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Exhibit 10.1    
  


        CREDIT AGREEMENT  


among 


CHATTEM, INC.,  


as Borrower, 


THE DOMESTIC SUBSIDIARIES OF BORROWER,  


as Guarantors, 


THE LENDERS IDENTIFIED HEREIN,  


 BANK OF AMERICA, N.A.,  


as Agent 


FLEET NATIONAL BANK, N.A.  


as Syndication Agent 


AND



SUNTRUST BANK  


as Documentation Agent 


DATED
AS OF MARCH 28, 2002 


BANC OF AMERICA SECURITIES LLC,  


as Sole Lead Arranger and Book Manager 





 
 
 

TABLE OF CONTENTS    
  



	 
	 	 
	 	Page

	SECTION 1    DEFINITIONS AND ACCOUNTING TERMS	 	1
	 	1.1	 	Definitions	 	1
	 	1.2	 	Computation of Time Periods and Other Definitional Provisions	 	18
	 	1.3	 	Accounting Terms	 	18
	SECTION 2    CREDIT FACILITIES	 	19
	 	2.1	 	Revolving Loans	 	19
	 	2.2	 	Letter of Credit Subfacility	 	20
	 	2.3	 	Term Loans	 	24
	 	2.4	 	Continuations and Conversions	 	26
	 	2.5	 	Minimum Amounts	 	26
	 	2.6	 	Notes	 	26
	SECTION 3    GENERAL PROVISIONS APPLICABLE TO LOANS	 	26
	 	3.1	 	Interest	 	26
	 	3.2	 	Place and Manner of Payments	 	27
	 	3.3	 	Prepayments	 	27
	 	3.4	 	Fees	 	28
	 	3.5	 	Payment in full at Maturity	 	29
	 	3.6	 	Computations of Interest and Fees	 	29
	 	3.7	 	Pro Rata Treatment	 	30
	 	3.8	 	Allocation of Payments After Acceleration	 	31
	 	3.9	 	Sharing of Payments	 	32
	 	3.10	 	Capital Adequacy	 	32
	 	3.11	 	Inability To Determine Interest Rate	 	32
	 	3.12	 	Illegality	 	33
	 	3.13	 	Requirements of Law	 	33
	 	3.14	 	Taxes	 	34
	 	3.15	 	Indemnity	 	35
	 	3.16	 	Replacement of Lenders	 	36
	SECTION 4    GUARANTY	 	36
	 	4.1	 	Guaranty of Payment	 	36
	 	4.2	 	Obligations Unconditional	 	36
	 	4.3	 	Modifications	 	37
	 	4.4	 	Waiver of Rights	 	37
	 	4.5	 	Reinstatement	 	38
	 	4.6	 	Remedies	 	38
	 	4.7	 	Limitation of Guaranty	 	38
	 	4.8	 	Rights of Contribution	 	38
	SECTION 5    CONDITIONS PRECEDENT	 	39
	 	5.1	 	Closing Conditions	 	39
	 	5.2	 	Conditions to All Extensions of Credit	 	42
	SECTION 6    REPRESENTATIONS AND WARRANTIES	 	43
	 	6.1	 	Financial Condition	 	43
	 	6.2	 	No Material Change	 	43
	 	6.3	 	Organization and Good Standing	 	43
	 	6.4	 	Due Authorization	 	43
	 	6.5	 	No Conflicts	 	44
	 	6.6	 	Consents	 	44
	 	6.7	 	Enforceable Obligations	 	44



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	 	6.8	 	No Default	 	44
	 	6.9	 	Ownership	 	44
	 	6.10	 	Indebtedness	 	44
	 	6.11	 	Litigation	 	44
	 	6.12	 	Taxes	 	45
	 	6.13	 	Compliance with Law	 	45
	 	6.14	 	ERISA	 	45
	 	6.15	 	Subsidiaries	 	46
	 	6.16	 	Use of Proceeds; Margin Stock	 	46
	 	6.17	 	Government Regulation	 	46
	 	6.18	 	Environmental Matters	 	46
	 	6.19	 	Intellectual Property	 	47
	 	6.20	 	Solvency	 	48
	 	6.21	 	Investments	 	48
	 	6.22	 	No Financing of Corporate Takeovers	 	48
	 	6.23	 	Location of Collateral	 	48
	 	6.24	 	Disclosure	 	48
	 	6.25	 	Licenses, etc	 	48
	 	6.26	 	No Burdensome Restrictions	 	48
	 	6.27	 	Brokers' Fees	 	48
	 	6.28	 	Labor Matters	 	49
	 	6.29	 	Collateral Documents	 	49
	 	6.30	 	Related Transactions	 	49
	 	6.31	 	Senior Debt	 	49
	 	6.32	 	Excess Proceeds	 	49
	SECTION 7    AFFIRMATIVE COVENANTS	 	49
	 	7.1	 	Information Covenants	 	49
	 	7.2	 	Preservation of Existence and Franchises	 	52
	 	7.3	 	Books and Records	 	52
	 	7.4	 	Compliance with Law	 	52
	 	7.5	 	Payment of Taxes and Other Indebtedness	 	52
	 	7.6	 	Insurance	 	52
	 	7.7	 	Maintenance of Property	 	53
	 	7.8	 	Performance of Obligations	 	53
	 	7.9	 	Collateral	 	53
	 	7.10	 	Use of Proceeds	 	54
	 	7.11	 	Audits/Inspections	 	54
	 	7.12	 	Financial Covenants	 	54
	 	7.13	 	Additional Credit Parties	 	55
	 	7.14	 	Ownership of Subsidiaries	 	55
	 	7.15	 	Appraisal Reports	 	55
	 	7.16	 	Post-Closing Matters	 	55
	SECTION 8    NEGATIVE COVENANTS	 	56
	 	8.1	 	Indebtedness	 	56
	 	8.2	 	Liens	 	56
	 	8.3	 	Nature of Business	 	56
	 	8.4	 	Consolidation and Merger	 	56
	 	8.5	 	Sale or Lease of Assets	 	57
	 	8.6	 	Advances, Investments and Loans	 	57
	 	8.7	 	Restricted Payments	 	57
	 	8.8	 	Transactions with Affiliates	 	58



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	 	8.9	 	Fiscal Year; Organizational Documents	 	58
	 	8.10	 	Prepayments of Indebtedness	 	58
	 	8.11	 	Subordinated Debt	 	58
	 	8.12	 	Limitations	 	58
	 	8.13	 	Sale Leasebacks	 	59
	 	8.14	 	Negative Pledges	 	59
	 	8.15	 	Capital Expenditures	 	59
	 	8.16	 	Operating Leases	 	59
	 	8.17	 	Payment Blockage Notice	 	59
	SECTION 9    EVENTS OF DEFAULT	 	59
	 	9.1	 	Events of Default	 	59
	 	9.2	 	Acceleration; Remedies	 	62
	SECTION 10    AGENCY PROVISIONS	 	62
	 	10.1	 	Appointment and Authorization of Agent	 	62
	 	10.2	 	Delegation of Duties	 	63
	 	10.5	 	Notice of Default	 	64
	 	10.6	 	Credit Decision; Disclosure of Information by Agent	 	64
	 	10.7	 	Indemnification of Agent	 	65
	 	10.8	 	Agent in its Individual Capacity.	 	65
	 	10.9	 	Successor Agent	 	65
	 	10.10	 	Other Agents; Lead Managers	 	66
	SECTION 11    MISCELLANEOUS	 	66
	 	11.1	 	Notices	 	66
	 	11.2	 	Right of Set-Off	 	66
	 	11.3	 	Benefit of Agreement	 	66
	 	11.4	 	No Waiver; Remedies Cumulative	 	69
	 	11.5	 	Payment of Expenses; Indemnification	 	69
	 	11.6	 	Amendments, Waivers and Consents	 	70
	 	11.7	 	Counterparts	 	71
	 	11.8	 	Headings	 	71
	 	11.9	 	Defaulting Lender	 	71
	 	11.10	 	Survival of Indemnification and Representations and Warranties	 	71
	 	11.11	 	Governing Law; Venue	 	71
	 	11.12	 	Waiver of Jury Trial	 	71
	 	11.13	 	Time	 	72
	 	11.14	 	Severability	 	72
	 	11.15	 	Entirety	 	72
	 	11.16	 	Binding Effect; Further Assurances	 	72
	 	11.17	 	Designated Senior Indebtedness	 	72




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SCHEDULES 



	Schedule 1.1(a)	 	Commitment Percentages
	Schedule 1.1(b)	 	Existing Permitted Investments
	Schedule 6.10	 	Indebtedness
	Schedule 6.15	 	Subsidiaries
	Schedule 6.18	 	Environmental Matters
	Schedule 6.19	 	Intellectual Property
	Schedule 6.23(a)	 	Personal Property Locations
	Schedule 6.23(b)	 	Chief Executive Offices
	Schedule 7.6	 	Insurance
	Schedule 8.2	 	Liens
	Schedule 8.8	 	Affiliate Transactions
	Schedule 11.1	 	Notices





        




EXHIBITS 



	Exhibit 2.1	 	Form of Notice of Borrowing
	Exhibit 2.2(b)	 	Form of Notice of Request of Letter of Credit
	Exhibit 2.4	 	Form of Notice of Continuation/Conversion
	Exhibit 2.6(a)	 	Form of Revolving Note
	Exhibit 2.6(b)	 	Form of Term Note
	Exhibit 7.1(c)	 	Form of Officer's Certificate
	Exhibit 7.1(e)	 	Form of Borrowing Base Certificate
	Exhibit 7.13	 	Form of Joinder Agreement
	Exhibit 11.3	 	Form of Assignment and Assumption




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CREDIT AGREEMENT    
  


        THIS CREDIT AGREEMENT (this "Credit Agreement"), is entered into as of March 28, 2002 among
CHATTEM, INC., a Tennessee corporation (the "Borrower"), each of the Borrower's Domestic Subsidiaries, individually a
"Guarantor" and collectively the "Guarantors"), the Lenders (as defined herein), and BANK OF AMERICA,
N.A., as agent for the Lenders (in such capacity, the "Agent"). 


RECITALS  


        WHEREAS, the Borrower has requested that the Lenders provide $60 million in credit facilities for the
purposes hereinafter set forth; and 


        WHEREAS, the Lenders have agreed to make the requested credit facilities available to the Borrower on the terms and conditions hereinafter
set forth; 


        NOW, THEREFORE, IN CONSIDERATION of the premises and other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows: 


 
 

SECTION 1
  
    DEFINITIONS AND ACCOUNTING TERMS    
  


        1.1    Definitions.    



        As
used herein, the following terms shall have the meanings herein specified unless the context otherwise requires. Defined terms herein shall include in the singular number the plural
and in the plural the singular: 



        "Acquired Assets" means, collectively, those assets acquired under and pursuant to the Purchase Agreement. 


        "Additional Credit Party" means each Person that becomes a Guarantor after the Closing Date, as provided in Section 7.13. 



        "Adjusted Base Rate" means the Base Rate plus the Applicable Percentage. 


        "Adjusted Eurodollar Rate" means the Eurodollar Rate plus the Applicable Percentage. 


        "Administrative Questionnaire" means an Administrative Questionnaire in a form supplied by the Agent. 


        "Affiliate" means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the Person specified. "Control" means the possession, directly or indirectly, of the power
(a) to vote 10% or more of the securities having ordinary voting power for the election of directors of a Person or (b) to direct or cause the direction of the management or policies of
a Person, whether through the ability to exercise voting power, by contract or otherwise. "Controlled" has the meaning correlative thereto. 


        "Agent" means Bank of America, N.A. or any successor administrative agent appointed pursuant to Section 10.9. 



        "Agent-Related Person" means the Agent (including any successor administrative agent), together with its Affiliates (including, in the
case of Bank of America in its capacity as the Agent, BAS), and their respective officers, directors, employees, agents, counsel and attorneys-in-fact. 


        "Applicable Percentage" means for purposes of calculating the applicable interest rate for any day for Loans, the applicable rate for any
day for the Letter of Credit Fee and the applicable rate 






 





for any day for the Unused Fee, the appropriate applicable percentages corresponding to the Leverage Ratio in effect as of the most recent Calculation Date as shown below: 



	Pricing

Level
 
	 	Leverage

Ratio
	 	Applicable Percentage For

Eurodollar Loans and

Letter of Credit Fee
	 	Applicable

Percentage

For Base Rate

Loans
	 	Applicable Percentage for

Unused Fees
	 
	I	 	£ 3.75 to 1.0	 	2.25	%	0.75	%	0.375	%
	II	 	> 3.75 to 1.0 but £ 4.25 to 1.0	 	2.50	%	1.00	%	0.500	%
	III	 	> 4.25 to 1.0 but £ 4.50 to 1.0	 	2.75	%	1.25	%	0.500	%
	IV	 	> 4.50 to 1.0	 	3.00	%	1.50	%	0.500	%





The
Applicable Percentage shall, in each case, be determined and adjusted quarterly on the date (each a "Calculation Date") five Business Days after the
date by which the Borrower is required to provide the officer's certificate in accordance with the provisions of Section 7.1(c); provided,
however, (i) the initial Applicable Percentages shall be based on Pricing Level IV (as shown above) and shall remain at Pricing Level IV until the first Calculation Date
following the fiscal quarter ending August 31, 2002 and, thereafter, the Applicable Percentage shall be determined by the then current Leverage Ratio, and (ii) if the Borrower fails to
provide the officer's certificate required by Section 7.1(c) on or before the most recent Calculation Date or fails to deliver a copy of such officer's certificate to the Agent as required by
Section 7.1(c), the Applicable Percentage from such Calculation Date shall be based on Pricing Level IV until such time that an appropriate officer's certificate is provided whereupon the
Applicable Percentage shall be determined by the then current Leverage Ratio. Each Applicable Percentage shall be effective from one Calculation Date until the next Calculation Date. Any adjustment in
the Applicable Percentage shall be applicable to all existing Loans and Letters of Credit as well as any new Loans or Letters of Credit made or issued. 



        "Approved Fund" means any Fund that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or
(c) an entity or an Affiliate of an entity that administers or manages a Lender. 


        "Asset Disposition" means (a) the disposition of any or all of the assets of the Borrower or any of its Subsidiaries whether by
sale, lease, transfer or otherwise and (b) any "Asset Sale" under, and as defined in, the Indenture. 


        "Assignment and Assumption" means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any
party whose consent is required by Section 11.3), and accepted by the Agent, in substantially the form of Exhibit 11.3(b) or any other
form approved by the Agent. 


        "Bank of America" means Bank of America, N.A. and its successors. 


        "Bankruptcy Code" means the Bankruptcy Code in Title 11 of the United States Code, as amended, modified, succeeded or replaced from time
to time. 


        "BAS" means Banc of America Securities LLC. 



        "Base Rate" means for any day a fluctuating rate per annum equal to the higher of (a) the Federal Funds Rate in effect on such day
plus 1/2 of 1% and (b) the Prime Rate in effect on such day. 


        "Base Rate Loan" means any Loan bearing interest at a rate determined by reference to the Base Rate. 


        "Borrower" means the Person identified as such in the heading hereof, together with any successors and permitted assigns. 



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        "Borrowing Base" means, as of any day, the sum, calculated in Dollars, of (a) 80% of Eligible Receivables plus (b) 50% of
Eligible Inventory in each case as set forth in the most recent Borrowing Base Certificate delivered to the Agent and the Lenders in accordance with the terms of Section 7.1(e). 



        "Borrowing Base Certificate" means a Borrowing Base Certificate substantially in the form of  Exhibit 7.1(e).


        "Business Day" means any day other than a Saturday, a Sunday, a legal holiday or a day on which banking institutions are authorized or
required by law or other governmental action to close in Charlotte, North Carolina; provided that in the case of Eurodollar Loans, such day is also a day on which dealings between banks are carried on
in Dollar deposits in the London interbank market. 


        "Calculation Date" has the meaning set forth in the definition of Applicable Percentage. 


        "Capital Expenditures" means all expenditures of the Credit Parties and their Subsidiaries which, in accordance with GAAP, would be
classified as capital expenditures, including, without limitation, Capital Leases. 


        "Capital Lease" means, as applied to any Person, any lease of any property (whether real, personal or mixed) by that Person as lessee
which, in accordance with GAAP, is or should be accounted for as a capital lease on the balance sheet of that Person. 


        "Capital Stock" means (i) in the case of a corporation, capital stock, (ii) in the case of an association or business
entity, any and all shares, interests, participations, rights or other equivalents (however designated) of capital stock, (iii) in the case of a partnership, partnership interests (whether
general or limited), (iv) in the case of a limited liability company, membership interests and (v) any other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distributions of assets of, the issuing Person. 


        "Cash Equivalents" means (a) securities 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 United States of America is pledged in support thereof) having maturities of not more than twelve months from the date
of acquisition, (b) Dollar denominated (or with respect to Foreign Subsidiaries, Dollar denominated and non Dollar denominated) time deposits and certificates of deposit of (i) any
Lender, (ii) any domestic (or with respect to Foreign Subsidiaries, any domestic or nondomestic) commercial bank of recognized standing having capital and surplus in excess of $500,000,000 or
(iii) any bank whose short-term commercial paper rating from S&P is at least A-1 or the equivalent thereof or from Moody's is at least P-1 or the equivalent
thereof (any such bank being an "Approved Bank"), in each case with maturities of not more than 270 days from the date of acquisition,
(c) commercial paper and variable or fixed rate notes issued by any Approved Bank (or by the parent company thereof) or any variable rate notes issued by, or guaranteed by, any domestic
corporation rated A-1 (or the equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or better by Moody's and maturing within six months of the date of
acquisition, (d) repurchase agreements with a bank or trust company (including any of the Lenders) or recognized securities dealer having capital and surplus in excess of $500,000,000 for
direct obligations issued by or fully guaranteed by the United States of America in which the Borrower shall have a perfected first priority security interest (subject to no other Liens) and having,
on the date of purchase thereof, a fair market value of at least 100% of the amount of the repurchase obligations and (e) Investments, classified in accordance with GAAP as current assets, in
money market investment programs registered under the Investment Company Act of 1940, as amended, which are administered by reputable financial institutions having capital of at least 



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$500,000,000 and the portfolios of which are limited to Investments of the character described in the foregoing subdivisions (a) through (d). 


        "Change of Control" means any of the following events: either (i) a "person" or a "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934) becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of more than 35% of the then
outstanding voting stock of the Borrower or (ii) a majority of the Board of Directors of the Borrower shall consist of individuals who are not Continuing Directors;
"Continuing Director" means, as of any date of determination, (A) an individual who on the date two years prior to such determination date was a
member of the Borrower's Board of Directors or (B) any new Director whose nomination for election by the Borrower's shareholders was approved by a vote of at least 75% of the Directors then
still in office who either were Directors on the date two years prior to such determination date or whose nomination for election was previously so approved. 


        "Closing Date" means the date hereof. 


        "Code" means the Internal Revenue Code of 1986, as amended, modified, succeeded or replaced from time to time. 


        "Collateral" means all collateral referred to in and covered by the Collateral Documents. 


        "Collateral Documents" means the Security Agreement, the Pledge Agreement and such other documents executed and delivered in connection
with the attachment and perfection of the Agent's security interests, for the benefit of the Lenders, in the assets of the Credit Parties, including, without limitation, UCC financing statements and
patent and trademark filings. 


        "Commitments" means any of the Revolving Commitments, the LOC Commitments and/or the Term Loan Commitments. 


        "Credit Documents" means this Credit Agreement, the Notes, the LOC Documents, any Joinder Agreement, the Collateral Documents, the Fee
Letter and all other related agreements and documents issued or delivered hereunder or thereunder or pursuant hereto or thereto. 



        "Credit Parties" means the Borrower and the Guarantors, and "Credit Party" means any one of them. 


        "Credit Party Obligations" means, without duplication, (a) all of the obligations of the Credit Parties to the Lenders and the
Agent, whenever arising, under this Credit Agreement, the Notes, the Collateral Documents or any of the other Credit Documents to which the Borrower or any other Credit Party is a party (including,
but not limited to, any interest accruing after the occurrence of a Bankruptcy Event with respect to any Credit Party, regardless of whether such interest is an allowed claim under the Bankruptcy
Code) and (b) all liabilities and obligations, whenever arising, owing from the Borrower to any Lender, or any Affiliate of a Lender, arising under any Hedging Agreement. 


        "Debt Issuance" means the issuance of any Indebtedness by a Credit Party or any of its Subsidiaries, other than Indebtedness permitted by
Section 8.1. 


        "Default" means any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. 


        "Defaulting Lender" means, at any time, any Lender that, at such time (a) has failed to make a Loan or purchase a Participation
Interest required pursuant to the terms of this Credit Agreement, (b) has failed to pay to the Agent or any Lender an amount owed by such Lender pursuant to the terms of this Credit Agreement
or (c) has been deemed insolvent or has become subject to a bankruptcy or insolvency proceeding or to a receiver, trustee or similar official. 



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        "Domestic Subsidiaries" means all Subsidiaries of the Borrower that are domiciled, incorporated or organized under the laws of any state
of the United States or the District of Columbia. 


        "Dollars" and "$" means dollars in lawful currency of the United States of America. 


        "EBITDA" means, for any period, with respect to the Borrower and its Subsidiaries on a consolidated basis, the sum of (a) Net
Income for such period (excluding the effect of any extraordinary or other non-recurring gains outside of the ordinary course of business) plus (b) an amount which, in the
determination of Net Income for such period has been deducted for (i) Interest Expense for such period, (ii) total federal, state, foreign or other income taxes for such period,
(iii) all depreciation and amortization for such period, (v) write-offs of accounts receivable owing from Kmart Corporation during such period in an aggregate amount not to
exceed $3,000,000 during the term of this Credit Agreement, provided that Kmart Corporation was subject to bankruptcy proceedings or any other comparable insolvency proceedings at the time of any such
write-off and (vi) extraordinary or other non-recurring losses outside of the ordinary course of business for such period in an aggregate amount not to exceed 10% of
EBITDA (as determined after giving effect to the addition of such losses), all as determined in accordance with GAAP. 


        "Effective Date" means the date on which the conditions set forth in Section 5.1 shall have been fulfilled (or waived in the sole
discretion of the Lenders) and on which the initial Loans shall have been made or the initial Letters of Credit shall have been issued. 


        "Eligible Assets" means any assets or any business (or any substantial part thereof) used or useful in the same or a similar line of
business as the Credit Parties and their Subsidiaries were engaged in on the Closing Date. 


        "Eligible Assignee" means (a) a Lender; (b) an Affiliate of a Lender; (c) an Approved Fund; and (d) any other
Person (other than a natural person) approved by (i) the Agent, (ii) in the case of any assignment of a Revolving Commitment, the Issuing Lender, and (iii) unless a Default or
Event of Default has occurred and is continuing, the Borrower (each such approval not to be unreasonably withheld or delayed); provided that
notwithstanding the foregoing, "Eligible Assignee" shall not include the Borrower or any of the Borrower's Affiliates or Subsidiaries. 


        "Eligible Inventory" means, as of any date of determination and without duplication, the lower of (a) the aggregate book value
(based on a LIFO or a moving average cost valuation, consistently applied) or (b) fair market value of all raw materials and finished goods inventory owned by the Borrower or any of its
Domestic Subsidiaries, in either case, less appropriate reserves determined in accordance with GAAP, but excluding in any event (i) inventory subject to any Lien, other than Liens securing
Credit Party Obligations, (ii) inventory which is not in good condition or fails to meet standards for sale or use imposed by governmental agencies, departments or divisions having regulatory
authority over such goods, (iii) inventory which is not useable or saleable at prices approximating their cost in the ordinary
course of the Borrower's business (including without duplication the amount of any reserves for obsolescence, unsalability or decline in value), (iv) inventory located outside of the United
States, (v) inventory which is leased or on consignment, (vi) inventory consisting of packaging materials and supplies, (vii) inventory which consists of goods in transit,
(viii) inventory with respect to which the Agent does not have a valid and perfected first-priority security interest and (ix) inventory which fails to meet such other specifications
and requirements as may from time to time be established by the Agent in its reasonable discretion. 


        "Eligible Receivables" means, at any time, the aggregate book value of all accounts receivable, receivables, and obligations for payment
created or arising from the sale of inventory or the rendering of services in the ordinary course of business (collectively, the "Receivables"), owned
by 



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or owing to the Borrower or any of its Domestic Subsidiaries, net of allowances and reserves for doubtful or uncollectible accounts and sales adjustments consistent with the Borrower's internal
policies and in any event in accordance with GAAP, but excluding in any event (i) Receivables subject to any Lien, other than Liens securing Credit Party Obligations, (ii) Receivables
which are more than 60 days past due (net of reserves for bad debts in connection with any such Receivables), (iii) Receivables not otherwise excluded by clause (ii) above but
owing from an account debtor having twenty percent (20%) of the balance owing by such account debtor to the Borrower (calculated without taking into account any credit balances of such account debtor)
more than sixty (60) days past due, (iv) Receivables evidenced by notes, chattel paper or other instruments, unless such notes, chattel paper or instruments have been delivered to and
are in the possession of the Agent, (v) Receivables owing by an account debtor which is not solvent or is subject to any bankruptcy or insolvency proceeding of any kind (other than Receivables
owing by Kmart Corporation that are created from the sale of inventory following Kmart Corporation's filing of a petition pursuant to Chapter 11 of the Bankruptcy Code) and,
(vi) Receivables owing by an account debtor located outside of the United States (unless payment for the goods shipped is secured by an irrevocable letter of credit in a form and from an
institution acceptable to the Agent), (vii) Receivables which are contingent or subject to offset, deduction, counterclaim, dispute or other defense to payment, in each case to the extent of
such offset, deduction, counterclaim, dispute or other defense, (viii) Receivables for which any direct or indirect Subsidiary of the Borrower or any Affiliate of the Borrower is the account
debtor, (ix) Receivables representing a sale to the government of the United States of America or any subdivision thereof unless the Borrower has complied (to the satisfaction of the Agent),
with respect to the granting of a security interest in such Receivable, with the Federal Assignment of Claims Act or other similar applicable law, (x) Receivables from any single account debtor
(other than Wal-Mart) and its Affiliates which otherwise constitute Eligible Receivables comprising more than twenty-five percent (25%) of all Eligible Receivables, but only to
the extent in excess of such twenty-five percent (25%), (xi) unless otherwise agreed by the Required Lenders, Receivables from Wal-Mart and its Affiliates which
otherwise constitute Eligible Receivables comprising more than fifty percent (50%) of all Eligible Receivables, but only to the extent in excess of such fifty percent (50%) and
(xii) Receivables which fail to meet such other specifications and requirements as may from time to time be established by the Agent in its reasonable discretion. 


        "Environmental Claim" means any investigation, written notice, violation, written demand, written allegation, action, suit, injunction,
judgment, order, consent decree, penalty, fine, lien, proceeding, or written claim (whether administrative, judicial, or private in nature) arising (a) pursuant to, or in connection with, an
actual or alleged violation of, any Environmental Law, (b) in connection with any Hazardous Material, (c) from any assessment, abatement, removal, remedial, corrective, or other response
action in connection with an Environmental Law or other order of a Governmental Authority
or (d) from any actual or alleged damage, injury, threat, or harm to health, safety, natural resources, or the environment. 


        "Environmental Laws" means any current or future legal requirement of any Governmental Authority pertaining to (a) the protection
of health, safety, and the indoor or outdoor environment, (b) the conservation, management, or use of natural resources and wildlife, (c) the protection or use of surface water and
groundwater, (d) the management, manufacture, possession, presence, use, generation, transportation, treatment, storage, disposal, release, threatened release, abatement, removal, remediation
or handling of, or exposure to, any hazardous or toxic substance or material or (e) pollution (including any release to air, land, surface water, and groundwater), and includes, without
limitation, the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 USC 9601  et seq., Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and Hazardous and Solid Waste Amendment of 1984,
42 USC 6901 



6





 




 et seq., Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 USC 1251 et seq., Clean Air
Act of 1966, as amended, 42 USC 7401 et seq., Toxic Substances Control Act of 1976, 15 USC 2601 et seq.,
Hazardous Materials Transportation Act, 49 USC App. 1801 et seq., Occupational Safety and Health Act of 1970, as amended, 29 USC 651  et seq., Oil Pollution
Act of 1990, 33 USC 2701 et seq., Emergency Planning and Community
Right-to-Know Act of 1986, 42 USC 11001 et seq., National Environmental Policy Act of 1969, 42 USC 4321  et seq., Safe Drinking Water Act of 1974, as
amended, 42 USC 300(f) et seq., any analogous implementing
or successor law, and any amendment, rule, regulation, order, or directive issued thereunder. 


        "Equity Issuance" means any issuance by the Borrower to any Person of (a) shares of its Capital Stock, (b) any shares of its
Capital Stock pursuant to the exercise of options or warrants or (c) any shares of its Capital Stock pursuant to the conversion of any debt securities to equity;  provided, however, the term "Equity
Issuance" shall not include the issuance by the Borrower of shares of its Capital Stock to employees and directors
pursuant to employees or directors stock plans. 


        "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto, as interpreted by the
rules and regulations thereunder, all as the same may be in effect form time to time. References to sections of ERISA shall be construed also to refer to any successor sections. 


        "ERISA Affiliate" means an entity, whether or not incorporated, which is under common control with any Credit Party or any of its
Subsidiaries within the meaning of Section 4001(a)(14) of ERISA, or is a member of a group which includes any Credit Party or any of its Subsidiaries and which is treated as a single employer
under Sections 414(b), (c), (m), or (o) of the Code. 


        "Eurodollar Loan" means any Loan bearing interest based at a rate determined by reference to the Eurodollar Rate. 


        "Eurodollar Rate" means, for the Interest Period for each Eurodollar Loan comprising part of the same borrowing (including conversions,
extensions and renewals), a per annum interest rate determined pursuant to the following formula: 



	Eurodollar Rate =	London Interbank Offered Rate
 1 - Eurodollar Reserve Percentage	 	 






        "Eurodollar Reserve Percentage" means for any day, that percentage (expressed as a decimal) which is in effect from time to time under
Regulation D, as such regulation may be amended from time to time or any successor regulation, as the maximum reserve requirement (including, without limitation, any basic, supplemental,
emergency, special, or marginal reserves) applicable with respect to Eurocurrency liabilities as that term is defined in Regulation D (or against any other category of liabilities that includes
deposits by reference to which the interest rate of Eurodollar Loans is determined), whether or not a Lender has any Eurocurrency liabilities subject to such reserve requirement at that time.
Eurodollar Loans shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefits of credits for proration, exceptions or offsets
that may be available from time to time to a Lender. The Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Eurodollar Reserve Percentage. 


        "Event of Default" has the meaning specified in Section 9.1. 


        "Excess Cash Flow" means, with respect to any fiscal year period of the Borrower and its Subsidiaries, on a consolidated basis, an amount
equal to (a) EBITDA for such period minus (b) Capital Expenditures for such period minus (c) cash Interest Expense for such period minus 



7





 





(d) federal, state and other income taxes actually paid during such period minus (e) Principal Amortization Payments made during such period minus (f) voluntary prepayments made
with respect to the Term Loans during such period minus (g) increases in Working Capital for such period plus (h) decreases in Working Capital for such period, minus (i) any cash
gain from an Asset Disposition (to the extent included in EBITDA and paid to the Lenders as a mandatory prepayment pursuant to Section 3.3(b)(iii) hereof). 


        "Extension of Credit" means, as to any Lender, the making of a Loan by such Lender (or a participation therein by a Lender) or the
issuance or extension of, or participation in, a Letter of Credit by such Lender. 


        "Federal Funds Rate" means for any day the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers on such day, as published by the Federal Reserve Bank
of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such
day shall be such rate on such transactions on the next preceding Business Day and (b) if no such rate is so published on such next preceding Business Day, the Federal Funds Rate for such day
shall be the average rate quoted to the Agent on such day on such transactions as determined by the Agent. 


        "Fee Letter" means that certain letter agreement, dated as of March 4, 2002, between Bank of America, BAS and the Borrower, as
amended, modified, supplemented or replaced from time to time. 


        "Fixed Charge Coverage Ratio" means, as of the end of each fiscal quarter of the Borrower, for the twelve month period ending on such
date, with respect to the Borrower and its Subsidiaries on a consolidated basis, the ratio of (a) EBITDA for the applicable period minus Capital Expenditures for the applicable period minus
federal, state and other income taxes paid in cash for the applicable period to (b) the sum of (i) cash Interest Expense for the applicable period plus (ii) Scheduled Funded Debt
Payments for the applicable period plus (iii) Restricted Payments for the applicable period. 


        "Foreign Subsidiaries" means all Subsidiaries of the Borrower that are not Domestic Subsidiaries. 


        "Fund" means any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing
in commercial loans and similar extensions of credit in the ordinary course of its business. 


        "Funded Debt" means, with respect to any Person, without duplication, (a) all obligations (other than Hedging Agreements) of such
Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, or upon which interest payments are customarily made, (c) all
obligations of such Person under conditional sale or other title retention agreements relating to assets purchased by such Person (other than customary reservations or retentions of title under
agreements with suppliers entered into in the ordinary course of business), (d) all obligations of such Person issued or assumed as the deferred purchase price of assets or services purchased
by such Person (other than trade debt incurred in the ordinary course of business and due within six months of the incurrence thereof) which would appear as liabilities on a balance sheet of such
Person in accordance with GAAP, (e) the implied principal component of all obligations of such Person under Capital Leases, (f) commercial letters of credit and the maximum amount of all
performance and standby letters of credit issued or bankers' acceptances facilities created for the account of such Person
and, without duplication, all drafts drawn thereunder (to the extent unreimbursed), (g) all preferred Capital Stock issued by 



8





 





such Person and required by the terms thereof to be redeemed, or for which mandatory sinking fund payments are due, by a fixed date), (h) the principal portion of all obligations of such
Person under Synthetic Leases, (i) the aggregate amount of uncollected accounts receivable of such Person subject at such time to a sale of receivables (or similar transaction) to the extent
such transaction is effected with recourse to such Person (whether or not such transaction would be reflected on the balance sheet of such Person in accordance with GAAP), (j) all Funded Debt
of others secured by (or for which the holder of such Funded Debt has an existing right, contingent or otherwise, to be secured by) any Lien on, or payable out of the proceeds of production from,
assets owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (k) all Guaranty Obligations of such Person with respect to Funded Debt of another
Person and (l) the Funded Debt of any partnership or unincorporated joint venture in which such Person is a general partner or a joint venturer to the extent such Indebtedness is recourse to
such Person. 


        "GAAP" means generally accepted accounting principles in the United States applied on a consistent basis and subject to
Section 1.3. 


        "Governmental Authority" means any federal, state, local, provincial or foreign court or governmental agency, authority, instrumentality
or regulatory body. 


        "Guarantor" means each of the Domestic Subsidiaries of the Borrower and each Additional Credit Party which has executed a Joinder
Agreement, together with their successors and assigns. 


        "Guaranty Obligations" means, with respect to any Person, without duplication, any obligations (other than endorsements in the ordinary
course of business of negotiable instruments for deposit or collection) guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations of any other Person in any
manner, whether direct or indirect, and including without limitation any obligation, whether or not contingent, (a) to purchase any such Indebtedness or other obligation or any property
constituting security therefor, (b) to advance or provide funds or other support for the payment or purchase of such Indebtedness or obligation or to maintain working capital, solvency or other
balance sheet condition of such other Person (including, without limitation, maintenance agreements, comfort letters, take or pay arrangements, put agreements or similar agreements or arrangements)
for the benefit of the holder of Indebtedness of such other Person, (c) to lease or purchase property, securities or services primarily for the purpose of assuring the owner of such
Indebtedness or obligation, or (d) to otherwise assure or hold harmless the owner of such Indebtedness or obligation against loss in respect thereof. The amount of any Guaranty Obligation
hereunder shall (subject to any limitations set forth therein) be deemed to be an amount equal to the outstanding principal amount (or maximum principal amount, if larger) of the Indebtedness in
respect of which such Guaranty Obligation is made. 


        "Hazardous Materials" means any substance, material or waste defined or regulated in or under any Environmental Laws. 


        "Hedging Agreement" means any interest rate protection agreement, foreign currency exchange agreement, commodity purchase or option
agreement or other interest or exchange rate or commodity price hedging agreement. 



9











  



        "Indebtedness" means, with respect to any Person, without duplication, (a) all obligations of such Person for borrowed money,
(b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, or upon which interest payments are customarily made, (c) all obligations of such Person
under conditional sale or other title retention agreements relating to assets purchased by such Person (other than customary reservations or retentions of title under agreements with suppliers entered
into in the ordinary course of business), (d) all obligations of such Person issued or assumed as the deferred purchase price of assets or services purchased by such Person (other than trade
debt incurred in the ordinary course of business and due within six months of the incurrence thereof) which would appear as liabilities on a balance sheet of such Person, (e) all obligations of
such Person under take-or-pay or similar arrangements or under commodities agreements, (f) all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on, or payable out of the proceeds of production from, assets owned or acquired by such Person, whether or not
the obligations secured thereby have been assumed, (g) all Guaranty Obligations of such Person, (h) the principal portion of all obligations of such Person under Capital Leases,
(i) all obligations of such Person under Hedging Agreements, (j) commercial letters of credit and the maximum amount of all standby letters of credit issued or bankers' acceptances
facilities created for the account of such Person and, without duplication, all drafts drawn thereunder (to the extent unreimbursed), (k) the principal portion of all obligations of such Person
under Synthetic Leases, (l) all preferred Capital Stock issued by such Person and which by the terms thereof could be (at the request of the holders thereof or otherwise) be subject to
mandatory sinking fund payments, redemption or other acceleration by a fixed date, (m) all obligations of such Person to repurchase any securities issued by such Person at any time on or prior
to the Maturity Date which repurchase obligations are related to the issuance thereof, including, without limitation, obligations commonly known as residual equity appreciation potential shares,
(n) the Indebtedness of any partnership or unincorporated joint venture in which such Person is a general partner or a joint venturer to the extent such Indebtedness is recourse to such Person
and (o) the aggregate amount of uncollected accounts receivable of such Person subject at such time to a sale of receivables (or similar transaction) to the extent such transaction is effected
with recourse to such Person (whether or not such transaction would be reflected on the balance sheet of such Person in accordance with GAAP). 


        "Indemnified Liabilities" has the meaning set forth in Section 11.5. 



        "Indenture" means that certain Indenture dated as of March 24, 1998 among the Borrower, Signal and SouthTrust Bank of Alabama,
National Association, as trustee, as amended prior to the Closing Date and further amended, modified, restated or supplemented from time to time. 


        "Interest Expense" means, for any period, with respect to the Borrower and its Subsidiaries on a consolidated basis, all interest expense,
including the interest component under Capital Leases and Synthetic Leases, as determined in accordance with GAAP. 



        "Interest Payment Date" means (a) as to Base Rate Loans, the last Business Day of each fiscal quarter of the Borrower and on the
Termination Date and (b) as to Eurodollar Loans, on the last day of each applicable Interest Period and on the Termination Date and in addition if the Interest Period for a Eurodollar Loan is
more than 3 months, then at 3 month intervals beginning on the date 3 months from the beginning of the Interest Period. 


        "Interest Period" means, as to Eurodollar Loans, a period of one, two, three and six months' duration, as the Borrower may elect,
commencing, in each case, on the date of the borrowing (including continuations and conversions thereof); provided, however, (a) if any Interest
Period would end on a day which is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day (except that where the next succeeding Business Day falls in the next 



10





 





succeeding calendar month, then on the next preceding Business Day), (b) no Interest Period shall extend beyond the Termination Date and (c) where an Interest Period begins on a day for
which there is no numerically corresponding day in the calendar month in which the Interest Period is to end, such Interest Period shall end on the last Business Day of such calendar month. 


        "Investment" means (a) the acquisition (whether for cash, property, services, assumption of Indebtedness, securities or otherwise)
of assets (including, without limitation, inventory, fixed assets, trademarks or tradenames), shares of Capital Stock, bonds, notes, debentures, partnership, joint venture or other ownership interests
or other securities of any Person or (b) any deposit with, or advance, loan or other extension of credit to, any Person (other than deposits made in connection with the purchase of equipment or
other assets in the ordinary course of business) or (c) any other capital contribution to or investment in such Person, including, without limitation, any Guaranty Obligation incurred for the
benefit of such Person. 


        "Issuing Lender" means Bank of America. 


        "Joinder Agreement" means a Joinder Agreement substantially in the form of  Exhibit 7.13. 


        "Lenders" means any of the Persons identified as a "Lender" on the signature pages hereto, and any Person which may become a Lender by way
of assignment in accordance with the terms hereof, together with their successors and permitted assigns. 


        "Letter of Credit" means any letter of credit issued by the Issuing Lender for the account of the Borrower in accordance with the terms of
Section 2.2(a). 


        "Letter of Credit Fee" shall have the meaning assigned to such term in Section 3.4(b)(i). 



        "Leverage Ratio" means, as of the end of each fiscal quarter of the Borrower, with respect to the Borrower and its Subsidiaries on a
consolidated basis, the ratio of (a) Funded Debt on such date to (b) EBITDA for the twelve month period ending on such date. 


        "Lien" means any mortgage, pledge, hypothecation, assignment, deposit arrangement, security interest, encumbrance, lien (statutory or
otherwise), preference, priority or charge of any kind (including, without limitation, any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under the Uniform Commercial Code as adopted and in effect in the relevant jurisdiction or other similar recording or notice statute, and any lease in
the nature thereof). 


        "Loan" or "Loans" means the Revolving Loans and/or the Term Loans (or a portion of any
Revolving Loan or Term Loan), individually or collectively, as appropriate. 


        "LOC Commitment" means the commitment of the Issuing Lender to issue Letters of Credit, and to honor payment obligations under Letters of
Credit hereunder in an aggregate face amount at any time outstanding (together with the amounts of any unreimbursed drawings thereon) of up to the LOC Committed Amount and with respect to each Lender,
the commitment of each Lender to purchase participation interests in the Letters of Credit. 


        "LOC Committed Amount" means the maximum amount of LOC Obligations hereunder. The initial LOC Committed Amount on the Closing Date is
referenced in Section 2.2(a). 


        "LOC Documents" means, with respect to any Letter of Credit, such Letter of Credit, any amendments thereto, any documents delivered in
connection therewith, any application therefor, and any agreements, instruments, guarantees or other documents (whether general in application or applicable only to such Letter of Credit) governing or
providing for (i) the rights and obligations of the parties concerned or at risk or (ii) any collateral security for such obligations. 



11





 




        "LOC Obligations" means, at any time, the sum of (i) the maximum amount which is, or at any time thereafter may become, available
to be drawn under Letters of Credit then outstanding, assuming compliance with all requirements for drawings referred to in such Letters of Credit plus
(ii) the aggregate amount of all drawings under Letters of Credit honored by the Issuing Lender but not theretofore reimbursed. 


        "London Interbank Offered Rate" means, with respect to any Eurodollar Loan for the Interest Period applicable thereto, the rate of
interest per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in Dollars at
approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided,
however, if more than one rate is specified on Telerate Page 3750, the applicable rate shall be the arithmetic mean of all such rates. If, for any reason, such rate is not
available, the term "London Interbank Offered Rate" shall mean, with respect to any Eurodollar Loan for the Interest Period applicable thereto, the rate
of interest per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in Dollars at approximately
11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided,
however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates. 



        "Material Adverse Effect" means a material adverse effect, after taking into account applicable insurance (to the extent the provider
thereof has the financial ability to support its obligations with respect thereto and is not disputing same), on (a) the operations, financial condition, business or prospects of the Borrower
and its Subsidiaries taken as a whole, (b) the ability of a Credit Party to perform its respective obligations under this Credit Agreement, or any of the other Credit Documents or
(c) the validity or enforceability of this Credit Agreement, or any of the other Credit Documents, or the rights and remedies of the Lenders hereunder or thereunder taken as a whole. 



        "Material Foreign Subsidiary" means (i) any Foreign Subsidiary that is directly owned by a Credit Party in which the revenue for
any period attributable to such Foreign Subsidiary and its Subsidiaries exceeds 7.5% of consolidated revenue for the Borrower and its Subsidiaries for such period and/or (ii) those Foreign
Subsidiaries that are directly owned by Credit Parties in which the revenue for any period attributable to all such Foreign Subsidiaries and their Subsidiaries exceeds 15% of consolidated revenue for
the Borrower and its Subsidiaries for such period. 



        "Moody's" means Moody's Investors Service, Inc., or any successor or assignee of the business of such company in the business of
rating securities. 


        "Multiemployer Plan" means a Plan covered by Title IV of ERISA which is a multiemployer plan as defined in Sections 3(37) or 4001(a)(3) of
ERISA. 


        "Multiple Employer Plan" means a Plan covered by Title IV of ERISA, other than a Multiemployer Plan, which any Credit Party or any of its
Subsidiaries or any ERISA Affiliate and at least one employer other than a Credit Party or any of its Subsidiaries or any ERISA Affiliate are contributing sponsors. 



        "Net Cash Proceeds" means the gross cash proceeds (including cash actually received by way of deferred payment pursuant to a promissory
note, receivable, or otherwise) received from an Asset Disposition, an Equity Issuance, a Debt Issuance or Recovery Event net of (a) transaction costs payable or to be paid to third parties and
(b) a good faith estimate of the taxes payable with respect to such proceeds (including, without duplication, withholding taxes). 



12





 




        "Net Income" means, for any period, the net income after taxes for such period of the Borrower and its Subsidiaries on a consolidated
basis, as determined in accordance with GAAP; provided that, for purposes of determining compliance with the Fixed Charge Coverage Ratio covenant in
Section 7.12(a), the Leverage Ratio covenant in Section 7.12(b), the Senior Leverage Ratio covenant in Section 7.12(c) and the Net Worth covenant in Section 7.12(d), there
shall be excluded from Net Income the effects of the amount of any write-down of goodwill required under FASB 142 for such period. 



        "Net Worth" means, as of any date, shareholders' equity or net worth of the Borrower and its Subsidiaries on a consolidated basis, as
determined in accordance with GAAP. 


        "Non-Excluded Taxes" has the meaning set forth in Section 3.14. 


        "Note" or "Notes" means the Revolving Notes and/or the Term Notes, individually or
collectively, as appropriate. 


        "Notice of Borrowing" means a request by the Borrower for a Revolving Loan, in the form of  Exhibit 2.1. 


        "Notice of Continuation/Conversion" means a request by the Borrower to continue an existing Eurodollar Loan to a new Interest Period or to
convert a Eurodollar Loan to a Base Rate Loan or a Base Rate Loan to a Eurodollar Loan, in the form of Exhibit 2.4. 



        "Notice of Request for Letter of Credit" means a request by the Borrower for a Letter of Credit, in the form of  Exhibit 2.2(a). 


        "Operating Lease" means, as applied to any Person, any lease (including, without limitation, leases which may be terminated by the lessee
at any time) of any property (whether real, personal or mixed) which is not a Capital Lease other than any such lease in which that Person is the lessor. 


        "Participant" has the meaning assigned to such term in Section 11.3(d). 



        "Participation Interest" means the Extension of Credit by a Lender by way of the issuance of or a purchase of a participation in LOC
Obligations as provided in Section 2.2(d) or in any Loans as provided in Section 3.9. 


        "PBGC" means the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA and any successor thereto. 


        "Permitted Acquisition" means (1) the acquisition of the Acquired Assets on the Closing Date and (2) the acquisition of all
of the Capital Stock of another Person, all or substantially all of the assets of another Person or a brand or product line of another Person, provided that each of the following conditions are
satisfied: (a) prior to such acquisition, the Borrower shall deliver to the Agent and Lenders evidence reasonably satisfactory to the Agent and Required Lenders demonstrating that after giving
effect to such acquisition on a Pro Forma Basis, the Credit Parties and their Subsidiaries would have been in compliance with all the financial covenants set forth in Section 7.12,
(b) simultaneously with any such acquisition, the Borrower shall have taken all action required under applicable law, or reasonably requested by the Agent, to grant to the Agent, for the
benefit of the Lenders, a valid and perfected first-priority security interest in all the assets acquired pursuant to such acquisition, (c) the acquisition is consummated pursuant to a
negotiated acquisition agreement and involves the purchase of a consumer product or product line similar to those manufactured, distributed or sold by the Borrower as of the date hereof, or of a
business that manufactures, distributes or sells one or more consumer products or product lines, similar to those manufactured, distributed or sold by the Borrower as of the date hereof,
(d) after giving effect to the acquisition, the representations and warranties set forth in Section 6 hereof shall be 



13





 





true and correct in all material respects on and as of the date of such acquisition with the same effect as though made on and as of such date, (e) no Default or Event of Default exists and is
continuing or would result from such acquisition and (f) the aggregate consideration (including cash and non-cash consideration, assumption of liabilities and any contingency
payments associated therewith) paid by the Borrower and its Subsidiaries shall not to exceed (i) $15,000,000 in the aggregate for all acquisitions occurring during any fiscal year of the
Borrower and (ii) $30,000,000 in the aggregate for all such acquisitions occurring subsequent to the Closing Date. 


        "Permitted Investments" means Investments which are (a) cash or Cash Equivalents, (b) accounts receivable created, acquired
or made in the ordinary course of business and payable or dischargeable in accordance with customary trade terms, (c) Investments in any Credit Party, (d) loans to directors, officers,
employees, agents, customers or suppliers in the ordinary course of business for reasonable business expenses, not to exceed in the aggregate $500,000 at any one time, (e) Investments
subsequent to the Closing Date in (i) Chattem (Canada) Inc. not to exceed $1,500,000 in the aggregate and (ii) Chattem (U.K.) Limited not to exceed $1,500,000 in the aggregate,
(f) Investments in (including any insurance premiums funded to) HBA Indemnity Company, Ltd. not to exceed $2,500,000 in the aggregate in any fiscal year of the Borrower,
(g) purchases or redemptions of Capital Stock of the Borrower permitted by Section 8.7, (h) redemptions or repurchases of Subordinated Debt permitted by Section 8.11,
(i) Permitted Acquisitions and (j) all those existing Investments of the Borrower identified on Schedule 1.1(b) attached hereto. 



        "Permitted Liens" means (a) Liens securing Credit Party Obligations, (b) Liens for taxes not yet due or Liens for taxes
being contested in good faith by appropriate proceedings for which adequate reserves determined in accordance with GAAP have been established (and as to which the property subject to any such Lien is
not yet subject to foreclosure, sale or loss on account thereof), (c) Liens in respect of property imposed by law arising in the ordinary course of business such as materialmen's, mechanics',
warehousemen's, carrier's, landlords' and other nonconsensual statutory Liens which are not due and payable or, if due and payable, are being contested in good faith by appropriate proceedings for
which adequate reserves determined in accordance with GAAP have been established (and as to which the property subject to any such Lien is not yet subject to foreclosure, sale or loss on account
thereof), (d) pledges or deposits made in the ordinary course of business to secure payment of worker's compensation insurance, unemployment insurance, pensions or social security programs,
(e) Liens arising from good faith deposits in connection with or to secure performance of tenders, bids, leases, government contracts, performance and return-of-money
bonds and other similar obligations incurred in the ordinary course of business (other than obligations in respect of the payment of borrowed money), (f) Liens arising from good faith deposits
in connection with or to secure performance of statutory obligations and surety and appeal bonds, (g) easements, rights-of-way, restrictions (including zoning
restrictions), minor defects or irregularities in title and other similar charges or encumbrances not, in any material respect, impairing the use of the encumbered property for its intended purposes,
(h) judgment Liens that would not constitute an Event of Default, (i) Liens on assets of any Person securing purchase money Indebtedness (including Capital Leases) to the extent
permitted under Section 8.1(e), provided that any such Lien attaches to such assets concurrently with or within 90 days after the
acquisition thereof, (j) Liens arising by virtue of any statutory or common law provision relating to banker's liens, rights of setoff or similar rights as to deposit accounts or other funds
maintained with a creditor depository institution and (k) Liens existing on the date hereof and identified on Schedule 8.2; provided that
no such Lien shall extend to any property other than the property subject thereto on the Closing Date. 


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



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        "Plan" means any employee benefit plan (as defined in Section 3(3) of ERISA) which is covered by ERISA and with respect to which
any Credit Party or any of its Subsidiaries or any ERISA Affiliate is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" within the
meaning of Section 3(5) of ERISA. 


        "Pledge Agreement" means the Pledge Agreement, executed and delivered by each of the applicable Credit Parties in favor of the Agent, for
the benefit of the Lenders, to secure their obligations under the Credit Documents, as amended, modified, extended, renewed or replaced from time to time. 



        "Prime Rate" means the per annum rate of interest established from time to time by the Agent at its principal office in Charlotte, North
Carolina (or such other principal office of the Agent as communicated in writing to the Borrower and the Lenders) as its Prime Rate. Any change in the interest rate resulting from a change in the
Prime Rate shall become effective as of 12:01 a.m. of the Business Day on which each change in the Prime Rate is announced by the Agent. The Prime Rate is a reference rate used by the Agent in
determining interest rates on certain loans and is not intended to be the lowest rate of interest charged on any extension of credit to any debtor. 



        "Principal Amortization Payment" means a principal payment on the Term Loan as set forth in Section 2.3(c). 


        "Pro Forma Basis" means, in connection with any Permitted Acquisition, any Asset Disposition, any Restricted Payment permitted by
Section 8.7 or any prepayment of Subordinated Debt permitted by Section 8.11, that such transaction shall be deemed to have occurred on the first day of the twelve month period ending on
the last day of the Borrower's most recently completed fiscal quarter for which the Borrower has delivered the officer's certificate pursuant to Section 7.1(c). 



        "Purchase Agreement" means that certain Asset Purchase Agreement, as amended and modified from time to time, by and between Abbott
Laboratories, as the seller, and the Borrower, as the purchaser, dated as of March 5, 2002. 


        "Real Properties" means the collective reference to each of the facilities and real properties owned, leased or operated by the Borrower
and its Subsidiaries at such time. 


        "Recovery Event" means the receipt by the Borrower or any of its Subsidiaries of any cash insurance proceeds, condemnation award payable
or indemnification payments from other third parties by reasons of theft, loss, physical destruction or damage, taking or similar event with respect to any of their respective property or assets. 


        "Regulation D, T, U, or X" means Regulation D, T, U or X, respectively, of the Board of Governors of the Federal Reserve
System as from time to time in effect and any successor to all or a portion thereof. 


        "Related Parties" means, with respect to any specified Person, such Person's Affiliates and the respective directors, officers, employees,
agents and advisors of such Person and such Person's Affiliates. 


        "Reportable Event" means a "reportable event" as defined in Section 4043 of ERISA with respect to which the notice requirements to
the PBGC have not been waived. 


        "Required Lenders" means any two or more Lenders whose aggregate Credit Exposure (as hereinafter defined) constitutes at least 51% of the
Credit Exposure of all Lenders at such time; provided, however, that if any Lender shall be a Defaulting Lender at such time then there shall be excluded from the determination of Required Lenders the
aggregate principal amount of Credit 



15





 





Exposure of such Lender at such time. For purposes of the preceding sentence, the term "Credit Exposure" as applied to each Lender shall mean (a) at any time prior to the termination of the
Commitments, the sum of (i) the Revolving Loan Commitment Percentage of such Lender multiplied by the Revolving Committed Amount plus
(ii) the Term Loan Commitment Percentage of such Lender multiplied by the aggregate principal amount of Term Loans outstanding at such time and (b) at any time after the termination of
the Commitments, the sum of the principal balance of the outstanding Loans of such Lender. 



        "Requirement of Law" means, as to any Person, the articles or certificate of incorporation and by-laws or other organizational
or governing documents of such Person, and any law, treaty, rule or regulation or final, non-appealable determination of an arbitrator or a court or other Governmental Authority, in each
case applicable to or binding upon such Person or to which any of its material property is subject. 


        "Restricted Payment" shall have the meaning assigned to such term in Section 8.7. 



        "Revolving Loan Commitment Percentage" means, for each Lender, the percentage identified as its Revolving Loan Commitment Percentage on  Schedule 1.1(a), as such
percentage may be modified in connection with any assignment made in accordance with the provisions of
Section 11.3. 


        "Revolving Commitment" means, with respect to each Lender, the commitment of such Lender in an aggregate principal amount at any time
outstanding of up to such Lender's Revolving Loan Commitment Percentage of the Revolving Committed Amount, (i) to make Revolving Loans in accordance with the provisions of Section 2.1(a)
and (ii) to purchase Participation Interests in Letters of Credit in accordance with the provisions of Section 2.2(d). 


        "Revolving Committed Amount" means FIFTEEN MILLION DOLLARS ($15,000,000) or such lesser amount as the Revolving Committed Amount may be
reduced pursuant to Section 2.1(d) or Section 3.3. 


        "Revolving Loans" means the Revolving Loans made to the Borrower pursuant to Section 2.1. 



        "Revolving Note" or "Revolving Notes" means the promissory notes of the Borrower in favor
of each of the Lenders evidencing the Revolving Loans provided pursuant to Section 2.1, individually or collectively, as appropriate, as such promissory notes may be amended, modified,
supplemented, extended, renewed or replaced from time to time and as evidenced in the form of Exhibit 2.6(a). 


        "S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill, Inc., or any successor or assignee of the business
of such division in the business of rating securities. 


        "Scheduled Funded Debt Payments" means, as of the date of determination, for the Borrower and its Subsidiaries, on a consolidated basis,
the sum of all scheduled payments of principal on Funded Debt for the applicable period ending on the date of determination (including the principal component of payments due on Capital Leases and
Synthetic Leases during the applicable period ending on the date of determination); it being understood that Scheduled Funded Debt Payments shall not include voluntary prepayments or the mandatory
prepayments required pursuant to Section 3.3. 


        "Security Agreement" means that certain Security Agreement dated as of the date hereof and executed and delivered by the Credit Parties in
favor of the Agent for the benefit of the Lenders to secure their obligations under the Credit Documents, as such may be amended, modified, extended, renewed, restated or replaced from time to time. 


        "Senior Leverage Ratio" means as of the end of each fiscal quarter of the Borrower, with respect to the Borrower and its Subsidiaries on a
consolidated basis, the ratio of (a) Funded Debt 



16





 





minus Subordinated Debt on such date to (b) EBITDA for the twelve month period ending on such date. 


        "Signal" means Signal Investment & Management Co., a Delaware corporation, which is a wholly-owned subsidiary of the Borrower. 


        "Single Employer Plan" means any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan. 



        "Solvent" means, with respect to any Person as of a particular date, that on such date (a) such Person is able to pay its debts and
other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (b) such Person does not intend to, and does not believe that it will, incur
debts or liabilities beyond such Person's ability to pay as such debts and liabilities mature in their ordinary course, (c) such Person is not engaged in a business or a transaction, and is not
about to engage in a business or a transaction, for which such Person's assets would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in
which such Person is engaged or is to engage, (d) the fair value of the assets of such Person is greater than the total amount of liabilities, including, without limitation, contingent
liabilities, of such Person and (e) the present fair saleable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person
on its debts as they become absolute and matured. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount which, in light of
all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability. 



        "Subordinated Debt" means the Indebtedness evidenced by the Indenture or by the guarantees thereof in an aggregate principal amount not to
exceed $205,000,000. 


        "Subsidiary" means, as to any Person, (a) any corporation more than 50% of whose stock of any class or classes having by the terms
thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time, any class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through Subsidiaries, and (b) any partnership, association, joint venture
or other entity in which such person directly or indirectly through Subsidiaries has more than a 50% equity interest at any time. 


        "Synthetic Lease" means any synthetic lease, tax retention operating lease, off-balance sheet loan or similar
off-balance sheet financing product where such transaction is considered borrowed money indebtedness for tax purposes but is classified as an Operating Lease. 


        "Termination Date" means March 28, 2007. 



        "Termination Event" means (a) with respect to any Plan, the occurrence of a Reportable Event or the substantial cessation of
operations (within the meaning of Section 4062(e) of ERISA); (b) the withdrawal of any Credit Party or any of its Subsidiaries or any ERISA Affiliate from a Multiple Employer Plan during
a plan year in which it was a substantial employer (as such term is defined in Section 4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan; (c) the distribution of a
notice of intent to terminate or the actual termination of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA; (d) the institution of proceedings to terminate or the actual
termination of a Plan by the PBGC under
Section 4042 of ERISA; (e) any event or condition which might reasonably constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan; or (f) the complete or partial withdrawal of any Credit Party or any of its Subsidiaries or any ERISA Affiliate from a Multiemployer Plan. 



17











  




        "Term Loan Commitment" means, with respect to each Lender, the commitment of such Lender to make its portion of the Term Loan in a
principal amount equal to such Lender's Term Loan Percentage (if any) of the Term Loan Committed Amount. 



        "Term Loan Commitment Percentage" means, for each Lender, the percentage identified as its Term Loan Commitment Percentage on  Schedule 1.1(a), as such percentage
may be modified in connection with any assignment made in accordance with the provisions of
Section 11.3. 


        "Term Loan Committed Amount" means FORTY-FIVE MILLION DOLLARS ($45,000,000). 


        "Term Loan Note" or "Term Loan Notes" means the promissory notes of the Borrower in favor
of the Lenders having a Term Loan Commitment Percentage evidencing the Term Loans provided pursuant to Section 2.3, individually or collectively, as appropriate, as such promissory notes may be
amended, modified, supplemented, extended, renewed or replaced from time to time as evidenced in the form of Exhibit 2.6(b). 


        "Term Loans" means the Term Loans made to the Borrower pursuant to Section 2.3. 


        "Unused Fee" shall have the meaning assigned to such term in Section 3.4(a). 



        "Unused Fee Calculation Period" shall have the meaning assigned to such term in Section 3.4(a). 


        "Unused Revolving Committed Amount" means, for any period, the amount by which (a) the then applicable Revolving Committed Amount
exceeds (b) the daily average sum for such period of (i) the outstanding aggregate principal amount of all Revolving Loans plus  (ii) the outstanding aggregate principal amount of all LOC
Obligations. 


        "Wal-Mart" means Wal-Mart Stores, Inc., a Delaware corporation. 



        "Working Capital" means, at any time, with respect to the Borrower and its Subsidiaries on a consolidated basis, the excess of current
assets (excluding cash and Cash Equivalents) over current liabilities (excluding the current portion of Funded Debt), as determined in accordance with GAAP. 




        1.2    Computation of Time Periods and Other Definitional Provisions.    


        For
purposes of computation of periods of time hereunder, the word "from" means "from and including" and the words "to" and "until" each mean "to but excluding." References in this
Credit Agreement to "Articles", "Sections", "Schedules" or "Exhibits" shall be to Articles, Sections, Schedules or Exhibits of or to this Credit Agreement unless otherwise specifically provided. 


        1.3    Accounting Terms.    


        Except
as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters
required to be delivered to the Lenders hereunder shall be prepared, in accordance with GAAP applied on a consistent basis. All financial statements delivered to the Lenders hereunder shall be
accompanied by a statement from the Borrower that GAAP has not changed since the most recent financial statements delivered by the Borrower to the Lenders or if GAAP has changed describing such
changes in detail and explaining how such changes affect the financial statements. All calculations made for the purposes of determining compliance with this Credit Agreement shall (except as
otherwise expressly provided herein) be made by application of GAAP applied on a basis consistent with the most recent annual or quarterly financial statements delivered pursuant to Section 7.1
(or, prior to the delivery of the first financial statements pursuant to Section 7.1, consistent with the financial statements described in Section 5.1(c));  provided, however, if (a) the
Borrower shall object to determining such compliance on such basis at the time of delivery of such financial
statements due to any change in GAAP or the rules 


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promulgated with respect thereto or (b) either Agent or the Required Lenders shall so object in writing within 60 days after delivery of such financial statements (or after the Lenders
have been informed of the change in GAAP affecting such financial statements, if later), then such calculations shall be made on a basis consistent with the most recent financial statements delivered
by the Borrower to the Lenders as to which no such objection shall have been made. 



        Notwithstanding
the above, the parties hereto acknowledge and agree that, for purposes of all calculations made under the financial covenants set forth in Section 7.12, financial
statement items (whether positive or negative) attributable to the assets acquired in any Permitted Acquisition and any Indebtedness incurred by the Borrower or any of its Subsidiaries in order to
consummate such Permitted Acquisition shall be included to the extent relating to any period applicable in such calculations occurring on or after the date of such Permitted Acquisition on a Pro Forma
Basis (and, if any Indebtedness incurred by the Borrower or any of its Subsidiaries in order to consummate such
Permitted Acquisition has a floating or formula rate, then the implied rate of interest for such Indebtedness for the applicable period shall be determined by utilizing the rate which is or would be
in effect with respect to such Indebtedness as at the relevant date of determination). Furthermore, the parties hereto agree that, for purposes of all calculations made under the financial covenants
set forth in Section 7.12 after any Asset Disposition, such calculations shall be conducted in a manner similar to any calculation related to a Permitted Acquisition in similar circumstances
except that the applicable financial statement items and Indebtedness attributable to the Person or Property related to the applicable Asset Disposition shall be excluded (rather than included) from
such calculation on a Pro Forma Basis. 


 
 

SECTION 2
  
    CREDIT FACILITIES    
  


        2.1    Revolving Loans.    



        (a)    Revolving Commitment.    Subject to the terms and conditions set forth herein, each Lender severally agrees to
make revolving loans (each a "Revolving Loan" and collectively the "Revolving Loans") to the Borrower,
in Dollars, at any time and from time to time, during the period from and including the Effective Date to but not including the Termination Date (or such earlier date if the Revolving Committed Amount
has been terminated as provided herein); provided, however, that (i) the sum of the aggregate amount of Revolving Loans outstanding plus the
aggregate amount of LOC Obligations outstanding shall not exceed the lesser of (x) the Revolving Committed Amount and (y) the Borrowing Base, and (ii) with respect to each
individual Lender, such Lender's outstanding Revolving Loans shall not exceed such Lender's Revolving Loan Commitment Percentage of the Revolving Committed Amount. 



        (b)    Method of Borrowing for Revolving Loans.    By no later than 11:00 a.m. (i) on the Business Day
of the requested borrowing of Revolving Loans that will be Base Rate Loans or (ii) three Business Days prior to the date of the requested borrowing of Revolving Loans that will be Eurodollar
Loans, the Borrower shall submit a written Notice of Borrowing in the form of Exhibit 2.1 (or telephone notice promptly confirmed in writing) to
the Agent setting forth (A) the amount requested, (B) whether such Revolving Loans shall accrue interest at the Adjusted Base Rate or the Adjusted Eurodollar Rate, (C) with
respect to Revolving Loans that will be Eurodollar Loans, the Interest Period applicable thereto and (D) evidence that the Borrower has complied in all respects with Section 5.2. 


        (c)    Funding of Revolving Loans.    Upon receipt of a Notice of Borrowing, the Agent shall promptly inform the
applicable Lenders as to the terms thereof. Each such Lender shall make its Revolving Loan Commitment Percentage of the requested Revolving Loans available to the Agent by 1:00 p.m. on the date
specified in the Notice of Borrowing by deposit, in Dollars, of 



19





 





immediately available funds at the offices of the Agent at its principal office in Charlotte, North Carolina or at such other address as the Agent may designate in writing. The amount of the
requested Revolving Loans will then be made available to the Borrower by the Agent by crediting the account of the Borrower on the books of such office of the Agent, to the extent the amount of such
Revolving Loans are made available to the Agent. 



        (d)    Reductions of Revolving Committed Amount.    Upon at least three Business Days' notice, the Borrower shall have
the right to permanently terminate or reduce the aggregate unused amount of the Revolving Committed Amount at any time or from time to time; provided that (i) each partial reduction shall be in
an aggregate amount at least equal to $1,000,000 and in integral multiples of $500,000 above such amount and (ii) no reduction shall be made which would reduce the Revolving Committed Amount to
an amount less than the aggregate amount of outstanding Revolving Loans. Any reduction in (or termination of) the Revolving Committed Amount shall be permanent and may not be reinstated. 




        2.2    Letter of Credit Subfacility.    



        (a)    Issuance.    From the Effective Date until the date thirty (30) days prior to the Termination Date, in
reliance upon the agreements of the Lenders set forth herein and subject to the terms and conditions hereof and of the LOC Documents, if any, and such other terms and conditions which the Issuing
Lender may reasonably require, the Issuing Lender shall issue, and the Lenders shall participate in, such standby and commercial Letters of Credit in Dollars as the Borrower may request for its own
account or for the account of another Credit Party as provided herein, in a form acceptable to the Issuing Lender, for the purposes hereinafter set forth; provided  that (i) the aggregate amount of
LOC Obligations shall not exceed FIVE MILLION DOLLARS ($5,000,000) at any time (the "LOC Committed
Amount") and (ii) the sum of the aggregate amount of Revolving Loans outstanding plus the aggregate amount of LOC Obligations outstanding shall not exceed the lesser of
(x) the Revolving Committed Amount and (y) the Borrowing Base. Letters of Credit issued hereunder shall have an expiry date not more than one year from the date of issuance or extension,
and may not extend beyond the Termination Date. 


        (b)    Notice of Request for Letter of Credit.    The Borrower shall request a Letter of Credit hereunder by written
notice (or telephone notice promptly confirmed in writing) to the Issuing Lender with a copy to the Agent not later than 11:00 A.M. (Charlotte, North Carolina time) on the third Business Day
prior to the date of the requested issuance or extension (or such shorter period as may be agreed by the Issuing Lender). Each such request for issuance or extension of a Letter of Credit shall be
irrevocable and shall specify, among other things, (A) that a Letter of Credit is requested, (B) the date of the requested issuance or extension, (C) the type, amount, expiry date
and terms on which the Letter of Credit is to be issued or extended, and (D) the beneficiary. A form of Notice of Request for Letter of Credit is attached as  Exhibit 2.2(a). The Issuing Lender
shall notify the Lenders of the issuance of any Letter of Credit. 


        (c)    Reports.    The Issuing Lender will provide to the Agent at least monthly, and more frequently upon request, a
detailed summary report on its Letters of Credit and the activity thereon, in form and substance acceptable to the Agent. In addition, the Issuing Lender will provide to the Agent for dissemination to
the Lenders and the Borrower at least quarterly, and more frequently upon request, a detailed summary report on its Letters of Credit and the activity thereon, including, among other things, the
Credit Party for whose account the Letter of Credit is issued, the beneficiary, the face amount, and the expiry date. The Issuing Lender will provide (i) the proposed form of Letter of Credit
to the Borrower prior to its issuance promptly upon request and (ii) copies of the Letters of Credit to the Agent, the Lenders and the Borrower promptly upon request. 



20





 




        (d)    Participation.    Each Lender, upon issuance of a Letter of Credit, shall be deemed to have purchased without
recourse a risk participation from the Issuing Lender in such Letter of Credit and the obligations arising thereunder, in each case in an amount equal to its pro rata share of the obligations under
such Letter of Credit (based on the respective Revolving Loan Commitment Percentages of the Lenders) and shall absolutely, unconditionally and irrevocably assume, as primary obligor and not as surety,
and be obligated to pay to the Issuing Lender therefor and discharge when due, its pro rata share of the obligations arising under such Letter of Credit. Without limiting the scope and nature of each
Lender's participation in any Letter of Credit, to the extent that the Issuing Lender has not been reimbursed as required hereunder or under any such Letter of Credit, each Lender shall pay to the
Issuing Lender its pro rata share of such unreimbursed drawing in same day funds pursuant to the provisions of subsection (c) hereof. The obligation of each Lender to so reimburse the Issuing
Lender shall be absolute and unconditional and shall not be affected by the occurrence of a Default, an Event of Default or any other occurrence or event. Any such reimbursement shall not relieve or
otherwise impair the obligation of the Borrower to reimburse the Issuing Lender under any Letter of Credit, together with interest as hereinafter provided. 


        (e)    Reimbursement.    In the event of any drawing under any Letter of Credit, the Issuing Lender will promptly
notify the Borrower. Unless the Borrower shall immediately notify the Issuing Lender that the Borrower intends to otherwise reimburse the Issuing Lender for such drawing, the Borrower shall be deemed
to have requested that the Lenders make a Revolving Loan in the amount of the drawing as provided in subsection (d) hereof on the related Letter of Credit, the proceeds of which will be used to
satisfy the related reimbursement obligations. The Borrower promises to reimburse the Issuing Lender on the day of drawing under any Letter of Credit (either with the proceeds of a Revolving Loan
obtained hereunder or otherwise) in same day funds. If the Borrower shall fail to reimburse the Issuing Lender as provided hereinabove, the unreimbursed amount of such drawing shall bear interest at a
per annum rate equal to the Adjusted Base Rate plus four percent (4%). The Borrower's reimbursement obligations hereunder shall be absolute and unconditional under all circumstances irrespective of
any rights of setoff, counterclaim or defense to payment the Borrower may claim or have against the Issuing Lender, the Agent, the Lenders, the beneficiary of the Letter of Credit drawn upon or any
other Person, including without limitation any defense based on any failure of the Borrower or any other Credit Party to receive consideration or the legality, validity, regularity or unenforceability
of the Letter of Credit. The Issuing Lender will promptly notify the other Lenders of the amount of any unreimbursed drawing and each Lender shall promptly pay to the Agent for the account of the
Issuing Lender in Dollars and in immediately available funds, the amount of such Lender's Revolving Loan Commitment Percentage of such unreimbursed drawing. Such payment shall be made on the day such
notice is received by such Lender from the Issuing Lender if such notice is received at or before
2:00 P.M. (Charlotte, North Carolina time) otherwise such payment shall be made at or before 12:00 Noon (Charlotte, North Carolina time) on the Business Day next succeeding the day such notice
is received. If such Lender does not pay such amount to the Issuing Lender in full upon such request, such Lender shall, on demand, pay to the Agent for the account of the Issuing Lender interest on
the unpaid amount during the period from the date of such drawing until such Lender pays such amount to the Issuing Lender in full at a rate per annum equal to, if paid within two (2) Business
Days of the date that such Lender is required to make payments of such amount pursuant to the preceding sentence, the Federal Funds Rate and thereafter at a rate equal to the Base Rate. Each Lender's
obligation to make such payment to the Issuing Lender, and the right of the Issuing Lender to receive the same, shall be absolute and unconditional, shall not be affected by any circumstance
whatsoever and without regard to the termination of this Credit Agreement or the Commitments hereunder, the existence of a Default or Event of Default or the acceleration of the obligations of the
Borrower hereunder and shall be 



21





 





made without any offset, abatement, withholding or reduction whatsoever. Simultaneously with the making of each such payment by a Lender to the Issuing Lender, such Lender shall, automatically and
without any further action on the part of the Issuing Lender or such Lender, acquire a participation in an amount equal to such payment (excluding the portion of such payment constituting interest
owing to the Issuing Lender) in the related unreimbursed drawing portion of the LOC Obligation and in the interest thereon and in the related LOC Documents, and shall have a claim against the Borrower
with respect thereto. 


        (f)    Repayment with Revolving Loans.    On any day on which the Borrower shall have requested, or been deemed to
have requested, a Revolving Loan advance to reimburse a drawing under a Letter of Credit, the Agent shall give notice to the Lenders that a Revolving Loan has been requested or deemed requested by the
Borrower to be made in connection with a drawing under a Letter of Credit, in which case a Revolving Loan advance comprised of Base Rate Loans (or Eurodollar Loans to the extent the Borrower has
complied with the procedures of Section 2.1(b) with respect thereto) shall be immediately made to the Borrower by all Lenders (notwithstanding any termination of the Commitments pursuant to
Section 9.2) pro rata based on the respective Revolving Loan Commitment Percentages of the Lenders (determined before giving effect to any
termination of the Commitments pursuant to Section 9.2) and the proceeds thereof shall be paid directly to the Issuing Lender for application to the respective LOC Obligations. Each such Lender
hereby irrevocably agrees to make its pro rata share of each such Revolving Loan advance immediately upon any such request or deemed request in the amount, in the manner and on the date specified in
the preceding sentence notwithstanding (i) the amount of such borrowing may not comply with the minimum amount for advances of Revolving Loans
otherwise required hereunder, (ii) whether any conditions specified in Section 5.2 are then satisfied, (iii) whether a Default or an Event of Default then exists,
(iv) failure for any such request or deemed request for Revolving Loan to be made by the time otherwise required hereunder, (v) whether the date of such borrowing is a date on which
Revolving Loans are otherwise permitted to be made hereunder or (vi) any termination of the Commitments relating thereto immediately prior to or contemporaneously with such borrowing. In the
event that any Revolving Loan advance cannot for any reason be so made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the
Bankruptcy Code with respect to the Borrower or any Credit Party), then each such Lender hereby agrees that it shall forthwith fund its purchase (as of the date such borrowing would otherwise have
occurred, but adjusted for any payments received from the Borrower on or after such date and prior to such purchase) from the Issuing Lender such Participation Interest in the outstanding LOC
Obligations as shall be necessary to cause each such Lender to share in such LOC Obligations ratably (based upon the respective Commitment Percentages of the Lenders (determined before giving effect
to any termination of the Commitments pursuant to Section 9.2)), provided that in the event such payment is not made when required by subsection
(c), such Lender shall pay in addition
to the Issuing Lender interest on the amount of its unfunded Participation Interest at a rate equal to, if paid within two (2) Business Days of the date of drawing, the Federal Funds Rate, and
thereafter at the Base Rate. 


        (g)    Designation of other Credit Parties as Account Parties.    Notwithstanding anything to the contrary set forth
in this Credit Agreement, a Letter of Credit issued hereunder may contain a statement to the effect that such Letter of Credit is issued for the account of a Credit Party other than the Borrower,
provided that notwithstanding such statement, the Borrower shall be the actual account party for all purposes of this Credit Agreement for such Letter of Credit and such statement shall not affect the
Borrower's reimbursement obligations hereunder with respect to such Letter of Credit. 



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        (h)    Renewal, Extension.    The renewal or extension of any Letter of Credit shall, for purposes hereof, be treated
in all respects the same as the issuance of a new Letter of Credit hereunder. 


        (i)    Applicability of ISP98 and UCP.    Unless otherwise expressly agreed by the Issuing Lender and the Borrower
when a Letter of Credit is issued, (i) the rules of the "International Standby Practices 1998" published by the Institute of International Banking Law & Practice (or such later version
thereof as may be in effect at the time of issuance) shall apply to each standby Letter of Credit, and (ii) the rules of the Uniform Customs and Practice for Documentary Credits, as most
recently published by the International Chamber of Commerce (the "ICC") at the time of issuance (including the ICC decision published by the Commission
on Banking Technique and Practice on April 6, 1998 regarding the European single currency (euro)) shall apply to each commercial Letter of Credit. 



        (j)    Indemnification; Nature of Issuing Lender's Duties.    



          (i)  In
addition to its other obligations under this Section 2.2, the Borrower hereby agrees to protect, indemnify, pay and save the Issuing Lender and the Lenders
harmless from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable attorneys' fees) that the Issuing Lender or any Lender may incur
or be subject to as a consequence, direct or indirect, of (A) the issuance of any Letter of Credit or (B) the failure of the Issuing Lender to honor a drawing under a Letter of Credit as
a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or governmental authority (all such acts or omissions, herein called
"Government Acts"). 


        (ii)  As
between the Borrower on the one hand and the Issuing Lender and the Lenders on the other hand, the Borrower shall assume all risks of the acts, omissions or misuse
of any Letter of Credit by the beneficiary thereof. The Issuing Lender and the Lenders shall not be responsible: (A) for the form, validity, sufficiency, accuracy, genuineness or legal effect
of any document submitted by any party in connection with the application for and issuance of any Letter of Credit, even if it should in fact prove
to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (B) for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer
or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, that may prove to be invalid or ineffective for any reason; (C) for errors,
omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher unless such errors, omissions,
interruptions or delays are the result of the gross negligence or willful misconduct of the Issuing Lender; (D) for any loss or delay in the transmission or otherwise of any document required
in order to make a drawing under a Letter of Credit or of the proceeds thereof unless such loss or delay is the result of the gross negligence or willful misconduct of the Issuing Lender; and
(E) for any consequences arising from causes beyond the control of the Issuing Lender, including, without limitation, any Government Acts. None of the above shall affect, impair, or prevent the
vesting of the Issuing Lender's rights or powers hereunder. 


        (iii)  In
furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by the Issuing Lender, under or in
connection with any Letter of Credit or the related certificates, if taken or omitted in good faith, shall not put such Issuing Lender under any resulting liability to the Borrower or any other Credit
Party. It is the intention of the parties that this Credit Agreement shall be construed and applied to protect and indemnify the Issuing Lender and the Lenders against any and all risks involved in
the issuance of the Letters of Credit, all of which risks are hereby assumed by the Borrower (on behalf of itself and each of the other Credit Parties), including, without limitation, any and all
Government Acts. The Issuing Lender and the Lenders shall 




23





 






not, in any way, be liable for any failure by the Issuing Lender or anyone else to pay any drawing under any Letter of Credit as a result of any Government Acts or any other cause beyond the control
of the Issuing Lender or the Lenders, as the case may be. 


        (iv)  Nothing
in this subsection (j) is intended to limit the reimbursement obligations of the Borrower contained in subsection (e) above. The obligations of the
Borrower under this subsection (j) shall survive the termination of this Credit Agreement. No act or omissions of any current or prior beneficiary of a Letter of Credit shall in any way affect
or impair the rights of the Issuing Lender to enforce any right, power or benefit under this Credit Agreement. 


        (v)  Notwithstanding
anything to the contrary contained in this subsection (j), the Borrower shall have no obligation to indemnify the Issuing Lender in respect of any
liability incurred by the Issuing Lender (A) to the extent arising out of the gross negligence or willful misconduct of the Issuing Lender, as determined by a court of competent jurisdiction,
or (B) caused by the Issuing Lender's failure to pay under any Letter of Credit after presentation to it of a request strictly complying with the terms and conditions of such Letter of Credit,
as determined by a court of competent jurisdiction, unless such payment is prohibited by any law, regulation, court order or decree. 




        (k)    Responsibility of Issuing Lender.    It is expressly understood and agreed that the obligations of the Issuing
Lender hereunder to the Lenders are only those expressly set forth in this Credit Agreement and that the Issuing Lender shall be entitled to assume that the conditions precedent set forth in
Section 5.2 have been satisfied unless it shall have acquired actual knowledge that any such condition
precedent has not been satisfied; provided, however, that nothing set forth in this Section 2.2 shall be deemed to prejudice the right of any
Lender to recover from the Issuing Lender any amounts made available by such Lender to the Issuing Lender pursuant to this Section 2.2 in the event that it is determined by a court of competent
jurisdiction that the payment with respect to a Letter of Credit constituted gross negligence or willful misconduct on the part of the Issuing Lender. 



        (l)    Limitation on Obligation of the Issuing Lender.    Notwithstanding anything contained herein to the contrary,
the Issuing Lender shall not be under any obligation to issue, renew or extend any Letter of Credit if (i) any order, judgment or decree of any Governmental Authority or arbitrator shall by its
terms purport to enjoin or restrain the Issuing Lender from issuing a Letter of Credit, or any applicable law, rule or regulation or any request or directive (whether or not having the force of law)
from any governmental with jurisdiction over the Issuing Lender shall prohibit, or request that the Issuing Lender refrain from, the issuance of letters of credit generally or any such Letter of
Credit in particular, or shall impose upon the Issuing Lender with respect to any such Letter of Credit any restriction, reserve or capital requirement (for which the Issuing Lender is not otherwise
compensated hereunder) not in effect on the Closing Date, or shall impose upon the Issuing Lender any unreimbursed loss, costs or expense which was not applicable on the Closing Date and which the
Issuing Lender should deem material to it in good faith, or (ii) the issuance, renewal or extension would violate or otherwise contravene its internal policy. 


        (m)    Conflict with LOC Documents.    In the event of any conflict between this Credit Agreement and any LOC Document
(including any letter of credit application), this Credit Agreement shall control. 




        2.3    Term Loans.    



        (a)    Term Loans.    Subject to the terms and conditions set forth herein, each Lender severally agrees on the date
hereof, to make a term loan (collectively, the "Term Loans") to the Borrower, in Dollars, in an amount equal to such Lender's Term Loan Commitment
Percentage of the Term Loan Committed Amount; provided that the aggregate amount of such Term Loans made on the 



24





 


date hereof shall not exceed the Term Loan Committed Amount. Once repaid, Term Loans cannot be reborrowed. 


        (b)    Funding of Term Loans.    On the Effective Date, each Lender will make its Term Loan Commitment Percentage of
the Term Loan Committed Amount available to the Agent by deposit, in Dollars and in immediately available funds, at the offices of the Agent at its principal office in Charlotte, North Carolina or at
such other address as the Agent may designate in writing. The amount of the Term Loans will then be made available to the Borrower by the Agent by crediting the account of the Borrower on the books of
such office of the Agent, to the extent the amount of such Term Loans are made available to the Agent. All Term Loans funded on the date hereof shall be Base Rate Loans. Thereafter, all or any portion
of the Term Loans may be converted into Eurodollar Loans in accordance with the terms of Section 2.4. No Lender shall be responsible for the failure or delay by any other Lender in its
obligation to make Term Loans hereunder; provided however, that the failure of
any Lender to fulfill its obligations hereunder shall not relieve any other Lender of its obligations hereunder. 



        (c)    Amortization.    The principal amount of the Term Loans shall be repaid in quarterly payments in the amounts
and on the dates set forth below: 



	Principal

Amortization

Payment Dates
	 	Term Loan Principal

Amortization Payment

	June 30, 2002	 	$	1,500,000
	September 30, 2002	 	$	2,000,000
	December 31, 2002	 	$	1,750,000
	March 31, 2003	 	$	1,500,000
	June 30, 2003	 	$	1,750,000
	September 30, 2003	 	$	2,250,000
	December 31, 2003	 	$	2,250,000
	March 31, 2004	 	$	1,750,000
	June 30, 2004	 	$	2,000,000
	September 30, 2004	 	$	2,500,000
	December 31, 2004	 	$	2,500,000
	March 31, 2005	 	$	2,000,000
	June 30, 2005	 	$	2,250,000
	September 30, 2005	 	$	2,750,000
	December 31, 2005	 	$	2,750,000
	March 31, 2006	 	$	2,250,000
	June 30, 2006	 	$	2,500,000
	September 30, 2006	 	$	3,000,000
	December 31, 2006	 	$	3,000,000
	March 28, 2007	 	$	2,750,000
	Total	 	$	45,000,000





25







  




        2.4    Continuations and Conversions.    



        Subject
to the terms of Section 5.2, the Borrower shall have the option, on any Business Day, to continue in existence Eurodollar Loans for a subsequent Interest Period, to
convert Base Rate Loans into Eurodollar Loans or to convert Eurodollar Loans into Base Rate Loans; provided, however, that (a) each such continuation or conversion must be requested by the
Borrower pursuant to a written Notice of Continuation/Conversion, in the form of Exhibit 2.4, in compliance with the terms set forth below,
(b) except as provided in Section 3.12, Eurodollar Loans may only be continued or converted into Base Rate Loans on the last day of the Interest Period applicable thereto,
(c) Eurodollar Loans may not be continued nor may Base Rate Loans be converted into Eurodollar Loans during the existence and continuation of a Default or Event of Default and (d) any
request to extend a Eurodollar Loan that fails to comply with the terms hereof or any failure to request an extension of a Eurodollar Loan at the end of an Interest Period shall constitute a request
for a conversion to a Base Rate Loan on the last day of the applicable Interest Period. Each continuation or conversion must be requested by the Borrower no later than 11:00 a.m. (i) one
Business Day prior to the date for a requested conversion of a Eurodollar Loan to a Base Rate Loan or (ii) three Business Days prior to the date for a requested extension of a Eurodollar Loan
or conversion of a Base Rate Loan to a Eurodollar Loan, in each case pursuant to a written Notice of Continuation/Conversion submitted to the Agent which shall set forth (A) whether the
Borrower wishes to continue or convert such Loans and (B) if the request is to continue a Eurodollar Loan or convert a Base Rate Loan to a Eurodollar Loan, the Interest Period applicable
thereto. 


        2.5    Minimum Amounts.    


        Each
request for a borrowing, conversion or continuation shall be subject to the requirements that (a) each Eurodollar Loan shall be in a minimum amount of $1,000,000 and in
integral multiples of $500,000 in excess thereof, (b) each Base Rate Loan shall be in a minimum amount of the lesser of $1,000,000 (and integral multiples of $500,000 in excess thereof) or the
remaining amount available under the Revolving Committed Amount and (c) no more than six Eurodollar Loans (including both Revolving Loans and Term Loans) shall, in the aggregate, be outstanding
hereunder at any one time. For the purposes of this Section, all Eurodollar Loans with the same Interest Periods shall be considered as one Eurodollar Loan, but Eurodollar Loans with different
Interest Periods, even if they begin on the same date, shall be considered as separate Eurodollar Loans. 


        2.6    Notes.    



        (a)    Revolving Notes.    The Revolving Loans made by each Lender shall be evidenced by a duly executed promissory
note of the Borrower to each applicable Lender in the face amount of its Revolving Loan Commitment Percentage of the Revolving Committed Amount in substantially the form of  Exhibit 2.6(a).



        (b)    Term Notes.    The Term Loans made by the Lenders shall be evidenced by a duly executed promissory note of the
Borrower to each such Lender in the face amount of its Term Loan Commitment Percentage of the Term Loan Committed Amount in substantially the form of  Exhibit 2.6(b). 



 
 

SECTION 3
  
    GENERAL PROVISIONS APPLICABLE TO LOANS    
  


        3.1    Interest.    



        (a)    Interest Rate.    All Base Rate Loans shall accrue interest at the Adjusted Base Rate and all Eurodollar Loans
shall accrue interest at the Adjusted Eurodollar Rate. 


        (b)    Default Rate of Interest.    Upon the occurrence, and during the continuance, of an Event of Default, the
principal of and, to the extent permitted by law, interest on the Loans and any 



26





 





other amounts owing hereunder or under the other Credit Documents (including without limitation fees and expenses) shall bear interest, payable on demand, at a per annum rate equal to 4% plus the
rate which would otherwise be applicable (or if no rate is applicable, then the rate for Revolving Loans that are Base Rate Loans plus four percent (4%) per annum). 


        (c)    Interest Payments.    Interest on Loans shall be due and payable in arrears on each Interest Payment Date. If
an Interest Payment Date falls on a date which is not a Business Day, such Interest Payment Date shall be deemed to be the next succeeding Business Day (subject to accrual of interest for the period
of such extension), except that in the case of Eurodollar Loans where the next succeeding Business Day falls in the next succeeding calendar month, then on the next preceding day. 




        3.2    Place and Manner of Payments.    


        All
payments of principal, interest, fees, expenses and other amounts to be made by a Credit Party under this Credit Agreement shall be made unconditionally and without any setoff,
deduction, counterclaim, defense, recoupment or withholding of any kind and received not later than 2:00 p.m. on the date when due, in Dollars and in immediately available funds, by the Agent
at its offices in Charlotte, North Carolina. Payments received after such time shall be deemed to have been received on the next Business Day. The Borrower shall, at the time it makes any payment
under this Credit Agreement, specify to the Agent, the Loans, fees or other amounts payable by the Borrower hereunder to which such payment is to be applied (and in the event that it fails to specify,
or if such application would be inconsistent with the terms hereof, the Agent shall, subject to Section 3.7, distribute such payment to the Lenders in such manner as the Agent may deem
appropriate). The Agent will distribute such payments to the applicable Lenders on the date received if any such payment is received prior to 2:00 p.m.; otherwise the Agent will distribute such
payment to the applicable Lenders on the next succeeding Business Day. Whenever any payment hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be
extended to the next succeeding Business Day (subject to accrual of interest and fees for the period of such extension), except that in the case of Eurodollar Loans, if the extension would cause the
payment to be made in the next following calendar month, then such payment shall instead be made on the next preceding Business Day. 


        3.3    Prepayments.    



        (a)    Voluntary Prepayments.    The Borrower shall have the right to prepay Loans in whole or in part from time to
time without premium or penalty; provided, however, that (i) Eurodollar Loans may only be prepaid on three Business Days' prior written notice to
the Agent and any prepayment of Eurodollar Loans will be subject to Section 3.15; (ii) Base Rate Loans may only be prepaid after written notice (confirmed by a telephone call from the
Borrower) to the Agent not later than 11:00 a.m. on the Business Day of the applicable prepayment; (iii) each such partial prepayment of Loans shall be (A) in the case of
Revolving Loans in the minimum principal amount of $500,000 and integral multiples of $500,000 in excess thereof and (B) in the case of Term Loans in the minimum principal amount of $1,000,000
and integral multiples of $1,000,000 in excess thereof. 


        (b)    Mandatory Prepayments.    



        (i)    Revolving Committed Amount.    If at any time the sum of the aggregate amount of Revolving Loans outstanding
plus the aggregate amount of LOC Obligations outstanding exceeds the lesser of (x) the Revolving Committed Amount and (y) the Borrowing Base, the Borrower shall immediately make a
principal payment on the Revolving Loans and/or to a cash collateral account in respect of the LOC Obligations, in an amount sufficient to eliminate such excess (to be applied as set forth in
Section 3.3(c) below). 


        (ii)    Excess Cash Flow.    Within 10 days after the date the audited financial statements are required to be
delivered pursuant to Section 7.1(a) (commencing with the fiscal year 




27





 






ending November 30, 2003), the Borrower shall make a prepayment of the Loans in an amount equal to 50% of the Excess Cash Flow earned during such prior fiscal year (to be applied as set forth
in Section 3.3(c) below). 


        (iii)    Asset Dispositions.    The Borrower shall immediately prepay the Loans in an aggregate amount equal to
(A) 100% of the Net Cash Proceeds of any Asset Disposition (other than any Asset Disposition permitted by Sections 8.5(a) through (e), inclusive and Section 8.5(f) to the extent a
mandatory prepayment is not required thereunder) and (B) 50% of the Net Cash Proceeds of any Asset Disposition of the type permitted by Section 8.5(e) (to be applied as set forth in
Section 3.3(c) below). 


        (iv)    Issuances of Equity.    Immediately upon receipt by the Borrower or any of its Subsidiaries of proceeds from
any Equity Issuance, the Borrower shall forward 100% of the Net Cash Proceeds of such Equity Issuance to the Lenders as a prepayment of the Loans (to be applied as set forth in Section 3.3(c)
below). 


        (v)    Recovery Event.    Subject to the terms and conditions of Section 7.6 hereof, immediately upon receipt
by the Borrower or any of its Subsidiaries of proceeds from any Recovery Event, the Borrower shall forward 100% of the Net Cash Proceeds from such Recovery Event to the Lenders as a prepayment of the
Loans (to be applied as set forth in Section 3.3(c) below). 


        (vi)    Debt Issuances.    Immediately upon receipt by the Borrower or any of its Subsidiaries of proceeds from any
Debt Issuance, the Borrower shall prepay the Loans in an aggregate amount equal to 100% of the Net Cash Proceeds of such Debt Issuance to the Lenders (such prepayment to be applied as set forth in
Section 3.3(c) below). 




        (c)    Application of Prepayments.    All amounts required to be paid pursuant to
Section 3.3(b)(i) shall be applied first to Revolving Loans and second to a cash
collateral account in respect of the LOC Obligations. All amounts required to be paid pursuant to Sections 3.3(b)(ii), (iv), (v) and (vi) above shall be applied to the outstanding Term
Loans (which amounts shall then be applied to the remaining Principal Amortization Payments due with respect to the Term Loans in inverse order of maturity thereof). All amounts required to be paid
pursuant to Section 3.3(b)(iii) above shall be applied, first to the outstanding Term Loans (which amounts shall then be applied to the
remaining Principal Amortization Payments due with respect to the Term Loans in inverse order of maturity thereof), second to the Revolving Loans (with
a corresponding permanent reduction in the Revolving Committed Amount) and third to a cash collateral account in respect of the LOC Obligations (with a
corresponding permanent reduction in the Revolving Committed Amount). Within the parameters of the application set forth above, prepayments shall be applied first to Base Rate Loans and then to
Eurodollar Loans in direct order of Interest Period maturities. All prepayments hereunder shall be subject to Section 3.15. 




        3.4    Fees.    



        (a)    Unused Fees.    In consideration of the Revolving Commitments of the Lenders hereunder, the Borrower agrees to
pay to the Agent for the account of each Lender a fee (the "Unused Fee") computed at a per annum rate on the Unused Revolving Committed Amount during
the Unused Fee Calculation Period (hereinafter defined) equal to the Applicable Percentage for Unused Fees then in effect. The Unused Fee shall commence to accrue on the Closing Date and shall be due
and payable in arrears on the last business day of each March, June, September and December (and any date that the Revolving Committed Amount is reduced as provided in Section 2.1(d),
Section 3.3(c) and the Termination Date) for the immediately preceding quarter (or portion thereof) (each such quarter or portion thereof for which the Unused Fee is payable hereunder being
herein referred to as an "Unused Fee Calculation Period"), beginning with the first of such dates to occur after the Closing Date. 



28





 

        (b)    Letter of Credit Fees.    



        (i)    Letter of Credit Fee.    In consideration of the issuance of Letters of Credit hereunder, the Borrower promises
to pay to the Agent for the account of each Lender a fee (the "Letter of Credit Fee") on such Lender's Revolving Loan Commitment Percentage of the
average daily maximum amount available to be drawn under each such Letter of Credit computed at a per annum rate for each day from the date of issuance to the date of expiration equal to the
Applicable Percentage. The Letter of Credit Fee shall be payable quarterly in arrears on the last Business Day of each March, June, September and December for the immediately preceding quarter (or a
portion thereof). 


        (ii)    Issuing Lender Fees.    In addition to the Letter of Credit Fee, the Borrower promises to pay to the Agent for
the account of the Issuing Lender without sharing by the other Lenders (i) a letter of credit fronting fee of one-eighth of one percent (0.125%) on the average daily maximum amount
available to be drawn under each Letter of Credit computed at a per annum rate for each day from the date of issuance to the date of expiration and (ii) the customary charges from time to time
of the Issuing Lender with respect to the issuance, amendment, transfer, administration, cancellation and conversion of, and drawings under, such Letters of Credit. 




        (c)    Administrative Fees.    The Borrower agrees to pay to the Agent, for its own account, an annual fee as agreed
to between the Borrower and the Agent in the Fee Letter. 




        3.5    Payment in full at Maturity.    


        On
the Termination Date, the entire outstanding principal balance of all Loans, together with accrued but unpaid interest and all other sums owing with respect thereto, shall be due and
payable in full, unless accelerated sooner pursuant to Section 9. 


        3.6    Computations of Interest and Fees.    



        (a)  Except
for Base Rate Loans, in which case interest shall be computed on the basis of a 365 or 366 day year as the case may be (unless the Base Rate is determined
by reference to the Federal Funds Rate), all computations of interest and fees hereunder shall be made on the basis of the actual number of days elapsed over a year of 360 days. Interest shall
accrue from and include the date of borrowing (or continuation or conversion) but exclude the date of payment. 


        (b)  It
is the intent of the Lenders and the Credit Parties to conform to and contract in strict compliance with applicable usury law from time to time in effect. All
agreements between the Lenders and the Borrower are hereby limited by the provisions of this paragraph which shall override and control all such agreements, whether now existing or hereafter arising
and whether written or oral. In no way, nor in any event or contingency (including but not limited to prepayment or acceleration of the maturity of any obligation), shall the interest taken, reserved,
contracted for, charged, or received under this Credit Agreement, under the Notes or otherwise, exceed the maximum nonusurious amount permissible under applicable law. If, from any possible
construction of any of the Credit Documents or any other document, interest would otherwise be payable in excess of the maximum nonusurious amount, any such construction shall be subject to the
provisions of this paragraph and such documents shall be automatically reduced to the maximum nonusurious amount permitted under applicable law, without the necessity of execution of any amendment or
new document. If any Lender shall ever receive anything of value which is characterized as interest on the Loans under applicable law and which would, apart from this provision, be in excess of the
maximum lawful amount, an amount equal to the amount which would have been excessive interest shall, without penalty, be applied to the reduction of the principal amount owing on the Loans and not to
the payment of interest, or refunded to the Borrower or the other payor thereof if and to the extent such amount which would have been excessive exceeds such unpaid principal amount of the Loans. The
right to demand payment of the 



29





 





Loans or any other Indebtedness evidenced by any of the Credit Documents does not include the right to receive any interest which has not otherwise accrued on the date of such demand, and the Lenders
do not intend to charge or receive any unearned interest in the event of such demand. All interest paid or agreed to be paid to the Lenders with respect to the Loans shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread throughout the full stated term (including any renewal or extension) of the Loans so that the amount of interest on account of such
Indebtedness does not exceed the maximum nonusurious amount permitted by applicable law. 




        3.7    Pro Rata Treatment.    


        Except
to the extent otherwise provided herein: 



        (a)    Loans.    Each Loan borrowing, each payment or prepayment of principal of any Loan or reimbursement obligations
arising from drawings under Letters of Credit, each payment of interest on any Loan or reimbursement obligations arising from drawings under Letters of Credit, each payment of fees (other than the
administrative fees retained by the Agent for its own account), each reduction of the Revolving Committed Amount, and each conversion or continuation of any Loan shall be allocated pro rata among the
relevant Lenders in accordance with the respective Revolving Loan Commitment Percentages and Term Loan Commitment Percentages, as applicable, of such Lenders (or, if the Commitments of such Lenders
have expired or been terminated, in accordance with the respective principal amounts of their outstanding Loans and Participation Interests of such Lenders); provided that, if any Lender shall have
failed to pay its applicable pro rata share of any Loan then any amount to which such Lender would otherwise be entitled pursuant to this Section shall instead be payable to the Agent; provided
further, that in the event any amount paid to any Lender pursuant to this Section is rescinded or must otherwise be returned by the Agent, each Lender shall, upon the request of the Agent, repay to
the Agent the amount so paid to such Lender, with interest for the period commencing on the date such payment is returned by the Agent until the date the Agent receives such repayment at a rate per
annum equal to, during the period to but excluding the date two Business Days after such request, the Federal Funds Rate, and thereafter, the Base Rate plus four percent (4%) per annum. 


        (b)    Advances.    



          (i)  No
Lender shall be responsible for the failure or delay by any other Lender in its obligation to make its ratable share of a borrowing hereunder;  provided, however, that the failure of any Lender to
fulfill its obligations hereunder shall not relieve any other Lender of its obligations hereunder.
 


        (ii)  Unless
the Borrower or any Lender has notified the Agent prior to the date any payment is required to be made by it to the Agent hereunder, that the Borrower or such
Lender, as the case may be, will not make such payment, the Agent may assume that the Borrower or such Lender, as the case may be, has timely made such payment and may (but shall not be so required
to), in reliance thereon, make available a corresponding amount to the Person entitled thereto. If and to the extent that such payment was not in fact made to the Agent in immediately available funds,
then: 



        (A)  if
the Borrower failed to make such payment, each Lender shall forthwith on demand repay to the Agent the portion of such assumed payment that was made available to such
Lender in immediately available funds, together with interest thereon in respect of each day from and including the date such amount was made available by the Agent to such Lender to the date such
amount is repaid to the Agent in immediately available funds, at the Federal Funds Rate from time to time in effect; and 


        (B)  if
any Lender failed to make such payment, such Lender shall forthwith on demand pay to the Agent the amount thereof in immediately available funds, together 





30





 







with interest thereon for the period from the date such amount was made available by the Agent to the Borrower to the date such amount is recovered by the Agent (the
"Compensation Period") at a rate per annum equal to the Federal Funds Rate from time to time in effect. If such Lender does not pay such amount
forthwith upon the Agent's demand therefor, the Agent may make a demand therefor upon the Borrower, and the Borrower shall pay such amount to the Agent, together with interest thereon for the
Compensation Period at a rate per annum equal to the rate of interest applicable to the applicable Borrowing. 






Nothing
herein shall be deemed to relieve any Lender from its obligation to fulfill its Commitment or to prejudice any rights that the Agent or the Borrower may have against any Lender as a result of
any default by such Lender hereunder. A notice of the Agent to any Lender with respect to any amount owing under this subsection (b) shall be conclusive, absent manifest error. 


        3.8    Allocation of Payments After Acceleration.    


        Notwithstanding
any other provisions of this Credit Agreement, after the acceleration of the Credit Party Obligations pursuant to Section 9.2, all amounts collected or received by
an Agent or any Lender on account of amounts outstanding under any of the Credit Documents or in respect of the Collateral shall be paid over or delivered as follows: 



        FIRST,
to the payment of all reasonable out-of-pocket costs and expenses (including without limitation reasonable attorneys' fees) of the Agent in connection with
enforcing the rights of the Lenders under the Credit Documents and any protective advances made by the Agent with respect to the Collateral under or pursuant to the terms of the Collateral Documents; 


        SECOND,
to payment of any fees owed to an Agent in its capacity as Agent; 


        THIRD,
to the payment of all reasonable out-of-pocket costs and expenses, (including, without limitation, reasonable attorneys' fees) of each of the Lenders in
connection with enforcing its rights under the Credit Documents; 


        FOURTH,
to the payment of all accrued fees and interest payable to the Lenders hereunder; 


        FIFTH,
to the payment of the outstanding principal amount of the Loans (including the payment or cash collateralization of the outstanding LOC Obligations), and to any amounts owing
under Hedging Agreements, pro rata, as set forth below; 


        SIXTH,
to all other obligations which shall have become due and payable under the Credit Documents and not repaid pursuant to clauses "FIRST" through "FIFTH" above; and 


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




In
carrying out the foregoing, (a) amounts received shall be applied in the numerical order provided until exhausted prior to application to the next succeeding category; (b) each of the
Lenders shall receive an amount equal to its pro rata share (based on the proportion that the then outstanding Loans and obligations under Hedging Agreements held by such Lender bears to the aggregate
then outstanding Loans and obligations under Hedging Agreements) of amounts available to be applied pursuant to clauses "THIRD", "FOURTH," "FIFTH," and "SIXTH" above; and (c) to the extent that
any amounts available for distribution pursuant to clause "FIFTH" above are attributable to the issued but undrawn amount of outstanding Letters of Credit, such amounts shall be held by the Agent in a
cash collateral account and applied (A) first, to reimburse the Issuing Lender for any drawings under such Letters of Credit and (B) then, following the expiration of all Letters of
Credit, to all other obligations of the types described in clauses "FIFTH" and "SIXTH" above in the manner provided in this Section 3.8. 


31





 

        3.9    Sharing of Payments.    


        The
Lenders agree among themselves for the benefit of themselves that, except to the extent otherwise provided herein, in the event that any Lender shall obtain payment in respect of any
Loan, LOC Obligation or any other obligation owing to such Lender under this Credit Agreement through the exercise of a right of setoff, banker's lien or counterclaim, or pursuant to a secured claim
under Section 506 of the Bankruptcy Code or other security or interest arising from, or in lieu of, such secured claim, received by such Lender under any applicable bankruptcy, insolvency or
other similar law or otherwise, or by any other means, in excess of its pro rata share of such payment as provided for in this Credit Agreement, such Lender shall promptly purchase from the other
Lenders for cash an interest in such Loans, LOC Obligations and other obligations in such amounts, and make such other adjustments from time to time, as shall be equitable to the end that all Lenders
share such payment in accordance with their respective ratable shares as provided for in this Credit Agreement. The Lenders further agree among themselves that if payment to a Lender obtained by such
Lender through the exercise of a right of setoff, banker's lien, counterclaim or other event as aforesaid shall be rescinded or must otherwise be restored, each Lender which shall have shared the
benefit of such payment shall, by repurchase of the interest theretofore sold, return its share of that benefit (together with its share of any accrued interest payable with respect thereto) to each
Lender whose payment shall have been rescinded or otherwise restored. The Borrower agrees that any Lender so purchasing such an interest may, to the fullest extent permitted by law, exercise all
rights of payment, including setoff, banker's lien or counterclaim, with respect to such interest as fully as if such Lender were a holder of such Loan, LOC Obligation or other obligation in the
amount of such interest. Except as otherwise expressly
provided in this Credit Agreement, if any Lender or the Agent shall fail to remit to the Agent or any other Lender an amount payable by such Lender or the Agent to the Agent or such other Lender
pursuant to this Credit Agreement on the date when such amount is due, such payments shall be made together with interest thereon for each date from the date such amount is due until the date such
amount is paid to the Agent or such other Lender at a rate per annum equal to the Federal Funds Rate. 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 3.9 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the
rights of the Lenders under this Section 3.9 to share in the benefits of any recovery on such secured claim. 


        3.10    Capital Adequacy.    



        If,
after the date hereof, any Lender has determined that the adoption or the becoming effective of, or any change in, or any change by any Governmental Authority, central bank or
comparable agency charged with the interpretation or administration thereof in the interpretation or administration of, any applicable law, rule or regulation regarding capital adequacy, or compliance
by such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect
of reducing the rate of return on such Lender's capital or assets as a consequence of its commitments or obligations hereunder to a level below that which such Lender could have achieved but for such
adoption, effectiveness, change or compliance (taking into consideration such Lender's policies with respect to capital adequacy), then, upon notice from such Lender to the Borrower, the Borrower
shall be obligated to pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction. Each determination by any such Lender of amounts owing under this Section
shall, absent manifest error, be conclusive and binding on the parties hereto. 


        3.11    Inability To Determine Interest Rate.    


        If
prior to the first day of any Interest Period, the Agent shall have determined (which determination shall be conclusive and binding upon the Borrower) that, by reason of circumstances
affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurodollar Rate for such Interest Period, the Agent shall promptly give telecopy or telephonic notice 


32





 




thereof to the Borrower and the Lenders. If such notice is given (a) any Eurodollar Loans requested to be made on the first day of such Interest Period shall be made as Base Rate Loans,
(b) any Loans that were to have been converted on the first day of such Interest Period to or continued as Eurodollar Loans shall be converted to or continued as Base Rate Loans and
(c) any outstanding Eurodollar Loans shall be converted, on the first day of such Interest Period, to Base Rate Loans. Until such notice has been withdrawn by the Agent, no further Eurodollar
Loans shall be made or continued as such, nor shall the Borrower have the right to convert Base Rate Loans to Eurodollar Loans. 


        3.12    Illegality.    


        Notwithstanding
any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof occurring after the Closing Date
shall make it unlawful for any Lender to make or maintain Eurodollar Loans as contemplated by this Credit Agreement, (a) such Lender shall promptly give written notice of such circumstances to
the Borrower and the Agent (which notice shall be withdrawn whenever such circumstances no longer exist), (b) the commitment of such Lender hereunder to make Eurodollar Loans, continue
Eurodollar Loans as such and convert a Base Rate Loan to Eurodollar Loans shall forthwith be canceled and, until such time as it shall no longer be unlawful for such Lender to make or maintain
Eurodollar Loans, such Lender shall then have a commitment only to make a Base Rate Loan when a Eurodollar Loan is requested and (c) such Lender's Loans then outstanding as Eurodollar Loans, if
any, shall be converted automatically to Base Rate Loans on the respective last days or 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 Eurodollar Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if
any, as may be required pursuant to Section 3.15. 


        3.13    Requirements of Law.    


        If
the adoption of or any change in any Requirement of Law or in the interpretation or application thereof applicable to any Lender, or compliance by any Lender with any request or
directive (whether or not having the force of law) from any central bank or other Governmental Authority, in each case made subsequent to the Closing Date (or, if later, the date on which such Lender
becomes a Lender): 



        (a)  shall
subject such Lender to any tax of any kind whatsoever with respect to any Eurodollar Loans made by it or its obligation to make Eurodollar Loans, or change the
basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes covered by Section 3.14 (including Non-Excluded Taxes imposed solely by
reason of any failure of such Lender to comply with its obligations under Section 3.14(b)) and changes in taxes measured by or imposed upon the overall net income, or franchise tax (imposed in
lieu of such net income tax), of such Lender or its applicable lending office, branch, or any affiliate thereof); 


        (b)  shall
impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or
for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender which is not otherwise included in the determination of the
Eurodollar Rate hereunder; or 


        (c)  shall
impose on such Lender any other condition (excluding any tax of any kind whatsoever); 




and
the result of any of the foregoing is to increase the cost to such Lender, by an amount which such Lender reasonably deems to be material, of making, converting into, continuing or maintaining
Eurodollar Loans or to reduce any amount receivable hereunder in respect thereof, then, in any such case, upon notice to the Borrower from such Lender, through the Agent, in accordance herewith, the
Borrower shall be obligated to promptly pay such Lender, upon its demand, any additional amounts 


33





 


necessary to compensate such Lender for such increased cost or reduced amount receivable, provided that, in any such case, the Borrower may elect to
convert the Eurodollar Loans made by such Lender hereunder to Base Rate Loans by giving the Agent at least one Business Day's notice of such election, in which case the Borrower shall promptly pay to
such Lender, upon demand, without duplication, such amounts, if any, as may be required pursuant to Section 3.15. If any Lender becomes entitled to claim any additional amounts pursuant to this
Section 3.13, it shall provide prompt notice thereof to the Borrower, through the Agent, certifying (x) that one of the events described in this Section 3.13 has occurred and
describing in reasonable detail the nature of such event, (y) as to the increased cost or reduced amount resulting from such event and (z) as to the additional amount demanded by such
Lender and a reasonably detailed explanation of the calculation thereof. Such a certificate as to any additional amounts payable pursuant to this Section 3.13 submitted by such Lender, through
the Agent, to the Borrower shall be conclusive and binding on the parties hereto in the absence of manifest error. This covenant shall survive the termination of this Credit Agreement and the payment
of the Loans and all other amounts payable hereunder. 


        3.14    Taxes.    



        (a)  Except
as provided below in this Section 3.14, all payments made by the Borrower under this Credit Agreement and any Notes shall be made free and clear of, and
without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any court, or governmental body, agency or other official, excluding taxes measured by or imposed upon the overall net income of any Lender or its applicable
lending office, or any branch or affiliate thereof, and all franchise taxes, branch taxes, taxes on doing business or taxes on the overall capital or net worth of any Lender or its applicable lending
office, or any branch or affiliate thereof, in each case imposed in lieu of net income taxes: (i) by the jurisdiction under the laws of which such Lender, applicable lending office, branch or
affiliate is organized or is located, or in which its principal executive office is located, or any nation within which such jurisdiction is located or any political subdivision thereof; or
(ii) by reason of any connection between the jurisdiction imposing such tax and such Lender, applicable lending office, branch or affiliate other than a connection arising solely from such
Lender having executed, delivered or performed its obligations, or received payment under or enforced, this Credit Agreement or any Notes. If any such non-excluded taxes, levies, imposts,
duties, charges, fees, deductions or withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts payable to the Agent
or any Lender hereunder or under any Notes, (A) the amounts so payable to the Agent or such Lender shall be increased to the extent necessary to yield to an Agent or such Lender (after payment
of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Credit Agreement and any Notes,  provided, however, that the Borrower
shall be entitled to deduct and withhold any Non-Excluded Taxes and shall not be required to increase
any such amounts payable to any Lender that is not organized under the laws of the United States of America or a state thereof if such Lender fails to comply with the requirements of
paragraph (b) of this Section 3.14 whenever any Non-Excluded Taxes are payable by the Borrower, and (B) as promptly as possible thereafter the Borrower shall send to
the Agent for its own account or for the account of such Lender, as the case may be, a certified copy of an original official
receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to the Agent
the required receipts or other required documentary evidence, the Borrower shall indemnify the Agent and the Lenders for any incremental taxes, interest or penalties that may become payable by the
Agent or any Lender as a result of any such failure. The agreements in this subsection shall survive the termination of this Credit Agreement and the payment of the Loans, the LOC Obligations and all
other amounts payable hereunder. 



34







  




        (b)  Each
Lender that is not a "United States Person" within the meaning of Section 7701(a)(30) of the Code shall: 



          (i)  (A)
on or before the date of any payment by the Borrower under this Credit Agreement or Notes to such Lender, deliver to the Borrower and the Agent (x) two duly
completed copies of United States Internal Revenue Service Form W-8BEN or W-8ECI, or successor applicable form, as the case may be, certifying that it is entitled to
receive payments under this Credit Agreement and any Notes without deduction or withholding of any United States federal income taxes and (y) an Internal Revenue Service
Form W-8 or W-9, or successor applicable form, as the case may be, certifying that it is entitled to an exemption from United States backup withholding tax; 



        (B)  deliver
to the Borrower and the Agent two further copies of any such form or certification on or before the date that any such form or certification expires or becomes
obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Borrower; and 


        (C)  obtain
such extensions of time for filing and complete such forms or certifications as may reasonably be requested by the Borrower or the Agent; or 




        (ii)  (A)
represent to the Borrower (for the benefit of the Borrower and the Agent) that it is not a "United States Person" within the meaning of Section 7701(a)(30)
of the Code, (B) agree to furnish to the Borrower, on or before the date of any payment by the Borrower, with a copy to the Agent, two accurate and complete original signed copies of Internal
Revenue Service Form W-8, or successor applicable form certifying to such Lender's legal entitlement at the date of such certificate to an exemption from U.S. withholding tax under
the provisions of Section 881(c) of the Code with respect to payments to be made under this Credit Agreement and any Notes (and to deliver to the Borrower and the Agent two further copies of
such form on or before the date it expires or becomes obsolete and after the occurrence of any event requiring a change in the most recently provided form and, if necessary, obtain any extensions of
time reasonably requested by the Borrower or the Agent for filing and completing such forms), and (C) agree, to the extent legally entitled to do so, upon reasonable request by the Borrower, to
provide to the Borrower (for the benefit of the Borrower and the Agent) such other forms as may be reasonably required in order to establish the legal entitlement of such Lender to an exemption from
withholding with respect to payments under this Credit Agreement and any Notes. 





Notwithstanding
the above, if any change in treaty, law or regulation has occurred after the date such Person becomes a Lender hereunder which renders all such forms inapplicable or which would
prevent such Lender from duly completing and delivering any such form with respect to it and such Lender so advises the Borrower and the Agent then such Lender shall be exempt from such requirements. 



        3.15    Indemnity.    


        Upon
the written demand of any Lender, the Borrower shall promptly compensate such Lender for and hold such Lender harmless from any loss, cost or expense incurred by it as a result of: 



        (a)  any
continuation, conversion, payment or prepayment of any Eurodollar Loan on a day other than the last day of the Interest Period for such Eurodollar Loan (whether
voluntary, mandatory, automatic, by reason of acceleration, or otherwise); or 



        (b)  any
failure by the Borrower (for a reason other than the failure of such Lender to make a Eurodollar Loan) to prepay, borrow, continue or convert any Eurodollar Loan on
the date or in the amount previously requested by the Borrower. 



35





 





The
amount each such Lender shall be compensated pursuant to this Section 3.15 shall include, without limitation, (i) any loss incurred by such Lender in connection with the
re-employment of funds prepaid, repaid, not borrowed or paid, as the case may be and (ii) any reasonable out-of-pocket expenses (including reasonable
attorneys' fees) incurred and reasonably attributable thereto. 


For
purposes of calculating amounts payable by the Borrower to the Lenders under this Section 3.15, each Lender may deem that it funded each Eurodollar Loan made by it at the Eurodollar Rate
for such Eurodollar Loan by a matching deposit or other borrowing in the applicable offshore Dollar interbank market for a comparable amount and for a comparable period, whether or not such Eurodollar
Loan was in fact so funded. 


        3.16    Replacement of Lenders.    



        If
any Lender delivers a notice to the Borrower pursuant to Sections 3.10, 3.13 or 3.14, then the Borrower shall have the right, if no Default or Event of Default then exists, to either
(i) replace such
Lender (the "Replaced Lender") with one or more additional banks or financial institutions (collectively, the "Replacement
Lender"), provided that (A) at the time of any replacement pursuant to this Section 3.16, the Replacement Lender
shall enter into one or more assignment agreements substantially in the form of Exhibit 11.3 pursuant to, and in accordance with the terms of,
Section 11.3(b) (and with all fees payable pursuant to said Section 11.3(b) to be paid by the Replacement Lender) pursuant to which the Replacement Lender shall acquire all of the rights
and obligations of the Replaced Lender hereunder and, in connection therewith, shall pay to the Replaced Lender in respect thereof an amount equal to the sum of (a) the principal of, and all
accrued interest on, all outstanding Loans of the Replaced Lender, and (b) all accrued, but theretofore unpaid, fees owing to the Replaced Lender pursuant to Section 3.4, and
(B) all obligations of the Borrower owing to the Replaced Lender (including all obligations, if any, owing pursuant to Section 3.10, 3.13 or 3.14, but excluding those obligations
specifically described in clause (A) above in respect of which the assignment purchase price has been, or is concurrently being paid) shall be paid in full to such Replaced Lender concurrently
with such replacement or (ii) if a Replacement Lender is not located within 60 days of such notice, terminate the Commitments and repay the Loans owing to such Replaced Lender. 


 
 

SECTION 4
  
    GUARANTY    
  


        4.1    Guaranty of Payment.    



        Subject
to Section 4.7 below, each of the Guarantors hereby, jointly and severally, unconditionally guarantees to each Lender, each Affiliate of Lender that enters into a Hedging
Agreement and the Agent the prompt payment of the Credit Party Obligations in full when due (whether at stated maturity, as a mandatory prepayment, by acceleration or otherwise). The Guarantors
additionally, jointly and severally, unconditionally guarantee to each Lender the timely performance of all other obligations under the Credit Documents and Hedging Agreements. This Guaranty is a
guaranty of payment and not of collection and is a continuing guaranty and shall apply to all Credit Party Obligations whenever arising. 



        4.2    Obligations Unconditional.    


        The
obligations of the Guarantors hereunder are absolute and unconditional, irrespective of the value, genuineness, validity, regularity or enforceability of any of the Credit Documents
or the Hedging Agreements, or any other agreement or instrument referred to therein, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever which might
otherwise constitute a legal or equitable discharge or defense of a surety or guarantor. Each Guarantor agrees that this Guaranty may be enforced by the Lenders without the necessity at any time of
resorting to or exhausting any other security or collateral and without the necessity at any time of having recourse to 


36





 




the Notes or any other of the Credit Documents or any collateral, if any, hereafter securing the Credit Party Obligations or otherwise and each Guarantor hereby waives the right to require the
Lenders to proceed against the Borrower or any other Person (including a co-guarantor) or to require the Lenders to pursue any other remedy or enforce any other right. Each Guarantor
further agrees that it shall have no right of subrogation, indemnity, reimbursement or contribution against the Borrower or any other Guarantor of the Credit Party Obligations for amounts paid under
this Guaranty until such time as the Lenders (and any Affiliates of Lenders entering into Hedging Agreements) have been paid in full, all Commitments under the Credit Agreement have been terminated
and no Person or Governmental Authority shall have any right to request any return or reimbursement of funds from the Lenders in connection with monies received under the Credit Documents. Each
Guarantor further agrees that nothing contained herein shall prevent the Lenders from suing on the Notes or any of the other Credit Documents or any of the Hedging Agreements or foreclosing its
security interest in or Lien on any collateral, if any, securing the Credit Party Obligations or from exercising any other rights available to it under this Credit Agreement, the Notes, any other of
the Credit Documents, or any other instrument of security, if any, and the exercise of any of the aforesaid rights and the completion of any foreclosure proceedings shall not constitute a discharge of
any of any Guarantor's obligations hereunder; it being the purpose and intent of each Guarantor that its Guarantor's obligations hereunder shall be absolute, independent and unconditional under any
and all circumstances. Neither any Guarantor's obligations under this Guaranty nor any remedy for the enforcement thereof shall be impaired, modified, changed or released in any manner whatsoever by
an impairment, modification, change, release or limitation of the liability of the Borrower or by reason of the bankruptcy or insolvency of the Borrower. Each Guarantor waives any and all notice of
the creation, renewal, extension or accrual of any of the Credit Party Obligations and notice of or proof of reliance by the Agent or any Lender upon this Guarantee or acceptance of this Guarantee.
The Credit Party Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon this Guarantee. All
dealings between the Borrower and any of the Guarantors, on the one hand, and the Agent and the Lenders, on the other hand, likewise shall be conclusively presumed to have been had or consummated in
reliance upon this Guarantee. 


        4.3    Modifications.    


        Each
Guarantor agrees that (a) all or any part of the security now or hereafter held for the Credit Party Obligations, if any, may be exchanged, compromised or surrendered from
time to time; (b) the Lenders shall not have any obligation to protect, perfect, secure or insure any such security interests, liens or encumbrances now or hereafter held, if any, for the
Credit Party Obligations or the properties subject thereto; (c) the time or place of payment of the Credit Party Obligations may be changed or extended, in whole or in part, to a time certain
or otherwise, and may be renewed or accelerated, in whole or in part; (d) the Borrower and any other party liable for payment under the Credit Documents may be granted indulgences generally;
(e) any of the provisions of the Notes or any of the other Credit Documents may be modified, amended or waived; (f) any party (including any co-guarantor) liable for the
payment thereof may be granted indulgences or be released; and (g) any deposit balance for the credit of the Borrower or any other party liable for the payment of the Credit Party Obligations
or liable upon any security therefor may be released, in whole or in part, at, before or after the stated, extended or accelerated maturity of the Credit Party Obligations, all without notice to or
further assent by the Guarantor, which shall remain bound thereon, notwithstanding any such exchange, compromise, surrender, extension, renewal, acceleration, modification, indulgence or release. 


        4.4    Waiver of Rights.    


        Each
Guarantor expressly waives: (a) notice of acceptance of this Guaranty by the Lenders and of all extensions of credit to the Borrower by the Lenders; (b) presentment
and demand for payment or performance of any of the Credit Party Obligations; (c) protest and notice of dishonor or of default 


37





 




(except as specifically required in the Credit Agreement) with respect to the Credit Party Obligations or with respect to any security therefor; (d) notice of the Lenders obtaining, amending,
substituting for, releasing, waiving or modifying any security interest, lien or encumbrance, if any, hereafter securing the Credit Party Obligations, or the Lenders' subordinating, compromising,
discharging or releasing such security interests, liens or encumbrances, if any; (e) all other notices to which the Guarantor might otherwise be entitled; and (f) demand for payment
under this Guaranty. 


        4.5    Reinstatement.    


        The
obligations of the Guarantors under this Section 4 shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of any Person in
respect of the Credit Party Obligations is rescinded or must be otherwise restored by any holder of any of the Credit Party Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees that it will indemnify the Agent and each Lender on demand for all reasonable costs and expenses (including, without limitation, reasonable fees
of counsel) incurred by an Agent or such Lender in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such
payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law. 


        4.6    Remedies.    



        The
Guarantors agree that, as between the Guarantors, on the one hand, and the Agent and the Lenders, on the other hand, the Credit Party Obligations may be declared to be forthwith due
and payable as provided in Section 9 (and shall be deemed to have become automatically due and payable in the circumstances provided in Section 9) notwithstanding any stay, injunction or
other prohibition preventing such declaration (or preventing such Credit Party Obligations from becoming automatically due and payable) as against any other Person and that, in the event of such
declaration (or such Credit Party Obligations being deemed to have become automatically due and payable), such Credit Party Obligations (whether or not due and payable by any other Person) shall
forthwith become due and payable by the Guarantors. The Guarantors acknowledge and agree that their obligations hereunder are secured in accordance with the terms of the Security Agreement and the
other Collateral Documents and that the Lenders may exercise their remedies thereunder in accordance with their terms. 


        4.7    Limitation of Guaranty.    


        Notwithstanding
any provision to the contrary contained herein or in any other of the Credit Documents or Hedging Agreements, the obligations of each Guarantor hereunder shall be limited
to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the Bankruptcy Code or any comparable provisions of
any applicable state law. 


        4.8    Rights of Contribution.    


        The
Guarantors hereby agree, as among themselves, that if any Guarantor shall become an Excess Funding Guarantor (as defined below), each other Guarantor shall, on demand of such Excess
Funding Guarantor (but subject to the next sentence hereof), pay to such Excess Funding Guarantor an amount equal to such Guarantor's Pro Rata Share (as defined below and determined, for this purpose,
without reference to the properties, assets, liabilities and debts of such Excess Funding Guarantor) of such Excess Payment (as defined below). The payment obligation of any Guarantor to any Excess
Funding Guarantor under this Section 4.8 shall be subordinate and subject in right of payment to the prior payment in full of the obligations of such Guarantor under the other provisions of
this Section 4, and such Excess Funding Guarantor shall not exercise any right or remedy with respect to such excess until payment and satisfaction in full of all of such obligations. For
purposes hereof, (i) "Excess Funding Guarantor" shall mean, in respect of any obligations arising under the other provisions of this
Section 4 


38





 




(hereafter, the "Guaranteed Obligations"), a Guarantor that has paid an amount in excess of its Pro Rata Share of the Guaranteed Obligations;
(ii) "Excess Payment" shall mean, in respect of any Guaranteed Obligations, the amount paid by an Excess Funding Guarantor in excess of its Pro
Rata Share of such Guaranteed Obligations; and (iii) "Pro Rata Share", for the purposes of this Section 4.8, shall mean, for any
Guarantor, the ratio (expressed as a percentage) of (a) the amount by which the aggregate present fair saleable value of all of its assets and properties exceeds the amount of all debts and
liabilities of such Guarantor (including contingent, subordinated, unmatured, and unliquidated liabilities, but excluding the obligations of such Guarantor hereunder) to (b) the amount by which
the aggregate present fair saleable value of all assets and other properties of the Borrower and all of the Guarantors exceeds the amount of all of the debts and liabilities (including contingent,
subordinated, unmatured, and unliquidated liabilities, but excluding the obligations of the Borrower and the Guarantors hereunder) of the Borrower and all of the Guarantors, all as of the Closing Date
(if any Guarantor becomes a party hereto subsequent to the Closing Date, then for the purposes of this Section 4.8 such subsequent Guarantor shall be deemed to have been a Guarantor as of the
Closing Date and the information pertaining to, and only pertaining to, such Guarantor as of the date such Guarantor became a Guarantor shall be deemed true as of the Closing Date). 


 
 

SECTION 5
  
    CONDITIONS PRECEDENT    
  


        5.1    Closing Conditions.    



        The
obligation of the Lenders to enter into this Credit Agreement and make the initial Extension of Credit is subject to satisfaction of the following conditions (in form and substance
acceptable to the Lenders in their sole discretion): 



        (a)    Executed Credit Documents.    Receipt by the Agent of duly executed copies of: (i) this Credit
Agreement; (ii) the Notes; (iii) the Collateral Documents and (iv) all other Credit Documents. 



        (b)    Corporate Documents.    Receipt by the Agent of the following: 



        (i)    Charter Documents.    Copies of the articles or certificates of incorporation or other charter documents of
each Credit Party certified to be true and complete as of a recent date by the appropriate Governmental Authority of the state or other jurisdiction of its incorporation and certified by a secretary
or assistant secretary of such Credit Party to be true and correct as of the Effective Date. 



        (ii)    Bylaws.    A copy of the bylaws of each Credit Party certified by a secretary or assistant secretary of such
Credit Party to be true and correct as of the Effective Date. 


        (iii)    Resolutions.    Copies of resolutions of the Board of Directors of each Credit Party approving and adopting
the Credit Documents to which it is a party, the transactions contemplated therein and authorizing execution and delivery thereof, certified by a secretary or assistant secretary of such Credit Party
to be true and correct and in force and effect as of the Effective Date. 



        (iv)    Good Standing.    Copies of certificates of good standing, existence or its equivalent with respect to each
Credit Party certified as of a recent date by the appropriate Governmental Authorities of the state or other jurisdiction of incorporation and each other jurisdiction in which the failure to so
qualify and be in good standing would have a Material Adverse Effect on the business or operations of a Credit Party in such jurisdiction. 


        (v)    Incumbency.    An incumbency certificate of each Credit Party certified by a secretary or assistant secretary
to be true and correct as of the Effective Date. 




39





 






        (c)    Financial Statements.    Receipt by the Agent and the Lenders of the consolidated and consolidating financial
statements of the Borrower and its Subsidiaries for fiscal year ending November 30, 2001, including balance sheets and income and cash flow statements, audited by nationally recognized
independent public accountants and containing an unqualified opinion of such firm that such statements fairly present in all material respects the consolidated financial condition of the Borrower and
its Subsidiaries and have been prepared in conformity with GAAP, (iii) interim unaudited quarterly financial statements of the Borrower and its Subsidiaries, prepared in conformity with GAAP,
for the trailing twelve months of the Borrower and first projected year of the Borrower and working capital detail for the trailing twelve months of the Borrower and the first projected fiscal year of
the Borrower, (iv) a satisfactory proforma consolidated balance sheet of the Borrower and its Subsidiaries as of February 28, 2002 giving effect to the acquisition of the Acquired Assets
and the transactions contemplated by the Purchase Agreement and reflecting estimated purchase price accounting adjustments, prepared in conformity with GAAP and (v) such other information
relating to the Acquired Assets as the Agent may reasonably require in connection with the structuring and syndication of credit facilities of the type described herein. 


        (d)    Opinion of Counsel.    Receipt by the Lenders of an opinion, or opinions (which shall cover, among other
things, authority, legality, validity, binding effect, enforceability and attachment and perfection of liens), satisfactory to the Agent, addressed to the Agent and the Lenders and dated as of the
Effective Date, from legal counsel to the Credit Parties. 



        (e)    Appraisal Report.    Receipt by the Lenders of asset appraisal reports with respect to trademarks and patents
of the Credit Parties (excluding the Acquired Assets) indicating an appraised value of at least $300,000,000 and otherwise in form and substance satisfactory to the Agent. 


        (f)    Personal Property Collateral.    The Agent shall have received, in form and substance satisfactory to the
Agent: 



          (i)  searches
of Uniform Commercial Code ("UCC") filings in the jurisdiction of the chief executive office of each Credit Party and each jurisdiction where any Collateral is
located or where a filing would need to be made in order to perfect the Agent's security interest, for the benefit of the Lenders, in the Collateral, copies of the financing statements on file in such
jurisdictions and evidence that no Liens exist other than Permitted Liens; 


        (ii)  UCC
financing statements for each appropriate jurisdiction as is necessary, in the Agent's sole discretion, to perfect the Agent's security interest, for the benefit of
the Lenders, in the Collateral; 


        (iii)  searches
of ownership of intellectual property in the appropriate governmental offices and such United States or Canadian patent/trademark/copyright filings as
requested by the Agent in order to perfect the Agent's security interest in the Collateral; 


        (iv)  all
stock certificates evidencing the stock pledged to the Agent pursuant to the Pledge Agreement, together with duly executed in blank undated stock powers attached
thereto; 


        (v)  all
instruments and chattel paper in the possession of a Credit Party together with allonges or assignments as may be necessary or appropriate to perfect the Lenders'
security interest in the Collateral; and 


        (vi)  duly
executed consents as are necessary, in the Agent's sole discretion, to perfect the Agent's security interest in the Collateral. 




        (g)    Evidence of Insurance.    Receipt by the Agent of copies of insurance policies or certificates of insurance of
the Borrower and its Subsidiaries evidencing liability and casualty 



40





 


insurance meeting the requirements set forth in the Credit Documents, including, but not limited to, naming the Agent as sole loss payee on behalf of the Lenders. 


        (h)    Corporate Structure.    The corporate capital and ownership structure of the Borrower and its Subsidiaries
shall be satisfactory in form and substance to the Agent. 


        (i)    Material Adverse Effect.    (i) With respect to the Borrower and its Subsidiaries, there shall not have
occurred a change since November 30, 2001 that has had or could reasonably be expected to have a Material Adverse Effect, including specifically without limitation any such change resulting
from any matter not disclosed in the Purchase Agreement or resulting from a change in status of any matter disclosed in the Purchase Agreement (including matters related to litigation, tax,
accounting, labor, insurance and pension liabilities) and (ii) with respect to the Acquired Assets, there shall not have occurred a change since December 31, 2001 that has had or could
reasonably be expected to have a material adverse effect on the business, assets, operations or condition (financial or otherwise) of the Acquired Assets. 


        (j)    Litigation.    There shall not exist any (i) order, decree, judgment, ruling or injunction which
restrains the consummation of the acquisition of the Acquired Assets in the manner contemplated by the Purchase Agreement or (ii) pending or threatened action, suit, investigation or proceeding
which if adversely determined against the Borrower or any of its Subsidiaries would have or would reasonably be expected to have a Material Adverse Effect. 


        (k)    Other Indebtedness.    Receipt by the Agent of evidence that after the acquisition of the Acquired Assets, the
Borrower and its Subsidiaries shall have no borrowed money Indebtedness other than (i) the Indebtedness under the Credit Documents, (ii) the Subordinated Debt and (iii) other
Indebtedness disclosed on Schedule 6.10 attached hereto. 



        (l)    Purchase Agreement.    There shall not have been any material modification, amendment, supplement or waiver to
the Purchase Agreement without the prior written consent of the Lenders, including, but not limited to, any modification, amendment, supplement or waiver relating to the amount or type of
consideration to be paid in connection with the acquisition of the Acquired Assets and the contents of all disclosure schedules and exhibits, and the acquisition of the Acquired Assets shall have been
consummated in accordance with the terms of the Purchase Agreement and all applicable law and the aggregate cash amount paid in connection with such acquisition at the Closing Date shall not exceed
$75 million (plus certain inventories). Receipt by the Agent of the final Purchase Agreement, together with all exhibits and schedules thereto, certified by an officer of the Borrower. 


        (m)    Officer's Certificate.    The Agent shall have received a certificate executed by the chief operating officer
of the Borrower as of the Effective Date stating that (A) the Borrower and each of the Borrower's Subsidiaries are in compliance with all existing financial obligations, (B) all
governmental, shareholder and third party consents and approvals, if any, with respect to the Credit Documents and the transactions contemplated thereby have been obtained, (C) no action, suit,
investigation or proceeding is pending or threatened in any court or before any arbitrator or governmental instrumentality that purports to effect the Borrower, any of the Borrower's Subsidiaries or
any transaction contemplated by the Credit Documents, or could have or might be reasonably expected to have a Material Adverse Effect, (D) the transactions contemplated by the Purchase
Agreement have been consummated in accordance with the terms thereof and (E) immediately after giving effect to this Credit Agreement, the other Credit Documents and all the transactions
contemplated herein or therein to occur on such date, (1) the Borrower and each of its Subsidiaries is Solvent, (2) no Default or Event of Default exists, (3) all representations
and warranties contained herein and in the other Credit Documents are true and correct in all material respects, and (4) the Credit Parties are in compliance with each of the financial
covenants set forth in Section 7.12. 



41





 




        (n)    Fees and Expenses.    Payment by the Credit Parties of all fees and expenses owed by them to the Lenders and
the Agent, including, without limitation, payment to the Agent of the fees set forth in the Fee Letter. 



        (o)    First Priority Lien.    Receipt by the Agent of evidence satisfactory in form and substance to the Agent, that
the Agent, on behalf of the Lenders, holds a perfected, first priority lien, subject to no other Liens other than Permitted Liens, in the Collateral. 


        (p)    Accountant Certificate.    Receipt from independent certified public accountants of nationally recognized
standing of a calculation satisfactory to the Agent calculating the Fixed Charge Coverage Ratio (as defined in the Indenture) at an amount of at least 2.0 to 1.0, in each case after giving effect to
(i) the acquisition of the Acquired Assets and the incurrence of Indebtedness related thereto and (ii) the incurrence of Indebtedness under this Credit Agreement as of the Closing Date. 


        (q)    Other.    Receipt by the Lenders of such other documents, instruments, agreements or information as reasonably
requested by any Lender, including, but not limited to (after giving effect to the purchase of the Acquired Assets), information regarding litigation, tax, accounting, labor, insurance, pension
liabilities (actual or contingent), real estate leases, material contracts, debt agreements, property ownership and contingent liabilities of the Borrower and its Subsidiaries. 




        5.2    Conditions to All Extensions of Credit.    


        In
addition to the conditions precedent stated elsewhere herein, the Lenders shall not be obligated to make, continue or convert Loans (nor shall the Issuing Lender be obligated to issue
any Letter of Credit) hereunder unless: 



        (a)    Notice.    The Borrower shall have delivered (i) in the case of any new Revolving Loan, a Notice of
Borrowing, duly executed and completed, by the time specified in Section 2.1, (ii) in the case of any Letter of Credit, a Notice of Request for Letter of Credit, duly executed and
completed, by the time specified in Section 2.2 and (iii) in the case of any continuation or conversion of a Loan, a duly executed and completed Notice of Continuation/Conversion by the
time specified in Section 2.4; 


        (b)    Representations and Warranties.    The representations and warranties made by the Credit Parties in any Credit
Document are true and correct in all material respects at and as if made as of such date; 



        (c)    No Default.    No Default or Event of Default shall exist or be continuing either prior to or after giving
effect thereto; 


        (d)    No Material Adverse Effect.    There shall not have occurred any Material Adverse Effect; and 


        (e)    Availability.    Immediately after giving effect to the making of such Loan (and the application of the
proceeds thereof) or the issuance of such Letter of Credit, the sum of the Revolving Loans outstanding plus LOC Obligations outstanding shall not exceed the lesser of (i) the Revolving
Commitment Amount and (ii) the Borrowing Base. 


        (f)    Indenture Compliance.    Other than Revolving Loans and LOC Obligations, neither the Borrower nor any of its
Subsidiaries has incurred any Indebtedness pursuant to clause (ix) of Section 4.09 of the Indenture. 




        The
delivery of each Notice of Borrowing and each Notice of Extension/Conversion shall constitute a representation and warranty by the Borrower of the correctness of the matters
specified in subsections (b), (c), (d), (e) and (f) above. 


42





 
 
 

SECTION 6
  
    REPRESENTATIONS AND WARRANTIES    
  


        The Credit Parties hereby represent to the Agent and each Lender that: 


        6.1    Financial Condition.    


        The
financial statements delivered to the Lenders pursuant to Section 5.1(c), (a) have been prepared in accordance with GAAP and (b) present fairly (on the basis
disclosed in the footnotes to such financial statements) the consolidated and consolidating (as applicable) financial condition, results of operations and cash flows of the Credit Parties and their
Subsidiaries as of such date and for such periods. Since November 30, 2001, there has been no sale, transfer or other disposition by the Borrower or any of its Subsidiaries of any material part
of the business or property of the Borrower or any of its Subsidiaries, and no purchase or other acquisition by any of them of any business or assets (other than (i) the acquisition of the
Acquired Assets on the Closing Date, (ii) the Borrower's repurchase of 44,000 shares of its Capital Stock, (iii) the Borrower's Investment of $500,000 in HBA Indemnity
Company, Ltd. and (iv) the transfer of product lines to Sundex, Inc. in connection with the formation thereof, in the case of clauses (ii), (iii) and (iv) prior to
the Closing Date) material in relation to the consolidated financial condition of the Borrower and its Subsidiaries, in each case, which, is not reflected in the foregoing financial statements or in
the notes thereto. 


        6.2    No Material Change.    


        Since
November 30, 2001, (a) there has been no development or event relating to or affecting Borrower or any of its Subsidiaries which has had or would be reasonably
expected to have a Material Adverse Effect and (b) other than the Borrower's repurchase of 44,000 shares of its Capital Stock prior to the Closing Date, no dividends or other distributions have
been declared, paid or made upon the Capital Stock in Borrower or any of its Subsidiaries nor, except as otherwise permitted under this Credit Agreement, has any of the Capital Stock in a Credit Party
been redeemed, retired, purchased or otherwise acquired for value. 


        6.3    Organization and Good Standing.    


        The
Borrower and each of its Subsidiaries (a) is duly organized, validly existing and in good standing under the laws of the State (or other jurisdiction) of its organization,
(b) is duly qualified and in good standing authorized to do business in every jurisdiction where the failure to be so qualified would have a Material Adverse Effect and (c) has the
requisite power and authority to own its properties and to carry on its business as now conducted and as proposed to be conducted. 



        6.4    Due Authorization.    


        Each
Credit Party (a) has the requisite power and authority to execute, deliver and perform this Credit Agreement and the other Credit Documents to which it is a party and to
incur the obligations herein and therein provided for and (b) is duly authorized to, and has been authorized by all necessary action, to execute, deliver and perform this Credit Agreement and
the other Credit Documents to which it is a party. 


43









  




        6.5    No Conflicts.    


        Neither
the execution and delivery of the Credit Documents, nor the consummation of the transactions contemplated therein, nor performance of and compliance with the terms and provisions
thereof by such Credit Party will (a) violate or conflict with any provision of its articles or certificate of incorporation or bylaws, (b) violate, contravene or materially conflict
with any Requirement of Law or any other law, regulation (including, without limitation, Regulation U or Regulation X), order, writ, judgment, injunction, decree or permit applicable to
it, (c) violate, contravene or conflict with contractual provisions of, or cause an event of default under, any indenture, loan agreement, mortgage, deed of trust, contract or other agreement
or instrument to which it is a party or by which it may be bound, the violation of which could have or might be reasonably expected to have a Material Adverse Effect, or (d) result in or
require the creation of any Lien (other than those contemplated in or created in connection with the Credit Documents) upon or with respect to its properties. 



        6.6    Consents.    


        No
consent, approval, authorization or order of, or filing, registration or qualification with, any court or Governmental Authority or third party in respect of a Credit Party is
required in connection with the execution, delivery or performance of this Credit Agreement or any of the other Credit Documents by a Credit Party, or if required, such consent, approval and
authorization has been obtained. 


        6.7    Enforceable Obligations.    



        This
Credit Agreement and the other Credit Documents have been duly executed and delivered and constitute legal, valid and binding obligations of each Credit Party enforceable against
such Credit Party in accordance with their respective terms, except as may be limited by bankruptcy or insolvency laws or similar laws affecting creditors' rights generally or by general equitable
principles. 


        6.8    No Default.    


        Neither
the Borrower nor any of its Subsidiaries is in default in any respect under any contract, lease, loan agreement, indenture, mortgage, security agreement or other agreement or
obligation to which it is a party or by which any of its properties is bound which default would have or would be reasonably expected to have a Material Adverse Effect. No Default or Event of Default
has occurred or exists except as previously disclosed to the Lenders. 


        6.9    Ownership.    


        The
Borrower and each of its Subsidiaries is the owner of and has good and marketable title to all of its assets and none of such assets are subject to any Lien other than Permitted
Liens. 


        6.10    Indebtedness.    


        The
Borrower and its Subsidiaries have no Indebtedness except (a) as disclosed in the financial statements referenced in Section 6.1, (b) as set forth on  Schedule 6.10 and (c) as
otherwise permitted by this Credit Agreement. 


        6.11    Litigation.    



        There
are no actions, suits or legal, equitable, arbitration or administrative proceedings, pending or, to the knowledge of any Credit Party, threatened against the Borrower or any of
its Subsidiaries which, if adversely determined, would have or would be reasonably expected to have a Material Adverse Effect. 


44





 



        6.12    Taxes.    



        Each
of the Borrower and its Subsidiaries has filed, or caused to be filed, all tax returns (federal, state, local and foreign) required to be filed and paid (a) all amounts of
taxes shown thereon to be due (including interest and penalties) and (b) all other taxes, fees, assessments and other governmental charges (including mortgage recording taxes, documentary stamp
taxes and intangibles taxes) owing by it, except for such taxes (i) which are not yet delinquent or (ii) that are being contested in good faith and by proper proceedings, and against
which adequate reserves are being maintained in accordance with GAAP. No Credit Party is aware of any proposed tax assessments against it, any of its Subsidiaries or any other Credit Party. 



        6.13    Compliance with Law.    


        Each
of the Borrower and its Subsidiaries is in compliance with all Requirements of Law and all other laws, rules, regulations, orders and decrees (including without limitation
Environmental Laws) applicable to it, or to its properties, unless such failure to comply would not have or would not be reasonably expected to have a Material Adverse Effect. No Requirement of Law
would be reasonably expected to cause a Material Adverse Effect. 



        6.14    ERISA.    


        Except
as would not result in a Material Adverse Effect: 



        (a)  During
the five-year period prior to the date on which this representation is made or deemed made: (i) no Termination Event has occurred, and, to the
best knowledge of the Credit Parties, no event or condition has occurred or exists as a result of which any Termination Event could reasonably be expected to occur, with respect to any Plan;
(ii) no "accumulated funding deficiency," as such term is defined in Section 302 of ERISA and Section 412 of the Code, whether or not waived, has occurred with respect to any
Plan; (iii) each Plan has been maintained, operated, and funded in compliance with its own terms and in material compliance with the provisions of ERISA, the Code, and any other applicable
federal or state laws; and (iv) no lien in favor or the PBGC or a Plan has arisen or is reasonably likely to arise on account of any Plan. 


        (b)  The
actuarial present value of all "benefit liabilities" under each Single Employer Plan (determined within the meaning of Section 401(a)(2) of the Code,
utilizing the actuarial assumptions used to fund such Plans), whether or not vested, did not, as of the last annual valuation date prior to the date on which this representation is made or deemed
made, exceed the current value of the assets of such Plan allocable to such accrued liabilities. 



        (c)  Neither
the Borrower, nor any of its Subsidiaries nor any ERISA Affiliate has incurred, or, to the best knowledge of the Credit Parties, are reasonably expected to
incur, any withdrawal liability under ERISA to any Multiemployer Plan or Multiple Employer Plan. Neither the Borrower, nor any of its Subsidiaries nor any ERISA Affiliate has received any notification
that any Multiemployer Plan is in reorganization (within the meaning of Section 4241 of ERISA), is insolvent (within the meaning of Section 4245 of ERISA), or has been terminated (within
the meaning of Title IV of ERISA), and no Multiemployer Plan is, to the best knowledge of the Credit Parties, reasonably expected to be in reorganization, insolvent, or terminated. 



        (d)  No
prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) or breach of fiduciary responsibility has occurred with
respect to a Plan which has subjected or may subject the Borrower or any of its Subsidiaries or any ERISA Affiliate to any liability under Sections 406, 409, 502(i), or 502(l) of ERISA or
Section 4975 of the Code, or under any agreement or other instrument pursuant to which the Borrower or any of its Subsidiaries or any ERISA Affiliate has agreed or is required to indemnify any
person against any such liability. 



45





 




        (e)  The
present value (determined using actuarial and other assumptions which are reasonable with respect to the benefits provided and the employees participating) of the
liability of the Borrower and its Subsidiaries and each ERISA Affiliate for post-retirement welfare benefits to be provided to their current and former employees under Plans which are
welfare benefit plans (as defined in Section 3(1) of ERISA), net of all assets under all such Plans allocable to such benefits, are reflected on the Financial Statements in accordance with
FAS 106. 



          (f)  Each
Plan which is a welfare plan (as defined in Section 3(1) of ERISA) to which Sections 601-609 of ERISA and Section 4980B of the Code apply
has been administered in compliance in all material respects with such sections. 




        6.15    Subsidiaries.    


        Set
forth on Schedule 6.15 is a complete and accurate list of all Subsidiaries of each Credit Party. Information on  Schedule 6.15 includes
jurisdiction of organization, the number of shares of each class of Capital Stock outstanding, the number and percentage
of outstanding shares of each class owned (directly or indirectly) by such Credit Party; and the number and effect, if exercised, of all outstanding options, warrants, rights of conversion or purchase
and all other similar rights with respect thereto. The outstanding Capital Stock of all such Subsidiaries is validly issued, fully paid and non-assessable and is owned by each such Credit
Party, directly or indirectly, free and clear of all Liens (other than those arising under or contemplated in connection with the Credit Documents). Other than as set forth in  Schedule 6.15,
neither any Credit Party nor any Subsidiary thereof has outstanding any securities convertible into or exchangeable for its
Capital Stock nor does any such Person have outstanding any rights to subscribe for or to purchase or any options for the purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to its Capital Stock. Schedule 6.15 may be updated from time to time
by the Borrower by giving written notice thereof to the Agent. 


        6.16    Use of Proceeds; Margin Stock.    


        The
proceeds of the Loans hereunder will be used solely for the purposes specified in Section 7.10. None of the proceeds of the Loans will be used for the purpose of purchasing or
carrying any "margin stock" as defined in Regulation U or Regulation X, or for the purpose of reducing or retiring any Indebtedness which was originally incurred to purchase or carry
"margin stock" or any "margin security" or for any other purpose which might constitute this transaction a "purpose credit" within the meaning of Regulation U, Regulation X or
Regulation T. None of the Credit Parties owns any "margin stock". 


        6.17    Government Regulation.    


        No
Credit Party is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Investment Company Act of 1940 or the Interstate Commerce Act,
each as amended. In addition, no Credit Party is (a) an "investment company" registered or required to be registered under the Investment Company Act of 1940, as amended, or controlled by such
a company, or (b) a "holding company," or a "Subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "Subsidiary" or a "holding company," within the meaning
of the Public Utility Holding Company Act of 1935, as amended. 


        6.18    Environmental Matters.    



        (a)  Except
as set forth on Schedule 6.18. 



          (i)  each
of the Real Properties and all operations at the Real Properties are in compliance with all applicable Environmental Laws, and there is no violation of any
Environmental Law with respect to the Real Properties or the businesses operated by the Borrower or any of its Subsidiaries (the "Businesses"), and
there are no conditions relating to 




46





 



the Businesses or Real Properties that could give rise to liability under any applicable Environmental Laws. 



        (ii)  None
of the Real Properties contains, or has previously contained, any Hazardous Materials at, on or under the Real Properties in amounts or concentrations that, if
released, constitute or constituted a violation of, or could give rise to liability under, Environmental Laws. 


        (iii)  Neither
the Borrower nor any of its Subsidiaries has received any written or oral notice of, or inquiry from any Governmental Authority regarding, any violation,
alleged violation, non-compliance, liability or potential liability regarding Hazardous Materials or compliance with Environmental Laws with regard to any of the Real Properties or the
Businesses, nor does the Borrower or any of its Subsidiaries have knowledge or reason to believe that any such notice is being threatened. 



        (iv)  Hazardous
Materials have not been transported or disposed of from the Real Properties, or generated, treated, stored or disposed of at, on or under any of the Real
Properties or any other location, in each case by, or on behalf or with the permission of, the Borrower or any of its Subsidiaries in a manner that would reasonably be expected to give rise to
liability under any applicable Environmental Law. 


        (v)  No
judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Borrower or any of its Subsidiaries, threatened, under any
Environmental Law to which the Borrower or any of its Subsidiaries is or will be named as a party, nor are there any consent decrees or other decrees, consent orders, administrative orders or other
orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Borrower or any of its Subsidiaries, the Real Properties or the Businesses. 


        (vi)  There
has been no release or threat of release of Hazardous Materials at or from the Real Properties or arising from or related to the operations (including, without
limitation, disposal) of the Borrower or any of its Subsidiaries in connection with the Real Properties or otherwise in connection with the Businesses. 


      (vii)  Neither
the Borrower nor any of its Subsidiaries has assumed any liability of any Person (other than another Credit Party) under any Environmental Law. 




        (b)  The
Borrower has adopted procedures that are designed to (i) ensure that each Credit Party and their Subsidiaries, any of their operations and each of the
properties owned or leased by each Credit Party and their Subsidiaries remains in compliance with applicable Environmental Laws and (ii) minimize any liabilities or potential liabilities that
each Credit Party and their Subsidiaries, any of their operations and each of the properties owned or leased by each Credit Party and their Subsidiaries may have under applicable Environmental Laws. 




        6.19    Intellectual Property.    



        The
Borrower and each of its Subsidiaries owns, or has the legal right to use, all trademarks, tradenames, copyrights, technology, know-how and processes (the
"Intellectual Property") necessary for each of them to conduct its business as currently conducted except for those the failure to own or have such
legal right to use would not have or be reasonably expected to have a Material Adverse Effect. Set forth on Schedule 6.19 is a list of all
Intellectual Property owned by the Borrower and its Subsidiaries or that the Borrower or one of its Subsidiaries has the right to use (which list shall identify the Person that owns or has the right
to use each such item of Intellectual Property). Except as provided on Schedule 6.19, no claim has been asserted and is pending by any Person
challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such 


47





 




Intellectual Property, nor does any Credit Party know of any such claim, and to the Credit Parties' knowledge the use of such Intellectual Property by the Borrower or any of its Subsidiaries does not
infringe on the rights of any Person, except for such claims and infringements that in the aggregate, would not have or be reasonably expected to have a Material Adverse Effect. 



        6.20    Solvency.    


        Each
Credit Party is and, after consummation of the transactions contemplated by this Credit Agreement, will be Solvent. 


        6.21    Investments.    


        All
Investments of the Borrower and each of its Subsidiaries are either Permitted Investments or otherwise permitted by the terms of this Credit Agreement. 



        6.22    No Financing of Corporate Takeovers.    


        No
proceeds of the Loans hereunder have been or will be used to acquire, directly or indirectly, any security in any transaction which is subject to Sections 13 or 14 of the Securities
Exchange Act of 1934, as amended (including, without limitation, Sections 13(d) and 14(d) thereof) or to refinance any Indebtedness used to acquire any such securities. 


        6.23    Location of Collateral.    



        Set
forth on Schedule 6.23(a) is a list of all locations where any personal property of a Credit Party is located, including county
and state where located. Set forth on Schedule 6.23(b) is the jurisdiction or incorporation, federal tax identification number, chief executive
office and principal place of business of each Credit Party. Each of Schedule 6.23(a) and Schedule 6.23(b)  may be updated from time to time by
the Borrower by written notice to the Agent. 


        6.24    Disclosure.    



        Neither
this Credit Agreement nor any financial statements delivered to the Lenders nor any other document, certificate or statement furnished to the Lenders by or on behalf of any
Credit Party in connection with the transactions contemplated hereby contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements
contained therein or herein not misleading. 


        6.25    Licenses, etc.    


        The
Borrower and each of its Subsidiaries has obtained and holds in full force and effect, all franchises, licenses, permits, certificates, authorizations, qualifications,
accreditations, easements, rights of way and other rights, consents and approvals which are necessary for the operation of their respective businesses as presently conducted. 


        6.26    No Burdensome Restrictions.    


        Neither
the Borrower nor any Subsidiary of the Borrower is a party to any agreement or instrument or subject to any other obligation or any charter or corporate restriction or any
provision of any applicable law, rule or regulation which, individually or in the aggregate, would have or be reasonably expected to have a Material Adverse Effect. 



        6.27    Brokers' Fees.    


        No
Credit Party has any obligation to any Person in respect of any finder's, broker's, investment banking or other similar fee in connection with any of the transactions contemplated
under the Credit Documents. 


48





 



        6.28    Labor Matters.    


        There
are no collective bargaining agreements or Multiemployer Plans covering the employees of the Borrower or any Subsidiary of the Borrower and none of such Persons has suffered any
strikes, walkouts, work stoppages or other material labor difficulty within the last five years. 


        6.29    Collateral Documents.    



        The
Collateral Documents create valid security interests in, and first Liens on, the Collateral purported to be covered thereby, which security interests and Liens are and will remain
perfected security interests and Liens, prior to all other Liens other than Permitted Liens. Each of the representations and warranties made by the Borrower and its Subsidiaries in the Collateral
Documents is true and correct. 


        6.30    Related Transactions.    


        The
closing of the acquisition of the Acquired Assets will occur simultaneously with the making of the initial Extensions of Credit hereunder and no party has waived, without the consent
of the Required Lenders, any condition precedent to their obligations to close as set forth in the Purchase Agreement. True and complete copies of the Purchase Agreement have been delivered to each of
the Lenders, together with a true and complete copy of each document to be delivered at the closing of the acquisition of the Acquired Assets. 


        6.31    Senior Debt.    


        The
Extensions of Credit are Senior Indebtedness (as defined in the Indenture) under the Indenture, meaning the Lenders shall have all of the rights and privileges of a holder of Senior
Indebtedness (as defined in the Indenture) under the Indenture. 


        6.32    Excess Proceeds.    



        (a)  As
of the Closing Date, the aggregate amount of Excess Proceeds (as defined in the Indenture) does not exceed $250,000. 


        (b)  At
all times after the Closing Date, the aggregate amount of Excess Proceeds (as defined in the Indenture) is less than $5,000,000. 



 
 

SECTION 7
  
    AFFIRMATIVE COVENANTS    
  


        Each Credit Party hereby covenants and agrees that so long as this Credit Agreement is in effect and until the Loans, together with interest, fees and other
obligations hereunder, have been paid in full, no Letter of Credit is outstanding and the Commitments hereunder shall have terminated: 


        7.1    Information Covenants.    



        The
Borrower will furnish, or cause to be furnished, to the Agent: 



        (a)    Annual Financial Statements.    As soon as available, and in any event within 120 days after the close
of each fiscal year of the Borrower, a consolidated and consolidating balance sheet and income statement of the Borrower and its Subsidiaries, as of the end of such fiscal year, together with related
consolidated and consolidating statements of operations and retained earnings and of cash flows for such fiscal year, setting forth in comparative form consolidated figures for the preceding fiscal
year, all such financial information described above to be in reasonable form and detail and audited by independent certified public accountants of recognized national standing reasonably acceptable
to the Agent and whose opinion shall be to the effect that such financial statements have been prepared in accordance with GAAP (except for changes with 



49





 


which such accountants concur) and shall not be limited as to the scope of the audit or qualified in any manner. 



        (b)    Quarterly Financial Statements.    As soon as available, and in any event within 45 days after the close
of each fiscal quarter of the Borrower (other than the fourth fiscal quarter, in which case 120 days after the end thereof) a consolidated balance sheet and income statement of the Borrower and
its Subsidiaries, as of the end of such fiscal quarter, together with related consolidated statements of operations and retained earnings and of cash flows for such fiscal quarter in each case setting
forth in comparative form consolidated figures for the corresponding period of the preceding fiscal year, all such financial information described above to be in reasonable form and detail and
reasonably acceptable to the Agent, and accompanied by a certificate of the chief financial officer of the Borrower to the effect that such quarterly financial statements fairly present in all
material respects the financial condition of the Borrower and its Subsidiaries and have been prepared in accordance with GAAP, subject to changes resulting from audit and normal year-end
audit adjustments. 


        (c)    Officer's Certificate.    At the time of delivery of the financial statements provided for in Sections 7.1(a)
and 7.1(b) above, a certificate of the chief operating or accounting officer of the Borrower substantially in the form of Exhibit 7.1(c),
(i) demonstrating compliance with the financial covenants contained in Section 7.12 by calculation thereof as of the end of each such fiscal period and (ii) stating that no
Default or Event of Default exists, or if any Default or Event of Default does exist, specifying the nature and extent thereof and what action the Borrower proposes to take with respect thereto. 


        (d)    Annual Business Plan and Budgets.    No later than 70 days after the end of each fiscal year of the
Borrower, beginning with the fiscal year ending November 30, 2002, an annual business plan and budget of the Borrower and its Subsidiaries containing, among other things, pro forma financial
statements for the next fiscal year. 


        (e)    Borrowing Base Certificate.    Within 20 days after the end of each calendar quarter, a Borrowing Base
Certificate as of the end of the immediately preceding quarter, substantially in the form of Exhibit 7.1(e) and certified by the chief financial
officer of the Borrower to be true and correct as of such date. 


        (f)    Compliance With Certain Provisions of the Credit Agreement.    Within 120 days after the end of each
fiscal year of the Borrower, the Borrower shall deliver a certificate, containing information regarding (i) the calculation of Excess Cash Flow (it being understood that no Excess Cash Flow
prepayment under Section 3.3(b)(ii) shall be required until the fiscal year ending November 30, 2003) and (ii) the amount of any Asset Dispositions, Debt Issuances, Equity
Issuances and Recovery Events that were made during the prior fiscal year. 


        (g)    Accountant's Certificate.    Within the period for delivery of the annual financial statements provided in
Section 7.1(a), a certificate of the accountants conducting the annual audit stating that they have reviewed this Credit Agreement and stating further whether, in the course of their audit,
they have become aware of any Default or Event of Default and, if any such Default or Event of Default exists, specifying the nature and extent thereof. 


        (h)    Auditor's Reports.    Promptly upon receipt thereof, a copy of any "management letter" submitted by independent
accountants to the Borrower or any of its Subsidiaries in connection with any annual, interim or special audit of the books of the Borrower or any of its Subsidiaries. 


        (i)    Reports.    Promptly upon transmission or receipt thereof, (a) copies of any filings and registrations
with, and reports to or from, the Securities and Exchange Commission, or any successor agency, and copies of all financial statements, proxy statements, notices and reports as the Borrower or any of
its Subsidiaries shall send to its shareholders generally or to a holder of 



50





 





any Indebtedness owed by the Borrower or any of its Subsidiaries in its capacity as such a holder and (b) upon the written request of the Agent, all reports and written information to and from
the United States Environmental Protection Agency, or any state or local agency responsible for environmental matters, the United States Occupational Health and Safety Administration, or any state or
local agency responsible for health and safety matters, or any successor agencies or authorities concerning environmental, health or safety matters. 


        (j)    Notices.    Upon a Credit Party obtaining knowledge thereof, such Credit Party will give written notice to the
Agent immediately of (a) the occurrence of an event or condition consisting of a Default or Event of Default, specifying the nature and existence thereof and what action the Borrower proposes
to take with respect thereto, and (b) the occurrence of any of the following with respect to the Borrower or any of its Subsidiaries (i) the pendency or commencement of any litigation,
arbitral or governmental proceeding against the Borrower or any of its Subsidiaries which if adversely determined would have or would be reasonably expected to have a Material Adverse Effect, or
(ii) the institution of any proceedings against the Borrower or any of its Subsidiaries with respect to, or the receipt of notice by such Person of potential liability or responsibility for
violation, or alleged violation of any federal, state or local law, rule or regulation, including but not limited to, Environmental Laws, the violation of which would have or would be reasonably
expected to have a Material Adverse Effect. 


        (k)    ERISA.    Upon any of the Credit Parties or any ERISA Affiliate obtaining knowledge thereof, Borrower will give
written notice to the Agent promptly (and in any event within five Business Days) of: (i) any event or condition, including, but not limited to, any Reportable Event, that constitutes, or might
reasonably lead to, a Termination Event; (ii) with respect to any Multiemployer Plan, the receipt of notice as prescribed in ERISA or otherwise of any withdrawal liability assessed against the
Borrower or any of its ERISA Affiliates, or of a determination that any Multiemployer Plan is in reorganization or insolvent (both within the meaning of Title IV of ERISA); (iii) the failure to
make full payment on or before the due date (including extensions) thereof of all amounts which the Borrower or any of its Subsidiaries or ERISA Affiliate is required to contribute to each Plan
pursuant to its terms and as required to meet the minimum funding standard set forth in ERISA and the Code with respect thereto; or (iv) any change in the funding status of any Plan that could
have a Material Adverse Effect; together, with a description of any such event or condition or a copy of any such notice and a statement by the principal financial officer of the Borrower briefly
setting forth the details regarding such event, condition, or notice, and the action, if any, which has been or is being taken or is proposed to be taken by the Credit Parties with respect thereto.
Promptly upon request, the Borrower shall furnish the Agent with such additional information concerning any Plan as may be reasonably requested, including, but not limited to, copies of each annual
report/return (Form 5500 series), as well as all schedules and attachments thereto required to filed with the Department of Labor and/or the Internal Revenue Service pursuant to ERISA and the
Code, respectively, for each "plan year" (within the meaning of Section 3(39) of ERISA). 



        (l)    Environmental.    The Borrower and each of its Subsidiaries will conduct and complete all investigations,
studies, sampling, and testing and all remedial, removal, and other actions necessary to address all Hazardous Materials on, from, or affecting any real property owned or leased by the Borrower or its
Subsidiaries to the extent necessary to be in compliance with all Environmental Laws and all other applicable federal, state, and local laws, regulations, rules and policies and with the orders and
directives of all Governmental Authorities exercising jurisdiction over such real property to the extent any failure would have or be reasonably expected to have a Material Adverse Effect. 



        (m)    Quarterly Report.    At the time of delivery of the financial statements provided for in Section 7.1(b)
above, (i) a company-prepared report containing information as to brand sales and 



51





 





advertising cost analysis and variable contribution margins for the fiscal quarter of the Borrower most recently ending and (ii) a company-prepared report containing information with respect
to the status of
on-going litigation of the Borrower and its Subsidiaries, including, without limitation, judgments and settlements during such fiscal quarter. 


        (n)    Other Information.    With reasonable promptness upon any such request, such other information regarding the
business, properties or financial condition of the Borrower and its Subsidiaries as the Agent or the Required Lenders may reasonably request. 




        7.2    Preservation of Existence and Franchises.    



        Each
of the Credit Parties will, and will cause each of its Subsidiaries to, do all things necessary to preserve and keep in full force and effect in all material respects its existence,
rights, franchises and authority. 


        7.3    Books and Records.    


        Each
of the Credit Parties will, and will cause each of its Subsidiaries to, keep complete and accurate books and records of its transactions in accordance with good accounting practices
on the basis of GAAP (including the establishment and maintenance of appropriate reserves). 


        7.4    Compliance with Law.    


        Each
of the Credit Parties will, and will cause each of its Subsidiaries to, comply with all laws, rules, regulations and orders, and all applicable restrictions imposed by all
Governmental Authorities, applicable to it and its property (including, without limitation, Environmental Laws) if noncompliance with any such law, rule, regulation, order or restriction would have or
reasonably be expected to have a Material Adverse Effect. 


        7.5    Payment of Taxes and Other Indebtedness.    


        Each
of the Credit Parties will, and will cause its Subsidiaries to, pay and discharge (a) all taxes, assessments and governmental charges or levies imposed upon it, or upon its
income or profits, or upon any of its properties, before they shall become delinquent, (b) all lawful claims (including claims for labor, materials and supplies) which, if unpaid, might give
rise to a Lien upon any of its properties, and (c) except as prohibited hereunder, all of its other Indebtedness as it shall become due; provided, however, that a Credit Party or its Subsidiary
shall not be required to pay any such tax, assessment, charge, levy, claim or Indebtedness which is being contested in good faith by appropriate proceedings
and as to which adequate reserves therefor have been established in accordance with GAAP, unless the failure to make any such payment (i) would give rise to an immediate right to foreclose on a
Lien securing such amounts or (ii) would have a Material Adverse Effect. 


        7.6    Insurance.    


        Each
of the Credit Parties will, and will cause each of its Subsidiaries to, at all times maintain in full force and effect insurance (including worker's compensation insurance,
liability insurance, casualty insurance and business interruption insurance) in such amounts, covering such risks and liabilities and with such deductibles or self-insurance retentions as
are in accordance with normal industry practice. All liability policies shall have each Lender as an additional insured and all casualty policies shall have the Agent, on behalf of the Lenders, as
loss payee. 


52









  





        In addition the Credit Parties will, and will cause each of its Subsidiaries to, at all times maintain in full force and effect self-insurance covering product liability
claims. The Credit Parties shall cause the amount of such self-insurance coverage to increase by at least $1,500,000 per year. 



        In
the event there occurs any material loss, damage to or destruction of the Collateral of any Credit Party or any part thereof, such Credit Party shall promptly give written notice
thereof to the Agent generally describing the nature and extent of such damage or destruction. Subsequent to any loss, damage to or destruction of the Collateral of any Credit Party or any part
thereof, such Credit Party, whether or not the insurance proceeds, if any, received on account of such damage or destruction shall be sufficient for that purpose, at such Credit Party's cost and
expense, will promptly repair or replace the Collateral of such Credit Party so lost, damaged or destroyed; provided, however, that such Credit Party shall not be obligated to repair or replace any
Collateral so lost, damaged or destroyed to the extent the failure to make such repair or replacement (a) is desirable to the proper conduct of the business of such Credit Party in the ordinary
course and otherwise is in the best interest of such Credit Party and (b) would not materially impair the rights and benefits of the Agent or the Lenders under this Credit Agreement or any
other Credit Document. In the event a Credit Party shall receive any insurance proceeds, as a result of any loss, damage or destruction, in a net amount in excess of $500,000, such Credit Party will
immediately pay over such proceeds to the Agent as cash collateral for the Credit Party Obligations. The Agent agrees to release such insurance proceeds to such Credit Party for replacement or
restoration of the portion of the Collateral of such Credit Party lost, damaged or destroyed if, (A) within 120 days from the date the Agent receives such insurance proceeds, the Agent
has received written application for such release from such Credit Party together with evidence reasonably satisfactory to it that the Collateral lost, damaged or destroyed has been or will be
replaced or restored to its condition (or by Collateral having a value at least equal to the condition of the asset subject to the loss, damage or destruction) immediately prior to the loss,
destruction or other event giving rise to the payment of such insurance proceeds and (B) on the date of such release no Default or Event of Default exists. If the conditions in the preceding
sentence are not met, the Agent shall, on the first Business Day subsequent to the date 120 days after it received such insurance proceeds, apply such insurance proceeds as a mandatory
prepayment of the Credit Party Obligations for application in accordance with the terms of Section 3.3(b)(v) and Section 3.3(c). All insurance proceeds shall be subject to the
security interest of the Lenders under the Collateral Documents. 


        The
present insurance coverage of the Borrower and its Subsidiaries is outlined as to carrier, policy number, expiration date, type and amount on  Schedule 7.6, as Schedule 7.6 may be amended from time to time by written notice to the
Agent. 


        7.7    Maintenance of Property.    



        Each
of the Credit Parties will, and will cause its Subsidiaries to, maintain and preserve its properties and equipment in good repair, working order and condition, normal wear and tear
excepted, and will make, or cause to be made, in such properties and equipment from time to time all repairs, renewals, replacements, extensions, additions, betterments and improvements thereto as may
be needed or proper, to the extent and in the manner customary for companies in similar businesses. 


        7.8    Performance of Obligations.    



        Each
of the Credit Parties will, and will cause its Subsidiaries to, perform in all material respects all of its obligations under the terms of all material agreements, indentures,
mortgages, security agreements or other debt instruments to which it is a party or by which it is bound. 


        7.9    Collateral.    


        If,
subsequent to the Closing Date, a Credit Party shall (a) acquire or lease any real property or (b) acquire any intellectual property, securities instruments, chattel
paper or other personal property 


53





 




required to be delivered to the Agent as Collateral hereunder or under any of the Collateral Documents, the Borrower shall immediately notify the Agent of same. Each Credit Party shall take such
action (including, but not limited to, the actions set forth in Section 5.1), as requested by the Agent and at its own expense, to ensure that the Lenders have a first priority perfected Lien
in all owned real property (and in such leased real property as requested by the Agent or the Required Lenders) and all personal property of the Credit Parties (whether now owned or hereafter
acquired), subject only to Permitted Liens. Each Credit Party shall adhere to the covenants regarding the location of personal property as set forth in the Security Agreement. 


        7.10    Use of Proceeds.    


        The
Credit Parties will use the proceeds of the Loans solely (a) to refinance the existing Indebtedness of the Borrower, (b) to finance the acquisition of the Acquired
Assets, (c) to provide working capital, (d) to finance Permitted Acquisitions and (e) for general corporate purposes. 



        7.11    Audits/Inspections.    


        Upon
reasonable notice and during normal business hours, each Credit Party will, and will cause its Subsidiaries to, permit representatives appointed by the Agent or any Lender,
including, without limitation, independent accountants, agents, attorneys and appraisers to visit and inspect such Credit Party's (or its Subsidiary's) property, including its books and records, its
accounts receivable and inventory, its facilities and its other business assets, and to make photocopies or photographs thereof and to write down and record any information such representative obtains
and shall permit the Agent or its representatives to investigate and verify the accuracy of information provided to the Lenders and to discuss all such matters with the officers, employees and
representatives of the Credit Parties and their Subsidiaries. The Credit Parties agree that the Agent, and its representatives, may conduct an annual audit of the Collateral, at the expense of the
Borrower. 


        7.12    Financial Covenants.    



        (a)    Fixed Charge Coverage Ratio.    The Fixed Charge Coverage Ratio, as of the end of each fiscal quarter, shall be
greater than or equal to 1.15 to 1.0. 


        (b)    Leverage Ratio.    The Leverage Ratio, as of the end of each fiscal quarter, shall be less than or equal to: 



          (i)  From
the Effective Date to and including November 30, 2003, 5.00 to 1.0; 


        (ii)  From
December 1, 2003 to and including November 30, 2005, 4.50 to 1.0; and 


        (iii)  From
December 1, 2005 to and thereafter, 4.00 to 1.0. 




        (c)    Senior Leverage Ratio.    The Senior Leverage Ratio, as of the end of each fiscal quarter, shall be less than
or equal to: 



          (i)  From
the Effective Date to and including November 30, 2003, 1.50 to 1.0; and 


        (ii)  From
December 1, 2003 and thereafter, 1.00 to 1.0. 




        (d)    Net Worth.    At all times Net Worth shall be no less than $50,000,000 increased on a cumulative basis,
commencing with the fiscal quarter ending May 31, 2002, by an amount equal to, (i) as of the last day of each fiscal quarter, 75% of Net Income for the fiscal quarter then ended (without
deductions for any losses) plus (ii) 100% of the Net Cash Proceeds from any Equity Issuance subsequent to the Effective Date. For purposes of determining compliance with the Net Worth covenant
set forth above, the base number of $50,000,000 set forth above shall be reduced by the amount of any write-down of goodwill required under FASB 142 occurring or incurred subsequent to
November 30, 2001. 



54





 

        (e)    Compliance Dates.    Notwithstanding anything to the contrary contained herein, the Credit Parties shall not be
required to comply with Sections 7.12(a), (b) or (c) until the earlier to occur of (i) the last day of the fiscal quarter during which the Borrower has delivered to the Agent the
documents required pursuant to Section 7.16 or (ii) August 31, 2002. 




        7.13    Additional Credit Parties.    


        At
the time any Person becomes a Subsidiary of a Credit Party, the Borrower shall so notify the Agent and promptly thereafter (but in any event within 30 days after the date
thereof) shall cause such Person to (a) if it is a Domestic Subsidiary, execute a Joinder Agreement in substantially the same form as  Exhibit 7.13, (b) cause all of the Capital Stock of
such Person (if such Person is a Domestic Subsidiary) or 65% of the Capital Stock of
such Person (if such Person is a Material Foreign Subsidiary) to be delivered to the Agent (together with undated stock powers signed in blank) and pledged to the Agent pursuant to an appropriate
pledge agreement in substantially the form of the Pledge Agreement and otherwise in a form acceptable to the Agent, (c) if such Person is a Domestic Subsidiary, pledge all of its assets to the
Lenders pursuant to a security agreement in substantially the form of the Security Agreement and otherwise in a form acceptable to the Agent, (d) if such Person has any Subsidiaries,
(i) deliver all of the Capital Stock of such Domestic Subsidiaries and 65% of the Capital Stock of such Material Foreign Subsidiaries (together with undated stock powers signed in blank) to the
Agent and (ii) execute a pledge agreement in substantially the form of the Pledge Agreement and otherwise in a form acceptable to the Agent, and (e) deliver such other documentation as
the Agent may reasonably request in connection with the foregoing, including, without limitation, appropriate UCC-1 financing statements, landlord waivers, certified resolutions and other
organizational and authorizing documents of such Person and favorable opinions of counsel to such Person (which shall cover, among other things, the legality, validity, binding effect and
enforceability of the documentation referred to above), all in form, content and scope reasonably satisfactory to the Agent. 


        7.14    Ownership of Subsidiaries.    



        The
Borrower shall at all times own 100% of the Capital Stock of its Subsidiaries (other than to the extent necessary for Chattem (U.K.) Limited to qualify for incorporation in its
country of incorporation
and any nominal qualifying shares owned by any necessary governmental authorities) and may not sell, transfer or otherwise dispose of any shares of Capital Stock of any of its Subsidiaries. 


        7.15    Appraisal Reports.    



        (a)  To
the extent required to comply with FASB 142 or (b) following the occurrence of an Event of Default (if requested by the Agent), the Borrower and its
Subsidiaries shall provide the Agent, at the expense of the Borrower, with asset appraisal reports with respect to the personal property of the Borrower and its Subsidiaries, including without
limitation, brand values. 




        7.16    Post-Closing Matters.    



        (a)  Not
later than 75 days following the Closing Date, the Borrower shall furnish to the Agent financial statements with respect to the Acquired Assets in a form
sufficient for filing with the Borrower's Form 8-K and otherwise in form and substance reasonably satisfactory to the Agent. 



        (b)  The
Credit Parties agree to use commercially reasonable efforts to obtain landlord waivers with respect to each of their respective leased real properties (in form and
substance reasonably satisfactory to the Agent) within 90 days following the Closing Date. 



55





 




 
 

SECTION 8
  
    NEGATIVE COVENANTS    
  



        Each Credit Party hereby covenants and agrees that so long as this Credit Agreement is in effect and until the Loans, together with interest, fees and other
obligations hereunder, have been paid in full, no Letter of Credit is outstanding and the Commitments hereunder shall have terminated: 


        8.1    Indebtedness.    


        No
Credit Party will, nor will it permit any of its Subsidiaries to, contract, create, incur, assume or permit to exist any Indebtedness, except: 



        (a)  Indebtedness
arising under this Credit Agreement and the other Credit Documents; 


        (b)  the
Subordinated Debt; 


        (c)  Indebtedness
existing as of the Closing Date as referenced in Section 6.10 (and renewals, refinancings or extensions thereof on terms and conditions no more
favorable, in the aggregate, to such Person than such existing Indebtedness and in a principal amount not in excess of that outstanding as of the date of such renewal, refinancing or extension); 



        (d)  Indebtedness
owing by one Credit Party to another Credit Party; 


        (e)  purchase
money Indebtedness (including Capital Leases) incurred by the Borrower or any of its Subsidiaries to finance the purchase of fixed assets; provided that
(i) the total of all such Indebtedness for all such Persons taken together shall not exceed an aggregate principal amount of $2,000,000 at any one time outstanding (including any such
Indebtedness referred to in subsection (c) above); (ii) such Indebtedness when incurred shall not exceed the purchase price of the asset(s) financed; and (iii) no such
Indebtedness shall be refinanced for a principal amount in excess of the principal balance outstanding thereon at the time of such refinancing; 



          (f)  obligations
of the Credit Parties in respect of Hedging Agreements entered into in the ordinary course of business to manage existing or anticipated risks and not for
speculative purposes; and 


        (g)  Indebtedness
incurred by Foreign Subsidiaries not to exceed $500,000, in the aggregate, at any one time outstanding (including any such Indebtedness referred to in
subsection (c) above). 




        8.2    Liens.    



        No
Credit Party will, nor will it permit its Subsidiaries to, contract, create, incur, assume or permit to exist any Lien with respect to any of its property or assets of any kind
(whether real or personal, tangible or intangible), other than any "margin stock" within the meaning of Regulation U, whether now owned or after acquired, except for Permitted Liens. 


        8.3    Nature of Business.    


        No
Credit Party will, nor will it permit its Subsidiaries to, alter the character of its business from that conducted as of the Closing Date or engage in any business other than the
business conducted as of the Closing Date, which with respect to Signal shall be limited to the ownership of trademarks and tradenames for the purpose of licensing such trademarks and tradenames to
the Borrower or any other Credit Party. 


        8.4    Consolidation and Merger.    


        No
Credit Party will, nor will it permit its Subsidiaries to, enter into any transaction of merger or consolidation or liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution); provided that notwithstanding the foregoing provisions of this Section 8.4, the following actions may be taken if 


56





 




(a) the Agent is given prior written notice of such action, and the Credit Parties execute and deliver such documents, instruments and certificates as the Agent may request in order to
maintain the perfection and priority of the Liens on the assets of the Credit Parties and (b) after giving effect thereto no Default or Event of Default exists: 



          (i)  any
Credit Party may be merged or consolidated with or into the Borrower or any Credit Party (other than the Borrower) may be merged or consolidated with or into any
other Credit Party; provided that if such transaction shall be between the Borrower and another Credit Party, the Borrower shall be the continuing or surviving corporation; and 


        (ii)  any
Foreign Subsidiary may merge or consolidate with any other Foreign Subsidiary. 




        8.5    Sale or Lease of Assets.    



        No
Credit Party will, nor will it permit any of its Subsidiaries to, convey, sell, lease, transfer or otherwise dispose of, in one transaction or a series of transactions, all or any
part of its business or assets whether now owned or hereafter acquired, including, without limitation, inventory, receivables, real property, leasehold interests, equipment and securities other than
(a) any inventory or other assets sold, leased or disposed of (or simultaneously replaced with like goods) in the ordinary course of business, (b) obsolete, idle or worn-out
assets no longer used or useful in its business, (c) the sale, lease or transfer or other disposal by a Credit Party other than the Borrower of any or all of its assets to the Borrower or to
any other Credit Party, (d) the sale, transfer or other disposition of "margin stock" within the meaning of Regulation U, (e) the non-recourse sale of accounts
receivable to a Person that is not an Affiliate of the Borrower provided that (i) at the time of the sale (and after giving effect thereto) no Default or Event of Default exists, (ii) as
a result of such sale, no Material Adverse Effect would occur or be reasonably expected to occur, (iii) 50% of the proceeds from such sale are applied as a mandatory prepayment in accordance
with Section 3.3(b)(iii), and (iv) such sales do not exceed, in the
aggregate, $7,000,000 during the term of this Credit Agreement, (f) other sales of equipment provided that (i) the sale is for fair market value, (ii) the sale is for cash
consideration, (iii) at the time of the sale (and after giving effect thereto) no Default or Event of Default exists, (iv) as a result of such sale, no Material Adverse Effect would
occur or be reasonably expected to occur, (v) the proceeds from such sale are, within 120 days from the date of such sale, applied as a mandatory prepayment in accordance with
Section 3.3(b)(iii) or reinvested by the Credit Parties in Eligible Assets and (vi) such sales do not exceed, in the aggregate, $250,000 during any fiscal year and
(g) sales of product lines (or the right to produce a consumer product or products) provided that (i) the dispositions permitted under this subparagraph (g) shall not exceed
$10,000,000 during any fiscal year and, (ii) the dispositions permitted under this subparagraph (g) during any fiscal year shall be limited to product lines (or the right to produce a
consumer product or products) having aggregate sales for the twelve-month period ending on the fiscal quarter ending immediately preceding the sale in an aggregate amount not exceeding ten percent
(10%) of EBITDA for such twelve month period and (iii) after giving effect to any such disposition on a Pro Forma Basis, the Credit Parties and their Subsidiaries would have been in compliance
with all the financial covenants set forth in Section 7.12. 


        8.6    Advances, Investments and Loans.    


        No
Credit Party will, nor will it permit any of its Subsidiaries to, make any Investments except for Permitted Investments. 


        8.7    Restricted Payments.    



        No
Credit Party will, nor will it permit any of its Subsidiaries to, directly or indirectly, (a) declare or pay any dividends (whether cash or otherwise) or make any other
distribution upon any shares of its Capital Stock of any class or (b) purchase, redeem or otherwise acquire or retire or make any provisions for redemption, acquisition or retirement of any
shares of its Capital Stock of any class or any warrants or options to purchase any such shares (any such declaration, payment, distribution, 


57





 




purchase, redemption or other acquisition, a "Restricted Payment"); provided, however, (i) the Subsidiaries of the Borrower may pay dividends to
the Borrower and (ii) the Borrower may purchase, redeem, acquire or retire shares of its Capital Stock of any class or any warrants or options to purchase any such shares of its Capital Stock
in an amount not to exceed $5,000,000 in the aggregate in any fiscal year so long as the Borrower shall have provided the Agent with satisfactory evidence demonstrating that after giving effect to any
such transaction on a Pro Forma Basis, the Credit Parties and their Subsidiaries would have been in compliance with all the financial covenants set forth in Section 7.12. 



        8.8    Transactions with Affiliates.    


        Except
as set forth on Schedule 8.8, no Credit Party will, nor will it permit its Subsidiaries to, enter into any transaction or
series of transactions, whether or not in the ordinary course of business, with any officer, director, shareholder, Subsidiary or Affiliate other than on terms and conditions substantially as
favorable as would be obtainable in a comparable arm's-length transaction with a Person other than an officer, director, shareholder, Subsidiary or Affiliate. 



        8.9    Fiscal Year; Organizational Documents.    


        No
Credit Party will, nor will it permit any of its Subsidiaries to, change its fiscal year or materially change its articles or certificate of incorporation or its bylaws without the
prior written consent of the Required Lenders. 


        8.10    Prepayments of Indebtedness.    



        No
Credit Party will, nor will it permit any of its Subsidiaries to, (a) amend or modify (or permit the amendment or modification of) any of the terms of any Indebtedness if such
amendment or modification would add or change any terms in a manner adverse to the Lenders, including but not limited to, shortening final maturity or average life to maturity of such Indebtedness or
requiring any payment to be made sooner than originally scheduled or increasing the interest rate applicable thereto or change any subordination provision thereof, (b) during the existence of a
Default or Event of Default, or if a Default or Event of Default would be caused as a result thereof make (or give any notice with respect thereto) any voluntary or optional payment or prepayment or
redemption or acquisition for value of (including, without limitation, by way of depositing money or securities with the trustee with respect thereto before due for the purpose of paying when due),
refund, refinance or exchange of any other Indebtedness. 


        8.11    Subordinated Debt.    


        No
Credit Party will (i) make or offer to make any principal payments with respect to the Subordinated Debt, (ii) redeem or offer to redeem any of the Subordinated Debt or
(iii) deposit any funds intended to discharge or defease any or all of the Subordinated Debt; provided, however, the Borrower may redeem or
repurchase the Subordinated Debt in an aggregate amount not to exceed $5,000,000 (such amount to include any accrued interest, premiums or penalties associated therewith) during any fiscal year  provided that after giving effect to such repurchase or redemption on a Pro Forma Basis, the Credit Parties and their Subsidiaries would have been in
compliance with all the financial covenants set forth in Section 7.12. The Subordinated Debt or the Indenture may not be amended or modified in any material manner without the prior written
consent of the Required Lenders, it being specifically understood and agreed that no amendment to Article 4 or Article 10 of the Indenture shall be made without the prior written consent
of the Required Lenders. 


        8.12    Limitations.    


        No
Credit Party will, nor will it permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause, incur, assume, suffer or permit to exist or become effective any
consensual encumbrance or restriction of any kind on the ability of any such Person to (a) pay dividends or make 


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any other distribution on any of such Person's Capital Stock, (b) pay any Indebtedness owed to the Borrower or any other Credit Party, (c) make loans or advances to any other Credit
Party or (d) transfer any of its property to any other Credit Party, except for encumbrances or restrictions existing under or by reason of (i) customary non-assignment
provisions in any lease governing a leasehold interest, (ii) this Credit Agreement and the other Credit Documents and (iii) the Indenture. 


        8.13    Sale Leasebacks.    



        No
Credit Party will, nor will it permit any of its Subsidiaries to, directly or indirectly become or remain liable as lessee or as guarantor or other surety with respect to any lease,
of any property (whether real or personal or mixed), whether now owned or hereafter acquired, (a) which such Credit Party or Subsidiary has sold or transferred or is to sell or transfer to any
other Person other than a Credit Party or (b) which such Credit Party or Subsidiary intends to use for substantially the same purpose as any other property which has been sold or is to be sold
or transferred by such Credit Party or Subsidiary to any Person in connection with such lease. 


        8.14    Negative Pledges.    


        Other
than as set forth in Section 4.12 of the Indenture, none of the Credit Parties will, nor will it permit any of its Subsidiaries to, enter into, assume or become subject to
any agreement prohibiting or otherwise restricting the creation or assumption of any Lien upon its properties or assets, whether now owned or hereafter acquired, or requiring the grant of any security
for such obligation if security is given for some other obligation. 


        8.15    Capital Expenditures.    


        The
Credit Parties and their Subsidiaries will not make Capital Expenditures, in any fiscal year, that would exceed $5,000,000 in the aggregate. The acquisition of the Acquired Assets
shall not constitute Capital Expenditures for purposes of this Section 8.15. 


        8.16    Operating Leases.    



        Neither
the Borrower nor any of its Subsidiaries shall create, incur, assume or permit to exist obligations under Operating Leases which require aggregate annual payments in excess of
$1,500,000. 


        8.17    Payment Blockage Notice.    


        The
Borrower (i) covenants and agrees that it will not give the Payment Blockage Notice (as defined in the Indenture) without the consent of the Required Lenders and
(ii) hereby designates and appoints the Agent, as attorney-in-fact of the Borrower, irrevocably and with full power of substitution, to deliver any Payment Blockage
Notice (as defined in the Indenture) that the Borrower has the right to deliver pursuant to the terms of the Indenture; provided that the foregoing appointment shall terminate at such time as the
Loans, together with interest, fees and other obligations hereunder, have been paid in full and the Commitments hereunder shall have terminated. 


 
 

SECTION 9
  
    EVENTS OF DEFAULT    
  


        9.1    Events of Default.    



        An
Event of Default shall exist upon the occurrence of any of the following specified events (each an "Event of Default"): 



        (a)    Payment.    Any Credit Party shall: 



          (i)  default
in the payment when due of any principal of any of the Loans or of any reimbursement obligations arising from drawings under Letters of Credit; or 




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        (ii)  default,
and such default shall continue for three or more days, in the payment when due of any interest on the Loans or on any reimbursement obligations arising from
drawings under Letters of Credit or of any fees or other amounts owing hereunder, under any of the other Credit Documents or in connection herewith. 




        (b)    Representations.    Any representation, warranty or statement made or deemed to be made by any Credit Party
herein, in any of the other Credit Documents, or in any statement or certificate delivered or required to be delivered pursuant hereto or thereto shall prove untrue in any material respect on the date
as of which it was made or deemed to have been made. 


        (c)    Covenants.    Any Credit Party shall: 



          (i)  default
in the due performance or observance of any term, covenant or agreement contained in Sections 7.2, 7.4, 7.5, 7.6, 7.9, 7.10, 7.12, 7.13, 7.14, 7.15 or 7.16 or
Section 8; or 


        (ii)  default
in the due performance or observance by it of any term, covenant or agreement contained in Section 7.1 and such default shall continue unremedied for a
period of five Business Days after the earlier of an officer of a Credit Party becoming aware of such default or notice thereof given by the Agent; or 


        (iii)  default
in the due performance or observance by it of any term, covenant or agreement (other than those referred to in subsections (a), (b) or (c)(i) or
(ii) of this Section 9.1) contained in this Credit Agreement and such default shall continue unremedied for a period of at least 30 days after the earlier of an officer of a
Credit Party becoming aware of such default or notice thereof given by the Agent. 




        (d)    Other Credit Documents.    (i) Any Credit Party shall default in the due performance or observance of
any term, covenant or agreement in any of the other Credit Documents and such default shall continue unremedied for a period of at least 30 days after the earlier of an officer of a Credit
Party becoming aware of such default or notice thereof given by the Agent, or (ii) any Credit Document shall fail to be in full force and effect or to give the Agent and/or the Lenders the
security interests, liens, rights, powers and privileges purported to be created thereby. 


        (e)    Guaranties.    The guaranty given by the Credit Parties hereunder or by any Additional Credit Party hereafter
or any provision thereof shall cease to be in full force and effect, or any guarantor thereunder or any Person acting by or on behalf of such guarantor shall deny or disaffirm such Guarantor's
obligations under such guaranty. 


        (f)    Bankruptcy, etc.    The occurrence of any of the following with respect to the Borrower or any of its
Subsidiaries (i) a court or governmental agency having jurisdiction in the premises shall enter a decree or order for relief in respect of the Borrower or any of its Subsidiaries in an
involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appoint a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar
official of any of the Borrower or any of its Subsidiaries or for any substantial part of its property or ordering the winding up or liquidation of its affairs; or (ii) an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect is commenced against the Borrower or any of its Subsidiaries and such petition remains unstayed and in
effect for a period of 60 consecutive days; or (iii) the Borrower or any of its Subsidiaries shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now
or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of such Person or any substantial part of its property or make any general assignment for the benefit of creditors; or (iv) the
Borrower or any of its Subsidiaries shall admit in writing its inability to pay its debts generally as they become due or any action shall be taken by such Person in furtherance of any of the
aforesaid purposes. 



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        (g)    Defaults under Other Agreements.    With respect to any Indebtedness (other than Indebtedness outstanding under
this Credit Agreement) of the Borrower or any of its Subsidiaries in a principal amount in excess of $1,000,000, including, without limitation, the Subordinated Debt (i) a Credit Party shall
(A) default in any payment (beyond the applicable grace period with respect thereto, if any) with respect to any such Indebtedness, or (B) default (after giving effect to any applicable
grace period) in the observance or performance of any term, covenant or agreement relating to such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or
any other event or condition shall occur or condition exist, the effect of which default or other event or condition is to cause, or permit, the holder or holders of such Indebtedness (or trustee or
agent on behalf of such holders) to cause (determined without regard to whether any notice or lapse of time is required) any such Indebtedness to become due prior to its stated maturity; or
(ii) any such Indebtedness shall be declared due and payable, or required to be prepaid other than by a regularly scheduled required prepayment, prior to the stated maturity thereof. 


        (h)    Judgments.    One or more final, non-appealable judgments, orders, or decrees shall be entered
against any one or more of the Borrower or any of its Subsidiaries involving (i) a liability of $1,000,000 or more, in the aggregate, (to the extent not paid or covered by
self-insurance or insurance provided by a carrier who has acknowledged coverage) and such judgments, orders or decrees shall continue unsatisfied, undischarged and unstayed for a period of
30 days or (ii) a liability of $75,000,000 or more, in the aggregate related to products liability. 



        (i)    ERISA.    Any of the following events or conditions: (A) any "accumulated funding deficiency," as such
term is defined in Section 302 of ERISA and Section 412 of the Code, whether or not waived, shall exist with respect to any Plan, or any lien shall arise on the assets of the Borrower or
any of their Subsidiaries or any ERISA Affiliate in favor of the PBGC or a Plan; (B) a Termination Event shall occur with respect to a Single Employer Plan, which is, in the reasonable opinion
of the Agent, likely to result in the termination of such Plan for purposes of Title IV of ERISA; (C) a Termination Event shall occur with respect to a Multiemployer Plan or Multiple Employer
Plan, which is, in the reasonable opinion of the Agent, likely to result in (i) the termination of such Plan for purposes of Title IV of ERISA, or (ii) the Borrower or any of its
Subsidiaries or any ERISA Affiliate incurring any liability in connection with a withdrawal from, reorganization of (within the meaning of Section 4241 of ERISA), or insolvency or (within the
meaning of Section 4245 of ERISA) such Plan; or (D) any prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) or breach of
fiduciary responsibility shall occur which may subject the Borrower or any of its Subsidiaries or any ERISA Affiliate to any liability under Sections 406, 409, 502(i), or 502(l) of ERISA or
Section 4975 of the Code, or under any agreement or other instrument pursuant to which the Borrower or any of its Subsidiaries or any ERISA Affiliate has agreed or is required to indemnify any
person against any such liability. 


        (j)    Ownership.    There shall occur a Change of Control. 


        (k)    Subordinated Debt.    (i) Any holder of the Subordinated Debt alleges (or any Governmental Authority
with applicable jurisdiction determines) that the Lenders are not holders of Senior Indebtedness (as defined in the Indenture) or (ii) the subordination provisions in the Indenture shall, in
whole or in part, terminate, cease to be effective or cease to be legally valid, binding and enforceable against any holder of the Subordinated Debt. 


        (l)    Business.    The Borrower commences to engage in any material respect in a line of business or activity other
than the business of manufacturing and marketing of brand name over-the-counter pharmaceuticals, dietary supplements, functional toiletries and cosmetics. 



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        (m)    Indenture/Change of Control.    There shall occur a Change of Control (as defined in the Indenture) under the
Indenture. 




        9.2    Acceleration; Remedies.    


        Upon
the occurrence of an Event of Default, and at any time thereafter unless and until such Event of Default has been waived in writing by the Required Lenders (or the Lenders as may be
required hereunder), the Agent shall, upon the request and direction of the Required Lenders, by written notice to the Borrower, take any of the following actions: 



        (a)    Termination of Commitments.    Declare the Commitments terminated whereupon the Commitments shall be
immediately terminated. 


        (b)    Acceleration of Loans.    Declare the unpaid principal of and any accrued interest in respect of all Loans, any
reimbursement obligations arising from drawings under Letters of Credit and any and all other Indebtedness or obligations of any and every kind owing by a Credit Party to any of the Lenders hereunder
to be due whereupon the same shall be immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Credit Parties. 


        (c)    Cash Collateral.    Direct the Credit Parties to pay (and the Credit Parties agree that upon receipt of such
notice, or upon the occurrence of an Event of Default under Section 9.1(f), they will immediately
pay) to the Agent additional cash, to be held by the Agent, for the benefit of the Lenders, in a cash collateral account as additional security for the LOC Obligations in respect of subsequent
drawings under all then outstanding Letters of Credit in an amount equal to the maximum aggregate amount which may be drawn under all Letters of Credits then outstanding. 



        (d)    Enforcement of Rights.    Enforce any and all rights and interests created and existing under the Credit
Documents, including, without limitation, all rights and remedies existing under the Collateral Documents, all rights and remedies against a Guarantor and all rights of set-off. 




Notwithstanding
the foregoing, if an Event of Default specified in Section 9.1(f) shall occur, then the Commitments shall automatically terminate and all Loans, all reimbursement obligations
arising from drawings under Letters of Credit, all accrued interest in respect thereof, all accrued and unpaid fees and other Indebtedness or obligations owing to the Lenders hereunder shall
immediately become due and payable without the giving of any notice or other action by the Agent or the Lenders, which notice or other action is expressly waived by the Credit Parties. 


Notwithstanding
the fact that enforcement powers reside primarily with the Agent, each Lender has a separate right of payment and shall be considered a separate "creditor" holding a separate "claim"
within the meaning of Section 101(5) of the Bankruptcy Code or any other insolvency statute. 


 
 

SECTION 10
  
    AGENCY PROVISIONS    
  



        10.1    Appointment and Authorization of Agent.    



        (a)  Each
Lender hereby irrevocably (subject to Section 10.9) appoints, designates and authorizes the Agent to take such action on its behalf under the provisions of
this Credit Agreement and each other Credit Document and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Credit Agreement or any other Credit
Document, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere herein or in any other Credit Document, the Agent shall not
have any duties or responsibilities, except those expressly set forth herein, nor shall the Agent have or be deemed to have any fiduciary relationship with any Lender or participant, and 



62





 


no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Credit Agreement or any other Credit Document or otherwise exist against the Agent.
Without limiting
the generality of the foregoing sentence, the use of the term "agent" herein and in the other Credit Documents with reference to the Agent is not intended to connote any fiduciary or other implied (or
express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties. 


        (b)  The
Issuing Lender shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith until such time (and
except for so long) as the Agent may agree at the request of the Required Lenders to act for the Issuing Lender with respect thereto; provided, however,
that the Issuing Lender shall have all of the benefits and immunities (i) provided to the Agent in this Section 10 with respect to any acts taken or omissions suffered by the Issuing
Lender in connection with Letters of Credit issued by it or proposed to be issued by it and the application and agreements for letters of credit pertaining to the Letters of Credit as fully as if the
term "Agent" as used in this Section 10 included the Issuing Lender with respect to such acts or omissions, and (ii) as additionally provided herein with respect to the Issuing Lender. 




        10.2    Delegation of Duties.    


        The
Agent may execute any of its duties under this Credit Agreement or any other Credit Document by or through agents, employees or attorneys-in-fact and shall be
entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agent or
attorney-in-fact that it selects in the absence of gross negligence or willful misconduct. 


        10.3    Liability of Agent.    


        No
Agent-Related Person shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Credit Agreement or any other Credit
Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct in connection with its duties expressly set forth herein), or (b) be responsible in
any manner to any Lender or participant for any recital, statement, representation or warranty made by any Credit Party or any officer thereof, contained herein or in any other Credit Document, or in
any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Credit Agreement or any other Credit Document, or the
validity, effectiveness, genuineness, enforceability or sufficiency of this Credit Agreement or any other Credit Document, or for any failure of any Credit Party or any other party to any Credit
Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Lender or participant to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this Credit Agreement or any other Credit Document, or to inspect the properties, books or records of any Credit Party or any
Affiliate thereof. 


        10.4    Reliance by Agent.    



        (a)  The
Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, communication, signature, resolution, representation, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or
made by the proper Person or Persons, and upon advice and statements of legal counsel (including counsel to any Credit Party), independent accountants and other experts selected by the Agent. The
Agent shall be fully justified in failing or refusing to take any action under any Credit Document unless it shall first receive such advice or concurrence of the Required Lenders as it deems
appropriate and, if it so requests, it shall first be indemnified to its satisfaction by the Lenders against any and all 



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liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting,
under this Credit Agreement or any other Credit Document in accordance with a request or consent of the Required Lenders or all the Lenders, if required hereunder, and such request and any action
taken or failure to act pursuant thereto shall be binding upon all the Lenders and participants. Where this Credit Agreement expressly permits or prohibits an action unless the Required Lenders
otherwise determine, the Agent shall, and in all other instances, the Agent may, but shall not be required to, initiate any solicitation for the consent or a vote of the Lenders. 


        (b)  For
purposes of determining compliance with the conditions specified in Section 5.1, each Lender that has signed this Credit Agreement shall be deemed to have
consented to, approved or accepted or to be satisfied with, each document or other matter either sent by the Agent to such Lender for consent, approval, acceptance or satisfaction, or required
thereunder to be consented to or approved by or acceptable or satisfactory to a Lender. 




        10.5    Notice of Default.    


        The
Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default, except with respect to defaults in the payment of principal, interest and
fees required to be paid to the Agent for the account of the Lenders, unless the Agent shall have received written notice from a Lender or the Borrower referring to this Credit Agreement, describing
such Default or Event of Default and stating that such notice is a "notice of default." The Agent will notify the Lenders of its receipt of any such notice. The Agent shall take such action with
respect to such Default or Event of Default as may be directed by the Required Lenders in accordance with Section 9; provided, however, that
unless and until the Agent has received any such direction, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable or in the best interest of the Lenders. 


        10.6    Credit Decision; Disclosure of Information by Agent.    


        Each
Lender acknowledges that no Agent-Related Person has made any representation or warranty to it, and that no act by the Agent hereinafter taken, including any consent to and
acceptance of any assignment or review of the affairs of any Credit Party or any Affiliate thereof, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any
Lender as to any matter, including whether Agent-Related Persons have disclosed material information in their possession. Each Lender represents to the Agent that it has, independently and without
reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of the Credit Parties and their respective Subsidiaries, and all applicable bank or other regulatory laws relating to the transactions
contemplated hereby, and made its own decision to enter into this Credit Agreement and to extend credit to the Borrower and the other Credit Parties hereunder. Each Lender also represents that it
will, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Credit Agreement and the other Credit Documents, and to make such investigations as it deems necessary to inform itself as to the
business, prospects, operations, property, financial and other condition and creditworthiness of the Borrower and the other Credit Parties. Except for notices, reports and other documents expressly
required to be furnished to the Lenders by the Agent herein, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or creditworthiness of any of the Credit Parties or any of their respective Affiliates which may come into the possession of any
Agent-Related Person. 


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        10.7    Indemnification of Agent.    


        Whether
or not the transactions contemplated hereby are consummated, the Lenders shall indemnify upon demand each Agent-Related Person (to the extent not reimbursed by or on behalf of
any Credit Party and without limiting the obligation of any Credit Party to do so), pro rata, and hold harmless each Agent-Related Person from and against any and all Indemnified Liabilities incurred
by it; provided, however, that no Lender shall be liable for the payment to any Agent-Related Person of any portion of such Indemnified Liabilities
resulting from such Person's gross negligence or willful misconduct; provided, however, that no action taken in accordance with the directions of the
Required Lenders shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section. Without limitation of the foregoing, each Lender shall reimburse the Agent upon
demand for its ratable share of any costs or out-of-pocket expenses (including reasonable fees and costs of counsel) incurred by the Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities
under, this Credit Agreement, any other Credit Document, or any document contemplated by or referred to herein, to the extent that the Agent is not reimbursed for such expenses by or on behalf of the
Borrower. The undertaking in this Section shall survive termination of the Commitments, the payment of all Obligations hereunder and the resignation or replacement of the Agent. 


        10.8    Agent in its Individual Capacity.    


        Bank
of America and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of
banking, trust, financial advisory, underwriting or other business with each of the Credit Parties and their respective Affiliates as though Bank of America were not the Agent or the Issuing Lender
hereunder and without notice to or consent of the Lenders. The Lenders acknowledge that, pursuant to such activities, Bank of America or its Affiliates may receive information regarding any Credit
Party or its Affiliates (including information that may be subject to confidentiality obligations in favor of such Credit Party or such Affiliate) and acknowledge that the Agent shall be under no
obligation to provide such information to them. With respect to its Loans, Bank of America shall have the same rights and powers under this Credit Agreement as any other Lender and may exercise such
rights and powers as though it were not the Agent or the Issuing Lender, and the terms "Lender" and "Lenders" include Bank of America in its individual capacity. 



        10.9    Successor Agent.    


        The
Agent may resign as Agent upon 30 days' notice to the Lenders. If the Agent resigns under this Credit Agreement, the Required Lenders shall appoint from among the Lenders a
successor Agent for the Lenders which successor Agent shall be consented to by the Borrower at all times other than during the existence of an Event of Default (which consent of the Borrower shall not
be unreasonably withheld or delayed). If no successor Agent is appointed prior to the effective date of the resignation of the Agent, the Agent may appoint, after consulting with the Lenders and the
Borrower, a successor Agent from among the Lenders. Upon the acceptance of its appointment as successor Agent hereunder, such successor Agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor Agent and the retiring Agent's appointment, powers and duties as Agent shall be terminated. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Section 10 and Sections 11.4 and 11.10 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this
Credit Agreement. If no successor Agent has accepted appointment as Agent by the date which is 30 days following a retiring Agent's notice of resignation, the retiring Agent's resignation shall
nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided
for above. 


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        10.10    Other Agents; Lead Managers.    


        None
of the Lenders identified on the facing page or signature pages of this Credit Agreement as a "syndication agent," "documentation agent," "co-agent" or "lead manager"
shall have any right, power, obligation, liability, responsibility or duty under this Credit Agreement other than those applicable to all Lenders as such. Without limiting the foregoing, none of the
Lenders so identified shall have or be
deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders so identified in deciding to enter into this Credit
Agreement or in taking or not taking action hereunder. 


 
 

SECTION 11
  
    MISCELLANEOUS    
  


        11.1    Notices.    


        Except
as otherwise expressly provided herein, all notices and other communications shall have been duly given and shall be effective (a) when delivered, (b) when
transmitted via telecopy (or other facsimile device) to the number set out below followed by a confirmation of receipt, (c) the Business Day following the day on which the same has been
delivered prepaid to a reputable national overnight air courier service, or (d) the third Business Day following the day on which the same is sent by certified or registered mail, postage
prepaid, in each case to the respective parties at the address or telecopy numbers set forth on Schedule 11.1, or at such other address as such
party may specify by written notice to the other parties hereto. 


        11.2    Right of Set-Off.    


        In
addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence of an Event of Default and the
commencement of remedies described in Section 9.2, each Lender is authorized at any time and from time to time, without presentment, demand, protest or other notice of any kind (all of which
rights being hereby expressly waived), to set-off and to appropriate and apply any and all deposits (general or special) and any other Indebtedness at any time held or owing by such Lender
(including, without limitation branches, agencies or Affiliates of such Lender wherever located) to or for the credit or the account of any Credit Party against obligations and liabilities of such
Credit Party to the Lenders hereunder, under the Notes, the other Credit Documents or otherwise, irrespective of whether the Agent or the Lenders shall have made any demand hereunder and although such
obligations, liabilities or claims, or any of them, may be contingent or unmatured, and any such set-off shall be deemed to have been made immediately upon the occurrence of an Event of
Default even though such charge is made or entered on the books of such Lender subsequent thereto. The Credit Parties hereby agree that any Person purchasing a participation in the Loans and
Commitments hereunder pursuant to Section 11.3(d) or 3.9 may exercise all rights of set-off with respect to its participation interest as fully as if such Person were a Lender
hereunder. 


        11.3    Benefit of Agreement.    



        (a)    Generally.    The provisions of this Credit Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns permitted hereby, except that none of the Credit Parties may assign or otherwise transfer any of its rights or obligations hereunder without
the prior written consent of each Lender and no Lender may assign or otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in accordance with the
provisions of Section 11.3(b), (ii) by way of participation in accordance with the provisions of Section 11.3(d) or (iii) by way of pledge or assignment of a security
interest subject to the restrictions of Section 11.3(f) (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Credit Agreement, expressed
or implied, 



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shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in Section 11.3(d)
and, to the extent expressly contemplated hereby, the Related Parties of each of the Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Credit Agreement. 


        (b)    Assignments.    Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its
rights and obligations under this Credit Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that
(i) except in the case of an assignment of the entire remaining amount of the assigning Lender's Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender or
an Affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount of the Commitment (which for this purpose includes Loans outstanding thereunder) or, if the applicable
Commitment is not then in effect, the principal outstanding balance of the Loan of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with
respect to such assignment is delivered to the Agent or, if "Trade Date" is specified in the Assignment and Assumption, as of the Trade Date) shall not be less than $5,000,000, in the case of any
assignment in respect of a revolving facility, or $1,000,000, in the case of any assignment in respect of a term facility, unless each of the Agent and, so long as no Default or Event of Default has
occurred and is continuing, the Borrower otherwise consent (each such consent not to be unreasonably withheld or delayed); (ii) each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender's rights and obligations under this Credit Agreement with respect to the Loan or the Commitment assigned, except that this clause (ii) shall not
prohibit any Lender from assigning all or a portion of its rights and obligations among separate tranches on a non-pro rata basis; (iii) any assignment of a Revolving Commitment
must be approved by the Agent and the Issuing Lender unless the Person that is the proposed assignee is itself a Lender with a Revolving Commitment (whether or not the proposed assignee would
otherwise qualify as an Eligible Assignee); and (iv) the parties to each assignment shall execute and deliver to the Agent an Assignment and Assumption, together with a processing and
recordation fee of $3,500, and the Eligible Assignee, if it shall not be a Lender, shall deliver to the Agent an Administrative Questionnaire. Subject to acceptance and recording thereof by the Agent
pursuant to Section 11.3(c), from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Credit Agreement and, to
the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Credit Agreement, and the assigning Lender thereunder shall, to the extent
of the interest assigned by such Assignment and Assumption, be released from its obligations under this Credit Agreement (and, in the case of an Assignment and Assumption covering all of the assigning
Lender's rights and obligations under this Credit Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Sections 3.12, 3.13, 3.14, 3.15 and 11.5
with respect to facts and circumstances occurring
prior to the effective date of such assignment. Any assignment or transfer by a Lender of rights or obligations under this Credit Agreement that does not comply with this Section 11.3(b) shall
be treated for purposes of this Credit Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 11.3(d). 


        (c)    Register.    The Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at one of
its offices in the United States a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and
principal amounts of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall
be conclusive, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this 



67





 





Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior
notice. 


        (d)    Participations.    Any Lender may at any time, without the consent of, or notice to, the Borrower or the Agent,
sell participations to any Person (other than a natural person or the Borrower or any of the Borrower's Affiliates or Subsidiaries) (each, a
"Participant") in all or a portion of such Lender's rights and/or obligations under this Credit Agreement (including all or a portion of its Commitment
and/or the Loans owing to it); provided that (i) such Lender's obligations under this Credit Agreement shall remain unchanged, (ii) such
Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrower, the Agent and the other Lenders shall continue to deal solely
and directly with such Lender in connection with such Lender's rights and obligations under this Credit Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation
shall provide that such Lender shall retain the sole right to enforce this Credit Agreement and to approve any amendment, modification or waiver of any provision of this Credit Agreement;  provided that
such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment,
modification or waiver that decreases the amount of principal of or the rate at which interest is payable on such Loans, extends any scheduled principal payment date or date fixed for the payment of
interest on such Loans, extends its Commitment, releases all or substantially all of the Collateral or releases the Borrower or all or substantially all of the Guarantors from its or their respective
obligations under the Credit Documents. Subject to Section 11.3(e), the Borrower agrees that each Participant shall be entitled to the benefits of Sections 3.12 through 3.15, inclusive, to the
same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 11.3(b). To the extent permitted by law, each Participant also shall be entitled to the
benefits of Section 11.2 as though it were a Lender, provided such Participant agrees to be subject to Section 3.9 as though it were a Lender. 



        (e)    Additional Limitation on Participants' Rights.    A Participant shall not be entitled to receive any greater
payment under Sections 3.12 through 3.15, inclusive, than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the
participation to such Participant is made with the Borrower's prior written consent. A Participant that is not a "United States person" within the meaning of Section 7701(a)(30) of the Code
shall not be entitled to the benefits of Section 3.14 unless the Borrower is notified of the participation sold to such
Participant and such Participant agrees, for the benefit of the Borrower, to comply with Section 3.14(b) as though it were a Lender. 



        (f)    Unrestricted Assignments.    Any Lender may at any time pledge or assign a security interest in all or any
portion of its rights under this Credit Agreement to secure obligations of such Lender, including without limitation any pledge or assignment to secure obligations to a Federal Reserve Bank;  provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee
for such Lender as a party hereto. 


        (g)  Notwithstanding
anything to the contrary contained herein, if at any time Bank of America assigns all of its Commitment and Loans pursuant to Section 11.3(b)
above, Bank of America may, upon 30 days' notice to the Borrower and the Lenders, resign as Issuing Lender. In the event of any such resignation as Issuing Lender, the Borrower shall be
entitled to appoint from among the Lenders a successor Issuing Lender hereunder; provided, however, that no failure by the Borrower to appoint any such
successor shall affect the resignation of Bank of America as Issuing Lender. Bank of America shall retain all the rights and obligations of the Issuing Lender hereunder with respect to all Letters of
Credit outstanding as of the effective date of its resignation as Issuing Lender and all LOC Obligations with respect thereto (including the right to 



68





 





require the Lenders to make Base Rate Loans or fund participations in Letters of Credit pursuant to Section 2.2(d)). 




        11.4    No Waiver; Remedies Cumulative.    


        No
failure or delay on the part of the Agent or any Lender in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between the
Borrower or any Credit Party and the Agent or any Lender shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other
Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies provided herein are cumulative
and not exclusive of any rights or remedies which the Agent or any Lender would otherwise have. No notice to or demand on any Credit Party in any case shall entitle any Credit Party to any other or
further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Agent or the Lenders to any other or further action in any circumstances without notice or
demand. 


        11.5    Payment of Expenses; Indemnification.    


        The
Credit Parties agree to: (a) pay all reasonable out-of-pocket costs and expenses of (i) the Agent in connection with the negotiation,
preparation, execution and delivery and administration of this Credit Agreement and the other Credit Documents and the documents and instruments referred to therein
(including, without limitation, the reasonable fees and expenses of Moore & Van Allen, special counsel to the Agent and the fees and expenses of counsel for the Agent in connection with
collateral or foreign issues), and any amendment, waiver or consent relating hereto and thereto including, but not limited to, any such amendments, waivers or consents resulting from or related to any
work-out, renegotiation or restructure relating to the performance by the Credit Parties under this Credit Agreement and (ii) the Agent and the Lenders in connection with
enforcement of the Credit Documents and the documents and instruments referred to therein (including, without limitation, in connection with any such enforcement, the reasonable fees and disbursements
of counsel for the Agent and each of the Lenders) and (b) whether or not the transactions contemplated hereby are consummated, indemnify, save and hold harmless each Agent-Related Person, each
Lender and their respective Affiliates, directors, officers, employees, counsel, agents and attorneys-in-fact (collectively the
"Indemnitees") from and against: (i) any and all claims, demands, actions or causes of action that are asserted against any Indemnitee by any
Person (other than the Agent or any Lender) relating directly or indirectly to a claim, demand, action or cause of action that such Person asserts or may assert against any Credit Party, any Affiliate
of any Credit Party or any of their respective officers or directors; (ii) any and all claims, demands, actions or causes of action that may at any time (including at any time following
repayment of the Credit Party Obligations and the resignation or removal of the Agent or the replacement of any Lender) be asserted or imposed against any Indemnitee, arising out of or relating to,
the Credit Documents, any predecessor Credit Documents, the Commitments, the use or contemplated use of the proceeds of any Extension of Credit, or the relationship of any Credit Party, the Agent and
the Lenders under this Credit Agreement or any other Credit Document; (iii) any administrative or investigative proceeding by any Governmental Authority arising out of or related to a claim,
demand, action or cause of action described in clauses (b)(i) or (b)(ii) above; and (iv) any and all liabilities (including liabilities under indemnities), losses, costs or
expenses (including reasonable fees and costs of counsel) that any Indemnitee suffers or incurs as a result of the assertion of any foregoing claim, demand, action, cause of action or proceeding, or
as a result of the preparation of any defense in connection with any foregoing claim, demand, action, cause of action or proceeding, in all cases, whether or not arising out of the negligence of an
Indemnitee, and whether or not an Indemnitee is a party to such claim, demand, action, cause of action or proceeding (all the foregoing, collectively, the "Indemnified
Liabilities"); provided that no Indemnitee shall be entitled to indemnification for any claim caused by its own gross negligence
or willful misconduct or for any loss asserted against it by another Indemnitee. 


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           11.6    Amendments, Waivers and Consents.    


        Neither
this Credit Agreement, nor any other Credit Document, nor any of the terms hereof or thereof may be amended, changed, waived, discharged or terminated unless such amendment,
change, waiver, discharge or termination is in writing and signed by the Required Lenders and the Credit Parties; provided that no such amendment,
change, waiver, discharge or termination shall 



        (a)  without
the consent of each Lender affected thereby: 



          (i)  extend
the date of any Principal Amortization Payment or extend the final maturity of any Loan or of any reimbursement obligation, or any portion thereof, arising from
drawings under Letters of Credit, 


        (ii)  reduce
the rate or extend the time of payment of interest (other than as a result of waiving the applicability of any post-default increase in interest
rates) thereon or fees hereunder, 


        (iii)  reduce
or waive the principal amount of any Loan or of any reimbursement obligation, or any portion thereof, arising from drawings under Letters of Credit, 


        (iv)  increase
the Commitment of a Lender over the amount thereof in effect (it being understood and agreed that a waiver of any Default or Event of Default or mandatory
reduction in the Commitments shall not constitute a change in the terms of any Commitment of any Lender), 



        (v)  release
all or substantially all of the Collateral securing the Credit Party Obligations hereunder (provided that the Agent may, without consent from any other Lender,
release any Collateral that is sold or transferred by a Credit Party in conformance with Section 8.5), 


        (vi)  release
the Borrower or substantially all of the other Credit Parties from its obligations under the Credit Documents, 


      (vii)  amend,
modify or waive any provision of this Section or Section 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 3.15, 9.1(a), 9.1(f), 11.2 or 11.5, 


      (viii)  reduce
any percentage specified in, or otherwise modify, the definition of Required Lenders, or 


        (ix)  consent
to the assignment or transfer by the Borrower (or another Credit Party) of any of its rights and obligations under (or in respect of) the Credit Documents
except as permitted thereby. 




        (b)  Without
the consent of the Agent, no provision of Section 10 may be amended. 


        (c)  Without
the consent of the Issuing Lender, no provision of Section 2.2 may be amended. 


        (d)  Notwithstanding
the above, the right to deliver a Payment Blockage Notice (as defined in the Indenture) shall reside solely with the Agent, and the Agent shall deliver
such Payment Blockage Notice only upon the direction of the Required Lenders. 


        (e)  Notwithstanding
the fact that the consent of all the Lenders is required in certain circumstances as set forth above, (x) each Lender is entitled to vote as such
Lender sees fit on any bankruptcy reorganization plan that affects the Loans and each Lender acknowledges that the provisions of Section 1126(c) of the Bankruptcy Code supersedes the unanimous
consent provisions set forth herein and (y) the Required Lenders may consent to allow a Credit Party to use cash collateral in the context of a bankruptcy or insolvency proceeding. 



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        11.7    Counterparts.    



        This
Credit Agreement may be executed in any number of counterparts, each of which where so executed and delivered shall be an original, but all of which shall constitute one and the
same instrument. It shall not be necessary in making proof of this Credit Agreement to produce or account for more than one such counterpart. 


        11.8    Headings.    


        The
headings of the sections and subsections hereof are provided for convenience only and shall not in any way affect the meaning or construction of any provision of this Credit
Agreement. 


        11.9    Defaulting Lender.    


        Each
Lender understands and agrees that if such Lender is a Defaulting Lender then it shall not be entitled to vote on any matter requiring the consent of the Required Lenders or to
object to any matter requiring the consent of all the Lenders; provided, however, that all other benefits and obligations under the Credit Documents shall apply to such Defaulting Lender. 


        11.10    Survival of Indemnification and Representations and Warranties.    



        All
indemnities set forth herein and all representations and warranties made herein shall survive the execution and delivery of this Credit Agreement, the making of the Loans, the
issuance of the Letters of Credit, the repayment of the Loans, LOC Obligations and other obligations and the termination of the Commitments hereunder. 


        11.11    Governing Law; Venue.    



        (a)  THIS
CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TENNESSEE. Any legal action or proceeding with respect to this Credit Agreement or any other Credit Document may be brought in the courts of the
State of North Carolina or the State of Tennessee or of the United States for the Western District of North Carolina or the Eastern District of Tennessee and, by execution and delivery of this Credit
Agreement, each Credit Party hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of such courts. Each Credit Party further irrevocably
consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to it at
the address for notices pursuant to Section 11.1, such service to become effective 30 days after such mailing. Nothing herein shall affect the right of a Lender to serve process in any
other manner permitted by law or to commence legal proceedings or to otherwise proceed against a Credit Party in any other jurisdiction. 


        (b)  Each
Credit Party hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings
arising out of or in connection with this Credit Agreement or any other Credit Document brought in the courts referred to in subsection
(a) hereof and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an
inconvenient forum. 




        11.12    Waiver of Jury Trial.    


        EACH
PARTY TO THIS CREDIT AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER ANY CREDIT DOCUMENT OR IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF 


71





 




THEM WITH RESPECT TO ANY CREDIT DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH
PARTY 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 ANY PARTY TO THIS CREDIT AGREEMENT MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. 



        11.13    Time.    


        All
references to time herein shall be references to Eastern Standard Time or Eastern Daylight Time, as the case may be, unless specified otherwise. 


        11.14    Severability.    


        If
any provision of any of the Credit Documents is determined to be illegal, invalid or unenforceable, such provision shall be fully severable and the remaining provisions shall remain
in full force and effect and shall be construed without giving effect to the illegal, invalid or unenforceable provisions. 


        11.15    Entirety.    


        This
Credit Agreement together with the other Credit Documents represent the entire agreement of the parties hereto and thereto, and supersede all prior agreements and understandings,
oral or written,
if any, including any commitment letters or correspondence relating to the Credit Documents or the transactions contemplated herein and therein. 



        11.16    Binding Effect; Further Assurances.    


        This
Credit Agreement shall become effective at such time when all of the conditions set forth in Section 5.1 have been satisfied or waived by the Lenders and it shall have been
executed by the Borrower, the Guarantors and the Agent, and the Agent shall have received copies hereof (telefaxed or otherwise) which, when taken together, bear the signatures of each Lender, and
thereafter this Credit Agreement shall be binding upon and inure to the benefit of the Borrower, the Guarantors, the Agent and each Lender and their respective successors and assigns. The Borrower
further agrees, upon the request of the Agent and/or the Required Lenders, to promptly take such actions, as reasonably requested, as are appropriate to carry out the intent of this Credit Agreement
and the other Credit Documents, including, but not limited to, such actions as are reasonably necessary to ensure that the Agent, for the benefit of the Lenders, has a perfected security interest in
all Collateral securing the Credit Party Obligations, subject to no Liens other than Permitted Liens. 


        11.17    Designated Senior Indebtedness.    



        The
Borrower hereby designates this Credit Agreement and the Credit Party Obligations evidenced hereby as "Designated Senior Indebtedness" (as defined in the Indenture) for all purposes
of the Indenture. 


[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK] 


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        Each
of the parties hereto has caused a counterpart of this Credit Agreement to be duly executed and delivered as of the date first above written. 



	BORROWER:	 	 	 
	 	CHATTEM, INC.,

a Tennessee corporation
	

 	

By:	
 	

 
	 	 	 	

	

 	

Name:	
 	

 
	 	 	 	

	

 	

Title:	
 	

 
	 	 	 	

	
GUARANTORS:	

SIGNAL INVESTMENT & MANAGEMENT CO.,

a Delaware corporation
	

 	

By:	
 	

 
	 	 	 	

	

 	

Name:	
 	

 
	 	 	 	

	

 	

Title:	
 	

 
	 	 	 	

	

 	
SUNDEX, INC.,

a Tennessee corporation
	

 	

By:	
 	

 
	 	 	 	

	

 	

Name:	
 	

 
	 	 	 	

	

 	

Title:	
 	

 
	 	 	 	




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AGENT:	

 	
 	

 
	 	BANK OF AMERICA, N.A.,

in its capacity as Agent
	

 	

By:	
 	

 
	 	 	 	

	

 	

Name:	
 	

Susan J. Ryan
	 	 	 	

	

 	

Title:	
 	

Vice President
	 	 	 	

	
LENDERS:	

BANK OF AMERICA, N.A.,

in its capacity as a Lender
	

 	

By:	
 	

 
	 	 	 	

	

 	

Name:	
 	

 
	 	 	 	

	

 	

Title:	
 	

 
	 	 	 	

	

 	
FLEET NATIONAL BANK, N.A.
	

 	

By:	
 	

 
	 	 	 	

	

 	

Name:	
 	

 
	 	 	 	

	

 	

Title:	
 	

 
	 	 	 	

	

 	
SUNTRUST BANK
	

 	

By:	
 	

 
	 	 	 	

	

 	

Name:	
 	

 
	 	 	 	

	

 	

Title:	
 	

 
	 	 	 	





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QuickLinks



Exhibit 10.1


TABLE OF CONTENTS


CREDIT AGREEMENT

SECTION 1 DEFINITIONS AND ACCOUNTING TERMS


SECTION 2 CREDIT FACILITIES


SECTION 3 GENERAL PROVISIONS APPLICABLE TO LOANS


SECTION 4 GUARANTY

SECTION 5 CONDITIONS PRECEDENT

SECTION 6 REPRESENTATIONS AND WARRANTIES


SECTION 7 AFFIRMATIVE COVENANTS


SECTION 8 NEGATIVE COVENANTS

SECTION 9 EVENTS OF DEFAULT


SECTION 10 AGENCY PROVISIONS

SECTION 11 MISCELLANEOUS