Exhibit 10.3


 


SCHEDULE 1.1


 


As
used in the Agreement, the following terms shall have the following
definitions:


 


“Account”
means an account as that term is defined in the Code and in the case of Mondel,
in the PPSA.


 


“Account
Debtor” means any Person who is obligated on an Account, chattel paper, or
a general intangible.


 


“ACH
Transactions” means any cash management or related services (including the
Automated Clearing House processing of electronic fund transfers through the
direct Federal Reserve Fedline system) provided by a Bank Product Provider for
the account of Administrative Borrower or its Subsidiaries.


 


“Administrative
Borrower” has the meaning specified therefor in Section 16.9.


 


“Advances”
has the meaning specified therefor in Section 2.1(a).


 


“Affiliate”
means, as applied to any Person, any other Person who controls, is controlled
by, or is under common control with, such Person.  For purposes of this definition, “control”
means the possession, directly or indirectly through one or more intermediaries,
of the power to direct the management and policies of a Person, whether through
the ownership of Stock, by contract, or otherwise; provided, however,
that, for purposes of the definition of Eligible Accounts and Section 6.13
hereof:  (a) any Person which owns
directly or indirectly 10% or more of the Stock having ordinary voting power
for the election of directors or other members of the governing body of a
Person or 10% or more of the partnership or other ownership interests of a
Person (other than as a limited partner of such Person) shall be deemed an
Affiliate of such Person, (b) each director (or comparable manager) of a
Person shall be deemed to be an Affiliate of such Person, and (c) each
partnership or joint venture in which a Person is a partner or joint venturer
shall be deemed an Affiliate of such Person. 
Notwithstanding anything herein to the contrary, in no event shall any
Agent or any Lender be considered an “Affiliate” of any Borrower or any
Guarantor.


 


“After
Acquired Property” means any fee interest in Real Property acquired by the
Parent or any of its Subsidiaries after the date hereof.


 


“Agent”
has the meaning specified therefor in the preamble to the Agreement.


 


“Agent-Related
Persons” means Agent, together with its Affiliates, officers, directors,
employees, attorneys, and agents.


 


“Agent’s
Account” means the Deposit Account of Agent identified on Schedule A-1.


 


“Agent’s
Liens” means the Liens granted by Borrowers and/or any of their respective
Subsidiaries to Agent under the Loan Documents.


 


“Agreement”
means the Credit Agreement to which this Schedule 1.1 is attached.


 


“Applicable
Corporate Overhead Amount” means (a) with respect to any measurement
period ending on or before June 30, 2006, $500,000, and (b) with
respect to any measurement period ending after June 30, 2006, $1,500,000.


 





















 


“Applicable
Laws” means, with respect to any Person, those Laws that apply to such
Person or its business, undertakings, property or securities.


 


“Assignee”
has the meaning specified therefor in Section 13.1(a).


 


“Assignment
and Acceptance” means an Assignment and Acceptance Agreement substantially
in the form of Exhibit A-1.


 


“Authorized
Person” means any officer or employee of Administrative Borrower.


 


“Availability”
means, as of any date of determination, the amount that Borrowers are entitled
to borrow as Advances hereunder (after giving effect to all then outstanding
Obligations (other than Bank Product Obligations) and all sublimits and
reserves then applicable hereunder).


 


“Availability
Block” means, as of any date of determination: the sum of: (a) (i) prior
to Borrowers’ receipt of cash proceeds of the Second Lien Indebtedness in an
aggregate amount of not less than $18,000,000, an amount equal to $4,600,000
and (ii) upon and after Borrowers’ receipt of cash proceeds of the Second
Lien Indebtedness in an aggregate amount of not less than $18,000,000, an
amount equal to $0; plus (b) (i) prior
to the consummation of the Magnetek ADS Sale, an amount equal to $0 and (ii) upon
and at all times after the consummation of the Magnetek ADS Sale, an amount
equal to $2,000,000.


 


“Bank
Product” means any financial accommodation extended to Administrative
Borrower or its Subsidiaries by a Bank Product Provider (other than pursuant to
the Agreement) including:  (a) credit
cards, (b) credit card processing services, (c) debit cards, (d) purchase
cards, (e) ACH Transactions, (f) cash management, including
controlled disbursement, accounts or services, or (g) transactions under
Hedge Agreements.


 


“Bank
Product Agreements” means those agreements entered into from time to time
by Administrative Borrower or its Subsidiaries with a Bank Product Provider in
connection with the obtaining of any of the Bank Products.


 


“Bank
Product Obligations” means all obligations, liabilities, contingent
reimbursement obligations, fees, and expenses owing by Administrative Borrower
or its Subsidiaries to any Bank Product Provider pursuant to or evidenced by
the Bank Product Agreements and irrespective of whether for the payment of money,
whether direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, and including all such amounts that
Administrative Borrower or its Subsidiaries are obligated to reimburse to Agent
or any member of the Lender Group as a result of Agent or such member of the
Lender Group purchasing participations from, or executing indemnities or
reimbursement obligations to, a Bank Product Provider with respect to the Bank
Products provided by such Bank Product Provider to Administrative Borrower or
its Subsidiaries.


 


“Bank
Product Provider” means Wells Fargo or any of its Affiliates.


 


“Bank
Product Reserve” means, as of any date of determination, the lesser of (a) $3,000,000,
and (b) the amount of reserves that Agent has established (based upon the
Bank Product Providers’ reasonable determination of the credit exposure of
Administrative Borrower and its Subsidiaries in respect of Bank Products) in
respect of Bank Products then provided or outstanding; provided, that
in order to qualify as Bank Product Reserves such reserves must be established
on or prior to the time that the Bank Product Provider first provides the
applicable Bank Product.


 


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“Bankruptcy
Code” means Title 11 of the United States Code, together with any
bankruptcy or insolvency laws of Canada, to the extent they apply to Mondel,
including without limitation, the Bankruptcy and Insolvency Act (Canada) and
the Companies’ Creditors Arrangement Act (Canada).


 


“Base
LIBOR Rate” means the rate per annum, determined by Agent in accordance
with its customary procedures, and utilizing such electronic or other quotation
sources as it considers appropriate (rounded upwards, if necessary, to the next
1/100%), to be the rate at which Dollar deposits (for delivery on the first day
of the requested Interest Period) are offered to major banks in the London
interbank market 2 Business Days prior to the commencement of the requested
Interest Period, for a term and in an amount comparable to the Interest Period
and the amount of the LIBOR Rate Loan requested (whether as an initial LIBOR
Rate Loan or as a continuation of a LIBOR Rate Loan or as a conversion of a
Base Rate Loan to a LIBOR Rate Loan) by Administrative Borrower in accordance
with the Agreement, which determination shall be conclusive in the absence of
manifest error.


 


“Base
Rate” means, the rate of interest announced, from time to time, within
Wells Fargo at its principal office in San Francisco as its “prime rate,” with
the understanding that the “prime rate” is one of Wells Fargo’s base rates (not
necessarily the lowest of such rates) and serves as the basis upon which
effective rates of interest are calculated for those loans making reference
thereto and is evidenced by the recording thereof after its announcement in
such internal publications as Wells Fargo may designate; provided, however,
for purposes of this Agreement only, the Base Rate shall at no time be less
than 5.50%.


 


“Base
Rate Loan” means the portion of the Advances that bears interest at a rate
determined by reference to the Base Rate.


 


“Base
Rate Margin” means 2.50 percentage points.


 


“Benefit
Plan” means a “defined benefit plan” (as defined in Section 3(35) of
ERISA) for which any Borrower, any Guarantor or any Subsidiary or ERISA
Affiliate of any Borrower or any Guarantor has been an “employer” (as defined
in Section 3(5) of ERISA) within the past six years, and any
equivalent Canadian Employee Benefits Legislation.


 


“Board
of Directors” means the board of directors (or comparable managers) of
Parent or any committee thereof duly authorized to act on behalf of the board
of directors (or comparable managers).


 


“Borrower”
and “Borrowers” have the respective meanings specified therefor in the
preamble to the Agreement.


 


“Borrowing”
means a borrowing hereunder consisting of Advances made on the same day by the
Lenders (or Agent on behalf thereof), or by Swing Lender in the case of a Swing
Loan, or by Agent in the case of a Protective Advance.


 


“Borrowing
Base” means, as of any date of determination, the result of:


 


(a)                                  85% of the amount of Eligible Accounts, less the amount, if any, of the Dilution Reserve, plus


 


(b)                                 the lowest of:


 


(i)                                     $5,000,000,


 


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(ii)                                  the sum of (A) 50% of the value
(calculated at the lower of cost (on a first-in-first-out basis) or market
value) of Eligible Inventory plus (B) 25%
of the cost of Eligible Raw Materials Inventory,


 


(iii)                               85% times the Net
Liquidation Percentage times the book value of Borrowers’ Inventory, and


 


(iv)                              35% of the amount of credit availability
created by clause (a) above, minus


 


(c)                                  the sum of (i) the Bank Product Reserve,
(ii) the Prior Claims Reserve and (iii) the aggregate amount of
reserves, if any, established by Agent under Section 2.1(b).


 


“Borrowing
Base Certificate” means a certificate in the form of Exhibit B-1.


 


“Business
Day” means any day that is not a Saturday, Sunday, or other day on which
banks are authorized or required to close in the state of California, except
that, if a determination of a Business Day shall relate to a LIBOR Rate Loan,
the term “Business Day” also shall exclude any day on which banks are
closed for dealings in Dollar deposits in the London interbank market.


 


“Canadian
Documents” means (a) the Canadian Guaranty, (b) the Canadian
Stock Pledge and (c) the Canadian Security Agreement.


 


“Canadian
Dollars” means the lawful currency of Canada.


 


“Canadian
Employee Benefits Legislation” means the Canadian Pension Plan Act
(Canada), the Pension Benefits Standards Act (Canada), the Pension Benefits Act
(Ontario), the Health Insurance Act (Ontario) and the Employment Standards Act
(Ontario) and all similar legislation in any relevant Canadian jurisdiction.


 


“Canadian
Employee Plan” has the meaning specified therefore in Section 4.13(k).


 


“Canadian
Guaranty” means a general continuing guaranty executed and delivered by
Mondel in favor of Agent, for the benefit of the Lender Group and the Bank
Product Providers, in form and substance satisfactory to Agent.


 


“Canadian
Income Tax Act” means the Income Tax Act (Canada), R.S.C. 1985 c.1 (5th
Supp.).


 


“Canadian
Security Agreement” means a security agreement, in form and substance
satisfactory to Agent, executed and delivered by Mondel in favor of Agent, for
the benefit of the Lenders and the Bank Product Providers, together with all
supplements executed in connection therewith.


 


“Canadian
Stock Pledge” means a stock pledge agreement, in form and substance
satisfactory to Agent, executed and delivered by Mondel Holding in favor of
Agent, for the benefit of the Lenders and the Bank Product Providers, with
respect to the Stock of Mondel, together with 
all certificates representing the shares of Stock pledged thereunder along
with Stock powers with respect thereto endorsed in blank.


 


“Capital
Expenditures” means, with respect to any Person for any period, the
aggregate of all expenditures by such Person and its Subsidiaries during such
period that are capital expenditures as


 


4





















 


determined in accordance with GAAP (including capitalized software
costs), whether such expenditures are paid in cash or financed.


 


“Capital
Lease” means, with respect to any Person, any lease of real or personal
property by such Person as lessee which is required under GAAP to be
capitalized on the balance sheet of such Person.


 


“Capitalized
Lease Obligation” means, with respect to any Person, obligations of such
Person and its Subsidiaries under Capital Leases, and, for purposes hereof, the
amount of any such obligation shall be the capitalized amount thereof
determined in accordance with GAAP.


 


“Cash
Equivalents” means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States Government or Canada or issued by
any agency or instrumentality thereof and backed by the full faith and credit
of the United States or constituting a charge on or being payable from the
Canadian Consolidated Revenue Fund, in each case, maturing within six months
from the date of acquisition thereof; (b) commercial paper, maturing not
more than 270 days after the date of issue rated P-1 by  Moody’s Investors Service, Inc. (“Moody’s”)
or A-1 by Standard & Poor’s Rating Group (“S&P”) or any
equivalent rating agency in Canada; (c) certificates of deposit maturing
not more than 270 days after the date of issue, issued by commercial
banking institutions or a Canadian chartered bank and money market or demand
deposit accounts maintained at commercial banking institutions or a Canadian chartered
bank, each of which is a member of the Federal Reserve System in the case of
commercial banking institutions and has a combined capital and surplus and
undivided profits of not less than $500,000,000; (d) repurchase agreements
having maturities of not more than 90 days from the date of acquisition
which are entered into with banks included in the commercial banking
institutions described in clause (c) above or a Canadian chartered
bank and which are secured by marketable direct obligations of the United States
government or the government of Canada or any agency thereof, (e) money
market accounts maintained with mutual funds having assets in excess of
$2,500,000,000; and (f) tax exempt securities rated A or better by Moody’s
or A+ or better by S& P.


 


“Cash
Management Account” has the meaning specified therefor in Section 2.7(a).


 


“Cash
Management Agreements” means those certain cash management agreements, in
form and substance satisfactory to Agent, each of which is among Administrative
Borrower, Mondel or one of their respective Subsidiaries, Agent, Second Lien
Agent and one of the Cash Management Banks.


 


“Cash
Management Bank” has the meaning specified therefor in Section 2.7(a).


 


“Change
of Control” means that (a) any “person” or “group” (within the meaning
of Sections 13(d) and 14(d) of the Exchange Act) becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of 30%, or more, of the Stock of Parent having the
right to vote for the election of members of the Board of Directors, (b) a
majority of the members of the Board of Directors do not constitute Continuing
Directors, (c) except with respect to Magnetek ADS in connection with the
Magnetek ADS Sale, Parent or any Borrower fails to own and control, directly or
indirectly, 100% of the Stock of each Person that is a Subsidiary of Parent or
any Borrower as of the Closing Date or (d) (i) Parent consolidates
with or merges into another entity or conveys, transfers or leases all or
substantially all of its property and assets to any Person, or (ii) any
entity consolidates with or merges into Parent, which in either event (i) or
(ii) is pursuant to a transaction in which the outstanding voting Stock of
Parent is reclassified or changed into or exchanged for cash, securities or
other property, other than any such transaction in which the owners of Stock of
Parent immediately beforehand have a beneficial ownership in the aggregate of
at least 50.1% of the aggregate voting power of all Stock of the resulting,
surviving or transferee entity.


 


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“Closing
Date” means the date of the making of the initial Advance (or other
extension of credit) hereunder or the date on which Agent sends Administrative
Borrower a written notice that each of the conditions precedent set forth in Section 3.1
either have been satisfied or have been waived.


 


“Code”
means the New York Uniform Commercial Code.


 


“Collateral”
means all assets and interests in assets and proceeds thereof now owned or
hereafter acquired by Administrative Borrower or its Subsidiaries in or upon
which a Lien is granted under any of the Loan Documents.


 


“Collateral
Access Agreement” means a landlord waiver, bailee letter, or
acknowledgement agreement of any lessor, warehouseman, processor, consignee, or
other Person in possession of, having a Lien upon, or having rights or
interests in Administrative Borrower’s, Mondel’s or their respective
Subsidiaries’ books and records, Equipment or Inventory, in each case, in form
and substance satisfactory to Agent.


 


“Collections”
means all cash, checks, notes, instruments, and other items of payment
(including, without limitation, proceeds of Extraordinary Receipts and proceeds
of the Magnetek ADS Sale or any other Disposition Involving Accounts or
Inventory).


 


“Commitment”
means, with respect to each Lender, its Commitment, and, with respect to all
Lenders, the aggregate of the Commitments of each Lender, in each case as such
Dollar amounts are set forth on Schedule C-1 or in the Assignment and
Acceptance pursuant to which such Lender became a Lender hereunder, as such
amounts may be reduced or increased from time to time pursuant to the terms of
this Agreement and assignments made in accordance with the provisions of Section 13.1.


 


“Compliance
Certificate” means a certificate substantially in the form of Exhibit C-1
delivered by the chief financial officer of Parent to Agent.


 


“Consolidated
EBITDA” means, with respect to Parent for any period, the Consolidated Net
Income of Parent and its Subsidiaries for such period, plus (i) without
duplication, the sum of the following amounts of Parent and its Subsidiaries
for such period and to the extent deducted in determining Consolidated Net
Income of Parent and its Subsidiaries for such period:  (A) Consolidated Net Interest Expense, (B) net
income tax expense, (C) depreciation expense and (D) amortization
expense.


 


“Consolidated
Funded Indebtedness” means, with respect to Parent at any date, all
Indebtedness for borrowed money of Parent and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP, which by its terms matures more
than one year after the date of calculation, and any such Indebtedness maturing
within one year from such date which is renewable or extendable at the option
of Parent or the applicable Subsidiary to a date more than one year from such
date, including, in any event, but without duplication, with respect to Parent
and its Subsidiaries, the Second Lien Indebtedness, the Obligations, and the
amount of their Capitalized Lease Obligations.


 


“Consolidated
Net Income” means, with respect to Parent for any period, the net income
(loss) of Parent and its Subsidiaries for such period, determined on a
consolidated basis and in accordance with GAAP, but excluding from the
determination of Consolidated Net Income (without duplication) (a) any
non-cash extraordinary or non-recurring gains or non-cash gains or losses from
Dispositions, (b) non-cash restructuring charges, (c) non-cash
effects of discontinued operations, (d) cash effects of discontinued
operations in an aggregate amount not to exceed $1,500,000, (e) interest
that is paid-in-kind, (f) non-cash pension and non-cash stock compensation
charges and (f) any tax refunds, net operating losses or other net tax
benefits received during such period on account of any prior period.


 


6





















 


“Consolidated
Net Interest Expense” means, with respect to Parent for any period, gross
cash interest expense of Parent and its Subsidiaries for such period determined
on a consolidated basis and in accordance with GAAP (including interest expense
paid to Affiliates of Parent), less (i) the sum of (A) interest
income for such period and (B) gains for such period on Hedge Agreements
(to the extent not included in interest income above and to the extent not
deducted in the calculation of gross interest expense), plus (ii) the sum
of (A) losses for such period on Hedge Agreements (to the extent not
included in such gross interest expense) and (B) the upfront costs or fees
for such period associated with Hedge Agreements (to the extent not included in
such gross interest expense), in each case, determined on a consolidated basis
and in accordance with GAAP.


 


“Contingent
Obligation” means, with respect to any Person, any obligation of such
Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations (“primary obligations”) of any other Person (the
“primary obligor”) in any manner, whether directly or indirectly, including (i) the
direct or indirect guaranty, endorsement (other than for collection or deposit
in the ordinary course of business), co-making, discounting with recourse or
sale with recourse by such Person of the obligation of a primary obligor, (ii) the
obligation to make take-or-pay or similar payments, if required, regardless of
nonperformance by any other party or parties to an agreement, (iii) any
obligation of such Person, whether or not contingent, (A) to purchase any
such primary obligation or any property constituting direct or indirect
security therefor, (B) to advance or supply funds (1) for the
purchase or payment of any such primary obligation or (2) to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency of the primary obligor, (C) to purchase
property, assets, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (D) otherwise to assure or
hold harmless the holder of such primary obligation against loss in respect
thereof; provided, however, that the term “Contingent Obligation”
shall not include any product warranties extended in the ordinary course of
business.  The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation with respect to which such Contingent
Obligation is made (or, if less, the maximum amount of such primary obligation
for which such Person may be liable pursuant to the terms of the instrument
evidencing such Contingent Obligation) or, if not stated or determinable, the
maximum reasonably anticipated liability with respect thereto (assuming such
Person is required to perform thereunder), as determined by such Person in good
faith.


 


“Continuing
Director” means (a) any member of the Board of Directors who was a
director (or comparable manager) of Parent on the Closing Date, and (b) any
individual who becomes a member of the Board of Directors after the Closing
Date if such individual was appointed or nominated for election to the Board of
Directors by a majority of the Continuing Directors, but excluding any such
individual originally proposed for election in opposition to the Board of
Directors in office at the Closing Date in an actual or threatened election
contest relating to the election of the directors (or comparable managers) of
Parent and whose initial assumption of office resulted from such contest or the
settlement thereof.


 


“Control
Agreement” means a control agreement, in form and substance satisfactory to
Agent, executed and delivered by the Administrative Borrower, Mondel or one of
their respective Subsidiaries, Agent, Second Lien Agent and the applicable
securities intermediary (with respect to a Securities Account) or bank (with
respect to a Deposit Account).


 


“Controlled
Foreign Corporation” means a “controlled foreign corporation” as defined in
the IRC.


 


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“Controlled
Group ERISA Affiliates” has the meaning specified therefor in Section 7.12.


 


“Daily
Balance” means, as of any date of determination and with respect to any
Obligation, the amount of such Obligation owed at the end of such day.


 


“Default”
means an event, condition, or default that, with the giving of notice, the
passage of time, or both, would be an Event of Default.


 


“Defaulting
Lender” means any Lender that fails to make any Advance (or other extension
of credit) that it is required to make hereunder on the date that it is
required to do so hereunder.


 


“Defaulting
Lender Rate” means (a) for the first 3 days from and after the date
the relevant payment is due, the Base Rate, and (b) thereafter, the
interest rate then applicable to Advances that are Base Rate Loans (inclusive
of the Base Rate Margin applicable thereto).


 


“Deposit
Account” means any deposit account as that term is defined in the Code and,
in the case of Mondel, the PPSA.


 


“Designated
Account” means the Deposit Account of Administrative Borrower identified on
Schedule D-1.


 


“Designated
Account Bank” has the meaning specified therefor in Schedule D-1.


 


“Designated
Pension Payment” means the payment in the estimated amount of $3,463,902
that is due and payable on October 15, 2007 in respect of Parent’s and its
Subsidiaries’ Benefit Plans.


 


“Dilution”
means, as of any date of determination, a percentage, based upon the experience
of the immediately prior 90 consecutive days, that is the result of dividing
the Dollar amount of (a) bad debt write-downs, discounts, advertising
allowances, credits, or other dilutive items with respect to Borrowers’
Accounts during such period, by (b) Borrowers’ billings with respect to
such Accounts during such period.


 


“Dilution
Reserve” means, as of any date of determination, an amount sufficient to
reduce the advance rate against Eligible Accounts by 1 percentage point (and/or
fraction thereof) for each percentage point (and/or fraction thereof) by which
Dilution is in excess of 5.0%.


 


“Disposition”
means any transaction, or series of related transactions, pursuant to which any
Person or any of its Subsidiaries sells, assigns, transfers or otherwise
disposes of any property or assets (whether now owned or hereafter acquired) to
any other Person, in each case, whether or not the consideration therefor
consists of cash, securities or other assets owned by the acquiring Person.


 


“Dollars”
or “$” means United States dollars.


 


“Domestic
EBITDA” means, for any period, the Domestic Net Income for such period,
plus (i) without duplication, the sum of the following amounts of the
Borrowers and the Guarantors for such period and to the extent deducted in
determining Domestic Net Income of the Borrowers and the Guarantors for such
period:  (A) Domestic Net Interest
Expense, (B) net income tax expense, (C) depreciation expense, (D) amortization
expense, and (E) corporate overhead expense minus, (ii) the
Applicable Corporate Overhead Amount.


 


“Domestic
Net Income” means, with respect to the Borrowers and the Guarantors for any
period, the net income (loss) of the Borrowers and the Guarantors for such
period, determined in accordance with GAAP, but excluding from the
determination of Domestic Net Income (without


 


8





















 


duplication) (a) any non-cash extraordinary or non-recurring gains
or non-cash gains or losses from Dispositions, (b) non-cash restructuring
charges, (c) non-cash effects of discontinued operations, (d) interest
that is paid-in-kind, and (e) any tax refunds, net operating losses or
other net tax benefits received during such period on account of any prior
period, in each case solely with respect to the Borrowers and the Guarantors.


 


“Domestic
Net Interest Expense” means, with respect to the Borrowers and the Guarantors
for any period, gross cash interest expense of the Borrowers and the Guarantors
for such period determined in accordance with GAAP (including interest expense
paid to Affiliates of any Borrower or any Guarantor), less (i) the sum of (A) interest
income for such period and (B) gains for such period on Hedge Agreements
(to the extent not included in interest income above and to the extent not
deducted in the calculation of gross interest expense), plus (ii) the sum
of (A) losses for such period on Hedge Agreements (to the extent not
included in such gross interest expense) and (B) the upfront costs or fees
for such period associated with Hedge Agreements (to the extent not included in
such gross interest expense), in each case, determined in accordance with GAAP
with respect to the Borrowers and the Guarantors.


 


“Domestic
Subsidiaries” means, with respect to any Person, such Person’s Subsidiaries
which are organized under the laws of the United States, any state thereof,
Canada or any province thereof.


 


“Eligible
Accounts” means those Accounts created by a Borrower or Mondel in the
ordinary course of its business, that arise out of its sale of goods or
rendition of services, that comply with each of the representations and
warranties respecting Eligible Accounts made in the Loan Documents, and that
are not excluded as ineligible by virtue of one or more of the excluding
criteria set forth below; provided, however, that such criteria may be revised
from time to time by Agent in Agent’s Permitted Discretion to address the
results of any audit performed by Agent from time to time after the Closing
Date.  In determining the amount to be
included, Eligible Accounts shall be calculated net of customer deposits and
unapplied cash.  Eligible Accounts shall
not include the following:


 


(a)                                  Accounts that the Account Debtor has failed
to pay within (i) 90 days of original invoice date or (ii) 60 days of
due date,


 


(b)                                 Accounts owed by an Account Debtor (or its
Affiliates) where 50% or more of all Accounts owed by that Account Debtor (or
its Affiliates) are deemed ineligible under clause (a) above,


 


(c)                                  Accounts with respect to which the Account
Debtor is an Affiliate of any Borrower or an employee or agent of any Borrower
or any Affiliate of any Borrower,


 


(d)                                 Accounts arising in a transaction wherein
goods are placed on consignment or are sold pursuant to a guaranteed sale, a
sale or return, a sale on approval, a bill and hold, or any other terms by
reason of which the payment by the Account Debtor may be conditional,


 


(e)                                  Accounts that are not payable in Dollars or
Canadian Dollars,


 


(f)                                    Accounts with respect to which the Account
Debtor either (i) does not maintain its chief executive office in the
United States or Canada, or (ii) is not organized under the laws of the
United States, any state thereof, Canada or any province thereof, or (iii) is
the government of any foreign country or sovereign state, or of any state,
province, municipality, or other political subdivision thereof, or of any
department, agency, public corporation, or other instrumentality thereof,
unless (y) the Account is supported by an irrevocable letter of credit
satisfactory to Agent (as to form, substance, and issuer or domestic confirming
bank) that has been delivered to Agent and is directly drawable by Agent, or
(z) the Account is covered by credit insurance in form, substance, and
amount, and by an insurer, satisfactory to Agent,


 


9





















 


(g)                                 Accounts with respect to which the Account
Debtor is either (i) the United States, Canada or any department, agency,
or instrumentality thereof (exclusive, however, of Accounts with respect to
which the applicable Borrower or Mondel has complied, to the reasonable
satisfaction of Agent, with the Assignment of Claims Act, 31 USC § 3727 or
the Financial Administration Act (Canada), or (ii) any state of the United
States or province of Canada,


 


(h)                                 Accounts with respect to which the Account
Debtor is a creditor of any Borrower or Mondel, has or has asserted a right of setoff,
or has disputed its obligation to pay all or any portion of the Account, to the
extent of such claim, right of setoff, or dispute,


 


(i)                                     Accounts with respect to an Account Debtor
whose total obligations owing to Borrowers and Mondel exceed 10% (such
percentage, as applied to a particular Account Debtor, being subject to
reduction by Agent in its Permitted Discretion if the creditworthiness of such
Account Debtor deteriorates) of all Eligible Accounts, to the extent of the
obligations owing by such Account Debtor in excess of such percentage;
provided, however, that, in each case, the amount of Eligible Accounts that are
excluded because they exceed the foregoing percentage shall be determined by
Agent based on all of the otherwise Eligible Accounts prior to giving effect to
any eliminations based upon the foregoing concentration limit,


 


(j)                                     Accounts with respect to which the Account
Debtor is subject to an Insolvency Proceeding, is not Solvent, has gone out of
business, or as to which a Borrower or Mondel has received notice of an
imminent Insolvency Proceeding or a material impairment of the financial
condition of such Account Debtor,


 


(k)                                  Accounts with respect to which the Account
Debtor is located in a state or other jurisdiction (e.g., New Jersey, Minnesota,
and West Virginia) that requires, as a condition to access to the courts of
such jurisdiction, that a creditor qualify to transact business, file a
business activities report or other report or form, or take one or more other
actions, unless the applicable Borrower or Mondel has so qualified, filed such
reports or forms, or taken such actions (and, in each case, paid any required
fees or other charges), except to the extent that the applicable Borrower or
Mondel may qualify subsequently as a foreign entity authorized to transact
business in such state or jurisdiction and gain access to such courts, without
incurring any cost or penalty viewed by Agent to be significant in amount, and
such later qualification cures any access to such courts to enforce payment of
such Account,


 


(l)                                     Accounts, the collection of which, Agent, in
its Permitted Discretion, believes to be doubtful by reason of the Account
Debtor’s financial condition,


 


(m)                               Accounts that are not subject to a valid and
perfected first priority Agent’s Lien,


 


(n)                                 Accounts with respect to which (i) the
goods giving rise to such Account have not been shipped and billed to the
Account Debtor, or (ii) the services giving rise to such Account have not
been performed and billed to the Account Debtor, or


 


(o)                                 Accounts that represent the right to receive
progress payments or other advance billings that are due prior to the
completion of performance by the applicable Borrower or Mondel of the subject
contract for goods or services.


 


“Eligible
Inventory” means Inventory of a Borrower or Mondel consisting of first
quality finished goods held for sale in the ordinary course of such Person’s
business, that complies with each


 


10





















 


of the representations and warranties respecting Eligible Inventory
made in the Loan Documents, and that is not excluded as ineligible by virtue of
one or more of the excluding criteria set forth below; provided, however, that
such criteria may be revised from time to time by Agent in Agent’s Permitted
Discretion to address the results of any audit or appraisal performed by Agent
from time to time after the Closing Date. 
In determining the amount to be so included, Inventory shall be valued
at the lower of cost or market on a basis consistent with Borrowers’ and Mondel’s
historical accounting practices.  An item
of Inventory shall not be included in Eligible Inventory if:


 


(a)                                  a Borrower or Mondel does not have good,
valid, and marketable title thereto,


 


(b)                                 it is not located at one of the locations in
the continental United States or Canada set forth on Schedule E-1
(or in-transit from one such location to another such location), {note, Schedule E-1 will list only the
leased  locations set forth in item (n)
of Schedule 3.1}


 


(c)                                  it is located on real property leased by a
Borrower or Mondel or in a contract warehouse, in each case, unless it is
subject to a Collateral Access Agreement executed by the lessor, or
warehouseman, as the case may be, and unless it is segregated or otherwise separately
identifiable from goods of others, if any, stored on the premises,


 


(d)                                 it is not subject to a valid and perfected
first priority Agent’s Lien,


 


(e)                                  it consists of goods returned or rejected by
the applicable Borrower’s or Mondel’s customers,


 


(f)                                    it consists of goods that are obsolete or
slow moving, restrictive or custom items, work-in-process, raw materials, or
goods that constitute spare parts, packaging and shipping materials, supplies
used or consumed in the applicable Borrower’s or Mondel’s business, bill and
hold goods, defective goods, “seconds,” or Inventory acquired or for sale on
consignment, or


 


(g)                                 it consists of goods which are in the
possession of a processor or similar such Person.


 


“Eligible
Raw Materials Inventory” means Inventory of a Borrower or Mondel which
would constitute Eligible Inventory but for the fact that such Inventory
consists of raw materials and components used to produce finished goods
Inventory.


 


“Eligible
Transferee” means (a) a commercial bank organized under the laws of
the United States, or any state thereof, and having total assets in excess of
$250,000,000, (b) a commercial bank organized under the laws of any other
country which is a member of the Organization for Economic Cooperation and
Development or a political subdivision of any such country and which has total
assets in excess of $250,000,000, provided that such bank is acting through a
branch or agency located in the United States, (c) a finance company,
insurance company, or other financial institution or fund that is engaged in
making, purchasing, or otherwise investing in commercial loans in the ordinary
course of its business and having (together with its Affiliates and Related
Funds) total assets in excess of $250,000,000, (d) any Lender or any Affiliate
(other than individuals) or Related Fund of a Lender, (e) so long as no
Event of Default has occurred and is continuing, any other Person approved by
Agent and Administrative Borrower (which approval of Administrative Borrower
shall not be unreasonably withheld, delayed, or conditioned), and (f) during
the continuation of an Event of Default, any other Person approved by Agent.


 


“Environmental
Actions” means any complaint, summons, citation, notice, directive, order,
claim, litigation, investigation, judicial or administrative proceeding,
judgment, letter, or other communication from any Governmental Authority, or
any third party involving violations of Environmental Laws or releases of
Hazardous Materials from (a) any assets, properties, or businesses


 


11





















 


of any Borrower, any Guarantor, any of their respective Subsidiaries,
or any of their respective predecessors in interest, (b) from adjoining
properties or businesses, or (c) from or onto any facilities which
received Hazardous Materials generated by any Borrower, any Guarantor, any of
their respective Subsidiaries, or any of their respective predecessors in
interest.


 


“Environmental
Law” means any applicable federal, state, provincial, foreign or local statute,
law, rule, regulation, ordinance, code, binding and enforceable guideline,
binding and enforceable written policy or rule of common law now or
hereafter in effect and in each case as amended, or any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, in each case, to the extent binding on any
Borrower, any Guarantor or any of their respective Subsidiaries, relating to
the environment, the effect of the environment on employee health, or Hazardous
Materials, in each case as amended from time to time.


 


“Environmental
Liabilities” means all liabilities, monetary obligations, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, experts,
or consultants, and costs of investigation and feasibility studies), fines,
penalties, sanctions, and interest incurred as a result of any claim or demand,
or Remedial Action required, by any Governmental Authority or any third party,
and which relate to any Environmental Action.


 


“Environmental
Lien” means any Lien in favor of any Governmental Authority for
Environmental Liabilities.


 


“Equipment”
means equipment as that term is defined in the Code and, in the case of Mondel,
the PPSA.


 


“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended, from
time to time, and the regulations promulgated thereunder and any successor
statue or regulations.  References to
sections of ERISA or such regulations shall be construed to refer to any
successor sections.


 


“ERISA Affiliate” means each business or
entity which is or was a member of a “controlled group of corporations”, under “common
control” or an “affiliated service group” with any Borrower or any of their
respective Subsidiaries within the meaning of Section 414(b), (c) or
(m) of the IRC, required to be aggregated with any Borrower or any of their
respective Subsidiaries under Section 414(o) of the IRC, or is or was
under “common control” with any Borrower or any of their respective
Subsidiaries, within the meaning of Section 4001(a)(14) of ERISA.


 


“ERISA Event”
means (a) a reportable event as defined in Section 4043 of ERISA and
the regulations issued under such Section with respect to a Pension Plan,
excluding, however, such events as to which the PBGC by regulation has waived
the requirement of Section 4043(a) of ERISA that it be notified
within 30 days of the occurrence of such event; (b) the applicability of
the requirements of Section 4043(b) of ERISA with respect to a
contributing sponsor, as defined in Section 4001(a)(13) of ERISA, to any
Pension Plan where an event described in paragraph (9), (10), (11), (12) or
(13) of Section 4043(c) of ERISA is reasonably expected to occur with
respect to such plan within the following 30 days; (c) a withdrawal by any
Borrower, any of their respective Subsidiaries, or any ERISA Affiliate from a
Pension Plan or the termination of any Pension Plan resulting in liability
under Sections 4063 or 4064 of ERISA; (d) the withdrawal of any
Borrower, any of their respective Subsidiaries, or ERISA Affiliate in a
complete or partial withdrawal (within the meaning of Section 4203 and
4205 of ERISA) from any Multiemployer Plan if there is any potential liability
therefor, or the receipt by any Borrower, any of their respective Subsidiaries,
or ERISA Affiliate of notice from any Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA; (e) the
filing of a notice of intent to terminate, the treatment of a plan amendment


 


12





















 


as a termination
under Section 4041 or 4041A of ERISA, or the commencement of proceedings
by the PBGC to terminate a Pension Plan or Multiemployer Plan; (f) the
imposition of liability on any Borrower, any of their respective Subsidiaries,
or any ERISA Affiliate pursuant to Sections 4062(e) or 4069 of ERISA or by
reason of the application of Section 4212(c) of ERISA; (g) the
failure by any Borrower, any of their respective Subsidiaries, or any ERISA
Affiliate to timely make any required contribution to a Pension Plan (or the
failure to timely make a required contribution in any material respect with
respect to any Plan that is not a Pension Plan or a Multiemployer Plan), or the
failure to meet the minimum funding standard of Section 412 of the IRC
with respect to any Pension Plan (whether or not waived in accordance with Section 412(d) of
the IRC) or the failure to make by its due date a required installment under Section 412(m)
of the IRC with respect to any Pension Plan or the failure to timely make any
required contribution to a Multiemployer Plan; (h) an event or condition
which could reasonably be expected to result in the termination of, or the
appointment of a trustee to administer, any Pension Plan or Multiemployer Plan;
(i) the imposition of any material liability under ERISA, other than PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon any
Borrower, any of their respective Subsidiaries or any ERISA Affiliate;
(j) an application for a funding waiver under Section 303 of ERISA or
an extension of any amortization period pursuant to Section 412 of the IRC
with respect to any Pension Plan; (k) the occurrence of a non-exempt
prohibited transaction under Sections 406 or 407 of ERISA for which any
Borrower, or any of their respective Subsidiaries, may be directly or
indirectly liable and which is reasonably expected to result in a material
liability to any Borrower or any of their respective Subsidiaries; (l) a
material violation of the applicable requirements of Section 404
or 405 of ERISA or the exclusive benefit rule under Section 401(a) of
the IRC by any fiduciary or disqualified person for which any Borrower, any of
their respective Subsidiaries or any ERISA Affiliate may be directly or
indirectly liable; (m) the occurrence of an act, omission, event or condition
which could give rise to the imposition on any Borrower, any of their
respective Subsidiaries, or any ERISA Affiliate of material fines, material
penalties, material taxes, material related charges or material liability under
the IRC or under ERISA; (n) the assertion of a material claim (other than
routine claims for benefits) against any Plan or the assets or any fiduciary
thereof, or against any Borrower or any of their respective Subsidiaries in
connection with any such Plan; (o) receipt from the Internal Revenue Service of
notice of the failure of any Qualified Plan to qualify under Section 401(a) of
the IRC, or the failure of any trust forming part of any Qualified Plan to fail
to qualify for exemption from taxation under Section 501(a) of the
IRC; (p) the imposition of any lien on any of the rights, properties or assets
of any Borrower, any of their respective Subsidiaries, or any ERISA Affiliate,
in either case pursuant to ERISA or the IRC; or (q) the establishment or
amendment by any Borrower or any of their respective Subsidiaries, of any “welfare
plan”, as such term is defined in Section 3(1) of ERISA, that provides
post-employment health benefits in a manner that would materially increase the
liability of any Borrower or any of their respective Subsidiaries.


 


“Event
of Default” has the meaning specified therefor in Section 7.


 


“Excess
Availability” means, as of any date of determination, the amount equal to
Availability minus the aggregate amount, if
any, of all trade payables of Borrowers, Guarantors and their respective
Subsidiaries aged in excess of their historical levels with respect thereto and
all book overdrafts of Borrowers, Guarantors and their respective Subsidiaries
in excess of their historical practices with respect thereto, in each case as
determined by Agent in its Permitted Discretion.


 


“Exchange
Act” means the Securities Exchange Act of 1934.


 


“Excluded
Foreign Subsidiaries” means Magnetek de Mexico, S.A. de C.V., a corporation
organized under the laws of Mexico, Manufacturas Electricas de Reynosa S.A. de
C.V., a corporation organized under the laws of Mexico, Mejor Electronica de
Mexico, S.A. de C.V., a corporation organized under the laws of Mexico,
Servicio de Guarderias, S.C., a partnership organized under the laws of Mexico,
Magnetek Deteiligungsgesellschaft Gmbh, a corporation organized under the alws
of the Federal Republic of Germany, Magnetek Lighting Canada Limited, a
corporation organized under


 


13





















 


the laws of Canada, Magnetek Industrials Controls Group (UK) Ltd., a
corporation organized under the laws of Great Britain, and Magnetek Vertiebsgesellschaft
GmbH, a corporation organized under the alws of the Federal Republic of
Germany.


 


“Existing
Lender” means JPMorgan Chase Bank, N.A., a national banking association.


 


“Extraordinary
Receipts” means any cash received by any Borrower, any Guarantor or any of
their respective Subsidiaries that is not received in the ordinary course of
business (and not consisting of proceeds of Dispositions or Indebtedness), to
the extent the foregoing consists of proceeds of insurance or condemnation
awards in respect of Accounts or Inventory.


 


“Fee
Letter” means that certain fee letter between Borrowers and Agent, in form
and substance satisfactory to Agent.


 


“Financial
Statements” means (a) the audited consolidated balance sheet of the
Parent and its Subsidiaries for their fiscal year ended June 30, 2005, and
the related consolidated statement of operations, shareholders’ equity and cash
flows for their fiscal year then ended, and (ii) the unaudited
consolidated balance sheet of the Parent and its Subsidiaries for the month
ended July 31, 2005, and the related consolidated statement of operations,
shareholder’s equity and cash flows for the month then ended.


 


“Fixed
Charge Coverage Ratio” means, with respect to Parent and its Subsidiaries
for any period, the ratio of (i) (A) the Consolidated EBITDA for such
period minus (B) Capital Expenditures made by Parent and its
Subsidiaries during such period, to (ii) the sum of (A) all principal
of Indebtedness of Parent and its Subsidiaries scheduled to be paid or prepaid
during such period, plus (B) Consolidated Net Interest Expense of
Parent and its Subsidiaries for such period, plus (C) all income
tax liability of Parent and its Subsidiaries that accrued in such period (other
than the increase in such period, if any, in non-cash deferred tax liability
attributable to amortization of goodwill over a shorter period for tax purposes
than for financial reporting purposes), to the extent that the amount of such
liabilities is greater than zero, plus (D) cash dividends or distributions
paid by Parent and its Subsidiaries (other than dividends or distributions paid
to Parent or its wholly-owned Subsidiaries) during such period, plus, (E) the
aggregate amount of cash payments made by Parent and its Subsidiaries during
such period in respect of their Benefit Plans. 
In determining the Fixed Charge Coverage Ratio for a particular period,
the calculation of the income tax liabilities of Parent and its Subsidiaries
described in clause (ii)(C) of the immediately preceding sentence shall be
made without giving effect to any tax refunds, tax receivables, net operating
losses or other net tax benefits that were received or receivable during such
period on account of any prior periods.


 


“Foreign
Stock Pledge” means that certain stock pledge agreement with respect to the
capital Stock of Magnetek S.p.A., a company organized under the laws of Italy,
which is in form and substance satisfactory to Agent (including being governed
by the law of organization of such Person).


 


“Funding
Date” means the date on which a Borrowing occurs.


 


“Funding
Losses” has the meaning specified therefor in Section 2.13(b)(ii).


 


“GAAP”
means generally accepted accounting principles as in effect from time to time
in the United States, consistently applied.


 


“Governing
Documents” means, with respect to any Person, the certificate or articles
of incorporation, by-laws, or other organizational documents of such Person.


 


14





















 


“Governmental
Authority” means any U.S. or foreign federal, state, provincial, local, or
other governmental or administrative body, instrumentality, board, department,
or agency or any court, tribunal, administrative hearing body, arbitration
panel, commission, or other similar dispute-resolving panel or body.


 


“Guarantors”
means (a) each Domestic Subsidiary of each Borrower and (b) any other
Person at any time providing a guaranty in favor of Agent, for the benefit of
the Lender Group and the Bank Product Providers, with respect to the
Obligations or whose assets are otherwise pledged as security for the repayment
of the Obligations; and “Guarantor” means any one of them.


 


“Guaranty”
means, individually and collectively, (a) that certain general continuing
guaranty executed and delivered by each Guarantor in favor of Agent, for the
benefit of the Lender Group and the Bank Product Providers, in form and
substance satisfactory to Agent, (b) the Canadian Guaranty, and (c) any
other guaranty at any time executed and delivered by any other Guarantor in
favor of Agent, for the benefit of the Lender Group and the Bank Product
Providers, whether by execution of a joinder to any guaranty described in the
foregoing clauses (a) or (b) or otherwise.


 


“Hazardous
Materials” means (a) substances that are defined or listed in, or
otherwise classified pursuant to, any Applicable Laws or regulations as “hazardous
substances,” “hazardous materials,” “hazardous wastes,” “toxic substances,” or
any other formulation intended to define, list, or classify substances by
reason of deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, reproductive toxicity, or “EP toxicity”, (b) oil,
petroleum, or petroleum derived substances, natural gas, natural gas liquids,
synthetic gas, drilling fluids, produced waters, and other wastes associated
with the exploration, development, or production of crude oil, natural gas, or
geothermal resources, (c) any flammable substances or explosives or any
radioactive materials, and (d) asbestos in any form or electrical equipment
that contains any oil or dielectric fluid containing levels of polychlorinated
biphenyls in excess of 50 parts per million.


 


“Hedge
Agreement” means any interest rate, foreign currency, commodity or equity
swap, collar, cap, floor or forward rate agreement, or other agreement or
arrangement designed to protect against fluctuations in interest rates or
currency, commodity or equity values (including any option with respect to any
of the foregoing and any combination of the foregoing agreements or arrangements),
and any confirmation executed in connection with any such agreement or
arrangement.


 


“Holding
Account” means the deposit account specified on Schedule H-1.


 


“Holdout
Lender” has the meaning specified therefor in Section 14.2(a).


 


“Indebtedness”
means, with respect to any Person, without duplication, (a) all
indebtedness of such Person for borrowed money; (b) all obligations of
such Person for the deferred purchase price of property or services (other than
trade payables or other accounts payable incurred in the ordinary course of
such Person’s business and not outstanding for more than 90 days after the date
such payable was created); (c) all obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments or upon which interest
payments are customarily made; (d) all reimbursement, payment or other
obligations and liabilities of such Person created or arising under any
conditional sales or other title retention agreement with respect to property
used or acquired by such Person, even though the rights and remedies of the
lessor, seller or lender thereunder may be limited to repossession or sale of
such property; (e) all Capitalized Lease Obligations of such Person; (f) all
obligations and liabilities, contingent or otherwise, of such Person, in
respect of letters of credit, acceptances and similar facilities; (g) all
obligations and liabilities, calculated on a basis satisfactory to the
Collateral Agent and in accordance with accepted practice, of such Person under
Hedge Agreements; (h) all Contingent Obligations; (i) liabilities
incurred under Title IV of ERISA with respect to any Pension Plan;
(j) withdrawal liability incurred under ERISA by such Person or any of its
ERISA Affiliates


 


15





















 


with respect to any Multiemployer Plan; (k) all other items which, in
accordance with GAAP, would be included as liabilities on the liability side of
the balance sheet of such Person; and (l) all obligations referred to in
clauses (a) through (k) of this definition of another Person secured by
(or for which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) a Lien upon property owned by such Person, even
though such Person has not assumed or become liable for the payment of such
Indebtedness.  The Indebtedness of any
Person shall include the Indebtedness of any partnership or joint venture in
which such Person is a general partner or a joint venturer.


 


“Indemnified
Liabilities” has the meaning specified therefor in Section 10.3.


 


“Indemnified
Person” has the meaning specified therefor in Section 10.3.


 


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


 


“Intercompany
Subordination Agreement” means a subordination agreement executed and
delivered to Agent on the Closing Date by Borrowers, Guarantors and each of
their respective Subsidiaries, the form and substance of which is satisfactory
to Agent, together with the Joinder to Intercompany Subordination Agreement, as
the same may be further amended, modified or supplemented from time to time.


 


“Interest
Period” means, with respect to each LIBOR Rate Loan, a period commencing on
the date of the making of such LIBOR Rate Loan (or the continuation of a LIBOR
Rate Loan or the conversion of a Base Rate Loan to a LIBOR Rate Loan) and
ending 1, 2, or 3 months thereafter; provided, however, that (a) if any
Interest Period would end on a day that is not a Business Day, such Interest
Period shall be extended (subject to clauses (c)-(e) below) to the next
succeeding Business Day, (b) interest shall accrue at the applicable rate
based upon the LIBOR Rate from and including the first day of each Interest
Period to, but excluding, the day on which any Interest Period expires, (c) any
Interest Period that would end on a day that is not a Business Day shall be
extended to the next succeeding Business Day unless such Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Business Day, (d) with respect to an Interest Period that
begins on the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end of
such Interest Period), the Interest Period shall end on the last Business Day
of the calendar month that is 1, 2, or 3 months after the date on which the
Interest Period began, as applicable, and (e) Borrowers (or Administrative
Borrower on behalf thereof) may not elect an Interest Period which will end
after the Maturity Date.


 


“Inventory”
means inventory as that term is defined in the Code and, in the case of Mondel,
the PPSA.


 


“Investment”
means, with respect to any Person, any investment by such Person in any other
Person (including Affiliates) in the form of loans, guarantees, advances, or
capital contributions (excluding (a) commission, travel, and similar
advances to officers and employees of such Person made in the ordinary course
of business, and (b) bona fide Accounts arising in the ordinary course of
business consistent with past practice), purchases or other acquisitions of
Indebtedness, Stock, or all or substantially all of the assets of such other
Person (or of any division or business line of such other Person), and any
other items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP.


 


16





















 


“IRC”
means the Internal Revenue Code of 1986.


 


“Issuing
Lender” means WFF or any other Lender that, at the request of
Administrative Borrower and with the consent of Agent, agrees, in such Lender’s
sole discretion, to become an Issuing Lender for the purpose of issuing L/Cs or
L/C Undertakings pursuant to Section 2.12.


 


“Joinder
to Intercompany Subordination Agreement” means a joinder to the
Intercompany Subordination Agreement, substantially in the form of Exhibit J-1
hereto, or otherwise satisfactory to Agent in form and substance, executed and
delivered by the Subsidiaries of the Borrowers described therein.


 


“Laws”
means, in respect of the United States, Canada and any other country, all
published laws, statutes, codes, ordinances, decrees, rules, regulations,
by-laws, judicial, arbitral, administrative, ministerial, departmental or
regulatory judgments, orders, decisions, rulings or awards, including general
principals of common and civil law, and conditions of any grant of approval,
permission, authority or license of any court, Governmental Authority,
statutory body or self-regulatory authority.


 


“L/C”
has the meaning specified therefor in Section 2.12(a).


 


“L/C
Disbursement” means a payment made by the Issuing Lender pursuant to a
Letter of Credit.


 


“L/C
Undertaking” has the meaning specified therefor in Section 2.12(a).


 


“Lease”
means any lease of real property to which any Borrower, any Guarantor or their
respective Subsidiaries is a party as lessor or lessee.


 


“Lender”
and “Lenders” have the respective meanings set forth in the preamble to
the Agreement, and shall include any other Person made a party to the Agreement
in accordance with the provisions of Section 13.1.


 


“Lender
Group” means, individually and collectively, each of the Lenders (including
the Issuing Lender) and Agent.


 


“Lender
Group Expenses” means all (a) costs or expenses (including taxes, and
insurance premiums) required to be paid by a Borrower, a Guarantor or any of
their respective Subsidiaries under any of the Loan Documents that are paid,
advanced, or incurred by the Lender Group, (b) fees or charges paid or
incurred by Agent in connection with the Lender Group’s transactions with
Borrowers, Guarantors or their respective Subsidiaries, including, fees or
charges for photocopying, notarization, couriers and messengers,
telecommunication, public record searches (including tax lien, litigation, and
Uniform Commercial Code and PPSA searches and including searches with the
patent and trademark office, the copyright office, or the department of motor
vehicles), filing, recording, publication, appraisal (including periodic
collateral appraisals or business valuations to the extent of the fees and
charges (and up to the amount of any limitation) contained in the Agreement or
the Fee Letter, real estate surveys, real estate title policies and
endorsements, and environmental audits, (c) costs and expenses incurred by
Agent in the disbursement of funds to Borrowers or other members of the Lender
Group (by wire transfer or otherwise), (d) charges paid or incurred by
Agent resulting from the dishonor of checks, (e) reasonable costs and
expenses paid or incurred by the Lender Group to correct any default or enforce
any provision of the Loan Documents, or in gaining possession of, maintaining,
handling, preserving, storing, shipping, selling, preparing for sale, or
advertising to sell the Collateral, or any portion thereof, irrespective of
whether a sale is consummated, (f) audit fees and expenses of Agent
related to any inspections or audits to the extent of the fees and charges (and
up to the amount of any limitation) contained in the Agreement or the Fee
Letter, (g) reasonable costs and 


 


17





















 


expenses of third party claims or any other suit paid or incurred by
the Lender Group in enforcing or defending the Loan Documents or in connection
with the transactions contemplated by the Loan Documents or the Lender Group’s
relationship with any Borrower, any Guarantor or any Subsidiary of a Borrower
or Guarantor, including, without limitation, any amounts paid by Agent to
Existing Lender in connection with the termination and release of Existing
Lender’s Liens and agreements with respect to any Borrower, Guarantor or any of
their respective Subsidiaries, (h) Agent’s and each Lender’s reasonable
costs and expenses (including attorneys fees) incurred in advising,
structuring, drafting, reviewing, administering, syndicating, or amending the
Loan Documents, and (i) Agent’s and each Lender’s reasonable costs and
expenses (including attorneys, accountants, consultants, and other advisors
fees and expenses) incurred in terminating, enforcing (including attorneys,
accountants, consultants, and other advisors fees and expenses incurred in
connection with a “workout,” a “restructuring,” or an Insolvency Proceeding
concerning any Borrower, any Guarantor or any Subsidiary of a Borrower or
Guarantor or in exercising rights or remedies under the Loan Documents), or
defending the Loan Documents, irrespective of whether suit is brought, or in
taking any Remedial Action concerning the Collateral.


 


“Lender-Related
Person” means, with respect to any Lender, such Lender, together with such
Lender’s Affiliates, Related Funds, officers, directors, employees, attorneys,
and agents.


 


“Letter
of Credit” means an L/C or an L/C Undertaking, as the context requires.


 


“Letter
of Credit Usage” means, as of any date of determination, the aggregate
undrawn amount of all outstanding Letters of Credit.


 


“Leverage
Ratio” means, at any date of determination, the ratio of (a) the
outstanding principal amount of the Consolidated Funded Indebtedness at such
date, to (b) TTM EBITDA for the most recently completed 12 consecutive
month period most recently ended on or prior to the date of determination.


 


“LIBOR
Deadline” has the meaning specified therefor in Section 2.13(b)(i).


 


“LIBOR
Notice” means a written notice in the form of Exhibit L-1.


 


“LIBOR
Option” has the meaning specified therefor in Section 2.13(a).


 


“LIBOR
Rate” means, for each Interest Period for each LIBOR Rate Loan, the rate
per annum determined by Agent (rounded upwards, if necessary, to the next
1/100%) by dividing (a) the Base LIBOR Rate for such Interest Period, by (b) 100%
minus the Reserve Percentage; provided,
however, for purposes of this Agreement only, the LIBOR Rate shall at no
time be less than 2.50%.  The LIBOR Rate
shall be adjusted on and as of the effective day of any change in the Reserve
Percentage.


 


“LIBOR
Rate Loan” means each portion of an Advance that bears interest at a rate
determined by reference to the LIBOR Rate.


 


“LIBOR
Rate Margin” means 4.00 percentage points.


 


“Lien”
means any interest in an asset securing an obligation owed to, or a claim by,
any Person other than the owner of the asset, irrespective of whether (a) such
interest is based on the common law, statute, or contract, (b) such
interest is recorded or perfected, and (c) such interest is contingent
upon the occurrence of some future event or events or the existence of some
future circumstance or circumstances. 
Without limiting the generality of the foregoing, the term “Lien”
includes the lien or security interest arising from a mortgage, deed of trust,
encumbrance, notice of


 


18





















 


Lien, levy or assessment, pledge, hypothecation, assignment, deposit
arrangement, security agreement, conditional sale or trust receipt, or from a
lease, consignment, or bailment for security purposes and also includes
reservations, exceptions, encroachments, easements, rights-of-way, covenants,
conditions, restrictions, leases, and other title exceptions and encumbrances
affecting Real Property.


 


“Loan
Account” has the meaning specified therefor in Section 2.10.


 


“Loan
Documents” means the Agreement, the Bank Product Agreements, the Canadian
Documents, the Cash Management Agreements, the Control Agreements, the Fee
Letter, the Foreign Stock Pledge, the Guaranty, the Intercompany Subordination
Agreement, the Letters of Credit, the Mortgages, the Perfection Certificates,
the Second Lien Intercreditor Agreement, the Security Agreement and any other
Security Document, any note or notes executed by a Borrower in connection with
the Agreement and payable to a member of the Lender Group, the Subordination
Agreements and any other agreement entered into, now or in the future, by any
Borrower or Guarantor and any member of the Lender Group in connection with the
Agreement.


 


“Magnetek
ADS” means Magnetek ADS Power, Inc., a Delaware corporation.


 


“Magnetek
ADS Sale” means the sale of all or substantially all of the assets or
capital Stock of Magnetek ADS yielding no less than $3,000,000 in Net Cash
Proceeds and which is otherwise on fair and reasonable terms pursuant to an
arms-length transaction entered into with a third party.


 


“Magnetek
Electronics” means Magnetek Electronics Co. Ltd., a corporation organized
under the laws of the People’s Republic of China.


 


“Material
Adverse Change” means a material adverse change in or effect on any of (a) the
operations, business, assets, properties, condition (financial or otherwise) or
prospects of any Borrower or Guarantor or the Borrowers and Guarantors taken as
a whole, (b) the ability of any Borrower or Guarantor to perform any of
its obligations under any Loan Document to which it is a party, (c) the
legality, validity or enforceability of this Agreement or any other Loan
Document, (d) the rights and remedies of Agent or any Lender under any
Loan Document, or (e) the validity, perfection or priority of Agent’s
Liens on any of the Collateral.


 


“Material
Contracts” means (a) the Second Lien Loan Documents and (b) with
respect to any Person, (i) each contract or agreement to which such Person
or any of its Subsidiaries is a party involving aggregate consideration payable
to or by such Person or such Subsidiary of $1,000,000 or more (other than
purchase orders in the ordinary course of the business of such Person or such
Subsidiary and other than contracts that by their terms may be terminated by
such Person or Subsidiary in the ordinary course of its business upon less than
60 days notice without penalty or premium) and (ii) all other contracts or
agreements material to the business, operations, condition (financial or
otherwise), performance, prospects or properties of such Person or such
Subsidiary.


 


“Maturity
Date” has the meaning specified therefor in Section 3.3.


 


“Maximum
Revolver Amount” means $13,000,000.


 


“Mondel”
means Mondel ULC, a Nova Scotia unlimited liability company.


 


“Mondel
Holding” means Magnetek Mondel Holding, Inc., a Delaware corporation.


 


“Mortgage
Policy” means a mortgagee’s loan policy, in form and substance satisfactory
to the Agent, together with all endorsements made from time to time thereto,
issued by or on behalf of a title


 


19





















 


insurance company satisfactory to the Agent, insuring the Lien created
by a Mortgage in an amount and on terms satisfactory to the Agent, delivered to
the Agent.


 


“Mortgages”
means, individually and collectively, one or more mortgages, deeds of trust, or
deeds to secure debt, executed and delivered by a Borrower or a Subsidiary of a
Borrower in favor of Agent, in form and substance satisfactory to Agent, that
encumber any Real Property.


 


“Multiemployer
Plan” means a “multiemployer plan” (within the meaning of Section 3(37)
of ERISA) to which any Borrower, any of its Subsidiaries, or any ERISA
Affiliate makes, is making, is obligated, or within the last six years has been
obligated, to make contributions.


 


“Net
Cash Proceeds” means (a) with respect to the issuance or incurrence of
any Indebtedness by any Person or any of its Subsidiaries, or the sale or
issuance by any Person or any of its Subsidiaries of any shares of its Stock,
the aggregate amount of cash or Cash Equivalents received (directly or
indirectly) from time to time (whether as initial consideration or through the
payment or disposition of deferred consideration) by or on behalf of such
Person or such Subsidiary in connection therewith, after deducting therefrom
only (i) reasonable expenses related thereto incurred by such Person or
such Subsidiary in connection therewith, (ii) transfer taxes paid to any
taxing authorities by such Person or such Subsidiary in connection therewith
and (iii) net income taxes to be paid in connection therewith (after
taking into account any tax credits or deductions and any tax sharing
arrangements), and (b) with respect to any Extraordinary Receipts or
proceeds of Dispositions received by any Person or any of its Subsidiaries, the
aggregate amount of cash or Cash Equivalents received (directly or indirectly)
from time to time (whether as initial consideration or through the payment or
disposition of deferred consideration) by or on behalf of such Person or such
Subsidiary in connection therewith, after deducting therefrom only (i) reasonable
expenses related to the collection thereof incurred by such Person or such
Subsidiary, (ii) net income taxes to be paid in connection therewith
(after taking into account any tax credits or deductions and any tax sharing
arrangements) and (iii) the amount required to satisfy any Permitted Liens
attaching to such Extraordinary Receipts or proceeds of Dispositions to the
extent such Permitted Liens are senior to Agent’s Lien and not assumed by the
purchaser in any such Disposition; in the case of each of clauses (a) and
(b), to the extent, but only to the extent, that the amounts so deducted are
(x) actually paid to a Person that, except in the case of reasonable
out-of-pocket expenses, is not an Affiliate of such Person or any of its
Subsidiaries and (y) properly attributable to such transaction or asset that is
the subject thereof.


 


“Net
Liquidation Percentage” means the percentage of the book value of Borrowers’
Inventory that is estimated to be recoverable in an orderly liquidation of such
Inventory net of all associated costs and expenses of such liquidation, such
percentage to be as determined from time to time by a qualified appraisal
company selected by Agent.


 


“Nilssen
Award” means the arbitration award of $23,400,000 issued April 29,
2005 in favor of Ole K. Nilssen and Geo Foundation, Ltd. with regard to the
matter styled Ole K. Nilssen and Geo Foundation, Ltd. v. Magnetek, Inc.,
originally filed as Case No. 05C 2933 in the United States District Court
for the Northeastern District of Illinois, Eastern Division.


 


“Obligations”
means (a) all loans, Advances, debts, principal, interest (including any
interest 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), contingent reimbursement obligations with
respect to outstanding Letters of Credit, premiums, liabilities (including all
amounts charged to Borrowers’ Loan Account pursuant hereto), obligations
(including indemnification obligations), fees (including the fees provided for
in the Fee Letter), charges, costs, Lender Group Expenses (including any fees
or expenses that accrue 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), lease payments, guaranties, covenants, and
duties of any kind and


 


20





















 


description owing by Borrowers to the Lender Group pursuant to or
evidenced by the Loan Documents and irrespective of whether for the payment of
money, whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, and including all interest not paid
when due and all Lender Group Expenses that Borrowers are required to pay or
reimburse by the Loan Documents, by law, or otherwise, and (b) all Bank
Product Obligations.  Any reference in
the Agreement or in the Loan Documents to the Obligations shall include all or
any portion thereof and any extensions, modifications, renewals, or alterations
thereof, both prior and subsequent to any Insolvency Proceeding.


 


“Operating
Lease Obligations” means all obligations for the payment of rent for any
real or personal property under leases or agreements to lease, other than
Capitalized Lease Obligations.


 


“Originating
Lender” has the meaning specified therefor in Section 13.1(e).


 


“Overadvance”
has the meaning specified therefor in Section 2.5.


 


“Parent”
has the meaning specified therefor in the preamble to the Agreement.


 


“Participant”
has the meaning specified therefor in Section 13.1(e).


 


“Patriot
Act” means the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of
2001, as amended from time to time.


 


“PBGC”
means the Pension Benefit Guaranty Corporation or any entity succeeding to any
or all of its functions under ERISA.


 


“Pension
Plan” means an employee benefit plan (as defined in Section 3(3) of
ERISA) other than a Multiemployer Plan (a) that is or was within the last
six years maintained or sponsored by any Borrower, any of its Subsidiaries, or
any ERISA Affiliate or to which any Borrower, any of its Subsidiaries, or any
ERISA Affiliate has within the last six years made, or was obligated to make,
contributions or with respect to which any of them have any actual or
contingent liability, and (b) that is or was subject to Section 412
of the IRC, Section 302 of ERISA or Title IV of ERISA.


 


“Perfection
Certificates” means the representations and warranties of officers form
submitted by Agent to Administrative Borrower, together with the other
Borrowers’ and Guarantors’ completed responses to the inquiries set forth therein,
the form and substance of such responses to be satisfactory to Agent.


 


“Permitted
Capitalized Lease Obligations” means Indebtedness evidenced by Capitalized
Lease Obligations entered into in order to finance Capital Expenditures made by
a Borrower or an operating Subsidiary of a Borrower in accordance with the
provisions of Section 6.16(b)(i), which Indebtedness does not
exceed the amount provided for in clause (c) of the definition of
Permitted Indebtedness.


 


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


 


“Permitted
Dispositions” means (a) sales or other dispositions of Equipment that
is substantially worn, damaged, or obsolete in the ordinary course of business,
provided  that the Net Cash Proceeds of such dispositions do not
exceed $100,000 in the aggregate in any twelve-month period, (b) sales of
Inventory to buyers in the ordinary course of business, (c) the use or
transfer of money or Cash Equivalents in a manner that is not prohibited by the
terms of the Agreement or the


 


21





















 


other Loan Documents, (d) the licensing, on a non-exclusive basis,
of patents, trademarks, copyrights, and other intellectual property rights in
the ordinary course of business and (e) the Magnetek ADS Sale so long as
all Net Cash Proceeds of such sale are immediately remitted to Agent for
application to the Senior Debt in accordance with the terms of Section 2.4(b).


 


“Permitted
Indebtedness” means:


 


(a)                                  Indebtedness evidenced by this Agreement
and the other Loan Documents, together with Indebtedness owed to Underlying
Issuers with respect to Underlying Letters of Credit,


 


(b)                                 Indebtedness set forth on Schedule 4.19,
and the extension of maturity, refinancing or modification of the terms thereof
so long as (i) the terms and conditions of such refinancings, renewals, or
extensions do not, in Agent’s reasonable judgment, materially impair the
prospects of repayment of the Obligations by Borrowers and the Guarantors or
materially impair any Borrower’s or any Guarantor’s creditworthiness, (ii) such
refinancings, renewals, or extensions do not result in an increase in the
principal amount of, or interest rate with respect to, the Indebtedness so
refinanced, renewed, or extended or add one or more Borrowers or Guarantors as
liable with respect thereto if such additional Borrowers or Guarantors were not
liable with respect to the original Indebtedness, (iii) such refinancings,
renewals, or extensions do not result in a shortening of the average weighted
maturity of the Indebtedness so refinanced, renewed, or extended, nor are they
on terms or conditions, that, taken as a whole, are materially more burdensome
or restrictive to any Borrower or any Guarantor, (iv) if the Indebtedness
that is refinanced, renewed, or extended was subordinated in right of payment
to the Obligations, then the terms and conditions of the refinancing, renewal,
or extension Indebtedness must include subordination terms and conditions that
are at least as favorable to the Lender Group as those that were applicable to
the refinanced, renewed, or extended Indebtedness, (v) the Indebtedness
that is refinanced, renewed, or extended is not recourse to any Person that is
liable on account of the Obligations other than those Persons which were
obligated with respect to the Indebtedness that was refinanced, renewed, or
extended, and (vi) such refinancing, renewal or extension does not contain
terms that are less favorable to the Borrowers, the Guarantors or the Lender
Group than the terms of the Indebtedness being extended, refinanced or renewed,


 


(c)                                  Permitted Purchase Money Indebtedness and
Permitted Capitalized Lease Obligations to the extent the aggregate of such
Indebtedness does not exceed $5,000,000 at any time outstanding,


 


(d)                                 Indebtedness permitted under Section 6.12,


 


(e)                                  Indebtedness of the Parent or any of its
Subsidiaries under any Hedge Agreement so long as such Hedge Agreements are
used solely as a part of its normal business operations as a risk management
strategy or hedge against changes resulting from market operations and not as a
means to speculate for investment purposes on trends and shifts in financial or
commodities markets,


 


(f)                                    to the extent the Second Lien
Intercreditor Agreement remains in effect with respect thereto and subject to
any restrictions set forth in the Second Lien Intercreditor Agreement, the
Second Lien Indebtedness, and


 


(g)                                 unsecured Indebtedness incurred by a
Subsidiary of Parent that is a Controlled Foreign Corporation in an aggregate
amount, for all such Subsidiaries, not to exceed $5,000,000 at any time
outstanding, provided, that, neither Parent nor any Subsidiary of Parent that
is not a Controlled Foreign Corporation is obligated with respect to or has
pledged any of its assets as collateral to secure Indebtedness, whether
directly or indirectly.


 


22





















 


“Permitted
Investments” means Investments in Cash Equivalents.


 


“Permitted
Liens” means (a) Liens held by Agent to secure the Obligations, (b) Liens
for unpaid taxes, assessments, or other governmental charges or levies that
either (i) are not yet delinquent, or (ii) do not have priority over
the Agent’s Liens and the underlying taxes, assessments, or charges or levies
are the subject of Permitted Protests, (c) judgment Liens that do not
constitute an Event of Default under Section 7.7 of the Agreement, (d) Liens
set forth on Schedule P-1, (e) the interests of lessors under
operating leases, (f) purchase money Liens or the interests of lessors
under Capital Leases to the extent that such Liens or interests secure
Permitted Purchase Money Indebtedness and so long as (i) such Lien
attaches only to the asset purchased or acquired and the proceeds thereof, and (ii) the
principal amount of the Indebtedness secured thereby shall not exceed the
lesser of 80% of the fair market value or the cost of the property so held or
acquired, (g) Liens arising by operation of law in favor of warehousemen,
landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred
in the ordinary course of Borrowers’ business and not in connection with the
borrowing of money, and which Liens either (i) are for sums not yet
delinquent, or (ii) are the subject of Permitted Protests, (h) Liens
on amounts deposited in connection with obtaining worker’s compensation or
other unemployment insurance, (i) Liens on amounts deposited in connection
with the making or entering into of bids, tenders, or leases in the ordinary
course of business and not in connection with the borrowing of money,
(j) Liens on amounts deposited as security for surety or appeal bonds in
connection with obtaining such bonds in the ordinary course of business,
(k) with respect to any Real Property, easements, rights of way, and
zoning restrictions that do not materially interfere with or impair the use or
operation thereof and (l) to the extent subject to the Second Lien
Intercreditor Agreement, the Liens of the Second Lien Agent securing the Second
Lien Indebtedness.


 


“Permitted
Preferred Stock” means any Preferred Stock that by its terms is mandatorily
redeemable or subject to any other payment obligation (including any obligation
to pay dividends, other than dividends of shares of Preferred Stock of the same
class and series payable in kind or dividends of shares of common stock) on or
before a date that is less than 2 years after the Maturity Date, or, on or
before the date that is less than 2 years after the Maturity Date, is
redeemable at the option of the holder thereof for cash or assets or securities
(other than distributions in kind of shares of Preferred Stock of the same
class and series or of shares of common stock).


 


“Permitted
Protest” means the right of Administrative Borrower or any of its
Subsidiaries to protest any Lien (other than any Lien that secures the
Obligations), taxes (other than payroll taxes or taxes that are the subject of
a United States federal tax lien), or rental payment, provided that (a) a
reserve with respect to such obligation is established on a Borrower’s or any
of its Subsidiaries’ books and records in such amount as is required under
GAAP, (b) any such protest is instituted promptly and prosecuted
diligently by Administrative Borrower or any of its Subsidiaries, as
applicable, in good faith, and (c) Agent is satisfied that, while any such
protest is pending, there will be no impairment of the enforceability,
validity, or priority of any of the Agent’s Liens.


 


“Permitted
Purchase Money Indebtedness” means purchase money Indebtedness incurred to
enable a Borrower or any of its operating Subsidiaries to acquire Equipment in
the ordinary course of its business, which Indebtedness does not exceed the
amount provided for in clause (c) of the definition of Permitted Indebtedness.


 


“Person”
means natural persons, corporations, limited liability companies, limited
partnerships, general partnerships, limited liability partnerships, joint
ventures, trusts, land trusts, business trusts, or other organizations,
irrespective of whether they are legal entities, and governments and agencies
and political subdivisions thereof.


 


“Plan”
means (a) an employee benefit plan (as defined in Section 3(3) of
ERISA) other than a Multiemployer Plan that is or was within the last six years
maintained or sponsored by any Borrower


 


23





















 


or any of its Subsidiaries or to which any Borrower or any of its
Subsidiaries has within the last six years made, or was obligated to make,
contributions or with respect to which any of them have any actual or
contingent liability, (b) a Pension Plan, or (c) a Qualified Plan.


 


“Power
Systems Division” means, on a combined basis, the “power control systems”
operating division of Parent together with Mondel Holding and its Subsidiaries.


 


“Power
Systems EBITDA” means, for any period, the Power Systems Net Income for
such period, plus (i) without duplication, the sum of the following
amounts of the Power Systems Division for such period and to the extent
deducted in determining Power Systems Net Income for such period:  (A) Power Systems Net Interest Expense, (B) net
income tax expense, (C) depreciation expense, and (D) amortization
expense.


 


“Power
Systems Net Income” means, with respect to the Power Systems Division for
any period, the net income (loss) of the Power Systems Division for such
period, determined on a consolidated basis in accordance with GAAP, but
excluding from the determination of Power Systems Net Income (without
duplication) (a) any non-cash extraordinary or non-recurring gains or
non-cash gains or losses from Dispositions, (b) non-cash restructuring
charges, (c) non-cash effects of discontinued operations, (d) interest
that is paid-in-kind, and (e) any tax refunds, net operating losses or
other net tax benefits received during such period on account of any prior
period, in each case solely with respect to the Power Systems Division.


 


“Power
Systems Net Interest Expense” means, with respect to the Power Systems
Division for any period, gross cash interest expense of such Persons for such
period determined on a consolidated basis in accordance with GAAP (including
interest expense paid to Affiliates of such Persons), less (i) the sum of (A) interest
income for such period and (B) gains for such period on Hedge Agreements
(to the extent not included in interest income above and to the extent not
deducted in the calculation of gross interest expense), plus (ii) the sum
of (A) losses for such period on Hedge Agreements (to the extent not
included in such gross interest expense) and (B) the upfront costs or fees
for such period associated with Hedge Agreements (to the extent not included in
such gross interest expense), in each case, determined on a consolidated basis
in accordance with GAAP with respect to the Power Systems Division.


 


“PPSA”
means the Personal Property Security Act (Ontario) and the Regulations
thereunder, as from time to time in effect; provided, however, if
attachment, perfection or priority of any Agent’s or Lender’s security
interests in any Collateral are governed by the personal property security laws
or any jurisdiction other than Ontario, “PPSA” shall mean those personal
property security laws in such other jurisdiction for the purposes of the
provisions hereof relating to such attachment, perfection or priority and for
the definitions related to such provisions.


 


“Preferred
Stock” means, as applied to the capital Stock of any Person, the capital
Stock of any class or classes (however designated) that is preferred with
respect to the payment of dividends, or as to the distribution of assets upon
any voluntary or involuntary liquidation or dissolution of such Person, over
shares of capital Stock of any other class of such Person.


 


“Prior
Claims” means all Liens created by Applicable Law (in contrast with Liens
voluntarily granted) which rank or are capable of ranking prior to or pari
passu with the Agent’s Liens against all or part of the Collateral, including
for amounts owing for wages, employee source deductions, goods and services
taxes, sales taxes, municipal taxes, workers’ compensation, Quebec corporate
taxes, pension fund obligations and overdue rents.


 


“Prior
Claims Reserve” means, as of any date of determination, the full
outstanding amount of all Prior Claims which relate to Accounts of any Borrower
or Mondel.


 


24





















 


“Prohibited
Preferred Stock” means any Preferred Stock that by its terms is mandatorily
redeemable or subject to any other payment obligation (including any obligation
to pay dividends, other than dividends of shares of Preferred Stock of the same
class and series payable in kind or dividends of shares of common Stock) on or
before a date that is less than 2 years after the Maturity Date, or, on or
before the date that is less than 2 years after the Maturity Date, is
redeemable at the option of the holder thereof for cash or assets or securities
(other than distributions in kind of shares of Preferred Stock of the same
class and series or of shares of common Stock).


 


“Projections”
means Parent’s forecasted (a) balance sheets, (b) profit and loss
statements, and (c) cash flow statements, all prepared on a basis
consistent with Parent’s historical financial statements, together with
appropriate supporting details and a statement of underlying assumptions.


 


“Pro
Rata Share” means, as of any date of determination:


 


(a)                                  with respect to a Lender’s obligation to make
Advances and right to receive payments of principal, interest, fees, costs, and
expenses with respect thereto, (i) prior to the Commitments being
terminated or reduced to zero, the percentage obtained by dividing
(y) such Lender’s Commitment, by (z) the aggregate Commitments of all
Lenders, and (ii) from and after the time that the Commitments have been
terminated or reduced to zero, the percentage obtained by dividing (y) the
aggregate outstanding principal amount of such Lender’s Advances by
(z) the aggregate outstanding principal amount of all Advances,


 


(b)                                 with respect to a Lender’s obligation to
participate in Letters of Credit, to reimburse the Issuing Lender, and right to
receive payments of fees with respect thereto, (i) prior to the
Commitments being terminated or reduced to zero, the percentage obtained by
dividing (y) such Lender’s Commitment, by (z) the aggregate
Commitments of all Lenders, and (ii) from and after the time that the
Commitments have been terminated or reduced to zero, the percentage obtained by
dividing (y) the aggregate outstanding principal amount of such Lender’s
Advances by (z) the aggregate outstanding principal amount of all
Advances, and


 


(c)                                  with respect to all other matters as to a
particular Lender (including the indemnification obligations arising under Section 15.7),
the percentage obtained by dividing (i) such Lender’s Commitment, by (ii) the
aggregate amount of Commitments of all Lenders; provided, however,
that in the event the Commitments have been terminated or reduced to zero, Pro
Rata Share under this clause shall be the percentage obtained by dividing (A) the
outstanding principal amount of such Lender’s Advances plus
such Lender’s ratable portion of the Risk Participation Liability with respect
to outstanding Letters of Credit, by (B) the outstanding principal amount
of all Advances plus the aggregate amount of the
Risk Participation Liability with respect to outstanding Letters of Credit.


 


“Protective
Advance” has the meaning specified therefor in Section 2.3(d).


 


“Purchase
Money Indebtedness” means Indebtedness (other than the Obligations, but
including Capitalized Lease Obligations), incurred at the time of, or within 20
days after, the acquisition of any fixed assets for the purpose of financing
all or any part of the acquisition cost thereof.


 


“Qualified
Cash” means, as of any date of determination, the amount of unrestricted cash
and Cash Equivalents of Borrowers and their respective Subsidiaries that is in
Deposit Accounts or in Securities Accounts, or any combination thereof, and
which such Deposit Account or Securities Account is the subject of a Control
Agreement and is maintained by a branch office of the bank or securities
intermediary located within the United States or Canada.


 


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“Qualified
Plan” means an employee benefit plan (as defined in Section 3(3) of
ERISA) other than a Multiemployer Plan (a) that is or was within the last
six years maintained or sponsored by any Borrower, any of its Subsidiaries or
any ERISA Affiliate or to which any Borrower, any of its Subsidiaries or any
ERISA Affiliate has within the last six years made or was obligated to make,
contributions, and (b) that is intended to be tax-qualified under Section 401(a) of
the IRC.


 


“Real
Property” means any estates or interests in real property now owned or
hereafter acquired by any Borrower, any Guarantor or any of their respective
Subsidiaries and the improvements thereto.


 


“Real
Property Collateral” means any Real Property of any Borrower, any Guarantor
or any of their respective Subsidiaries which is subject to Agent’s Lien.


 


“Record”
means information that is inscribed on a tangible medium or which is stored in
an electronic or other medium and is retrievable in perceivable form.


 


“Reinvestment
Eligible Funds” means (a) Net Cash Proceeds which, but for the
application of Section 2.4(c)(v), would be required to be used to
prepay the Obligations pursuant to Section 2.4(c)(i) or (b) Extraordinary
Receipts which, but for the application of Section 2.4(c)(v), would
be required to be used to prepay the Obligations pursuant to Section 2.4(c)(iii).


 


“Reinvestment
Notice” has the meaning specified therefore in Section 2.4(c)(v).


 


“Related
Fund” means a fund or account managed by any Lender or an Affiliate of any
Lender or its investment manager.


 


“Release”
means any spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, seeping, migrating, dumping or disposing of any
Hazardous Material (including the abandonment or discarding of barrels,
containers and other closed receptacles containing any Hazardous Material) into
the indoor or outdoor environment, including the movement of Hazardous
Materials through or in the ambient air, soil, surface or ground water, or
property.


 


“Remedial
Action” means all actions taken to (a) clean up, remove, remediate,
contain, treat, monitor, assess, evaluate, or in any way address Hazardous
Materials in the indoor or outdoor environment, (b) prevent or minimize a
release or threatened release of Hazardous Materials so they do not migrate or
endanger or threaten to endanger public health or welfare or the indoor or
outdoor environment, (c) restore or reclaim natural resources or the
environment, (d) perform any pre-remedial studies, investigations, or post-remedial
operation and maintenance activities, or (e) conduct any other actions
with respect to Hazardous Materials authorized by Environmental Laws.


 


“Replacement
Lender” has the meaning specified therefor in Section 14.2(a).


 


“Report”
has the meaning specified therefor in Section 15.17.


 


“Required
Availability” means that the sum of (a) Excess Availability, plus (b) Qualified Cash exceeds $5,000,000.


 


“Required
Lenders” means, at any time, Lenders whose aggregate Pro Rata Shares
(calculated under clause (d) of the definition of Pro Rata Shares) equal
or exceed 67%.


 


“Reserve
Percentage” means, on any day, for any Lender, the maximum percentage
prescribed by the Board of Governors of the Federal Reserve System (or any
successor Governmental Authority) for determining the reserve requirements
(including any basic, supplemental, marginal, or


 


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emergency reserves) that are in effect on such date with respect to
Eurocurrency funding (currently referred to as “Eurocurrency liabilities”)
of that Lender, but so long as such Lender is not required or directed under
applicable regulations to maintain such reserves, the Reserve Percentage shall
be zero.


 


“Revolver
Usage” means, as of any date of determination, the sum of (a) the
amount of outstanding Advances, plus (b) the
amount of the Letter of Credit Usage.


 


“Risk
Participation Liability” means, as to each Letter of Credit, all
reimbursement obligations of Borrowers to the Issuing Lender with respect to an
L/C Undertaking, consisting of (a) the amount available to be drawn or
which may become available to be drawn, (b) all amounts that have been
paid by the Issuing Lender to the Underlying Issuer to the extent not
reimbursed by Borrowers, whether by the making of an Advance or otherwise, and (c) all
accrued and unpaid interest, fees, and expenses payable with respect thereto.


 


“SEC”
means the United States Securities and Exchange Commission and any successor
thereto.


 


“Second
Lien Agent” means Ableco Finance LLC, a Delaware limited liability company,
in its capacity as agent for the Second Lien Lenders, together with its
successors and assigns acting in such capacity.


 


“Second
Lien Indebtedness” means any and all Indebtedness of any Borrower, any
Guarantor or their respective Subsidiaries arising under or in connection with
any Second Lien Loan Documents.


 


“Second
Lien Intercreditor Agreement” means an intercreditor agreement executed and
delivered by Agent and Second Lien Agent, and acknowledged and consented to by
each Borrower and each Guarantor, as amended, modified, supplemented or
restated from time to time.


 


“Second
Lien Lenders” means the Persons from time to time party to the Second Lien
Loan Agreement as lenders.


 


“Second
Lien Loan Agreement” means that certain Financing Agreement, dated as of
the date hereof, by and among Second Lien Agent, Second Lien Lenders, and
Borrowers pursuant to which the Second Lien Lenders agree to provide to
Borrowers a term loan in the original principal amount of $18,000,000, as
amended, modified, supplemented, restated, renewed, extended, refinanced or
replaced from time to time in accordance with the terms thereof and the terms
of the Agreement.


 


“Second
Lien Loan Documents” means (a) the Second Lien Loan Agreement and (b) and
the other “Loan Documents” as such term is defined in the Second Lien Loan
Agreement, in each case, as amended, modified, supplemented, restated, renewed,
extended, refinanced or replaced from time to time in accordance with the terms
thereof and the terms of the Agreement.


 


“Second
Lien Prepayment Event” means any transaction or event, other than the
Magnetek ADS Sale, a Disposition of Accounts or Inventory of a Borrower or
Guarantor or the receipt of Extraordinary Receipts which, pursuant to the terms
of the Second Lien Loan Agreement, as in effect on the Closing Date, gives rise
to a mandatory prepayment of the Second Lien Indebtedness.


 


“Secretary”
means, with respect to any Person, the duly elected or appointed secretary or
other officer of such Person charged with keeping the corporate records of such
Person.


 


“Securities
Account” means a securities account as that term is defined in the Code
and, in the case of Mondel, the PPSA.


 


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“Security
Agreement” means a security agreement, in form and substance satisfactory
to Agent, executed and delivered by the Borrowers and Guarantors in favor of
Agent, together with all supplements executed in connection therewith.


 


“Security
Documents” means the Security Agreement, the Canadian Security Agreement,
the Canadian Stock Pledge, the Foreign Stock Pledge, the Mortgages, the Control
Agreements and all other Loan Documents that purport to create a Lien.


 


“Senior
Debt” means the Obligations and the Second Lien Indebtedness.


 


“Settlement”
has the meaning specified therefor in Section 2.3(e)(i).


 


“Settlement
Date” has the meaning specified therefor in Section 2.3(e)(i).


 


“Solvent”
means, with respect to any Person on a particular date, that on such date (i) the
fair value of the property of such Person is not less than the total amount of
the liabilities of such Person, (ii) the present fair salable value of the
assets of such Person is not less than the amount that will be required to pay
the probable liability of such Person on its existing debts as they become
absolute and matured, (iii) such Person is able to realize upon its assets
and pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (iv) such
Person does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person’s ability to pay as such debts and liabilities
mature, (v) such Person is not engaged in business or a transaction, and
is not about to engage in business or a transaction, for which such Person’s
property would constitute unreasonably small capital, and (vi) with
respect to Mondel, that Mondel is not an “insolvent person” (as defined in the
Bankruptcy and Insolvency Act (Canada)) or a “debtor company” (as defined in
the Companies’ Creditors Arrangement Act (Canada)).


 


“Statutory
Lien Payments” has the meaning specified therefor in Section 4.23.


 


“Stock”
means all shares, options, warrants, interests, participations, or other
equivalents (regardless of how designated) of or in a Person, whether voting or
nonvoting, including common stock, preferred stock, or any other “equity
security” (as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the SEC under the Exchange Act).


 


“Subordinated
Indebtedness” means any Indebtedness that is subordinated to the Obligations
in right of payment pursuant to a Subordination Agreement and any Indebtedness
with respect to which any Lien securing such Indebtedness is subordinated to
Agent’s Liens pursuant to a Subordination Agreement, provided, that,
the Second Lien Indebtedness shall not be deemed Subordinated Indebtedness for
purposes of this definition.


 


“Subordination
Agreements” means, collectively, the terms and conditions of any document
governing Indebtedness of any Borrower, any Guarantor and/or their respective Subsidiaries
which provide that such Indebtedness is subordinated to the Obligations in
right of payment and/or that any Liens securing such Indebtedness are
subordinate to Agent’s Liens and all other subordination or intercreditor
agreements at any time entered into by any Person in favor of Agent and the
Lenders with respect to Indebtedness owed or Liens granted to such Person by
any Borrower, any Guarantor and/or their respective Subsidiaries, provided,
that, the Second Lien Intercreditor Agreement shall not be deemed a
Subordination Agreement for purposes of this definition.


 


“Subsidiary”
of a Person means a corporation, partnership, limited liability company, or
other entity in which that Person directly or indirectly owns or controls the
shares of Stock having ordinary voting power to elect a majority of the board
of directors (or appoint other comparable managers) of such corporation,
partnership, limited liability company, or other entity.


 


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“Swing
Lender” means WFF or any other Lender that, at the request of
Administrative Borrower and with the consent of Agent agrees, in such Lender’s
sole discretion, to become the Swing Lender under Section 2.3(d).


 


“Swing
Loan” has the meaning specified therefor in Section 2.3(d)(i).


 


“Taxes”
has the meaning specified therefor in Section 15.11.


 


“Total
Debt Limiter” means, as of any date of determination for the 12 month
period ending on such date of determination, (a) during the period
commencing on the Closing Date and ending on June 30, 2006, 3.25 times TTM
Domestic EBITDA, (b) during the period commencing on July 1, 2006 and
ending on June 30, 2007, 3.00 times TTM Domestic EBITDA, and (c) at
all times on or after July 1, 2007, 2.75 times TTM Domestic EBITDA.


 


“Total
Debt Limiter Certificate” means a certificate substantially in the form of Exhibit T-1
delivered by the chief financial officer of Parent to Agent.


 


“Triggering
Event” means (a) any Borrower or any Guarantor is required to make any
cash payments in respect of their Benefit Plans which either (i) exceed
the amount of the Designated Pension Payment by more than 10%, or (ii) are
required to be paid more than 90 days earlier than the scheduled due date of
the Designated Pension Payment, (b) the occurrence and continuance of an
ERISA Event, or (c) a court of competent jurisdiction determines any of
the following in connection with the ULT Litigation (i) ULT has infringed
on the patents held by Ole K. Nilssen or Geo Foundation, Ltd. that are the
subject of the ULT Litigation, (ii) the patents held by Ole K. Nilssen or
Geo Foundation, Ltd. that are the subject of the ULT Litigation are valid and
enforceable, or (iii) ULT is liable to Ole K. Nilssen or Geo Foundation,
Ltd. for patent infringement, or (d) some other event or development
occurs in connection with the ULT Litigation that is materially adverse to the
interests of Parent and its Subsidiaries in connection with such litigation.


 


“TTM
EBITDA” means, as of any date of determination, the Consolidated EBITDA for
the 12 month period most recently ended; provided, that in calculating the TTM
EBITDA for any period that includes a period prior to September 1, 2005,
the Consolidated EBITDA for such prior period will be deemed to be the
applicable amount set forth on Schedule T-1 with respect thereto.


 


“TTM
Domestic EBITDA” means, as of any date of determination, the Domestic
EBITDA for the 12 month period most recently ended; provided, that in
calculating the TTM Domestic EBITDA for any period that includes a period prior
to September 1, 2005, the Domestic EBITDA for such prior period will be
deemed to be the applicable amount set forth on Schedule T-1 with
respect thereto.


 


“TTM
Power Systems EBITDA” means, as of any date of determination, the Power
Systems EBITDA for the 12 month period most recently ended; provided, that in
calculating the TTM Power Systems EBITDA for any period that includes a period
prior to September 1, 2005, the Power Systems EBITDA for such prior period
will be deemed to be the applicable amount set forth on Schedule T-1
with respect thereto.


 


“ULT”
means Universal Lighting Technologies, Inc., a Delaware corporation.


 


“ULT
Litigation” means the action styled Nilssen, et al v. Universal Lighting,
Case No. 3:04-0080, pending in the U.S. District Court for the Middle
District of Tennessee.


 


“Underlying
Issuer” means a third Person which is the beneficiary of an L/C Undertaking
and which has issued a letter of credit at the request of the Issuing Lender
for the benefit of Borrowers.


 


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“Underlying
Letter of Credit” means a letter of credit that has been issued by an
Underlying Issuer.


 


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


 


“Voidable
Transfer” has the meaning specified therefor in Section 16.6.


 


“WARN”
has the meaning specified therefor in Section 4.31.


 


“Wells
Fargo” means Wells Fargo Bank, National Association, a national banking
association.


 


“WFF”
means Wells Fargo Foothill, Inc., a California corporation.


 


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