other dispositions do not involve Equipment having anaggregate fair market value in excess of $500,000 for all such Equipment disposed of in any fiscal year of Borrower or as Agent may otherwise agree; 

 

(iii) the issuance and sale by Borrower of Capital Stock of Borrower after the date hereof; provided, that, (A) Agent shall have receivednot less than ten (10) Business Days’ prior written notice of such issuance and sale by Borrower, which notice shall specify the parties, if then identifiable, to whom such shares are to be sold, the terms of such sale, the total amount whichit is anticipated will be realized from the issuance and sale of such stock and the net cash proceeds which it is anticipated will be received by Borrower from such sale, (B) Borrower shall not be required to pay any cash dividends or repurchase orredeem such Capital Stock or make any other payments in respect thereof, except as otherwise permitted in 

 

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Section 9.11 hereof, (C) the terms of such Capital Stock, and the terms and conditions of the purchase and sale thereof, shall not include any terms thatinclude any limitation on the right of Borrower to request or receive Loans or Letter of Credit Accommodations or the right of Borrower to amend or modify any of the terms and conditions of this Agreement or any of the other Financing Agreements orotherwise in any way relate to or affect the arrangements of Borrower with Agent and Lenders or are more restrictive or burdensome to Borrower than the terms of any Capital Stock in effect on the date hereof, (D) except as Agent may otherwise agreein writing, and to the extent the proceeds of such sale are cash, or Cash Equivalents, all of the cash proceeds of the sale and issuance of such Capital Stock shall be paid to Agent for application to the Obligations in such order and manner asAgent may determine and may be reborrowed subject to the provisions of Section 2.1, and (E) as of the date of such issuance and sale and after giving effect thereto, no Default or Event of Default shall exist or have occurred; 

 

(iv) the issuance of Capital Stock of Borrower consisting ofcommon stock pursuant to an employee stock option or grant or similar equity plan or 401(k) plans of Borrower for the benefit of its employees, directors and consultants, provided, that, in no event shall Borrower be required to issue, or shallBorrower issue, Capital Stock pursuant to such stock plans or 401(k) plans which would result in a change of Control or other Event of Default; and 

 

(v) a Sale-Leaseback Transaction, provided, that, (A) Agent shall have received not less than ten (10) Business Days prior written noticeof any such proposed transaction which notice shall set forth, in reasonable detail, the terms of the Sale-Leaseback Transaction, (B) the sale is a single, bona fide arms length transaction to a Person that is not an Affiliate of Borrower, (C) Agentshall have received such information with respect thereto as Agent may request, (D) Agent shall have received true, correct and complete copies of all agreements, documents and instruments relating to the Sale-Leaseback Transaction, (E) theaggregate purchase price for the Tampa Real Property is at least $8,000,000, (F) the net cash proceeds from such sale, after payment of any Indebtedness outstanding as of the date thereof which is secured by the Tampa Real Property, (other thanIndebtedness owed by Borrower to the Agent, and owed by the Borrower under the Senior Subordinated Notes) shall be immediately remitted to Agent for application against the Obligations in such order and manner as Agent shall elect and may bere-borrowed subject to the provisions of Section 2, (G) Agent may establish the Supplemental Reserve, (H) if applicable, Borrower pledges and assigns to Agent, for the ratable benefit of Lenders, as additional security for the Obligations, anydocuments, notes or instruments evidencing the deferred portion of the purchase price, (I) no Default or Event of Default exists, immediately prior to and after giving effect to the Sale-Leaseback Transaction, and (J) the purchaser of the Tampa RealProperty shall deliver to Agent a Collateral Access Agreement, which shall be in form and substance satisfactory to Agent. Provided all of the above conditions are satisfied, Agent shall provide and deliver at the closing of the Sale-LeasebackTransaction, under such escrow instructions as the Agent deems appropriate, in recordable form a discharge and satisfaction of the Mortgage of the Real Property then of record having theretofore been granted by Borrower to Agent; 

 

(c) wind up, liquidate or dissolve; 

 

(d) agree to do any of the foregoing. 

 

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9.8 Encumbrances. Borrower shall not, and shall not permit any Subsidiary to, create, incur, assume orsuffer to exist any security interest, mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on any of its assets or properties, including the Collateral, or file or permit the filing of, or permit to remain in effect, anyfinancing statement or other similar notice of any security interest or lien with respect to any such assets or properties, except: 

 

(a) the security interests and liens of Agent for itself and the benefit of Lenders; 

 

(b) liens securing the payment of taxes, assessments or other governmental charges or levies either not yet overdue or thevalidity of which are being contested in good faith by appropriate proceedings diligently pursued and available to Borrower or Subsidiary, as the case may be and with respect to which adequate reserves have been set aside on its books; 

 

(c) non-consensual statutory liens (other than liens securing the paymentof taxes) arising in the ordinary course of Borrower ‘s or such Subsidiary’s business to the extent: (i) such liens secure Indebtedness which is not overdue or (ii) such liens secure Indebtedness relating to claims or liabilities which arefully insured and being defended at the sole cost and expense and at the sole risk of the insurer or being contested in good faith by appropriate proceedings diligently pursued and available to Borrower or such Subsidiary, in each case prior to thecommencement of foreclosure or other similar proceedings and with respect to which adequate reserves have been set aside on its books; 

 

(d) zoning restrictions, easements, licenses, covenants and other restrictions affecting the use of Real Property which do not interfere in any materialrespect with the use of such Real Property or ordinary conduct of the business of Borrower or such Subsidiary as presently conducted thereon or materially impair the value of the Real Property which may be subject thereto; 

 

(e) purchase money security interests in Equipment (including Capital Leases)and purchase money mortgages on Real Property to secure Indebtedness permitted under Section 9.9(b) hereof; 

 

(f) pledges and deposits of cash by Borrower after the date hereof in the ordinary course of business in connection with workers’ compensation,unemployment insurance and other types of social security benefits consistent with the current practices of Borrower as of the date hereof; 

 

(g) pledges and deposits of cash by Borrower after the date hereof to secure the performance of tenders, bids, leases, trade contracts (other than for therepayment of Indebtedness), statutory obligations and other similar obligations in each case in the ordinary course of business consistent with the current practices of Borrower as of the date hereof; provided, that, in connection with anyperformance bonds issued by a surety or other person, the issuer of such bond shall have waived in writing any rights in or to, or other interest in, any of the Collateral in an agreement, in form and substance satisfactory to Agent; 

 

(h) liens arising from (i) operating leases and the precautionary UCCfinancing statement filings in respect thereof and (ii) equipment or other materials which are not 

 

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owned by Borrower located on the premises of Borrower (but not in connection with, or as part of, the financing thereof) from time to time in the ordinarycourse of business and consistent with current practices of Borrower and the precautionary UCC financing statement filings in respect thereof; 

 

        (i) judgments and other similar liens arising in connection with court proceedings that do not constitutean Event of Default, provided, that, (i) such liens are being contested in good faith and by appropriate proceedings diligently pursued, (ii) adequate reserves or other appropriate provision, if any, as are required by GAAP have been made therefor,(iii) a stay of enforcement of any such liens is in effect and (iv) Agent may establish a Reserve with respect thereto; 

 

        (j) the security interest and mortgages granted to the Senior Subordinated Indenture Trustee, whichsecurity interest is junior and subordinated to the security interest of Agent and Lenders pursuant to the Intercreditor Agreement; and 

 

        (k) the security interests and liens set forth on Schedule 8.4 to the Information Certificate. 

 

9.9 Indebtedness. Borrower shall not, and shall not permit any Subsidiaryto, incur, create, assume, become or be liable in any manner with respect to, or permit to exist, any Indebtedness, or guarantee, assume, endorse, or otherwise become responsible for (directly or indirectly), the Indebtedness, performance,obligations or dividends of any other Person, except: 

 

        (a) the Obligations; 

 

        (b) purchase money Indebtedness (including Capital Leases) arising after the date hereof to the extent secured by purchase money security interests in Equipment(including Capital Leases) and purchase money mortgages on Real Property not to exceed, in any calendar year, $2,000,000 in the aggregate at any time outstanding so long as such security interests and mortgages do not apply to any property ofBorrower or any Subsidiary other than the Equipment or Real Property so acquired, and the Indebtedness secured thereby does not exceed the cost of the Equipment or Real Property so acquired, as the case may be; 

 

        (c) the Indebtedness setforth on Schedule 9.9 to the Information Certificate; provided, that, (i) Borrower may only make regularly scheduled payments of principal and interest in respect of such Indebtedness in accordance with the terms of the agreement or instrumentevidencing or giving rise to such Indebtedness as in effect on the date hereof, (ii) Borrower shall not, directly or indirectly, (A) amend, modify, alter or change the terms of such Indebtedness or any agreement, document or instrument relatedthereto as in effect on the date hereof except, that, Borrower may, after prior written notice to Agent, amend, modify, alter or change the terms thereof so as to extend the maturity thereof, or defer the timing of any payments in respect thereof,or to forgive or cancel any portion of such Indebtedness (other than pursuant to payments thereof), or to reduce the interest rate or any fees in connection therewith, or (B) redeem, retire, defease, purchase or otherwise acquire such Indebtedness,or set aside or otherwise deposit or invest any sums for such purpose, and (iii) Borrower shall furnish to Agent all notices or demands in connection with such Indebtedness either received by Borrower or on 

 

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its behalf, promptly after the receipt thereof, or sent by Borrower or on its behalf, concurrently with the sendingthereof, as the case may be; 

 

        (d) Indebtedness of Borrower evidenced by or arising under the Senior Subordinated Notes as in effect on the date hereof, provided, that: 

 

                (i) the aggregate principal amount of such Indebtedness is as provided for under the Plan, not to exceed $30,000,000, less the aggregate amountof all repayments, repurchases or redemptions, whether optional or mandatory, in respect thereof, made from and after the date of this Agreement, plus interest thereon at the rate provided for in the Senior Subordinated Notes as in effect on thedate hereof, 

 

                (ii) Borrower and any Obligor shall not, directly or indirectly, make any payments in respect of such Indebtedness; except that, Borrower maymake payments of interest in respect of the Senior Subordinated Notes in accordance with the terms of the Senior Subordinated Note and/or Senior Subordinated Indenture as permitted pursuant to the Intercreditor Agreement, as in effect on the datehereof, provided that, after giving effect to each such payment, no Event of Default exists and is continuing or would exist after giving effect to each such payment; 

 

                (iii) Borrower shall not,directly or indirectly, (A) amend, modify, alter or change in any material respect any terms of such Indebtedness or any of the Senior Subordinated Notes, the Senior Subordinated Indenture or any related agreements, documents or instruments, or (B)redeem, retire, defease, purchase or otherwise acquire such Indebtedness, except for a non-cash or non-Cash Equivalent exchange of Borrower’s Common Stock, or set aside or otherwise deposit or invest any sums for such purpose, and 

 

                (iv) Borrower shall furnish to Agent all notices or demands in connection with such Indebtedness received by Borrower or on its behalf, promptlyafter receipt thereof or sent by Borrower or on its behalf concurrently with the sending thereof. 

 

9.10 Loans, Investments, Etc. Borrower shall not, and shall not permit any Subsidiary to, directly or indirectly, make any loans or advance money orproperty to any person, or invest in (by capital contribution, dividend or otherwise) or purchase or repurchase the Capital Stock or Indebtedness for cash or Cash Equivalents or all or a substantial part of the assets or property of any person, orform or acquire any Subsidiaries, or agree to do any of the foregoing, except: 

 

        (a) the endorsement of instruments for collection or deposit in the ordinary course of business; 

 

        (b) investments in cash or Cash Equivalents, provided, that, (i) no Loansare then outstanding and (ii) the terms and conditions of Section 5.2 hereof shall have been satisfied with respect to the deposit account, investment account or other account in which such cash or Cash Equivalents are held; 

 

        (c) the existing equityinvestments of Borrower as of the date hereof in its Subsidiaries, provided, that, Borrower shall not have any further obligations or liabilities to make 

 

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any capital contributions or other additional investments or other payments to or in or for the benefit of any of suchSubsidiaries; 

 

        (d) loans and advances by Borrower to employees of Borrower not to exceed the principal amount of $100,000 in the aggregate at any time outstanding for: (i) reasonable and necessarywork-related travel or other ordinary business expenses to be incurred by such employee in connection with their work for Borrower and (ii) reasonable and necessary relocation expenses of such employees (including home mortgage financing forrelocated employees); 

 

        (e) stock or obligations issued to Borrower by any Person (or the representative of such Person) in respect of Indebtedness of such Person owing to Borrower in connection with the insolvency,bankruptcy, receivership or reorganization of such Person or a composition or readjustment of the debts of such Person; provided, that, the original of any such stock or instrument evidencing such obligations shall be promptly delivered to Agent,upon Agent’s request, together with such stock power, assignment or endorsement by Borrower as Agent may request; 

 

        (f) obligations of account debtors to Borrower arising from Accounts which are past due evidenced by apromissory note made by such account debtor payable to Borrower; provided, that, promptly upon the receipt of the original of any such promissory note by Borrower, such promissory note shall be endorsed to the order of Agent by Borrower and promptlydelivered to Agent as so endorsed; 

 

        (g) the loans and advances set forth on Schedule 9.10 to the Information Certificate; provided, that, as to such loans and advances, (i) Borrower shall not, directly or indirectly, amend,modify, alter or change the terms of such loans and advances or any agreement, document or instrument related thereto and (ii) Borrower shall furnish to Agent all notices or demands in connection with such loans and advances either received byBorrower or on its behalf, promptly after the receipt thereof, or sent by Borrower or on its behalf, concurrently with the sending thereof, as the case may be. 

 

9.11 Dividends and Redemptions. Borrower shall not, directly or indirectly, declare or pay any dividends on account of any shares of class of anyCapital Stock of Borrower now or hereafter outstanding, or set aside or otherwise deposit or invest any sums for such purpose, or redeem, retire, defease, purchase or otherwise acquire any shares of any class of Capital Stock (or set aside orotherwise deposit or invest any sums for such purpose) for any consideration or apply or set apart any sum, or make any other distribution (by reduction of capital or otherwise) in respect of any such shares or agree to do any of the foregoing,except that: 

 

        (a) Borrower may declare and pay such dividends or redeem, retire, defease, purchase or otherwise acquire any shares of any class of Capital Stock for consideration in the form of shares ofcommon stock (so long as after giving effect thereto no Change of Control or other Default or Event of Default shall exist or occur); 

 

        (b) Borrower may pay dividends to the extent permitted in Section 9.12 below; 

 

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        (c) Borrower may repurchase Capital Stock consisting ofcommon stock held by employees pursuant to any employee stock ownership plan thereof upon the termination, retirement or death of any such employee in accordance with the provisions of such plan, provided, that, as to any such repurchase, each ofthe following conditions is satisfied: (i) as of the date of the payment for such repurchase and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing, (ii) such repurchase shall be paid withfunds legally available therefor, (iii) such repurchase shall not violate any law or regulation or the terms of any indenture, agreement or undertaking to which Borrower is a party or by which Borrower or its or their property are bound, and (iv)the aggregate amount of all payments for such repurchases in any calendar year shall not exceed $100,000. 

 

9.12 Transactions with Affiliates. Borrower shall not, directly or indirectly: 

 

        (a) purchase, acquire or lease any property from, or sell, transfer or leaseany property to, any officer, director or other Affiliate of Borrower, except in the ordinary course of and pursuant to the reasonable requirements of Borrower’s business (as the case may be) and upon fair and reasonable terms no less favorableto Borrower than Borrower would obtain in a comparable arm’s length transaction with an unaffiliated person; or 

 

        (b) make any payments (whether by dividend, loan or otherwise) of management, consulting or other fees formanagement or similar services, or of any Indebtedness owing to any officer, employee, shareholder, director or any other Affiliate of Borrower, except reasonable compensation to officers, employees and directors for services rendered to Borrower inthe ordinary course of business. 

 

9.13 Compliance with ERISA.Borrower shall, and shall cause each of its ERISA Affiliates, to: (a) maintain each ERISA Plan in compliance in all material respects with the applicable provisions of ERISA, the Code and other Federal and State law; (b) cause each ERISA Plan whichis qualified under Section 401(a) of the Code to maintain such qualification; (c) not terminate any of such ERISA Plans so as to incur any material liability to the Pension Benefit Guaranty Corporation; (d) not allow or suffer to exist anyprohibited transaction involving any of such ERISA Plans or any trust created thereunder which would subject Borrower or such ERISA Affiliate to a material tax or penalty or other liability on prohibited transactions imposed under Section 4975 ofthe Code or ERISA; (e) make all required contributions to any ERISA Plan which it is obligated to pay under Section 302 of ERISA, Section 412 of the Code or the terms of such ERISA Plan; (f) not allow or suffer to exist any accumulated fundingdeficiency, whether or not waived, with respect to any such ERISA Plan; or (g) allow or suffer to exist any occurrence of a reportable event or any other event or condition which presents a material risk of termination by the Pension BenefitGuaranty Corporation of any such ERISA Plan that is a single employer plan, which termination could result in any material liability to the Pension Benefit Guaranty Corporation. 

 

9.14 End of Fiscal Years; Fiscal Quarters. Borrower shall, for financial reporting purposes, cause its, and each of itsSubsidiaries’ (a) fiscal years to end on December 31 of each year and (b) fiscal quarters to end on March 31, June 30, September 30 and December 31 of each year. 

 

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9.15 Change in Business. Borrower shall not engage in any business other than the business of Borrower onthe date hereof and any business reasonably related, ancillary or complimentary to the business in which Borrower is engaged on the date hereof. 

 

9.16 Limitation of Restrictions Affecting Subsidiaries. Borrower shall not, directly, or indirectly, create or otherwise cause or suffer to exist anyencumbrance or restriction which prohibits or limits the ability of any Subsidiary of Borrower to (a) pay dividends or make other distributions or pay any Indebtedness owed to Borrower or any Subsidiary of Borrower; (b) make loans or advances toBorrower or any Subsidiary of Borrower, (c) transfer any of its properties or assets to Borrower or any Subsidiary of Borrower; or (d) create, incur, assume or suffer to exist any lien upon any of its property, assets or revenues, whether now ownedor hereafter acquired, other than encumbrances and restrictions arising under (i) applicable law, (ii) this Agreement, (iii) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of Borrower or anySubsidiary of Borrower, (iv) customary restrictions on dispositions of real property interests found in reciprocal easement agreements of Borrower or any Subsidiary of Borrower, (v) any agreement relating to permitted Indebtedness incurred by aSubsidiary of Borrower prior to the date on which such Subsidiary was acquired by Borrower and outstanding on such acquisition date, and (vi) the extension or continuation of contractual obligations in existence on the date hereof; provided, that,any such encumbrances or restrictions contained in such extension or continuation are no less favorable to Agent and Lenders than those encumbrances and restrictions under or pursuant to the contractual obligations so extended or continued.

 

9.17 Debt Service Coverage Ratio. The Debt Service CoverageRatio for Borrower for the fiscal quarters ending on the dates set forth below shall not be less than the corresponding minimum Debt Service Coverage Ratio amount set forth below: 

 

**Period**

 
  
**Debt Service**

**Coverage**

**Ratio**
      
January 1, 2004 to March 31, 2004
  0.9:1.0      
April 1, 2004 to June 30, 2004
  1.2:1.0      
For the fiscal quarter ending September 30, 2004,

and as at the end of each fiscal quarter thereafter
  1.2:1.0      
 

Provided, that, Debt Service CoverageRatio will only be tested if (i) Excess Availability falls below Three Million ($3,000,000) Dollars at any time, or (ii) an Event of Default has occurred and is continuing. 

 

9.18 License Agreements. 

 

(a) Borrower shall (i) promptly and faithfully observe and perform all of the material terms, covenants, conditions and provisions of the material LicenseAgreements to which it is a party to be observed and performed by it, at the times set forth therein, if any, (ii) not do, permit, suffer or refrain from doing anything that could reasonably be expected to result in a default under or breach of anyof the terms of any material License Agreement, (iii) not 

 

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cancel, surrender, modify, amend, waive or release any material License Agreement in any material respect or any term,provision or right of the licensee thereunder in any material respect, or consent to or permit to occur any of the foregoing; except, that, subject to Section 9.18(b) below, Borrower may cancel, surrender or release any material License Agreement inthe ordinary course of the business of Borrower; provided, that, Borrower (as the case may be) shall give Agent not less than thirty (30) days prior written notice of its intention to so cancel, surrender and release any such material LicenseAgreement, (iv) give Agent prompt written notice of any material License Agreement entered into by Borrower after the date hereof, together with a true, correct and complete copy thereof and such other information with respect thereto as Agent mayrequest, (v )give Agent prompt written notice of any material breach of any obligation, or any default, by any party under any material License Agreement, and deliver to Agent (promptly upon the receipt thereof by Borrower in the case of a notice toBorrower and concurrently with the sending thereof in the case of a notice from Borrower ) a copy of each notice of default and every other notice and other communication received or delivered by Borrower in connection with any material LicenseAgreement which relates to the right of Borrower to continue to use the property subject to such License Agreement, and (vi) furnish to Agent, promptly upon the request of Agent, such information and evidence as Agent may reasonably require fromtime to time concerning the observance, performance and compliance by Borrower or the other party or parties thereto with the material terms, covenants or provisions of any material License Agreement. 

 

        (b) Borrower will eitherexercise any option to renew or extend the term of each material License Agreement to which it is a party in such manner as will cause the term of such material License Agreement to be effectively renewed or extended for the period provided by suchoption and give prompt written notice thereof to Agent or give Agent prior written notice that Borrower does not intend to renew or extend the term of any such material License Agreement or that the term thereof shall otherwise be expiring, not lessthan sixty (60) days prior to the date of any such non-renewal or expiration. In the event of the failure of Borrower to extend or renew any material License Agreement to which it is a party, Agent shall have, and is hereby granted, the irrevocableright and authority, at its option, to renew or extend the term of such material License Agreement, whether in its own name and behalf, or in the name and behalf of a designee or nominee of Agent or in the name and behalf of Borrower, as Agent shalldetermine at any time that an Event of Default shall exist or have occurred and be continuing. Agent may, but shall not be required to, perform any or all of such obligations of Borrower under any of the License Agreements, including, but notlimited to, the payment of any or all sums due from Borrower thereunder. Any sums so paid by Agent shall constitute part of the Obligations. 

 

9.19 After Acquired Real Property. If Borrower hereafter acquires any Real Property, fixtures or any other property that is of the kind or naturedescribed in the Mortgages and such Real Property, fixtures or other property is adjacent to, contiguous with or necessary or related to or used in connection with any Real Property then subject to a Mortgage, or if such Real Property is notadjacent to, contiguous with or related to or used in connection with such Real Property, then if such Real Property, fixtures or other property at any location (or series of adjacent, contiguous or related locations, and regardless of the number ofparcels) has a fair market value in an amount equal to or greater than $500,000 (or if a Default or Event of Default exists, then regardless of the fair market value of such assets), without limiting any other rights of Agent or any Lender, orduties or obligations of Borrower, promptly upon Agent’s request, 

 

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Borrower shall execute and deliver to Agent a mortgage, deed of trust or deed to secure debt, as Agent may determine, inform and substance substantially similar to the Mortgages and as to any provisions relating to specific state laws satisfactory to Agent and in form appropriate for recording in the real estate records of the jurisdiction in which such Real Propertyor other property is located granting to Agent a first and only lien and mortgage on and security interest in such Real Property, fixtures or other property (except as Borrower would otherwise be permitted to incur hereunder or under the Mortgagesor as otherwise consented to in writing by Agent) and such other agreements, documents and instruments as Agent may require in connection therewith. 

 

9.20 Costs and Expenses. Borrower shall pay to Agent on demand all costs, expenses, filing fees and taxes paid or payable in connection with thepreparation, negotiation, execution, delivery, recording, administration, collection, liquidation, enforcement and defense of the Obligations, Agent’s rights in the Collateral, this Agreement, the other Financing Agreements and all otherdocuments related hereto or thereto, including any amendments, supplements or consents which may hereafter be contemplated (whether or not executed) or entered into in respect hereof and thereof, including: (a) all costs and expenses of filing orrecording (including Uniform Commercial Code financing statement filing taxes and fees, documentary taxes, intangibles taxes and mortgage recording taxes and fees, if applicable); (b) costs and expenses and fees for insurance premiums, appraisalfees and search fees, costs and expenses of remitting loan proceeds, collecting checks and other items of payment, and establishing and maintaining the Blocked Accounts, together with Agent’s customary charges and fees with respect thereto; (c)charges, fees or expenses charged by any bank or issuer in connection with the Letter of Credit Accommodations; (d) costs and expenses of preserving and protecting the Collateral; (e) costs and expenses paid or incurred in connection with obtainingpayment of the Obligations, enforcing the security interests and liens of Agent, selling or otherwise realizing upon the Collateral, and otherwise enforcing the provisions of this Agreement and the other Financing Agreements or defending any claimsmade or threatened against Agent or any Lender arising out of the transactions contemplated hereby and thereby (including preparations for and consultations concerning any such matters); (f) from and after the date hereof, all out-of-pocket expensesand costs heretofore and from time to time hereafter incurred by Agent during the course of periodic field examinations of the Collateral and Borrower ‘s operations, plus a per diem charge at the then standard rate for Agent’s fieldexaminers in the field and office (which rate as of the date hereof is of eight hundred ($800) dollars person per day, plus travel, hotel and all other out-of-pocket expenses) provided, that, field examinations will be limited to four (4) per yearif no Event of Default exists, and will be further limited to three (3) per year, if at all times Excess Availability exceeds Three Million ($3,000,000) Dollars and no Default exists, provided, further, that, field examination charges forAgent’s field examiners in the field and office incurred after the date hereof will be limited to Fifty Thousand ($50,000) Dollars per year plus out-of-pocket expenses and costs, provided no Event of Default occurs during such year; and (g) thefees and disbursements of counsel (including legal assistants) to Agent in connection with any of the foregoing. 

 

9.21 Further Assurances. At the request of Agent at any time and from time to time, Borrower shall, at its expense, duly execute and deliver, or cause tobe duly executed and delivered, such further agreements, documents and instruments, and do or cause to be done such further acts as may be necessary or proper to evidence, perfect, maintain and enforce the security 

 

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interests and the priority thereof in the Collateral and to otherwise effectuate the provisions or purposes of thisAgreement or any of the other Financing Agreements. Agent may at any time and from time to time request a certificate from an officer of Borrower representing that all conditions precedent to the making of Loans and providing Letter of CreditAccommodations contained herein are satisfied. In the event of such request by Agent, Agent and Lenders may, at Agent’s option, cease to make any further Loans or provide any further Letter of Credit Accommodations until Agent has received suchcertificate and, in addition, Agent has determined that such conditions are satisfied. 

 

**SECTION 10. EVENTS OF DEFAULT AND REMEDIES**

 

10.1 Events of Default. The occurrence or existence of any one or more of the following events are referred to herein individually as an “Event of Default”, and collectively as “Events of Default”: 

 

        (a) (i) Borrower fails to payany of the Obligations when due or (ii) Borrower fails to perform any of the covenants contained in Sections 9.4, 9.14, 9.15, and 9.16 of this Agreement and such failure shall continue for ten (10) days; provided, that, such ten (10) day periodshall not apply in the case of: (A) any failure to observe any such covenant which is not capable of being cured at all or within such ten (10) day period or which has been the subject of a prior failure within a six (6) month period or (B) anintentional breach by Borrower of any such covenant or (iii) Borrower fails to perform any of the covenants contained in Section 9.3 of this Agreement and such failure shall continue for forty-five (45) days, after giving effect to any extensions oftime allowed by any Governmental Authority; provided, that, such forty-five (45) day period shall not apply in the case of: (A) any failure to observe any such covenant which is not capable of being cured at all or within such forty-five (45) dayperiod or which has been the subject of a prior failure within a six (6) month period or (B) an intentional breach by Borrower of any such covenant or (iv) Borrower fails to perform any of the covenants contained in Section 9.13 of this Agreementand such failure shall continue for sixty (60) days; provided, that, such sixty (60) day period shall not apply in the case of: (A) any failure to observe any such covenant which is not capable of being cured at all or within such sixty (60) dayperiod or which has been the subject of a prior failure within a six (6) month period or (B) an intentional breach by Borrower of any such covenant, or (v) Borrower fails to perform any of the terms, covenants, conditions or provisions contained inthis Agreement or any of the other Financing Agreements other than those described in Sections 10.1(a)(i),(ii), (iii) and (iv) above; 

 

        (b) any representation, warranty or statement of fact made by Borrower to Agent in this Agreement, theother Financing Agreements or any other written agreement, schedule, confirmatory assignment or otherwise shall when made or deemed made be false or misleading in any material respect; 

 

        (c) any Obligor revokes or terminates, or purports to revoke or terminate,or fails to perform any of the terms, covenants, conditions or provisions of any guarantee, endorsement or other agreement of such party in favor of Agent or any Lender; 

 

        (d) any judgment for the payment of money is rendered against Borrower orany Obligor in excess of One Hundred Thousand ($100,000) Dollars in any one case or in excess 

 

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of Five Hundred Thousand ($500,000) Dollars in the aggregate (to the extent not covered by insurance where the insurerhas assumed responsibility in writing for such judgment) and shall remain undischarged or unvacated for a period in excess of thirty (30) days or execution shall at any time not be effectively stayed, or any judgment other than for the payment ofmoney, or injunction, attachment, garnishment or execution is rendered against Borrower or any Obligor or any of the Collateral having a value in excess of One Hundred Thousand ($100,000) Dollars; 

 

        (e) any Obligor (being anatural person or a general partner of an Obligor which is a partnership) dies or Borrower or any Obligor, which is a partnership, limited liability company, limited liability partnership or a corporation, dissolves or suspends or discontinues doingbusiness; 

 

        (f)Borrower or any Obligor makes an assignment for the benefit of creditors, makes or sends notice of a bulk transfer or calls a meeting of its creditors or principal creditors in connection with a moratorium or adjustment of the Indebtedness due tothem; 

 

        (g) acase or proceeding under the bankruptcy laws of the United States of America now or hereafter in effect, other than the Chapter 11 Case, or under any insolvency, reorganization, receivership, readjustment of debt, dissolution or liquidation law orstatute of any jurisdiction now or hereafter in effect (whether at law or in equity) is filed against Borrower or any Obligor or all or any part of its properties and such petition or application is not dismissed within thirty (30) days after thedate of its filing or Borrower or any Obligor shall file any answer admitting or not contesting such petition or application or indicates its consent to, acquiescence in or approval of, any such action or proceeding or the relief requested isgranted sooner; 

 

        (h) a case or proceeding under the bankruptcy laws of the United States of America now or hereafter in effect or under any insolvency, reorganization, receivership, readjustment of debt,dissolution or liquidation law or statute of any jurisdiction now or hereafter in effect (whether at a law or equity) is filed by Borrower or any Obligor or for all or any part of its property; 

 

        (i) any default under theSenior Subordinated Indenture or any default in respect of any Indebtedness of Borrower or any Obligor (other than Indebtedness owing to Agent and Lenders hereunder), in any case in an amount in excess of Five Hundred Thousand ($500,000) Dollars,which default continues for more than the applicable cure period, if any, with respect thereto and/or is not waived in writing by the other parties thereto, or any default by Borrower or any Obligor under any Material Contract, which defaultcontinues for more than the applicable cure period, if any, with respect thereto and/or is not waived in writing by the other parties thereto; 

 

        (j) any material provision hereof or of any of the other Financing Agreements shall for any reason ceaseto be valid, binding and enforceable with respect to any party hereto or thereto (other than Agent) in accordance with its terms, or any such party shall challenge the enforceability hereof or thereof, or shall assert in writing, or take any actionor fail to take any action based on the assertion that any provision hereof or of any of the other Financing Agreements has ceased to be or is otherwise not valid, binding or enforceable in accordance with its terms, or any security interestprovided for herein or in any of the other Financing 

 

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Agreements shall cease to be a valid and perfected first priority security interest in any of the Collateral purported tobe subject thereto (except as otherwise permitted herein or therein); 

 

        (k) an ERISA Event shall occur which results in or could reasonably be expected to result in liability of Borrower in an aggregate amount in excess of Five Hundred Thousand ($500,000) Dollars;

 

        (l) anydefault by Borrower under the Plan, the Confirmation Order, or other material obligation to any person other than Agent and Lenders, which default continues for more than the applicable cure period, if any, with respect thereto; 

 

        (m) any Change of Control;

 

        (n) theindictment by any Governmental Authority, or as Agent may reasonably and in good faith determine, the threatened indictment by any Governmental Authority of Borrower or any Obligor of which Borrower, such Obligor or Agent receives notice, in eithercase, as to which there is a reasonable possibility of an adverse determination, in the good faith determination of Agent, under any criminal statute, or commencement or threatened commencement of criminal or civil proceedings against Borrower orany Obligor, pursuant to which statute or proceedings the penalties or remedies sought or available include forfeiture of (i) any of the Collateral having a value in excess of One Hundred Thousand ($100,000) Dollars, or (ii) any other property ofBorrower which is necessary or material to the conduct of its business; 

 

        (o) there shall be a material adverse change in the business, assets or prospects of Borrower or any Obligor after the date hereof; or 

 

        (p) there shall be an eventof default under any of the other Financing Agreements. 

 

10.2Remedies. 

 

(a) At any time an Event of Default exists or hasoccurred and is continuing, Agent and Lenders shall have all rights and remedies provided in this Agreement, the other Financing Agreements, the UCC and other applicable law, all of which rights and remedies may be exercised without notice to orconsent by Borrower or any Obligor, except as such notice or consent is expressly provided for hereunder or required by applicable law. All rights, remedies and powers granted to Agent and Lenders hereunder, under any of the other FinancingAgreements, the UCC or other applicable law, are cumulative, not exclusive and enforceable, in Agent’s discretion, alternatively, successively, or concurrently on any one or more occasions, and shall include, without limitation, the right toapply to a court of equity for an injunction to restrain a breach or threatened breach by Borrower or any Obligor of this Agreement or any of the other Financing Agreements. Subject to Section 12 hereof, Agent may, and at the direction of theRequired Lenders shall, at any time or times, proceed directly against Borrower or any Obligor to collect the Obligations without prior recourse to the Collateral. 

 

(b) Without limiting the foregoing, at any time an Event of Default exists or has occurred and is continuing, Agent may, inits discretion, and upon the direction of the 

 

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Required Lenders, shall (i) accelerate the payment of all Obligations and demand immediate payment thereof to Agent for itself and the ratable benefit ofLenders (provided, that, upon the occurrence of any Event of Default described in Sections 10.1(g) and 10.1(h), all Obligations shall automatically become immediately due and payable), (ii) with or without judicial process or the aid or assistanceof others, enter upon any premises on or in which any of the Collateral may be located and take possession of the Collateral or complete processing, manufacturing and repair of all or any portion of the Collateral, (iii) require Borrower or anyObligor, at Borrower’s expense, to assemble and make available to Agent any part or all of the Collateral at any place and time designated by Agent, (iv) collect, foreclose, receive, appropriate, setoff and realize upon any and all Collateral,(v) remove any or all of the Collateral from any premises on or in which the same may be located for the purpose of effecting the sale, foreclosure or other disposition thereof or for any other purpose, (vi) sell, lease, transfer, assign, deliver orotherwise dispose of any and all Collateral (including entering into contracts with respect thereto, public or private sales at any exchange, broker’s board, at any office of Agent or elsewhere) at such prices or terms as Agent may deemreasonable, for cash, upon credit or for future delivery, with the Agent having the right to purchase the whole or any part of the Collateral at any such public sale, all of the foregoing being free from any right or equity of redemption of Borroweror any Obligor, which right or equity of redemption is hereby expressly waived and released by Borrower and Obligors and/or (vii) terminate this Agreement. If any of the Collateral is sold or leased by Agent upon credit terms or for future delivery,the Obligations shall not be reduced as a result thereof until payment therefor is finally collected by Agent. If notice of disposition of Collateral is required by law, ten (10) days prior notice by Agent to Borrower designating the time and placeof any public sale or the time after which any private sale or other intended disposition of Collateral is to be made, shall be deemed to be reasonable notice thereof and Borrower waives any other notice. In the event Agent institutes an action torecover any Collateral or seeks recovery of any Collateral by way of prejudgment remedy, Borrower waives the posting of any bond which might otherwise be required. At any time an Event of Default exists or has occurred and is continuing, uponAgent’s request, Borrower will either, as Agent shall specify, furnish cash collateral to the issuer to be used to secure and fund Agent’s reimbursement obligations to the issuer in connection with any Letter of Credit Accommodations orfurnish cash collateral to Agent for the Letter of Credit Accommodations. Such cash collateral shall be in the amount equal to one hundred ten percent (110%) of the amount of the Letter of Credit Accommodations plus the amount of any fees andexpenses payable in connection therewith through the end of the latest expiration date of such Letter of Credit Accommodations. 

 

(c) At any time or times that an Event of Default exists or has occurred and is continuing, Agent may, in its discretion, and upon the direction of theRequired Lenders, Agent shall, enforce the rights of Borrower or any Obligor against any account debtor, secondary obligor or other obligor in respect of any of the Accounts or other Receivables. Without limiting the generality of the foregoing,Agent may, in its discretion, and upon the direction of the Required Lenders, Agent shall, at such time or times (i) notify any or all account debtors, secondary obligors or other obligors in respect thereof that the Receivables have been assignedto Agent and that Agent has a security interest therein and Agent may direct any or all account debtors, secondary obligors and other obligors to make payment of Receivables directly to Agent, (ii) extend the time of payment of, compromise, settleor adjust for cash, credit, return of merchandise or otherwise, and upon any terms or conditions, any and all Receivables or other 

 

75 

obligations included in the Collateral and thereby discharge or release the account debtor or any secondary obligors or other obligors in respect thereofwithout affecting any of the Obligations, (iii) demand, collect or enforce payment of any Receivables or such other obligations, but without any duty to do so, and Agent and Lenders shall not be liable for any failure to collect or enforce thepayment thereof nor for the negligence of its agents or attorneys with respect thereto and (iv) take whatever other action Agent may deem necessary or desirable for the protection of its interests and the interests of Lenders. At any time that anEvent of Default exists or has occurred and is continuing, at Agent’s request, all invoices and statements sent to any account debtor shall state that the Accounts and such other obligations have been assigned to Agent and are payable directlyand only to Agent and Borrower shall deliver to Agent such originals of documents evidencing the sale and delivery of goods or the performance of services giving rise to any Accounts as Agent may require. In the event any account debtor returnsInventory when an Event of Default exists or has occurred and is continuing, Borrower shall, upon Agent’s request, hold the returned Inventory in trust for Agent, segregate all returned Inventory from all of its other property, dispose of thereturned Inventory solely according to Agent’s instructions, and not issue any credits, discounts or allowances with respect thereto without Agent’s prior written consent. 

 

(d) To the extent that applicable law imposes duties on Agent or any Lender to exercise remedies in a commerciallyreasonable manner (which duties cannot be waived under such law), Borrower acknowledges and agrees that it is not commercially unreasonable for Agent or any Lender (i) to fail to incur expenses reasonably deemed significant by Agent or any Lender toprepare Collateral for disposition or otherwise to complete raw material or work in process into finished goods or other finished products for disposition, (ii) to fail to obtain third party consents for access to Collateral to be disposed of, or toobtain or, if not required by other law, to fail to obtain consents of any Governmental Authority or other third party for the collection or disposition of Collateral to be collected or disposed of, (iii) to fail to exercise collection remediesagainst account debtors, secondary obligors or other persons obligated on Collateral or to remove liens or encumbrances on or any adverse claims against Collateral, (iv) to exercise collection remedies against account debtors and other personsobligated on Collateral directly or through the use of collection agencies and other collection specialists, (v) to advertise dispositions of Collateral through publications or media of general circulation, whether or not the Collateral is of aspecialized nature, (vi) to contact other persons, whether or not in the same business as Borrower, for expressions of interest in acquiring all or any portion of the Collateral, (vii) to hire one or more professional auctioneers to assist in thedisposition of Collateral, whether or not the collateral is of a specialized nature, (viii) to dispose of Collateral by utilizing Internet sites that provide for the auction of assets of the types included in the Collateral or that have thereasonable capability of doing so, or that match buyers and sellers of assets, (ix) to dispose of assets in wholesale rather than retail markets, (x) to disclaim disposition warranties, (xi) to purchase insurance or credit enhancements to insureAgent or Lenders against risks of loss, collection or disposition of Collateral or to provide to Agent or Lenders a guaranteed return from the collection or disposition of Collateral, or (xii) to the extent deemed appropriate by Agent, to obtain theservices of other brokers, investment bankers, consultants and other professionals to assist Agent in the collection or disposition of any of the Collateral. Borrower acknowledges that the purpose of this Section is to provide non-exhaustiveindications of what actions or omissions by Agent or any Lender would not be commercially unreasonable in the exercise by Agent or any Lender of remedies against the Collateral and that other actions or omissions by Agent or 

 

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any Lender shall not be deemed commercially unreasonable solely on account of not being indicated in this Section. Without limitation of the foregoing,nothing contained in this Section shall be construed to grant any rights to Borrower or to impose any duties on Agent or Lenders that would not have been granted or imposed by this Agreement or by applicable law in the absence of this Section.

 

(e) For the purpose of enabling Agent to exercise the rightsand remedies hereunder, Borrower hereby grants to Agent, to the extent assignable, an irrevocable, non-exclusive license (exercisable at any time an Event of Default shall exist or have occurred and for so long as the same is continuing) withoutpayment of royalty or other compensation to Borrower, to use, assign, license or sublicense any of the trademarks, service-marks, trade names, business names, trade styles, designs, logos and other source of business identifiers and otherIntellectual Property and general intangibles now owned or hereafter acquired by Borrower, wherever the same maybe located, including in such license reasonable access to all media in which any of the licensed items may be recorded or stored and toall computer programs used for the compilation or printout thereof. 

 

(f) Agent may apply the cash proceeds of Collateral actually received by Agent from any sale, lease, foreclosure or other disposition of the Collateral to payment of the Obligations, in whole or in part and in such order as Agent may elect,whether or not then due. Borrower and Obligors shall remain liable to Agent and Lenders for the payment of any deficiency with interest at the highest rate provided for herein and all costs and expenses of collection or enforcement, includingattorneys’ fees and expenses. 

 

(g) Without limiting theforegoing, upon the occurrence of a Default or an Event of Default, (i) Agent and Lenders may, at Agent’s option, and upon the occurrence of an Event of Default, at the direction of the Required Lenders, Agent and Lenders shall, without notice,(A) cease making Loans or arranging for Letter of Credit Accommodations or reduce the lending formulas or amounts of Loans and Letter of Credit Accommodations available to Borrower and/or (B) terminate any provision of this Agreement providing forany future Loans or Letter of Credit Accommodations to be made by Agent and Lenders to Borrower, and (ii) Agent may, at its option, establish such Reserves as Agent determines without limitation or restriction, notwithstanding anything to thecontrary provided herein. 

 

**SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERSAND CONSENTS; GOVERNING LAW**

 

11.1 Governing Law; Choiceof Forum; Service of Process; Jury Trial Waiver. 

 

(a) Thevalidity, interpretation and enforcement of this Agreement and the other Financing Agreements (other than the Mortgages to the extent provided therein) and any dispute arising out of the relationship between the parties hereto, whether in contract,tort, equity or otherwise, shall be governed by the internal laws of the State of Florida but excluding any principles of conflicts of law or other rule of law that would cause the application of the law of any jurisdiction other than the laws ofthe State of Florida. 

 

 

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(b) Borrower, Agent and Lenders irrevocably consent and submit to the non-exclusive jurisdiction of theCircuit Court of Dade County, Florida and the United States District Court for the Southern District of Florida, whichever Agent may elect, and waive any objection based on venue or forum non conveniens with respect to any action instituted thereinarising under this Agreement or any of the other Financing Agreements or in any way connected with or related or incidental to the dealings of the parties hereto in respect of this Agreement or any of the other Financing Agreements or thetransactions related hereto or thereto, in each case whether now existing or hereafter arising, and whether in contract, tort, equity or otherwise, and agree that any dispute with respect to any such matters shall be heard only in the courtsdescribed above (except that Agent and Lenders shall have the right to bring any action or proceeding against Borrower or any Obligor or its or their property in the courts of any other jurisdiction which Agent deems necessary or appropriate inorder to realize on the Collateral or to otherwise enforce its rights against Borrower or any Obligor or its or their property). 

 

(c) Borrower hereby waives personal service of any and all process upon it and consents that all such service of process may be made by certified mail(return receipt requested) directed to its address set forth herein and service so made shall be deemed to be completed five (5) days after the same shall have been so deposited in the U.S. mails, or, at Agent’s option, by service upon Borrowerin any other manner provided under the rules of any such courts. Within thirty (30) days after such service, Borrower shall appear in answer to such process, failing which Borrower shall be deemed in default and judgment may be entered by Agentagainst Borrower for the amount of the claim and other relief requested. 

 

(d) BORROWER, AGENT AND LENDERS EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANYWAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTERARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER, AGENT AND LENDERS EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT BORROWER, AGENTOR ANY LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. 

 

(e) Agent and Lenders shall not have any liability to Borrower or any Obligor(whether in tort, contract, equity or otherwise) for losses suffered by Borrower in connection with, arising out of, or in any way related to the transactions or relationships contemplated by this Agreement, or any act, omission or event occurringin connection herewith, unless it is determined by a final and non-appealable judgment or court order binding on Agent and such Lender, that the losses were the result of acts or omissions constituting gross negligence or willful misconduct. In anysuch litigation, Agent and Lenders shall be entitled to the benefit of the rebuttable presumption that it acted in good faith and with the exercise of ordinary care in the performance by it of the terms of this Agreement. Borrower: (i) certifiesthat neither Agent, any 

 

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Lender nor any representative, agent or attorney acting for or on behalf of Agent or any Lender has represented, expressly or otherwise, that Agent andLenders would not, in the event of litigation, seek to enforce any of the waivers provided for in this Agreement or any of the other Financing Agreements and (ii) acknowledges that in entering into this Agreement and the other Financing Agreements,Agent and Lenders are relying upon, among other things, the waivers and certifications set forth in this Section 11.1 and elsewhere herein and therein. 

 

11.2 Waiver of Notices. Borrower hereby expressly waives demand, presentment, protest and notice of protest and notice of dishonor with respect to any andall instruments and chattel paper, included in or evidencing any of the Obligations or the Collateral, and any and all other demands and notices of any kind or nature whatsoever with respect to the Obligations, the Collateral and this Agreement,except such as are expressly provided for herein. No notice to or demand on Borrower which Agent or any Lender may elect to give shall entitle Borrower to any other or further notice or demand in the same, similar or other circumstances. 

 

11.3 Amendments and Waivers. 

 

(a) Neither this Agreement nor any other Financing Agreement nor any termshereof or thereof may be amended, waived, discharged or terminated unless such amendment, waiver, discharge or termination is in writing signed by Agent and the Required Lenders or at Agent’s option, by Agent with the authorization of theRequired Lenders, and as to amendments to any of the Financing Agreements (other than with respect to any provision of Section 12 hereof), by Borrower; except, that, no such amendment, waiver, discharge or termination shall: 

 

(i) reduce the interest rate or any fees or extend the timeof payment of principal, interest or any fees or reduce the principal amount of any Loan or Letter of Credit Accommodations, in each case without the consent of each Lender directly affected thereby, 

 

(ii) increase the Commitment of any Lender over the amountthereof then in effect or provided hereunder, in each case without the consent of the Lender directly affected thereby, 

 

(iii) release any Collateral (except as expressly required hereunder or under any of the other Financing Agreements or applicable law andexcept as permitted under Section 12.11(b) hereof), or modify the provisions of Sections 12.8(a) or 12.11(a)(ii) without the consent of Agent and all of Lenders, 

 

(iv) reduce any percentage specified in the definition of Required Lenders, without the consent of Agent andall of Lenders, 

 

(v) consent to the assignmentor transfer by Borrower or any Obligor of any of their rights and obligations under this Agreement, without the consent of Agent and all of Lenders, 

 

(vi) amend, modify or waive any terms of this Section 11.3 hereof, without the consent of Agent and all of Lenders, or 

 

 

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(vii) increase the advance rates constituting part of the Borrowing Base, without theconsent of Agent and all of Lenders. 

 

(b) Agent and Lendersshall not, by any act, delay, omission or otherwise be deemed to have expressly or impliedly waived any of its or their rights, powers and/or remedies unless such waiver shall be in writing and signed as provided herein. Any such waiver shall beenforceable only to the extent specifically set forth therein. A waiver by Agent or any Lender of any right, power and/or remedy on any one occasion shall not be construed as a bar to or waiver of any such right, power and/or remedy which Agent orany Lender would otherwise have on any future occasion, whether similar in kind or otherwise. 

 

(c) Notwithstanding anything to the contrary contained in Section 11.3(a) above, in connection with any amendment, waiver, discharge or termination, in the event that any Lender whose consent thereto is required shallfail to consent or fail to consent in a timely manner (such Lender being referred to herein as a “Non-Consenting Lender”), but the consent of any other Lenders to such amendment, waiver, discharge or termination that is required areobtained, if any, then Congress shall have the right, but not the obligation, at any time thereafter, and upon the exercise by Congress of such right, such Non-Consenting Lender shall have the obligation, to sell, assign and transfer to Congress orsuch Eligible Transferee as Congress may specify, the Commitment of such Non-Consenting Lender and all rights and interests of such Non-Consenting Lender pursuant thereto. Congress shall provide the Non-Consenting Lender with prior written notice ofits intent to exercise its right under this Section, which notice shall specify on date on which such purchase and sale shall occur. Such purchase and sale shall be pursuant to the terms of an Assignment and Acceptance (whether or not executed bythe Non-Consenting Lender), except that on the date of such purchase and sale, Congress, or such Eligible Transferee specified by Congress, shall pay to the Non-Consenting Lender the amount equal to: (i) the principal balance of the Loans held bythe Non-Consenting Lender outstanding as of the close of business on the business day immediately preceding the effective date of such purchase and sale, plus (ii) amounts accrued and unpaid in respect of interest and fees payable to theNon-Consenting Lender to the effective date of the purchase (but in no event shall the Non-Consenting Lender be deemed entitled to any early termination fee), minus (iii) the amount of the closing fee received by the Non-Consenting Lender pursuantto the terms hereof or of any of the other Financing Agreements multiplied by the fraction, the numerator of which is the number of months remaining in the then current term of the Credit Facility and the denominator of which is the number of monthsin the then current term thereof. Such purchase and sale shall be effective on the date of the payment of such amount to the Non-Consenting Lender and the Commitment of the Non-Consenting Lender shall terminate on such date. 

 

(d) The consent of Agent shall be required for any amendment, waiver orconsent affecting the rights or duties of Agent hereunder or under any of the other Financing Agreements, in addition to the consent of the Lenders otherwise required by this Section and the exercise by Agent of any of its rights hereunder withrespect to Reserves or Eligible Accounts or Eligible Inventory shall not be deemed an amendment to the advance rates provided for in this Section 11.3. 

 

11.4 Waiver of Counterclaims. Borrower waives all rights to interpose any claims, deductions, setoffs or counterclaims of any nature (other thencompulsory counterclaims) in any 

 

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action or proceeding with respect to this Agreement, the Obligations, the Collateral or any matter arising therefrom or relating hereto or thereto.

 

11.5 Indemnification. Borrower shall indemnify and hold Agentand each Lender, and its officers, directors, agents, employees, advisors and counsel and their respective Affiliates (each such person being an “Indemnitee”), harmless from and against any and all losses, claims, damages, liabilities,costs or expenses (including attorneys’ fees and expenses) imposed on, incurred by or asserted against any of them in connection with any litigation, investigation, claim or proceeding commenced or threatened related to the negotiation,preparation, execution, delivery, enforcement, performance or administration of this Agreement, any other Financing Agreements, or any undertaking or proceeding related to any of the transactions contemplated hereby or any act, omission, event ortransaction related or attendant thereto, including amounts paid in settlement, court costs, and the fees and expenses of counsel except that Borrower shall not have any obligation under this Section 11.5 to indemnify an Indemnitee with respect to amatter covered hereby resulting from the gross negligence or wilful misconduct of such Indemnitee as determined pursuant to a final, non-appealable order of a court of competent jurisdiction (but without limiting the obligations of Borrower as toany other Indemnitee). To the extent that the undertaking to indemnify, pay and hold harmless set forth in this Section may be unenforceable because it violates any law or public policy, Borrower shall pay the maximum portion which it is permittedto pay under applicable law to Agent and Lenders in satisfaction of indemnified matters under this Section. To the extent permitted by applicable law, Borrower shall not assert, and Borrower hereby waives any claim against any Indemnitee, on anytheory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any of the other Financing Agreements or any undertaking ortransaction contemplated hereby. All amounts due under this Section shall be payable upon demand. The foregoing indemnity shall survive the payment of the Obligations and the termination or non-renewal of this Agreement. 

 

**SECTION 12. THE AGENT**

 

12.1 Appointment, Powers and Immunities. Each Lender irrevocably designates,appoints and authorizes Congress to act as Agent hereunder and under the other Financing Agreements with such powers as are specifically delegated to Agent by the terms of this Agreement and of the other Financing Agreements, together with suchother powers as are reasonably incidental thereto. Agent (a) shall have no duties or responsibilities except those expressly set forth in this Agreement and in the other Financing Agreements, and shall not by reason of this Agreement or any otherFinancing Agreement be a trustee or fiduciary for any Lender; (b) shall not be responsible to Lenders for any recitals, statements, representations or warranties contained in this Agreement or in any of the other Financing Agreements, or in anycertificate or other document referred to or provided for in, or received by any of them under, this Agreement or any other Financing Agreement, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreementor any other Financing Agreement or any other document referred to or provided for herein or therein or for any failure by Borrower or any Obligor or any other Person to perform any of its obligations hereunder or thereunder; and (c) shall not beresponsible to Lenders for any action taken or omitted to be taken by it hereunder or under any other Financing Agreement or under any other document or instrument referred to or provided for herein or therein or in connection herewith or therewith,

 

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except for its own gross negligence or willful misconduct as determined by a final non-appealable judgment of a court of competent jurisdiction. Agent mayemploy agents and attorneys-in-fact and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith. Agent may deem and treat the payee of any note as the holder thereof for allpurposes hereof unless and until the assignment thereof pursuant to an agreement (if and to the extent permitted herein) in form and substance satisfactory to Agent shall have been delivered to and acknowledged by Agent. 

 

12.2 Reliance by Agent. Agent shall be entitled to rely upon anycertification, notice or other communication (including any thereof by telephone, telecopy, telex, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and uponadvice and statements of legal counsel, independent accountants and other experts selected by Agent. As to any matters not expressly provided for by this Agreement or any other Financing Agreement, Agent shall in all cases be fully protected inacting, or in refraining from acting, hereunder or thereunder in accordance with instructions given by the Required Lenders or all of Lenders as is required in such circumstance, and such instructions of such Agents and any action taken or failureto act pursuant thereto shall be binding on all Lenders. 

 

12.3Events of Default. 

 

(a) Agent shall not be deemed to haveknowledge or notice of the occurrence of a Default or an Event of Default or other failure of a condition precedent to the Loans and Letter of Credit Accommodations hereunder, unless and until Agent has received written notice from a Lender, or aBorrower specifying such Event of Default or any unfulfilled condition precedent, and stating that such notice is a “Notice of Default or Failure of Condition”. In the event that Agent receives such a Notice of Default or Failure ofCondition, Agent shall give prompt notice thereof to the Lenders. Agent shall (subject to Section 12.7) take such action with respect to any such Event of Default or failure of condition precedent as shall be directed by the Required Lenders;provided, that, unless and until Agent shall have received such directions, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to or by reason of such Event of Default or failure of conditionprecedent, as it shall deem advisable in the best interest of Lenders. 

 

(b) Except with the prior written consent of Agent, no Lender may assert or exercise any enforcement right or remedy in respect of the Loans, Letter of Credit Accommodations or other Obligations, as against Borrower or any Obligor or any ofthe Collateral or other property of Borrower or any Obligor. 

 

12.4 Congress in its Individual Capacity. With respect to its Commitment and the Loans made and Letter of Credit Accommodations issued or caused to be issued by it (and any successor acting as Agent), so long as Congress shall be a Lenderhereunder, it shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not acting as Agent, and the term “Lender” or “Lenders” shall, unless the context otherwise indicates,include Congress in its individual capacity as Lender hereunder. Congress (and any successor acting as Agent) and its Affiliates may (without having to account therefor to any Lender) lend money to, make investments in and generally engage in anykind of business with 

 

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Borrower (and any of its Subsidiaries or Affiliates) as if it were not acting as Agent, and Congress and its Affiliates may accept fees and otherconsideration from Borrower or any Obligor and any of its Subsidiaries and Affiliates for services in connection with this Agreement or otherwise without having to account for the same to Lenders. 

 

12.5 Indemnification. Lenders agree to indemnify Agent (to the extent notreimbursed by Borrower hereunder and without limiting any obligations of Borrower hereunder) ratably, in accordance with their Pro Rata Shares, for any and all claims of any kind and nature whatsoever that may be imposed on, incurred by or assertedagainst Agent (including by any Lender) arising out of or by reason of any investigation in or in any way relating to or arising out of this Agreement or any other Financing Agreement or any other documents contemplated by or referred to herein ortherein or the transactions contemplated hereby or thereby (including the costs and expenses that Agent is obligated to pay hereunder) or the enforcement of any of the terms hereof or thereof or of any such other documents, provided, that, no Lendershall be liable for any of the foregoing to the extent it arises from the gross negligence or willful misconduct of the party to be indemnified as determined by a final non-appealable judgment of a court of competent jurisdiction. The foregoingindemnity shall survive the payment of the Obligations and the termination or non-renewal of this Agreement. 

 

12.6 Non-Reliance on Agent and Other Lenders. Each Lender agrees that it has, independently and without reliance on Agent or other Lender, and based onsuch documents and information as it has deemed appropriate, made its own credit analysis of Borrower and Obligors and has made its own decision to enter into this Agreement and that it will, independently and without reliance upon Agent or anyother Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or any of the other Financing Agreements. Agentshall not be required to keep itself informed as to the performance or observance by Borrower or Obligor of any term or provision of this Agreement or any of the other Financing Agreements or any other document referred to or provided for herein ortherein or to inspect the properties or books of Borrower or any Obligor. Agent will use reasonable efforts to provide Lenders with any information received by Agent from Borrower or any Obligor which is required to be provided to Lenders hereunderand with a copy of any Notice of Default or Failure of Condition received by Agent from Borrower or any Lender; provided, that, Agent shall not be liable to any Lender for any failure to do so, except to the extent that such failure is attributableto Agent’s own gross negligence or willful misconduct as determined by a final non-appealable judgment of a court of competent jurisdiction. Except for notices, reports and other documents expressly required to be furnished to Lenders by Agenthereunder, Agent shall not have any duty or responsibility to provide any Lender with any other credit or other information concerning the affairs, financial condition or business of Borrower or any Obligor that may come into the possession ofAgent. 

 

12.7 Failure to Act. Except for action expresslyrequired of Agent hereunder and under the other Financing Agreements, Agent shall in all cases be fully justified in failing or refusing to act hereunder and thereunder unless it shall receive further assurances to its satisfaction from Lenders oftheir indemnification obligations under Section 12.5 hereof against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. 

 

 

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12.8 Additional Loans. Agent shall not make any Revolving Loans or provide any Letter of CreditAccommodations to Borrower on behalf of Lenders intentionally and with actual knowledge that such Revolving Loans or Letter of Credit Accommodations would cause the aggregate amount of the total outstanding Revolving Loans and Letter of CreditAccommodations to Borrower to exceed the Borrowing Base, without the prior consent of all Lenders, except, that, Agent may make such additional Revolving Loans or provide such additional Letter of Credit Accommodations on behalf of Lenders,intentionally and with actual knowledge that such Revolving Loans or Letter of Credit Accommodations will cause the total outstanding Revolving Loans and Letter of Credit Accommodations to Borrower to exceed the Borrowing Base, as Agent may deemnecessary or advisable in its discretion, provided, that: (a) the total principal amount of the additional Revolving Loans or additional Letter of Credit Accommodations to Borrower which Agent may make or provide after obtaining such actualknowledge that the aggregate principal amount of the Revolving Loans equal or exceed the Borrowing Base, plus the Special Agent Advances pursuant to Section 12.11(a)(ii) then outstanding, shall not cause the total of all outstanding Loans and Letterof Credit Accommodations to exceed the amount of the Revolving Loans and Letter of Credit Accommodations available to Borrower hereunder by more than five percent (5%) of such amount and shall not cause the total principal amount of the RevolvingLoans and Letter of Credit Accommodations to exceed the Maximum Credit and (b) no such additional Revolving Loans or Letter of Credit Accommodations shall be outstanding more than sixty (60) days after the date such additional Revolving Loan orLetter of Credit Accommodation is made or issued (as the case may be), except as the Required Lenders may otherwise agree. Each Lender shall be obligated to pay Agent the amount of its Pro Rata Share of any such additional Revolving Loans or Letterof Credit Accommodations. 

 

12.9 Concerning the Collateral andthe Related Financing Agreements. Each Lender authorizes and directs Agent to enter into this Agreement and the other Financing Agreements. Each Lender agrees that any action taken by Agent or Required Lenders in accordance with the terms of thisAgreement or the other Financing Agreements and the exercise by Agent or Required Lenders of their respective powers set forth therein or herein, together with such other powers that are reasonably incidental thereto, shall be binding upon all ofthe Lenders. 

 

12.10 Field Audit, Examination Reports and otherInformation; Disclaimer by Lenders. By signing this Agreement, each Lender: 

 

(a) is deemed to have requested that Agent furnish such Lender, promptly after it becomes available, a copy of each field audit or examination report and a weekly report with respect to the Borrowing Base prepared byAgent (each field audit or examination report and monthly report with respect to the Borrowing Base being referred to herein as a “Report” and collectively, “Reports”); 

 

(b) expressly agrees and acknowledges that Agent (A) does not make anyrepresentation or warranty as to the accuracy of any Report, or (B) shall not be liable for any information contained in any Report; 

 

(c) expressly agrees and acknowledges that the Reports are not comprehensive audits or examinations, that Agent or any other party performing any audit or

 

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examination will inspect only specific information regarding Borrower and any Obligor and will rely significantly upon Borrower’s and Obligors’books and records, as well as on representations of Borrower’ and Obligors’ personnel; and 

 

(d) agrees to keep all Reports confidential and strictly for its internal use in accordance with the terms of Section 13.5 hereof, and not to distributeor use any Report in any other manner. 

 

12.11 CollateralMatters. 

 

(a) Agent may, at its option, from time to time, atany time on or after an Event of Default and for so long as the same is continuing or upon any other failure of a condition precedent to the Loans and Letter of Credit Accommodations hereunder, make such disbursements and advances (“SpecialAgent Advances”) which Agent, in its sole discretion, deems necessary or desirable either (i) to preserve or protect the Collateral or any portion thereof or (ii) to enhance the likelihood or maximize the amount of repayment by Borrower of theLoans and other Obligations, provided, that, the aggregate principal amount of the Special Agent Advances pursuant to this clause (ii), plus the then outstanding principal amount of the additional Loans and Letter of Credit Accommodations whichAgent may make or provide as set forth in Section 12.8 hereof, shall not cause the total of all outstanding Loans and Letter of Credit Accommodations to exceed the amount of the Revolving Loans and Letter of Credit Accommodations available toBorrower hereunder by more than five percent (5%) of such amount or (iii) to pay any other amount chargeable to Borrower or Obligor pursuant to the terms of this Agreement or any of the other Financing Agreements consisting of costs, fees andexpenses and payments to any issuer of Letter of Credit Accommodations. Special Agent Advances shall be repayable on demand and be secured by the Collateral. Special Agent Advances shall not constitute Loans but shall otherwise constituteObligations hereunder. Agent shall notify each Lender and Borrower in writing of each such Special Agent Advance, which notice shall include a description of the purpose of such Special Agent Advance. Without limitation of its obligations pursuantto Section 6.10, each Lender agrees that it shall make available to Agent, upon Agent’s demand, in immediately available funds, the amount equal to such Lender’s Pro Rata Share of each such Special Agent Advance. If such funds are not madeavailable to Agent by such Lender, then such Lender shall be deemed a Defaulting Lender and Agent shall be entitled to recover such funds, on demand from such Lender together with interest thereon for each day from the date such payment was dueuntil the date such amount is paid to Agent at the Federal Funds Rate for each day during such period (as published by the Federal Reserve Bank of New York or at Agent’s option based on the arithmetic mean determined by Agent of the rates forthe last transaction in overnight Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by each of the three leading brokers of Federal funds transactions in New York City selected by Agent) and if such amounts are not paidwithin three (3) days of Agent’s demand, at the highest Interest Rate provided for in Section 3.1 hereof applicable to Prime Rate Loans. 

 

(b) Lenders hereby irrevocably authorize Agent, at its option and in its discretion to release any security interest in, mortgage or lien upon, any of theCollateral (i) upon termination of the Commitments and payment and satisfaction of all of the Obligations and delivery of cash collateral to the extent required under Section 13.1 below, or (ii) constituting 

 

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property being sold or disposed of if Borrower certifies to Agent that the sale or disposition is made in compliance withSection 9.7 hereof (and Agent may rely conclusively on any such certificate, without further inquiry), or (iii) constituting property in which Borrower or any Obligor did not own an interest at the time the security interest, mortgage or lien wasgranted or at any time thereafter, or (iv) having a value in the aggregate in any twelve (12) month period of less than Five Million ($5,000,000) Dollars, or (v) if required under the terms of any of the other Financing Agreements, including anyintercreditor agreement, or (vi) if approved, authorized or ratified in writing by all of Lenders. Except as provided above, Agent will not release any security interest in, mortgage or lien upon, any of the Collateral without the prior writtenauthorization of all of Lenders. Upon request by Agent at any time, Lenders will promptly confirm in writing Agent’s authority to release particular types or items of Collateral pursuant to this Section. 

 

(c) Without in any manner limiting Agent’s authority to act without anyspecific or further authorization or consent by the Required Lenders, each Lender agrees to confirm in writing, upon request by Agent, the authority to release Collateral conferred upon Agent under this Section. Agent shall (and is herebyirrevocably authorized by Lenders to) execute such documents as may be necessary to evidence the release of the security interest, mortgage or liens granted to Agent upon any Collateral to the extent set forth above; provided, that, (i) Agent shallnot be required to execute any such document on terms which, in Agent’s opinion, would expose Agent to liability or create any obligations or entail any consequence other than the release of such security interest, mortgage or liens withoutrecourse or warranty and (ii) such release shall not in any manner discharge, affect or impair the Obligations or any security interest, mortgage or lien upon (or obligations of Borrower or any Obligor in respect of) the Collateral retained byBorrower or such Obligor. 

 

(d) Agent shall have no obligationwhatsoever to any Lender or any other Person to investigate, confirm or assure that the Collateral exists or is owned by Borrower or any Obligor or is cared for, protected or insured or has been encumbered, or that any particular items of Collateralmeet the eligibility criteria applicable in respect of the Loans or Letter of Credit Accommodations hereunder, or whether any particular reserves are appropriate, or that the liens and security interests granted to Agent pursuant hereto or any ofthe Financing Agreements or otherwise have been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care,disclosure or fidelity, or to continue exercising, any of the rights, authorities and powers granted or available to Agent in this Agreement or in any of the other Financing Agreements, it being understood and agreed that in respect of theCollateral, or any act, omission or event related thereto, Agent may act in any manner it may deem appropriate, in its discretion, given Agent’s own interest in the Collateral as a Lender and that Agent shall have no duty or liabilitywhatsoever to any other Lender, except as otherwise expressly set forth in this Agreement. 

 

12.12 Agency for Perfection. Each Lender hereby appoints Agent and each other Lender as agent and bailee for the purpose of perfecting the security interests in and liens upon the Collateral of Agent in assets which,in accordance with Article 9 of the UCC can be perfected only by possession (or where the security interest of a secured party with possession has priority over the security interest of another secured party) and Agent and each Lender hereby

 

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acknowledges that it holds possession of any such Collateral for the benefit of Agent as secured party. Should any Lenderobtain possession of any such Collateral, such Lender shall notify Agent thereof, and, promptly upon Agent’s request therefor shall deliver such Collateral to Agent or in accordance with Agent’s instructions. 

 

12.13 Successor Agent. Agent may resign as Agent upon thirty (30) days’notice to Lenders and Borrower. If Agent resigns under this Agreement, the Required Lenders shall appoint from among the Lenders a successor agent for Lenders. If no successor agent is appointed prior to the effective date of the resignation ofAgent, Agent may appoint, after consulting with Lenders and Borrower, a successor agent from among Lenders. Upon the acceptance by the Lender so selected of its appointment as successor agent hereunder, such successor agent shall succeed to all ofthe rights, powers and duties of the retiring Agent and the term “Agent” as used herein and in the other Financing Agreements shall mean such successor agent and the retiring Agent’s appointment, powers and duties as Agent shall beterminated. After any retiring Agent’s resignation hereunder as Agent, the provisions of this Section 12 shall inure to its benefit as to any actions taken or omitted by it while it was Agent under this Agreement. If no successor agent hasaccepted appointment as Agent by the date which is thirty (30) days after the date of a retiring Agent’s notice of resignation, the retiring Agent’s resignation shall nonetheless thereupon become effective and Lenders shall perform all ofthe duties of Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. 

 

**SECTION 13. TERM OF AGREEMENT; MISCELLANEOUS**

 

13.1 Term. 

 

(a) This Agreement and the other Financing Agreements shall become effective as of the date set forth on the first page hereof and shall continue in fullforce and effect for a term ending on the date three (3) years from the date hereof (the “Renewal Date”), unless sooner terminated pursuant to the terms hereof; provided that Borrower agrees that Agent may, at its option, extend theRenewal Date to four (4) years from the date hereof by giving to Borrower notice at least sixty (60) days prior to the date of the third (3rd) anniversary of this Agreement (the “Renewal Notice”). Upon Borrower’s receipt of theRenewal Notice, the Renewal Date shall automatically be extended unless, within ten (10) Business Days of Borrower’s receipt of the Renewal Notice, Borrower provides to Agent with written notice of Borrower’s intention not to extendthe Renewal Date, in which case the stated term of this Agreement shall terminate on the original Renewal Date. In addition, Borrower may terminate this Agreement at any time upon sixty (60) days prior written notice to Agent (which notice shall beirrevocable) and Agent may, at its option, and shall at the direction of Required Lenders, terminate this Agreement at any time on or after an Event of Default. Upon the effective date of termination of the Financing Agreements, Borrower shall payto Agent all outstanding and unpaid Obligations and shall furnish cash collateral to Agent (or at Agent’s option, a letter of credit issued for the account of Borrower and at Borrower’s expense, in form and substance satisfactory to Agent,by an issuer acceptable to Agent and payable to Agent as beneficiary) in such amounts as Agent determines are reasonably necessary to secure Agent and Lenders from loss, cost, damage or expense, including attorneys’ fees and expenses, inconnection with any contingent Obligations, including issued and outstanding Letter of Credit Accommodations and 

 

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checks or other payments provisionally credited to the Obligations and/or as to which Agent or any Lender has not yetreceived final and indefeasible payment. The amount of such cash collateral (or letter of credit, as Agent may determine) as to any Letter of Credit Accommodations shall be in the amount equal to one hundred ten percent (110%) of the amount of theLetter of Credit Accommodations plus the amount of any fees and expenses payable in connection therewith through the end of the latest expiration date of such Letter of Credit Accommodations. Such payments in respect of the Obligations and cashcollateral shall be remitted by wire transfer in Federal funds to the Agent Payment Account or such other bank account of Agent, as Agent may, in its discretion, designate in writing to Borrower for such purpose. Interest shall be due until andincluding the next Business Day, if the amounts so paid by Borrower to the Agent Payment Account or other bank account designated by Agent are received in such bank account later than 12:00 noon, Miami, Florida time. 

 

(b) No termination of this Agreement or the other Financing Agreements shallrelieve or discharge Borrower or any Obligor of its respective duties, obligations and covenants under this Agreement or the other Financing Agreements until all Obligations have been fully and finally discharged and paid, and Agent’scontinuing security interest in the Collateral and the rights and remedies of Agent and Lenders hereunder, under the other Financing Agreements and applicable law, shall remain in effect until all such Obligations have been fully and finallydischarged and paid. Accordingly, Borrower waives any rights it may have under the UCC to demand the filing of termination statements with respect to the Collateral and Agent shall not be required to send such termination statements to Borrower, orto file them with any filing office, unless and until this Agreement shall have been terminated in accordance with its terms and all Obligations paid and satisfied in full in immediately available funds. 

 

(c) If for any reason this Agreement is terminated, in view of theimpracticality and extreme difficulty of ascertaining actual damages and by mutual agreement of the parties as to a reasonable calculation of Agent’s and each Lender’s lost profits as a result thereof, Borrower agrees to pay to Agent foritself and the ratable benefit of Lenders, upon the effective date of such termination, an early termination fee in the amount equal to 

 
   **Amount**  **Period**
(i)
  2.0% of Maximum Credit  From the date hereof through and including the first (1st) anniversary of the date hereof.
(ii)
  0.5% of the Maximum Credit  From the first (1st) day following the first (1st) anniversary of the date hereof to but not including the third (3rd) anniversary of the date hereof or at any time prior to the end of the thencurrent term.
 

Such early termination fee shall bepresumed to be the amount of damages sustained by Agent and Lenders as a result of such early termination and Borrower agrees that it is reasonable under 

 

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the circumstances currently existing. In addition, Agent and Lenders shall be entitled to such early termination fee uponthe occurrence of any Event of Default described in Sections 10.1(g) and 10.1(h) hereof, even if Agent and Lenders do not exercise the right to terminate this Agreement, but elect, at their option, to provide financing to Borrower permit the use ofcash collateral under the United States Bankruptcy Code. The early termination fee provided for in this Section 13.1 shall be deemed included in the Obligations. 

 

(d) Notwithstanding anything to the contrary contained in Section 13.1(c), in the event of the termination of this Agreementby Borrower after the first (1st) anniversary of the date hereof and prior to the end of the then current term and the full and final repayment of all of the Obligations and the receipt by Agent of cash collateral all as provided in Section 13.1(a),Borrower shall not be required to pay the early termination fee provided for above if each of the following conditions is satisfied: (i) no Event of Default or act, condition or event which with notice or passage of time or both would constitute anEvent of Default shall exist or have occurred and be continuing, (ii) Agent shall have received not less than thirty (30) days prior written notice of the intention of Borrower to so terminate this Agreement, and (iii) the final payment in full ofall of the Obligations is received simultaneously with the refinancing of the Credit Facility with proceeds of loans made by Wachovia Bank, National Association, or its affiliates to Borrower; 

 

13.2 Interpretative Provisions. 

 

(a) All terms used herein which are defined in Article 1, Article 8 orArticle 9 of the UCC shall have the meanings given therein unless otherwise defined in this Agreement. 

 

(b) All references to the plural herein shall also mean the singular and to the singular shall also mean the plural unless the context otherwise requires.

 

(c) All references to Borrower, any Obligor, Agent and Lenderspursuant to the definitions set forth in the recitals hereto, or to any other person herein, shall include their respective successors and assigns. 

 

(d) The words “hereof”, “herein”, “hereunder”, “this Agreement” and words of similar import when used in thisAgreement shall refer to this Agreement as a whole and not any particular provision of this Agreement and as this Agreement now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced. 

 

(e) The word “including” when used in this Agreement shall mean“including, without limitation”. 

 

(f) An Event ofDefault shall exist or continue or be continuing until such Event of Default is waived in accordance with Section 11.3 or is cured in a manner satisfactory to Agent, if such Event of Default is capable of being cured as determined by Agent.

 

(g) All references to the term “good faith” usedherein when applicable to Agent or any Lender shall mean, notwithstanding anything to the contrary contained herein or in the UCC, honesty in fact in the conduct or transaction concerned. Borrower shall have the 

 

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burden of proving any lack of good faith on the part of Agent or any Lender alleged by Borrower at any time. 

 

(h) Any accounting term used in this Agreement shall have, unlessotherwise specifically provided herein, the meaning customarily given in accordance with GAAP, and all financial computations hereunder shall be computed unless otherwise specifically provided herein, in accordance with GAAP as consistently appliedand using the same method for inventory valuation as used in the preparation of the financial statements of Borrower most recently received by Agent prior to the date hereof. 

 

(i) In the computation of periods of time from a specified date to a later specified date, the word “from” means“from and including”, the words “to” and “until” each mean “to but excluding” and the word “through” means “to and including”. 

 

(j) Unless otherwise expressly provided herein, (i) references herein to any agreement, document or instrument shall bedeemed to include all subsequent amendments, modifications, supplements, extensions, renewals, restatements or replacements with respect thereto, but only to the extent the same are not prohibited by the terms hereof or of any other FinancingAgreement, and (ii) references to any statute or regulation are to be construed as including all statutory and regulatory provisions consolidating, amending, replacing, recodifying, supplementing or interpreting the statute or regulation.

 

(k) The captions and headings of this Agreement are forconvenience of reference only and shall not affect the interpretation of this Agreement. 

 

(l) This Agreement and other Financing Agreements may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative andshall each be performed in accordance with their terms. 

 

(m)This Agreement and the other Financing Agreements are the result of negotiations among and have been reviewed by counsel to Agent and the other parties, and are the products of all parties. Accordingly, this Agreement and the other FinancingAgreements shall not be construed against Agent or Lenders merely because of Agent’s or any Lender’s involvement in their preparation. 

 

13.3 Notices. All notices, requests and demands hereunder shall be in writing and deemed to have been given or made: if delivered in person, immediatelyupon delivery; if by telex, telegram or facsimile transmission, immediately upon sending and upon confirmation of receipt; if by nationally recognized overnight courier service with instructions to deliver the next Business Day, one (1) Business Dayafter sending; and if by certified mail, return receipt requested, five (5) days after mailing. All notices, requests and demands upon the parties are to be given to the following addresses (or to such other address as any party may designate bynotice in accordance with this Section): 

 

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If to Borrower:
  
REPTRON ELECTRONICS, INC.

13700 ReptronBoulevard

Tampa, Florida 33626-3021

Attention: Mr. Paul J.Plante

Telephone No.: 813 854-2000

Telecopy No.: 813891-4007

If to Agent:
  
CONGRESS FINANCIAL CORPORATION (FLORIDA)

777 BrickellAvenue

Miami, Florida 33131

Attention: Ms. KerryMaxwell

Telephone No.: 305 371-6674

Telecopy No.: 305371-9456

 

13.3 PartialInvalidity. If any provision of this Agreement is held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate this Agreement as a whole, but this Agreement shall be construed as though it did not contain theparticular provision held to be invalid or unenforceable and the rights and obligations of the parties shall be construed and enforced only to such extent as shall be permitted by applicable law. 

 

13.4 Confidentiality. 

 

(a) Agent and each Lender shall use all reasonable efforts to keepconfidential, in accordance with its customary procedures for handling confidential information and safe and sound lending practices, any non-public information supplied to it by Borrower pursuant to this Agreement which is clearly and conspicuouslymarked as confidential at the time such information is furnished by Borrower to Agent or such Lender, provided, that, nothing contained herein shall limit the disclosure of any such information: (i) to the extent required by statute, rule,regulation, subpoena or court order, (ii) to bank examiners and other regulators, auditors and/or accountants, in connection with any litigation to which Agent or such Lender is a party, (iii) to any Lender or Participant (or prospective Lender orParticipant) or to any Affiliate of any Lender so long as such Lender or Participant (or prospective Lender or Participant) or Affiliate shall have been instructed to treat such information as confidential in accordance with this Section 13.5, or(iv) to counsel for Agent or any Lender or Participant (or prospective Lender or Participant). 

 

(b) In the event that Agent or any Lender receives a request or demand to disclose any confidential information pursuant to any subpoena or court order, Agent or such Lender, as the case may be, agrees (i) to theextent permitted by applicable law or if permitted by applicable law, to the extent Agent or such Lender determines in good faith that it will not create any risk of liability to Agent or such Lender, Agent or such Lender will promptly notifyBorrower of such request so that Borrower may seek a protective order or other appropriate relief or remedy and (ii) if disclosure of such information is required, disclose such information and, subject to reimbursement by Borrower of Agent’sor such Lender’s expenses, cooperate with Borrower in the reasonable efforts to obtain an order or other reliable assurance that confidential treatment will be accorded to such portion of the disclosed information which Borrower so 

 

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designates, to the extent permitted by applicable law or if permitted by applicable law, to the extent Agent or suchLender determines in good faith that it will not create any risk of liability to Agent or such Lender. 

 

(c) In no event shall this Section 13.5 or any other provision of this Agreement, any of the other Financing Agreements or applicable law be deemed: (i)to apply to or restrict disclosure of information that has been or is made public by Borrower, any Obligor or any third party or otherwise becomes generally available to the public other than as a result of a disclosure in violation hereof, (ii) toapply to or restrict disclosure of information that was or becomes available to Agent or any Lender (or any Affiliate of any Lender) on a non-confidential basis from a person other than Borrower, (iii) to require Agent or any Lender to return anymaterials furnished by Borrower to Agent or a Lender or prevent Agent or a Lender from responding to routine informational requests in accordance with the Code of Ethics for the Exchange of Credit Information promulgated by The Robert MorrisAssociates or other applicable industry standards relating to the exchange of credit information. The obligations of Agent and Lenders under this Section 13.5 shall supersede and replace the obligations of Agent and Lenders under any confidentialityletter signed prior to the date hereof. 

 

13.5 Successors. ThisAgreement, the other Financing Agreements and any other document referred to herein or therein shall be binding upon and inure to the benefit of and be enforceable by Agent, Lenders, Borrower, and their respective successors and assigns, except thatBorrower may not assign its rights under this Agreement, the other Financing Agreements and any other document referred to herein or therein without the prior written consent of Agent and Lenders. Any such purported assignment without such expressprior written consent shall be void. No Lender may assign its rights and obligations under this Agreement without the prior written consent of Agent, except as provided in Section 13.7 below. The terms and provisions of this Agreement and the otherFinancing Agreements are for the purpose of defining the relative rights and obligations of Borrower, Agent and Lenders with respect to the transactions contemplated hereby and there shall be no third party beneficiaries of any of the terms andprovisions of this Agreement or any of the other Financing Agreements. 

 

13.6 Assignments; Participations. 

 

(a) Each Lendermay, with the prior written consent of Agent, assign all or, if less than all, a portion equal to at least $5,000,000 in the aggregate for the assigning Lender, of such rights and obligations under this Agreement to one or more Eligible Transferees(but not including for this purpose any assignments in the form of a participation), each of which assignees shall become a party to this Agreement as a Lender by execution of an Assignment and Acceptance; provided, that, such transfer or assignmentwill not be effective until: (i) it is recorded by Agent on the Register and (ii) Agent shall have received for its sole account payment of a processing fee from the assigning Lender or the assignee in the amount of $5,000. 

 

(b) Agent shall maintain a register of the names and addresses of Lenders,their Commitments and the principal amount of their Loans (the “Register”). Agent shall also maintain a copy of each Assignment and Acceptance delivered to and accepted by it and shall modify the Register to give effect to each Assignmentand Acceptance. The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and Borrower, 

 

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Obligors, Agent and Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for allpurposes of this Agreement. The Register shall be available for inspection by Borrower and any Lender at any reasonable time and from time to time upon reasonable prior notice. 

 

(c) Upon such execution, delivery, acceptance and recording, from and after the effective date specified in each Assignmentand Acceptance, (i) the assignee thereunder shall be a party hereto and to the other Financing Agreements and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such Assignment and Acceptance, have the rightsand obligations (including, without limitation, the obligation to participate in Letter of Credit Accommodations) of a Lender hereunder and thereunder and (ii) the assigning Lender shall, to the extent that rights and obligations hereunder have beenassigned by it pursuant to such Assignment and Acceptance, relinquish its rights and be released from its obligations under this Agreement. 

 

(d) By execution and delivery of an Assignment and Acceptance, the assignor and assignee thereunder confirm to and agree with each other and the otherparties hereto as follows: (i) other than as provided in such Assignment and Acceptance, the assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in orin connection with this Agreement or any of the other Financing Agreements or the execution, legality, enforceability, genuineness, sufficiency or value of this Agreement or any of the other Financing Agreements furnished pursuant hereto, (ii) theassigning Lender makes no representation or warranty and assumes no responsibility with respect to the financial condition of Borrower, any Obligor or any of their Subsidiaries or the performance or observance by Borrower or any Obligor of any ofthe Obligations; (iii) such assignee confirms that it has received a copy of this Agreement and the other Financing Agreements, together with such other documents and information it has deemed appropriate to make its own credit analysis and decisionto enter into such Assignment and Acceptance, (iv) such assignee will, independently and without reliance upon the assigning Lender, Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its owncredit decisions in taking or not taking action under this Agreement and the other Financing Agreements, (v) such assignee appoints and authorizes Agent to take such action as agent on its behalf and to exercise such powers under this Agreement andthe other Financing Agreements as are delegated to Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto, and (vi) such assignee agrees that it will perform in accordance with their terms all of theobligations which by the terms of this Agreement and the other Financing Agreements are required to be performed by it as a Lender. Agent and Lenders may furnish any information concerning Borrower or any Obligor in the possession of Agent or anyLender from time to time to assignees and Participants. 

 

(e)Each Lender may sell participations to one or more banks or other entities in or to all or a portion of its rights and obligations under this Agreement and the other Financing Agreements (including, without limitation, all or a portion of itsCommitments and the Loans owing to it and its participation in the Letter of Credit Accommodations, without the consent of Agent or the other Lenders); provided, that, (i) such Lender’s obligations under this Agreement (including, withoutlimitation, its Commitment hereunder) and the other Financing Agreements 

 

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shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performanceof such obligations, and Borrower, the other Lenders and Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and the other Financing Agreements, (iii)the Participant shall not have any rights under this Agreement or any of the other Financing Agreements (the Participant’s rights against such Lender in respect of such participation to be those set forth in the agreement executed by suchLender in favor of the Participant relating thereto) and all amounts payable by Borrower or any Obligor hereunder shall be determined as if such Lender had not sold such participation. 

 

(f) Nothing in this Agreement shall prevent or prohibit any Lender from pledging its Loans hereunder to a Federal ReserveBank in support of borrowings made by such Lenders from such Federal Reserve Bank, 

 

(g) Borrower shall assist Agent or any Lender permitted to sell assignments or participations under this Section 13.7 in whatever manner reasonably necessary in order to enable or effect any such assignment orparticipation, including (but not limited to) the execution and delivery of any and all agreements, notes and other documents and instruments as shall be requested and the delivery of informational materials, appraisals or other documents for, andthe participation of relevant management in meetings and conference calls with, potential Lenders or Participants. Borrower shall certify the correctness, completeness and accuracy, in all material respects, of all descriptions of Borrower and itsaffairs provided, prepared or reviewed by Borrower that are contained in any selling materials and all other information provided by it and included in such materials. 

 

13.7 Entire Agreement. This Agreement, the other Financing Agreements, any supplements hereto or thereto, and anyinstruments or documents delivered or to be delivered in connection herewith or therewith represents the entire agreement and understanding concerning the subject matter hereof and thereof between the parties hereto, and supersede all other prioragreements, understandings, negotiations and discussions, representations, warranties, commitments, proposals, offers and contracts concerning the subject matter hereof, whether oral or written. In the event of any inconsistency between the terms ofthis Agreement and any schedule or exhibit hereto, the terms of this Agreement shall govern. 

 

13.8 Counterparts, Etc. This Agreement or any of the other Financing Agreements may be executed in any number of counterparts, each of which shall be an original, but all of which taken together shall constitute oneand the same agreement. Delivery of an executed counterpart of this Agreement or any of the other Financing Agreements by telefacsimile shall have the same force and effect as the delivery of an original executed counterpart of this Agreement or anyof such other Financing Agreements. Any party delivering an executed counterpart of any such agreement by telefacsimile shall also deliver an original executed counterpart, but the failure to do so shall not affect the validity, enforceability orbinding effect of such agreement. 

 

[SIGNATURE PAGE FOLLOWS]

 

 

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IN WITNESS WHEREOF, Agent, Lenders and Borrower has caused these presents to be duly executed as of theday and year first above written. 

 

AGENT

 

CONGRESS FINANCIAL CORPORATION

(FLORIDA), as Agent
   
BORROWER

 

REPTRON ELECTRONICS, INC.
By:     By:         Title:     Title:         
 

LENDER

 

CONGRESS FINANCIAL CORPORATION

(FLORIDA), as Lender
    By:                Title:                
 

Commitment: $25,000,000 

 

95 

**EXHIBIT A**

**to**

**LOAN AND SECURITY AGREEMENT**

 

**ASSIGNMENT AND ACCEPTANCE AGREEMENT**

 

This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this “Assignment and Acceptance”) dated as of            , 2004 is made between              (the “Assignor”) and                         (the “Assignee”). 

 

**W I T N E S S E T H:**

 

WHEREAS, Congress Financial Corporation (Florida), in its capacity as agent pursuant to the Loan Agreement (as hereinafter defined) acting for and onbehalf of the financial institutions which are parties thereto as lenders (in such capacity, “Agent”), and the financial institutions which are parties to the Loan Agreement as lenders (individually, each a “Lender” andcollectively, “Lenders”) have entered or are about to enter into financing arrangements pursuant to which Agent and Lenders may make loans and advances and provide other financial accommodations to Reptron Electronics, Inc.(“Borrower”) as set forth in the Loan and Security Agreement, dated February     , 2004, by and among Borrower, Agent and Lenders (as the same now exists or may hereafter be amended, modified, supplemented,extended, renewed, restated or replaced, the “Loan Agreement”), and the other agreements, documents and instruments referred to therein or at any time executed and/or delivered in connection therewith or related thereto (all of theforegoing, together with the Loan Agreement, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, being collectively referred to herein as the “Financing Agreements”);

 

WHEREAS, as provided under the Loan Agreement, Assignorcommitted to making Loans (the “Committed Loans”) to Borrower in an aggregate amount not to exceed $             (the “Commitment”); 

 

WHEREAS, Assignor wishes to assign to Assignee [part of the] [all] rights andobligations of Assignor under the Loan Agreement in respect of its Commitment in an amount equal to $             (the “Assigned Commitment Amount”) on the terms andsubject to the conditions set forth herein and Assignee wishes to accept assignment of such rights and to assume such obligations from Assignor on such terms and subject to such conditions; 

 

NOW, THEREFORE, in consideration of the foregoing and the mutual agreementscontained herein, the parties hereto agree as follows: 

 

1.Assignment and Acceptance. 

 

 

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(a) Subject to the terms and conditions of this Assignment and Acceptance, Assignor hereby sells,transfers and assigns to Assignee, and Assignee hereby purchases, assumes and undertakes from Assignor, without recourse and without representation or warranty (except as provided in this Assignment and Acceptance) an interest in (i) the Commitmentand each of the Committed Loans of Assignor and (ii) all related rights, benefits, obligations, liabilities and indemnities of the Assignor under and in connection with the Loan Agreement and the other Financing Agreements, so that after givingeffect thereto, the Commitment of Assignee shall be as set forth below and the Pro Rata Share of Assignee shall be              percent(            %). 

 

(b) With effect on and after the Effective Date (as defined in Section 5 hereof), Assignee shall be a party to the Loan Agreement and succeed to all of the rights and be obligated to perform all of the obligations ofa Lender under the Loan Agreement, including the requirements concerning confidentiality and the payment of indemnification, with a Commitment in an amount equal to the Assigned Commitment Amount. Assignee agrees that it will perform in accordancewith their terms all of the obligations which by the terms of the Loan Agreement are required to be performed by it as a Lender. It is the intent of the parties hereto that the Commitment of Assignor shall, as of the Effective Date, be reduced by anamount equal to the Assigned Commitment Amount and Assignor shall relinquish its rights and be released from its obligations under the Loan Agreement to the extent such obligations have been assumed by Assignee; provided, that, Assignor shall notrelinquish its rights under Sections 2.1, 6.4, 6.8 and 6.9 of the Loan Agreement to the extent such rights relate to the time prior to the Effective Date. 

 

(c) After giving effect to the assignment and assumption set forth herein, on the Effective Date Assignee’s Commitment will be$            . 

 

(d) After giving effect to the assignment and assumption set forth herein, on the Effective Date Assignor’s Commitment will be $             (assuch amount may be further reduced by any other assignment by Assignor on or after the date hereof). 

 

2. Payments. 

 

(a) As consideration for the sale, assignment and transfer contemplated in Section 1 hereof, Assignee shall pay to Assignor on the Effective Date inimmediately available funds an amount equal to $            , representing Assignee’s Pro Rata Share of the principal amount of all Committed Loans. 

 

(b) Assignee shall pay to Agent the processing fee in the amount specified inSection 13.7(a) of the Loan Agreement. 

 

3. Reallocation ofPayments. Any interest, fees and other payments accrued to the Effective Date with respect to the Commitment, Committed Loans and outstanding Letter of Credit Accommodations shall be for the account of Assignor. Any interest, fees and other paymentsaccrued on and after the Effective Date with respect to the Assigned Commitment Amount shall be for the account of Assignee. Each of Assignor and Assignee agrees that it will hold in trust for the other party any interest, fees and other amountswhich it may receive to 

 

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which the other party is entitled pursuant to the preceding sentence and pay to the other party any such amounts which itmay receive promptly upon receipt. 

 

4. Independent CreditDecision. Assignee acknowledges that it has received a copy of the Loan Agreement and the Schedules and Exhibits thereto, together with copies of the most recent financial statements of             and its Subsidiaries, and such other documents and information as it has deemed appropriate to make its own credit and legal analysis and decision to enter into thisAssignment and Acceptance and agrees that it will, independently and without reliance upon Assignor, Agent or any Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit and legaldecisions in taking or not taking action under the Loan Agreement. 

 

5. Effective Date; Notices. 

 

(a) As between Assignorand Assignee, the effective date for this Assignment and Acceptance shall be             , 200_ (the “Effective Date”); provided, that, the following conditions precedenthave been satisfied on or before the Effective Date: 

 

(i) this Assignment and Acceptance shall be executed and delivered by Assignor and Assignee; 

 

(ii) the consent of Agent as required for an effective assignment of the Assigned Commitment Amount by Assignor to Assignee shall havebeen duly obtained and shall be in full force and effect as of the Effective Date; 

 

(iii) written notice of such assignment, together with payment instructions, addresses and related information with respect to Assignee,shall have been given to Borrower and Agent; 

 

(iv) Assignee shall pay to Assignor all amounts due to Assignor under this Assignment and Acceptance; and 

 

(v) the processing fee referred to in Section 2(b) hereof shall have been paid to Agent. 

 

(b) Promptly following the execution of this Assignment and Acceptance,Assignor shall deliver to Borrower and Agent for acknowledgment by Agent, a Notice of Assignment in the form attached hereto as Schedule 1. 

 

[6. Agent. [INCLUDE ONLY IF ASSIGNOR IS AN AGENT] 

 

(a) Assignee hereby appoints and authorizes Assignor in its capacity as Agent to take such action as agent on its behalf to exercise such powers under theLoan Agreement as are delegated to Agent by Lenders pursuant to the terms of the Loan Agreement. 

 

(b) Assignee shall assume no duties or obligations held by Assignor in its capacity as Agent under the Loan Agreement.] 

 

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7. Withholding Tax. Assignee (a) represents and warrants to Assignor, Agent and Borrower that underapplicable law and treaties no tax will be required to be withheld by Assignee, Agent or Borrower with respect to any payments to be made to Assignee hereunder or under any of the Financing Agreements, (b) agrees to furnish (if it is organized underthe laws of any jurisdiction other than the United States or any State thereof) to Agent and Borrower prior to the time that Agent or Borrower are required to make any payment of principal, interest or fees hereunder, duplicate executed originals ofeither U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 (wherein Assignee claims entitlement to the benefits of a tax treaty that provides for a complete exemption from U.S. federal income withholding tax on allpayments hereunder) and agrees to provide new Forms 4224 or 1001 upon the expiration of any previously delivered form or comparable statements in accordance with applicable U.S. law and regulations and amendments thereto, duly executed and completedby Assignee, and (c) agrees to comply with all applicable U.S. laws and regulations with regard to such withholding tax exemption. 

 

8. Representations and Warranties. 

 

(a) Assignor represents and warrants that (i) it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interestis free and clear of any security interest, lien, encumbrance or other adverse claim, (ii) it is duly organized and existing and it has the full power and authority to take, and has taken, all action necessary to execute and deliver this Assignmentand Acceptance and any other documents required or permitted to be executed or delivered by it in connection with this Assignment and Acceptance and to fulfill its obligations hereunder, (iii) no notices to, or consents, authorizations or approvalsof, any Person are required (other than any already given or obtained) for its due execution, delivery and performance of this Assignment and Acceptance, and apart from any agreements or undertakings or filings required by the Loan Agreement, nofurther action by, or notice to, or filing with, any Person is required of it for such execution, delivery or performance, and (iv) this Assignment and Acceptance has been duly executed and delivered by it and constitutes the legal, valid andbinding obligation of Assignor, enforceable against Assignor in accordance with the terms hereof, subject, as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and other laws of general application relating to or affectingcreditors’ rights and to general equitable principles. 

 

(b) Assignor makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Agreement or any of the other Financing Agreements or theexecution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Agreement or any other instrument or document furnished pursuant thereto. Assignor makes no representation or warranty in connection with, and assumes noresponsibility with respect to, the solvency, financial condition or statements of Borrower, or the performance or observance by Borrower or any other Person, of any of its respective obligations under the Loan Agreement or any other instrument ordocument furnished in connection therewith. 

 

(c) Assigneerepresents and warrants that (i) it is duly organized and existing and it has full power and authority to take, and has taken, all action necessary to execute and deliver this Assignment and Acceptance and any other documents required or permittedto be 

 

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executed or delivered by it in connection with this Assignment and Acceptance, and to fulfill its obligations hereunder, (ii) no notices to, or consents,authorizations or approvals of, any Person are required (other than any already given or obtained) for its due execution, delivery and performance of this Assignment and Acceptance, and apart from any agreements or undertakings or filings requiredby the Loan Agreement, no further action by, or notice to, or filing with, any Person is required of it for such execution, delivery or performance; and (iii) this Assignment and Acceptance has been duly executed and delivered by it and constitutesthe legal, valid and binding obligation of Assignee, enforceable against Assignee in accordance with the terms hereof, subject, as to enforcement, to bankruptcy, insolvency, moratorium, reorganization and other laws of general application relatingto or affecting creditors’ rights to general equitable principles. 

 

9. Further Assurances. Assignor and Assignee each hereby agree to execute and deliver such other instruments, and take such other action, as either party may reasonably request in connection with the transactions contemplated by thisAssignment and Acceptance, including the delivery of any notices or other documents or instruments to Borrower or Agent, which may be required in connection with the assignment and assumption contemplated hereby. 

 

10. Miscellaneous 

 

(a) Any amendment or waiver of any provision of this Assignment andAcceptance shall be in writing and signed by the parties hereto. No failure or delay by either party hereto in exercising any right, power or privilege hereunder shall operate as a waiver thereof and any waiver of any breach of the provisions ofthis Assignment and Acceptance shall be without prejudice to any rights with respect to any other for further breach thereof. 

 

(b) All payments made hereunder shall be made without any set-off or counterclaim. 

 

(c) Assignor and Assignee shall each pay its own costs and expenses incurred in connection with the negotiation,preparation, execution and performance of this Assignment and Acceptance. 

 

(d) This Assignment and Acceptance may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. 

 

(e) THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED INACCORDANCE WITH THE LAW OF THE STATE OF FLORIDA. Assignor and Assignee each irrevocably submits to the non-exclusive jurisdiction of any State or Federal court sitting in Dade County, Florida over any suit, action or proceeding arising out of orrelating to this Assignment and Acceptance and irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such Florida State or Federal court. Each party to this Assignment and Acceptance herebyirrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. 

 

 

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(f) ASSIGNOR AND ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAYHAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS ASSIGNMENT AND ACCEPTANCE, THE LOAN AGREEMENT, ANY OF THE OTHER FINANCING AGREEMENTS OR ANY RELATED DOCUMENTS AND AGREEMENTS ORANY COURSE OF CONDUCT, COURSE OF DEALING, OR STATEMENTS (WHETHER ORAL OR WRITTEN). 

 

IN WITNESS WHEREOF, Assignor and Assignee have caused this Assignment and Acceptance to be executed and delivered by their duly authorized officers as of the date first above written. 

 

[ASSIGNOR] 

 

By:                                                                                                                                        

 

Title:                                                                                                                                    

 

[ASSIGNEE] 

 

By:                                                                                                                                        

 

Title:                                                                                                                                   

 

 

101 

**SCHEDULE 1**

**NOTICE OF ASSIGNMENT AND ACCEPTANCE**

 

                        , 2004 

 

Attn.: 

 
 Re:Reptron Electronics, Inc. 
 

Ladies and Gentlemen: 

 

CongressFinancial Corporation (Florida), in its capacity as agent pursuant to the Loan Agreement (as hereinafter defined) acting for and on behalf of the financial institutions which are parties thereto as lenders (in such capacity, “Agent”), andthe financial institutions which are parties to the Loan Agreement as lenders (individually, each a “Lender” and collectively, “Lenders”) have entered or are about to enter into financing arrangements pursuant to which Agent andLenders may make loans and advances and provide other financial accommodations to Reptron Electronics, Inc. (“Borrower”) as set forth in the Loan and Security Agreement, dated February     , 2004, by and amongBorrower, Agent and Lenders (as the same now exists or may hereafter be amended, modified, supplemented, extended, renewed, restated or replaced, the “Loan Agreement”), and the other agreements, documents and instruments referred totherein or at any time executed and/or delivered in connection therewith or related thereto (all of the foregoing, together with the Loan Agreement, as the same now exist or may hereafter be amended, modified, supplemented, extended, renewed,restated or replaced, being collectively referred to herein as the “Financing Agreements”). Capitalized terms not otherwise defined herein shall have the respective meanings ascribed thereto in the Loan Agreement. 

 

1. We hereby give you notice of, and request your consent to, the assignmentby              (the “Assignor”) to              (the “Assignee”) such that after giving effectto the assignment Assignee shall have an interest equal to              percent (            %) of the totalCommitments pursuant to the Assignment and Acceptance Agreement attached hereto (the “Assignment and Acceptance”). We understand that the Assignor’s Commitment shall be reduced by$            , as the same may be further reduced by other assignments on or after the date hereof. 

 

2. Assignee agrees that, upon receiving the consent of Agent to such assignment, Assignee will be bound by the terms of theLoan Agreement as fully and to the same extent as if the Assignee were the Lender originally holding such interest under the Loan Agreement. 

 

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3. The following administrative details apply to Assignee: 

 
 (A)Notice address: 
 

Assignee name: 

Address: 

 

Attention: 

Telephone: 

Telecopier: 

 
 (B)Payment instructions: 
 

Assignee name: 

Address: 

 

Attention: 

Telephone: 

Telecopier: 

 

4. You are entitled to rely upon therepresentations, warranties and covenants of each of Assignor and Assignee contained in the Assignment and Acceptance. 

 

IN WITNESS WHEREOF, Assignor and Assignee have caused this Notice of Assignment and Acceptance to be executed by their respective duly authorizedofficials, officers or agents as of the date first above mentioned. 

 

Very truly yours, 

 

[NAME OF ASSIGNOR] 

 

By:                                                                                                                                        

 

Title:                                                                                                                                    

 

[NAME OF ASSIGNEE] 

 

By:                                                                                                                                        

 

Title:                                                                                                                                    

 

ACKNOWLEDGED AND ASSIGNMENT 

CONSENTED TO: 

 

103 

CONGRESS FINANCIAL CORPORATION 

(FLORIDA), as Agent 

 

By:                                                                                                

 

Title:                                                                                            

 

 

104 

**EXHIBIT C**

**TO**

**LOAN AND SECURITY AGREEMENT**

 

**Compliance Certificate**

 
To:Congress Financial Corporation 
(Florida), as Agent

777 Brickell Avenue 

Miami,Florida 33131 

 

Ladies and Gentlemen: 

 

I hereby certify to you pursuant to Section 9.6 of the Loan Agreement (asdefined below) as follows: 

 

1. I am the duly elected ChiefFinancial Officer of Reptron Electronics, Inc., a Florida corporation (“Borrower”). Capitalized terms used herein without definition shall have the meanings given to such terms in the Loan and Security Agreement, dated February    , 2004, by and among Congress Financial Corporation (Florida) as agent for the financial institutions party thereto as lenders (in such capacity, “Agent”) and the financial institutions party thereto aslenders (collectively, “Lenders”) and Borrower (as such Loan and Security Agreement is amended, modified or supplemented, from time to time, the “Loan Agreement”). 

 

2. I have reviewed the terms of the Loan Agreement, and have made, or have caused to be made under my supervision, a reviewin reasonable detail of the transactions and the financial condition of Borrower and each of its Subsidiaries, during the immediately preceding fiscal month. 

 

3. The review described in Section 2 above did not disclose the existence during or at the end of such fiscal month, and I have no knowledge of theexistence and continuance on the date hereof, of any condition or event which constitutes a Default or an Event of Default, except as set forth on Schedule I attached hereto. Described on Schedule I attached hereto are the exceptions, if any, tothis Section 3 listing, in detail, the nature of the condition or event, the period during which it has existed and the action which Borrower or any Obligor has taken, is taking, or proposes to take with respect to such condition or event.

 

4. I further certify that, based on the review described inSection 2 above, Borrower and Obligors have not at any time during or at the end of such fiscal month, except as specifically described on Schedule II attached hereto or as permitted by the Loan Agreement, done any of the following: 

 

(a) Changed its respective corporate name, or transacted business under anytrade name, style, or fictitious name, other than those previously described to you and set forth in the Financing Agreements. 

 

105 

(b) Changed the location of its chief executive office, changed its jurisdiction of incorporation,changed its type of organization or changed the location of or disposed of any of its properties or assets (other than pursuant to the sale of Inventory in the ordinary course of its business or as otherwise permitted by Section 9.7 of the LoanAgreement), or established any new asset locations. 

 

(c)Materially changed the terms upon which it sells goods (including sales on consignment) or provides services, nor has any vendor or trade supplier to Borrower or any Obligor during or at the end of such period materially adversely changed the termsupon which it supplies goods to Borrower or such Obligor. 

 

(d)Permitted or suffered to exist any security interest in or liens on any of its properties, whether real or personal, other than as specifically permitted in the Financing Agreements. 

 

(e) Received any notice of, or obtained knowledge of any of the following not previously disclosed to Agent: (i) theoccurrence of any event involving the release, spill or discharge of any Hazardous Material in violation of applicable Environmental Law in a material respect or (ii) any investigation, proceeding, complaint, order, directive, claims, citation ornotice with respect to: (A) any non-compliance with or violation of any applicable Environmental Law by Borrower or any Obligor in any material respect or (B) the release, spill or discharge of any Hazardous Material in violation of applicableEnvironmental Law in a material respect or (C) the generation, use, storage, treatment, transportation, manufacture, handling, production or disposal of any Hazardous Materials in violation of applicable Environmental Laws in a material respect or(D) any other environmental, health or safety matter, which has a material adverse effect on Borrower or any Obligor or its business, operations or assets or any properties at which Borrower or such Obligor transported, stored or disposed of anyHazardous Materials. 

 

(f) Become aware of, obtained knowledgeof, or received notification of, any breach or violation of any material covenant contained in any instrument or agreement in respect of Indebtedness for money borrowed by Borrower or any Obligor. 

 

5. Attached hereto as Schedule III are the calculations used in determining,as of the end of such fiscal month whether Borrower is in compliance with the covenant set forth in Section 9.17 of the Loan Agreement for such fiscal month. 

 

The foregoing certifications are made and delivered this day of                    , 200    . 

 

Very truly yours, 

 

REPTRON ELECTRONICS, INC. 

 

By:                                                                                                                                        

 

Title:                                                                                                                                    

 

106