Exhibit 10.1


 


 




EXECUTION COPY





 


CREDIT AGREEMENT


 


 


by and
among


 


 


MAGNETEK,
INC.


 


 


and


 


 


EACH OF
ITS SUBSIDIARIES THAT ARE SIGNATORIES HERETO

as Borrowers,


 


 


THE
LENDERS THAT ARE SIGNATORIES HERETO

as the Lenders,


 


 


and


 


 


WELLS
FARGO FOOTHILL, INC.

as the Arranger and Administrative Agent


 


 


Dated as
of September 30, 2005




 





 





















 


TABLE OF CONTENTS


 


	
  1.

  	
  DEFINITIONS
  AND CONSTRUCTION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
  Definitions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.2

  	
  Accounting Terms

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.3

  	
  Code

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.4

  	
  Construction

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.5

  	
  Schedules and Exhibits

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  LOAN AND
  TERMS OF PAYMENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Revolver Advances

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.2

  	
  [Reserved]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.3

  	
  Borrowing Procedures and
  Settlements

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.4

  	
  Payments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.5

  	
  Overadvances

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.6

  	
  Interest Rates and Letter of
  Credit Fee: Rates, Payments, and Calculations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.7

  	
  Cash Management

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.8

  	
  Crediting Payments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.9

  	
  Designated Account

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.10

  	
  Maintenance of Loan Account;
  Statements of Obligations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.11

  	
  Fees

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.12

  	
  Letters of Credit

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.13

  	
  LIBOR Option

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.14

  	
  Capital Requirements

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.15

  	
  Joint and Several Liability
  of Borrowers

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  CONDITIONS;
  TERM OF AGREEMENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Conditions Precedent to the
  Initial Extension of Credit

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.2

  	
  Conditions Precedent to all
  Extensions of Credit

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.3

  	
  Term

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.4

  	
  Effect of Termination

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.5

  	
  Early Termination by Borrowers

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  No Encumbrances; Properties

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.2

  	
  Eligible Accounts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.3

  	
  Eligible Inventory

  	
   

  



 


i





















 


	
   

  	
  4.4

  	
  Equipment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.5

  	
  Location of Inventory and
  Equipment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.6

  	
  Inventory Records

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.7

  	
  State of Incorporation;
  Location of Chief Executive Office; Organizational Identification Number and
  FEIN; Commercial Tort Claims; Legal and Trade Name; Places of Business

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.8

  	
  Due Organization and
  Qualification; Subsidiaries

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.9

  	
  Due Authorization; No
  Conflict; Governmental Approvals; Enforceability

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.10

  	
  Litigation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.11

  	
  No Material Adverse Change;
  Financial Condition

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.12

  	
  Solvency; Fraudulent Transfer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.13

  	
  Employee Benefits

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.14

  	
  Environmental Condition

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.15

  	
  Intellectual Property

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.16

  	
  Leases

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.17

  	
  Deposit Accounts and
  Securities Accounts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.18

  	
  Complete Disclosure

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.19

  	
  Indebtedness

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.20

  	
  Material
  Contracts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.21

  	
  Second Lien
  Loan Documents

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.22

  	
  Compliance
  with Law, Etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.23

  	
  Taxes, Etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.24

  	
  Regulations
  T, U and X

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.25

  	
  Nature of
  Business

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.26

  	
  Adverse
  Agreements, Etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.27

  	
  Permits,
  Etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.28

  	
  Operating
  Lease Obligations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.29

  	
  Insurance

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.30

  	
  Holding
  Company and Investment Company Acts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.31

  	
  Employee
  and Labor Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.32

  	
  Customers
  and Suppliers

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.33

  	
  No
  Bankruptcy Filing

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.34

  	
  Separate Existence

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.35

  	
  Excluded
  Foreign Subsidiaries

  	
   

  



 


ii





















 


	
   

  	
  4.36

  	
  Representations
  and Warranties in Documents; No Default

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  AFFIRMATIVE
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Accounting
  System

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.2

  	
  Collateral
  Reporting

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.3

  	
  Financial
  Statements, Reports, Certificates

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.4

  	
  Guarantor
  Reports

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.5

  	
  Inspection

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.6

  	
  Maintenance
  of Properties

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.7

  	
  [Reserved]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.8

  	
  Insurance

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.9

  	
  Location of
  Inventory and Equipment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.10

  	
  Compliance
  with Laws, Etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.11

  	
  Leases

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.12

  	
  Existence

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.13

  	
  Environmental

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.14

  	
  Disclosure
  Updates

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.15

  	
  Control
  Agreements

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.16

  	
  Formation
  of Subsidiaries

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.17

  	
  ERISA Compliance

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.18

  	
  Second Lien
  Loan Documents

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.19

  	
  Completion
  of Magnetek ADS Sale

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.20

  	
  Obtaining
  of Permits, Etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.21

  	
  Subordination

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.22

  	
  After
  Acquired Property

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.23

  	
  Further
  Assurances

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.24

  	
  Post-Closing
  Requirements

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  NEGATIVE
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Indebtedness

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.2

  	
  Liens

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.3

  	
  Restrictions
  on Fundamental Changes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.4

  	
  Disposal of
  Assets

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.5

  	
  [Reserved.]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.6

  	
  Nature of
  Business

  	
   

  



 


iii





















 


	
   

  	
  6.7

  	
  Payments and
  Amendments, etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.8

  	
  Change of
  Control

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.9

  	
  Consignments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.10

  	
  Distributions;
  Restricted Payments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.11

  	
  Accounting
  Methods

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.12

  	
  Investments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.13

  	
  Transactions
  with Affiliates

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.14

  	
  Use of
  Proceeds

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.15

  	
  Inventory
  and Equipment with Bailees

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.16

  	
  Financial Covenants

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.17

  	
  ERISA

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.18

  	
  Lease
  Obligations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.19

  	
  Federal
  Reserve Regulations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.20

  	
  Limitations
  on Dividends and Other Payment Restrictions Affecting Subsidiaries

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.21

  	
  Limitation
  on Issuance of Capital Stock

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.22

  	
  Investment
  Company Act of 1940

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.23

  	
  Environmental

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.24

  	
  Excluded
  Foreign Subsidiaries

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  EVENTS
  OF DEFAULT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  THE LENDER
  GROUP’S RIGHTS AND REMEDIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  Rights and
  Remedies

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.2

  	
  Remedies
  Cumulative

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  TAXES
  AND EXPENSES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  WAIVERS;
  INDEMNIFICATION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
  Demand;
  Protest; etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.2

  	
  The Lender
  Group’s Liability for Collateral

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.3

  	
  Indemnification

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.4

  	
  Waiver of
  Consequential Damages, Etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  NOTICES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  CHOICE OF
  LAW AND VENUE; JURY TRIAL WAIVER

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  ASSIGNMENTS
  AND PARTICIPATIONS; SUCCESSORS

  	
   

  



 


iv





















 


	
   

  	
  13.1

  	
  Assignments
  and Participations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.2

  	
  Successors

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
  AMENDMENTS;
  WAIVERS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  14.1

  	
  Amendments
  and Waivers

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  14.2

  	
  Replacement
  of Holdout Lender

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  14.3

  	
  No Waivers;
  Cumulative Remedies

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
  AGENT; THE LENDER
  GROUP

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.1

  	
  Appointment
  and Authorization of Agent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.2

  	
  Delegation
  of Duties

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.3

  	
  Liability
  of Agent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.4

  	
  Reliance by
  Agent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.5

  	
  Notice of
  Default or Event of Default

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.6

  	
  Credit
  Decision

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.7

  	
  Costs and
  Expenses; Indemnification

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.8

  	
  Agent in
  Individual Capacity

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.9

  	
  Successor
  Agent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.10

  	
  Lender in
  Individual Capacity

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.11

  	
  Withholding Taxes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.12

  	
  Collateral Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.13

  	
  Restrictions
  on Actions by Lenders; Sharing of Payments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.14

  	
  Agency for
  Perfection

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.15

  	
  Payments by
  Agent to the Lenders

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.16

  	
  Concerning
  the Collateral and Related Loan Documents

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.17

  	
  Field
  Audits and Examination Reports; Confidentiality; Disclaimers by Lenders;
  Other Reports and Information

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.18

  	
  Several
  Obligations; No Liability

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.19

  	
  Bank
  Product Providers

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
  GENERAL
  PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.1

  	
  Effectiveness

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.2

  	
  Section
  Headings

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.3

  	
  Interpretation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.4

  	
  Severability
  of Provisions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.5

  	
  Counterparts;
  Electronic Execution

  	
   

  



 


v





















 


	
   

  	
  16.6

  	
  Revival and
  Reinstatement of Obligations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.7

  	
  Confidentiality

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.8

  	
  Integration

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.9

  	
  Parent as
  Agent for Borrowers

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.10

  	
  Public
  Disclosure

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.11

  	
  Borrowings
  Upon Partial Release of Availability Block

  	
   

  



 


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CREDIT AGREEMENT


 


THIS CREDIT AGREEMENT (this “Agreement”),
is entered into as of September 30, 2005, by and among the lenders identified
on the signature pages hereof (such lenders, together with their respective
successors and permitted assigns, are referred to hereinafter each individually
as a “Lender” and collectively as the “Lenders”), and WELLS FARGO FOOTHILL, INC., a California corporation, as the
arranger and administrative agent for the Lenders (in such capacity, together
with its successors and assigns in such capacity, “Agent”), and MAGNETEK, INC., a Delaware corporation (“Parent”),
and each of Parent’s Subsidiaries identified on the signature pages hereof
(such Subsidiaries, together with Parent, are referred to hereinafter each
individually as a “Borrower,” and individually and collectively, jointly
and severally, as the “Borrowers”).


 


The parties agree as follows:


 


1.                                      DEFINITIONS AND CONSTRUCTION.


 


1.1                                 Definitions. 
Capitalized terms used in this Agreement shall have the meanings
specified therefor on Schedule 1.1.


 


1.2                                 Accounting Terms.  All
accounting terms not specifically defined herein shall be construed in
accordance with GAAP.  When used herein,
the term “financial statements” shall include the notes and schedules thereto,
if any.  Whenever the term “Borrowers” or
the term “Parent” is used in respect of a financial covenant or a related
definition, it shall be understood to mean Parent and its Subsidiaries on a
consolidated basis unless the context clearly requires otherwise.


 


1.3                                 Code.  Any
terms used in this Agreement that are defined in the Code shall be construed
and defined as set forth in the Code unless otherwise defined herein, provided,
however, that to the extent that the Code is used to define any term herein and
such term is defined differently in different Articles of the Code, the
definition of such term contained in Article 9 shall govern; and
when used to define a category or categories of collateral owned or hereafter
acquired by any Borrower or Guarantor which may be subject to the provisions of
the PPSA, then such term shall include the equivalent category or categories of
collateral under the PPSA.


 


1.4                                 Construction.  Unless the context of this Agreement or any
other Loan Document clearly requires otherwise, references to the plural
include the singular, references to the singular include the plural, the terms “includes”
and “including” are not limiting, and the term “or” has, except where otherwise
indicated, the inclusive meaning represented by the phrase “and/or.”  The words “hereof,” “herein,” “hereby,” “hereunder,”
and similar terms in this Agreement or any other Loan Document refer to this
Agreement or such other Loan Document, as the case may be, as a whole and not
to any particular provision of this Agreement or such other Loan Document, as
the case may be.  Section, subsection,
clause, schedule, and exhibit references herein are to this Agreement unless
otherwise specified.  Any reference in
this Agreement or in the other Loan Documents to any agreement, instrument, or
document shall include all alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and
supplements, thereto and thereof, as applicable (subject to any restrictions on
such alterations, amendments, changes, extensions, modifications, renewals, replacements,
substitutions, joinders, and supplements set forth herein).  Any reference herein to the satisfaction or
repayment in full of the Obligations shall mean the repayment in full in cash
(or cash collateralization in accordance with the terms hereof) of all
Obligations other than contingent indemnification Obligations and other than
any Bank Product Obligations that, at such time, are allowed by the applicable
Bank Product Provider to remain outstanding and are not required to be repaid
or cash collateralized pursuant to the provisions of this Agreement.  Any reference herein to any Person shall be
construed to include such Person’s successors and assigns.  Any requirement of a writing contained herein
or in the other Loan Documents shall be satisfied by the transmission of a
Record and any Record transmitted shall constitute a representation and warranty as to the accuracy and completeness of the
information contained therein. 
References to statutes or regulations are to be construed as including
all statutory and regulatory provisions consolidating, amending, supplementing,
interpreting, or replacing the statute or regulation referred to.


 


1





















 


1.5                                 Schedules and Exhibits.  All
of the schedules and exhibits attached to this Agreement shall be deemed
incorporated herein by reference.


 


2.                                      LOAN AND TERMS OF PAYMENT.


 


2.1                                 Revolver Advances.


 


(a)                                  Subject to the terms and conditions of this
Agreement, and during the term of this Agreement, each Lender with a Commitment
agrees (severally, not jointly or jointly and severally) to make advances (“Advances”)
to Borrowers in an amount at any one time outstanding not to exceed such Lender’s
Pro Rata Share of an amount equal to the least of: (i) the Maximum
Revolver Amount less the sum of (A) the Letter of
Credit Usage plus (B) the Availability Block, (ii) the Borrowing Base less the sum of (A) the Letter of Credit Usage plus (B) the
Availability Block, or (iii) the Total Debt Limiter less
the sum of (A) the Letter of Credit Usage, plus (B) the Availability Block plus
(C) the outstanding principal balance of the Second Lien Indebtedness.


 


(b)                                 Anything to the contrary in this Section 2.1
notwithstanding, Agent shall have the right to establish reserves in such
amounts, and with respect to such matters, as Agent in its Permitted Discretion
shall deem necessary or appropriate, against the Borrowing Base, including
reserves (i) with respect to (A) sums that Borrowers are required to
pay by any Section of this Agreement or any other Loan Document (such as taxes,
assessments, insurance premiums, or, in the case of leased assets, rents or
other amounts payable under such leases) and has failed to pay, and
(B) amounts owing by Borrowers or their respective Subsidiaries to any Person
to the extent secured by a Lien on, or trust over, any of the Collateral (other
than a Permitted Lien), which Lien or trust, in the Permitted Discretion of
Agent likely would have a priority superior to the Agent’s Liens (such as Liens
or trusts in favor of landlords, warehousemen, carriers, mechanics,
materialmen, laborers, or suppliers, or Liens or trusts for ad valorem, excise,
sales, or other taxes where given priority under Applicable Law) in and to such
item of the Collateral, and (ii) after the occurrence and during the
continuance of an Event of Default, with respect to such other matters as Agent
in its Permitted Discretion shall deem necessary or appropriate.


 


(c)                                  Amounts borrowed pursuant to this Section 2.1
may be repaid and, subject to the terms and conditions of this Agreement,
reborrowed at any time during the term of this Agreement.


 


2.2                                 [Reserved].


 


2.3                                 Borrowing Procedures and
Settlements.


 


(a)                                  Procedure for Borrowing.  Each Borrowing shall be made by
an irrevocable written request by an Authorized Person delivered to Agent.  If Swing Lender is obligated to make a Swing
Loan pursuant to Section 2.3(b) below, such notice must be received
by Agent no later than 10:00 a.m. (California time) on the Business Day
that is the requested Funding Date specifying (i) the amount of such
Borrowing, and (ii) the requested Funding Date, which shall be a Business
Day; provided, however, that if Swing Lender is not obligated to make a Swing
Loan as to a requested Borrowing, such notice must be received by Agent no
later than 10:00 a.m. (California time) on the Business Day prior to the
date that is the requested Funding Date. 
At Agent’s election, in lieu of delivering the above-described written
request, any Authorized Person may give Agent telephonic notice of such request
by the required time.  In such
circumstances, Borrowers agree that any such telephonic notice will be
confirmed in writing within 24 hours of the giving of such telephonic notice,
but the failure to provide such written confirmation shall not affect the
validity of the request.


 


2





















 


(b)                                 Making of Swing Loans.  In the case of a request for an Advance and
so long as either (i) the aggregate amount of Swing Loans made since the
last Settlement Date plus the amount
of the requested Advance does not exceed $2,000,000, or (ii) Swing Lender,
in its sole discretion, shall agree to make a Swing Loan notwithstanding the
foregoing limitation, Swing Lender, as a Lender, shall make an Advance in the
amount of such Borrowing (any such Advance made solely by Swing Lender as a
Lender pursuant to this Section 2.3(b) being referred to as a “Swing
Loan” and such Advances being referred to collectively as “Swing Loans”)
available to Administrative Borrower on the Funding Date applicable thereto by
transferring immediately available funds to Administrative Borrower’s
Designated Account.  Each Swing Loan
shall be deemed to be an Advance hereunder and shall be subject to all the
terms and conditions applicable to other Advances, except that all payments on
any Swing Loan shall be payable to Swing Lender as a Lender solely for its own
account.  Subject to the provisions of Section 2.3(d)(ii),
Swing Lender as a Lender shall not make and shall not be obligated to make any
Swing Loan if Swing Lender has actual knowledge that (i) one or more of
the applicable conditions precedent set forth in Section 3 will not
be satisfied on the requested Funding Date for the applicable Borrowing, or
(ii) the requested Borrowing would exceed the Availability on such Funding
Date.  Swing Lender as a Lender shall not
otherwise be required to determine whether the applicable conditions precedent
set forth in Section 3 have been satisfied on the Funding Date
applicable thereto prior to making any Swing Loan.  The Swing Loans shall be secured by the Agent’s
Liens, constitute Obligations hereunder, and bear interest at the rate
applicable from time to time to Advances that are Base Rate Loans.


 


(c)                                  Making of Loans.


 


(i)                                     In the
event that Swing Lender is not obligated to make a Swing Loan, then promptly
after receipt of a request for a Borrowing pursuant to Section 2.3(a),
Agent shall notify the Lenders, not later than 1:00 p.m. (California time)
on the Business Day immediately preceding the Funding Date applicable thereto,
by telecopy, telephone, or other similar form of transmission, of the requested
Borrowing.  Each Lender shall make the
amount of such Lender’s Pro Rata Share of the requested Borrowing available to
Agent in immediately available funds, to Agent’s Account, not later than
10:00 a.m. (California time) on the Funding Date applicable thereto.  After Agent’s receipt of the proceeds of such
Advances, Agent shall make the proceeds thereof available to Administrative
Borrower on the applicable Funding Date by transferring immediately available
funds equal to such proceeds received by Agent to Administrative Borrower’s
Designated Account; provided, however, that, subject to the provisions of Section 2.3(d)(ii),
Agent shall not request any Lender to make, and no Lender shall have the
obligation to make, any Advance if Agent shall have actual knowledge that
(1) one or more of the applicable conditions precedent set forth in Section 3 will not be satisfied on the requested
Funding Date for the applicable Borrowing unless such condition has been
waived, or (2) the requested Borrowing would exceed the Availability on
such Funding Date.


 


(ii)                                  Unless Agent receives notice from a
Lender prior to 9:00 a.m. (California time) on the date of a Borrowing, that
such Lender will not make available as and when required hereunder to Agent for
the account of Borrowers the amount of that Lender’s Pro Rata Share of the
Borrowing, Agent may assume that each Lender has made or will make such amount
available to Agent in immediately available funds on the Funding Date and Agent
may (but shall not be so required), in reliance upon such assumption, make
available to Borrowers on such date a corresponding amount.  If and to the extent any Lender shall not
have made its full amount available to Agent in immediately available funds and
Agent in such circumstances has made available to Borrowers such amount, that
Lender shall on the Business Day following such Funding Date make such amount
available to Agent, together with interest at the Defaulting Lender Rate for
each day during such period.  A notice
submitted by Agent to any Lender with respect to amounts owing under this
subsection shall be conclusive, absent manifest error.  If such amount is so made available, such
payment to Agent shall constitute such Lender’s Advance on the date of
Borrowing for all purposes of this Agreement. 
If


 


3





















 


such amount is not made available to Agent on the
Business Day following the Funding Date, Agent will notify Administrative
Borrower of such failure to fund and, upon demand by Agent, Borrowers shall pay
such amount to Agent for Agent’s account, together with interest thereon for
each day elapsed since the date of such Borrowing, at a rate per annum equal to
the interest rate applicable at the time to the Advances composing such
Borrowing.  The failure of any Lender to
make any Advance on any Funding Date shall not relieve any other Lender of any
obligation hereunder to make an Advance on such Funding Date, but no Lender
shall be responsible for the failure of any other Lender to make the Advance to
be made by such other Lender on any Funding Date.


 


(iii)                               Agent shall not be obligated to transfer to a
Defaulting Lender any payments made by Borrowers to Agent for the Defaulting
Lender’s benefit, and, in the absence of such transfer to the Defaulting
Lender, Agent shall transfer any such payments to each other non-Defaulting
Lender member of the Lender Group ratably in accordance with their Commitments
(but only to the extent that such Defaulting Lender’s Advance was funded by the
other members of the Lender Group) or, if so directed by Administrative
Borrower and if no Default or Event of Default had occurred and is continuing
(and to the extent such Defaulting Lender’s Advance was not funded by the
Lender Group), retain same to be re-advanced to Borrowers as if such Defaulting
Lender had made Advances to Borrowers. 
Subject to the foregoing, Agent may hold and, in its Permitted
Discretion, re-lend to Borrowers for the account of such Defaulting Lender the
amount of all such payments received and retained by Agent for the account of
such Defaulting Lender.  Solely for the
purposes of voting or consenting to matters with respect to the Loan Documents,
such Defaulting Lender shall be deemed not to be a “Lender” and such Lender’s
Commitment shall be deemed to be zero. 
This Section shall remain effective with respect to such Lender until
(x) the Obligations under this Agreement shall have been declared or shall
have become immediately due and payable, (y) the non-Defaulting Lenders,
Agent, and Administrative Borrower shall have waived such Defaulting Lender’s
default in writing, or (z) the Defaulting Lender makes its Pro Rata Share
of the applicable Advance and pays to Agent all amounts owing by Defaulting
Lender in respect thereof.  The operation
of this Section shall not be construed to increase or otherwise affect the
Commitment of any Lender, to relieve or excuse the performance by such
Defaulting Lender or any other Lender of its duties and obligations hereunder,
or to relieve or excuse the performance by Borrowers of their duties and
obligations hereunder to Agent or to the Lenders other than such Defaulting
Lender.  Any such failure to fund by any
Defaulting Lender shall constitute a material breach by such Defaulting Lender
of this Agreement and shall entitle Administrative Borrower at its option, upon
written notice to Agent, to arrange for a substitute Lender to assume the
Commitment of such Defaulting Lender, such substitute Lender to be acceptable
to Agent.  In connection with the
arrangement of such a substitute Lender, the Defaulting Lender shall have no
right to refuse to be replaced hereunder, and agrees to execute and deliver a
completed form of Assignment and Acceptance in favor of the substitute Lender
(and agrees that it shall be deemed to have executed and delivered such
document if it fails to do so) subject only to being repaid its share of the
outstanding Obligations (other than Bank Product Obligations, but including an
assumption of its Pro Rata Share of the Risk Participation Liability) without
any premium or penalty of any kind whatsoever; provided however, that any such
assumption of the Commitment of such Defaulting Lender shall not be deemed to
constitute a waiver of any of the Lender Groups’ or Borrowers’ rights or
remedies against any such Defaulting Lender arising out of or in relation to
such failure to fund.


 


(d)                                 Protective Advances and Optional Overadvances.


 


(i)                                     Agent
hereby is authorized by Borrowers and the Lenders, from time to time in Agent’s
sole discretion, (A) after the occurrence and during the continuance of a
Default or an Event of Default, or (B) at any time that any of the other
applicable conditions precedent set forth in Section 3 are
not satisfied, to make Advances to Borrowers on behalf of the Lenders that
Agent, in its Permitted Discretion as it deems necessary or desirable
(1) to preserve or protect the Collateral, or any portion thereof,
(2) to enhance the likelihood of repayment of the Obligations (other than
the Bank Product Obligations), or (3) to pay any other amount chargeable
to Borrowers pursuant to the terms of this Agreement, including Lender Group
Expenses and the costs, fees, and expenses described in Section 9 (any
of the Advances described in this Section 2.3(d)(i) shall
be referred to as “Protective Advances”).


 


4





















 


(ii)                                  Any contrary provision of this Agreement
notwithstanding, the Lenders hereby authorize Agent or Swing Lender, as
applicable, and either Agent or Swing Lender, as applicable, may, but is not
obligated to, knowingly and intentionally, continue to make Advances (including
Swing Loans) to Borrowers notwithstanding that an Overadvance exists or thereby
would be created, so long as (A) after giving effect to such Advances, the
outstanding Revolver Usage does not exceed the Borrowing Base by more than
$2,000,000, and (B) after giving effect to such Advances, the outstanding
Revolver Usage (except for and excluding amounts charged to the Loan Account
for interest, fees, or Lender Group Expenses) does not exceed the Maximum
Revolver Amount.  In the event Agent
obtains actual knowledge that the Revolver Usage exceeds the amounts permitted
by the immediately foregoing provisions, regardless of the amount of, or reason
for, such excess, Agent shall notify the Lenders as soon as practicable (and
prior to making any (or any additional) intentional Overadvances (except for
and excluding amounts charged to the Loan Account for interest, fees, or Lender
Group Expenses) unless Agent determines that prior notice would result in
imminent harm to the Collateral or its value), and the Lenders with Commitments
thereupon shall, together with Agent, jointly determine the terms of
arrangements that shall be implemented with Borrowers intended to reduce,
within a reasonable time, the outstanding principal amount of the Advances to
Borrowers to an amount permitted by the preceding paragraph.  In such circumstances, if any Lender with a
Commitment disagrees over the proposed terms of reduction or repayment of any
Overadvance, the terms of reduction or repayment thereof shall be implemented
according to the determination of the Required Lenders.  Each Lender with a Commitment shall be
obligated to settle with Agent as provided in Section 2.3(e) for
the amount of such Lender’s Pro Rata Share of any unintentional Overadvances by
Agent reported to such Lender, any intentional Overadvances made as permitted
under this Section 2.3(d)(ii), and any Overadvances resulting from
the charging to the Loan Account of interest, fees, or Lender Group Expenses.


 


(iii)                               Each Protective Advance and
each Overadvance shall be deemed to be an Advance hereunder, except that no
Protective Advance or Overadvance shall be eligible to be a LIBOR Rate Loan and
all payments on the Protective Advances shall be payable to Agent solely for
its own account.  The Protective Advances
and Overadvances shall be repayable on demand, secured by the Agent’s Liens,
constitute Obligations hereunder, and bear interest at the rate applicable from
time to time to Advances that are Base Rate Loans.  The provisions of this Section 2.3(d) are for the exclusive benefit of Agent,
Swing Lender, and the Lenders and are not intended to benefit any Borrower in
any way.


 


(e)                                  Settlement.  It is
agreed that each Lender’s funded portion of the Advances is intended by the
Lenders to equal, at all times, such Lender’s Pro Rata Share of the outstanding
Advances.  Such agreement notwithstanding,
Agent, Swing Lender, and the other Lenders agree (which agreement shall not be
for the benefit of any Borrower) that in order to facilitate the administration
of this Agreement and the other Loan Documents, settlement among the Lenders as
to the Advances, the Swing Loans, and the Protective Advances shall take place
on a periodic basis in accordance with the following provisions:


 


(i)                                     Agent
shall request settlement (“Settlement”)
with the Lenders on a weekly basis, or on a more frequent basis if so
determined by Agent, (1) on behalf of Swing Lender, with respect to each
outstanding Swing Loan, (2) for itself, with respect to the outstanding
Protective Advances, and (3) with respect to Borrowers’ or their
respective Subsidiaries’ Collections received, as to each by notifying the
Lenders by telecopy, telephone, or other similar form of transmission, of such
requested Settlement, no later than 2:00 p.m. (California time) on the
Business Day immediately prior to the date of such requested Settlement (the
date of such requested Settlement being the “Settlement Date”).  Such notice of a Settlement Date shall
include a summary statement of the amount of outstanding Advances, Swing Loans,
and Protective Advances for the period since the prior Settlement Date.  Subject to the terms and conditions contained
herein (including Section 2.3(c)(iii)):  (y) if a Lender’s balance of the
Advances (including Swing Loans and


 


5





















 


Protective
Advances) exceeds such Lender’s Pro Rata Share of the Advances (including Swing
Loans and Protective Advances) as of a Settlement Date, then Agent shall, by no
later than 12:00 p.m. (California time) on the Settlement Date, transfer
in immediately available funds to a Deposit Account of such Lender (as such
Lender may designate), an amount such that each such Lender shall, upon receipt
of such amount, have as of the Settlement Date, its Pro Rata Share of the
Advances (including Swing Loans and Protective Advances), and (z) if a Lender’s
balance of the Advances (including Swing Loans and Protective Advances) is less than such Lender’s Pro Rata Share of the
Advances (including Swing Loans and Protective Advances) as of a Settlement
Date, such Lender shall no later than 12:00 p.m. (California time) on the
Settlement Date transfer in immediately available funds to the Agent’s Account,
an amount such that each such Lender shall, upon transfer of such amount, have
as of the Settlement Date, its Pro Rata Share of the Advances (including Swing
Loans and Protective Advances).  Such
amounts made available to Agent under clause (z) of the immediately
preceding sentence shall be applied against the amounts of the applicable Swing
Loans or Protective Advances and, together with the portion of such Swing Loans
or Protective Advances representing Swing Lender’s Pro Rata Share thereof,
shall constitute Advances of such Lenders. 
If any such amount is not made available to Agent by any Lender on the
Settlement Date applicable thereto to the extent required by the terms hereof,
Agent shall be entitled to recover for its account such amount on demand from
such Lender together with interest thereon at the Defaulting Lender Rate.


 


(ii)                                  In determining whether a Lender’s balance
of the Advances, Swing Loans, and Protective Advances is less
than, equal to, or greater than such Lender’s Pro Rata Share of the Advances,
Swing Loans, and Protective Advances as of a Settlement Date, Agent shall, as
part of the relevant Settlement, apply to such balance the portion of payments
actually received in good funds by Agent with respect to principal, interest,
fees payable by Borrowers and allocable to the Lenders hereunder, and proceeds
of Collateral.  To the extent that a net
amount is owed to any such Lender after such application, such net amount shall
be distributed by Agent to that Lender as part of such next Settlement.


 


(iii)                               Between
Settlement Dates, Agent, to the extent no Protective Advances or Swing Loans
are outstanding, may pay over to Swing Lender any payments received by Agent,
that in accordance with the terms of this Agreement would be applied to the
reduction of the Advances, for application to Swing Lender’s Pro Rata Share of
the Advances.  If, as of any Settlement
Date, Collections of Borrowers or their respective Subsidiaries received since
the then immediately preceding Settlement Date have been applied to Swing
Lender’s Pro Rata Share of the Advances other than to Swing Loans, as provided
for in the previous sentence, Swing Lender shall pay to Agent for the accounts
of the Lenders, and Agent shall pay to the Lenders, to be applied to the
outstanding Advances of such Lenders, an amount such that each Lender shall,
upon receipt of such amount, have, as of such Settlement Date, its Pro Rata
Share of the Advances.  During the period
between Settlement Dates, Swing Lender with respect to Swing Loans, Agent with
respect to Protective Advances, and each Lender (subject to the effect of
agreements between Agent and individual Lenders) with respect to the Advances
other than Swing Loans and Protective Advances, shall be entitled to interest
at the applicable rate or rates payable under this Agreement on the daily
amount of funds employed by Swing Lender, Agent, or the Lenders, as applicable.


 


(f)                                    Notation.  Agent
shall record on its books the principal amount of the Advances owing to each
Lender, including the Swing Loans owing to Swing Lender, and Protective
Advances owing to Agent, and the interests therein of each Lender, from time to
time and such records shall, absent manifest error, conclusively be presumed to
be correct and accurate.


 


(g)                                 Lenders’ Failure to Perform.  All Advances (other than Swing Loans and
Protective Advances) shall be made by the Lenders contemporaneously and in
accordance with their Pro Rata Shares. 
It is understood that (i) no Lender shall be responsible for any
failure by any other Lender to perform its obligation to make any Advance (or
other extension of credit) hereunder, nor shall any Commitment of any Lender be
increased or decreased as a result of any failure by any other Lender to
perform its obligations hereunder, and (ii) no failure by any Lender to
perform its obligations hereunder shall excuse any other Lender from its
obligations hereunder.


 


6





















 


2.4                                 Payments.


 


(a)                                  Payments by Borrowers.


 


(i)                                     Except as otherwise expressly provided
herein, all payments by Borrowers shall be made to Agent’s Account for the
account of the Lender Group and shall be made in immediately available funds,
no later than 11:00 a.m. (California time) on the date specified
herein.  Any payment received by Agent
later than 11:00 a.m. (California time), shall be deemed to have been
received on the following Business Day and any applicable interest or fee shall
continue to accrue until such following Business Day.


 


(ii)                                  Unless Agent receives notice from
Administrative Borrower prior to the date on which any payment is due to the
Lenders that Borrowers will not make such payment in full as and when required,
Agent may assume that Borrowers have made (or will make) such payment in full
to Agent on such date in immediately available funds and Agent may (but shall
not be so required), in reliance upon such assumption, distribute to each
Lender on such due date an amount equal to the amount then due such
Lender.  If and to the extent Borrowers
do not make such payment in full to Agent on the date when due, each Lender
severally shall repay to Agent on demand such amount distributed to such Lender,
together with interest thereon at the Defaulting Lender Rate for each day from
the date such amount is distributed to such Lender until the date repaid.


 


(b)                                 Apportionment and Application.


 


(i)                                     Except as otherwise provided with respect
to Defaulting Lenders and except as otherwise provided in the Loan Documents
(including agreements between Agent and individual Lenders), aggregate
principal and interest payments shall be apportioned ratably among the Lenders
(according to the unpaid principal balance of the Obligations to which such
payments relate held by each Lender) and payments of fees and expenses (other
than fees or expenses that are for Agent’s separate account, after giving
effect to any agreements between Agent and individual Lenders) shall be
apportioned ratably among the Lenders having a Pro Rata Share of the type of
Commitment or Obligation to which a particular fee relates.  All payments shall be remitted to Agent and
all such payments, and all proceeds of Collateral received by Agent, shall be
applied as follows:


 


(1)                                  first, ratably to pay any Lender Group Expenses then due to Agent or any of
the Lenders under the Loan Documents, until paid in full,


 


(2)                                  second, ratably to pay any fees or premiums then due to Agent (for its
separate account, after giving effect to any agreements between Agent and
individual Lenders) or any of the Lenders under the Loan Documents until paid
in full,


 


(3)                                  third, to pay interest due in respect of all Protective Advances until paid
in full,


 


(4)                                  fourth, to pay the principal of all Protective Advances until paid in full,


 


(5)                                  fifth, ratably to pay interest due in respect of the Advances (other than
Protective Advances) and the Swing Loans until paid in full,


 


(6)                                  sixth, to pay the principal of all Swing Loans until paid in full,


 


7





















 


(7)                                  seventh, so long as no Event of Default has occurred and is continuing, and at
Agent’s election (which election Agent agrees will not be made if an
Overadvance would be created thereby), to pay any Bank Product Obligations then
due and owing, until paid in full,


 


(8)                                  eighth, so long as no Event of Default has occurred and is continuing, to pay
the principal of all Advances until paid in full,


 


(9)                                  ninth, if an Event of Default has occurred and is continuing, ratably
(i) to pay the principal of all Advances until paid in full, (ii) to
Agent, to be held by Agent, for the ratable benefit of Issuing Lender and those
Lenders having a Commitment, as cash collateral in an amount up to 105% of the
Letter of Credit Usage until paid in full, and (iii) to Agent, to be held
by Agent, for the benefit of the Bank Product Providers, as cash collateral in
an amount up to the amount of the Bank Product Reserve established prior to the
occurrence of, and not in contemplation of, the subject Event of Default until
the Bank Product Obligations have been paid in full or the cash collateral
amount therefor has been exhausted,


 


(10)                            tenth, if an Event
of Default has occurred and is continuing, to pay any other Obligations
(including the provision of amounts to Agent, to be held by Agent, for the
benefit of the Bank Product Providers, as cash collateral in an amount up to
the amount determined by Agent in its Permitted Discretion as the amount
necessary to secure the Bank Product Obligations), and


 


(11)                            eleventh, to
Borrowers (to be wired to the Designated Account) or such other Person entitled
thereto under Applicable Law.


 


(ii)                                  Agent
promptly shall distribute to each Lender, pursuant to the applicable wire
instructions received from each Lender in writing, such funds as it may be
entitled to receive, subject to a Settlement delay as provided in Section 2.3(e).


 


(iii)                               Except with respect to proceeds of the Magnetek ADS
Sale or any Disposition described in Section 2.4(c), in each instance,
so long as no Event of Default has occurred and is continuing, this Section 2.4(b)
shall not apply to any payment made by Borrowers to Agent and specified by
Borrowers to be for the payment of specific Obligations then due and payable
(or prepayable) under any provision of this Agreement.


 


(iv)                              For purposes of
the foregoing, “paid in full” means payment of all amounts owing under the Loan
Documents according to the terms thereof, including loan fees, service fees,
professional fees, interest (and specifically including interest accrued after
the commencement of any Insolvency Proceeding), default interest, interest on
interest, and expense reimbursements, whether or not any of the foregoing would
be or is allowed or disallowed in whole or in part in any Insolvency Proceeding.


 


(v)                                 In the event of a direct conflict between
the priority provisions of this Section 2.4 and other provisions
contained in any other Loan Document, it is the intention of the parties hereto
that such priority provisions in such documents shall be read together and
construed, to the fullest extent possible, to be in concert with each
other.  In the event of any actual,
irreconcilable conflict that cannot be resolved as aforesaid, the terms and
provisions of this Section 2.4 shall control and govern.


 


(vi)                              In the event, pursuant to the provisions
of Section 6.7(g), Borrowers repay the Obligations as set forth in this Section 2.4(b)
after the incurrence and during the continuance of an Event of Default (A)
instead of making a scheduled principal payment with respect to the Second Lien
Indebtedness or (B) out of proceeds of a Second Lien Prepayment Event, then the
Maximum Revolver Amount, the aggregate Commitments and the Total Debt Limiter
shall be permanently reduced and a permanent reserve against the Borrowing Base
shall be established and maintained by Agent, in each case in an amount equal
to the amount of such repayment of the Obligations.


 


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(c)                                  Mandatory Prepayments.


 


(i)                                     Upon a
Disposition by any Borrower or Mondel of any Accounts or Inventory (but not all
or substantially all of the assets (x) of such Person or (y) that are used with
respect to one or more business lines maintained by any Borrower or Mondel) not
made in the ordinary course of such Borrower’s or Mondel’s business, Borrowers
shall prepay the Senior Debt (in accordance with the application procedures set
forth in Section
2.4(c)(vi)) in an amount equal to (A) in the case of a
Disposition solely of Accounts or Inventory, 100% of the Net Cash Proceeds
received by such Person in connection therewith, or (B) in the case of a
Disposition of assets including Accounts or Inventory as well as other assets,
100% of the net book value of such Accounts or Inventory that are the subject
of such Disposition.  The provisions of
this Section
2.4(c)(i) shall
not be deemed to be implied consent to any Disposition otherwise prohibited by
the terms and conditions of this Agreement.


 


(ii)                                  Upon a Disposition by any Borrower, any
Guarantor or any of their respective Subsidiaries of (x) all or substantially
all of the Stock in Mondel or any Borrower that owns Accounts or Inventory, or
(y) all or substantially all of the assets of Mondel or any Borrower that owns
Accounts or Inventory (or one or more business lines maintained by any Borrower
or Mondel that includes Accounts or Inventory), Borrowers shall prepay the
Senior Debt (in accordance with the application procedures set forth in Section
2.4(c)(vi)) in an amount equal to 100% of the net book value of such Accounts
or Inventory that are the subject of such Disposition.  The provisions of this Section 2.4(c)(i)
shall not be deemed to be implied consent to any Disposition otherwise
prohibited by the terms and conditions of this Agreement.


 


(iii)                               Upon the receipt by any Borrower, any Guarantor or any
of their respective Subsidiaries of any Extraordinary Receipts, Borrowers shall
prepay the Senior Debt (in accordance with the application procedures set forth
in Section 2.4(c)(vi)) in an amount equal to 100% of the Net Cash
Proceeds arising from such Extraordinary Receipts.


 


(iv)                              If, for any reason, the aggregate
outstanding principal balance of the Advances, Letter of Credit Usage and
Second Lien Indebtedness, when measured as of the end of any month, exceeds the
Total Debt Limiter, Borrowers shall immediately prepay the Senior Debt (in
accordance with the application procedures set forth in Section 2.4(c)(vi))
by remitting to Agent, in cash, the amount of such excess.


 


(v)                                 The foregoing to the contrary
notwithstanding, Borrowers shall not be required to make a prepayment otherwise
required pursuant to Sections 2.4(c)(i) or (iii) with
Reinvestment Eligible Funds so long as: (A) no Default or Event of Default has
occurred and is continuing on the date such Person receives such Reinvestment
Eligible Funds and on the date such amounts are to be released to a Borrower
pursuant to this Section 2.4(c)(v), (B) the Administrative Borrower
delivers a notice (a “Reinvestment Notice”) on or prior to the date that
the applicable Borrower receives the monies constituting such Reinvestment
Eligible Funds notifying the Agent of the intent of the applicable Person to
use such Reinvestment Eligible Funds (1) to repair, restore, or replace the
assets that were the subject of the Disposition, casualty or condemnation
giving rise to such amounts with assets of equal or greater fair market value
which will be useful in the conduct of their business in accordance with past
practice, (2) within the period specified in such notice, which period shall
not to exceed the earlier of (x) 180 days after the receipt of such
Reinvestment Eligible Funds by the applicable Borrower and (y) the Maturity
Date, and (C) pending the reinvestment described in clause (B)(1) above, such
Reinvestment Eligible Amounts are deposited in a cash


 


9





















 


collateral account over which is subject to a Control
Agreement.  If all or any portion of such
Reinvestment Eligible Funds are not used in accordance with the preceding
sentence within the period specified in the Reinvestment Notice, the remaining
portion shall be applied to the Obligations in accordance with Section 2.4(c)(vi)
on the last day of such specified period, to the extent that such Reinvestment
Eligible Funds were otherwise required to be used to prepay the Obligations
pursuant to this Section 2.4(c).


 


(vi)                              Any prepayments required to be made
pursuant to this Section 2.4(c) shall be (A) accompanied by all accrued
interest on the principal amount being prepaid to the date of prepayment and
(B) be applied to the Obligations then outstanding (other than Bank Product
Obligations in excess of the Bank Product Reserve) as set forth in Section 2.4(b)
until paid in full and thereafter be used to prepay the Second Lien Indebtedness
subject to the terms of the Second Lien Intercreditor Agreement and the
provisions of this Agreement.


 


2.5                                 Overadvances. 
Except as permitted by Section 2.3(d) with respect to optional
Overadvances, if, at any time or for any reason, the amount of Obligations owed
by Borrowers to the Lender Group pursuant to Section 2.1 or Section 2.12
is greater than any of the limitations set forth in Section 2.1 or Section 2.12,
as applicable (an “Overadvance”), Borrowers immediately shall pay to
Agent, in cash, the amount of such excess, which amount shall be used by Agent
to reduce the Obligations in accordance with the priorities set forth in Section 2.4(b).  In addition, Borrowers hereby promise to pay
the Obligations (including principal, interest, fees, costs, and expenses) in
Dollars in full as and when due and payable under the terms of this Agreement
and the other Loan Documents.


 


2.6                                 Interest Rates and Letter of
Credit Fee:  Rates, Payments, and
Calculations.


 


(a)                                  Interest Rates.  Except as provided in Section 2.6(c)
below, all Obligations (except for undrawn Letters of Credit and except for
Bank Product Obligations) that have been charged to the Loan Account pursuant
to the terms hereof shall bear interest on the Daily Balance thereof as follows
(i) if the relevant Obligation is an Advance that is a LIBOR Rate Loan, at
a per annum rate equal to the LIBOR Rate plus the LIBOR
Rate Margin and (ii) otherwise, at a per annum rate equal to the Base Rate
plus the Base Rate Margin.


 


(b)                                 Letter of Credit Fee.  Borrowers shall pay Agent (for the ratable
benefit of the Lenders with a Commitment, subject to any agreements between
Agent and individual Lenders), a Letter of Credit fee (in addition to the
charges, commissions, fees, and costs set forth in Section 2.12(e))
which shall accrue at a rate equal to 4.00% per annum times the Daily Balance
of the undrawn amount of all outstanding Letters of Credit.


 


(c)                                  Default Rate.  Upon the occurrence and during the
continuation of an Event of Default (and at the election of Agent or the
Required Lenders),


 


(i)                                     all Obligations (except for undrawn
Letters of Credit and except for Bank Product Obligations) that have been
charged to the Loan Account pursuant to the terms hereof shall bear interest on
the Daily Balance thereof at a per annum rate equal to 4 percentage points
above the per annum rate otherwise applicable hereunder, and


 


(ii)                                  the Letter of Credit fee provided for
above shall be increased to 4 percentage points above the per annum rate
otherwise applicable hereunder.


 


(d)                                 Payment.  Except as provided to the contrary in Section 2.11
or Section 2.13(a), interest, Letter of Credit fees, and all other
fees payable hereunder shall be due and payable, in arrears, on the first day
of each month at any time that Obligations or Commitments are outstanding.  Borrowers hereby


 


10





















 


authorize Agent, from time to time, without prior notice to Borrowers,
to charge all interest and fees (when due and payable), all Lender Group
Expenses (as and when incurred), all charges, commissions, fees, and costs
provided for in Section 2.12(e) (as and when accrued or incurred),
all fees and costs provided for in Section 2.11 (as and when
accrued or incurred), and all other payments as and when due and payable under
any Loan Document (including any amounts due and payable to the Bank Product
Providers in respect of Bank Products up to the amount of the Bank Product
Reserve) to Borrowers’ Loan Account, which amounts thereafter shall constitute
Advances hereunder and shall accrue interest at the rate then applicable to
Advances hereunder.  Any interest not
paid when due shall be compounded by being charged to Borrowers’ Loan Account
and shall thereafter constitute Advances hereunder and shall accrue interest at
the rate then applicable to Advances that are Base Rate Loans hereunder.


 


(e)                                  Computation.  All interest and fees chargeable under the
Loan Documents shall be computed on the basis of a 360 day year for the actual
number of days elapsed.  In the event the
Base Rate is changed from time to time hereafter, the rates of interest
hereunder based upon the Base Rate automatically and immediately shall be
increased or decreased by an amount equal to such change in the Base Rate.


 


(f)                                    Intent to Limit Charges to Maximum
Lawful Rate.  In no event shall the interest rate or rates
payable under this Agreement, plus any other
amounts paid in connection herewith, exceed the highest rate permissible under
any law that a court of competent jurisdiction shall, in a final determination,
deem applicable.  Borrowers and the
Lender Group, in executing and delivering this Agreement, intend legally to
agree upon the rate or rates of interest and manner of payment stated within
it; provided, however, that, anything contained herein to the contrary
notwithstanding, if said rate or rates of interest or manner of payment exceeds
the maximum allowable under Applicable Law, then, ipso facto, as of the date of
this Agreement, Borrowers are and shall be liable only for the payment of such maximum
as allowed by law, and payment received from Borrowers in excess of such legal
maximum, whenever received, shall be applied to reduce the principal balance of
the Obligations to the extent of such excess.


 


2.7                                 Cash Management.


 


(a)                                  Borrowers shall and shall cause each of their
respective Domestic Subsidiaries to (i) establish and maintain cash
management services of a type and on terms satisfactory to Agent at one or more
of the banks set forth on Schedule 2.7(a) (each a “Cash
Management Bank”), and shall request in writing and otherwise take such
reasonable steps to ensure that all of their and their respective Domestic
Subsidiaries’ Account Debtors forward payment of the amounts owed by them
directly to such Cash Management Bank, and (ii) deposit or cause to be
deposited promptly, and in any event no later than the first Business Day after
the date of receipt thereof, all of their Collections (including those sent
directly by their Account Debtors to Borrowers or their respective Domestic
Subsidiaries) into a bank account in Agent’s name (a “Cash Management
Account”) at one of the Cash Management Banks.


 


(b)                                 Each Cash Management Bank shall establish and
maintain Cash Management Agreements with Agent and Borrowers, in form and
substance acceptable to Agent.  Each such
Cash Management Agreement shall provide, among other things, that (i) the
Cash Management Bank will comply with any instructions originated by Agent (or,
after the date when the “Discharge of Priority First Lien Indebtedness” (as
such term is defined in the Intercreditor Agreement) has occurred, Second Lien
Loan Agent) directing the disposition of the funds in such Cash Management
Account without further consent by Borrowers or their respective Domestic
Subsidiaries, as applicable, (ii) the Cash Management Bank has no rights
of setoff or recoupment or any other claim against the applicable Cash
Management Account, other than for payment of its service fees and other
charges directly related to the administration of such Cash Management Account
and for returned checks or other items of payment, and (iii) it will
forward by daily sweep all amounts in the applicable Cash Management Account to
the Agent’s Account.


 


11





















 


(c)                                  So long as no Default or Event of Default has
occurred and is continuing, Administrative Borrower may amend Schedule 2.7(a)
to add or replace a Cash Management Bank or Cash Management Account; provided,
however, that (i) such prospective Cash Management Bank shall be
satisfactory to Agent, and (ii) prior to the time of the opening of such
Cash Management Account, a Borrower or its Domestic Subsidiary, as applicable,
and such prospective Cash Management Bank shall have executed and delivered to
Agent a Cash Management Agreement.  Borrowers
(or their respective Domestic Subsidiaries, as applicable) shall close any of
their Cash Management Accounts (and establish replacement cash management
accounts in accordance with the foregoing sentence) promptly and in any event
within 30 days of notice from Agent that the creditworthiness of any Cash
Management Bank is no longer acceptable in Agent’s reasonable judgment, or as
promptly as practicable and in any event within 60 days of notice from Agent
that the operating performance, funds transfer, or availability procedures or
performance of the Cash Management Bank with respect to Cash Management
Accounts or Agent’s liability under any Cash Management Agreement with such
Cash Management Bank is no longer acceptable in Agent’s reasonable judgment.


 


(d)                                 The Cash Management Accounts shall be cash
collateral accounts subject to Control Agreements.


 


2.8                                 Crediting Payments.  The
receipt of any payment item by Agent (whether from transfers to Agent by the
Cash Management Banks pursuant to the Cash Management Agreements or otherwise)
shall not be considered a payment on account unless such payment item is a wire
transfer of immediately available federal funds made to the Agent’s Account or
unless and until such payment item is honored when presented for payment.  Should any payment item not be honored when
presented for payment, then Borrowers shall be deemed not to have made such
payment and interest shall be calculated accordingly.  Anything to the contrary contained herein
notwithstanding, any payment item shall be deemed received by Agent only if it
is received into the Agent’s Account on a Business Day on or before
11:00 a.m. (California time).  If
any payment item is received into the Agent’s Account on a non-Business Day or
after 11:00 a.m. (California time) on a Business Day, it shall be deemed
to have been received by Agent as of the opening of business on the immediately
following Business Day.


 


2.9                                 Designated Account. 
Agent is authorized to make the Advances, and Issuing Lender is
authorized to issue the Letters of Credit, under this Agreement based upon
telephonic or other instructions received from anyone purporting to be an
Authorized Person or, without instructions, if pursuant to Section 2.6(d).  Administrative Borrower agrees to establish
and maintain the Designated Account with the Designated Account Bank for the
purpose of receiving the proceeds of the Advances requested by Borrowers and
made by Agent or the Lenders hereunder. 
Unless otherwise agreed by Agent and Administrative Borrower, any
Advance, Protective Advance, or Swing Loan requested by Borrowers and made by
Agent or the Lenders hereunder shall be made to the Designated Account.


 


2.10                           Maintenance of Loan Account;
Statements of Obligations.  Agent shall maintain an account on its books
in the name of Borrowers (the “Loan Account”) on which Borrowers will be
charged with all Advances (including Protective Advances and Swing Loans) made
by Agent, Swing Lender, or the Lenders to Borrowers or for Borrowers’ account,
the Letters of Credit issued by Issuing Lender for Borrowers’ account, and with
all other payment Obligations hereunder or under the other Loan Documents
(except for Bank Product Obligations), including, accrued interest, fees and
expenses, and Lender Group Expenses.  In
accordance with Section 2.8, the Loan Account will be credited with
all payments received by Agent from Borrowers or for Borrowers’ account,
including all amounts received in the Agent’s Account from any Cash Management
Bank.  Agent shall render statements
regarding the Loan Account to Administrative Borrower, including principal,
interest, fees, and including an itemization of all charges and expenses
constituting Lender Group Expenses owing, and such statements, absent manifest
error, shall be conclusively presumed to be correct and accurate and constitute
an account stated between Borrowers and the Lender Group unless, within 30 days
after receipt thereof by Administrative Borrower, Administrative Borrower shall
deliver to Agent written objection thereto describing the error or errors
contained in any such statements.


 


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2.11                           Fees. 
Borrowers shall pay to Agent, as and when due and payable under the
terms of the Fee Letter, the fees set forth in the Fee Letter.


 


2.12                           Letters of Credit.


 


(a)                                  Subject to the terms and conditions of this
Agreement, the Issuing Lender agrees to issue letters of credit for the account
of Borrowers (each, an “L/C”) or to purchase participations or execute
indemnities or reimbursement obligations (each such undertaking, an “L/C
Undertaking”) with respect to letters of credit issued by an Underlying
Issuer (as of the Closing Date, the prospective Underlying Issuer is to be
Wells Fargo) for the account of Borrowers. 
Each request for the issuance of a Letter of Credit or the amendment,
renewal, or extension of any outstanding Letter of Credit shall be made in
writing by an Authorized Person and delivered to the Issuing Lender and Agent
via hand delivery, telefacsimile, or other electronic method of transmission
reasonably in advance of the requested date of issuance, amendment, renewal, or
extension.  Each such request shall be in
form and substance satisfactory to the Issuing Lender in its Permitted Discretion
and shall specify (i) the amount of such Letter of Credit, (ii) the
date of issuance, amendment, renewal, or extension of such Letter of Credit,
(iii) the expiration date of such Letter of Credit, (iv) the name and
address of the beneficiary thereof (or the beneficiary of the Underlying Letter
of Credit, as applicable), and (v) such other information (including, in
the case of an amendment, renewal, or extension, identification of the
outstanding Letter of Credit to be so amended, renewed, or extended) as shall
be necessary to prepare, amend, renew, or extend such Letter of Credit.  If requested by the Issuing Lender, Borrowers
also shall be an applicant under the application with respect to any Underlying
Letter of Credit that is to be the subject of an L/C Undertaking.  The Issuing Lender shall have no obligation
to issue a Letter of Credit if any of the following would result after giving
effect to the issuance of such requested Letter of Credit:


 


(i)                                     the
Letter of Credit Usage would exceed the Borrowing Base less the sum of (A) the outstanding amount of
Advances plus (B) the Availability Block,


 


(ii)                                  the Letter of Credit Usage would exceed
$4,000,000,


 


(iii)                               the Letter of Credit Usage would exceed the Maximum
Revolver Amount less the sum of (A) the
outstanding amount of Advances plus (B) the Availability Block, or


 


(iv)                              the Letter of
Credit Usage would exceed the Total Debt Limiter less the sum of (A) the outstanding amount of
Advances plus (B) the Availability Block plus (C) the outstanding principal
balance of the Second Lien Indebtedness.


 


Borrowers and the Lender Group acknowledge
and agree that certain Underlying Letters of Credit may be issued to support
letters of credit that already are outstanding as of the Closing Date.  Each Letter of Credit (and corresponding
Underlying Letter of Credit) shall be in form and substance acceptable to the
Issuing Lender (in the exercise of its Permitted Discretion), including the
requirement that the amounts payable thereunder must be payable in
Dollars.  If Issuing Lender is obligated
to advance funds under a Letter of Credit, Borrowers immediately shall
reimburse such L/C Disbursement to Issuing Lender by paying to Agent an amount
equal to such L/C Disbursement not later than 11:00 a.m., California time,
on the date that such L/C Disbursement is made, if Administrative Borrower
shall have received written or telephonic notice of such L/C Disbursement prior
to 10:00 a.m., California time, on such date, or, if such notice has not
been received by Administrative Borrower prior to such time on such date, then
not later than 11:00 a.m., California time, on the Business Day that
Administrative Borrower receives such notice, if such notice is received prior
to 10:00 a.m., California time, on the date of receipt, and, in the
absence of such reimbursement, the L/C Disbursement


 


13





















 


immediately and automatically shall be deemed
to be an Advance hereunder and, thereafter, shall bear interest at the rate
then applicable to Advances that are Base Rate Loans under Section 2.6.  To the extent an L/C Disbursement is deemed
to be an Advance hereunder, Borrowers’ obligation to reimburse such L/C
Disbursement shall be discharged and replaced by the resulting Advance.  Promptly following receipt by Agent of any
payment from Borrowers pursuant to this paragraph, Agent shall distribute such
payment to the Issuing Lender or, to the extent that Lenders have made payments
pursuant to Section 2.12(c) to reimburse the Issuing Lender, then
to such Lenders and the Issuing Lender as their interests may appear.


 


(b)                                 Promptly following receipt of a notice of L/C
Disbursement pursuant to Section 2.12(a), each Lender with a
Commitment agrees to fund its Pro Rata Share of any Advance deemed made
pursuant to the foregoing subsection on the same terms and conditions as if
Borrowers had requested such Advance and Agent shall promptly pay to Issuing
Lender the amounts so received by it from the Lenders.  By the issuance of a Letter of Credit (or an
amendment to a Letter of Credit increasing the amount thereof) and without any
further action on the part of the Issuing Lender or the Lenders with
Commitments, the Issuing Lender shall be deemed to have granted to each Lender
with a Commitment, and each Lender with a Commitment shall be deemed to have
purchased, a participation in each Letter of Credit, in an amount equal to its
Pro Rata Share of the Risk Participation Liability of such Letter of Credit,
and each such Lender agrees to pay to Agent, for the account of the Issuing
Lender, such Lender’s Pro Rata Share of any payments made by the Issuing Lender
under such Letter of Credit.  In
consideration and in furtherance of the foregoing, each Lender with a
Commitment hereby absolutely and unconditionally agrees to pay to Agent, for
the account of the Issuing Lender, such Lender’s Pro Rata Share of each L/C
Disbursement made by the Issuing Lender and not reimbursed by Borrowers on the
date due as provided in clause (a) of this Section, or of any reimbursement
payment required to be refunded to Borrowers for any reason.  Each Lender with a Commitment acknowledges
and agrees that its obligation to deliver to Agent, for the account of the
Issuing Lender, an amount equal to its respective Pro Rata Share of each L/C
Disbursement made by the Issuing Lender pursuant to this Section 2.12(b)
shall be absolute and unconditional and such remittance shall be made
notwithstanding the occurrence or continuation of an Event of Default or
Default or the failure to satisfy any condition set forth in Section 3
hereof.  If any such Lender fails to make
available to Agent the amount of such Lender’s Pro Rata Share of each L/C
Disbursement made by the Issuing Lender in respect of such Letter of Credit as
provided in this Section, such Lender shall be deemed to be a Defaulting Lender
and Agent (for the account of the Issuing Lender) shall be entitled to recover
such amount on demand from such Lender together with interest thereon at the
Defaulting Lender Rate until paid in full.


 


(c)                                  Each Borrower hereby agrees to indemnify, save,
defend, and hold the Lender Group harmless from any loss, cost, expense, or
liability, and reasonable attorneys fees incurred by the Lender Group arising
out of or in connection with any Letter of Credit; provided, however, that no
Borrower shall be obligated hereunder to indemnify for any loss, cost, expense,
or liability to the extent that it is caused by the gross negligence or willful
misconduct of the Issuing Lender or any other member of the Lender Group.  Each Borrower agrees to be bound by the Underlying
Issuer’s regulations and interpretations of any Underlying Letter of Credit or
by Issuing Lender’s interpretations of any L/C issued by Issuing Lender to or
for such Borrower’s account, even though this interpretation may be different
from such Borrower’s own, and each Borrower understands and agrees that the
Lender Group shall not be liable for any error, negligence, or mistake, whether
of omission or commission, in following Borrowers’ instructions or those
contained in the Letter of Credit or any modifications, amendments, or
supplements thereto.  Each Borrower
understands that the L/C Undertakings may require Issuing Lender to indemnify
the Underlying Issuer for certain costs or liabilities arising out of claims by
Borrowers against such Underlying Issuer. 
Each Borrower hereby agrees to indemnify, save, defend, and hold the
Lender Group harmless with respect to any loss, cost, expense (including
reasonable attorneys fees), or liability incurred by the Lender Group under any
L/C Undertaking as a result of the Lender Group’s indemnification of any
Underlying Issuer; provided, however, that no Borrower shall be obligated
hereunder to indemnify for any loss, cost, expense, or liability to the extent
that it is caused by the gross negligence or willful misconduct of the Issuing
Lender or any other member of the Lender Group. 
Each Borrower hereby acknowledges and agrees that neither the Lender
Group nor the Issuing Lender shall be responsible for delays, errors, or
omissions resulting from the malfunction of equipment in connection with any
Letter of Credit.


 


14





















 


(d)                                 Each Borrower hereby authorizes and directs
any Underlying Issuer to deliver to the Issuing Lender all instruments,
documents, and other writings and property received by such Underlying Issuer
pursuant to such Underlying Letter of Credit and to accept and rely upon the
Issuing Lender’s instructions with respect to all matters arising in connection
with such Underlying Letter of Credit and the related application.


 


(e)                                  Any and all issuance charges, commissions,
fees, and costs incurred by the Issuing Lender relating to Underlying Letters
of Credit shall be Lender Group Expenses for purposes of this Agreement and
immediately shall be reimbursable by Borrowers to Agent for the account of the
Issuing Lender; it being acknowledged and agreed by each Borrower that, as of
the Closing Date, the issuance charge imposed by the prospective Underlying
Issuer is .825% per annum times the face amount of each Underlying Letter of
Credit, that such issuance charge may be changed from time to time, and that
the Underlying Issuer also imposes a schedule of charges for amendments,
extensions, drawings, and renewals.


 


(f)                                    If by reason of (i) any change after the
Closing Date in any Applicable Law, treaty, rule, or regulation or any change
in the interpretation or application thereof by any Governmental Authority, or
(ii) compliance by the Underlying Issuer or the Lender Group with any
direction, request, or requirement (irrespective of whether having the force of
law) of any Governmental Authority or monetary authority including, Regulation
D of the Federal Reserve Board as from time to time in effect (and any
successor thereto):


 


(i)                                     any reserve, deposit, or similar requirement
is or shall be imposed or modified in respect of any Letter of Credit issued
hereunder, or


 


(ii)                                  there shall be imposed on the Underlying
Issuer or the Lender Group any other condition regarding any Underlying Letter
of Credit or any Letter of Credit issued pursuant hereto;


 


and
the result of the foregoing is to increase, directly or indirectly, the cost to
the Lender Group of issuing, making, guaranteeing, or maintaining any Letter of
Credit or to reduce the amount receivable in respect thereof by the Lender
Group, then, and in any such case, Agent may, at any time within a reasonable
period after the additional cost is incurred or the amount received is reduced,
notify Administrative Borrower, and Borrowers shall pay on demand such amounts
as Agent may specify to be necessary to compensate the Lender Group for such
additional cost or reduced receipt, together with interest on such amount from
the date of such demand until payment in full thereof at the rate then
applicable to Base Rate Loans hereunder. 
The determination by Agent of any amount due pursuant to this Section,
as set forth in a certificate setting forth the calculation thereof in
reasonable detail, shall, in the absence of manifest or demonstrable error, be
final and conclusive and binding on all of the parties hereto.


 


2.13                           LIBOR Option.


 


(a)                                  Interest and Interest Payment Dates.  In lieu of having interest
charged at the rate based upon the Base Rate, Borrowers shall have the option
(the “LIBOR Option”) to have interest on all or a portion of the
Advances be charged at a rate of interest based upon the LIBOR Rate.  Interest on LIBOR Rate Loans shall be payable
on the earliest of (i) the last day of the Interest Period applicable
thereto, (ii) the occurrence of an Event of Default in consequence of
which the Required Lenders or Agent on behalf thereof have elected to
accelerate the maturity of all or any portion of the Obligations, or
(iii) termination of this Agreement pursuant to the terms hereof.  On the last day of each applicable Interest
Period, unless Administrative Borrower properly has exercised the LIBOR Option
with respect thereto, the interest rate


 


15





















 


applicable to such LIBOR Rate Loan automatically shall convert to the
rate of interest then applicable to Base Rate Loans of the same type
hereunder.  At any time that an Event of
Default has occurred and is continuing, Borrowers no longer shall have the
option to request that Advances bear interest at a rate based upon the LIBOR Rate
and Agent shall have the right to convert the interest rate on all outstanding
LIBOR Rate Loans to the rate then applicable to Base Rate Loans hereunder.


 


(b)                                 LIBOR Election.


 


(i)                                     Administrative
Borrower may, at any time and from time to time, so long as no Event of Default
has occurred and is continuing, elect to exercise the LIBOR Option by notifying
Agent prior to 11:00 a.m. (California time) at least 3 Business Days prior
to the commencement of the proposed Interest Period (the “LIBOR Deadline”). 
Notice of Administrative Borrower’s election of the LIBOR Option for a
permitted portion of the Advances and an Interest Period pursuant to this
Section shall be made by delivery to Agent of a LIBOR Notice received by Agent
before the LIBOR Deadline, or by telephonic notice received by Agent before the
LIBOR Deadline (to be confirmed by delivery to Agent of a LIBOR Notice received
by Agent prior to 5:00 p.m. (California time) on the same day).  Promptly upon its receipt of each such LIBOR
Notice, Agent shall provide a copy thereof to each of the Lenders having a
Commitment.


 


(ii)                                  Each LIBOR Notice shall be irrevocable
and binding on Borrowers.  In connection
with each LIBOR Rate Loan, each Borrower shall indemnify, defend, and hold
Agent and the Lenders harmless against any loss, cost, or expense incurred by
Agent or any Lender as a result of (A) the payment of any principal of any
LIBOR Rate Loan other than on the last day of an Interest Period applicable
thereto (including as a result of an Event of Default), (B) the conversion
of any LIBOR Rate Loan other than on the last day of the Interest Period
applicable thereto, or (C) the failure to borrow, convert, continue or
prepay any LIBOR Rate Loan on the date specified in any LIBOR Notice delivered
pursuant hereto (such losses, costs, and expenses, collectively, “Funding
Losses”).  Funding Losses shall, with
respect to Agent or any Lender, be deemed to equal the amount determined by
Agent or such Lender to be the excess, if any, of (x) the amount of
interest that would have accrued on the principal amount of such LIBOR Rate
Loan had such event not occurred, at the LIBOR Rate that would have been
applicable thereto, for the period from the date of such event to the last day
of the then current Interest Period therefor (or, in the case of a failure to
borrow, convert or continue, for the period that would have been the Interest
Period therefor), minus (y) the amount of
interest that would accrue on such principal amount for such period at the
interest rate which Agent or such Lender would be offered were it to be
offered, at the commencement of such period, Dollar deposits of a comparable
amount and period in the London interbank market.  A certificate of Agent or a Lender delivered
to Administrative Borrower setting forth any amount or amounts that Agent or
such Lender is entitled to receive pursuant to this Section 2.13
shall be conclusive absent manifest error.


 


(iii)                               Borrowers shall
have not more than 5 LIBOR Rate Loans in effect at any given time.  Borrowers only may exercise the LIBOR Option
for LIBOR Rate Loans of at least $1,000,000 and integral multiples of $500,000
in excess thereof.


 


(c)                                  Prepayments.  Borrowers may prepay LIBOR Rate Loans at any
time; provided, however, that in the event that LIBOR Rate Loans are prepaid on
any date that is not the last day of the Interest Period applicable thereto,
including as a result of any automatic prepayment through the required
application by Agent of proceeds of Borrowers’ and their respective
Subsidiaries’ Collections in accordance with Section 2.4(b) or for
any other reason, including early termination of the term of this Agreement or
acceleration of all or any portion of the Obligations pursuant to the terms
hereof, each Borrower shall indemnify, defend, and hold Agent and the Lenders
and their Participants harmless against any and all Funding Losses in
accordance with clause (b)(ii) above.


 


16





















 


(d)                                 Special Provisions Applicable to LIBOR Rate.


 


(i)                                     The LIBOR Rate may be adjusted by Agent
with respect to any Lender on a prospective basis to take into account any
additional or increased costs to such Lender of maintaining or obtaining any
Eurodollar deposits or increased costs, in each case, due to changes in
Applicable Law occurring subsequent to the commencement of the then applicable
Interest Period, including changes in tax laws (except changes of general
applicability in corporate income tax laws) and changes in the reserve
requirements imposed by the Board of Governors of the Federal Reserve System
(or any successor), excluding the Reserve Percentage, which additional or
increased costs would increase the cost of funding loans bearing interest at
the LIBOR Rate.  In any such event, the
affected Lender shall give Administrative Borrower and Agent notice of such a
determination and adjustment and Agent promptly shall transmit the notice to
each other Lender and, upon its receipt of the notice from the affected Lender,
Administrative Borrower may, by notice to such affected Lender (y) require
such Lender to furnish to Administrative Borrower a statement setting forth the
basis for adjusting such LIBOR Rate and the method for determining the amount
of such adjustment, or (z) repay the LIBOR Rate Loans with respect to
which such adjustment is made (together with any amounts due under clause
(b)(ii) above).


 


(ii)                                  In the event that any change in market
conditions or any law, regulation, treaty, or directive, or any change therein
or in the interpretation of application thereof, shall at any time after the
date hereof, in the reasonable opinion of any Lender, make it unlawful or
impractical for such Lender to fund or maintain LIBOR Rate Loans or to continue
such funding or maintaining, or to determine or charge interest rates at the
LIBOR Rate, such Lender shall give notice of such changed circumstances to
Agent and Administrative Borrower and Agent promptly shall transmit the notice
to each other Lender and (y) in the case of any LIBOR Rate Loans of such
Lender that are outstanding, the date specified in such Lender’s notice shall
be deemed to be the last day of the Interest Period of such LIBOR Rate Loans,
and interest upon the LIBOR Rate Loans of such Lender thereafter shall accrue
interest at the rate then applicable to Base Rate Loans, and (z) Borrowers
shall not be entitled to elect the LIBOR Option until such Lender determines
that it would no longer be unlawful or impractical to do so.


 


(e)                                  No Requirement of Matched Funding.  Anything to the contrary
contained herein notwithstanding, neither Agent, nor any Lender, nor any of
their Participants, is required actually to acquire Eurodollar deposits to fund
or otherwise match fund any Obligation as to which interest accrues at the
LIBOR Rate.  The provisions of this
Section shall apply as if each Lender or its Participants had match funded any
Obligation as to which interest is accruing at the LIBOR Rate by acquiring
Eurodollar deposits for each Interest Period in the amount of the LIBOR Rate
Loans.


 


2.14                           Capital Requirements.  If,
after the date hereof, any Lender determines that (i) the adoption of or
change in any law, rule, regulation or guideline regarding capital requirements
for banks or bank holding companies, or any change in the interpretation or
application thereof by any Governmental Authority charged with the
administration thereof, or (ii) compliance by such Lender or its parent
bank holding company with any guideline, request or directive of any such
entity regarding capital adequacy (whether or not having the force of law), has
the effect of reducing the return on such Lender’s or such holding company’s
capital as a consequence of such Lender’s Commitments hereunder to a level
below that which such Lender or such holding company could have achieved but
for such adoption, change, or compliance (taking into consideration such Lender’s
or such holding company’s then existing policies with respect to capital
adequacy and assuming the full utilization of such entity’s capital) by any
amount deemed by such Lender to be material, then such Lender may notify
Administrative Borrower and Agent thereof. 
Following receipt of such notice, Borrowers agree to pay such Lender on
demand the amount of such reduction of return of capital as and when such
reduction is determined, payable within 90 days after presentation by such
Lender of a statement in the amount and setting forth in reasonable detail such
Lender’s calculation thereof and the assumptions upon which such calculation
was based (which statement shall be deemed true and correct absent manifest
error).  In determining such amount, such
Lender may use any reasonable averaging and attribution methods.


 


17





















 


2.15                           Joint and Several Liability of
Borrowers.


 


(a)                                  Each Borrower is accepting joint and several
liability hereunder and under the other Loan Documents in consideration of the
financial accommodations to be provided by the Lender Group under this
Agreement, for the mutual benefit, directly and indirectly, of each Borrower
and in consideration of the undertakings of the other Borrowers to accept joint
and several liability for the Obligations.


 


(b)                                 Each Borrower, jointly and severally, hereby
irrevocably and unconditionally accepts, not merely as a surety but also as a
co-debtor, joint and several liability with the other Borrowers, with respect
to the payment and performance of all of the Obligations (including, without
limitation, any Obligations arising under this Section 2.15), it
being the intention of the parties hereto that all the Obligations shall be the
joint and several obligations of each Borrower without preferences or
distinction among them.


 


(c)                                  If and to the extent that any Borrower shall
fail to make any payment with respect to any of the Obligations as and when due
or to perform any of the Obligations in accordance with the terms thereof, then
in each such event the other Borrowers will make such payment with respect to,
or perform, such Obligation.


 


(d)                                 The Obligations of each Borrower under the
provisions of this Section 2.15 constitute the absolute and
unconditional, full recourse Obligations of each Borrower enforceable against
each Borrower to the full extent of its properties and assets, irrespective of
the validity, regularity or enforceability of this Agreement or any other
circumstances whatsoever.


 


(e)                                  Except as otherwise expressly provided in
this Agreement, each Borrower hereby waives notice of acceptance of its joint
and several liability, notice of any Advances or Letters of Credit issued under
or pursuant to this Agreement, notice of the occurrence of any Default, Event
of Default, or of any demand for any payment under this Agreement, notice of
any action at any time taken or omitted by Agent or Lenders under or in respect
of any of the Obligations, any requirement of diligence or to mitigate damages
and, generally, to the extent permitted by Applicable Law, all demands, notices
and other formalities of every kind in connection with this Agreement (except
as otherwise provided in this Agreement). 
Each Borrower hereby assents to, and waives notice of, any extension or
postponement of the time for the payment of any of the Obligations, the
acceptance of any payment of any of the Obligations, the acceptance of any
partial payment thereon, any waiver, consent or other action or acquiescence by
Agent or Lenders at any time or times in respect of any default by any Borrower
in the performance or satisfaction of any term, covenant, condition or
provision of this Agreement, any and all other indulgences whatsoever by Agent
or Lenders in respect of any of the Obligations, and the taking, addition,
substitution or release, in whole or in part, at any time or times, of any
security for any of the Obligations or the addition, substitution or release,
in whole or in part, of any Borrower. 
Without limiting the generality of the foregoing, each Borrower assents
to any other action or delay in acting or failure to act on the part of any
Agent or Lender with respect to the failure by any Borrower to comply with any
of its respective Obligations, including, without limitation, any failure
strictly or diligently to assert any right or to pursue any remedy or to comply
fully with Applicable Laws or regulations thereunder, which might, but for the
provisions of this Section 2.15 afford grounds for terminating,
discharging or relieving any Borrower, in whole or in part, from any of its
Obligations under this Section 2.15, it being the intention of each
Borrower that, so long as any of the Obligations hereunder remain unsatisfied,
the Obligations of each Borrower under this Section 2.15 shall not
be discharged except by performance and then only to the extent of such
performance.  The Obligations of each
Borrower under this Section 2.15 shall not be diminished or
rendered unenforceable by any winding up, reorganization, arrangement,
liquidation, reconstruction or similar proceeding with respect to any Borrower
or any Agent or Lender.


 


18





















 


(f)                                    Each Borrower represents and warrants to Agent
and Lenders that such Borrower is currently informed of the financial condition
of Borrowers and of all other circumstances which a diligent inquiry would
reveal and which bear upon the risk of nonpayment of the Obligations.  Each Borrower further represents and warrants
to Agent and Lenders that such Borrower has read and understands the terms and
conditions of the Loan Documents.  Each
Borrower hereby covenants that such Borrower will continue to keep informed of Borrowers’
financial condition, the financial condition of other guarantors, if any, and
of all other circumstances which bear upon the risk of nonpayment or
nonperformance of the Obligations.


 


(g)                                 In the event the Obligations or any Guaranty
is at any time secured by any Real Property, each Borrower waives all rights
and defenses arising out of an election of remedies by Agent or any Lender,
even though that election of remedies, such as a nonjudicial foreclosure with
respect to security for a guaranteed obligation, has destroyed Agent’s or such
Lender’s rights of subrogation and reimbursement against such Borrower by the
operation of Section 580(d) of the California Code of Civil Procedure, any
comparable statute, or otherwise.


 


(h)                                 In the event the Obligations or any Guaranty
is at any time secured by any Real Property, each Borrower waives all rights
and defenses that such Borrower may have because the Obligations or such
Guaranty is secured by Real Property. 
This means, among other things:


 


(i)                                     Agent and Lenders may collect from such
Borrower without first foreclosing on any Real or Personal Property Collateral
pledged by Borrowers.


 


(ii)                                  If Agent or any Lender forecloses on any
Real Property Collateral pledged by Borrowers:


 


(1)                                  The amount of the Obligations may be reduced
only by the price for which that collateral is sold at the foreclosure sale,
even if the collateral is worth more than the sale price.


 


(2)                                  Agent and Lenders may collect from such
Borrower even if Agent or Lenders, by foreclosing on the Real Property
Collateral, has or have destroyed any right such Borrower may have to collect
from the other Borrowers.


 


This is an unconditional and irrevocable
waiver of any rights and defenses such Borrower may have because the
Obligations are secured by Real Property. 
These rights and defenses include, but are not limited to, any rights or
defenses based upon Section 580a, 580b, 580d or 726 of the California Code
of Civil Procedure or any comparable statutes. 
As provided in Section 12(a), this Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York.  The foregoing provisions are included solely
out of an abundance of caution and shall not be construed to mean that any of
the above referenced provisions of California law are in any way applicable to
this Agreement or the Obligations.


 


(i)                                     The provisions of this Section 2.15
are made for the benefit of Agent, Lenders and their respective successors and
assigns, and may be enforced by it or them from time to time against any or all
Borrowers as often as occasion therefor may arise and without requirement on
the part of any such Agent, Lender, successor or assign first to marshal any of
its or their claims or to exercise any of its or their rights against any
Borrower or to exhaust any remedies available to it or them against any
Borrower or to resort to any other source or means of obtaining payment of any
of the Obligations hereunder or to elect any other remedy.  The provisions of this Section 2.15
shall remain in effect until all of the Obligations shall have been paid in
full or otherwise fully satisfied.  If at
any time, any payment, or any part thereof, made in respect of any of the
Obligations, is rescinded or must otherwise be restored or returned by any Agent
or Lender upon the insolvency, bankruptcy or reorganization of any Borrower, or
otherwise, the provisions of this Section 2.15 will forthwith be
reinstated in effect, as though such payment had not been made.


 


19





















 


(j)                                     Each Borrower hereby agrees that it will not
enforce any of its rights of contribution or subrogation against any other
Borrower with respect to any liability incurred by it hereunder or under any of
the other Loan Documents, any payments made by it to Agent or Lenders with
respect to any of the Obligations or any collateral security therefor until
such time as all of the Obligations have been paid in full in cash.  Any claim which any Borrower may have against
any other Borrower with respect to any payments to any Agent or Lender hereunder
or under any other Loan Documents are hereby expressly made subordinate and
junior in right of payment, without limitation as to any increases in the
Obligations arising hereunder or thereunder, to the prior payment in full in
cash of the Obligations and, in the event of any insolvency, bankruptcy,
receivership, liquidation, reorganization or other similar proceeding under the
laws of any jurisdiction relating to any Borrower, its debts or its assets,
whether voluntary or involuntary, all such Obligations shall be paid in full in
cash before any payment or distribution of any character, whether in cash,
securities or other property, shall be made to any other Borrower therefor.


 


(k)                                  Each Borrower hereby agrees that, after the
occurrence and during the continuance of any Default or Event of Default, the
payment of any amounts due with respect to the indebtedness owing by any
Borrower to any other Borrower is hereby subordinated to the prior payment in
full in cash of the Obligations.  Each
Borrower hereby agrees that after the occurrence and during the continuance of
any Default or Event of Default, such Borrower will not demand, sue for or
otherwise attempt to collect any indebtedness of any other Borrower owing to
such Borrower until the Obligations shall have been paid in full in cash.  If, notwithstanding the foregoing sentence,
such Borrower shall collect, enforce or receive any amounts in respect of such
indebtedness, such amounts shall be collected, enforced and received by such
Borrower as trustee for Agent, and such Borrower shall deliver any such amounts
to Agent for application to the Obligations in accordance with Section 2.4(b).


 


3.                                      CONDITIONS; TERM OF AGREEMENT.


 


3.1                                 Conditions Precedent to the
Initial Extension of Credit.  The obligation of each Lender to make its
initial extension of credit provided for hereunder, is subject to the
fulfillment, to the satisfaction of Agent and each Lender of each of the
conditions precedent set forth on Schedule 3.1 (the making of such
initial extension of credit by a Lender being conclusively deemed to be its
satisfaction or waiver of the conditions precedent).


 


3.2                                 Conditions Precedent to all
Extensions of Credit.  The obligation of the Lender Group (or any
member thereof) to make any Advances hereunder at any time (or to extend any
other credit hereunder) shall be subject to the following conditions precedent:


 


(a)                                  the representations and warranties contained
in this Agreement or in the other Loan Documents shall be true and correct in
all material respects (except that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by a materiality concept in the text thereof) on and as of the date of
such extension of credit, as though made on and as of such date (except to the
extent that such representations and warranties relate solely to an earlier
date);


 


(b)                                 no Default or Event of Default shall have
occurred and be continuing on the date of such extension of credit, nor shall
either result from the making thereof;


 


(c)                                  no injunction, writ, restraining order, or
other order of any nature restricting or prohibiting, directly or indirectly,
the extending of such credit shall have been issued and remain in force by any
Governmental Authority against any Borrower, Agent, any Lender, or any of their
Affiliates; and


 


(d)                                 no Material Adverse Change shall have
occurred.


 


20





















 


3.3                                 Term.  This
Agreement shall continue in full force and effect for a term ending on the
earlier to occur of (a) December 31, 2007 or (b) the “Final Maturity Date,” as
defined in the Second Lien Loan Agreement (the “Maturity Date”).  The foregoing notwithstanding, the Lender
Group, upon the election of the Required Lenders, shall have the right to
terminate its obligations under this Agreement immediately and without notice
upon the occurrence and during the continuation of an Event of Default.


 


3.4                                 Effect of Termination.  On
the date of termination of this Agreement, all Obligations (including
contingent reimbursement obligations of Borrowers with respect to outstanding
Letters of Credit and including all Bank Product Obligations) immediately shall
become due and payable without notice or demand (including (a) either (i) providing
cash collateral to be held by Agent for the benefit of those Lenders with a
Commitment in an amount equal to 105% of the Letter of Credit Usage, or
(ii) causing the original Letters of Credit to be returned to the Issuing
Lender, and (b) providing cash collateral (in an amount determined by
Agent as sufficient to satisfy the reasonably estimated credit exposure) to be
held by Agent for the benefit of the Bank Product Providers with respect to the
Bank Product Obligations).  No
termination of this Agreement, however, shall relieve or discharge Borrowers or
their respective Subsidiaries of their duties, Obligations, or covenants
hereunder or under any other Loan Document and the Agent’s Liens in the
Collateral shall remain in effect until all Obligations have been paid in full
and the Lender Group’s obligations to provide additional credit hereunder have
been terminated.  When this Agreement has
been terminated and all of the Obligations have been paid in full and the
Lender Group’s obligations to provide additional credit under the Loan
Documents have been terminated irrevocably, Agent will, at Borrowers’ sole
expense, execute and deliver any termination statements, lien releases,
mortgage releases, re-assignments of trademarks, discharges of security
interests, and other similar discharge or release documents (and, if
applicable, in recordable form) as are reasonably necessary to release, as of
record, the Agent’s Liens and all notices of security interests and liens
previously filed by Agent with respect to the Obligations.


 


3.5                                 Early Termination by Borrowers. 
Borrowers have the option, at any time upon 90 days prior written notice
by Administrative Borrower to Agent, to terminate this Agreement by paying to
Agent, in cash, the Obligations (including (a) either (i) providing
cash collateral to be held by Agent for the benefit of those Lenders with a
Commitment in an amount equal to 105% of the Letter of Credit Usage, or
(ii) causing the original Letters of Credit to be returned to the Issuing
Lender, and (b) providing cash collateral (in an amount determined by
Agent as sufficient to satisfy the reasonably estimated credit exposure) to be
held by Agent for the benefit of the Bank Product Providers with respect to the
Bank Product Obligations), in full.  If
Administrative Borrower has sent a notice of termination pursuant to the
provisions of this Section, then the Commitments shall terminate and Borrowers
shall be obligated to repay the Obligations (including (a) either
(i) providing cash collateral to be held by Agent for the benefit of those
Lenders with a Commitment in an amount equal to 105% of the Letter of Credit
Usage, or (ii) causing the original Letters of Credit to be returned to
the Issuing Lender, and (b) providing cash collateral (in an amount determined
by Agent as sufficient to satisfy the reasonably estimated credit exposure) to
be held by Agent for the benefit of the Bank Product Providers with respect to
the Bank Product Obligations), in full, on the date set forth as the date of
termination of this Agreement in such notice.


 


4.                                      REPRESENTATIONS AND WARRANTIES.


 


In order to induce the Lender Group to enter into this Agreement, each
Borrower makes the following representations and warranties to the Lender Group
which shall be true, correct, and complete, in all material respects, as of the
date hereof, and shall be true, correct, and complete, in all material
respects, as of the Closing Date, and at and as of the date of the making of
each Advance (or other extension of credit) made thereafter, as though made on
and as of the date of such Advance (or other extension of credit) (except to
the extent that such representations and warranties relate solely to an earlier
date) and such representations and warranties shall survive the execution and
delivery of this Agreement:


 


21





















 


4.1                                 No Encumbrances; Properties.


 


(a)                                  Each Borrower, each Guarantor and each of
their respective Subsidiaries has good and marketable title to, valid leasehold
interests in, or valid licenses to use, all property and assets material to its
business, free and clear of all Liens, except Permitted Liens.  All such properties and assets are in good
working order and condition, ordinary wear and tear excepted.


 


(b)                                 Schedule 4.1 sets forth a complete and accurate list of
the location, by state or province and street address, of all Real Property.


 


4.2                                 Eligible Accounts.  As
to each Account that is identified as an Eligible Account in a borrowing base
report submitted to Agent, such Account is (a) a bona fide existing
payment obligation of the applicable Account Debtors created by the sale and
delivery of Inventory or the rendition of services to such Account Debtors in
the ordinary course of the applicable Borrower’s or Mondel’s business,
(b) owed to the applicable Borrower or Mondel without any known defenses,
disputes, offsets, counterclaims, or rights of return or cancellation, and
(c) not excluded as ineligible by virtue of one or more of the excluding
criteria set forth in the definition of Eligible Accounts.


 


4.3                                 Eligible Inventory.  As
to each item of Inventory that is identified as Eligible Inventory in a
borrowing base report submitted to Agent, such Inventory is (a) of good
and merchantable quality, free from known defects, and (b) not excluded as
ineligible by virtue of one or more of the excluding criteria set forth in the
definition of Eligible Inventory.


 


4.4                                 Equipment.  Each
material item of Equipment of Borrowers and their respective Subsidiaries is
used or held for use in their business and is in good working order, ordinary
wear and tear and damage by casualty excepted.


 


4.5                                 Location of Inventory and
Equipment.  Other than as set forth on Schedule 4.5
(as such Schedule may be updated pursuant to Section 5.9), the
Inventory and Equipment (other than vehicles or Equipment out for repair) of
Borrowers and their respective Subsidiaries are not stored with a bailee,
warehouseman, or similar party and are located only at, or in-transit between,
the locations identified thereon. 
Without limiting the foregoing, in the event any goods of any Borrower
or its Subsidiaries are stored at any warehouse or are otherwise in the
possession of a bailee, none of the receipts received by such Borrower or
Subsidiary states that the goods covered thereby are to be delivered to bearer
or to the order of a named Person or to a named Person and such named Person’s
assigns.


 


4.6                                 Inventory Records.  Each
Borrower keeps correct and accurate records itemizing and describing the type,
quality, and quantity of its and its Subsidiaries’ Inventory and the book value
thereof.


 


4.7                                 State of Incorporation; Location
of Chief Executive Office; Organizational Identification Number and FEIN;
Commercial Tort Claims; Legal and Trade Name; Places of Business.


 


(a)                                  The jurisdiction of organization of each
Borrower and each of its Subsidiaries is set forth on Schedule 4.7(a).


 


(b)                                 The chief executive office of each Borrower
and each Guarantor is located at the address indicated on Schedule 4.7(b)
(as such Schedule may be updated pursuant to Section 5.9).


 


(c)                                  Each Borrower’s and each Guarantor’s
organizational identification number and federal employer identification number
(or in the case of Mondel, the business number assigned by the Canadian Revenue
Agency), if any, are identified on Schedule 4.7(c).


 


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(d)                                 As of the Closing Date, none of the Borrowers
or Guarantors holds any commercial tort claims in respect of which a claim has
been filed in a court of law or a written notice by an attorney has been given
to a potential defendant, except as set forth on Schedule 4.7(d).


 


(e)                                  The exact legal name of, and all tradenames
used by, each Borrower and each Guarantor and the exact legal name of each
Subsidiary of any Borrower or Guarantor is as set forth on Schedule 4.7(e).


 


(f)                                    Each place of business of each Borrower and
each of its Subsidiaries is set forth on Schedule 4.7(f).


 


4.8                                 Due Organization and
Qualification; Subsidiaries.


 


(a)                                  Each Borrower and its Subsidiaries other than
Excluded Foreign Subsidiaries (i) is a corporation, limited liability company
or limited partnership duly organized and existing and in good standing under
the laws of the jurisdiction of its organization, (ii) is qualified to do
business in any state, province or other jurisdiction in which the character of
the properties owned or leased by it or in which the transaction of its
business makes such qualification necessary and (iii) has all requisite power
and authority to conduct its business as now conducted and as currently
contemplated and, in the case of the Borrowers, to make the borrowings
hereunder, and to execute and deliver each Loan Document to which it is a
party, and to consummate the transactions contemplated thereby.


 


(b)                                 Set forth on Schedule 4.8(b), is
a complete and accurate description of the authorized capital Stock of each
Borrower and each Guarantor, by class, and, as of the Closing Date, a
description of the number of shares of each such class that are issued and
outstanding.  Other than as described on Schedule 4.8(b),
there are no subscriptions, options, warrants, or calls relating to any shares
of each Borrower’s or any Borrower’s Subsidiary’s capital Stock, including any
right of conversion or exchange under any outstanding security or other
instrument.  No Borrower nor any of its
Subsidiaries is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital Stock or
any security convertible into or exchangeable for any of its capital Stock.


 


(c)                                  Set forth on Schedule 4.8(c), is
a complete and accurate list of each Borrower’s direct and indirect
Subsidiaries (other than Excluded Foreign Subsidiaries), showing:  (i) the legal name of each such Subsidiary,
(ii) the jurisdiction of their organization, (iii) the number of
shares of each class of common and preferred Stock authorized for each of such
Subsidiaries, and (iv) the number and the percentage of the outstanding
shares of each such class owned directly or indirectly by the applicable
Borrower.  All of the issued and
outstanding capital Stock of each such Subsidiary has been validly issued and
is fully paid and non-assessable, and the holders thereof are not entitled to
any preemptive, first refusal or other similar rights.  Except as indicated on Schedule 4.8(c),
all such capital Stock is owned by a Borrower or one or more of its
wholly-owned Subsidiaries, free and clear of all Liens.  There are no outstanding debt or equity
securities of any Borrower or any of its Subsidiaries and no outstanding
obligations of any Borrower or any of its Subsidiaries convertible into or
exchangeable for, or warrants, options or other rights for the purchase or
acquisition from such Borrower or any of its Subsidiaries, or other obligations
of any Borrower or any of its Subsidiaries to issue, directly or indirectly,
any shares of capital Stock of any Borrower or Subsidiary of any Borrower.


 


(d)                                 Except as set forth on Schedule 4.8(c),
there are no subscriptions, options, warrants, or calls relating to any shares
of any Borrower’s Subsidiaries’ capital Stock, including any right of
conversion or exchange under any outstanding security or other instrument.  No Borrower or any of its Subsidiaries is
subject to any obligation (contingent or otherwise) to repurchase or otherwise
acquire or retire any shares of any Borrower’s Subsidiaries’ capital Stock or
any security convertible into or exchangeable for any such capital Stock.


 


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4.9                                 Due Authorization; No Conflict;
Governmental Approvals; Enforceability.


 


(a)                                  The execution, delivery and performance by
each Borrower and each Guarantor of each Loan Document to which it is or will
be a party, (i) have been duly authorized and approved by all necessary action
(whether of the interestholders of any such Borrower or such Guarantor, any
Person under any material contractual obligation of any such Borrower or such
Guarantor, or otherwise), (ii) do not and will not contravene its charter or
by-laws, its limited liability company or operating agreement or its
certificate of partnership or partnership agreement, as applicable, or any
applicable provision of United States or foreign federal, state, provincial or
local law or regulation, any order, judgment or decree of any court or other
Governmental Authority binding on any such Borrower or such Guarantor, or any
contractual restriction binding on or otherwise affecting it or any of its
properties, (iii) do not and will not result in or require the creation of any
Lien (other than pursuant to any Loan Document) upon or with respect to any of
its properties, and (iv) do not and will not result in any default,
noncompliance, suspension, revocation, impairment, forfeiture or nonrenewal of
any permit, license, authorization or approval applicable to its operations or
any of its properties.


 


(b)                                 As to each Borrower and each Guarantor, the
execution, delivery, and performance by such Borrower of this Agreement and the
other Loan Documents to which it is or will be a party do not and will not
(i) violate any provision of United States or foreign federal, state,
provincial, or local law or regulation applicable to any Borrower or any
Guarantor, the Governing Documents of any Borrower or any Guarantor, or any
order, judgment, or decree of any court or other Governmental Authority binding
on any Borrower or any Guarantor, (ii) conflict with, result in a breach
of, or constitute (with due notice or lapse of time or both) a default under
any material contractual obligation of any Borrower or any Guarantor,
(iii) result in or require the creation or imposition of any Lien of any
nature whatsoever upon any properties or assets of any Borrower or any
Guarantor, other than Permitted Liens, or (iv) require any approval of any
Borrower’s or any Guarantor’s interestholders or any approval or consent of any
Person under any material contractual obligation of any Borrower or any
Guarantor, other than consents or approvals that have been obtained and that
are still in force and effect.


 


(c)                                  Other than the filing of financing
statements, and the recordation of the Mortgages, no authorization or approval
or other action by, and no notice to or filing with, any Governmental Authority
is required in connection with the due execution, delivery and performance by
any Borrower or Guarantor of any Loan Document to which it is or will be a
party.


 


(d)                                 This Agreement is, and each other Loan
Document to which any Borrower or Guarantor is or will be a party, when
delivered hereunder, will be, a legal, valid and binding obligation of such
Person, enforceable against such Person in accordance with its terms, except as
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws.


 


(e)                                  The Agent’s Liens are validly created, perfected,
and first priority Liens, subject only to Permitted Liens.


 


4.10                           Litigation. 
Other than those matters disclosed on Schedule 4.10,
(a) there is no pending or, to the knowledge of any Borrower, any
Guarantor or their respective Subsidiaries, threatened action, suit or
proceeding affecting any Borrower, any Guarantor or their respective
Subsidiaries before any court or other Governmental Authority or any arbitrator
that (i) if adversely determined, could reasonably be expected to result
in a Material Adverse Change or (ii) relates to this Agreement or any
other Loan Document or any transaction contemplated hereby or thereby.


 


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4.11                           No Material Adverse Change;
Financial Condition.


 


(a)                                  The Financial Statements, copies of which
have been delivered to each Agent and each Lender, fairly present, in all
material respects, the consolidated financial condition of the Parent and its
Subsidiaries as at the respective dates thereof and the consolidated results of
operations of the Parent and its Subsidiaries for the fiscal periods ended on
such respective dates, all in accordance with GAAP, and since June 30, 2005 no
event or development has occurred that has had or could reasonably be expected
to result in a Material Adverse Change.


 


(b)                                 The Parent has heretofore furnished to each
Agent and each Lender (i) Projections for the Parent’s fiscal years ending
in June 30, 2006 through June 30, 2008, which projected financial statements
shall be updated from time to time pursuant to Section 5.3.  Such Projections, as so updated, are believed
by the Parent at the time furnished to be reasonable, have been prepared on a
reasonable basis and in good faith by the Parent, and have been based on
assumptions believed by the Parent to be reasonable at the time made and upon
the best information then reasonably available to the Parent, and the Parent is
not aware of any facts or information that would lead it to believe that such
projections, as so updated, are incorrect or misleading in any material
respect.


 


4.12                           Solvency; Fraudulent Transfer.


 


(a)                                  After giving effect to the transactions
contemplated by this Agreement and the Second Lien Loan Documents and before
and after giving effect to each Advance, Parent is and the Borrowers,
Guarantors and their respective Subsidiaries, on a consolidated basis, are
Solvent.


 


(b)                                 No transfer of property is being made by any
Borrower, any Guarantor or any Subsidiary of a Borrower or Guarantor and no
obligation is being incurred by any Borrower or any Subsidiary of a Borrower in
connection with the transactions contemplated by this Agreement or the other
Loan Documents with the intent to hinder, delay, or defraud either present or
future creditors of Borrowers or their respective Subsidiaries.


 


4.13                           Employee Benefits.


 


(a)                                  Set forth on Schedule 4.13(a) is a
complete and accurate list of all Plans that meet the definition of an “employee
pension benefit plan” under Section 3(2) of ERISA and that are currently
maintained or contributed to by any Borrower, any of their respective
Subsidiaries or any of their respective ERISA Affiliates as of the Closing
Date.


 


(b)                                 Each Borrower, its Subsidiaries (other than
Mondel), and their respective ERISA Affiliates are in compliance in all
material respects with all applicable provisions and requirements of ERISA, the
IRC and the regulations and published interpretations thereunder with respect
to each Plan, and have performed all their obligations in all material respects
under each Plan.


 


(c)                                  No ERISA Event has occurred or could
reasonably be expected to occur.


 


(d)                                 Except to the extent required under Section
4980B of the IRC, or as described on Schedule 4.13(d) hereto, no Plan
provides welfare benefits (through the purchase of insurance or otherwise) for
any retired or former employee of any Borrower, any of their respective
Subsidiaries or any of their respective ERISA Affiliates.


 


(e)                                  As of the most recent valuation date for any
Pension Plan, the amount of unfunded benefit liabilities (as defined in Section
4001(a)(18) of ERISA), individually or in the aggregate for all Pension Plans
(excluding for purposes of such computation any Pension Plans with respect to
which assets exceed benefit liabilities), does not exceed $70,600,000.


 


25





















 


(f)                                    Provided that the assets of the Lenders used
to fund Advances do not and will not constitute “plan assets” within the
meaning of United States Department of Labor Regulations set forth in 29 C.F.R.
§2510.3-101, the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereunder will not involve any transaction
that is subject to the prohibitions of Section 406 of ERISA or in connection
with which taxes could be imposed pursuant to Section 4975(c)(1)(A)-(D) of the
IRC.


 


(g)                                 All liabilities under each Plan are (i)
funded to at least the minimum level required by law or, if higher, to the
level required by the terms governing the Plans, (ii) insured with a reputable
insurance company, (iii) provided for or recognized in the financial statements
most recently delivered to Agent pursuant to Section 5.3 hereof to the
extent required by GAAP or (iv) estimated in the formal notes to the financial
statements most recently delivered to Agent pursuant to Section 5.3
hereof to the extent required by GAAP.


 


(h)                                 To the best knowledge of each Borrower, there
are no circumstances which may give rise to a material liability in relation to
any Plan which is not funded, insured, provided for, recognized or estimated in
the manner described in subsection (g) above.


 


(i)                                     Borrowers and their respective Subsidiaries
are not and will not be a “plan” within the meaning of Section 4975(e) of the
IRC; (ii) the assets of Borrowers and their respective Subsidiaries do not and
will not constitute “plan assets” within the meaning of the United States
Department of Labor Regulations set forth in 29 C.F.R. §2510.3-101; (iii)
Borrowers and their respective Subsidiaries are not and will not be a “governmental
plan” within the meaning of Section 3(32) of ERISA; and (iv) provided that the
assets of the Lenders used to fund Advances do not and will not constitute
assets of a governmental plan, transactions by or with Borrowers and their
respective Subsidiaries are not and will not be subject to state statutes
applicable to Borrowers and their respective Subsidiaries regulating
investments of fiduciaries with respect to governmental plans.


 


(j)                                     Except as set forth in Schedule 4.13(j),
Mondel, has no, and is not subject to, any present or future obligation or
liability under, any pension plan, deferred compensation plan, retirement
income plan, stock option or stock purchase plan, profit sharing plan, bonus
plan or policy, employee group insurance plan, program policy or practice,
formal or informal, with respect to its employees.


 


(k)                                  Schedule 4.13(j) lists all the employee benefit, health,
welfare, supplemental unemployment benefit, bonus, pension, profit sharing,
deferred compensation, stock compensation, stock purchase, retirement, hospitalization
insurance, medical, dental, legal, disability and similar plans or arrangements
or practices relating to the employees or former employees of Mondel which are
currently maintained or were maintained at any time in the last five calendar
years (the “Canadian Employee Plans”).


 


(l)                                     All of the Canadian Employee Plans are and
have been established, registered, qualified, invested and administered in all
respects in accordance with all Laws applicable to the Canadian Employee
Plans.  No fact or circumstance exists
that could adversely affect the tax-exempt status of a Canadian Employee Plan.


 


(m)                               All obligations regarding the Canadian Employee Plans have been
satisfied, there are no outstanding defaults or violations by any part to any
Canadian Employee Plan and no taxes, penalties or fees are owing or eligible
under any of the Canadian Employee Plans.


 


26





















 


(n)                                 No amendments have been made to any Canadian
Employee Plan and no improvements to any Canadian Employee Plan have been
promised and no amendments or improvements to a Canadian Employee Plan will be
made or promised by Mondel before the Closing Date.


 


(o)                                 Mondel has furnished to Agent true, correct
and complete copies of all the Canadian Employee Plans as amended as of the
date hereof together with all related documentation including funding
agreements, actuarial reports, funding and financial information returns and
statements, all professional opinions (whether or not internally prepared) with
respect to each Canadian Employee Plan, all material internal memoranda
concerning the Canadian Employee Plans, copies of material correspondence with
all regulatory authorities with respect to each Canadian Employee Plan and plan
summaries, booklets and personnel manuals. 
No material changes have occurred to the Canadian Employee Plans or are
expected to occur which would affect the actuarial reports or financial
statements required to be provided to Lenders pursuant to this Section 4.13.


 


(p)                                 Each Canadian Employee Plan is fully funded
or fully insured on both an ongoing and solvency basis pursuant to the
actuarial assumptions and methodology set out in Schedule 4.13(j).


 


(q)                                 Except as disclosed in Schedule 4.13(j),
none of the Canadian Employee Plans provides benefits to retired employees or
to the beneficiaries or dependents of retired employees.


 


4.14                           Environmental Condition. 
Except as set forth on Schedule 4.14, (a) the operations of
each Borrower and each of their respective Subsidiaries are in compliance with
all Environmental Laws; (b) there has been no Release at any of the properties
owned or operated by any Borrower or any of their respective Subsidiaries or
any predecessor in interest, or at any disposal or treatment facility which
received Hazardous Materials generated by any Borrower or any of their
respective Subsidiaries or any predecessor in interest which could reasonably
be expected to result in a Material Adverse Change; (c) no Environmental Action
has been asserted against any Borrower or any of their respective Subsidiaries
or any predecessor in interest nor does any Borrower have knowledge or notice
of any threatened or pending Environmental Action against any Borrower or any
of their respective Subsidiaries or any predecessor in interest which could
reasonably be expected to result in a Material Adverse Change; (d) no
Environmental Actions have been asserted against any facilities that may have
received Hazardous Materials generated by any Borrower or any of their
respective Subsidiaries or any predecessor in interest which could reasonably
be expected to result in a Material Adverse Change; (e) no property now or
formerly owned or occupied by any Borrower or any of their respective
Subsidiaries has been used as a treatment or disposal site for any Hazardous
Material; (f) neither any Borrower nor any of their respective Subsidiaries has
failed to report to the proper Governmental Authority the occurrence of any
Release which is required to be so reported by any Environmental Laws which
could reasonably be expected to result in a Material Adverse Change; (g) each
Borrower and each of their respective Subsidiaries holds all licenses, permits
and approvals required under any Environmental Laws in connection with the
operation of the business carried on by it, except for such licenses, permits
and approvals as to which any Borrower’s or any their respective Subsidiaries’
failure to maintain or comply with could not reasonably be expected to result
in a Material Adverse Change; (h) no Borrower or any of its Subsidiaries has
received any notification pursuant to any Environmental Laws that (i) any work,
repairs, construction or Capital Expenditures are required to be made in
respect as a condition of continued compliance with any Environmental Laws, or
any license, permit or approval issued pursuant thereto or (ii) any license,
permit or approval referred to above is about to be reviewed, made subject to
limitations or conditions, revoked, withdrawn or terminated, in each case,
except as could not reasonably be expected to result in a Material Adverse
Change; and (i) neither any Borrower nor any of their respective Subsidiaries
has received notice that a Lien arising under any Environmental Law has
attached to any revenues or to any Real Property owned or operated by any
Borrower or any of their respective Subsidiaries.


 


27





















 


4.15                           Intellectual Property. 
Except as set forth on Schedule 4.15, each Borrower, each
Guarantor and each of their respective Subsidiaries owns or licenses or
otherwise has the right to use all licenses, permits, patents, patent
applications, trademarks, trademark applications, service marks, tradenames,
copyrights, copyright applications, franchises, authorizations,
non-governmental licenses and permits and other intellectual property rights
that are necessary for the operation of its business, without infringement upon
or conflict with the rights of any other Person with respect thereto, except
for such infringements and conflicts which, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse Change.  Set forth on Schedule 4.15 is a
complete and accurate list as of the Closing Date of all such material
licenses, permits, patents, patent applications, trademarks, trademark
applications, service marks, tradenames, copyrights, copyright applications,
franchises, authorizations, non-governmental licenses and permits and other
intellectual property rights of each Borrower, each Guarantor and each of their
respective Subsidiaries.  No slogan or
other advertising device, product, process, method, substance, part or other
material now employed, or now contemplated to be employed, by any Borrower, any
Guarantor or any of their respective Subsidiaries infringes upon or conflicts
with any rights owned by any other Person, and no claim or litigation regarding
any of the foregoing is pending or threatened, except for such infringements
and conflicts which could not reasonably be expected to result in, individually
or in the aggregate, a Material Adverse Change. 
To the knowledge of each Borrower, each Guarantor and each of their
respective Subsidiaries, no patent, invention, device, application, principle
or any statute, law, rule, regulation, standard or code is pending or proposed,
which, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Change.


 


4.16                           Leases.  Each
Borrower, each Guarantor and each of their respective Subsidiaries has valid
leasehold interests in the Leases described on Schedule 4.1 to
which it is a party.  Schedule 4.1
sets forth with respect to each such Lease, the commencement date, termination
date, renewal options (if any) and annual base rents.  Each such Lease is valid and enforceable in
accordance with its terms in all material respects and is in full force and
effect.  No consent or approval of any
landlord or other third party in connection with any such Lease is necessary
for any Borrower, any Guarantor or their respective Subsidiaries to enter into
and execute the Loan Documents to which it is a party, except as set forth on Schedule 4.1.  To the knowledge of any Borrower, any
Guarantor or their respective Subsidiaries, no other party to any such Lease is
in default of its obligations thereunder, and no Borrower, Guarantor or their
respective Subsidiaries (or any other party to any such Lease) has at any time
delivered or received any notice of default which remains uncured under any
such Lease and no event has occurred which, with the giving of notice or the
passage of time or both, would constitute a default under any such Lease.


 


4.17                           Deposit Accounts and Securities
Accounts.  Set forth on Schedule 4.17 is a
listing of all of each Borrower’s, each Guarantor’s and their respective
Subsidiaries’ Deposit Accounts and Securities Accounts, including, with respect
to each bank or securities intermediary (a) the name and address of such
Person, (b) the account numbers of the Deposit Accounts or Securities
Accounts maintained with such Person, and (c) a description of the purpose of
such Deposit Account or Securities Account.


 


4.18                           Complete Disclosure.  Each
Borrower, Guarantor and each of their respective Subsidiaries has disclosed to
the Agent all agreements, instruments and corporate or other restrictions to
which it is subject, and all other matters known to it, that, individually or
in the aggregate, could reasonably be expected to result in a Material Adverse
Change.  All factual information (as
modified or supplemented by other information so furnished) furnished by or on
behalf of Borrowers, the Guarantors or their respective Subsidiaries in writing
to Agent or any Lender (including all information contained in the Schedules
hereto or in the other Loan Documents) for purposes of or in connection with
this Agreement, the other Loan Documents, the Second Lien Loan Documents, or
any transaction contemplated herein or therein is, and all other such factual
information (as modified or supplemented by other information so furnished)
hereafter furnished by or on behalf of Borrowers or their respective
Subsidiaries in writing to Agent or any Lender will be, true and accurate in
all material respects on the date as of which such information is dated or
certified and not incomplete by omitting to state any fact necessary to make
such information (as modified or supplemented by other information so 


 


28





















furnished) not misleading at
such time in light of the circumstances under which such information was
provided.  There is no contingent
liability or fact that could reasonably be expected to result in a Material
Adverse Change which has not been set forth in a footnote included in the
Financial Statements or a Schedule hereto. 
All of the information which is required to be scheduled to this
Agreement is set forth on the Schedules attached hereto, is correct and accurate
in all material respects and does not omit to state any information material
thereto.


 


4.19                           Indebtedness.  Set
forth on Schedule 4.19 is a true and complete list of all
Indebtedness of each Borrower, each Guarantor and each of their respective
Subsidiaries outstanding immediately prior to the Closing Date that is to
remain outstanding after the Closing Date and such Schedule accurately reflects
the holder of, aggregate outstanding principal amount of, interest rate
applicable to and maturity date of such Indebtedness, describes any guaranties
of and/or collateral securing such Indebtedness and indicates the date, title
and parties to the document or agreement governing or giving rise to such
Indebtedness, if any.


 


4.20                           Material Contracts.  Set
forth on Schedule 4.20 (which Borrowers may amend from time to time
pursuant to Section 5.2) is a complete and accurate list of all Material
Contracts, showing the parties and subject matter thereof and amendments and
modifications thereto.  Each Material
Contract (a) is in full force and effect and is binding upon and enforceable
against each Borrower party thereto, and to such Borrowers’ best knowledge,
each other Person that is a party thereto in accordance with its terms, (b) has
not been otherwise amended or modified (other than amendments or modifications
that are not otherwise prohibited by the terms of this Agreement or any other
Loan Document), and (c) is not in default due to the action of any Borrower,
any Guarantor, their respective Subsidiaries or, to the knowledge of any
Borrower, any other party thereto.


 


4.21                           Second Lien Loan Documents.  The
Borrowers have delivered to Agent true and correct copies of the Second Lien
Loan Documents.  The transactions
contemplated by the Second Lien Loan Documents will be consummated (a)
contemporaneously with the making of the initial Advances hereunder and (b) in
accordance with their respective terms. 
All of the representations and warranties of the Borrowers and the
Guarantors contained in the Second Lien Loan Documents are true and correct in
all material respects (except where any such representation or warranty is
already subject to a materiality standard, in which case such representation or
warranty is true and correction all respects) as of the Closing Date or, to the
extent that any such representation or warranty relates solely to an earlier
date, as of such earlier date.


 


4.22                           Compliance with Law, Etc.  No
Borrower, Guarantor or Subsidiary of any Borrower or Guarantor is in violation
of its organizational documents, any law, rule, regulation, judgment or order
of any Governmental Authority applicable to it or any of its property or
assets, or any material term of any agreement or instrument (including any
Material Contract) binding on or otherwise affecting it or any of its
properties.


 


4.23                           Taxes, Etc.  All
U.S. and foreign federal, state, provincial and local tax returns and other
reports required by Applicable Law to be filed by any Borrower, any Guarantor
or any of their respective Subsidiaries have been filed, or extensions have
been obtained, and all taxes, assessments and other governmental charges
imposed upon any Borrower, any Guarantor or any of their respective
Subsidiaries or any property of any Borrower, any Guarantor or any of their
respective Subsidiaries and which have become due and payable have been paid,
except to the extent subject to a Permitted Protest.  Without limiting the generality of the
foregoing, Mondel has withheld from each payment made to any of its present or
former employees, officers and directors, and to all Persons who are
non-residents of Canada for the purposes of the Canadian Income Tax Act all
amounts required by law to be withheld, including without limitation, all
payroll deductions required to be withheld, and furthermore, has remitted such
withheld amounts within the prescribed periods to the appropriate Governmental
Authority.  Mondel has remitted all
municipal real estate taxes, Canadian Pension Plan contributions, provincial
pension plan contributions, employment insurance premiums, workers compensation
assessments, employer health taxes and other taxes and obligations payable
under Applicable Law (“Statutory Lien Payments”) by it and has remitted
such amounts to the proper Governmental Authority within the time required
under Applicable Law.


 


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4.24                           Regulations T, U and X.  No
Borrower, Guarantor or any of their respective Subsidiaries is or will be
engaged in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation T, U or X), and no
proceeds of any Advance will be used to purchase or carry any margin stock or
to extend credit to others for the purpose of purchasing or carrying any margin
stock.


 


4.25                           Nature of Business.  No
Borrower, Guarantor or any of their respective Subsidiaries is engaged in any
business other than the manufacturing and distribution of electronic
instruments, controls, components and systems.


 


4.26                           Adverse Agreements, Etc. 
Except as set forth on Schedule 4.26, no Borrower, Guarantor or
any of their respective Subsidiaries is a party to any agreement or instrument,
or subject to any charter, limited liability company agreement, partnership
agreement or other corporate, partnership or limited liability company
restriction or any judgment, order, regulation, ruling or other requirement of
a court or other Governmental Authority, which has, or could reasonably be
expected to result in, a Material Adverse Change.


 


4.27                           Permits, Etc.  Each
Borrower, each Guarantor and each of their respective Subsidiaries, other than
Excluded Foreign Subsidiaries, has, and is in compliance with, all permits,
licenses, authorizations, approvals, entitlements and accreditations required
for such Person lawfully to own, lease, manage or operate, or to acquire, each
business currently owned, leased, managed or operated, or to be acquired, by
such Person.  No condition exists or
event has occurred which, in itself or with the giving of notice or lapse of
time or both, would result in the suspension, revocation, impairment,
forfeiture or non-renewal of any such permit, license, authorization, approval,
entitlement or accreditation, and there is no claim that any thereof is not in
full force and effect.


 


4.28                           Operating Lease Obligations.  No
Borrower, Guarantor or any of their respective Subsidiaries has any Operating
Lease Obligations other than the Operating Lease Obligations set forth on Schedule 4.28.


 


4.29                           Insurance.  Each
Borrower, each Guarantor and each of their respective Subsidiaries, other than
Excluded Foreign Subsidiaries, keeps its property adequately insured and
maintains (a) insurance to such extent and against such risks, including
fire, as is customary with companies in the same or similar businesses, (b)
worker’s compensation insurance in the amount required by Applicable Law, (c)
public liability insurance, which shall include product liability insurance, in
the amount customary with companies in the same or similar business against
claims for personal injury or death on properties owned, occupied or controlled
by it, and (d) such other insurance as may be required by law or as may be
reasonably required by the Agent (including against larceny, embezzlement or
other criminal misappropriation).  Schedule
4.29 sets forth a list of all insurance maintained by each Borrower, each
Guarantor and each of their respective Subsidiaries on the Closing Date.


 


4.30                           Holding Company and Investment
Company Acts.  No Borrower, Guarantor or Subsidiary of any
Borrower or Guarantor is (i) a “holding company” or a “subsidiary company”
of a “holding company” or an “affiliate” of a “holding company”, as such terms
are defined in the Public Utility Holding Company Act of 1935, or (ii) an “investment
company” or an “affiliated person” or “promoter” of, or “principal underwriter”
of or for, an “investment company”, as such terms are defined in the Investment
Company Act of 1940.


 


4.31                           Employee and Labor Matters.  There
is (a) no unfair labor practice complaint pending or, to the knowledge of any
Borrower, any Guarantor or any of their respective Subsidiaries, threatened
against any Borrower, any Guarantor or any of their respective Subsidiaries
before any Governmental Authority and no


 


30





















 


grievance or arbitration
proceeding pending or threatened against any Borrower, any Guarantor or any of
their respective Subsidiaries which arises out of or under any collective
bargaining agreement, (b) no strike, labor dispute, slowdown, stoppage or
similar action or grievance pending or threatened against any Borrower, any
Guarantor or any of their respective Subsidiaries or (c) to the knowledge of
any Borrower, any Guarantor or any of their respective Subsidiaries, no union
representation question existing with respect to the employees of any Borrower,
any Guarantor or any of their respective Subsidiaries and no union organizing
activity taking place with respect to any of the employees of any Borrower, any
Guarantor or any of their respective Subsidiaries.  No Borrower, Guarantor, any of their
respective Subsidiaries or any of their respective ERISA Affiliates has
incurred any liability or obligation under the Worker Adjustment and Retraining
Notification Act (“WARN”) or similar state law, which remains unpaid or
unsatisfied.  The hours worked and
payments made to employees of any Borrower, any Guarantor or any of their
respective Subsidiaries have not been in violation of the Fair Labor Standards
Act or any other applicable legal requirements, except to the extent such
violations could not, individually or in the aggregate, reasonably be expected
to result in a Material Adverse Change. 
All material payments due from any Borrower, any Guarantor or any of
their respective Subsidiaries on account of wages and employee health and
welfare insurance and other benefits have been paid or accrued as a liability
on the books of such Person, except where the failure to do so could not,
individually or in the aggregate, reasonably be expected to result in a
Material Adverse Change.


 


4.32                           Customers and Suppliers.  There
exists no actual or threatened termination, cancellation or limitation of, or
modification to or change in, the business relationship between (a) any
Borrower, any Guarantor or any of their respective Subsidiaries, on the one
hand, and any customer or any group thereof, on the other hand, whose
agreements with any Borrower, any Guarantor or any of their respective
Subsidiaries are individually or in the aggregate material to the business or
operations of such Person, or (b) any Borrower, any Guarantor or any of
their respective Subsidiaries, on the one hand, and any material supplier
thereof, on the other hand.


 


4.33                           No Bankruptcy Filing.  No
Borrower, Guarantor or any of their respective Subsidiaries is contemplating
either the filing of a petition by it under any U.S. state, federal or foreign
bankruptcy or insolvency laws or the liquidation of all or a major portion of
its assets or property, and no Borrower, Guarantor or any of their respective
Subsidiaries has any knowledge of any Person contemplating the filing of any
such petition against it.


 


4.34                           Separate Existence.


 


(a)                                  All customary formalities regarding the
separate existence of each Borrower, each Guarantor and their respective
Subsidiaries have been at all times since its formation observed.


 


(b)                                 Each Borrower, each Guarantor and their
respective Subsidiaries has at all times since its formation accurately
maintained its financial statements, accounting records and other
organizational documents separate from those of any Affiliate of such Borrower,
Guarantor or Subsidiary and any other Person. 
No Borrower, Guarantor or any of their respective Subsidiaries has at
any time since its formation commingled its assets with those of any of its
Affiliates or any other Person.  Each
Borrower, each Guarantor and their respective Subsidiaries has at all times
since its formation accurately maintained its own bank accounts and separate
books of account.


 


(c)                                  Each Borrower, each Guarantor and their
respective Subsidiaries has at all times since its formation paid its own
liabilities from its own separate assets.


 


(d)                                 Each Borrower, each Guarantor and their
respective Subsidiaries has at all times since its formation identified itself
in all dealings with the public, under its own name and as a separate and
distinct Person.  No Borrower, Guarantor
or any of their respective Subsidiaries has at any time since its formation
identified itself as being a division or a part of any other Person.


 


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4.35                           Excluded Foreign Subsidiaries.  None
of the Excluded Foreign Subsidiaries (a) have any assets, (ii) have any
liabilities that are recourse to any Borrower or Guarantor, or (c) engage in
any activity or business of any kind.


 


4.36                           Representations and Warranties in
Documents; No Default.  All
representations and warranties set forth in this Agreement and the other Loan
Documents are true and correct in all material respects (except where any such
representation or warranty is already subject to a materiality standard, in
which case such representation or warranty is true and correction all respects)
on the Closing Date and at the time as of which such representations are deemed
made.  No Event of Default has occurred
and is continuing and no condition exists which constitutes a Default or an
Event of Default.


 


5.                                      AFFIRMATIVE COVENANTS.


 


Each Borrower covenants and agrees that, until termination of all of
the Commitments and payment in full of the Obligations, Borrowers shall and
shall cause each Guarantor and each of their respective Subsidiaries to do all
of the following:


 


5.1                                 Accounting System. 
Maintain a system of accounting that enables Borrowers, Guarantors and
their respective Domestic Subsidiaries to produce financial statements in
accordance with GAAP and maintain records pertaining to the Collateral that
contain information as from time to time reasonably may be requested by
Agent.  Borrowers, Guarantors and their
respective Subsidiaries also shall keep a reporting system that shows all
additions, sales, claims, returns, and allowances with respect to their and
their respective Subsidiaries’ sales.


 


5.2                                 Collateral Reporting. 
Provide Agent (and if so requested by Agent, with copies for each
Lender) with each of the reports set forth on Schedule 5.2 at the
times specified therein.  In addition,
each Borrower agrees to cooperate fully with Agent to facilitate and implement
a system of electronic collateral reporting in order to provide electronic
reporting of each of the items set forth above.


 


5.3                                 Financial Statements, Reports,
Certificates.  Deliver to Agent, with copies to each Lender,
each of the financial statements, reports, or other items set forth on Schedule 5.3
at the time specified herein.  In
addition, Parent agrees that none of its Subsidiaries (other than Magnetek
Electronics) will have a fiscal year different from that of Parent and that
Parent shall not have a fiscal year ending on a date other than June 30 unless
Agent consents to such change in such fiscal year (and appropriate related
changes to this Agreement).


 


5.4                                 Guarantor Reports.  Cause
each Guarantor to deliver its annual financial statements at the time when
Parent provides its audited financial statements to Agent, but only to the
extent such Guarantor’s financial statements are not consolidated with Parent’s
financial statements.


 


5.5                                 Inspection. 
Permit Agent, each Lender, and each of their duly authorized
representatives or agents to visit any of its properties and inspect any of its
assets or books and records, to examine and make copies of its books and
records, and to discuss its affairs, finances, and accounts with, and to be
advised as to the same by, its officers and employees at such reasonable times
and intervals as Agent or any such Lender may designate and, so long as no
Default or Event of Default exists, with reasonable prior notice to
Administrative Borrower.


 


5.6                                 Maintenance of Properties. 
Maintain and preserve all of its properties which are necessary or
useful in the proper conduct of its business in good working order and
condition, ordinary wear and tear excepted, and comply, and cause each of its
Subsidiaries to comply, at all times with the provisions of all leases to which
it is a party as lessee or under which it occupies property, so as to prevent any
loss or forfeiture thereof or thereunder.


 


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5.7                                 [Reserved].


 


5.8                                 Insurance.


 


(a)                                  At Borrowers’ expense, maintain insurance
respecting their and their respective Subsidiaries’ (other than Excluded
Foreign Subsidiaries’) assets wherever located, covering loss or damage by
fire, theft, explosion, and all other hazards and risks as ordinarily are
insured against by other Persons engaged in the same or similar
businesses.  Borrowers also shall
maintain business interruption, public liability, and product liability
insurance, as well as insurance against larceny, embezzlement, and criminal
misappropriation.  All such policies of
insurance shall be in such amounts and with such insurance companies as are
reasonably satisfactory to Agent.  Except
as otherwise required pursuant to Schedule 3.1, within 30 days after the
Closing Date, Borrowers shall deliver certified copies of all such policies to
Agent with an endorsement naming Agent as a loss payee (under a satisfactory
lender’s loss payable endorsement) or additional insured, as appropriate.  Each policy of insurance or endorsement shall
contain a clause requiring the insurer to give not less
than 30 days prior written notice to Agent in the event of cancellation of the
policy for any reason whatsoever.


 


(b)                                 Administrative Borrower shall give Agent
prompt notice of any loss exceeding $250,000 covered by such insurance.  So long as no Event of Default has occurred
and is continuing, the applicable Borrower shall have the exclusive right to
adjust any losses payable under any such insurance policies which are less than $250,000. 
Following the occurrence and during the continuation of an Event of
Default, or in the case of any losses payable under such insurance exceeding
$250,000, Agent shall have the exclusive right (subject to the rights of the
Second Lien Agent pursuant to the Second Lien Intercreditor Agreement) to
adjust any losses payable under any such insurance policies, without any
liability to any Borrower whatsoever in respect of such adjustments.


 


5.9                                 Location of Inventory and
Equipment.  Keep Borrowers’, Guarantors’ and their
respective Subsidiaries’ Inventory and Equipment (other than vehicles and
Equipment out for repair) only at the locations identified on Schedule 4.5
and their chief executive offices only at the locations identified on Schedule 4.7(b);
provided, however, that Administrative Borrower may amend Schedule 4.5
or Schedule 4.7 so long as such amendment occurs by written notice
to Agent not less than 30 days prior to the
date on which such Inventory or Equipment is moved to such new location or such
chief executive office is relocated, so long as such new location is within the
continental United States, or in the case of Mondel, within Canada, and so long
as, at the time of such written notification, the applicable Borrower or Mondel
provides Agent a Collateral Access Agreement with respect thereto.


 


5.10                           Compliance with Laws, Etc. 
Comply in all material respects with all Applicable Laws, rules,
regulations and orders (including all Environmental Laws), such compliance to
include, without limitation, (i) paying before the same become delinquent all
taxes, assessments and governmental charges or levies imposed upon it or upon
its income or profits or upon any of its properties, and (ii) paying all
other lawful claims, including the Statutory Lien Payments, which if unpaid
might become a Lien or charge upon any of its properties, except, in each case,
to the extent contested in good faith by proper proceedings which stay the
imposition of any penalty, fine or Lien resulting from the non-payment thereof
and with respect to which adequate reserves have been set aside for the payment
thereof in accordance with GAAP.


 


5.11                           Leases.  Pay
when due all rents and other amounts payable under any material Leases to which
any Borrower, any Guarantor or any of their respective Subsidiaries is a party
or by which any Borrower’s, any Guarantor’s or any of their respective
Subsidiaries’ properties and assets are bound, unless such payments are the
subject of a Permitted Protest.


 


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5.12                           Existence. 
Maintain and preserve its existence, rights, franchises and privileges,
and become or remain, and cause each of its Subsidiaries to become or remain,
duly qualified and in good standing in each jurisdiction in which the character
of the properties owned or leased by it or in which the transaction of its
business makes such qualification necessary.


 


5.13                           Environmental.


 


(a)                                  Keep any property either owned or operated by
any Borrower, any Guarantor or any of their respective Subsidiaries free of any
Environmental Liens or post bonds or other financial assurances sufficient to
satisfy the obligations or liability evidenced by such Environmental Liens,
(b) comply, in all material respects, with Environmental Laws and provide
to Agent documentation of such compliance which Agent reasonably requests,
(c) promptly notify Agent of any release of a Hazardous Material in any
reportable quantity from or onto property owned or operated by any Borrower,
any Guarantor or any of their respective Subsidiaries and take any Remedial
Actions required to abate said release or otherwise to come into compliance
with applicable Environmental Law, (d) promptly, but in any event within 5
days of its receipt thereof, provide Agent with written notice of any of the
following:  (i) notice that an
Environmental Lien has been filed against any of the real or personal property
of any Borrower, any Guarantor or any of their respective Subsidiaries,
(ii) commencement of any Environmental Action or notice that an
Environmental Action will be filed against any Borrower, any Guarantor or any
of their respective Subsidiaries, and (iii) notice of a violation, citation,
or other administrative order which reasonably could be expected to result in a
Material Adverse Change and (e) defend, indemnify and hold harmless the Agent,
the Lender Group, their respective transferees, and their respective employees,
agents, officers and directors, from and against any claims, demands,
penalties, fines, liabilities, settlements, damages, costs or expenses
(including attorney and consultant fees, investigation and laboratory fees,
court costs and litigation expenses) arising out of (i) the presence, disposal,
release or threatened release of any Hazardous Materials on any property at any
time owned or occupied by any Borrower, any Guarantor or any of their
respective Subsidiaries (or their respective predecessors in interest or title),
(ii) any personal injury (including wrongful death) or property damage (real or
personal) arising out of or related to such Hazardous Materials, (iii) any
investigation, lawsuit brought or threatened, settlement reached or government
order relating to such Hazardous Materials, (iv) any violation of any
Environmental Law or (v) any Environmental Action filed against Agent or any
member of the Lender Group.


 


5.14                           Disclosure Updates. 
Promptly and in no event later than 5 Business Days after obtaining
knowledge thereof, notify Agent if any written information, exhibit, or report
furnished to the Lender Group contained, at the time it was furnished, any
untrue statement of a material fact or omitted to state any material fact
necessary to make the statements contained therein not misleading in light of
the circumstances in which made.  The
foregoing to the contrary notwithstanding, any notification pursuant to the
foregoing provision will not cure or remedy the effect of the prior untrue
statement of a material fact or omission of any material fact nor shall any
such notification have the effect of amending or modifying this Agreement or
any of the Schedules hereto.


 


5.15                           Control Agreements.  Take
all reasonable steps in order for Agent to obtain control in accordance with
Sections 8-106, 9-104, 9-105, 9-106, and 9-107 of the Code with respect to
(subject to the proviso contained in Section 6.12) all of its
Securities Accounts, Deposit Accounts, electronic chattel paper, investment
property, and letter of credit rights.


 


5.16                           Formation of Subsidiaries.  At
the time that any Borrower or any Guarantor forms any direct or indirect
Subsidiary or acquires any direct or indirect Subsidiary after the Closing
Date, such Borrower


 


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or such Guarantor shall, as
Agent may request, promptly, but in any event within 3 Business Days after the
formation or acquisition of such Subsidiary: (a) cause such new Subsidiary
to provide to Agent a joinder to the Guaranty, the applicable Security
Documents (including Mortgages with respect to any Real Property of such new
Subsidiary) and such of the other Loan Documents as Agent may request, together
with such other security documents as Agent may request, as well as appropriate
financing statements (and with respect to all property subject to a Mortgage,
fixture filings), all in form and substance satisfactory to Agent (including
being sufficient to grant Agent a first priority Lien (subject to Permitted
Liens) in and to the assets of such newly formed or acquired Subsidiary),
(b) provide to Agent a pledge agreement and appropriate certificates and
powers and/or financing statements, hypothecating all of the direct or
beneficial ownership interest in such new Subsidiary, in form and substance
satisfactory to Agent, and (c) provide to Agent all other documentation,
including one or more opinions of counsel satisfactory to Agent, which in its
opinion is appropriate with respect to the execution and delivery of the
applicable documentation referred to above (including Mortgage Policies,
surveys, appraisals, phase I environmental site assessments and other
documentation with respect to all property subject to a Mortgage), in each case
in form and substance satisfactory to Agent. 
Any document, agreement, or instrument executed or issued pursuant to
this Section 5.16 shall be a Loan Document.  Notwithstanding the foregoing, if a
Subsidiary that is so formed or acquired is a Controlled Foreign Corporation
and if Borrowers can reasonably demonstrate to Agent that the granting of a
Lien in the assets of such Subsidiary would result in an increase in tax
liability of Parent and its Subsidiaries (based on the amount of retained
earnings at the time of such formation or acquisition) in excess of $50,000 per
fiscal year, then clause (a) of the immediately preceding sentence shall not be
applicable and, with respect to clause (b) of the immediately preceding
sentence, such pledge shall be limited to 66% of the voting power of all
classes of capital Stock of such Subsidiary entitled to vote; provided,
that immediately upon any amendment of the IRC that would allow the pledge of a
greater percentage of the voting power of capital Stock in such Subsidiary
without adverse tax consequences, such pledge shall include such greater
percentage of capital Stock of such Subsidiary from that time forward.


 


5.17                           ERISA Compliance.


 


(a)                                  Each Borrower shall do, and shall cause each
of their respective Subsidiaries (other than Mondel) and ERISA Affiliates to
do, each of the following:  (i) maintain
each Plan in compliance in all material respects with the applicable provisions
of ERISA, the IRC and each other applicable federal or state law; (ii) cause
each Qualified Plan to maintain its qualified status under Section 401(a) of the
IRC; (iii) make all required contributions to each Plan; (iv) not become a
party to any Multiemployer Plan; (v) ensure that all liabilities under each
Plan are (A) funded to at least the minimum level required by law or, if
higher, to the level required by the terms governing such Plan; (B) insured
with a reputable insurance company with respect to fiduciary liability; and (C)
provided for or recognized in the financial statements most recently delivered
to Agent under Section 5.3 (to the extent required by GAAP); and (vi) ensure
that the contributions or premium payments to or in respect of each Plan are
and continue to be promptly paid at no less than the rates required under the
rules of such Plan and in accordance with the most recent actuarial advice
received in relation to such Plan and Applicable Law.


 


(b)                                 Deliver to Agent such certifications or other
evidence of compliance with the provisions of Section 4.13 as Agent may
from time to time reasonably request.


 


(c)                                  Promptly notify Agent of each of the
following ERISA events affecting any Borrower, any of their respective
Subsidiaries or any ERISA Affiliates (but in no event more than ten (10) days
after such event), together with a copy of each notice with respect to such
event that may be required to be filed with a Governmental Authority and each
notice delivered by a Governmental Authority to any Borrower, any of their
respective Subsidiaries or any ERISA Affiliates with respect to such event:


 


(i)                                     an ERISA Event;


 


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(ii)                                  the adoption of any new Pension Plan by
any Borrower, any of their respective Subsidiaries or any ERISA Affiliates;


 


(iii)                               the adoption of any amendment to a Pension Plan, if
such amendment will result in a material increase in benefits or unfunded
benefit liabilities (as defined in Section 4001(a)(18) of ERISA); or


 


(iv)                              the commencement of contributions by any
Borrower, any of their respective Subsidiaries or any ERISA Affiliate to any
Plan that is subject to Title IV of ERISA or section 412 of the IRC other than
as set forth on Schedule 5.17;


 


(d)                                 Promptly deliver to Agent copies of (i) each
Schedule B (Actuarial Information) to the annual report (Form 5500 Series)
filed by any Borrower, any of their respective Subsidiaries or any ERISA
Affiliates with the Internal Revenue Service with respect to each Pension Plan;
(ii) all notices received by any Borrower, any of their respective Subsidiaries
or any of their respective ERISA Affiliates from a Multiemployer Plan sponsor
concerning an ERISA Event; and (iii) such other documents or governmental
reports or filings relating to any Plan as Agent shall reasonably request.


 


5.18                           Second Lien Loan Documents.


 


(a)                            Contemporaneously with the initial extensions of credit hereunder: (i)
cause all transactions contemplated by the Second Lien Loan Documents to be
consummated; and (ii) furnish to Agent evidence thereof in form and content
satisfactory to Agent, as well as certified (as of the Closing Date) true and
complete copies of the Second Lien Loan Documents which shall be in compliance
with all Applicable Laws and all necessary approvals shall have been obtained
in connection therewith.


 


(b)                           Promptly provide Agent with true and complete copies of any and all
material documents delivered to any Person pursuant to, or in connection with
the Second Lien Loan Documents.


 


5.19                           Completion of Magnetek ADS Sale.  On or
before December 31, 2005, Borrowers shall have consummated the Magnetek ADS
Sale, provided satisfactory evidence thereof to Agent and remitted all Net Cash
Proceeds thereof to Agent for application to the Senior Debt in accordance with
Section 2.4(c).


 


5.20                           Obtaining of Permits, Etc. 
Obtain, maintain and preserve and take all necessary action to timely
renew, all permits, licenses, authorizations, approvals, entitlements and
accreditations which are necessary or useful in the proper conduct of its
business.


 


5.21                           Subordination. 
Cause all Indebtedness and other obligations now or hereafter owed by it
to any of its Affiliates which is permitted to exist or be incurred under the
terms of Section 6.1, to be subordinated in right of payment and
security to the Obligations in accordance with the Intercompany Subordination
Agreement or another Subordination Agreement in form and substance satisfactory
to the Agent.


 


5.22                           After Acquired Property.  Upon
the acquisition of any After Acquired Property, immediately so notify the
Agent, setting forth with specificity a description of the interest acquired,
the location of such Real Property, any structures or improvements thereon and
either an appraisal or such acquiring Person’s good-faith estimate of the
current value of such Real Property.  The
Agent shall notify such acquiring Person whether it intends to require a
Mortgage and the other documents referred to below or in the case of leasehold,
a Collateral Access Agreement with respect thereto; provided, however,
Agent shall not require a Mortgage upon the acquisition of any After Acquired
Property by a Subsidiary that is a Controlled Foreign Corporation and is not a
Borrower or a Guarantor.  Upon receipt of
such notice requesting a Mortgage,


 


36





















 


the Person which has
acquired such After Acquired Property shall immediately furnish to the Agent
the following, each in form and substance satisfactory to the Agent:  (a) a Mortgage with respect to such
After Acquired Property, each duly executed by such Person and in recordable
form; (b) evidence of the recording of the Mortgage referred to in clause
(a) above in such office or offices as may be necessary or, in the opinion of
the Agent, desirable to create and perfect a valid and enforceable first
priority lien on the property purported to be covered thereby or to otherwise
protect the rights of the Agent, the Lenders and the Bank Product Providers
thereunder, (c) a Mortgage Policy, (d) a survey of such Real
Property, certified to the Agent and to the issuer of the Mortgage Policy by a
licensed professional surveyor reasonably satisfactory to the Agent,
(e) phase I environmental site assessments with respect to such Real
Property, certified to the Agent by a company reasonably satisfactory to the
Agent, and (f) such other documents or instruments (including guaranties
and opinions of counsel) as the Agent may reasonably require.  The Borrowers shall pay all fees and
expenses, including reasonable attorneys’ fees and expenses, and all title
insurance charges and premiums, in connection with Person’s obligations under
this Section 5.22.


 


5.23                           Further Assurances.  Take
such action and execute, acknowledge and deliver, at its sole cost and expense,
such agreements, instruments or other documents as are necessary, or as Agent
may reasonably request, from time to time in order (a) to carry out more
effectively the purposes of this Agreement and the other Loan Documents,
(b) to subject to valid and perfected first priority Liens (subject only
to Permitted Liens) any of the Collateral or any other property of any Borrower
and its Subsidiaries, (c) to establish and maintain the validity and
effectiveness of any of the Loan Documents and the validity, perfection and
priority of the Liens intended to be created thereby, and (d) to better
assure, convey, grant, assign, transfer and confirm unto Agent and each Lender
the rights now or hereafter intended to be granted to it under this Agreement
or any other Loan Document.  In
furtherance of the foregoing, to the maximum extent permitted by Applicable
Law, each Borrower and each Guarantor (x) authorizes Agent to execute any
such agreements, instruments or other documents in the applicable Borrower’s or
Guarantor’s name and to file such agreements, instruments or other documents in
any appropriate filing office, (y) authorizes Agent to file any financing
statement required hereunder or under any other Loan Document, and any
continuation statement or amendment with respect thereto, in any appropriate
filing office without the signature of any Borrower or any Guarantor, and
(z) ratifies the filing of any financing statement, and any continuation
statement or amendment with respect thereto, filed without the signature of
such Borrower or Guarantor prior to the date hereof.


 


5.24                           Post-Closing Requirements.


 


(a)                                  Within 10 days after the Closing Date,
deliver to Agent all original certificates representing the shares of Stock
pledged under the Security Agreement along with Stock powers with respect
thereto endorsed in blank.


 


(b)                                 Within 20 days after the Closing Date,
deliver to Agent Collateral Access Agreements with respect to the following locations
and Persons, each in form and substance satisfactory to Agent: (i) 8966 Mason
Avenue, Chatsworth, CA; (ii) N49 W13650 Campbell Drive, Menomonee Falls, WI;
(iii) N50 W13605 Overview Drive, Menomonee Falls, WI; (iv) W136 N4863 Campbell
Drive, Menomonee Falls, WI; and (v) MTI Electronics, Inc.


 


(c)                                  Within 20 days after the Closing Date,
deliver to Agent the Joinder to Intercompany Subordination Agreement, duly
executed by each Subsidiary of a Borrower described therein.


 


(d)                                 Within 20 days after the Closing Date,
deliver to Agent, in each case in form and substance satisfactory to Agent: (i)
the Foreign Stock Pledge, duly executed by all parties thereto, together with
all original certificates representing the shares of Stock pledged thereunder
along with Stock powers with respect thereto endorsed in blank, and other
documents or instruments contemplated thereby and (ii) an opinion of Italian
counsel to Borrowers as to such Foreign Stock Pledge and such other matters as
Agent may reasonably request.


 


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(e)                                  Within 30 days after the Closing Date,
deliver to Agent consolidated and consolidating financial statements of Parent
and its Subsidiaries for their fiscal year ended June 30, 2005, audited by
independent certified public accountants reasonably acceptable to Agent and
certified, without any qualifications (including any (i) ”going concern”
or like qualification or exception, (ii) qualification or exception as to
the scope of such audit, or (iii) qualification which relates to the
treatment or classification of any item and which, as a condition to the
removal of such qualification, would require an adjustment to such item) by
such accountants to have been prepared in accordance with GAAP (such audited financial
statements to include a balance sheet, income statement, and statement of cash
flow and, if prepared, such accountants’ letter to management), with such
financial statements being materially consistent, as determined by Agent, with
the preliminary set of such financial statements previously provided by Parent
to Agent.


 


(f)                                    On or before November 30, 2005, deliver to
Agent either (i) a Collateral Access Agreement, in form and substance
satisfactory to Agent, with respect to Borrowers’ facility located at 10900
Wilshire Boulevard, Suite 850, Los Angeles, California (the “Wilshire
Facility”) or (ii) evidence, in form and substance satisfactory to Agent,
of the closure of the Wilshire Facility and the Borrowers’ and Guarantors’
having vacated such premises.


 


6.                                      NEGATIVE COVENANTS.


 


Each Borrower covenants and agrees that, until termination of all of
the Commitments and payment in full of the Obligations, Borrowers will not and
will not permit any Guarantor or any of their respective Subsidiaries to do any
of the following:


 


6.1                                 Indebtedness. 
Create, incur, assume, suffer to exist, guarantee, or otherwise become
or remain, directly or indirectly, liable with respect to any Indebtedness,
except Permitted Indebtedness.


 


6.2                                 Liens. 
Create, incur, assume or suffer to exist any Lien upon or with respect
to any of its properties, whether now owned or hereafter acquired; file or
suffer to exist under the Code, the PPSA or any similar law or statute of any
jurisdiction, a financing statement (or the equivalent thereof) that names it
or any of its Subsidiaries as debtor; sign or suffer to exist any security
agreement authorizing any secured party thereunder to file such financing
statement (or the equivalent thereof); sell any of its property or assets
subject to an understanding or agreement, contingent or otherwise, to
repurchase such property or assets (including sales of accounts receivable)
with recourse to it or any of its Subsidiaries or assign or otherwise transfer,
or permit any of its Subsidiaries to assign or otherwise transfer, any account
or other right to receive income; other than, as to all of the above, Permitted
Liens; provided, that, no Liens shall be permitted on any assets
included in the Borrowing Base other than Agent’s Liens and Permitted Liens securing
the Second Lien Indebtedness.


 


6.3                                 Restrictions on Fundamental
Changes.


 


(a)                                  Merge, consolidate or amalgamate with any
Person, enter into any reorganization or reclassify its Stock, (or agree to do
any of the foregoing),


 


(b)                                 Liquidate, wind up, or dissolve itself, or
suffer any liquidation or dissolution, (or agree to do any of the foregoing),


 


(c)                                  Suspend or go out of a substantial portion of
its or their business, (or agree to do any of the foregoing), or


 


38





















 


(d)                                 Purchase or otherwise acquire, whether in one
transaction or a series of related transactions, all or substantially all of
the assets of any Person (or any division thereof) (or agree to do any of the
foregoing).


 


6.4                                 Disposal of Assets.  Other
than Permitted Dispositions, convey, sell, lease, sublease, license, assign,
transfer, or otherwise dispose of, in one transaction or a series of
transactions, all or any part of its business, property or assets, whether now
or hereafter acquired (or agree to do any of the foregoing).


 


6.5                                 [Reserved.]


 


6.6                                 Nature of Business.  Make
any change in the nature of its business as described in Section 4.25.


 


6.7                                 Payments and Amendments, etc.


 


(a)                                  Amend, modify or otherwise change (or permit
the amendment, modification or other change in any manner of) any of the
provisions of:


 


(i)                                     any of its or its Subsidiaries’
Indebtedness (other than any Subordinated Indebtedness or the Second Lien
Indebtedness) or of any instrument or agreement (including any purchase agreement,
indenture, loan agreement or security agreement) relating to any such
Indebtedness if such amendment, modification or change would shorten the final
maturity or average life to maturity of, or require any payment to be made
earlier than the date originally scheduled on, such Indebtedness, would
increase the interest rate applicable to such Indebtedness, would change the
subordination provisions, if any, of such Indebtedness, or would otherwise be
adverse to the Lenders or the issuer of such Indebtedness in any respect;


 


(ii)                                  any Subordinated Indebtedness unless
expressly permitted under the terms of the applicable Subordination Agreement
which is an agreement to which Agent is a party; or


 


(iii)                               any Second Lien Loan Documents to the extent such amendment,
modification or waiver is prohibited pursuant to the terms of the Second Lien
Intercreditor Agreement.


 


(b)                                 With respect to Indebtedness other than
Subordinated Indebtedness, the Second Lien Indebtedness and the Obligations,
make any voluntary or optional payment, prepayment, redemption, defeasance,
sinking fund payment or other acquisition for value of any of such Indebtedness
or such of its Subsidiaries’ Indebtedness (including by way of depositing money
or securities with the trustee therefor before the date required for the
purpose of paying any portion of such Indebtedness when due), or refund,
refinance, replace or exchange any other Indebtedness for any such Indebtedness
(except to the extent such refinanced Indebtedness is otherwise expressly
permitted by the definition of Permitted Indebtedness), or make any payment,
prepayment, redemption, defeasance, sinking fund payment or repurchase of any
outstanding Indebtedness as a result of any asset sale, change of control,
issuance and sale of debt or equity securities or similar event, or give any
notice with respect to any of the foregoing.


 


(c)                                  Except as expressly permitted pursuant to the
terms of the applicable Subordination Agreement, make any payments, of any kind
or nature, with respect to such Subordinated Indebtedness.


 


(d)                                 Amend, modify or otherwise change its name,
jurisdiction of organization, organizational identification number, federal
employer identification number or, in the case of Mondel, its business number
assigned by the Canadian Revenue Agency.


 


39





















 


(e)                                  Amend, modify or otherwise change its
certificate of incorporation or bylaws (or other similar organizational
documents), including by the filing or modification of any certificate of
designation, or any agreement or arrangement entered into by it, with respect
to any of its capital Stock (including any shareholders’ agreement), or enter
into any new agreement with respect to any of its capital Stock, except any
such amendments, modifications or changes or any such new agreements or
arrangements pursuant to this subsection (e) that either individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Change.


 


(f)                                    Except as permitted by Section 6.7(a),
agree to any material amendment or other material change to or material waiver
of its rights under any Material Contract.


 


(g)                                 Make any principal payments (whether
voluntary, mandatory or otherwise), with respect to the Second Lien
Indebtedness other than (i) as set forth in Section 2.4(c)(vi), (ii)
regularly scheduled quarterly principal payments of no more than $1,000,000
commencing October 1, 2006 so long as, both before and after giving effect to
any such payment, no Event of Default exists or would otherwise result from
making any such principal payment, (iii) in connection with Second Lien
Prepayment Events so long as, both before and after giving effect to any such
payment, no Event of Default exists or would otherwise result from making any
such principal payment and (iv) voluntary prepayments so long as, both before
and after giving effect to any such payment no Event of Default exists or would
otherwise result from making any such principal payment; provided, however,
that in the event any principal payment with respect to the Second Lien
Indebtedness is not permitted to be made as a result of the existence of an
Event of Default, then Borrowers may make such principal payment to the extent
Agent has notified Borrowers that the Obligations (up to the Maximum First Lien
Loan Amount (as such term is defined in the Second Lien Intercreditor
Agreement)) have first been satisfied and paid in full in accordance with the
terms of Section 2.4(b), it being understood that the operation of the
foregoing provision shall not be construed to or result in a waiver or cure of
any payment default which would arise under the Second Lien Loan Documents.


 


6.8                                 Change of Control. 
Cause, permit, or suffer, directly or indirectly, any Change of Control.


 


6.9                                 Consignments. 
Consign any of their Inventory or sell any of their Inventory on bill
and hold, sale or return, sale on approval, or other conditional terms of sale
unless Agent has received a Collateral Access Agreement executed by the
applicable consignee or other such Person; provided, however,
that no such Collateral Access Agreement shall be required to the extent the
book value of all Inventory held by such consignee or other such Person does
not exceed $100,000 in any one instance or $300,000 in the aggregate (inclusive
of all Inventory and Equipment stored with any bailee, warehouseman or similar
party).


 


6.10                           Distributions; Restricted
Payments.  (a) Declare or pay any dividend or other
distribution, direct or indirect, on account of any of its or its Subsidiaries’
capital Stock now or hereafter outstanding, (b) make any repurchase,
redemption, retirement, defeasance, sinking fund or similar payment, purchase
or other acquisition for value, direct or indirect, of any of its or its direct
or indirect parent’s capital Stock now or hereafter outstanding, (c) make any
payment to retire, or to obtain the surrender of, any outstanding warrants,
options or other rights for the purchase or acquisition of shares of any class
of its capital Stock now or hereafter outstanding, or (d) pay any management
fees or any other fees or expenses (including the reimbursement thereof by any
Borrower, any Guarantor or any of their respective Subsidiaries) pursuant to
any management, consulting or other services agreement to any of the shareholders
or other equity holders of any Borrower, any Guarantor or any of their
respective Subsidiaries or other Affiliates, or to any other Subsidiaries or
Affiliates of any Borrower or any Guarantor; provided, however,
that so long as no Default or Event of Default has occurred and is continuing
or would result therefrom (i) any Subsidiary of any Borrower may pay
dividends to such Borrower, and (ii) the Parent may pay dividends in the
form of common capital Stock.


 


40





















 


6.11                           Accounting Methods. 
Modify or change their fiscal year or their method of accounting (other
than as may be required to conform to GAAP) or enter into, modify, or terminate
any agreement currently existing, or at any time hereafter entered into with
any third party accounting firm or service bureau for the preparation or
storage of Borrowers’ or their respective Subsidiaries’ accounting records
without said accounting firm or service bureau agreeing to provide Agent
information regarding Borrowers’ and their respective Subsidiaries’ financial
condition.


 


6.12                           Investments.  Make
or commit or agree to make any Investment or other loan, advance guarantee of
obligations, other extension of credit or capital contributions to, or hold or
invest in or commit or agree to hold or invest in, or purchase or otherwise
acquire or commit or agree to purchase or otherwise acquire any shares of the
capital Stock, bonds, notes, debentures or other securities of, or make or
commit or agree to make any other investment in, any other Person, or purchase
or own any futures contract or otherwise become liable for the purchase or sale
of currency or other commodities at a future date in the nature of a futures
contract, or incur any liabilities (including contingent obligations) for or in
connection with any Investment, or permit any of its Subsidiaries to do any of
the foregoing, except for: 
(a) Investments existing on the date hereof, as set forth on Schedule 6.12
hereto, but not any increase in the amount thereof as set forth in such
Schedule or any other modification of the terms thereof, (b) temporary
loans and advances by a Borrower to a Borrower or a Guarantor that is an
operating Subsidiary of a Borrower and by such other Borrower or Guarantor to a
Borrower, made in the ordinary course of business and not exceeding in the
aggregate at any one time outstanding $100,000, and (c) Permitted
Investments.  Without limiting the
foregoing: (x) Administrative Borrower, Guarantors and their respective
Subsidiaries shall not have cash, Cash Equivalents and other Permitted
Investments (other than in the Cash Management Accounts) in Deposit Accounts or
Securities Accounts (i) located in the United States or Canada in an amount in
excess of $10,000 at any one time with respect to any one such account unless
Administrative Borrower, such Guarantor or such Subsidiary, as applicable, and
the applicable securities intermediary or bank have entered into a Control
Agreement governing such cash, Cash Equivalents and other Permitted Investments
in order to perfect (and further establish) the Agent’s Liens therein or (ii)
located outside the United States or Canada in an amount in excess of
$5,000,000 in the aggregate at any one time unless Administrative Borrower,
such Guarantor or such Subsidiary, as applicable, and the applicable securities
intermediary or bank have entered into a Control Agreement governing such cash,
Cash Equivalents and other Permitted Investments in order to perfect (and
further establish) the Agent’s Liens therein; and (y) subject to the foregoing
clause (x), Borrowers and Guarantors shall not and shall not permit their
respective Subsidiaries to establish or maintain any Deposit Account or
Securities Account unless Agent shall have received a Control Agreement in
respect of such Deposit Account or Securities Account.


 


6.13                           Transactions with Affiliates. 
Enter into, renew, extend or be a party to, any transaction or series of
related transactions (including the purchase, sale, lease, transfer or exchange
of property or assets of any kind or the rendering of services of any kind)
with any Affiliate, except (a) in the ordinary course of business in a
manner and to an extent consistent with past practice and necessary or
desirable for the prudent operation of its business, for fair consideration and
on terms no less favorable to it or its Subsidiaries than would be obtainable
in a comparable arm’s length transaction with a Person that is not an Affiliate
thereof, (ii) if such transactions involve one or more payments by any
Borrower or any of its Subsidiaries in excess of $100,000, are fully disclosed
to Agent, and (iii) transactions permitted by Section 6.10 or Section
6.12.


 


6.14                           Use of Proceeds.  Use
the proceeds of (1) the Advances for any purpose other than (a) on the
Closing Date, (i) to repay in full the outstanding principal, accrued
interest, and accrued fees and expenses owing to Existing Lender, (ii) to fund
no more than $4,600,000 of the Nilssen Award or any full and final settlement
in respect thereof, and (iii) to pay transactional fees, costs, and
expenses incurred in connection with this Agreement, the other Loan Documents,
and the transactions contemplated hereby and thereby, and (b) thereafter,
consistent with the terms and conditions hereof, for its lawful and permitted
purposes and (2) the Second Lien Indebtedness other than to (i) pay the Nilssen
Award or any full and final settlement in respect


 


41





















 


thereof; provided, that,
if the Nilssen Award is vacated pursuant to a final non-appealable court order
by a court of competent jurisdiction or if the amount to be paid in connection
with the Nilssen Award or any full and final settlement in respect thereof is
less than $18,000,000, such proceeds or excess proceeds, as the case may be,
shall be used consistent with the terms and conditions hereof, for the
Borrowers’ lawful and permitted purposes, and (ii) to pay transactional
fees, costs, and expenses incurred in connection with the Second Lien Loan
Documents and the transactions contemplated thereby.


 


6.15                           Inventory and Equipment with
Bailees.  Store the Inventory or Equipment of
Borrowers, Guarantors or their respective Subsidiaries at any time now or
hereafter with a bailee, warehouseman, or similar party other than as set forth
on Schedule 4.5 and only to the extent a Collateral Access Agreement has
been delivered to Agent with respect to such bailee, warehouseman or similar
party; provided, that, to the extent any Inventory and Equipment
stored with such bailee, warehouseman or similar party has a book value of less
than $100,000 for any one location and $300,000 in the aggregate for all such
locations (inclusive of any Inventory or Equipment on consignment with any
Person), no such Collateral Access Agreement shall be required.


 


6.16                           Financial Covenants.


 


(a)                                  Fail to maintain or achieve:


 


(i)             Minimum TTM EBITDA.  TTM EBITDA, measured as of the end of each
fiscal quarter specified in the following table of no less than the applicable
amount set forth opposite thereto:


 


	
  Applicable Amount

  	
   

  	
  Fiscal Quarter Ending

  
	
  $

  	
  13,000,000

  	
   

  	
  September 30, 2005

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  12,400,000

  	
   

  	
  December 31, 2005

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  14,700,000

  	
   

  	
  March 31, 2006

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  17,000,000

  	
   

  	
  June 30, 2006 and

  the last day of each

  fiscal quarter thereafter

  



 


(ii)          Minimum TTM Power Systems EBITDA.  TTM Power Systems EBITDA, measured as of the
end of each fiscal quarter specified in the following table of no less than the
applicable amount set forth opposite thereto:


 


	
  Applicable Amount

  	
   

  	
  Fiscal Quarter Ending

  
	
  $

  	
  8,500,000

  	
   

  	
  September 30, 2005

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  8,500,000

  	
   

  	
  December 31, 2005

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  8,500,000

  	
   

  	
  March 31, 2006

  
	
   

  	
   

  	
   

  	
   

  
	
  $

  	
  8,500,000

  	
   

  	
  June 30, 2006 and

  the last day of each

  fiscal quarter thereafter

  



 


42





















 


(iii)       Fixed Charge Coverage Ratio.  A Fixed Charge Coverage Ratio, measured for
the period specified in the following table of not less than the applicable
ratio set forth opposite thereto:


 


	
  Applicable Ratio

  	
   

  	
  Measurement Period

  
	
  2.00:1.00

  	
   

  	
  3 months ending
  September 30, 2005

  
	
   

  	
   

  	
   

  
	
  2.00:1.00

  	
   

  	
  6 months ending
  December 31, 2005

  
	
   

  	
   

  	
   

  
	
  1.75:1.00

  	
   

  	
  9 months ending March
  31, 2006

  
	
   

  	
   

  	
   

  
	
  1.75:1.00

  	
   

  	
  12 months ending June
  30, 2006 and

  the 12 months ending on the last day of each

  fiscal quarter thereafter

  



 


(iv)      Leverage Ratio.  A
Leverage Ratio, measured as of the end of each fiscal quarter specified in the
following table of not more than the applicable ratio set forth opposite
thereto:


 


	
  Applicable Ratio

  	
   

  	
  Fiscal Quarter Ending

  
	
  4.10:1.00

  	
   

  	
  September 30, 2005

  
	
   

  	
   

  	
   

  
	
  4.40:1.00

  	
   

  	
  December 31, 2005

  
	
   

  	
   

  	
   

  
	
  3.75:1.00

  	
   

  	
  March 31, 2006

  
	
   

  	
   

  	
   

  
	
  3.25:1.00

  	
   

  	
  June 30, 2006 and

  the last day of each

  fiscal quarter thereafter

  



 


(b)                                 Make:


 


(i)             Capital Expenditures.  Capital Expenditures in any fiscal year in
excess of the amount set forth in the following table for the applicable
period:


 


	
  Fiscal Year 2006

  	
   

  	
  Fiscal Year 2007

  	
   

  	
  6 Months Ended

  December 31, 2007

  	
   

  
	
  $

  	
  7,500,000

  	
   

  	
  $

  	
  9,600,000

  	
   

  	
  $

  	
  5,200,000

  	
   

  
									



 


43





















 


Notwithstanding
the foregoing, Capital Expenditures for any fiscal year of Parent and its
Subsidiaries after 2007 shall be permitted only to the extent (A) not in excess
of the amount set forth above and (B) supported by updated Projections provided
to Agent in accordance with the terms of this Agreement for such fiscal years.


 


6.17                           ERISA. 
(a) Terminate or
permit any of their ERISA Affiliates to, terminate any Pension Plan so as to
result in any material liability to Parent, its Subsidiaries or any ERISA
Affiliate, (b) permit to exist any ERISA Event, or any other event or condition,
which presents the risk of a material liability to any ERISA Affiliate, (c)
make a complete or partial withdrawal (within the meaning of ERISA Section
4201) from any Multiemployer Plan so as to result in any material liability to
Parent, its Subsidiaries or any ERISA Affiliate, (d) enter into any new Plan or
modify any existing Plan so as to increase its obligations thereunder which
could result in any material liability to any ERISA Affiliate, (e) permit the
present value of all nonforfeitable accrued benefits under any Plan (using the
actuarial assumptions utilized by the PBGC upon termination of a Plan)
materially to exceed the fair market value of Plan assets allocable to such
benefits, all determined as of the most recent valuation date for each such
Plan, or (f) engage in any transaction which would cause any obligation, or
action taken or to be taken, hereunder (or the exercise by Agent or any Lender
of any of their rights under this Agreement or the other Loan Documents) to be
a non-exempt (under a statutory or administrative class exemption) prohibited
transaction under ERISA or Section 4975 of the IRC.


 


6.18                           Lease Obligations. 
Create, incur or suffer to exist any obligations as lessee (a) for
the payment of rent for any real or personal property in connection with any
sale and leaseback transaction, or (b) for the payment of rent for any
real or personal property under leases or agreements to lease other than
(i) Capitalized Lease Obligations which would not cause the aggregate
amount of all obligations under Capitalized Leases entered into after the
Closing Date owing by all Borrowers, Guarantors and their respective
Subsidiaries in any of fiscal year of to exceed the amounts set forth in Section
6.16(b)(i)), and (ii) Operating Lease Obligations which would not
cause the aggregate amount of all Operating Lease Obligations owing by all
Borrowers, Guarantors and their Subsidiaries in any fiscal year to exceed
$5,000,000.


 


6.19                           Federal Reserve Regulations. 
Permit any Advance or the proceeds of any Advance under this Agreement
to be used for any purpose that would cause such Advance to be a margin loan
under the provisions of Regulation T, U or X of the Board.


 


6.20                           Limitations on Dividends and
Other Payment Restrictions Affecting Subsidiaries. 
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 Subsidiary of any Borrower or Guarantor (i) to pay
dividends or to make any other distribution on any shares of capital Stock of
such Subsidiary owned by such Borrower or such Guarantor or any of its
Subsidiaries, (ii) to pay or prepay or to subordinate any Indebtedness
owed to any Borrower, any Guarantor or any of their respective Subsidiaries,
(iii) to make loans or advances to any Borrower, any Guarantor or any of
their respective Subsidiaries or (iv) to transfer any of its property or
assets to any Borrower, any Guarantor or any of their respective Subsidiaries,
or permit any of its Subsidiaries to do any of the foregoing; provided, however, that nothing
in any of clauses (i) through (iv) of this Section 6.20 shall
prohibit or restrict compliance with:


 


(a)                                  this Agreement and the other Loan Documents;


 


(b)                                 any agreements in effect on the date of this
Agreement and described on Schedule 6.20;


 


(c)                                  any Applicable Law, rule or regulation
(including applicable currency control laws and applicable state corporate
statutes restricting the payment of dividends in certain circumstances);


 


44





















 


(d)                                 in the case of clause (iv), any agreement
setting forth customary restrictions on the subletting, assignment or transfer
of any property or asset that is leased or licensed; or


 


(e)                                  in the case of clause (iv), any agreement,
instrument or other document evidencing a Permitted Lien that restricts, on
customary terms, the transfer of any property or assets subject thereto.


 


6.21                           Limitation on Issuance of Capital
Stock. 
Except for the issuance or sale of common stock or Permitted Preferred
Stock by the Parent, issue or sell or enter into any agreement or arrangement
for the issuance and sale of, or permit any of its Subsidiaries to issue or
sell or enter into any agreement or arrangement for the issuance and sale of,
any shares of its capital Stock, any securities convertible into or
exchangeable for its capital Stock or any warrants.


 


6.22                           Investment Company Act of 1940. 
Engage in any business, enter into any transaction, use any securities
or take any other action that would cause it or any of its Subsidiaries to
become subject to the registration requirements of the Investment Company Act
of 1940, as amended, by virtue of being an “investment company” or a company “controlled”
by an “investment company” not entitled to an exemption within the meaning of
such Act.


 


6.23                           Environmental. 
Permit the use, handling, generation, storage, treatment, release or
disposal of Hazardous Materials at any property owned or leased by it or any of
its Subsidiaries, except in compliance with Environmental Laws and so long as
such use, handling, generation, storage, treatment, release or disposal of
Hazardous Materials does not result in a Material Adverse Change.


 


6.24                           Excluded Foreign Subsidiaries. 
Permit any Excluded Foreign Subsidiary to (a) have or acquire any
assets, (b) incur any liabilities with recourse to any Borrower or Guarantor,
or (c) engage in any other activity or business of any kind other than the
dissolution thereof.


 


7.                                      EVENTS OF DEFAULT.


 


Any one or more of the following events shall constitute an event of
default (each, an “Event of Default”) under this Agreement:


 


7.1                                 If any Borrower fails to pay when due and
payable, or when declared due and payable (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) all or any portion of
the Obligations (including any portion thereof that accrues after the
commencement of an Insolvency Proceeding, regardless of whether allowed or
allowable in whole or in part as a claim in any such Insolvency Proceeding).


 


7.2                                 If any Borrower, any Guarantor or any of
their respective Subsidiaries fails to perform or comply with any covenant or
agreement contained in (a) Section 5 or Section 6, or any
Borrower, any Guarantor or any of their respective Subsidiaries fails to
perform or comply with any covenant or agreement contained in any Security
Document to which it is a party or (b) any Loan Document to be performed or
observed by it and, except as set forth in Section 7.1 or clause (a) of
this Section 7.2, such failure, if capable of being remedied, shall
remain unremedied for 15 days after the earlier of the date a senior officer of
any Borrower or Guarantor becomes aware of such failure and the date written
notice of such default shall have been given by any Agent to such Borrower or
Guarantor.


 


7.3                                 If any material portion of any Borrower’s or
any of its Subsidiaries’ assets is attached, seized, subjected to a writ or
distress warrant, or is levied upon, or comes into the possession of any third
Person and the same is not discharged before the earlier of 30 days after the
date it first arises or 5 days prior to the date on which such property or
asset is subject to forfeiture by such Borrower or the applicable Subsidiary.


 


45





















 


7.4                                 If (a) an Insolvency Proceeding is commenced
by any Borrower or any Subsidiary of a Borrower, (b) any Borrower or any
Subsidiary of any Borrower shall be generally not paying its debts as such
debts become due or shall admit in writing its inability to pay its debts
generally, (c) any Borrower or any Subsidiary of any Borrower shall make a
general assignment for the benefit of creditors, or (d) any Borrower or any
Subsidiary of any Borrower shall take any action to authorize or effect any of
the actions set forth above in this Section 7.4.


 


7.5                                 If an Insolvency Proceeding is commenced
against any Borrower or any Subsidiary of a Borrower, and any of the following
events occur:  (a) the applicable
Borrower or Subsidiary consents to the institution of such Insolvency
Proceeding against it, (b) the petition commencing the Insolvency
Proceeding is not timely controverted, (c) the petition commencing the
Insolvency Proceeding is not dismissed within 30 calendar days of the date of
the filing thereof; (d) an interim trustee is appointed to take possession
of all or any substantial portion of the properties or assets of, or to operate
all or any substantial portion of the business of, any Borrower or any
Subsidiary of a Borrower, or (e) an order for relief shall have been
issued or entered therein.


 


7.6                                 If any Borrower or any Subsidiary of a
Borrower is enjoined, restrained, or in any way prevented by court order or any
Governmental Authority from continuing to conduct all or any material part of
its business.


 


7.7                                 If Borrower or any of its Subsidiaries shall
fail to pay any principal of or interest on any of its Indebtedness (excluding
the Obligations) in excess of $100,000, or any premium thereon, when due
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise) and such failure shall continue after the applicable grace period,
if any, specified in the agreement or instrument relating to such Indebtedness,
or any other default under any agreement or instrument relating to any such
Indebtedness, or any other event, shall occur and shall continue after the
applicable grace period, if any, specified in such agreement or instrument, if
the effect of such default or event is to accelerate, or to permit the
acceleration of, the maturity of such Indebtedness; or any such Indebtedness
shall be declared to be due and payable, or required to be prepaid (other than
by a regularly scheduled required prepayment), redeemed, purchased or defeased
or an offer to prepay, redeem, purchase or defease such Indebtedness shall be
required to be made, in each case, prior to the stated maturity thereof.


 


7.8                                 If one or more judgments or orders for the
payment of money exceeding $100,000 in the aggregate shall be rendered against
Parent or any of its Subsidiaries and remain unsatisfied, or the Parent or any
of its Subsidiaries shall agree to the settlement of any one or more pending or
threatened actions, suits or proceedings affecting any Borrower or Guarantor
before any court or other Governmental Authority or any arbitrator or mediator,
providing for the payment of money exceeding $100,000 in the aggregate, and in
the case of any such judgment or order either (a) enforcement proceedings shall
have been commenced by any creditor upon any such judgment or order, or (b)
there shall be a period of 10 consecutive days after entry thereof during which
a stay of enforcement of any such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; provided, however,
that any such judgment, order or settlement shall not give rise to an Event of
Default under this Section 7.7 if and for so long as (i) the amount of
such judgment, order, or settlement is covered by a valid and binding policy of
insurance between the defendant and the insurer covering full payment thereof
(subject to customary deductibles) and (ii) such insurer has been notified, and
has not disputed the claim made for payment, of the amount of such judgment,
order or settlement; provided, further, that the Nilssen Award
shall not give rise to an Event of Default under this Section 7.7 so
long as the Nilssen Award is paid or vacated pursuant to a final non-appealable
court order by a court of competent jurisdiction.


 


7.9                                 If any warranty, representation, statement,
or Record made or deemed made herein or in any other Loan Document or delivered
to Agent or any Lender in connection with this Agreement or any other Loan
Document proves to be untrue in any material respect (except where any such
representation or warranty is already subject to a materiality standard, in
which case such representation or warranty proves to be untrue in any respect)
as of the date of making or deemed making thereof.


 


46





















 


7.10                           If the obligation of any Guarantor under the Guaranty is limited or
terminated by operation of law or by such Guarantor or any such Guarantor
becomes the subject of an Insolvency Proceeding or if any event described in
any other subsection of this Section 7 occurs with respect to a Guarantor.


 


7.11                           If any Security Document shall, for any reason, fail or cease to create
a valid and perfected and, except to the extent permitted by the terms hereof
or thereof, first priority Lien on or security interest in the Collateral
covered hereby or thereby, except as a result of a disposition of the
applicable Collateral in a transaction permitted under this Agreement.


 


7.12                           Any provision of any Loan Document shall at any time for any reason
cease to be valid and binding on any Borrower or Subsidiary of a Borrower
purported to be bound thereby, or be declared to be null and void, or the
validity or enforceability thereof shall be contested by any Borrower or any
Subsidiary of a Borrower or any such Person shall deny in writing that it has
any liability or obligation purported to be created by any Loan Document, or a
proceeding shall be commenced by any Borrower or any Subsidiary of a Borrower,
or by any Governmental Authority having jurisdiction over any Borrower or any
Subsidiary of a Borrower, seeking to establish the invalidity or
unenforceability thereof, or any Borrower or any Subsidiary of a Borrower shall
deny that it has any liability or obligation purported to be created under any
Loan Document.


 


7.13                           If there occurs one or more ERISA Events which individually or in the
aggregate results in or otherwise is associated with liability of any Borrower,
any of its Subsidiaries, or any of their respective ERISA Affiliates in excess
of $100,000 during the term of this Agreement; or there exists, an amount of
unfunded benefit liabilities (as defined in Section 4001(a)(18) of ERISA),
individually or in the aggregate for all Pension Plans maintained, sponsored or
obligated to be contributed by any Borrower, any of its Subsidiaries or any of
their ERISA Affiliates (excluding for purposes of such computation any Pension
Plans with respect to which assets exceed benefit liabilities) which exceeds
$70,600,000.


 


7.14                           If (a) any default or event of default occurs under or with respect to
any Material Contract (other than any Second Lien Loan Document) which is not
cured or waived upon such occurrence, (b) any Event of Default (as defined in
any Second Lien Loan Document) occurs under any Second Lien Loan Document, or
(c) any Material Contract is terminated and such termination could reasonably
be expected to result in a Material Adverse Change.


 


7.15                           [Reserved.]


 


7.16                           If (a) there shall occur and be continuing any “Event of Default”
(or any comparable term) by any Borrower, any Guarantor or their respective
Subsidiaries under, and as defined in or any document evidencing or governing
any Subordinated Indebtedness, (b) any of the Obligations for any reason shall
cease to be “First Lien Obligations,” “Permitted Indebtedness,” “Senior Debt”, “Senior
Indebtedness” or “Designated Senior Indebtedness” (or any comparable terms)
under, and as defined in any Second Lien Loan Document or document evidencing
or governing any Subordinated Indebtedness, (c) Agent’s Liens securing the
Obligations for any reason shall cease to be “Permitted Liens” (or any
comparable term) under, and as defined in any Second Lien Loan Document or
document evidencing or governing any Subordinated Indebtedness, (d) any
Indebtedness other than the Obligations and the Second Lien Indebtedness shall
constitute “Senior Indebtedness”, “Senior Debt” or “Designated Senior
Indebtedness” (or any comparable term) under, and as defined in, any document
evidencing or governing any Subordinated Indebtedness, (e) any Subordination
Agreement 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
Indebtedness related thereto, or (f) the Second Lien Intercreditor Agreement
shall, in whole or in part, terminate, cease to be effective or cease to be
legally valid, binding and enforceable against any the Second Lien Agent, any
Second Lien Lender or any other holder of Second Lien Indebtedness.


 


47





















 


7.17                           If any material damage to, or loss, theft or destruction of, any
Collateral, whether or not insured, or any strike, lockout, labor dispute,
embargo, condemnation, act of God or public enemy, or other casualty which
causes, for more than 15 days, the cessation or substantial curtailment of
revenue producing activities at any facility of any Borrower or any of its
Subsidiaries, if any such event or circumstance could reasonably be expected to
result in a Material Adverse Change.


 


7.18                           If any cessation of a substantial part of the business of any Borrower
or any of its Subsidiaries occurs for a period which materially and adversely
affects the ability of any Borrower or any of its Subsidiaries to continue its
business on a profitable basis.


 


7.19                           If there occurs the loss, suspension or revocation of, or failure to
renew, any license or permit now held or hereafter acquired by the Parent or
any of its Subsidiaries, if such loss, suspension, revocation or failure to
renew could reasonably be expected to result in a Material Adverse Change.


 


7.20                           If there occurs the indictment, or the threatened indictment of the
Parent or any of its Subsidiaries under any criminal statute, or commencement
or threatened commencement of criminal or civil proceedings against Parent or
any of its Subsidiaries pursuant to which statute or proceedings the penalties
or remedies sought or available include forfeiture to any Governmental
Authority of any material portion of the property of such Person.


 


7.21                           If the Parent or any of its Subsidiaries shall be liable for any
Environmental Liabilities the payment of which could reasonably be expected to
result in a Material Adverse Change.


 


7.22                           If an event or development occurs which could reasonably be expected to
result in a Material Adverse Change.


 


7.23                           If a Triggering Event has occurred and is continuing.


 


7.24                           If the Borrowers have not received, and remitted to the Holding
Account, cash proceeds of the Second Lien Indebtedness in an aggregate amount
of not less than $18,000,000 on or before November 30, 2005.


 


8.                                      THE LENDER GROUP’S RIGHTS AND
REMEDIES.


 


8.1                                 Rights and Remedies.  Upon
the occurrence, and during the continuation, of an Event of Default, the
Required Lenders (at their election but without notice of their election and
without demand) may authorize and instruct Agent to do any one or more of the
following on behalf of the Lender Group (and Agent, acting upon the
instructions of the Required Lenders, shall do the same on behalf of the Lender
Group), all of which are authorized by Borrowers:


 


(a)                                  Declare all or any portion of the
Obligations, whether evidenced by this Agreement, by any of the other Loan
Documents, or otherwise, immediately due and payable;


 


(b)                                 Cease advancing money or extending credit to
or for the benefit of Borrowers under this Agreement, under any of the Loan
Documents, or under any other agreement between Borrowers and the Lender Group;


 


48





















 


(c)                                  Terminate this Agreement and any of the other
Loan Documents as to any future liability or obligation of the Lender Group,
but without affecting any of the Agent’s Liens in the Collateral and without
affecting the Obligations; and


 


(d)                                 The Lender Group shall have all other rights
and remedies available at law or in equity or pursuant to any other Loan
Document.


 


The foregoing to the contrary notwithstanding, upon the occurrence of
any Event of Default described in Section 7.4 or Section 7.5,
in addition to the remedies set forth above, without any notice to Borrowers or
any other Person or any act by the Lender Group, the Commitments shall
automatically terminate and the Obligations then outstanding, together with all
accrued and unpaid interest thereon and all fees and all other amounts due
under this Agreement and the other Loan Documents, shall automatically and immediately
become due and payable, without presentment, demand, protest, or notice of any
kind, all of which are expressly waived by Borrowers.


 


8.2                                 Remedies Cumulative.  The
rights and remedies of the Lender Group under this Agreement, the other Loan
Documents, and all other agreements shall be cumulative.  The Lender Group shall have all other rights
and remedies not inconsistent herewith as provided under the Code, by law, or
in equity.  No exercise by the Lender
Group of one right or remedy shall be deemed an election, and no waiver by the
Lender Group of any Event of Default shall be deemed a continuing waiver.  No delay by the Lender Group shall constitute
a waiver, election, or acquiescence by it.


 


9.                                      TAXES AND EXPENSES.


 


If any Borrower or its Subsidiaries fails to pay any monies (whether
taxes, assessments, insurance premiums, or, in the case of leased properties or
assets, rents or other amounts payable under such leases) due to third Persons,
or fails to make any deposits or furnish any required proof of payment or
deposit, all as required under the terms of this Agreement, then, Agent, in its
sole discretion and without prior notice to any Borrower or any other Person,
may do any or all of the following:  (a) make
payment of the same or any part thereof, (b) set up such reserves against
the Borrowing Base or the Maximum Revolver Amount as Agent deems necessary to
protect the Lender Group from the exposure created by such failure, or
(c) in the case of the failure to comply with Section 5.8
hereof, obtain and maintain insurance policies of the type described in Section 5.8
and take any action with respect to such policies as Agent deems prudent.  Any such amounts paid by Agent shall
constitute Lender Group Expenses and any such payments shall not constitute an
agreement by the Lender Group to make similar payments in the future or a
waiver by the Lender Group of any Event of Default under this Agreement.  Agent need not inquire as to, or contest the
validity of, any such expense, tax, or Lien and the receipt of the usual
official notice for the payment thereof shall be conclusive evidence that the
same was validly due and owing.


 


10.                               WAIVERS; INDEMNIFICATION.


 


10.1                           Demand; Protest; etc.  Each
Borrower waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of documents, instruments,
chattel paper, and guaranties at any time held by the Lender Group on which any
such Borrower may in any way be liable.


 


10.2                           The Lender Group’s Liability for
Collateral.  Each Borrower hereby agrees that:  (a) so long as Agent complies with its
obligations, if any, under the Code or other Applicable Law, the Lender Group
shall not in any way or manner be liable or responsible for:  (i) the safekeeping of the Collateral,
(ii) any loss or damage thereto occurring or arising in any manner or
fashion from any cause, (iii) any diminution in the value thereof, or
(iv) any act or default of any carrier, warehouseman, bailee, forwarding
agency, or other Person, and (b) all risk of loss, damage, or destruction
of the Collateral shall be borne by Borrowers.


 


49





















 


10.3                           Indemnification.  Each
Borrower shall jointly and severally pay, indemnify, defend, and hold the Agent-Related
Persons, the Lender-Related Persons, and each Participant (each, an “Indemnified
Person”) harmless (to the fullest extent permitted by law) from and against
any and all claims, demands, suits, actions, investigations, proceedings, and
damages, and all reasonable attorneys fees and disbursements and other costs
and expenses actually incurred in connection therewith or in connection with
the enforcement of this indemnification (as and when they are incurred and
irrespective of whether suit is brought), at any time asserted against, imposed
upon, or incurred by any of them (a) in connection with or as a result of
or related to the execution, delivery, enforcement, performance, or
administration (including any restructuring or workout with respect hereto) of
this Agreement, any of the other Loan Documents, or the transactions
contemplated hereby or thereby or the monitoring of Borrowers’ and their
respective Subsidiaries’ compliance with the terms of the Loan Documents,
(b) with respect to any investigation, litigation, or proceeding related
to this Agreement, any other Loan Document, or the use of the proceeds of the
credit provided hereunder (irrespective of whether any Indemnified Person is a
party thereto), or any act, omission, event, or circumstance in any manner
related thereto and (c) in connection with or arising out of any presence or
release of Hazardous Materials at, on, under, to or from any assets or
properties owned, leased or operated by any Borrower or any of its Subsidiaries
or any Environmental Actions, Environmental Liabilities and Costs or Remedial
Actions related in any way to any such assets or properties of any Borrower or
any of its Subsidiaries (all the foregoing, collectively, the “Indemnified
Liabilities”).  The foregoing to the
contrary notwithstanding, Borrowers shall have no obligation to any Indemnified
Person under this Section 10.3 with respect to any Indemnified
Liability that a court of competent jurisdiction finally determines to have
resulted from the gross negligence or willful misconduct of such Indemnified
Person.  This provision shall survive the
termination of this Agreement and the repayment of the Obligations.  If any Indemnified Person makes any payment
to any other Indemnified Person with respect to an Indemnified Liability as to
which Borrowers were required to indemnify the Indemnified Person receiving
such payment, the Indemnified Person making such payment is entitled to be
indemnified and reimbursed by Borrowers with respect thereto.  WITHOUT LIMITATION, THE
FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO
INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF
ANY NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER
PERSON.


 


10.4                           Waiver of Consequential Damages,
Etc.  To the fullest extent permitted by Applicable
Law, no Borrower shall assert, and each Borrower hereby waives, any claim
against any Indemnified Person, on any theory of liability, for special,
indirect, consequential or punitive damages (as opposed to direct or actual
damages) arising out of, in connection with, or as a result of, this Agreement,
any other Loan Document or any agreement or instrument contemplated hereby, the
transactions contemplated hereby or thereby, any Advance or Letter of Credit or
the use of the proceeds thereof.  No
Indemnified Person shall be liable for any damages arising from the use by
unintended recipients of any information or other materials distributed by it
through telecommunications, electronic or other information transmission
systems in connection with this Agreement or the other Loan Documents or the
transactions contemplated hereby or thereby.


 


11.                               NOTICES.


 


Unless otherwise provided in this Agreement, all notices or demands by
Borrowers or Agent to the other relating to this Agreement or any other Loan
Document shall be in writing and (except for financial statements and other
informational documents which may be sent by first-class mail, postage prepaid)
shall be personally delivered or sent by registered or certified mail (postage
prepaid, return receipt requested), overnight courier, electronic mail (at such
email addresses as Administrative Borrower or Agent, as 


 


50





















 


applicable, may designate to each other in accordance herewith), or
telefacsimile to Borrowers in care of Administrative Borrower or to Agent, as
the case may be, at its address set forth below:


 


	
  If
  to Borrowers, in care of

  	
  MAGNETEK, INC.

  
	
  Administrative
  Borrower at:

  	
  8966
  Mason Avenue

  
	
   

  	
  Chatsworth,
  CA 91311

  
	
   

  	
  Attn:
  Tina McKnight

  
	
   

  	
  Fax
  No.: 818.727.2219

  
	
   

  	
   

  
	
  with
  copies to:

  	
  GIBSON, DUNN & CRUTCHER LLP

  
	
   

  	
  333
  South Grand Avenue

  
	
   

  	
  Los Angeles, CA 90071

  
	
   

  	
  Attn: Jennifer Bellah Maguire, Esq.

  
	
   

  	
  Fax
  No.: 213.229.7520

  
	
   

  	
   

  
	
  If
  to Agent:

  	
  WELLS FARGO FOOTHILL, INC.

  
	
   

  	
  2450
  Colorado Avenue, Suite 3000 West

  
	
   

  	
  Santa
  Monica, CA 90404

  
	
   

  	
  Attn:
  Business Finance Division Manager

  
	
   

  	
  Fax
  No.: 310.453.7413

  
	
   

  	
   

  
	
  with
  copies to:

  	
  MORRISON & FOERSTER LLP

  
	
   

  	
  555
  West Fifth Street

  
	
   

  	
  Los Angeles, CA 90013

  
	
   

  	
  Attn: Sandra L. Montgomery, Esq.

  
	
   

  	
  Fax
  No.: 213.892.5454

  



 


Agent and Borrowers may change the address at
which they are to receive notices hereunder, by notice in writing in the
foregoing manner given to the other parties. 
All notices or demands sent in accordance with this Section 11,
other than notices by Agent in connection with enforcement rights against the
Collateral under the provisions of the Code or PPSA, shall be deemed received
on the earlier of the date of actual receipt or 3 Business Days after the
deposit thereof in the mail.  Each
Borrower acknowledges and agrees that notices sent by the Lender Group in
connection with the exercise of enforcement rights against Collateral under the
provisions of the Code or PPSA shall be deemed sent when deposited in the mail
or personally delivered, or, where permitted by law, transmitted by
telefacsimile or any other method set forth above.


 


12.                               CHOICE OF LAW AND VENUE; JURY
TRIAL WAIVER.


 


(a)                                  THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS
EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH
OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF
AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO
ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL
BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK.


 


(b)                                 THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION
WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED
ONLY IN THE STATE AND TO THE EXTENT PERMITTED


 


51





















 


BY APPLICABLE LAW, FEDERAL COURTS LOCATED IN THE BOROUGH OF MANHATTAN,
COUNTY OF NEW YORK, STATE OF NEW YORK, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING
ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT’S
OPTION, IN THE COURTS OF ANY JURISDICTION WHERE AGENT ELECTS TO BRING SUCH ACTION
OR WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND.  EACH BORROWER AND EACH MEMBER OF THE LENDER
GROUP WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY
HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO
THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 12(b).


 


(c)                                  EACH BORROWER AND EACH MEMBER OF THE LENDER GROUP HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.  EACH BORROWER AND EACH MEMBER OF THE LENDER
GROUP REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.  IN THE EVENT OF LITIGATION, A
COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.


 


13.                               ASSIGNMENTS AND PARTICIPATIONS;
SUCCESSORS.


 


13.1                           Assignments and Participations.


 


(a)                                  Any Lender may assign and delegate to one or
more assignees (each an “Assignee”) that are Eligible Transferees all,
or any ratable part of all, of the Obligations, the Commitments and the other
rights and obligations of such Lender hereunder and under the other Loan
Documents, in a minimum amount of $5,000,000; provided, however, that Borrowers
and Agent may continue to deal solely and directly with such Lender in
connection with the interest so assigned to an Assignee until (i) written
notice of such assignment, together with payment instructions, addresses, and
related information with respect to the Assignee, have been given to
Administrative Borrower and Agent by such Lender and the Assignee,
(ii) such Lender and its Assignee have delivered to Administrative
Borrower and Agent an Assignment and Acceptance, and (iii) the assigning
Lender or Assignee has paid to Agent for Agent’s separate account a processing
fee in the amount of $3,500.  Anything
contained herein to the contrary notwithstanding, the payment of any fees shall
not be required and the Assignee need not be an Eligible Transferee if such
assignment is in connection with any merger, consolidation, sale, transfer, or
other disposition of all or any substantial portion of the business or loan
portfolio of the assigning Lender.


 


(b)                                 From and after the date that Agent notifies
the assigning Lender (with a copy to Administrative Borrower) that it has
received an executed Assignment and Acceptance and payment of the above-referenced
processing fee, (i) the Assignee thereunder shall be a party hereto and,
to the extent that rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, shall have the rights and
obligations of a Lender under the Loan Documents, and (ii) the assigning
Lender shall, to the extent that rights and obligations hereunder and under the
other Loan Documents have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights (except with respect to Section 10.3 hereof)
and be released from any future obligations under this Agreement (and in the
case of an Assignment and Acceptance covering all or the remaining portion of
an assigning Lender’s rights and obligations under this Agreement and the other
Loan Documents, such Lender shall cease to be a party hereto and thereto), and
such assignment shall effect a novation between Borrowers and the Assignee;
provided, however, that nothing contained herein shall release any assigning
Lender from obligations that survive the termination of this Agreement,
including such assigning Lender’s obligations under Article 16 and Section 16.7
of this Agreement.


 


52





















 


(c)                                  By executing and delivering an Assignment and
Acceptance, the assigning Lender thereunder and the Assignee thereunder confirm
to and agree with each other and the other parties hereto as follows:  (1) other than as provided in such
Assignment and Acceptance, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other Loan Document furnished pursuant hereto,
(2) such assigning Lender makes no representation or warranty and assumes
no responsibility with respect to the financial condition of any Borrower, any
Subsidiary of any Borrower or the performance or observance by any Borrower or
its of any of their respective obligations under this Agreement or any other
Loan Document furnished pursuant hereto, (3) such Assignee confirms that
it has received a copy of this Agreement and the Second Lien Intercreditor
Agreement, together with such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance, (4) such Assignee will, independently and
without reliance upon Agent, such assigning Lender or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement, (5) such Assignee appoints and authorizes Agent to
take such actions and to exercise such powers under this Agreement as are
delegated to Agent, by the terms hereof, together with such powers as are
reasonably incidental thereto, (6) such Assignee agrees that it will
perform all of the obligations which by the terms of this Agreement are
required to be performed by it as a Lender and (7) such Assignee expressly
assumes all rights and obligations of such assigning Lender under the Second
Lien Intercreditor Agreement and agrees to be bound by the terms thereof.


 


(d)                                 Immediately upon Agent’s receipt of the
required processing fee payment and the fully executed Assignment and
Acceptance, this Agreement shall be deemed to be amended to the extent, but only
to the extent, necessary to reflect the addition of the Assignee and the
resulting adjustment of the Commitments arising therefrom.  The Commitment allocated to each Assignee
shall reduce such Commitments of the assigning Lender pro tanto.


 


(e)                                  Any Lender may at any time sell to one or
more commercial banks, financial institutions, or other Persons (a “Participant”)
participating interests in its Obligations, the Commitment, and the other
rights and interests of that Lender (the “Originating Lender”) hereunder
and under the other Loan Documents; provided, however, that (i) the
Originating Lender shall remain a “Lender” for all purposes of this Agreement
and the other Loan Documents and the Participant receiving the participating
interest in the Obligations, the Commitments, and the other rights and
interests of the Originating Lender hereunder shall not constitute a “Lender”
hereunder or under the other Loan Documents and the Originating Lender’s
obligations under this Agreement shall remain unchanged, (ii) the
Originating Lender shall remain solely responsible for the performance of such
obligations, (iii) Borrowers, Agent, and the Lenders shall continue to
deal solely and directly with the Originating Lender in connection with the
Originating Lender’s rights and obligations under this Agreement and the other
Loan Documents, (iv) no Lender shall transfer or grant any participating
interest under which the Participant has the right to approve any amendment to,
or any consent or waiver with respect to, this Agreement or any other Loan
Document, except to the extent such amendment to, or consent or waiver with
respect to this Agreement or of any other Loan Document would (A) extend
the final maturity date of the Obligations hereunder in which such Participant is
participating, (B) reduce the interest rate applicable to the Obligations
hereunder in which such Participant is participating, (C) release all or
substantially all of the Collateral or guaranties (except to the extent
expressly provided herein or in any of the Loan Documents) supporting the
Obligations hereunder in which such Participant is participating,
(D) postpone the payment of, or reduce the amount of, the interest or fees
payable to such Participant through such Lender, or (E) change the amount
or due dates of scheduled principal repayments or prepayments or premiums, and
(v) all amounts


 


53





















 


payable by Borrowers hereunder shall be determined as if such Lender
had not sold such participation, except that, if amounts outstanding under this
Agreement are due and unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each Participant
shall be deemed to have the right of set off in respect of its participating
interest in amounts owing under this Agreement to the same extent as if the
amount of its participating interest were owing directly to it as a Lender
under this Agreement.  The rights of any
Participant only shall be derivative through the Originating Lender with whom
such Participant participates and no Participant shall have any rights under
this Agreement or the other Loan Documents or any direct rights as to the other
Lenders, Agent, Borrowers, the Collections of Borrowers or their respective
Subsidiaries, the Collateral, or otherwise in respect of the Obligations.  No Participant shall have the right to
participate directly in the making of decisions by the Lenders among
themselves.


 


(f)                                    In connection with any such assignment or
participation or proposed assignment or participation, a Lender may, subject to
the provisions of Section 16.7, disclose all documents and
information which it now or hereafter may have relating to Borrowers and their
respective Subsidiaries and their respective businesses.


 


(g)                                 Any other provision in this Agreement
notwithstanding, any Lender may at any time create a security interest in, or
pledge, all or any portion of its rights under and interest in this Agreement
in favor of any Federal Reserve Bank in accordance with Regulation A of the
Federal Reserve Bank or U.S. Treasury Regulation 31 CFR § 203.24, and such
Federal Reserve Bank may enforce such pledge or security interest in any manner
permitted under Applicable Law.


 


13.2                           Successors.  This
Agreement shall bind and inure to the benefit of the respective successors and
assigns of each of the parties; provided, however, that no
Borrower may assign this Agreement or any of its rights or duties hereunder
without the Lenders’ prior written consent and any prohibited assignment shall
be absolutely void ab initio.  No consent
to assignment by the Lenders shall release any Borrower from its obligations
hereunder or under any other Loan Document. 
A Lender may assign this Agreement and the other Loan Documents and its
rights and duties hereunder and thereunder pursuant to Section 13.1
hereof and, except as expressly required pursuant to Section 13.1
hereof, no consent or approval by any Borrower is required in connection with
any such assignment.


 


14.                               AMENDMENTS; WAIVERS.


 


14.1                           Amendments and Waivers.  No
amendment or waiver of any provision of this Agreement or any other Loan
Document (other than Bank Product Agreements), and no consent with respect to
any departure by any Borrower, any Guarantor or any of their respective
Subsidiaries therefrom, shall be effective unless the same shall be in writing
and signed by the Required Lenders (or by Agent at the written request of the
Required Lenders) and then any such waiver or consent shall be effective, but
only in the specific instance and for the specific purpose for which given; provided,
however, that no such waiver, amendment, or consent shall, unless in
writing and signed by all of the Lenders affected thereby, do any of the
following:


 


(a)                                  increase or extend any Commitment of any
Lender,


 


(b)                                 postpone or delay any date fixed by this
Agreement or any other Loan Document for any payment of principal, interest,
fees, or other amounts due hereunder or under any other Loan Document,


 


(c)                                  reduce the principal of, or the rate of
interest on, any loan or other extension of credit hereunder, or reduce any
fees or other amounts payable hereunder or under any other Loan Document,


 


(d)                                 change the Pro Rata Share that is required to
take any action hereunder,


 


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(e)                                  amend or modify this Section or any provision
of this Agreement providing for consent or other action by all Lenders,


 


(f)                                    other than as permitted by Section 15.12,
release Agent’s Lien in and to any of the Collateral,


 


(g)                                 change the definition of Required Lenders or
Pro Rata Share,


 


(h)                                 contractually subordinate any of the Agent’s
Liens,


 


(i)                                     release any Borrower or any Guarantor from
any obligation for the payment of money other than pursuant to the terms of the
Loan Documents or in connection with the Disposition by Parent of the capital
Stock of a Borrower or a Guarantor which has been consented to by the Required
Lenders,


 


(j)                                     change the definitions of Borrowing Base,
Eligible Accounts, Eligible Inventory, Maximum Revolver Amount or Total Debt
Limiter, or change Section 2.1(b), or


 


(k)                                  amend any of the provisions of Section 15;


 


provided further, however, that no amendment, waiver or consent shall, unless in
writing and signed by Agent, Issuing Lender, or Swing Lender, as applicable,
affect the rights or duties of Agent, Issuing Lender, or Swing Lender, as
applicable, under this Agreement or any other Loan Document; and provided further, however, any amendment or modification that directly affects or
alters the express rights or obligations of any Borrower shall also require the
consent or agreement of such Borrower (which, in the case of any Borrower, may
be given by the Administrative Borrower). 
The foregoing notwithstanding, any amendment, modification, waiver, consent,
termination, or release of, or with respect to, any provision of this Agreement
or any other Loan Document that relates only to the relationship of the Lender
Group among themselves, and that does not affect the rights or obligations of
any Borrower, shall not require consent by or the agreement of any Borrower.


 


14.2                           Replacement of Holdout Lender.


 


(a)                                  If any action to be taken by the Lender Group
or Agent hereunder requires the unanimous consent, authorization, or agreement
of all Lenders, and a Lender (“Holdout Lender”) fails to give its
consent, authorization, or agreement, then Agent, upon at least 5 Business Days
prior irrevocable notice to the Holdout Lender, may permanently replace the
Holdout Lender with one or more substitute Lenders (each, a “Replacement
Lender”), and the Holdout Lender shall have no right to refuse to be
replaced hereunder.  Such notice to
replace the Holdout Lender shall specify an effective date for such
replacement, which date shall not be later than 15 Business Days after the date
such notice is given.


 


(b)                                 Prior to the effective date of such
replacement, the Holdout Lender and each Replacement Lender shall execute and
deliver an Assignment and Acceptance, subject only to the Holdout Lender being
repaid its share of the outstanding Obligations (including an assumption of its
Pro Rata Share of the Risk Participation Liability) without any premium or
penalty of any kind whatsoever.  If the
Holdout Lender shall refuse or fail to execute and deliver any such Assignment
and Acceptance prior to the effective date of such replacement, the Holdout
Lender shall be deemed to have executed and delivered such Assignment and
Acceptance.  The replacement of any
Holdout Lender shall be made in accordance with the terms of Section 13.1.  Until such time as the Replacement Lenders
shall have acquired all of the Obligations, the Commitments, and the other
rights and obligations of the Holdout Lender hereunder and under the other Loan
Documents, the Holdout Lender shall remain obligated to make the Holdout Lender’s
Pro Rata Share of Advances and to purchase a participation in each Letter of
Credit, in an amount equal to its Pro Rata Share of the Risk Participation
Liability of such Letter of Credit.


 


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14.3                           No Waivers; Cumulative Remedies.  No
failure by Agent or any Lender to exercise any right, remedy, or option under
this Agreement or any other Loan Document, or delay by Agent or any Lender in
exercising the same, will operate as a waiver thereof.  No waiver by Agent or any Lender will be
effective unless it is in writing, and then only to the extent specifically
stated.  No waiver by Agent or any Lender
on any occasion shall affect or diminish Agent’s and each Lender’s rights
thereafter to require strict performance by Borrowers of any provision of this
Agreement.  Agent’s and each Lender’s
rights under this Agreement and the other Loan Documents will be cumulative and
not exclusive of any other right or remedy that Agent or any Lender may have.


 


15.                               AGENT; THE LENDER GROUP.


 


15.1                           Appointment and Authorization of
Agent.  Each Lender hereby designates and appoints
WFF as its representative under this Agreement and the other Loan Documents and
each Lender hereby irrevocably authorizes Agent to execute and deliver each of
the other Loan Documents on its behalf and to take such other action on its
behalf under the provisions of this Agreement and each other Loan Document and
to exercise such powers and perform such duties as are expressly delegated to
Agent by the terms of this Agreement or any other Loan Document, together with
such powers as are reasonably incidental thereto.  Agent agrees to act as such on the express
conditions contained in this Section 15.  The provisions of this Section 15
(other than the proviso to Section 15.11(a)) are solely for the
benefit of Agent, and the Lenders, and Borrowers, Guarantors and their
respective Subsidiaries shall have no rights as a third party beneficiary of
any of the provisions contained herein. 
Any provision to the contrary contained elsewhere in this Agreement or
in any other Loan Document notwithstanding, Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall Agent have
or be deemed to have any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or any other Loan Document or otherwise exist
against Agent; it being expressly understood and agreed that the use of the
word “Agent” is for convenience only, that WFF is merely the representative of
the Lenders, and only has the contractual duties set forth herein.  Except as expressly otherwise provided in
this Agreement, Agent shall have and may use its sole discretion with respect
to exercising or refraining from exercising any discretionary rights or taking
or refraining from taking any actions that Agent expressly is entitled to take
or assert under or pursuant to this Agreement and the other Loan Documents.  Without limiting the generality of the
foregoing, or of any other provision of the Loan Documents that provides rights
or powers to Agent, Lenders agree that Agent shall have the right to exercise
the following powers as long as this Agreement remains in effect:  (a) maintain, in accordance with its
customary business practices, ledgers and records reflecting the status of the
Obligations, the Collateral, the Collections of Borrowers, Guarantors and their
respective Subsidiaries, and related matters, (b) execute or file any and
all financing or similar statements or notices, amendments, renewals,
supplements, documents, instruments, proofs of claim, notices and other written
agreements with respect to the Loan Documents, (c) make Advances, for itself
or on behalf of Lenders as provided in the Loan Documents, (d) exclusively
receive, apply, and distribute the Collections of Borrowers, Guarantors and
their respective Subsidiaries as provided in the Loan Documents, (e) open
and maintain such bank accounts and cash management arrangements as Agent deems
necessary and appropriate in accordance with the Loan Documents for the
foregoing purposes with respect to the Collateral and the Collections of
Borrowers, Guarantors and their respective Subsidiaries, (f) perform,
exercise, and enforce any and all other rights and remedies of the Lender Group
with respect to Borrowers, Guarantors, the Obligations, the Collateral, the
Collections of Borrowers, Guarantors and their respective Subsidiaries, or
otherwise related to any of same as provided in the Loan Documents, and
(g) incur and pay such Lender Group Expenses as Agent may deem necessary
or appropriate for the performance and fulfillment of its functions and powers
pursuant to the Loan Documents.


 


15.2                           Delegation of Duties. 
Agent may execute any of its duties under this Agreement or any other
Loan Document by or through agents, employees or attorneys in fact and shall be
entitled to advice of counsel concerning all matters pertaining to such
duties.  Agent shall not be responsible
for the negligence or misconduct of any agent or attorney in fact that it
selects as long as such selection was made without gross negligence or willful
misconduct.


 


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15.3                           Liability of Agent.  None
of the Agent Related Persons shall (a) be liable for any action taken or
omitted to be taken by any of them under or in connection with this Agreement
or any other Loan Document or the transactions contemplated hereby (except for
its own gross negligence or willful misconduct), or (b) be responsible in
any manner to any of the Lenders for any recital, statement, representation or
warranty made by any Borrower, any Guarantor or any of their respective
Subsidiaries or Affiliates, or any officer or director thereof, contained in
this Agreement or in any other Loan Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by
Agent under or in connection with, this Agreement or any other Loan Document,
or the validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement or any other Loan Document, or for any failure of any Borrower,
any Guarantor or any other party to any Loan Document to perform its
obligations hereunder or thereunder.  No
Agent Related Person shall be under any obligation to any Lender to ascertain
or to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Loan Document, or
to inspect the books and records or properties of Borrowers or Guarantors or
the books or records or properties of any Borrower’s or any Guarantor’s
Subsidiaries or Affiliates.


 


15.4                           Reliance by Agent. 
Agent shall be entitled to rely, and shall be fully protected in
relying, upon any writing, resolution, notice, consent, certificate, affidavit,
letter, telegram, telefacsimile or other electronic method of transmission,
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 Borrowers or counsel to any Lender), independent
accountants and other experts selected by Agent.  Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other Loan Document
unless Agent shall first receive such advice or concurrence of the Lenders as
it deems appropriate and until such instructions are received, Agent shall act,
or refrain from acting, as it deems advisable. 
If Agent so requests, it shall first be indemnified to its reasonable
satisfaction by the Lenders against any and all liability and expense that may
be incurred by it by reason of taking or continuing to take any such
action.  Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement
or any other Loan Document in accordance with a request or consent of the
requisite Lenders and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Lenders.


 


15.5                           Notice of Default or Event of
Default.  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, fees, and expenses
required to be paid to Agent for the account of the Lenders and, except with
respect to Events of Default of which Agent has actual knowledge, unless Agent
shall have received written notice from a Lender or Administrative Borrower
referring to this Agreement, describing such Default or Event of Default, and
stating that such notice is a “notice of default.”  Agent promptly will notify the Lenders of its
receipt of any such notice or of any Event of Default of which Agent has actual
knowledge.  If any Lender obtains actual
knowledge of any Event of Default, such Lender promptly shall notify the other
Lenders and Agent of such Event of Default. 
Each Lender shall be solely responsible for giving any notices to its
Participants, if any.  Subject to Section 15.4,
Agent shall take such action with respect to such Default or Event of Default
as may be requested by the Required Lenders in accordance with Section 8;
provided, however, that unless and until Agent has received any such request,
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.


 


15.6                           Credit Decision.  Each
Lender acknowledges that none of the Agent Related Persons has made any
representation or warranty to it, and that no act by Agent hereinafter taken,
including any review of the affairs of Borrowers, Guarantors and their
respective Subsidiaries or Affiliates, shall be deemed to


 


57





















 


constitute any
representation or warranty by any Agent-Related Person to any Lender.  Each Lender represents to 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 Borrowers,
Guarantors and any other Person party to a Loan Document, and all applicable
bank regulatory laws relating to the transactions contemplated hereby, and made
its own decision to enter into this Agreement and to extend credit to
Borrowers.  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 Agreement and the other Loan 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 Borrowers, Guarantors and any other Person party to a Loan
Document.  Except for notices, reports,
and other documents expressly herein required to be furnished to the Lenders by
Agent, 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 Borrowers,
Guarantors and any other Person party to a Loan Document that may come into the
possession of any of the Agent Related Persons.


 


15.7                           Costs and Expenses;
Indemnification.  Agent may incur and pay Lender Group Expenses
to the extent Agent reasonably deems necessary or appropriate for the
performance and fulfillment of its functions, powers, and obligations pursuant
to the Loan Documents, including court costs, attorneys fees and expenses, fees
and expenses of financial accountants, advisors, consultants, and appraisers,
costs of collection by outside collection agencies, auctioneer fees and
expenses, and costs of security guards or insurance premiums paid to maintain
the Collateral, whether or not Borrowers are obligated to reimburse Agent or
Lenders for such expenses pursuant to this Agreement or otherwise.  Agent is authorized and directed to deduct and
retain sufficient amounts from the Collections of Borrowers, Guarantors and
their respective Subsidiaries received by Agent to reimburse Agent for such out-of-pocket
costs and expenses prior to the distribution of any amounts to Lenders.  In the event Agent is not reimbursed for such
costs and expenses from the Collections of Borrowers, Guarantors and their
respective Subsidiaries received by Agent, each Lender hereby agrees that it is
and shall be obligated to pay to or reimburse Agent for the amount of such
Lender’s Pro Rata Share thereof.  Whether
or not the transactions contemplated hereby are consummated, the Lenders shall
indemnify upon demand the Agent Related Persons (to the extent not reimbursed
by or on behalf of Borrowers and without limiting the obligation of Borrowers
to do so), according to their Pro Rata Shares, from and against any and all
Indemnified Liabilities; provided, however, that no Lender shall be liable for
the payment to any Agent Related Person of any portion of such Indemnified Liabilities
resulting solely from such Person’s gross negligence or willful misconduct nor
shall any Lender be liable for the obligations of any Defaulting Lender in
failing to make an Advance or other extension of credit hereunder.  Without limitation of the foregoing, each
Lender shall reimburse Agent upon demand for such Lender’s Pro Rata Share of
any costs or out of pocket expenses (including attorneys, accountants,
advisors, and consultants fees and expenses) incurred by 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 Agreement, any other Loan Document, or any document contemplated by or
referred to herein, to the extent that Agent is not reimbursed for such
expenses by or on behalf of Borrowers. 
The undertaking in this Section shall survive the payment of all Obligations
hereunder and the resignation or replacement of Agent.


 


15.8                           Agent in Individual Capacity.  WFF
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 Borrowers, Guarantors and their respective Subsidiaries and Affiliates and
any other Person party to any Loan Documents as though WFF were not Agent
hereunder, and, in each case, without notice to or consent of the other members
of the Lender Group.  The other members
of the Lender Group acknowledge that, pursuant to such activities, WFF or its


 


58





















 


Affiliates may receive
information regarding Borrowers, Guarantors or their Affiliates and any other
Person party to any Loan Documents that is subject to confidentiality
obligations in favor of Borrowers or such other Person and that prohibit the
disclosure of such information to the Lenders, and the Lenders acknowledge
that, in such circumstances (and in the absence of a waiver of such
confidentiality obligations, which waiver Agent will use its reasonable best
efforts to obtain), Agent shall not be under any obligation to provide such
information to them.  The terms “Lender”
and “Lenders” include WFF in its individual capacity.


 


15.9                           Successor Agent. 
Agent may resign as Agent upon 45 days notice to the Lenders.  If Agent resigns under this Agreement, the
Required Lenders shall appoint a successor Agent for the Lenders.  If no successor Agent is appointed prior to
the effective date of the resignation of Agent, Agent may appoint, after
consulting with the Lenders, a successor Agent. 
If Agent has materially breached or failed to perform any material
provision of this Agreement or of Applicable Law, the Required Lenders may
agree in writing to remove and replace Agent with a successor Agent from among
the Lenders.  In any such event, 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 15 shall inure
to its benefit as to any actions taken or omitted to be taken by it while it
was Agent under this Agreement.  If no
successor Agent has accepted appointment as Agent by the date which is 45 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 Agent hereunder until such time, if any, as the
Lenders appoint a successor Agent as provided for above.


 


15.10                     Lender in Individual Capacity.  Any
Lender and its respective 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 Borrowers and their respective Subsidiaries
and Affiliates and any other Person party to any Loan Documents as though such
Lender were not a Lender hereunder without notice to or consent of the other
members of the Lender Group.  The other
members of the Lender Group acknowledge that, pursuant to such activities, such
Lender and its respective Affiliates may receive information regarding
Borrowers or their Affiliates and any other Person party to any Loan Documents
that is subject to confidentiality obligations in favor of Borrowers or such
other Person and that prohibit the disclosure of such information to the
Lenders, and the Lenders acknowledge that, in such circumstances (and in the
absence of a waiver of such confidentiality obligations, which waiver such
Lender will use its reasonable best efforts to obtain), such Lender shall not
be under any obligation to provide such information to them.  With respect to the Swing Loans and
Protective Advances, Swing Lender shall have the same rights and powers under
this Agreement as any other Lender and may exercise the same as though it were
not the sub-agent of Agent.


 


15.11                     Withholding Taxes.


 


(a)                                  All payments made by any Borrower hereunder
or under any note or other Loan Document will be made without setoff,
counterclaim, or other defense.  In
addition, all such payments will be made free and clear of, and without
deduction or withholding for, any present or future Taxes, and in the event any
deduction or withholding of Taxes is required, each Borrower shall comply with
the penultimate sentence of this Section 15.11(a).  “Taxes” shall mean, any taxes, levies,
imposts, duties, fees, assessments or other charges of whatever nature now or
hereafter imposed by any jurisdiction or by any political subdivision or taxing
authority thereof or therein with respect to such payments (but excluding any
tax imposed by any jurisdiction or by any political subdivision or taxing
authority thereof or therein measured by or based on the net income or net
profits of Lender) and all interest, penalties or similar liabilities with
respect thereto, together with any and all Canadian federal, provincial and
other taxes, levies, imposts, duties, fees, charges, claims and assessments
which are or may become due in respect of any Borrower or any Guarantor.  If any Taxes are so


 


59





















 


levied or imposed, each Borrower agrees to pay the full amount of such
Taxes and such additional amounts as may be necessary so that every payment of
all amounts due under this Agreement, any note, or Loan Document, including any
amount paid pursuant to this Section 15.11(a) after withholding or
deduction for or on account of any Taxes, will not be less than the amount
provided for herein; provided, however, that Borrowers shall not be required to
increase any such amounts if the increase in such amount payable results from
Agent’s or such Lender’s own willful misconduct or gross negligence (as finally
determined by a court of competent jurisdiction).  Each Borrower will furnish to Lender as
promptly as possible after the date the payment of any Tax is due pursuant to
Applicable Law certified copies of tax receipts evidencing such payment by any
Borrower.


 


(b)                                 If a Lender claims an exemption from United
States withholding tax, such Lender agrees with and in favor of Agent and any
Borrower, to deliver to Agent:


 


(i)                                     if such Lender claims an exemption from
United States withholding tax pursuant to its portfolio interest exception,
(A) a statement of the Lender, signed under penalty of perjury, that it is
not a (I) a “bank” as described in Section 881(c)(3)(A) of the IRC,
(II) a 10% shareholder of any Borrower (within the meaning of Section 871(h)(3)(B)
of the IRC), or (III) a controlled foreign corporation related to any
Borrower within the meaning of Section 864(d)(4) of the IRC, and
(B) a properly completed and executed IRS Form W-8BEN, before receiving
its first payment under this Agreement and at any other time reasonably
requested by Agent or any Borrower;


 


(ii)                                  if such Lender claims an exemption from,
or a reduction of, withholding tax under a United States tax treaty, properly
completed and executed IRS Form W-8BEN before receiving its first payment under
this Agreement and at any other time reasonably requested by Agent or any
Borrower;


 


(iii)                               if such Lender claims that interest paid under this
Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such Lender,
two properly completed and executed copies of IRS Form W-8ECI before receiving
its first payment under this Agreement and at any other time reasonably
requested by Agent or any Borrower; or


 


(iv)                              such other form or forms, including IRS
Form W-9, as may be required under the IRC or other laws of the United States
as a condition to exemption from, or reduction of, United States withholding or
backup withholding tax before receiving its first payment under this Agreement
and at any other time reasonably requested by Agent or any Borrower.  Each Lender agrees promptly to notify Agent
and Administrative Borrower of any change in circumstances which would modify
or render invalid any claimed exemption or reduction.


 


(c)                                  If a Lender claims an exemption from
withholding tax in a jurisdiction other than the United States, Lender agrees
with and in favor of Agent and Borrowers, to deliver to Agent any such form or
forms, as may be required under the laws of such jurisdiction as a condition to
exemption from, or reduction of, foreign withholding or backup withholding tax
before receiving its first payment under this Agreement and at any other time
reasonably requested by Agent or Administrative Borrower.  Each Lender agrees promptly to notify Agent
and Administrative Borrower of any change in circumstances which would modify
or render invalid any claimed exemption or reduction.


 


(d)                                 If any Lender claims exemption from, or
reduction of, withholding tax and such Lender sells, assigns, grants a
participation in, or otherwise transfers all or part of the Obligations of
Borrowers to such Lender, such Lender agrees to notify Agent and Administrative
Borrower of  the percentage amount in
which it is no longer the beneficial owner of Obligations of Borrowers to such
Lender.  To the extent of such percentage
amount, Agent and Borrowers will treat such Lender’s documentation provided
pursuant to Sections 15.11(b) or 15.11(c) as no longer
valid.  With respect to such percentage amount,
such Lender may provide new documentation, pursuant to Sections 15.11(b)
or 15.11(c), if applicable.


 


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(e)                                  If any Lender is entitled to a reduction in
the applicable withholding tax, Agent may withhold from any interest payment to
such Lender an amount equivalent to the applicable withholding tax after taking
into account such reduction.  If the
forms or other documentation required by subsection (b) or (c)
of this Section 15.11 are not delivered to Agent, then Agent may
withhold from any interest payment to such Lender not providing such forms or
other documentation an amount equivalent to the applicable withholding tax.


 


(f)                                    If the IRS or any other Governmental
Authority of the United States or other jurisdiction asserts a claim that Agent
did not properly withhold tax from amounts paid to or for the account of any
Lender due to a failure on the part of the Lender (because the appropriate form
was not delivered, was not properly executed, or because such Lender failed to
notify Agent of a change in circumstances which rendered the exemption from, or
reduction of, withholding tax ineffective, or for any other reason) such Lender
shall indemnify and hold Agent harmless for all amounts paid, directly or indirectly,
by Agent, as tax or otherwise, including penalties and interest, and including
any taxes imposed by any jurisdiction on the amounts payable to Agent under
this Section 15.11, together with all costs and expenses (including
attorneys fees and expenses).  The
obligation of the Lenders under this subsection shall survive the payment of
all Obligations and the resignation or replacement of Agent.


 


15.12                     Collateral Matters.


 


(a)                                  The Lenders hereby irrevocably authorize
Agent, at its option and in its sole discretion, to release any Lien on any
Collateral (i) upon the termination of the Commitments and payment and
satisfaction in full by Borrowers of all Obligations, (ii) constituting
property being sold or disposed of if a release is required or desirable in
connection therewith and if Administrative Borrower certifies to Agent that the
sale or disposition is permitted under Section 6.4 of this
Agreement or the other Loan Documents (and Agent may rely conclusively on any
such certificate, without further inquiry), (iii) constituting property in
which no Borrower, no Guarantor and none of their respective Subsidiaries owned
any interest at the time the Agent’s Lien was granted nor at any time
thereafter, or (iv) constituting property leased to a Borrower, a
Guarantor or one of their respective Subsidiaries under a lease that has
expired or is terminated in a transaction permitted under this Agreement.  Except as provided above, Agent will not
execute and deliver a release of any Lien on any Collateral without the prior
written authorization of (y) if the release is of all or substantially all
of the Collateral, all of the Lenders, or (z) otherwise, the Required
Lenders.  Upon request by Agent or
Administrative Borrower at any time, the Lenders will confirm in writing Agent’s
authority to release any such Liens on particular types or items of Collateral
pursuant to this Section 15.12; provided, however, that
(1) Agent shall not be required to execute any document necessary to
evidence such release on terms that, in Agent’s opinion, would expose Agent to
liability or create any obligation or entail any consequence other than the
release of such Lien without recourse, representation, or warranty, and
(2) such release shall not in any manner discharge, affect, or impair the
Obligations or any Liens (other than those expressly being released) upon (or
obligations of any Borrower or any Guarantor in respect of) all interests
retained by the applicable Borrower or Guarantor, including, the proceeds of
any sale, all of which shall continue to constitute part of the Collateral.


 


(b)                                 Agent shall have no obligation whatsoever to
any of the Lenders to assure that the Collateral exists or is owned by any
Borrower, any Guarantor or any of their respective Subsidiaries or is cared
for, protected, or insured or has been encumbered, or that the Agent’s Liens
have been properly or sufficiently or lawfully created, perfected, protected,
or enforced or are entitled to any particular priority, or to exercise at all
or in any particular manner or under any duty of care, disclosure or fidelity,
or to continue exercising, any of the rights, authorities and powers granted or
available to Agent pursuant to any of the Loan Documents, it 


 


61





















 


being understood and agreed that in respect of the Collateral, or any
act, omission, or event related thereto, subject to the terms and conditions
contained herein, Agent may act in any manner it may deem appropriate, in its
sole discretion given Agent’s own interest in the Collateral in its capacity as
one of the Lenders and that Agent shall have no other duty or liability
whatsoever to any Lender as to any of the foregoing, except as otherwise
provided herein.


 


15.13                     Restrictions on Actions by
Lenders; Sharing of Payments.


 


(a)                                  Each of the Lenders agrees that it shall not,
without the express written consent of Agent, and that it shall, to the extent
it is lawfully entitled to do so, upon the written request of Agent, set off
against the Obligations, any amounts owing by such Lender to any Borrower or
Guarantor or any deposit accounts of any Borrower or Guarantor now or hereafter
maintained with such Lender.  Each of the
Lenders further agrees that it shall not, unless specifically requested to do
so in writing by Agent, take or cause to be taken any action, including, the
commencement of any legal or equitable proceedings, to foreclose any Lien on,
or otherwise enforce any security interest in, any of the Collateral.


 


(b)                                 If, at any time or times any Lender shall
receive (i) by payment, foreclosure, setoff, or otherwise, any proceeds of
Collateral or any payments with respect to the Obligations, except for any such
proceeds or payments received by such Lender from Agent pursuant to the terms
of this Agreement, or (ii) payments from Agent in excess of such Lender’s
ratable portion of all such distributions by Agent, such Lender promptly shall
(1) turn the same over to Agent, in kind, and with such endorsements as
may be required to negotiate the same to Agent, or in immediately available
funds, as applicable, for the account of all of the Lenders and for application
to the Obligations in accordance with the applicable provisions of this
Agreement, or (2) purchase, without recourse or warranty, an undivided interest
and participation in the Obligations owed to the other Lenders so that such
excess payment received shall be applied ratably as among the Lenders in
accordance with their Pro Rata Shares; provided, however, that to the extent
that such excess payment received by the purchasing party is thereafter
recovered from it, those purchases of participations shall be rescinded in
whole or in part, as applicable, and the applicable portion of the purchase
price paid herefore shall be returned to such purchasing party, but without
interest except to the extent that such purchasing party is required to pay
interest in connection with the recovery of the excess payment.


 


15.14                     Agency for Perfection. 
Agent hereby appoints each other Lender as its agent (and each Lender
hereby accepts such appointment) for the purpose of perfecting the Agent’s
Liens in assets which, in accordance with Article 8 or Article 9,
as applicable, of the Code (or under the equivalent section of the PPSA) can be
perfected only by possession or control or which may be accorded higher
priority in terms of perfection.  Should
any Lender obtain possession or control of any such Collateral, such Lender
shall notify Agent thereof, and, promptly upon Agent’s request therefor shall
deliver possession or control of such Collateral to Agent or in accordance with
Agent’s instructions.


 


15.15                     Payments by Agent to the Lenders.  All
payments to be made by Agent to the Lenders shall be made by bank wire transfer
of immediately available funds pursuant to such wire transfer instructions as
each party may designate for itself by written notice to Agent.  Concurrently with each such payment, Agent
shall identify whether such payment (or any portion thereof) represents principal,
premium, fees, or interest of the Obligations.


 


15.16                     Concerning the Collateral and
Related Loan Documents.  Each member of the Lender Group authorizes
and directs Agent to enter into this Agreement, the Second Lien Intercreditor
Agreement and the other Loan Documents. 
Each member of the Lender Group agrees that any action taken by Agent in
accordance with the terms of this Agreement, the Second Lien Intercreditor
Agreement and the other Loan Documents relating to the Collateral and the
exercise by Agent of its powers set forth therein or herein, together with such
other powers that are reasonably incidental thereto, shall be binding upon all
of the Lenders.


 


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15.17                     Field Audits and Examination
Reports; Confidentiality; Disclaimers by Lenders; Other Reports and Information.  By
becoming a party to this Agreement, each Lender:


 


(a)                                  is deemed to have requested that Agent
furnish such Lender, promptly after it becomes available, a copy of each field
audit or examination report (each a “Report” and collectively, “Reports”)
prepared by or at the request of Agent, and Agent shall so furnish each Lender
with such Reports,


 


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


 


(c)                                  expressly agrees and acknowledges that the
Reports are not comprehensive audits or examinations, that Agent or other party
performing any audit or examination will inspect only specific information
regarding Borrowers and will rely significantly upon the books and records of
Borrowers and their respective Subsidiaries, as well as on representations of
Borrowers’ personnel,


 


(d)                                 agrees to keep all Reports and other
material, non-public information regarding Borrowers and their respective
Subsidiaries and their operations, assets, and existing and contemplated
business plans in a confidential manner in accordance with Section 16.7,
and


 


(e)                                  without limiting the generality of any other
indemnification provision contained in this Agreement, agrees:  (i) to hold Agent and any such other
Lender preparing a Report harmless from any action the indemnifying Lender may
take or fail to take or any conclusion the indemnifying Lender may reach or
draw from any Report in connection with any loans or other credit
accommodations that the indemnifying Lender has made or may make to Borrowers,
or the indemnifying Lender’s participation in, or the indemnifying Lender’s
purchase of, a loan or loans of Borrowers; and (ii) to pay and protect,
and indemnify, defend and hold Agent, and any such other Lender preparing a
Report harmless from and against, the claims, actions, proceedings, damages,
costs, expenses, and other amounts (including, attorneys fees and costs)
incurred by Agent and any such other Lender preparing a Report as the direct or
indirect result of any third parties who might obtain all or part of any Report
through the indemnifying Lender.


 


In addition to the foregoing:  (x) any Lender may from time to time
request of Agent in writing that Agent provide to such Lender a copy of any
report or document provided by Borrowers to Agent that has not been
contemporaneously provided by Borrowers to such Lender, and, upon receipt of
such request, Agent promptly shall provide a copy of same to such Lender,
(y) to the extent that Agent is entitled, under any provision of the Loan
Documents, to request additional reports or information from Borrowers, any
Lender may, from time to time, reasonably request Agent to exercise such right
as specified in such Lender’s notice to Agent, whereupon Agent promptly shall
request of Administrative Borrower the additional reports or information
reasonably specified by such Lender, and, upon receipt thereof from Administrative
Borrower, Agent promptly shall provide a copy of same to such Lender, and
(z) any time that Agent renders to Administrative Borrower a statement
regarding the Loan Account, Agent shall send a copy of such statement to each
Lender.


 


15.18                     Several Obligations; No Liability. 
Notwithstanding that certain of the Loan Documents now or hereafter may
have been or will be executed only by or in favor of Agent in its capacity as
such, and not by or in favor of the Lenders, any and all obligations on the part
of Agent (if any) to make any credit available hereunder shall constitute the
several (and not joint) obligations of the respective Lenders on a ratable
basis, according to their respective Commitments, to make an amount of such
credit not to exceed, in principal amount, at any one time outstanding, the
amount of their respective Commitments. 
Nothing contained herein shall confer upon any Lender any interest in,
or subject any Lender to any liability for, or in respect of, the business,
assets, profits, losses, or liabilities of any other Lender.  Each Lender shall be solely responsible for
notifying its Participants of any matters relating to the Loan Documents to the
extent any such


 


63





















 


notice may be required, and
no Lender shall have any obligation, duty, or liability to any Participant of
any other Lender.  Except as provided in Section 15.7,
no member of the Lender Group shall have any liability for the acts of any
other member of the Lender Group.  No
Lender shall be responsible to any Borrower or any other Person for any failure
by any other Lender to fulfill its obligations to make credit available
hereunder, nor to advance for it or on its behalf in connection with its
Commitment, nor to take any other action on its behalf hereunder or in
connection with the financing contemplated herein.


 


15.19                     Bank Product Providers.  Each
Bank Product Provider shall be deemed a party hereto for purposes of any
reference in a Loan Document to the parties for whom Agent is acting; it being
understood and agreed that the rights and benefits of such Bank Product
Provider under the Loan Documents consist exclusively of such Bank Product
Provider’s right to share in payments and collections out of the Collateral as
more fully set forth herein.  In
connection with any such distribution of payments and collections, Agent shall
be entitled to assume no amounts are due to any Bank Product Provider unless
such Bank Product Provider has notified Agent in writing of the amount of any
such liability owed to it prior to such distribution.


 


16.                               GENERAL PROVISIONS.


 


16.1                           Effectiveness.  This
Agreement shall be binding and deemed effective when executed by Borrowers,
Agent, and each Lender whose signature is provided for on the signature pages
hereof.


 


16.2                           Section Headings. 
Headings and numbers have been set forth herein for convenience
only.  Unless the contrary is compelled
by the context, everything contained in each Section applies equally to this
entire Agreement.


 


16.3                           Interpretation. 
Neither this Agreement nor any uncertainty or ambiguity herein shall be
construed against the Lender Group or Borrowers, whether under any rule of
construction or otherwise.  On the
contrary, this Agreement has been reviewed by all parties and shall be
construed and interpreted according to the ordinary meaning of the words used
so as to accomplish fairly the purposes and intentions of all parties hereto.


 


16.4                           Severability of Provisions.  Each
provision of this Agreement shall be severable from every other provision of
this Agreement for the purpose of determining the legal enforceability of any
specific provision.


 


16.5                           Counterparts; Electronic
Execution.  This Agreement may be executed in any number
of counterparts and by different parties on separate counterparts, each of
which, when executed and delivered, shall be deemed to be an original, and all
of which, when taken together, shall constitute but one and the same
Agreement.  Delivery of an executed counterpart
of this Agreement by telefacsimile or other electronic method of transmission
shall be equally as effective as delivery of an original executed counterpart
of this Agreement.  Any party delivering
an executed counterpart of this Agreement by telefacsimile or other electronic
method of transmission also shall deliver an original executed counterpart of
this Agreement but the failure to deliver an original executed counterpart
shall not affect the validity, enforceability, and binding effect of this
Agreement.  The foregoing shall apply to
each other Loan Document mutatis mutandis.


 


16.6                           Revival and Reinstatement of
Obligations.  If the incurrence or payment of the
Obligations by any Borrower or Guarantor or the transfer to the Lender Group of
any property should for any reason subsequently be declared to be void or
voidable under any state or federal law relating to creditors’ rights,
including provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, or other voidable or recoverable payments of money or transfers of
property (collectively, a “Voidable Transfer”), and if the Lender Group
is required to repay or restore, in whole or in part, any such Voidable
Transfer, or elects to do so upon the reasonable advice of its counsel, then,
as to any such Voidable Transfer, or the amount thereof that the Lender Group
is required or elects to repay or restore, and as to all reasonable costs,
expenses, and attorneys fees of the Lender Group related thereto, the liability
of Borrowers or Guarantors automatically shall be revived, reinstated, and
restored and shall exist as though such Voidable Transfer had never been made.


 


64





















 


16.7                           Confidentiality. 
Agent and Lenders each individually (and not jointly or jointly and
severally) agree that material, non-public information regarding Borrowers and
their respective Subsidiaries, their operations, assets, and existing and
contemplated business plans shall be treated by Agent and the Lenders in a
confidential manner, and shall not be disclosed by Agent and the Lenders to
Persons who are not parties to this Agreement, except:  (a) to attorneys for and other advisors,
accountants, auditors, and consultants to any member of the Lender Group, (b) to
Subsidiaries and Affiliates of any member of the Lender Group (including the
Bank Product Providers), provided that any such Subsidiary or Affiliate shall
have agreed to receive such information hereunder subject to the terms of this Section 16.7,
(c) as may be required by statute, decision, or judicial or administrative
order, rule, or regulation, (d) as may be agreed to in advance by
Administrative Borrower or its Subsidiaries or as requested or required by any
Governmental Authority pursuant to any subpoena or other legal process, (e) as
to any such information that is or becomes generally available to the public
(other than as a result of prohibited disclosure by Agent or the Lenders),
(f) in connection with any assignment, prospective assignment, sale,
prospective sale, participation or prospective participations, or pledge or
prospective pledge of any Lender’s interest under this Agreement, provided that
any such assignee, prospective assignee, purchaser, prospective purchaser,
participant, prospective participant, pledgee, or prospective pledgee shall
have agreed in writing to receive such information hereunder subject to the
terms of this Section, and (g) in connection with any litigation or other
adversary proceeding involving parties hereto which such litigation or
adversary proceeding involves claims related to the rights or duties of such
parties under this Agreement or the other Loan Documents.  The provisions of this Section 16.7
shall survive for 2 years after the payment in full of the Obligations.


 


16.8                           Integration.  This
Agreement, together with the other Loan Documents, reflects the entire
understanding of the parties with respect to the transactions contemplated
hereby and shall not be contradicted or qualified by any other agreement, oral
or written, before the date hereof.


 


16.9                           Parent as Agent for Borrowers.  Each
Borrower hereby irrevocably appoints Parent as the borrowing agent and attorney-in-fact
for all Borrowers (the “Administrative Borrower”) which appointment
shall remain in full force and effect unless and until Agent shall have
received prior written notice signed by each Borrower that such appointment has
been revoked and that another Borrower has been appointed Administrative
Borrower.  Each Borrower hereby
irrevocably appoints and authorizes the Administrative Borrower (i) to
provide Agent with all notices with respect to Advances and Letters of Credit
obtained for the benefit of any Borrower and all other notices and instructions
under this Agreement and (ii) to take such action as the Administrative
Borrower deems appropriate on its behalf to obtain Advances and Letters of
Credit and to exercise such other powers as are reasonably incidental thereto
to carry out the purposes of this Agreement. 
It is understood that the handling of the Loan Account and Collateral of
Borrowers and Mondel in a combined fashion, as more fully set forth herein, is
done solely as an accommodation to Borrowers and Mondel in order to utilize the
collective borrowing powers of Borrowers and Mondel in the most efficient and
economical manner and at their request, and that Lender Group shall not incur
liability to any Borrower, Mondel or any other Person as a result hereof.  Each Borrower and Mondel expects to derive
benefit, directly or indirectly, from the handling of the Loan Account and the
Collateral in a combined fashion since the successful operation of each
Borrower and Mondel is dependent on the continued successful performance of the
integrated group.  To induce the Lender
Group to do so, and in consideration thereof, each Borrower hereby jointly and
severally agrees to indemnify each member of the Lender Group and hold each
member of the Lender Group harmless against any and all liability, expense,
loss or claim of damage or injury, made against the Lender Group by any
Borrower, by Mondel or by any third party whosoever, arising from or incurred
by reason of (a) the handling of the Loan Account and Collateral of
Borrowers and Mondel as herein provided, (b) the Lender Group’s relying on
any instructions of the Administrative Borrower, or (c) any other action
taken by the Lender Group


 


65





















 


hereunder or under the other
Loan Documents, except that Borrowers will have no liability to the relevant
Agent-Related Person or Lender-Related Person under this Section 16.9
with respect to any liability that has been finally determined by a court of
competent jurisdiction to have resulted solely from the gross negligence or
willful misconduct of such Agent-Related Person or Lender-Related Person, as
the case may be.


 


16.10                     Public Disclosure. 
Parent, Borrower and each of their respective Subsidiaries agrees that
neither they nor any of their respective Affiliates will issue any press
release or other public disclosure using the name of Agent, any Lender or any of
their respective Affiliates or referring to this Agreement or any other Loan
Document without the prior written consent of Agent and such Lender, except to
the extent that such Person is required to do so under Applicable Law (in which
event, such Person will consult with Agent and such Lender before issuing such
press release or other public disclosure). 
Parent, Borrower and each of their respective Subsidiaries hereby
authorize Agent and each Lender, after consultation with Administrative
Borrower, to advertise the closing of the transactions contemplated by this
Agreement, and to make appropriate announcements of the financial arrangements
entered into among the parties hereto, as Agent and the Lenders shall deem
appropriate, including announcements commonly known as tombstones, in such
trade publications, business journals, newspapers of general circulation and to
such selected parties as Agent or such Lender shall deem appropriate.


 


16.11                     Borrowings Upon Partial Release
of Availability Block.  Upon Borrowers’ receipt of cash proceeds of
the Second Lien Indebtedness in an aggregate amount of not less than
$18,000,000, that portion of the Availability Block in the amount of $4,600,000
shall be released and Borrowers shall automatically be deemed to have requested
an Advance in the amount of $4,600,000, the proceeds of which shall be funded
to the Holding Account.  Funds credited
to the Holding Account shall not be released without the prior written consent
of Agent and Second Lien Agent, such consent not to be unreasonably withheld in
connection with a request to release such funds to make any payment
contemplated by Section 6.14(1)(a)(ii).


 


[Signature pages follow.]


 


66





















 


IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed and delivered as of the date first above
written.


 


	
   

  	
  MAGNETEK,
  INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David P. Reiland

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
  Executive VP and Chief Financial Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MAGNETEK
  ADS POWER, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David P. Reiland

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
  President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MAGNETEK
  MONDEL HOLDING, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David P. Reiland

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
  President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WELLS
  FARGO FOOTHILL, INC.,

  
	
   

  	
  a California corporation,

  
	
   

  	
  as Agent and as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Thomas Lane

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
  Senior Vice President

  	
   

  
									



 


67





















 


EXHIBITS
AND SCHEDULES


 


 


	
  Exhibit A-1

  	
  Form of Assignment and
  Acceptance 

  
	
  Exhibit B-1

  	
  Form of Borrowing Base
  Certificate

  
	
  Exhibit C-1

  	
  Form of Compliance
  Certificate

  
	
  Exhibit J-1

  	
  Form of Joinder to
  Intercompany Subordination Agreement

  
	
  Exhibit L-1

  	
  Form of LIBOR Notice

  
	
  Exhibit T-1

  	
  Form of Total Debt Limiter
  Certificate

  
	
   

  	
   

  
	
  Schedule A-1

  	
  Agent’s Account

  
	
  Schedule C-1

  	
  Commitments

  
	
  Schedule D-1

  	
  Designated Account

  
	
  Schedule E-1

  	
  Eligible Inventory
  Locations

  
	
  Schedule H-1

  	
  Holding Account

  
	
  Schedule P-1

  	
  Permitted Liens

  
	
  Schedule T-1

  	
  Applicable EBITDA Amounts

  
	
  Schedule 1.1

  	
  Definitions

  
	
  Schedule 2.7(a)

  	
  Cash Management Banks

  
	
  Schedule 3.1

  	
  Conditions Precedent

  
	
  Schedule 4.1

  	
  Real Property Locations

  
	
  Schedule 4.5

  	
  Locations of Inventory and
  Equipment

  
	
  Schedule 4.7(a)

  	
  States of Organization

  
	
  Schedule 4.7(b)

  	
  Chief Executive Offices

  
	
  Schedule 4.7(c)

  	
  Organizational Identification
  Numbers

  
	
  Schedule 4.7(d)

  	
  Commercial Tort Claims

  
	
  Schedule 4.8(b)

  	
  Capitalization of
  Borrowers

  
	
  Schedule 4.8(c)

  	
  Capitalization of
  Borrowers’ Subsidiaries

  
	
  Schedule 4.10

  	
  Litigation

  
	
  Schedule 4.13(a)

  	
  Certain Employee Pension
  Benefit Plans

  
	
  Schedule 4.13(d)

  	
  Certain Employee Health
  Benefit Plans

  
	
  Schedule 4.13(j)

  	
  Canadian Employee Plan
  Disclosures

  
	
  Schedule 4.14

  	
  Environmental Matters

  
	
  Schedule 4.15

  	
  Intellectual Property

  
	
  Schedule 4.17

  	
  Deposit Accounts and
  Securities Accounts

  
	
  Schedule 4.19

  	
  Permitted Indebtedness

  
	
  Schedule 4.20

  	
  Material Contracts

  
	
  Schedule 4.28

  	
  Operating Lease
  Obligations

  
	
  Schedule 4.26

  	
  Adverse Agreements

  
	
  Schedule 4.29

  	
  Insurance

  
	
  Schedule 5.2

  	
  Collateral Reporting

  
	
  Schedule 5.3

  	
  Financial Statements,
  Reports, Certificates

  
	
  Schedule 5.17

  	
  Scheduled Contribution
  Payments

  
	
  Schedule 6.12

  	
  Existing Investments

  
	
  Schedule 6.20

  	
  Agreements Affecting
  Subsidiaries