exv10w1



 






Exhibit 10.1









 





EXECUTION VERSION




$75,000,000




FIRST LIEN CREDIT AGREEMENT




among




AMERICAN PACIFIC CORPORATION,

as Borrower,




and




THE DOMESTIC SUBSIDIARIES OF THE BORROWER

FROM TIME TO TIME PARTIES HERETO,

as Guarantors,




THE LENDERS PARTIES HERETO,




WACHOVIA BANK, NATIONAL ASSOCIATION,

as Administrative Agent,




and




BANK OF AMERICA, N.A.,

as Syndication Agent




Dated as of November 30, 2005




WACHOVIA CAPITAL MARKETS, LLC,

as Sole Lead Arranger and Sole Book Runner




 











 









 








TABLE OF CONTENTS




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	ARTICLE I DEFINITIONS	 	 	1	 
	 
	 	Section 1.1	 	Defined Terms	 	 	1	 
	 
	 	Section 1.2	 	Other Definitional Provisions	 	 	23	 
	 
	 	Section 1.3	 	Accounting Terms	 	 	24	 
	 
	 	Section 1.4	 	Resolution of Drafting Ambiguities	 	 	24	 
	 
	 	Section 1.5	 	Time References	 	 	24	 
	ARTICLE II THE LOANS; AMOUNT AND TERMS	 	 	24	 
	 
	 	Section 2.1	 	Revolving Loans	 	 	24	 
	 
	 	Section 2.2	 	Term Loan	 	 	26	 
	 
	 	Section 2.3	 	Letter of Credit Subfacility	 	 	27	 
	 
	 	Section 2.4	 	Swingline Loan Subfacility	 	 	30	 
	 
	 	Section 2.5	 	Incremental Facilities	 	 	31	 
	 
	 	Section 2.6	 	Fees	 	 	32	 
	 
	 	Section 2.7	 	Commitment Reductions	 	 	32	 
	 
	 	Section 2.8	 	Prepayments	 	 	33	 
	 
	 	Section 2.9	 	Default Rate and Payment Dates	 	 	35	 
	 
	 	Section 2.10	 	Conversion Options	 	 	35	 
	 
	 	Section 2.11	 	Computation of Interest and Fees; Usury	 	 	36	 
	 
	 	Section 2.12	 	Pro Rata Treatment and Payments	 	 	37	 
	 
	 	Section 2.13	 	Non-Receipt of Funds by the Administrative Agent	 	 	38	 
	 
	 	Section 2.14	 	Inability to Determine Interest Rate	 	 	39	 
	 
	 	Section 2.15	 	Illegality	 	 	39	 
	 
	 	Section 2.16	 	Requirements of Law	 	 	40	 
	 
	 	Section 2.17	 	Indemnity	 	 	41	 
	 
	 	Section 2.18	 	Taxes	 	 	41	 
	 
	 	Section 2.19	 	Indemnification; Nature of Issuing Lender’s Duties	 	 	42	 
	ARTICLE III REPRESENTATIONS AND WARRANTIES	 	 	44	 
	 
	 	Section 3.1	 	Financial Condition	 	 	44	 
	 
	 	Section 3.2	 	No Change	 	 	44	 
	 
	 	Section 3.3	 	Corporate Existence; Compliance with Law	 	 	44	 
	 
	 	Section 3.4	 	Corporate Power; Authorization; Enforceable Obligations	 	 	45	 
	 
	 	Section 3.5	 	No Legal Bar; No Default	 	 	45	 
	 
	 	Section 3.6	 	No Material Litigation	 	 	45	 
	 
	 	Section 3.7	 	Investment Company Act; PUHCA, Etc.	 	 	45	 
	 
	 	Section 3.8	 	Margin Regulations	 	 	45	 
	 
	 	Section 3.9	 	ERISA	 	 	46	 
	 
	 	Section 3.10	 	Environmental Matters	 	 	46	 
	 
	 	Section 3.11	 	Use of Proceeds	 	 	47	 
	 
	 	Section 3.12	 	Subsidiaries	 	 	47	 
	 
	 	Section 3.13	 	Ownership	 	 	47	 
	 
	 	Section 3.14	 	Indebtedness	 	 	47	 
	 
	 	Section 3.15	 	Taxes	 	 	47	 
	 
	 	Section 3.16	 	Intellectual Property Rights	 	 	47	 
	 
	 	Section 3.17	 	Solvency	 	 	48	 
	 
	 	Section 3.18	 	Investments	 	 	48	 
	 
	 	Section 3.19	 	Location of Collateral	 	 	48	 
	 
	 	Section 3.20	 	No Burdensome Restrictions	 	 	48	 
	 
	 	Section 3.21	 	Brokers’ Fees	 	 	48	 
	 
	 	Section 3.22	 	Labor Matters	 	 	48	 
	 
	 	Section 3.23	 	Accuracy and Completeness of Information	 	 	49	 
	 
	 	Section 3.24	 	Material Contracts	 	 	49	 
	 
	 	Section 3.25	 	Insurance	 	 	49	 
	 
	 	Section 3.26	 	Security Documents	 	 	49	 






 i 




 









 






	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	 
	 	Section 3.27	 	Regulation H	 	 	49	 
	 
	 	Section 3.28	 	Classification of Senior Indebtedness	 	 	50	 
	 
	 	Section 3.29	 	Anti-Terrorism Laws	 	 	50	 
	 
	 	Section 3.30	 	Compliance with OFAC Rules and Regulations	 	 	50	 
	 
	 	Section 3.31	 	Directors; Capitalization	 	 	50	 
	 
	 	Section 3.32	 	Consummation of Acquisition; Representations and Warranties from Other Documents	 	 	50	 
	 
	 	Section 3.33	 	Compliance with FCPA	 	 	50	 
	ARTICLE IV CONDITIONS PRECEDENT	 	 	51	 
	 
	 	Section 4.1	 	Conditions to Closing Date	 	 	51	 
	 
	 	Section 4.2	 	Conditions to All Extensions of Credit	 	 	55	 
	ARTICLE V AFFIRMATIVE COVENANTS	 	 	56	 
	 
	 	Section 5.1	 	Financial Statements	 	 	56	 
	 
	 	Section 5.2	 	Certificates; Other Information	 	 	57	 
	 
	 	Section 5.3	 	Payment of Taxes and Other Obligations	 	 	58	 
	 
	 	Section 5.4	 	Conduct of Business and Maintenance of Existence	 	 	58	 
	 
	 	Section 5.5	 	Maintenance of Property; Insurance	 	 	58	 
	 
	 	Section 5.6	 	Inspection of Property; Books and Records; Discussions	 	 	59	 
	 
	 	Section 5.7	 	Notices	 	 	59	 
	 
	 	Section 5.8	 	Environmental Laws	 	 	60	 
	 
	 	Section 5.9	 	Financial Covenants	 	 	60	 
	 
	 	Section 5.10	 	Additional Guarantors	 	 	62	 
	 
	 	Section 5.11	 	Compliance with Law	 	 	62	 
	 
	 	Section 5.12	 	Pledged Assets	 	 	62	 
	 
	 	Section 5.13	 	Hedging Agreements	 	 	63	 
	 
	 	Section 5.14	 	Covenants Regarding Patents, Trademarks and Copyrights	 	 	63	 
	 
	 	Section 5.15	 	Credit Facility Ratings	 	 	64	 
	 
	 	Section 5.16	 	Real Property Collateral	 	 	64	 
	 
	 	Section 5.17	 	Federal Assignment of Claims Act	 	 	65	 
	 
	 	Section 5.18	 	Post-Closing Covenant; Further Assurances	 	 	65	 
	ARTICLE VI NEGATIVE COVENANTS	 	 	66	 
	 
	 	Section 6.1	 	Indebtedness	 	 	66	 
	 
	 	Section 6.2	 	Liens	 	 	67	 
	 
	 	Section 6.3	 	Nature of Business	 	 	67	 
	 
	 	Section 6.4	 	Consolidation, Merger, Sale or Purchase of Assets, etc.	 	 	68	 
	 
	 	Section 6.5	 	Advances, Investments and Loans	 	 	69	 
	 
	 	Section 6.6	 	Transactions with Affiliates	 	 	69	 
	 
	 	Section 6.7	 	Ownership of Subsidiaries; Restrictions	 	 	69	 
	 
	 	Section 6.8	 	Corporate Changes; Material Contracts	 	 	69	 
	 
	 	Section 6.9	 	Limitation on Restricted Actions	 	 	69	 
	 
	 	Section 6.10	 	Restricted Payments	 	 	70	 
	 
	 	Section 6.11	 	Amendments to Second Lien Loan Documents; Amendments to Subordinated Debt	 	 	71	 
	 
	 	Section 6.12	 	Sale Leasebacks	 	 	71	 
	 
	 	Section 6.13	 	No Further Negative Pledges	 	 	71	 
	 
	 	Section 6.14	 	Deposit Account Control Agreements; Additional Bank Accounts	 	 	71	 
	ARTICLE VII EVENTS OF DEFAULT	 	 	72	 
	 
	 	Section 7.1	 	Events of Default	 	 	72	 
	 
	 	Section 7.2	 	Acceleration; Remedies	 	 	74	 
	ARTICLE VIII THE ADMINISTRATIVE AGENT	 	 	75	 
	 
	 	Section 8.1	 	Appointment	 	 	75	 
	 
	 	Section 8.2	 	Delegation of Duties	 	 	75	 
	 
	 	Section 8.3	 	Exculpatory Provisions	 	 	75	 
	 
	 	Section 8.4	 	Reliance by Administrative Agent	 	 	75	 
	 
	 	Section 8.5	 	Notice of Default	 	 	76	 
	 
	 	Section 8.6	 	Non-Reliance on Administrative Agent and Other Lenders	 	 	76	 
	 
	 	Section 8.7	 	Indemnification	 	 	76	 
	 
	 	Section 8.8	 	Administrative Agent in Its Individual Capacity	 	 	77	 






 ii 




 









 






	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	 
	 	Section 8.9	 	Successor Administrative Agent	 	 	77	 
	 
	 	Section 8.10	 	Nature of Duties	 	 	77	 
	 
	 	Section 8.11	 	Intercreditor Agreement	 	 	77	 
	 
	 	Section 8.12	 	Releases	 	 	77	 
	ARTICLE IX MISCELLANEOUS	 	 	78	 
	 
	 	Section 9.1	 	Amendments, Waivers and Release of Collateral	 	 	78	 
	 
	 	Section 9.2	 	Notices	 	 	80	 
	 
	 	Section 9.3	 	No Waiver; Cumulative Remedies	 	 	81	 
	 
	 	Section 9.4	 	Survival of Representations and Warranties	 	 	81	 
	 
	 	Section 9.5	 	Payment of Expenses and Taxes	 	 	81	 
	 
	 	Section 9.6	 	Successors and Assigns; Participations; Purchasing Lenders	 	 	82	 
	 
	 	Section 9.7	 	Adjustments; Set-off	 	 	85	 
	 
	 	Section 9.8	 	Table of Contents and Section Headings	 	 	85	 
	 
	 	Section 9.9	 	Counterparts	 	 	86	 
	 
	 	Section 9.10	 	Effectiveness	 	 	86	 
	 
	 	Section 9.11	 	Severability	 	 	86	 
	 
	 	Section 9.12	 	Integration	 	 	86	 
	 
	 	Section 9.13	 	Governing Law	 	 	86	 
	 
	 	Section 9.14	 	Consent to Jurisdiction and Service of Process	 	 	86	 
	 
	 	Section 9.15	 	Confidentiality	 	 	87	 
	 
	 	Section 9.16	 	Acknowledgments	 	 	87	 
	 
	 	Section 9.17	 	Waivers of Jury Trial; Waiver of Consequential Damages	 	 	88	 
	 
	 	Section 9.18	 	Patriot Act Notice	 	 	88	 
	ARTICLE X GUARANTY	 	 	88	 
	 
	 	Section 10.1	 	The Guaranty	 	 	88	 
	 
	 	Section 10.2	 	Bankruptcy	 	 	88	 
	 
	 	Section 10.3	 	Nature of Liability	 	 	89	 
	 
	 	Section 10.4	 	Independent Obligation	 	 	89	 
	 
	 	Section 10.5	 	Authorization	 	 	89	 
	 
	 	Section 10.6	 	Reliance	 	 	89	 
	 
	 	Section 10.7	 	Waiver	 	 	89	 
	 
	 	Section 10.8	 	Limitation on Enforcement	 	 	90	 
	 
	 	Section 10.9	 	Confirmation of Payment	 	 	90	 






iii




 









 






Schedules




	 	 	 
	Schedule 1.1(a)

	 	Account Designation Letter
	Schedule 1.1(b)

	 	Investments
	Schedule 1.1(c)

	 	Liens
	Schedule 1.1(d)

	 	Consolidated EBITDA
	Schedule 2.1(b)(i)

	 	Form of Notice of Borrowing
	Schedule 2.1(e)

	 	Form of Revolving Note
	Schedule 2.2(d)

	 	Form of Term Loan Note
	Schedule 2.4(d)

	 	Form of Swingline Note
	Schedule 2.10

	 	Form of Notice of Conversion/Extension
	Schedule 3.3

	 	Jurisdictions of Organization and Qualification
	Schedule 3.12

	 	Subsidiaries
	Schedule 3.16

	 	Intellectual Property
	Schedule 3.19(a)

	 	Location of Real Property
	Schedule 3.19(b)

	 	Location of Collateral
	Schedule 3.19(c)

	 	Chief Executive Offices
	Schedule 3.19(d)

	 	Mortgaged Property
	Schedule 3.21

	 	Broker’s Fees
	Schedule 3.22

	 	Labor Matters
	Schedule 3.24

	 	Material Contracts
	Schedule 3.25

	 	Insurance
	Schedule 3.31

	 	Directors; Capitalization
	Schedule 4.1(b)

	 	Form of Secretary’s Certificate
	Schedule 4.1(h)

	 	Form of Solvency Certificate
	Schedule 5.2(b)

	 	Form of Officer’s Compliance Certificate
	Schedule 5.10

	 	Form of Joinder Agreement
	Schedule 6.1(b)

	 	Indebtedness
	Schedule 6.14

	 	Deposit Accounts
	Schedule 9.6(c)

	 	Form of Assignment Agreement






iv




 









 








     FIRST LIEN CREDIT AGREEMENT, dated as of November 30, 2005, among AMERICAN PACIFIC
CORPORATION, a Delaware corporation (the “Borrower”), each of those Domestic Subsidiaries
of the Borrower identified as a “Guarantor” on the signature pages hereto and such other Domestic
Subsidiaries of the Borrower as may from time to time become a party hereto (collectively the
“Guarantors” and individually a “Guarantor”), the several banks and other financial
institutions from time to time parties to this Credit Agreement (collectively the “Lenders”
and individually a “Lender”), WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking
association, as administrative agent for the Lenders hereunder (in such capacity, the
“Administrative Agent” or the “Agent”), and BANK OF AMERICA, N.A., as Syndication
Agent.



W I T N E S S E T H:




     WHEREAS, the Borrower has requested that the Lenders make loans and other financial
accommodations to the Credit Parties in the amount of up to $75,000,000, as more particularly
described herein; and



     WHEREAS, the Lenders have agreed to make such loans and other financial accommodations to the
Credit Parties on the terms and conditions contained herein.



     NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by the parties hereto, such parties hereby agree as follows:



ARTICLE I




DEFINITIONS




     Section 1.1 Defined Terms.



     As used in this Credit Agreement, terms defined in the preamble to this Credit Agreement have
the meanings therein indicated, and the following terms have the following meanings:



     “2006 Charges” shall mean non-recurring charges in fiscal year 2006 in an amount not
to exceed $600,000 comprised of (a) consulting expenses related to perchlorate environmental
remediation, (b) expenses incurred in connection with Sarbanes-Oxley reporting requirements and (c)
integration costs related to the In-Space Propulsion Acquisition.



     “ABR Default Rate” shall have the meaning set forth in Section 2.9.



     “Accessible Borrowing Availability” shall mean, as of any date of determination, the
amount that the Borrower is able to borrow on such date under the Revolving Committed Amount
without a Default or Event of Default occurring or existing after giving pro forma effect to such
borrowing.



     “Account Designation Letter” shall mean the Account Designation Letter dated as of the
Closing Date from the Borrower to the Administrative Agent in substantially the form attached
hereto as Schedule 1.1(a).



     “Acquired Company” shall mean Aerojet Fine Chemicals LLC, a Delaware limited liability
company.



     “Acquiring Company” shall mean Ampac Fine Chemicals LLC, a California limited
liability company.



     “Acquisition” shall mean the acquisition of all or substantially all of the assets of
the Acquired Company pursuant to the Acquisition Documents.



     “Acquisition Documents” shall mean (a) that certain purchase agreement dated as of
July 12, 2005, among the Acquired Company and Aerojet-General Corporation, as the sellers, and the
Acquiring Company, as assignee of the Borrower, as the buyer, together with any schedules and
exhibits thereto, in each case as amended, modified or



 









 




supplemented from time to time in accordance
with the terms hereof, and (b) any other material agreement, document or instrument executed in
connection with the foregoing, in each case as amended, modified or supplemented from time to time.




     “Additional Credit Party” shall mean each Person that becomes a Guarantor by execution
of a Joinder Agreement in accordance with Section 5.10.



     “Administrative Agent” or “Agent” shall have the meaning set forth in the
first paragraph of this Credit Agreement and any successors in such capacity.



     “Administrative Details Form” shall mean, with respect to any Lender, a document
containing such Lender’s contact information for purposes of notices provided under this Credit
Agreement and account details for purposes of payments made to such Lender under this Credit
Agreement.



     “AFC Guaranty” shall mean the guaranty delivered by the Borrower to GenCorp, Inc., an
Ohio corporation, to guaranty the obligations of the Acquiring Company pursuant to the Acquisition
Documents.



     “Affiliate” shall mean as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by, or is under common control with, such Person. For
purposes of this definition, a Person shall be deemed to be “controlled by” a Person if such Person
possesses, directly or indirectly, power either (a) to vote 10% or more of the securities having
ordinary voting power for the election of directors of such Person or (b) to direct or cause the
direction of the management and policies of such Person whether by contract or otherwise.



     “Agreement” or “Credit Agreement” shall mean this First Lien Credit Agreement,
as amended, restated, amended and restated, modified or supplemented from time to time in
accordance with its terms.



     “Alternate Base Rate” shall mean, for any day, a rate per annum equal to the greater
of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on
such day plus 1/2 of 1%. For purposes hereof: “Prime Rate” shall mean, at any time, the
rate of interest per annum publicly announced or otherwise identified from time to time by Wachovia
at its principal office in Charlotte, North Carolina as its prime rate. The parties hereto
acknowledge that the rate announced publicly by Wachovia as its Prime Rate is an index or base rate
and shall not necessarily be its lowest or best rate charged to its customers or other banks; and
“Federal Funds Effective Rate” shall mean, for any day, the weighted average of the rates
on overnight federal funds transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank
of New York, or, if such rate is not so published on the next succeeding Business Day, the average
of the quotations for the day of such transactions received by the Administrative Agent from three
federal funds brokers of recognized standing selected by it. If for any reason the Administrative
Agent shall have determined (which determination shall be conclusive in the absence of manifest
error) that it is unable to ascertain the Federal Funds Effective Rate, for any reason, including
the inability or failure of the Administrative Agent to obtain sufficient quotations in accordance
with the terms above, the Alternate Base Rate shall be determined without regard to clause (b) of
the first sentence of this definition until the circumstances giving rise to such inability no
longer exist. Any change in the Alternate Base Rate due to a change in the Prime Rate or the
Federal Funds Effective Rate shall be effective on the opening of business on the date of such
change.



     “Alternate Base Rate Loans” shall mean Loans that bear interest at an interest rate
based on the Alternate Base Rate.



     “Applicable Percentage” shall mean, for any day, the rate per annum set forth below
opposite the applicable Level then in effect, it being understood that the Applicable Percentage
for (a) Revolving Loans that are Alternate Base Rate Loans shall be the percentage set forth under
the column “Revolving Loans” and “Base Rate Margin”, (b) Revolving Loans that are LIBOR Rate Loans
shall be the percentage set forth under the column “Revolving Loans” and “LIBOR Margin & L/C Fee”,
(c) the Commitment Fee shall be the percentage set forth under the column “Revolving Loans” and
“Commitment Fee”, (d) Term Loans that are Alternate Base Rate Loans shall be the percentage set
forth under the column “Term Loan” and “Base Rate Margin” and (e) Term Loans that are LIBOR Rate
Loans shall be the percentage set forth under the column “Term Loan” and “LIBOR Margin”:



2









 





Applicable Percentage




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Revolving Loans	 	 	Term Loan	 
	 	 	 	 	 	 	LIBOR	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Total	 	 	Margin	 	 	Base Rate	 	 	Commitment	 	 	LIBOR	 	 	Base Rate	 
	Level	 	Leverage Ratio	 	 	& L/C Fee	 	 	Margin	 	 	Fee	 	 	Margin	 	 	Margin	 
	I
	 	3 4.00 to 1.0	 	 	4.00	%	 	 	2.75	%	 	 	0.50	%	 	 	4.00	%	 	 	2.75	%
	II
	 	<4.00 to 1.0 but	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	3 3.50 to 1.0	 	 	3.75	%	 	 	2.50	%	 	 	0.50	%	 	 	4.00	%	 	 	2.75	%
	III
	 	< 3.50 to 1.0	 	 	3.50	%	 	 	2.25	%	 	 	0.50	%	 	 	4.00	%	 	 	2.75	%






     The Applicable Percentage shall, in each case, be determined and adjusted quarterly on the
date five (5) Business Days after the date on which the Administrative Agent has received from the
Credit Parties the quarterly financial information (in the case of the first three fiscal quarters
of the Borrower’s fiscal year), the annual financial information (in the case of the fourth fiscal
quarter of the Borrower) and the certifications required to be delivered to the Administrative
Agent and the Lenders in accordance with the provisions of Sections 5.1(a), 5.1(b) and 5.2(b) (each
an “Interest Determination Date”). Such Applicable Percentage shall be effective from such
Interest Determination Date until the next such Interest Determination Date. After the Closing
Date, if the Credit Parties shall fail to provide the financial information or certifications in
accordance with the provisions of Sections 5.1(a), 5.1(b) and 5.2(b), the Applicable Percentage
shall, on the date five (5) Business Days after the date by which the Credit Parties were so
required to provide such financial information or certifications to the Administrative Agent and
the Lenders, be based on Level I until such time as such information or certifications are
provided, whereupon the Level shall be determined by the then current Total Leverage Ratio.
Notwithstanding the foregoing, the Applicable Percentage shall be as set forth above opposite Level
I for the first two complete fiscal quarters after the Closing Date.



     “Approved Fund” shall mean, with respect to any Lender, any fund or trust or entity
that invests in commercial bank loans in the ordinary course of business and is advised or managed
by (a) such Lender, (b) an Affiliate of such Lender, (c) any other Lender or any Affiliate thereof
or (d) the same investment advisor as any Person described in
clauses (a) — (c).



     “Arranger” shall mean Wachovia Capital Markets, LLC, together with its successors and
assigns.



     “Asset Disposition” shall mean the disposition of any or all of the assets (including,
without limitation, the Capital Stock of a Subsidiary or any ownership interest in a joint venture)
of any Credit Party or any Subsidiary whether by sale, lease, transfer or otherwise. The term
“Asset Disposition” shall not include (a) the sale, lease or transfer of assets permitted by
Subsections 6.4(a)(i) through (vii), or (b) any Equity Issuance.



     “Assignment Agreement” shall mean an Assignment Agreement, in substantially the form
of Schedule 9.6(c).



     “Bankruptcy Code” shall mean the Bankruptcy Code in Title 11 of the United States
Code, as amended, modified, succeeded or replaced from time to time.



     “Bankruptcy Event” shall mean any of the events described in Section 7.1(f).



     “Borrower” shall have the meaning set forth in the first paragraph of this Credit
Agreement.



     “Borrowing Date” shall mean, in respect of any Loan, the date such Loan is made.



     “Business” shall have the meaning set forth in Section 3.10.



3









 





     “Business Day” shall mean a day other than a Saturday, Sunday or other day on which
commercial banks in Charlotte, North Carolina or New York, New York are authorized or required by
law to close; provided, however, that when used in connection with a rate
determination, borrowing or payment in respect of a LIBOR Rate Loan, the term “Business Day” shall
also exclude any day on which banks in London, England are not open for dealings in Dollar deposits
in the London interbank market.



     “Capital Lease” shall mean any lease of property, real or personal, the obligations
with respect to which are required to be capitalized on a balance sheet of the lessee in accordance
with GAAP.



     “Capital Lease Obligations” shall mean the capitalized lease obligations relating to a
Capital Lease determined in accordance with GAAP.



     “Capital Stock” shall mean (a) in the case of a corporation, capital stock, (b) in the
case of an association or business entity, any and all shares, interests, participations, rights or
other equivalents (however designated) of capital stock, (c) in the case of a partnership,
partnership interests (whether general or limited), (d) in the case of a limited liability company,
membership interests and (e) any other interest or participation that confers on a Person the right
to receive a share of the profits and losses of, or distributions of assets of, the issuing Person.



     “Cash Equivalents” shall mean (a) securities issued or directly and fully guaranteed
or insured by the United States of America or any agency or instrumentality thereof (provided that
the full faith and credit of the United States of America is pledged in support thereof) having
maturities of not more than twelve months from the date of acquisition (“Government
Obligations”), (b) Dollar denominated (or foreign currency fully hedged to the Dollar) time
deposits, certificates of deposit, Eurodollar time deposits and Eurodollar certificates of deposit
of (i) any domestic commercial bank of recognized standing having capital and surplus in excess of
$250,000,000 or (ii) any bank whose short-term commercial paper rating from S&P is at least A-1 or
the equivalent thereof or from Moody’s is at least P-1 or the equivalent thereof (any such bank
being an “Approved Bank”), in each case with maturities of not more than 364 days from the
date of acquisition, (c) commercial paper and variable or fixed rate notes issued by any Approved
Bank (or by the parent company thereof) or any variable rate notes issued by, or guaranteed by any
domestic corporation rated A-1 (or the equivalent thereof) or better by S&P or P-1 (or the
equivalent thereof) or better by Moody’s and maturing within six months of the date of acquisition,
(d) repurchase agreements with a bank or trust company (including a Lender) or a recognized
securities dealer having capital and surplus in excess of $500,000,000 for direct obligations
issued by or fully guaranteed by the United States of America, (e) obligations of any State of the
United States or any political subdivision thereof for the payment of the principal and redemption
price of and interest on which there shall have been irrevocably deposited Government Obligations
maturing as to principal and interest at times and in amounts sufficient to provide such payment,
(f) auction preferred stock rated in the highest short-term credit rating category by S&P or
Moody’s, (g) readily marketable tax-free municipal bonds of a domestic issuer rated Aaa by Moody’s,
or AAA by S&P, and maturing within one year from the date of issuance (and investments in mutual
funds investing primarily in those bonds), (h) investments in money market
funds substantially all of whose assets are comprised of securities of the types described in
subparts (a) through (g) above, and (i) demand deposit accounts maintained in the ordinary course
of business.



     “Change of Control” shall mean at any time the occurrence of any of the following
events: (a) any “person” or “group” (as such terms are used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934), is or becomes the “beneficial owner” (as defined in Rules 13d-3
and 13d-5 under the Securities Exchange Act of 1934, except that a person shall be deemed to have
“beneficial ownership” of all securities that such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time), directly or indirectly, of 25%
or more of the then outstanding Voting Stock of the Borrower; or (b) the replacement of a majority
of the Board of Directors of the Borrower over a two-year period from the directors who constituted
the Board of Directors at the beginning of such period, and such replacement shall not have been
approved by a vote of at least a majority of the Board of Directors of the Borrower then still in
office who either were members of such Board of Directors at the beginning of such period or whose
election as a member of such Board of Directors was previously so approved.



     “Closing Date” shall mean the date of this Credit Agreement.



     “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.



4









 





     “Collateral” shall mean a collective reference to the collateral which is identified
in, and at any time will be covered by, the Security Documents and any other property or assets of
a Credit Party, whether tangible or intangible and whether real or personal, that may from time to
time secure the Credit Party Obligations.



     “Commitment” shall mean the Revolving Commitments, the LOC Commitments, the Term Loan
Commitments and the Swingline Commitments, individually or collectively, as appropriate.



     “Commitment Fee” shall have the meaning set forth in Section 2.6(a).



     “Commitment Percentage” shall mean the Revolving Commitment Percentage and/or the Term
Loan Commitment Percentage, as appropriate.



     “Commitment Period” shall mean (a) with respect to Revolving Loans, the period from
and including the Closing Date to but excluding the Maturity Date and (b) with respect to Letters
of Credit, the period from and including the Closing Date to but excluding the date that is 30 days
prior to the Maturity Date.



     “Commonly Controlled Entity” shall mean an entity, whether or not incorporated, which
is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of
a group that includes the Borrower and that is treated as a single employer under Section 414 of
the Code.



     “Consolidated” shall mean, when used with reference to financial statements or
financial statement items of the Credit Parties and their Subsidiaries or any other Person, such
statements or items on a consolidated basis in accordance with the consolidation principles of
GAAP.



     “Consolidated Capital Expenditures” shall mean, as of any date of determination for
the four quarter period ending on such date, all expenditures of the Credit Parties and their
Subsidiaries on a Consolidated basis for such period that in accordance with GAAP would be
classified as capital expenditures, including without limitation, Capital Lease Obligations. The
term “Consolidated Capital Expenditures” shall not include (a) any Permitted Acquisition, (b)
Environmental Remediation Equipment Payments in an amount not to exceed $6,300,000 during the term
of this Agreement, (c) capital expenditures to the extent reimbursed by a third party (that is not
an Affiliate of a Credit Party or any Subsidiary thereof) in the ordinary course of business, (d)
capital expenditures in respect of the reinvestment of proceeds from Asset Dispositions in
accordance with the terms of Section 2.8(b)(iii) or Recovery Events in accordance with the terms of
Section 2.8(b)(vi) or (e) any such expenditures of ESI.



     “Consolidated Cash Taxes” shall mean, as of any date of determination for the four
quarter period ending on such date, the aggregate of all taxes (including, without limitation, any
federal, state, local and foreign income and similar taxes) actually paid (net of any tax refund)
by the Credit Parties and their Subsidiaries on a Consolidated basis during such period;
provided, that Consolidated Cash Taxes shall not include any such taxes of ESI.
Notwithstanding the foregoing, for purposes of calculating Consolidated Cash Taxes for the fiscal
quarters ending December 31, 2005, March 31, 2006 and June 30, 2006, Consolidated Cash Taxes shall
be annualized during such fiscal quarters such that (a) for the calculation of Consolidated Cash
Taxes as of December 31, 2005, Consolidated Cash Taxes for the fiscal quarter then ending will be
multiplied by four (4), (b) for the calculation of Consolidated Cash Taxes as of March 31, 2006,
Consolidated Cash Taxes for the two fiscal quarter period then ending will be multiplied by two (2)
and (c) for the calculation of Consolidated Cash Taxes as of June 30, 2006, Consolidated Cash Taxes
for the three fiscal quarter period then ending will be multiplied by one and one-third (1 1/3).



     “Consolidated EBITDA” shall mean, as of any date of determination for the four quarter
period ending on such date, without duplication, (a) Consolidated Net Income for such period
plus (b) the sum of the following to the extent deducted in calculating Consolidated Net
Income: (i) Consolidated Interest Expense for such period, (ii) income tax expense (including,
without limitation, any federal, state, local and foreign income and similar taxes) of the Credit
Parties and their Subsidiaries for such period, (iii) depreciation and amortization expense
(including amortization of debt discount and debt issuance costs to the extent permitted by GAAP)
of the Credit Parties and their Subsidiaries for such period, (iv) other non-cash charges
(excluding reserves for future cash payments during the term of this Agreement) of the Credit
Parties and their Subsidiaries for such period, (v) 2006 Charges for such period, (vi) non-cash
compensation expense, or other non-cash expenses or charges, arising from the granting of



5









 




stock
options to employees, officers and directors and similar arrangements (including repricing,
amendment, modification, substitution or change of any such options or similar arrangements) for
such period, (vii) payment-in-kind interest payments related to the Seller Subordinated Note and
the Second Lien Term Loan for such period and (viii) increases in reserves for Environmental
Remediation Payments for such period, minus (c) non-cash charges previously added back to
Consolidated Net Income in determining Consolidated EBITDA to the extent such non-cash charges have
become cash charges during such period, minus (d) payments for Environmental Remediation OM
Payments for such period (net of cash recovered), minus (e) any other non-recurring cash or
non-cash gains in excess of $50,000 during such period; provided that,
notwithstanding the foregoing, Consolidated EBITDA for the fiscal quarters ending, December 31,
2004, March 31, 2005, June 30, 2005 and September 30, 2005 shall be the amounts corresponding to
such fiscal quarters set forth on Schedule 1.1(d).



Further, (1) for any four-quarter period, Consolidated EBITDA shall be calculated on a pro forma
basis to exclude the effects of any sales of real property assets owned by the Borrower or any of
its Subsidiaries, (2) for any four-quarter period ending on or after the closing date of the ESI
Sale (to the extent that such date occurs), Consolidated EBITDA shall be calculated on a pro forma
basis to exclude the effects of ESI and (3) for any four-quarter period ending on after the closing
date of any Permitted Acquisition, Consolidated EBITDA shall be calculated on a pro forma basis
assuming the consummation of such Permitted Acquisition as of the first day of such period.




     “Consolidated Fixed Charges” shall mean, as of any date of determination for the four
quarter period ending on such date, the sum of (a) Consolidated Interest Expense for such period
plus (b) Consolidated Scheduled Debt Payments for such period plus (c) Consolidated
Cash Taxes for such period, in each case for the Borrower and its Subsidiaries on a Consolidated
basis; provided, that Consolidated Fixed Charges shall not include any such charges
described above in clauses (a) through (c) of ESI.



     “Consolidated Funded Debt” shall mean, on any date of calculation, Funded Debt of the
Borrower and its Subsidiaries on a Consolidated basis.



     “Consolidated Interest Expense” shall mean, as of any date of determination for the
four quarter period ending on such date, all interest expense (excluding (i) amortization of debt
discount, other debt issue costs and premium and (ii) any payment-in-kind interest related to the
Seller Subordinated Note and
the Second Lien Term Loan, but including the interest component under Capital Leases and synthetic
leases, tax retention operating leases, off-balance sheet loans and similar off-balance sheet
financing products) for such period of the Credit Parties and their Subsidiaries on a Consolidated
basis; provided, that Consolidated Interest Expense shall not include any such interest
expense of ESI. Notwithstanding the foregoing, for purposes of calculating Consolidated Interest
Expense for the fiscal quarters ending December 31, 2005, March 31, 2006 and June 30, 2006,
Consolidated Interest Expense shall be annualized during such fiscal quarters such that (a) for the
calculation of Consolidated Interest Expense as of December 31, 2005, Consolidated Interest Expense
for the fiscal quarter then ending will be multiplied by four (4), (b) for the calculation of
Consolidated Interest Expense as of March 31, 2006, Consolidated Interest Expense for the two
fiscal quarter period then ending will be multiplied by two (2) and (c) for the calculation of
Consolidated Interest Expense as of June 30, 2006, Consolidated Interest Expense for the three
fiscal quarter period then ending will be multiplied by one and one-third (1 1/3).



     “Consolidated Net Income” shall mean, as of any date of determination for the four
quarter period ending on such date, the net income (before discontinued operations, extraordinary
items, and changes in accounting principals) or loss of Borrower and its Subsidiaries, determined
in accordance with GAAP of the Borrower and its Subsidiaries on a Consolidated basis for such
period; provided that Consolidated Net Income shall not include (a) the net income of any
corporation, partnership, limited liability company, joint venture or other legal arrangement
(whether created by contract or conducted through a separate legal entity) now or hereafter formed
by the Borrower or any Subsidiary with another Person that is not the Borrower or any Subsidiary
and (b) any such net income of ESI.



     “Consolidated Scheduled Debt Payments” shall mean, as of any date of determination for
the four quarter period ending on such date, the sum of all scheduled payments of principal on
Consolidated Funded Debt for such period (including the principal component of payments due on
Capital Leases during the applicable period ending on such date); it being understood that
Consolidated Scheduled Debt Payments shall not include optional prepayments or the mandatory
prepayments required pursuant to Section 2.8.



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     “Consolidated Subsidiaries” shall mean Subsidiaries of the Borrower which are included
on a consolidated basis in the financial statements of the Borrower in accordance with GAAP.



     “Consolidated Working Capital” shall mean, as of any date of determination, the excess
of (a) current assets (excluding cash and Cash Equivalents) of the Credit Parties and their
Subsidiaries on a Consolidated basis as of such date of determination less (b) current
liabilities (excluding the current portion of long term Indebtedness) of the Credit Parties and
their Subsidiaries on a Consolidated basis as of such date of determination, all as determined in
accordance with GAAP; provided, that Consolidated Working Capital shall not include any
such excess amount described above of ESI.



     “Contractual Obligation” shall mean, as to any Person, any provision of any security
issued by such Person or of any contract, agreement, instrument or undertaking to which such Person
is a party or by which it or any of its property is bound.



     “Control Agent” shall have the meaning assigned to such term in the Intercreditor
Agreement.



     “Copyright Licenses” shall mean any written agreement providing for the grant by or to
a Person of any right under any Copyright, including, without limitation, any thereof referred to
in Schedule 3.16 to this Credit Agreement.



     “Copyrights” shall mean all copyrights of the Credit Parties and their Subsidiaries in
all works, now existing or hereafter created or acquired, all registrations and recordings thereof,
and all applications in connection therewith, whether in the United States Copyright Office or in
any similar office or agency of the United States, any state thereof or any other country or any
political subdivision thereof, or otherwise, including, without limitation, any thereof referred to
in Schedule 3.16 and all renewals thereof.



     “Credit Documents” shall mean this Credit Agreement, the Intercreditor Agreement, each
of the Notes, any Joinder Agreement, the Letters of Credit, LOC Documents and the Security
Documents and all other agreements, documents, certificates and instruments delivered to the
Administrative Agent or any Lender by any Credit Party in connection therewith (other than any
agreement, document, certificate or instrument related to a Hedging Agreement).



     “Credit Party” shall mean any of the Borrower or the Guarantors; provided that
ESI shall not be a Guarantor hereunder and shall not be considered a Credit Party.



     “Credit Party Obligations” shall mean, without duplication, (a) all of the
obligations, indebtedness and liabilities of the Credit Parties to the Lenders (including the
Issuing Lender) and the Administrative Agent, whenever arising, under this Credit Agreement, the
Notes or any of the other Credit Documents, including principal, interest, fees, prepayment
premiums (if any), expenses, reimbursements and indemnification obligations and other amounts
(including, but not limited to, any interest accruing after the occurrence of a filing of a
petition of bankruptcy under the Bankruptcy Code with respect to any Credit Party, regardless of
whether such interest is an allowed claim under the Bankruptcy Code) and (b) all liabilities and
obligations, whenever arising, owing from any Credit Party or any of their Subsidiaries to any
Hedging Agreement Provider arising under any Secured Hedging Agreement.



     “Debt Issuance” shall mean the issuance of any Indebtedness by the Credit Parties or
any of their Subsidiaries (excluding any issuance of Indebtedness by ESI to the extent such
Indebtedness is non-recourse to any Credit Party, any Equity Issuance and any Indebtedness of the
Credit Parties and their Subsidiaries permitted to be incurred pursuant to Section 6.1(a)-(m)
hereof).



     “Default” shall mean any of the events specified in Section 7.1, whether or not any
requirement for the giving of notice or the lapse of time, or both, or any other condition, has
been satisfied.



     “Defaulting Lender” shall mean, at any time, any Lender that, at such time (a) has
failed to make a Loan or fund a Participation Interest required pursuant to the terms of this
Credit Agreement, (b) has failed to pay to the Administrative Agent or any Lender an amount owed by
such Lender pursuant to the terms of this Credit Agreement



7









 




and such default remains uncured, or (c)
has been deemed insolvent or has become subject to a bankruptcy or insolvency proceeding or to a
receiver, trustee or similar official.




     “Deposit Account Control Agreement” shall mean an agreement among a Credit Party, a
depository institution, and the Administrative Agent or the Control Agent, as applicable, which
agreement is in a form reasonably acceptable to the Administrative Agent or the Control Agent, as
applicable, and which provides the Administrative Agent or the Control Agent, as applicable, with
“control” (as such term is used in Article 9 of the Uniform Commercial Code) over the deposit
accounts described therein, as the same may be amended, restated, supplemented, extended, replaced
or otherwise modified from time to time.



     “Dollars” and “$” shall mean dollars in lawful currency of the United States
of America.



     “Domestic Lending Office” shall mean, initially, the office of each Lender designated
as such Lender’s Domestic Lending Office shown in such Lender’s Administrative Details Form; and
thereafter, such other office of such Lender as such Lender may from time to time specify to the
Administrative Agent and the Borrower as the office of such Lender at which Alternate Base Rate
Loans of such Lender are to be made.



     “Domestic Subsidiary” shall mean any Subsidiary that is organized and existing under
the laws of the United States or any state or commonwealth thereof or under the laws of the
District of Columbia.



     “Environmental Laws” shall mean any and all applicable foreign, federal, state, local
or municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements
of any Governmental Authority or other Requirement of Law (including common law) regulating,
relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as now or may at
any time be in effect during the term of this Credit Agreement.



     “Environmental Lien” shall mean a Lien in favor of any Governmental Authority for (a)
any liability under Environmental Laws, or any limitations or restrictions placed upon any real
property owned, leased or operated by the Borrower or any of its Subsidiaries by any Governmental
Authority, or (b) damages relating to, or costs incurred by such Governmental Authority in response
to, a release or threatened release of Materials of Environmental Concern into the environment.



     “Environmental Remediation Equipment Payments” shall mean the Environmental
Remediation Payments consisting of payments made for equipment costs.



     “Environmental Remediation OM Payments” shall mean the Environmental Remediation
Payments consisting of payments made for the operating and maintenance costs.



     “Environmental Remediation Payments” shall mean payments made by the Borrower or any
of its Subsidiaries in connection with the implementation of a remediation program together with
the operation and maintenance of such program and equipment acquired under such program involving
(a) any liability under Environmental Laws, or any limitations or restrictions placed upon any real
property owned, leased or operated by the Borrower or any of its Subsidiaries by any Government
Authority or court, or (b) damages relating to, or costs incurred by such Governmental Authority in
response to, a release or threatened release of Materials of Environmental Concern into the
environment with respect to the Athens Road Project Site and the Valley Drive Site.



     “Equity Issuance” shall mean any issuance by any Credit Party or any Subsidiary (other
than ESI) to any Person which is not a Credit Party of (a) shares of its Capital Stock, (b) any
shares of its Capital Stock pursuant to the exercise of options or warrants, (c) any shares of its
Capital Stock pursuant to the conversion of any debt securities to equity or (d) warrants or
options that are exercisable for shares of its Capital Stock. The term “Equity Issuance” shall not
include (i) any equity issued constituting consideration for a Permitted Acquisition, (ii) any
Asset Disposition, (iii) any Debt Issuance, or (iv) any equity issuance made in connection with any
director or employee stock option plan, stock award plan or dividend rights plan of any Credit
Party.



     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended
from time to time.



8









 





     “ESI” shall mean Energetic Systems, Inc., LLC and any subsidiary of ESI.



     “ESI Indebtedness” shall mean the Indebtedness owed by ESI to Energetic Additives,
Inc., LLC and other third parties.



     “ESI Sale” shall mean the sale or other disposition of all or substantially all of the
Borrower’s direct or indirect ownership interest in ESI.



     “Eurodollar Reserve Percentage” shall mean for any day, the percentage (expressed as a
decimal and rounded upwards, if necessary, to the next higher 1/100th of 1%) which is in effect for
such day as prescribed by the Federal Reserve Board (or any successor) for determining the maximum
reserve requirement (including without limitation any basic, supplemental or emergency reserves) in
respect of Eurocurrency liabilities, as defined in Regulation D of such Board as in effect from
time to time, or any similar category of liabilities for a member bank of the Federal Reserve
System in New York City.



     “Event of Default” shall mean any of the events specified in Section 7.1;
provided, however, that any requirement for the giving of notice or the lapse of
time, or both, or any other condition, has been satisfied.



     “Excess Cash Flow” shall mean, with respect to any fiscal year period of the Borrower
and its Subsidiaries on a Consolidated basis, an amount equal to (a) Consolidated EBITDA for such
period plus (b) decreases in Consolidated Working Capital for such period minus (c)
Consolidated Capital Expenditures to the extent not financed for such period minus (d)
Consolidated Interest Expense for such period to the extent paid or payable in cash minus
(e) Consolidated Cash Taxes paid during such period minus (f) Consolidated Scheduled Debt
Payments made during such period minus (g) increases in Consolidated Working Capital for
such period minus (h) Environmental Remediation Payments for such period minus (i)
voluntary prepayments of the Term Loan and minus (j) 2006 Charges for such period.



     “Extension of Credit” shall mean, as to any Lender, the making of a Loan by such
Lender or the issuance of, or participation in, a Letter of Credit by such Lender.



     “Federal Funds Effective Rate” shall have the meaning set forth in the definition of
“Alternate Base Rate”.



     “Fee Letter” shall mean the letter agreement dated July 12, 2005, addressed to the
Borrower from Wachovia and the Arranger, as amended, modified or otherwise supplemented.



     “First Lien Leverage Ratio” shall mean the ratio of (i) Consolidated Funded Debt
(excluding the Second Lien Obligations and any other Indebtedness that is specifically subordinated
in right of payment to the prior payment of the Credit Party Obligations) to (ii) Consolidated
EBITDA.



     “First Priority” shall mean, with respect to any Lien purported to be created in any
Collateral pursuant to any Security Document, that such Lien is the only Lien to which such
Collateral is subject, other than any Permitted Lien.



     “Fixed Charge Coverage Ratio” shall mean the ratio of (i) Consolidated EBITDA minus
Consolidated Capital Expenditures to (ii) Consolidated Fixed Charges.



     “Flood Hazard Property” any Mortgaged Property that is in an area designated by the
Federal Emergency Management Agency as having special flood or mud slide hazards.



     “Foreign Subsidiary” shall mean any Subsidiary that is not a Domestic Subsidiary.



     “Funded Debt” shall mean, with respect to any Person, without duplication, (a) all
obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by
bonds, debentures, notes or similar instruments, or upon which interest payments are customarily
made, (c) all obligations of such Person under conditional sale or other title retention agreements
relating to property purchased by such Person (other than customary reservations or retentions



9









 




of title under agreements with suppliers entered into in the ordinary course of business), (d) all
obligations (including, without limitation, the noncontingent amount of earnout obligations) of
such Person incurred, issued or assumed as the deferred purchase price of property or services
purchased by such Person (other than trade debt incurred in the ordinary course of business and due
within six months of the incurrence thereof) which would appear as liabilities on a balance sheet
of such Person, (e) the unreimbursed amount of all letters of credit issued or bankers’ acceptances
facilities created for the account of such Person, (f) the principal portion of all Capital Lease
Obligations of such Person, (g) all net obligations of such Person under Hedging Agreements,
excluding any portion thereof which would be accounted for as interest expense under GAAP, (h) all
preferred Capital Stock issued by such Person and which by the terms thereof could be (at the
request of the holders thereof or otherwise) subject to mandatory sinking fund payments, redemption
or other acceleration, (i) the principal balance outstanding under any synthetic lease, tax
retention operating lease, off-balance sheet loan or similar off-balance sheet financing product,
(j) all Indebtedness of others of the type described in clauses (a) through (i) hereof secured by
(or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on, or payable out of the proceeds of production from, property owned or
acquired by such Person, whether or not the obligations secured thereby have been assumed, (k) all
Guaranty Obligations of such Person with respect to Indebtedness of another Person of the type
described in clauses (a) through (i) hereof, and (l) all Indebtedness of the type described in
clauses (a) through (i) hereof of any partnership or
unincorporated joint venture in which such Person is a general partner or a joint venturer (to the
extent such Person is liable therefor) calculated based on the percentage of such Indebtedness for
which such Person is liable; provided, however, that Funded Debt shall not include
Indebtedness among the Credit Parties, the ESI Indebtedness or the Subordinated Seller Obligations.




     “GAAP” shall mean generally accepted accounting principles in effect in the United
States of America applied on a consistent basis, subject, however, in the case of
determination of compliance with the financial covenants set out in Section 5.9 to the provisions
of Section 1.3.



     “GenCorp Earn Out Obligations” shall have the meaning set forth in Section 6.1(j).



     “Government Acts” shall have the meaning set forth in Section 2.19.



     “Government Contract” shall mean any contract entered into between the Borrower or any
of its Subsidiaries and the government of the United States of America, or any department, agency,
public corporation, or other instrumentality or agent thereof or any state government or any
department, agency or instrumentality or agent thereof.



     “Governmental Approvals” shall mean all authorizations, consents, approvals, permits,
licenses and exemptions of, registrations and filings with, and reports to, all Governmental
Authorities.



     “Governmental Authority” shall mean any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.



     “Guarantor” shall have the meaning set forth in the first paragraph of this Credit
Agreement.



     “Guaranty” shall mean the guaranty of the Guarantors set forth in Article X.



     “Guaranty Obligations” shall mean, with respect to any Person, without duplication,
any obligations of such Person (other than endorsements in the ordinary course of business of
negotiable instruments for deposit or collection) guaranteeing or intended to guarantee any
Indebtedness of any other Person in any manner, whether direct or indirect, and including without
limitation any obligation, whether or not contingent, (i) to purchase any such Indebtedness or any
property constituting security therefor, (ii) to advance or provide funds or other support for the
payment or purchase of any such Indebtedness or to maintain working capital, solvency or other
balance sheet condition of such other Person (including without limitation keep well agreements,
maintenance agreements, comfort letters or similar agreements or arrangements) for the benefit of
any holder of Indebtedness of such other Person, (iii) to lease or purchase property, securities or
services primarily for the purpose of assuring the holder of such Indebtedness, or (iv) to
otherwise assure or hold harmless the holder of such Indebtedness against loss in respect thereof,
but excluding ordinary course indemnification obligations not constituting financial undertakings.
The amount of any Guaranty Obligation



10









 




hereunder shall (subject to any limitations set forth
therein) be deemed to be an amount equal to the outstanding principal amount (or maximum principal
amount, if larger) of the Indebtedness in respect of which such Guaranty Obligation is made or, if
not stated or determinable, the maximum reasonably anticipated liability in respect thereof as
determined by such Person in good faith.




     “Hedging Agreement Provider” shall mean any Person that enters into a Secured Hedging
Agreement with a Credit Party or any of its Subsidiaries that is permitted by Section 6.1(d) to the
extent such Person is a Lender, an Affiliate of a Lender or any other Person that was a Lender (or
an Affiliate of a Lender) at the time it entered into the Secured Hedging Agreement but has ceased
to be a Lender (or whose Affiliate has ceased to be a Lender) under the Credit Agreement.



     “Hedging Agreements” shall mean, with respect to any Person, any agreement entered
into to protect such Person against fluctuations in interest rates, or currency or raw materials
values, including, without limitation, any interest rate swap, cap or collar agreement or similar
arrangement between such Person and one or more counterparties, any foreign currency exchange
agreement, currency protection agreements, commodity purchase or option agreements or other interest or exchange rate hedging
agreements.



     “Indebtedness” shall mean, with respect to any Person, without duplication, (a) all
obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by
bonds, debentures, notes or similar instruments, or upon which interest payments are customarily
made, (c) all obligations of such Person under conditional sale or other title retention agreements
relating to property purchased by such Person (other than customary reservations or retentions of
title under agreements with suppliers entered into in the ordinary course of business), (d) all
obligations (including, without limitation, the reasonably anticipated amount of earnout
obligations) of such Person incurred, issued or assumed as the deferred purchase price of property
or services purchased by such Person (other than trade debt incurred in the ordinary course of
business and due within six months of the incurrence thereof) which would appear as liabilities on
a balance sheet of such Person, (e) the maximum amount of all letters of credit issued or bankers’
acceptances facilities created for the account of such Person and, without duplication, all drafts
drawn thereunder (to the extent unreimbursed), (f) the principal portion of all Capital Lease
Obligations of such Person, (g) all net obligations of such Person under Hedging Agreements,
excluding any portion thereof which would be accounted for as interest expense under GAAP, (h) all
preferred Capital Stock issued by such Person and which by the terms thereof could be (at the
request of the holders thereof or otherwise) subject to mandatory sinking fund payments, redemption
or other acceleration, (i) the principal balance outstanding under any synthetic lease, tax
retention operating lease, off-balance sheet loan or similar off-balance sheet financing product,
(j) all obligations of such Person under take-or-pay or similar arrangements or under commodities
agreements, (k) all Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on, or payable out of
the proceeds of production from, property owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed, (l) all Guaranty Obligations of such Person with
respect to Indebtedness of another Person and (m) the Indebtedness of any partnership or
unincorporated joint venture in which such Person is a general partner or a joint venturer (to the
extent such Person is liable therefor) calculated based on the percentage of such Indebtedness for
which such Person is liable.



     “Insolvency” shall mean, with respect to any Multiemployer Plan, the condition that
such Plan is insolvent within the meaning of such term as used in Section 4245 of ERISA.



     “In-Space Propulsion Acquisition” shall mean the acquisition contemplated by the
Purchase Agreement, dated as of April 26, 2004, by and between the Borrower and Aerojet-General
Corporation.



     “Intellectual Property” shall mean the Copyrights, Copyright Licenses, Patents, Patent
Licenses, Trademarks and Trademark Licenses of the Credit Parties and their Subsidiaries, all
goodwill associated therewith and all rights to sue for infringement thereof.



     “Intercreditor Agreement” means the Intercreditor Agreement, dated as of November 30,
2005, by and among the Administrative Agent, the Second Lien Administrative Agent, the Control
Agent and the Credit Parties, as amended, modified, supplemented or restated from time to time.



     “Interest Payment Date” shall mean (a) as to any Alternate Base Rate Loan, the last
day of each March, June, September and December and on the applicable Maturity Date, (b) as to any
LIBOR Rate Loan having an



11









 




Interest Period of three months or less, the last day of such Interest
Period, (c) as to any LIBOR Rate Loan having an Interest Period longer than three months, (i) each
three (3) month anniversary following the first day of such Interest Period and (ii) the last day
of such Interest Period and (d) as to any Loan which is the subject of a mandatory prepayment
required pursuant to Section 2.8(b), the date on which such mandatory prepayment is due.




     “Interest Period” shall mean, with respect to any LIBOR Rate Loan,




     (a) initially, the period commencing on the Borrowing Date or conversion date, as the case may be, with respect
to such LIBOR Rate Loan and ending one, two, three or six months thereafter, subject to availability to all applicable
Lenders, as selected by the Borrower in the Notice of Borrowing or Notice of Conversion given with respect thereto; and




     (b) thereafter, each period commencing on the last day of the immediately preceding
Interest Period applicable to such LIBOR Rate Loan and ending one, two, three or six months
thereafter, subject to availability to all applicable Lenders, as selected by the Borrower
by irrevocable notice to the Administrative Agent not less than three Business Days prior to
the last day of the then current Interest Period with respect thereto; provided that
the foregoing provisions are subject to the following:




     (i) if any Interest Period pertaining to a LIBOR Rate Loan would otherwise end
on a day that is not a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless the result of such extension would be to carry
such Interest Period into another calendar month in which event such Interest Period
shall end on the immediately preceding Business Day;




     (ii) any Interest Period pertaining to a LIBOR Rate Loan 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) shall
end on the last Business Day of the relevant calendar month;




     (iii) if the Borrower shall fail to give notice as provided above, the Borrower
shall be deemed to have selected an Alternate Base Rate Loan to replace the affected
LIBOR Rate Loan;




     (iv) no Interest Period in respect of any Loan shall extend beyond the
applicable Maturity Date and, further with regard to the Term Loan, no Interest
Period shall extend beyond any principal amortization payment date with respect to
such Term Loan unless the portion of such Term Loan consisting of Alternate Base
Rate Loans together with the portion of such Term Loan consisting of LIBOR Rate
Loans with Interest Periods expiring prior to or concurrently with the date such
principal amortization payment date is due, is at least equal to the amount of such
principal amortization payment due on such date; and




     (v) no more than ten (10) LIBOR Rate Loans may be in effect at any time. For
purposes hereof, LIBOR Rate Loans with different Interest Periods shall be
considered as separate LIBOR Rate Loans, even if they shall begin on the same date,
although borrowings, extensions and conversions may, in accordance with the
provisions hereof, be combined at the end of existing Interest Periods to constitute
a new LIBOR Rate Loan with a single Interest Period.



     “Investment” shall mean (a) the acquisition (whether for cash, property, services,
assumption of Indebtedness, securities or otherwise) of shares of Capital Stock, other ownership
interests or other securities of any Person or bonds, notes, debentures or all or substantially all
of the assets of any Person or (b) any deposit with, or advance, loan or other extension of credit
to, any Person (other than deposits made in the ordinary course of business) or (c) any other
capital contribution to or investment in any Person, including, without limitation, any Guaranty
Obligation (including any support for a letter of credit issued on behalf of such Person) incurred
for the benefit of such Person.



     “Issuing Lender” shall mean Wachovia or any successor in such capacity.



12









 





     “Issuing Lender Fees” shall have the meaning set forth in Section 2.6(c).



     “Joinder Agreement” shall mean a Joinder Agreement in substantially the form of
Schedule 5.10, executed and delivered by an Additional Credit Party in accordance with the
provisions of Section 5.10.



     “Lender” shall have the meaning set forth in the first paragraph of this Credit
Agreement and shall include the Issuing Lender and the Swingline Lender.



     “Lender Commitment Letter” shall mean, with respect to any Lender, the letter (or
other correspondence) to such Lender from the Administrative Agent notifying such Lender of its LOC
Commitment, Revolving Commitment Percentage and/or Term Loan Commitment Percentage.



     “Letters of Credit” shall mean any letter of credit issued by the Issuing Lender
pursuant to the terms hereof, as such letter of credit may be amended, modified, extended, renewed
or replaced from time to time.



     “Letter of Credit Facing Fee” shall have the meaning set forth in Section 2.6(c).



     “Letter of Credit Fee” shall have the meaning set forth in Section 2.6(b).



     “LIBOR” shall mean, for any LIBOR Rate Loan for any Interest Period therefor, the rate
per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Telerate Page
3750 (or any successor page) as the London interbank offered rate for deposits in Dollars at
approximately 11:00 A.M. (London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period. If for any reason such rate is not
available, the term “LIBOR” shall mean, for any LIBOR Rate Loan for any Interest Period therefor,
the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters
Screen LIBO Page as the London interbank offered rate for deposits in Dollars at approximately
11:00 A.M. (London time) two Business Days prior to the first day of such Interest Period for a
term comparable to such Interest Period; provided, however, if more than one rate
is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all
such rates (rounded upwards, if necessary, to the nearest 1/100 of 1%). If, for any reason,
neither of such rates is available, then “LIBOR” shall mean the rate per annum at which, as
determined by the Administrative Agent, Dollars in an amount comparable to the Loans then requested
are being offered to leading banks at approximately 11:00 A.M. London time, two (2) Business Days
prior to the commencement of the applicable Interest Period for settlement in immediately available
funds by leading banks in the London interbank market for a period equal to the Interest Period
selected.



     “LIBOR Lending Office” shall mean, initially, the office of each Lender designated as
such Lender’s LIBOR Lending Office in such Lender’s Administrative Details Form; and thereafter,
such other office of such Lender as such Lender may from time to time specify to the Administrative
Agent and the Borrower as the office of such Lender at which the LIBOR Rate Loans of such Lender
are to be made.



     “LIBOR Rate” shall mean a rate per annum (rounded upwards, if necessary, to the next
higher 1/100th of 1%) determined by the Administrative Agent pursuant to the following formula:



	 	 	 	 	 
	LIBOR Rate =

	 	LIBOR
	 	 
	 

	 	1.00 – Eurodollar Reserve Percentage
	 	 






     “LIBOR Rate Loan” shall mean Loans the rate of interest applicable to which is based
on the LIBOR Rate.



     “Lien” shall mean any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security interest or any
preference, priority or other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title retention agreement
and any Capital Lease having substantially the same economic effect as any of the foregoing).



     “Loan” shall mean a Revolving Loan, the Term Loan and/or a Swingline Loan, as
appropriate.



13









 





     “LOC Commitment” shall mean the commitment of the Issuing Lender to issue Letters of
Credit and with respect to each Revolving Lender, the commitment of such Revolving Lender to
purchase participation interests in the Letters of Credit up to such Lender’s LOC Committed Amount as
specified in the Lender Commitment Letter or in the Register, as such amount may be reduced from
time to time in accordance with the provisions hereof.



     “LOC Committed Amount” shall have the meaning set forth in Section 2.3(a).



     “LOC Documents” shall mean, with respect to any Letter of Credit, such Letter of
Credit, any amendments thereto, any documents delivered in connection therewith, any application
therefor, and any agreements, instruments, guarantees or other documents (whether general in
application or applicable only to such Letter of Credit) governing or providing for (a) the rights
and obligations of the parties concerned or (b) any collateral security for such obligations.



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



     “Mandatory LOC Borrowing” shall have the meaning set forth in Section 2.3(e).



     “Mandatory Swingline Borrowing” shall have the meaning set forth in Section
2.4(b)(ii).



     “Material Adverse Effect” shall mean a material adverse effect on (a) the business,
operations, property, assets or financial condition of the Borrower and its Subsidiaries taken as a
whole, (b) the ability of the Borrower or any Guarantor to perform its obligations, when such
obligations are required to be performed, under this Credit Agreement, any of the Notes or any
other Credit Document or (c) the validity or enforceability of this Credit Agreement, any of the
Notes or any of the other Credit Documents or the rights or remedies of the Administrative Agent or
the Lenders hereunder or thereunder.



     “Material Contract” shall mean (a) any contract or other written agreement listed on
Schedule 3.24, (b) any contract or other agreement of the Credit Parties or any of their
Subsidiaries involving monetary liability of or to any such Person in an amount in excess of
$10,000,000 per annum (including, without limitation, the Second Lien Credit Documents), (c) any
contract or other agreement of the Credit Parties or any of their Subsidiaries representing at
least $10,000,000 of the total Consolidated revenues of the Credit Parties and their Subsidiaries
for any fiscal year and (d) any other contract, agreement, permit or license, written or oral, of
the Credit Parties or any of their Subsidiaries as to which the breach, nonperformance,
cancellation of failure to renew by any party thereto, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.



     “Materials of Environmental Concern” shall mean any gasoline or petroleum (including
crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances,
materials or wastes, defined or regulated as such in or under any Environmental Law, including,
without limitation, asbestos, perchlorate, polychlorinated biphenyls and urea-formaldehyde
insulation.



     “Maturity Date” shall mean the date that is five (5) years after the Closing Date.



     “Material IP” shall mean all material Intellectual Property of each Credit Party
reasonably necessary for each of them to conduct its business as currently conducted or with a fair
market value in excess of $500,000 (other than non-exclusive licenses for off-the-shelf software,
and other non-exclusive licenses in intellectual property, in each case, obtained in the ordinary
course of business).



     “Moody’s” shall mean Moody’s Investors Service, Inc.



     “Mortgage Instrument” shall mean any mortgage, deed of trust or deed to secure debt
executed by a Credit Party in favor of the Administrative Agent pursuant to the terms of Section
5.12 or 5.16, as the same may be amended, modified, restated or supplemented from time to time.



14









 





     “Mortgage Policy” shall mean, with respect to any Mortgage Instrument, an ALTA
mortgagee title insurance policy issued by a title insurance company (the “Title Insurance
Company”) selected by the Administrative Agent in an amount satisfactory to the Administrative
Agent, in form and substance satisfactory to the Administrative Agent.



     “Mortgaged Property” shall mean any owned or leased real property of a Credit Party
(a) as of the Closing Date which is set forth on Schedule 3.19(d), or (b) that is acquired
by a Credit Party after the Closing Date and that (i) has an appraised value (to the extent such
appraisal is less than two years old at the time of determination) in excess of $2,000,000 or (ii)
if an appraised value is not available in accordance with the terms of clause (i), has a fair
market value in excess of $2,000,000 (as reasonably determined by the Borrower) and, in each case,
with respect to which such Credit Party executes a Mortgage Instrument in favor of the
Administrative Agent.



     “Multiemployer Plan” shall mean a Plan that is a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.



     “Net Cash Proceeds” shall mean the aggregate cash proceeds received by any Credit
Party or any Subsidiary (other than ESI) in respect of any Asset Disposition, Equity Issuance, Debt
Issuance or Recovery Event, net of (a) direct costs (including, without limitation, legal,
accounting and investment banking fees, and sales commissions) associated therewith, (b) amounts
held in escrow to be applied as part of the purchase price of any Asset Disposition, (c) taxes paid
or payable as a result thereof and (d) in the case of any Asset Disposition or Recovery Event, the
amount of any Indebtedness secured by a Lien on the asset that is the subject of the Asset
Disposition or Recovery Event and which, by the terms of the transaction, is required to be repaid
in connection with the Asset Disposition or Recovery Event; it being understood that “Net Cash
Proceeds” shall include, without limitation, any cash received upon the sale or other disposition
of any non-cash consideration received by any Credit Party or any Subsidiary in any Asset
Disposition, Equity Issuance, Debt Issuance or Recovery Event and any cash released from escrow as
part of the purchase price in connection with any Asset Disposition.



     “Note” or “Notes” shall mean the Revolving Notes, the Term Loan Notes and/or
the Swingline Notes, collectively, separately or individually, as appropriate.



     “Notice of Borrowing” shall mean a request for a Revolving Loan borrowing pursuant to
Section 2.1(b)(i) or a request for a Swingline Loan borrowing pursuant to Section 2.4(b)(i), as
appropriate. A Form of Notice of Borrowing is attached as Schedule 2.1(b)(i).



     “Notice of Conversion/Extension” shall mean the written notice of conversion of a
LIBOR Rate Loan to an Alternate Base Rate Loan or an Alternate Base Rate Loan to a LIBOR Rate Loan,
or extension of a LIBOR Rate Loan, in each case substantially in the form of Schedule 2.10.



     “Obligations” shall mean, collectively, Loans and LOC Obligations and all other
obligations of the Credit Parties to the Administrative Agent and the Lenders under the Credit
Documents.



     “OFAC” shall mean the U.S. Department of the Treasury’s Office of Foreign Assets
Control.



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



     “Participant” shall have the meaning set forth in Section 9.6(b).



     “Participation Interest” shall mean a participation interest purchased by a Revolving
Lender in LOC Obligations as provided in Section 2.3(c) and in Swingline Loans as provided in
Section 2.4.



     “Patent Licenses” shall mean all written agreements providing for the grant by or to a
Person of any license to manufacture, use or sell any invention covered by a Patent, including,
without limitation, any thereof referred to in Schedule 3.16 to the Credit Agreement.



15









 





     “Patents” shall mean all letters patent of the United States or any other country, now
existing or hereafter arising, and all improvement patents, reissues, reexaminations, patents of
additions, renewals and extensions thereof, including, without limitation, any thereof referred to
in Schedule 3.16 to this Credit Agreement, and (ii) all applications for letters patent of
the United States or any other country, now existing or hereafter arising, and all provisionals,
divisions, continuations and continuations-in-part and substitutes thereof, including, without
limitation, any thereof referred to in Schedule 3.16 to this Credit Agreement.



     “PBGC” shall mean the Pension Benefit Guaranty Corporation established pursuant to
Subtitle A of Title IV of ERISA.



     “Permitted Acquisition” shall mean an acquisition or any series of related
acquisitions by a Credit Party of (a) all or substantially all of the assets or a majority of the
Voting Stock and other ownership interests of a Person by a merger, amalgamation or consolidation
or any other combination with such Person or (b) any division, line of business or other business
unit of a Person (such Person or such division, line of business or other business unit of such
Person shall be referred to herein as the “Target”), in each case that is a type of
business (or assets used in a type of business) permitted to be engaged in by the Credit Parties
and their Subsidiaries pursuant to Section 6.3, so long as (i) no Default or Event of Default shall
then exist or would exist after giving effect thereto, (ii) the Credit Parties shall demonstrate to
the reasonable satisfaction of the Administrative Agent and the Required Lenders that, after giving
effect to the acquisition on a Pro Forma Basis, (A) the Total Leverage Ratio shall be less than or
equal to the ratio that is 0.25 lower than the Total Leverage Ratio then required under Section
5.9(a) and (B) the Credit Parties are in compliance with each of the financial covenants set forth
in Section 5.9, (iii) the Administrative Agent, on behalf of the Lenders, shall have received (or
shall receive in connection with the closing of such acquisition) a first priority perfected
security interest (except for Permitted Liens) in all property (including, without limitation,
Capital Stock) acquired with respect to the Target in accordance with the terms of Sections 5.10
and 5.12 and the Target, if a Person, shall have executed a Joinder Agreement in accordance with
the terms of Section 5.10, subject to the exceptions in Section 5.10 and 5.12 in the case of any
non-U.S. assets acquired as a part of such acquisition, (iv) the Administrative Agent and the
Lenders shall have received (A) a description of the material terms of such acquisition, (B)
audited financial statements (or, if unavailable, management-prepared financial statements) of the
Target for its two most recent fiscal years and for any fiscal quarters ended within the fiscal
year to date and (C) consolidated projected income statements of the Borrower and its Consolidated
Subsidiaries (giving effect to such acquisition), all in form and substance reasonably satisfactory
to the Administrative Agent; provided, however, that if the aggregate purchase price for
such acquisition is less than or equal to $2,000,000, the requirements set forth in this subclause
(iv) may be waived by the Administrative Agent upon receipt of such other financial information
reasonably acceptable to the Administrative Agent, (v) the Target shall have earnings before
interest, taxes, depreciation and amortization for the four fiscal quarter period prior to the
acquisition date in an amount greater than $0, (vi) such acquisition shall not be a “hostile”
acquisition and shall have been approved by the Board of Directors and/or shareholders of the
applicable Credit Party and the Target, (vii) after giving effect to such acquisition, there shall
be at least $5,000,000 of Accessible Borrowing Availability under the Revolving Committed Amount
and (viii) the aggregate consideration (including without limitation equity consideration, earn
outs or deferred compensation or non-competition arrangements and the amount of Indebtedness and
other liabilities assumed by the Credit Parties and their Subsidiaries) paid by the Credit Parties
and their Subsidiaries (A) in connection with any such acquisition shall not exceed $10,000,000,
(B) for all acquisitions made during the term of this Agreement shall not exceed $25,000,000 and
(c) for all acquisitions made during any fiscal year of the Borrower of a Persons that are not
incorporated, formed or organized in the United States shall not exceed $5,000,000.



     “Permitted Investments” shall mean:




     (a) cash and Cash Equivalents;




     (b) Investments set forth on Schedule 1.1(b);




     (c) receivables owing to the Credit Parties or any of their Subsidiaries or any
receivables and advances to suppliers, in each case if created, acquired or made in the
ordinary course of business and payable or dischargeable in accordance with customary trade
terms;




     (d) Investments in and loans to any Credit Party;



16









 






     (e) loans and advances to officers, directors and employees in an aggregate amount not
to exceed $500,000 at any time outstanding; provided that such loans and advances
shall comply with all applicable Requirements of Law;




     (f) Investments (including debt obligations) received in connection with the bankruptcy
or reorganization of suppliers and customers and in settlement of delinquent obligations of,
and other disputes with, customers and suppliers arising in the ordinary course of business;




     (g) Investments, acquisitions or transactions permitted under Section 6.4(b) (including
any Investments owned by a Person acquired in a Permitted Acquisition);




     (h) Hedging Agreements to the extent permitted hereunder;




     (i) Investments (including debt obligations) received in connection with the permitted
disposition of any assets;




     (j) Guaranty Obligations to the extent permitted hereunder;




     (k) the AFC Guaranty;




     (l) Investments in and loans to AmPac ISP UK Ltd. in an aggregate amount not to exceed
$2,000,000 at any time outstanding; and




     (m) additional loan advances and/or Investments of a nature not contemplated by the
foregoing clauses hereof; provided that such loans, advances and/or Investments made
pursuant to this clause shall not exceed an aggregate amount of $3,000,000 at any time
outstanding; provided that, if the Total Leverage Ratio as of the most recently
ended fiscal year (commencing with the fiscal year ending September 30, 2006) is less than
or equal to 3.00 to 1.00, then such loans, advances and/or Investments made pursuant to this
clause shall not exceed an aggregate amount of $3,000,000 per fiscal year so long as after
giving effect to any such Investment on a pro forma basis, the Credit Parties are in
compliance with the financial covenants set forth in Section 5.9.



     “Permitted Liens” shall mean:




     (a) Liens created by or otherwise existing under or in connection with this Credit
Agreement or the other Credit Documents in favor of the Administrative Agent on behalf of
the Secured Parties;




     (b) Liens in favor of a Hedging Agreement Provider in connection with a Secured Hedging
Agreement; provided that such Liens shall secure the Credit Party Obligations and
the obligations under such Secured Hedging Agreement on a pari passu basis;




     (c) Liens securing purchase money indebtedness and Capital Lease Obligations (and
refinancings thereof) to the extent permitted under Section 6.1(c); provided, that
(i) any such Lien attaches to such property concurrently with or within 30 days after the
acquisition thereof and (ii) such Lien attaches solely to the property so acquired in such
transaction;




     (d) Liens for taxes, assessments, charges or other governmental levies not yet due or
as to which the period of grace, if any, related thereto has not expired or which are being
contested in good faith by appropriate proceedings; provided that adequate reserves
with respect thereto are maintained on the books of any Credit Party or its Subsidiaries, as
the case may be, in conformity with GAAP (or, in the case of Foreign Subsidiaries with
significant operations outside the United States of America, generally accepted accounting
principles in effect from time to time in their respective jurisdictions of incorporation);




     (e) statutory Liens such as carriers’, warehousemen’s, mechanics’, materialmen’s,
landlords’, repairmen’s or other like Liens arising in the ordinary course of business which
are not overdue



17









 





for a period of more than 90 days or which are being contested in good faith
by appropriate proceedings; provided that a reserve or other appropriate provision
shall have been made therefor in an amount consistent with historical practices and normal
course of business of the Credit Parties and their Subsidiaries;




     (f) pledges or deposits in connection with workers’ compensation, unemployment
insurance and other social security legislation and deposits securing liability to insurance
carriers under insurance or self-insurance arrangements in an aggregate amount consistent
with historical practices and normal course of business of the Credit Parties and their
Subsidiaries;




     (g) deposits to secure the performance of bids, trade contracts (other than for
borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature incurred in the ordinary course of business;




     (h) Liens granted pursuant to the Second Lien Credit Documents and any Hedging
Agreement with respect to the Second Lien Obligations so long as such Liens are second in
priority to the Liens granted pursuant to the Security Documents;




     (i) easements, rights of way, restrictions and other similar encumbrances affecting
real property which, in the aggregate, are not substantial in amount, and which do not in
any case materially detract from the value of the property subject thereto or materially
interfere with the ordinary conduct of the business of the applicable Person;




     (j) any extension, renewal or replacement (or successive extensions, renewals or
replacements), in whole or in part, of any Lien referred to in this definition (other than
Liens set forth on Schedule 1.1(c)); provided that such extension, renewal
or replacement Lien shall be limited to all or a part of the property which secured the Lien
so extended, renewed or replaced (plus improvements on such property);




     (k) Liens existing on the Closing Date and set forth on Schedule 1.1(c);
provided that (i) no such Lien shall at any time be extended to cover property or
assets other than the property or assets subject thereto on the Closing Date and
improvements thereon and (ii) the principal amount of the Indebtedness secured by such Lien
may be extended, renewed, refunded and refinanced; however, such principal amount may not be
increased;




     (l) Liens arising in the ordinary course of business by virtue of any contractual,
statutory or common law provision relating to banker’s Liens, rights of set-off or similar
rights and remedies covering deposit or securities accounts (including funds or other assets
credited thereto) or other funds maintained with a depository institution or securities
intermediary;




     (m) any zoning, building or similar laws or rights reserved to or vested in any
Governmental Authority;




     (n) restrictions on transfers of securities imposed by applicable securities laws;




     (o) Liens arising out of judgments or awards not resulting in an Event of Default;
provided that the applicable Credit Party or Subsidiary shall in good faith be
prosecuting an appeal or proceedings for review;




     (p) Liens on the property of a Person existing at the time such Person becomes a
Subsidiary of a Credit Party in a transaction permitted hereunder securing Indebtedness
permitted hereunder; provided, however, that any such Lien may not extend to
any other property of any Credit Party or any other Subsidiary that is not a Subsidiary of
such Person; provided, further, that any such Lien was not created in
anticipation of or in connection with the transaction or series of transactions pursuant to
which such Person became a Subsidiary of a Credit Party;



18









 






     (q) any interest or title of a lessor, licensor, sublessor, sublicensor or licensee
under any lease, license or sublease entered into by any Credit Party or any Subsidiary
thereof in the ordinary course of its business and covering only the assets so leased,
licensed or subleased;




     (r) assignments of insurance or condemnation proceeds provided to landlords (or their
mortgagees) pursuant to the terms of any lease and Liens or rights reserved in any lease for
rent or for compliance with the terms of such lease;




     (s) Liens on assets of ESI granted in connection with the ESI Indebtedness and any
refinancing thereof; and




     (t) additional Liens so long as the principal amount of Indebtedness and other
obligations secured thereby does not exceed $500,000 in the aggregate.



     “Person” shall mean an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.



     “Plan” shall mean, as of any date of determination, any employee benefit plan which is
covered by Title IV of ERISA and in respect of which any Credit Party or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be
deemed to be) an “employer” as defined in Section 3(5) of ERISA.



     “Pledge Agreement” shall mean the First Lien Pledge Agreement dated as of the Closing
Date executed by the Credit Parties in favor of the Administrative Agent and the Control Agent, for
the benefit of the Secured Parties, as the same may from time to time be amended, restated, amended
and restated, supplemented or otherwise modified in accordance with the terms hereof and thereof.



     “Prime Rate” shall have the meaning set forth in the definition of Alternate Base
Rate.



     “Pro Forma Basis” shall mean, with respect to any transaction, that such transaction
shall be deemed to have occurred as of the first day of the twelve-month period ending as of the
most recent quarter end preceding the date of such transaction.



     “Properties” shall have the meaning set forth in Section 3.10(a).



     “Purchasing Lenders” shall have the meaning set forth in Section 9.6(c).



     “Recovery Event” shall mean the receipt by the Credit Parties or any of their
Subsidiaries of any cash insurance proceeds or condemnation or expropriation award payable by reason of theft, loss, physical destruction or damage, taking or similar event with respect to any of their respective
property or assets other than obsolete property or assets no longer used or useful in the business
of the Credit Parties or any of their Subsidiaries.



     “Register” shall have the meaning set forth in Section 9.6(d).



     “Reimbursement Obligation” shall mean the obligation of the Borrower to reimburse the
Issuing Lender pursuant to Section 2.3(d) for amounts drawn under Letters of Credit.



     “Reorganization” shall mean, with respect to any Multiemployer Plan, the condition
that such Plan is in reorganization within the meaning of such term as used in Section 4241 of
ERISA.



     “Replaced Lender” shall have the meaning set forth in Section 2.20.



     “Replacement Lender” shall have the meaning set forth in Section 2.20.



19









 





     “Reportable Event” shall mean any of the events set forth in Section 4043(c) of ERISA,
other than those events as to which the thirty-day notice period is waived under PBGC Reg. §4043.



     “Required Lenders” shall mean, as of any date of determination, Lenders holding at
least a majority of (a) the outstanding Revolving Commitments and Term Loan or (ii) if the
Revolving Commitments have been terminated, the outstanding Loans and Participation Interests;
provided, however, that if any Lender shall be a Defaulting Lender at such time,
then there shall be excluded from the determination of Required Lenders, Obligations (including
Participation Interests) owing to such Defaulting Lender and such Defaulting Lender’s Commitments.



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



     “Responsible Officer” shall mean, as to (a) the Borrower, the President, any
Vice-President, the Chief Executive Officer, Chief Financial Officer, Treasurer or the Chief
Operating Officer or (b) any other Credit Party, any duly authorized officer thereof.



     “Restricted Payment” shall mean (a) any dividend or other distribution, direct or
indirect, on account of any shares of any class of Capital Stock of any Credit Party or any of its
Subsidiaries, now or hereafter outstanding, (b) any redemption, retirement, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect, of any shares of any class of
Capital Stock of any Credit Party or any of its Subsidiaries, now or hereafter outstanding, (c) any
payment made to retire, or to obtain the surrender of, any outstanding warrants, options or other
rights to acquire shares of any class of Capital Stock of any Credit Party or any of its
Subsidiaries, now or hereafter outstanding, (d) any payment with respect to any earnout obligation,
(e) any payment or prepayment of principal of, premium, if any, or interest (other than pay-in-kind
interest) on, redemption, purchase, retirement, defeasance, sinking fund or similar payment with
respect to, any Subordinated Debt of any Credit Party or any of its Subsidiaries or the Second Lien
Term Loan and (f) the payment by any Credit Party or any of its Subsidiaries of any management,
advisory or consulting fee to any Person or the payment of any extraordinary salary, bonus or other
form of compensation to any Person who is directly or indirectly a significant partner,
shareholder, owner or executive officer of any such Person, to the extent such extraordinary
salary, bonus or other form of compensation is not included in the corporate overhead of such
Credit Party or such Subsidiary.



     “Revolving Commitment” shall mean, with respect to each Revolving Lender, the
commitment of such Revolving Lender to make Revolving Loans in an aggregate principal amount at any
time outstanding up to an amount equal to such Revolving Lender’s Revolving Commitment Percentage
of the Revolving Committed Amount.



     “Revolving Commitment Percentage” shall mean, for each Lender, the percentage
identified as its Revolving Commitment Percentage in its Lender Commitment Letter or in the
Assignment Agreement pursuant to which such Lender became a Lender hereunder, as such percentage
may be modified in connection with any assignment made in accordance with the provisions of Section
9.6(c).



     “Revolving Committed Amount” shall have the meaning set forth in Section 2.1(a).



     “Revolving Lender” shall mean, as of any date of determination, a Lender holding a
Revolving Commitment on such date.



     “Revolving Loan” shall have the meaning set forth in Section 2.1.



     “Revolving Note” or “Revolving Notes” shall mean the promissory notes of the
Borrower provided pursuant to Section 2.1(e) in favor of any of the Revolving Lenders evidencing
the Revolving Loan provided by any such Revolving Lender pursuant to Section 2.1(a), individually
or collectively, as appropriate, as such promissory notes may be amended, modified, restated,
supplemented, extended, renewed or replaced from time to time.



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     “SEC” shall mean the Securities and Exchange Commission or any successor thereto.



     “S&P” shall mean Standard & Poor’s Ratings Services, a division of The McGraw Hill
Companies, Inc.



     “Sanctioned Country” shall mean a country subject to a sanctions program identified on
the list maintained by OFAC and available at
http://www.treas.gov/offices/eotffc/ofac/sanctions/index.html, or as otherwise published
from time to time.



     “Sanctioned Person” shall mean (i) a Person named on the list of “Specially Designated
Nationals and Blocked Persons” maintained by OFAC available at
http://www.treas.gov/offices/eotffc/ofac/sdn/index.html, or as otherwise published from
time to time, or (ii) (A) an agency of the government of a Sanctioned Country, (B) an organization
controlled by a Sanctioned Country, or (C) a person resident in a Sanctioned Country, to the extent
subject to a sanctions program administered by OFAC.



     “Second Lien Administrative Agent” shall mean Wachovia, together with its successors
and assigns.



     “Second Lien Credit Agreement” shall mean the Credit Agreement, dated as of the date
hereof, entered into by the Credit Parties, the Second Lien Administrative Agent and the various
lenders and agents thereunder, as the same may be amended, supplemented, restated or otherwise
modified from time to time to the extent permitted hereunder.



     “Second Lien Credit Documents” shall have the meaning set forth in the Intercreditor
Agreement.



     “Second Lien Event of Default” shall have the meaning assigned to the term “Event of
Default” in the Second Lien Credit Agreement.



     “Second Lien Obligations” shall have the meaning set forth in the Intercreditor
Agreement.



     “Second Lien Term Loan” shall have the meaning assigned to the term “Term Loan” in the
Second Lien Credit Agreement.



     “Secured Hedging Agreement” shall mean any Hedging Agreement between a Credit Party
and a Hedging Agreement Provider, as amended, restated, amended and restated, modified,
supplemented or extended from time to time.



     “Secured Hedging Obligations” shall mean, without duplication, all of the obligations,
indebtedness and liabilities of the Credit Parties to the Hedging Agreement Providers, whenever
arising, under the Secured Hedging Agreements, including principal, interest, fees, premiums,
scheduled periodic payments, breakage, termination and other payments, reimbursements and
indemnification obligations and other amounts (including, but not limited to, any interest accruing
after the occurrence of a filing of a petition of bankruptcy under the Bankruptcy Code with respect
to any Credit Party, regardless of whether such interest is an allowed claim under the Bankruptcy
Code).



     “Secured Parties” shall mean the Administrative Agent, the Lenders and the Hedging
Agreement Providers.



     “Security Agreement” shall mean the First Lien Security Agreement dated as of the
Closing Date executed by the Credit Parties in favor of the Administrative Agent and the Control
Agent, for the benefit of the Secured Parties, as amended, restated, amended and restated, modified
or supplemented from time to time in accordance with its terms.



     “Security Documents” shall mean the Security Agreement, the Pledge Agreement, the
Mortgage Instruments and all other agreements, documents and instruments relating to, arising out
of, or in any way connected with any of the foregoing documents or granting to the Administrative
Agent, Liens or security interests to secure, inter alia, the Credit Party Obligations whether now
or hereafter executed and/or filed, each as may be amended from time to time in accordance with the
terms hereof, executed and delivered in connection with the granting, attachment and perfection of
the Administrative Agent’s security interests and liens arising thereunder, including, without
limitation, UCC financing statements.



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     “Single Employer Plan” shall mean any Plan that is not a Multiemployer Plan.



     “Subordinated Debt” shall mean any Indebtedness (i) owing by a Credit Party to another
Credit Party or (ii) owing by a Credit Party to any other Person which is unsecured and
non-amortizing, and in each case by its terms is specifically subordinated in right of payment to
the prior payment of the Credit Party Obligations and contains subordination and other terms
acceptable to the Administrative Agent, including, without limitation, the Subordinated Seller
Note.



     “Subordinated Seller Note” shall mean the promissory note from the Borrower or any of
its Subsidiaries to GenCorp Inc., an Ohio corporation, subordinated in right of payment to the
prior payment of the Credit Party Obligations and containing subordination and other terms
acceptable to the Administrative Agent.



     “Subordinated Seller Obligations” shall mean, collectively, the GenCorp Earn Out
Obligations and all obligations of the Borrower and its Subsidiaries with respect to the
Subordinated Seller Note.



     “Subsidiary” shall mean, as to any Person, a corporation, partnership, limited
liability company or other entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests having such power only by
reason of the happening of a contingency) to elect a majority of the board of directors or other
managers of such corporation, limited liability company, partnership or other entity are at the
time owned, or the management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a
“Subsidiary” or to “Subsidiaries” in this Credit Agreement shall refer to a Subsidiary or
Subsidiaries of the Borrower.



     “Swingline Commitment” shall mean the commitment of the Swingline Lender to make
Swingline Loans in an aggregate principal amount at any time outstanding up to the Swingline
Committed Amount, and the commitment of the Revolving Lenders to purchase participation interests
in the Swingline Loans as provided in Section 2.4(b)(ii), as such amounts may be reduced from time to time in
accordance with the provisions hereof.



     “Swingline Committed Amount” shall mean the amount of the Swingline Lender’s Swingline
Commitment as specified in Section 2.4(a).



     “Swingline Lender” shall mean Wachovia and any successor in such capacity.



     “Swingline Loan” shall have the meaning set forth in Section 2.4(a).



     “Swingline Note” shall mean the promissory note of the Borrower in favor of the
Swingline Lender evidencing the Swingline Loans provided pursuant to Section 2.4(d), as such
promissory note may be amended, modified, supplemented, extended, renewed or replaced from time to
time.



     “Taxes” shall have the meaning set forth in Section 2.18.



     “Term Loan” shall have the meaning set forth in Section 2.2(a).



     “Term Loan Commitment” shall mean, with respect to each Term Loan Lender, the
commitment of such Term Loan Lender to make its portion of the Term Loan in a principal amount
equal to such Term Loan Lender’s Term Loan Commitment Percentage of the Term Loan Committed Amount,
which commitment shall terminate upon the funding of the Term Loan.



     “Term Loan Commitment Percentage” shall mean, for any Term Loan Lender, the percentage
identified as its Term Loan Commitment Percentage in its Lender Commitment Letter.



     “Term Loan Committed Amount” shall have the meaning set forth in Section 2.2(a).



     “Term Loan Lender” shall mean a Lender holding a Term Loan Commitment or a portion of
the outstanding Term Loan.



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     “Term Loan Note” or “Term Loan Notes” shall mean the promissory notes of the
Borrower (if any) in favor of any of the Term Loan Lenders evidencing the portion of the Term Loan
provided by any such Term Loan Lender pursuant to Section 2.2(a), individually or collectively, as
appropriate, as such promissory notes may be amended, modified, restated, amended and restated,
supplemented, extended, renewed or replaced from time to time.



     “Total Leverage Ratio” shall mean, as of the end of each fiscal quarter of the
Borrower, for the Borrower and its Subsidiaries on a consolidated basis for the four consecutive
quarters ending on such date, the ratio of (a) Funded Debt of the Borrower and its Subsidiaries on
a consolidated basis on the last day of such period to (b) Consolidated EBITDA for such four fiscal
quarter period.



     “Trademark License” shall mean any written agreement providing for the grant by or to
a Person of any right to use any Trademark, including, without limitation, any thereof referred to
in Schedule 3.16 to this Credit Agreement.



     “Trademarks” shall mean (a) all trademarks, trade names, corporate names, company
names, business names, fictitious business names, service marks, elements of package or trade dress
of goods or services, logos and other source or business identifiers, together with the goodwill
associated therewith, now existing or hereafter adopted or acquired, all registrations and
recordings thereof, and all applications in connection therewith, whether in the United States
Patent and Trademark Office or in any similar office or agency of the United States, any State
thereof or any other country or any political subdivision thereof, including, without limitation,
any thereof referred to in Schedule 3.16 to this Credit Agreement, and (b) all renewals
thereof including, without limitation, any thereof referred to in Schedule 3.16.



     “Tranche” shall mean the collective reference to LIBOR Rate Loans whose Interest
Periods begin and end on the same day.



     “Transactions” shall mean the closing of this Agreement and the other Credit
Documents, the closing of the Second Lien Credit Documents and the consummation of the Acquisition
and the other transactions contemplated hereby to occur in connection with such closing and
Acquisition (including, without limitation, the initial borrowings under the Credit Documents and
the Second Lien Term Loan and the payment of fees and expenses in connection with all of the
foregoing).



     “Transfer Effective Date” shall have the meaning set forth in each Assignment
Agreement.



     “Type” shall mean, as to any Loan, its nature as an Alternate Base Rate Loan or LIBOR
Rate Loan, as the case may be.



     “UCC” shall mean the Uniform Commercial Code from time to time in effect in any
applicable jurisdiction.



     “Voting Stock” shall mean, with respect to any Person, Capital Stock issued by such
Person the holders of which are ordinarily, in the absence of contingencies, entitled to vote for
the election of directors (or persons performing similar functions) of such Person, even though the
right so to vote may be or have been suspended by the happening of such a contingency.



     “Wachovia” shall mean Wachovia Bank, National Association, a national banking
association, together with its successors and/or assigns.



     “Works” shall mean all works which are subject to copyright protection pursuant to
Title 17 of the United States Code.



     Section 1.2 Other Definitional Provisions.





     (a) Unless otherwise specified therein, all terms defined in this Credit Agreement
shall have the defined meanings when used in the Notes or other Credit Documents or any
certificate or other document made or delivered pursuant hereto.



23









 






     (b) The words “hereof”, “herein” and “hereunder” and words of similar import when used
in this Credit Agreement shall refer to this Credit Agreement as a whole and not to any
particular provision of this Credit Agreement, and Section, subsection, Schedule and Exhibit
references are to this Credit Agreement unless otherwise specified.




     (c) The meanings given to terms defined herein shall be equally applicable to both the
singular and plural forms of such terms.



     Section 1.3 Accounting Terms.



     Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements required to be
delivered hereunder shall be prepared in accordance with GAAP applied on a basis consistent with
the most recent audited Consolidated financial statements of the Borrower delivered to the Lenders;
provided that, if the Borrower shall notify the Administrative Agent that it wishes amend
the definitions of Consolidated Cash Taxes, Consolidated EBITDA, Consolidated Interest Expense,
Consolidated Net Income, Funded Debt, Excess Cash Flow, any definitions incorporated in the
foregoing defined terms or Section 5.9 to eliminate the effect of any change in GAAP on the
operation of any such definition or provision (or if the Administrative Agent notifies the Borrower
that the Required Lenders wish to amend any such definition or provision for such purpose), then
the Borrower’s compliance with such provisions shall be determined on the basis of GAAP in effect
immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such definition or provision is amended in a manner
satisfactory to the Borrower and the Required Lenders.



     The Borrower shall deliver to the Administrative Agent and each Lender at the same time as the
delivery of any annual or quarterly financial statements given in accordance with the provisions of
Section 5.1, (i) a description in reasonable detail of any material change in the application of
accounting principles employed in the preparation of such financial statements from those applied
in the most recently preceding quarterly or annual financial statements as to which no objection
shall have been made in accordance with the provisions above and (ii) a reasonable estimate of the
effect on the financial statements on account of such changes in application.



     Section 1.4 Resolution of Drafting Ambiguities.



     Each Credit Party acknowledges and agrees that it was represented by counsel in connection
with the execution and delivery of this Credit Agreement and the other Credit Documents to which it
is a party, that it and its counsel reviewed and participated in the preparation and negotiation
hereof and thereof and that any rule of construction to the effect that ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation hereof or thereof.



     Section 1.5 Time References.



     Unless otherwise specified, all references herein to times of day shall be references to
Eastern time (daylight or standard, as applicable).



ARTICLE II




THE LOANS; AMOUNT AND TERMS




     Section 2.1 Revolving Loans.




     (a) Revolving Commitment. During the Commitment Period, subject to the terms
and conditions hereof, each Revolving Lender severally agrees to make revolving credit loans
in Dollars (“Revolving Loans”) to the Borrower from time to time for the purposes
hereinafter set forth; provided, however, that (i) with regard to each
Revolving Lender individually, the sum of such Revolving Lender’s Revolving Commitment
Percentage of the aggregate principal amount of outstanding Revolving Loans plus
such



24









 





Revolving Lender’s Revolving Commitment Percentage of outstanding Swingline Loans
plus such Revolving Lender’s Revolving Commitment Percentage of outstanding LOC
Obligations shall not exceed such Revolving Lender’s Revolving Commitment and (ii) with
regard to the Revolving Lenders collectively, the sum of the aggregate principal amount of
outstanding Revolving Loans plus outstanding Swingline Loans plus
outstanding LOC Obligations shall not exceed the Revolving Committed Amount then in effect.
For purposes hereof, the aggregate principal amount available hereunder for Revolving Loans
shall be TEN MILLION DOLLARS ($10,000,000) (as such aggregate maximum amount may be reduced
from time to time as provided in Section 2.7, the “Revolving Committed Amount”).
Revolving Loans may consist of Alternate Base Rate Loans or LIBOR Rate Loans, or a
combination thereof, as the Borrower may request, and may be repaid and reborrowed in
accordance with the provisions hereof; provided, however, the Revolving
Loans made on the Closing Date may only consist of Alternate Base Rate Loans unless the
Borrower delivers a funding indemnity letter reasonably acceptable to the Administrative
Agent not less than three (3) Business Days prior to the Closing Date. LIBOR Rate Loans
shall be made by each Revolving Lender at its LIBOR Lending Office and Alternate Base Rate
Loans at its Domestic Lending Office.




     (b) Revolving Loan Borrowings.




     (i) Notice of Borrowing. The Borrower shall request a Revolving Loan
borrowing by delivering a Notice of Borrowing (or telephone notice promptly
confirmed in writing by delivery of a Notice of Borrowing, which delivery may be by
fax) to the Administrative Agent not later than 1:00 P.M. on the Business Day prior
to the date of the requested borrowing in the case of Alternate Base Rate Loans, and
on the third Business Day prior to the date of the requested borrowing in the case
of LIBOR Rate Loans. Each such Notice of Borrowing shall be irrevocable and shall
specify (A) that a Revolving Loan is requested, (B) the date of the requested
borrowing (which shall be a Business Day), (C) the aggregate principal amount to be
borrowed and (D) whether the borrowing shall be comprised of Alternate Base Rate
Loans, LIBOR Rate Loans or a combination thereof, and if LIBOR Rate Loans are
requested, the Interest Period(s) therefor. If the Borrower shall fail to specify
in any such Notice of Borrowing (1) an applicable Interest Period in the case of a
LIBOR Rate Loan, then such notice shall be deemed to be a request for an Interest
Period of one month, or (2) the Type of Revolving Loan requested, then such notice
shall be deemed to be a request for an Alternate Base Rate Loan hereunder. The
Administrative Agent shall give notice to each Revolving Lender promptly upon
receipt of each Notice of Borrowing, the contents thereof and each such Revolving
Lender’s share thereof.




     (ii) Minimum Amounts. Each Revolving Loan which is an Alternate Base
Rate Loan shall be in a minimum aggregate amount of $500,000 and in integral
multiples of $500,000 in excess thereof (or the remaining amount of the Revolving
Committed Amount, if less). Each Revolving Loan which is a LIBOR Rate Loan shall be
in a minimum aggregate amount of $1,000,000 and in integral multiples of $1,000,000
in excess thereof (or the remaining amount of the Revolving Committed Amount, if
less).




     (iii) Advances. Each Revolving Lender will make its Revolving
Commitment Percentage of each Revolving Loan borrowing available to the
Administrative Agent for the account of the Borrower at the office of the
Administrative Agent specified in Section 9.2, or at such other office as the
Administrative Agent may designate in writing, upon reasonable advance notice by
1:00 P.M. on the date specified in the applicable Notice of Borrowing, in Dollars
and in funds immediately available to the Administrative Agent. Such borrowing will
then be made available to the Borrower by the Administrative Agent by crediting the
account of the Borrower on the books of such office with the aggregate of the
amounts made available to the Administrative Agent by the Revolving Lenders and in
like funds as received by the Administrative Agent.




     (c) Repayment. Subject to the terms of this Credit Agreement, Revolving Loans
may be borrowed, repaid and reborrowed during the Commitment Period. The principal amount
of all Revolving Loans shall be due and payable in full on the Maturity Date, unless
accelerated sooner pursuant to Section 7.2.



25









 






     (d) Interest. Subject to the provisions of Section 2.9(b), Revolving Loans
shall bear interest as follows:




     (i) Alternate Base Rate Loans. During such periods as Revolving Loans
shall be comprised of Alternate Base Rate Loans, each such Alternate Base Rate Loan
shall bear interest at a per annum rate equal to the sum of the Alternate Base Rate
plus the Applicable Percentage; and




     (ii) LIBOR Rate Loans. During such periods as Revolving Loans shall be
comprised of LIBOR Rate Loans, each such LIBOR Rate Loan shall bear interest at a
per annum rate equal to the sum of the LIBOR Rate plus the Applicable
Percentage.


Interest on Revolving Loans shall be payable in arrears on each Interest Payment Date.





     (e) Revolving Notes; Covenant to Pay. Each Revolving Lender’s Revolving
Commitment shall be evidenced, upon such Revolving Lender’s request, by a duly executed
promissory note of the Borrower to such Revolving Lender in substantially the form of
Schedule 2.1(e). The Borrower covenants and agrees to pay the Revolving Loans in
accordance with the terms of this Credit Agreement and the Revolving Note or Revolving
Notes.



     Section 2.2 Term Loan.




     (a) Term Loan. Subject to the terms and conditions hereof and in reliance upon
the representations and warranties set forth herein, each Term Loan Lender severally agrees
to make available to the Borrower (through the Administrative Agent) on the Closing Date
such Term Loan Lender’s Term Loan Commitment Percentage of a term loan in Dollars (the
“Term Loan”) in the aggregate principal amount of SIXTY-FIVE MILLION DOLLARS
($65,000,000) (the “Term Loan Committed Amount”) for the purposes hereinafter set
forth. Upon receipt by the Administrative Agent of the proceeds of the Term Loan, such
proceeds will then be made available to the Borrower by the Administrative Agent by
crediting the account of the Borrower on the books of the office of the Administrative Agent
specified in Section 9.2, or at such other office as the Administrative Agent may designate
in writing, with the aggregate of such proceeds made available to the Administrative Agent
by the Term Loan Lenders and in like funds as received by the Administrative Agent (or by
crediting such other account(s) as directed by the Borrower). The Term Loan may consist of
Alternate Base Rate Loans or LIBOR Rate Loans, or a combination thereof, as the Borrower may
request; provided, however, on the Closing Date the Term Loan may only
consist of Alternate Base Rate Loans unless the Borrower delivers a funding indemnity letter
reasonably acceptable to the Administrative Agent not less than three (3) Business Days
prior to the Closing Date. Amounts repaid or prepaid on the Term Loan may not be
reborrowed.




     (b) Repayment of Term Loan. The principal amount of the Term Loan shall be
repaid in twenty (20) consecutive quarterly installments as follows, unless accelerated
sooner pursuant to Section 7.2:



	 	 	 	 	 
	Principal Amortization Payment Dates	 	Term Loan Principal Amortization Payment
	December 31, 2005

	 	$	162,500	 
	March 31, 2006

	 	$	162,500	 
	June 30, 2006

	 	$	162,500	 
	September 30, 2006

	 	$	162,500	 
	December 31, 2006

	 	$	812,500	 
	March 31, 2007

	 	$	812,500	 
	June 30, 2007

	 	$	812,500	 
	September 30, 2007

	 	$	812,500	 
	December 31, 2007

	 	$	1,625,000	 
	March 31, 2008

	 	$	1,625,000	 
	June 30, 2008

	 	$	1,625,000	 






26









 






	 	 	 	 	 
	Principal Amortization Payment Dates	 	Term Loan Principal Amortization Payment
	September 30, 2008

	 	$	1,625,000	 
	December 31, 2008

	 	$	1,625,000	 
	March 31, 2009

	 	$	1,625,000	 
	June 30, 2009

	 	$	1,625,000	 
	September 30, 2009

	 	$	1,625,000	 
	December 31, 2009

	 	$	12,025,000	 
	March 31, 2010

	 	$	12,025,000	 
	June 30, 2010

	 	$	12,025,000	 
	Maturity Date

	 	$12,025,000 or the remaining outstanding principal amount of the Term Loan








     (c) Interest on the Term Loan. Subject to the provisions of Section 2.9, the
Term Loan shall bear interest as follows:




     (i) Alternate Base Rate Loans. During such periods as the Term Loan
shall be comprised of Alternate Base Rate Loans, each such Alternate Base Rate Loan
shall bear interest at a per annum rate equal to the sum of the Alternate Base Rate
plus the Applicable Percentage; and




     (ii) LIBOR Rate Loans. During such periods as the Term Loan shall be
comprised of LIBOR Rate Loans, each such LIBOR Rate Loan shall bear interest at a
per annum rate equal to the sum of the LIBOR Rate plus the Applicable
Percentage.




     Interest on the Term Loan shall be payable in arrears on each Interest Payment
Date.




     (d) Term Loan Notes. Each Term Loan Lender’s Term Loan Commitment shall be
evidenced, upon such Term Loan Lender’s request, by a duly executed promissory note of the
Borrower to such Term Loan Lender in substantially the form of Schedule 2.2(d).



            Section 2.3 Letter of Credit Subfacility.




     (a) Issuance. Subject to the terms and conditions hereof and of the LOC
Documents, if any, and any other terms and conditions which the Issuing Lender may
reasonably require, during the Commitment Period the Issuing Lender shall issue, and the
Revolving Lenders shall participate in, standby Letters of Credit for the account of the
Borrower from time to time upon request in a form reasonably acceptable to the Issuing
Lender; provided, however, that (i) the aggregate amount of LOC Obligations
shall not at any time exceed FIVE MILLION DOLLARS ($5,000,000) (the “LOC Committed
Amount”), (ii) the sum of the aggregate principal amount of outstanding Revolving Loans
plus outstanding Swingline Loans plus outstanding LOC Obligations shall not
at any time exceed the Revolving Committed Amount then in effect, (iii) all Letters of
Credit shall be denominated in Dollars and (iv) Letters of Credit shall be issued for any
lawful corporate purposes and may be issued as standby letters of credit, including in
connection with workers’ compensation and other insurance programs. Except as otherwise
expressly agreed upon by all the Revolving Lenders, no Letter of Credit shall have an
original expiry date more than twelve (12) months from the date of issuance;
provided, however, up to $250,000 of Letters of Credit may have an original
expiry date up to five (5) years after issuance so long as any such Letter of Credit
extending beyond the Maturity Date shall be cash collateralized by the date that is seven
(7) Business Days prior to the Maturity Date or shall be terminated by the Company prior to
the Maturity Date. So long as no Default or Event of Default has occurred and is continuing
and subject to the other terms and conditions to the issuance of Letters of Credit
hereunder, the expiry dates of Letters of Credit may be extended annually or periodically
from time to time on the request of the Borrower or by operation of the terms of the
applicable Letter of Credit to a date not more than twelve (12) months from the date of
extension; provided, further, that no Letter of Credit, as originally issued
or as extended, shall have an expiry date extending beyond the date that is thirty (30) days
prior to the Maturity Date. Each Letter of Credit shall comply with the related LOC
Documents. The issuance and expiry date of each Letter of Credit shall be a Business



27









 





Day.
Any Letters of Credit issued hereunder shall be in a minimum original face amount of
$100,000 or such lesser amount approved by the Issuing Lender.




     (b) Notice and Reports. The request for the issuance of a Letter of Credit
shall be submitted to the Issuing Lender at least five (5) Business Days prior to the
requested date of issuance. The Issuing Lender will promptly upon request provide to the
Administrative Agent for dissemination to the Revolving Lenders a detailed report specifying
the Letters of Credit which
are then issued and outstanding and any activity with respect thereto which may have
occurred since the date of any prior report, and including therein, among other things, the
account party, the beneficiary, the face amount, expiry date as well as any payments or
expirations which may have occurred. The Issuing Lender will further provide to the
Administrative Agent promptly upon request copies of the Letters of Credit. The Issuing
Lender will provide to the Administrative Agent promptly upon request a summary report of
the nature and extent of LOC Obligations then outstanding.




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




     (d) Reimbursement. In the event of any drawing under any Letter of Credit, the
Issuing Lender will promptly notify the Borrower and the Administrative Agent. The Borrower
shall reimburse the Issuing Lender on the day of drawing under any Letter of Credit (either
with the proceeds of a Revolving Loan obtained hereunder or otherwise) in same day funds as
provided herein or in the LOC Documents. If the Borrower shall fail to reimburse the
Issuing Lender as provided herein, the unreimbursed amount of such drawing shall bear
interest at a per annum rate equal to the ABR Default Rate. Unless the Borrower shall
immediately notify the Issuing Lender and the Administrative Agent of its intent to
otherwise reimburse the Issuing Lender, the Borrower shall be deemed to have requested a
Mandatory LOC Borrowing in the amount of the drawing as provided in subsection (e) hereof,
the proceeds of which will be used to satisfy the Reimbursement Obligations. The Borrower’s
Reimbursement Obligations hereunder shall be absolute and unconditional under all
circumstances irrespective of any rights of set-off, counterclaim or defense to payment the
Borrower may claim or have against the Issuing Lender, the Administrative Agent, the
Lenders, the beneficiary of the Letter of Credit drawn upon or any other Person, including
without limitation any defense based on any failure of the Borrower to receive consideration
or the legality, validity, regularity or unenforceability of the Letter of Credit. The
Issuing Lender will promptly notify the other Revolving Lenders of the amount of any
unreimbursed drawing and each Revolving Lender shall promptly pay to the Administrative
Agent for the account of the Issuing Lender, in Dollars and in immediately available funds,
the amount of such Revolving Lender’s Revolving Commitment Percentage of such unreimbursed
drawing. Such payment shall be made on the day such notice is received by such Revolving
Lender from the Issuing Lender if such notice is received at or before 2:00 P.M., otherwise
such payment shall be made at or before 12:00 Noon on the Business Day next succeeding the
day such notice is received. If such Revolving Lender does not pay such amount to the
Issuing Lender in full upon such request, such Revolving Lender shall, on demand, pay to the
Administrative Agent for the account of the Issuing Lender interest on the unpaid amount
during the period from the date of such drawing until such Revolving Lender pays such amount
to the Issuing Lender in full at a rate per annum equal to, if paid within two (2) Business
Days of the date of drawing, the Federal Funds



28









 





Effective Rate and thereafter at a rate equal
to the Alternate Base Rate. Each Revolving Lender’s obligation to make such payment to the
Issuing Lender, and the right of the Issuing Lender to receive the same, shall be absolute
and unconditional, shall not be affected by any circumstance whatsoever and without regard to the termination of this Credit Agreement or
the Commitments hereunder, the existence of a Default or Event of Default or the
acceleration of the Credit Party Obligations hereunder and shall be made without any offset,
abatement, withholding or reduction whatsoever.




     (e) Repayment with Revolving Loans. On any day on which the Borrower shall
have requested, or been deemed to have requested, a Revolving Loan to reimburse a drawing
under a Letter of Credit, the Administrative Agent shall give notice to the Revolving
Lenders that a Revolving Loan has been requested or deemed requested in connection with a
drawing under a Letter of Credit, in which case a Revolving Loan borrowing comprised
entirely of Alternate Base Rate Loans (each such borrowing, a “Mandatory LOC
Borrowing”) shall be made (without giving effect to any termination of the Commitments
pursuant to Section 7.2) pro rata based on each Revolving Lender’s
respective Revolving Commitment Percentage (determined before giving effect to any
termination of the Commitments pursuant to Section 7.2) and the proceeds thereof shall be
paid directly to the Issuing Lender for application to the respective LOC Obligations. Each
Revolving Lender hereby irrevocably agrees to make such Revolving Loans on the day such
notice is received by the Revolving Lenders from the Administrative Agent if such notice is
received at or before 2:00 P.M., otherwise such payment shall be made at or before 12:00
Noon on the Business Day next succeeding the day such notice is received, in each case
notwithstanding (i) the amount of Mandatory LOC Borrowing may not comply with the
minimum amount for borrowings of Revolving Loans otherwise required hereunder, (ii) whether
any conditions specified in Section 4.2 are then satisfied, (iii) whether a Default or an
Event of Default then exists, (iv) failure for any such request or deemed request for
Revolving Loan to be made by the time otherwise required in Section 2.1(b), (v) the date of
such Mandatory LOC Borrowing, or (vi) any reduction in the Revolving Committed Amount after
any such Letter of Credit may have been drawn upon. In the event that any Mandatory LOC
Borrowing cannot for any reason be made on the date otherwise required above (including,
without limitation, as a result of the occurrence of a Bankruptcy Event), then each such
Revolving Lender hereby agrees that it shall forthwith fund (as of the date the Mandatory
LOC Borrowing would otherwise have occurred, but adjusted for any payments received from the
Borrower on or after such date and prior to such purchase) its Participation Interests in
the outstanding LOC Obligations; provided, further, that in the event any
Revolving Lender shall fail to fund its Participation Interest on the day the Mandatory LOC
Borrowing would otherwise have occurred, then the amount of such Revolving Lender’s unfunded
Participation Interest therein shall bear interest payable by such Revolving Lender to the
Issuing Lender upon demand, at the rate equal to, if paid within two (2) Business Days of
such date, the Federal Funds Effective Rate, and thereafter at a rate equal to the Alternate
Base Rate.




     (f) Modification, Extension. The issuance of any supplement, modification,
amendment, renewal, or extension to any Letter of Credit shall, for purposes hereof, be
treated in all respects the same as the issuance of a new Letter of Credit hereunder.




     (g) ISP98 and UCP. Unless otherwise expressly agreed by the Issuing Lender and
the Borrower, when a Letter of Credit is issued, (i) the rules of the “International Standby
Practices 1998,” as most recently published by the Institute of International Banking Law &
Practice at the time of issuance shall apply to each standby Letter of Credit, and (ii) the
rules of The Uniform Customs and Practice for Documentary Credits, as most recently
published by the International Chamber of Commerce at the time of issuance, shall apply to
each commercial Letter of Credit.




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




     (i) Designation of Subsidiaries as Account Parties. Notwithstanding anything
to the contrary set forth in this Credit Agreement, including without limitation Section
2.3(a), a Letter of Credit issued hereunder may contain a statement to the effect that such Letter of Credit is
issued for the account of a Subsidiary of the Borrower; provided that,
notwithstanding such statement, the Borrower shall be the actual



29









 





account party for all
purposes of this Credit Agreement for such Letter of Credit and such statement shall not
affect the Borrower’s Reimbursement Obligations hereunder with respect to such Letter of
Credit.



       Section 2.4 Swingline Loan Subfacility.




     (a) Swingline Commitment. During the Commitment Period, subject to the terms
and conditions hereof, the Swingline Lender, in its individual capacity, agrees to make
certain revolving credit loans to the Borrower (each a “Swingline Loan” and,
collectively, the “Swingline Loans”) for the purposes hereinafter set forth;
provided, however, (i) the aggregate amount of Swingline Loans outstanding
at any time shall not exceed TWO MILLION DOLLARS ($2,000,000) (the “Swingline Committed
Amount”), and (ii) the sum of the aggregate principal amount of outstanding Revolving
Loans plus outstanding Swingline Loans plus outstanding LOC Obligations
shall not exceed the Revolving Committed Amount. Swingline Loans hereunder may be repaid
and reborrowed in accordance with the provisions hereof.




     (b) Swingline Loan Borrowings.




     (i) Notice of Borrowing and Disbursement. Upon receiving a Notice of
Borrowing from the Borrower not later than 2:00 P.M. on any Business Day requesting
that a Swingline Loan be made, the Swingline Lender will make Swingline Loans
available to the Borrower on the same Business Day such request is received by the
Administrative Agent. Swingline Loan borrowings hereunder shall be made in minimum
amounts of $100,000 (or the remaining available amount of the Swingline Committed
Amount if less) and in integral amounts of $100,000 in excess thereof.




     (ii) Repayment of Swingline Loans. Each Swingline Loan borrowing shall
be due and payable on the Maturity Date. The Swingline Lender may, at any time, in
its sole discretion, by written notice to the Borrower and the Administrative Agent,
demand repayment of its Swingline Loans by way of a Revolving Loan borrowing, in
which case the Borrower shall be deemed to have requested a Revolving Loan borrowing
comprised entirely of Alternate Base Rate Loans in the amount of such Swingline
Loans; provided, however, that, in the following circumstances, any
such demand shall also be deemed to have been given one Business Day prior to each
of (A) the Maturity Date, (B) the occurrence of any Bankruptcy Event, (C) upon
acceleration of the Credit Party Obligations hereunder, whether on account of a
Bankruptcy Event or any other Event of Default, and (D) the exercise of remedies in
accordance with the provisions of Section 7.2 hereof (each such Revolving Loan
borrowing made on account of any such deemed request therefor as provided herein
being hereinafter referred to as “Mandatory Swingline Borrowing”). Each
Revolving Lender hereby irrevocably agrees to make such Revolving Loans promptly
upon any such request or deemed request on account of each Mandatory Swingline
Borrowing in the amount and in the manner specified in the preceding sentence on the
date such notice is received by the Revolving Lenders from the Administrative Agent
if such notice is received at or before 2:00 P.M., otherwise such payment shall be
made at or before 12:00 Noon on the Business Day next succeeding the date such
notice is received notwithstanding (1) the amount of Mandatory Swingline
Borrowing may not comply with the minimum amount for borrowings of Revolving Loans
otherwise required hereunder, (2) whether any conditions specified in Section 4.2
are then satisfied, (3) whether a Default or an Event of Default then exists, (4)
failure of any such request or deemed request for Revolving Loans to be made by the
time otherwise required in Section 2.1(b)(i), (5) the date of such Mandatory
Swingline Borrowing, or (6) any reduction in the Revolving Committed Amount or
termination of the Revolving Commitments immediately prior to such Mandatory
Swingline Borrowing or contemporaneously therewith. In the event that any Mandatory
Swingline Borrowing cannot for any reason be made on the date otherwise required above (including,
without limitation, as a result of the commencement of a proceeding under the
Bankruptcy Code), then each Revolving Lender hereby agrees that it shall forthwith
purchase (as of the date the Mandatory Swingline Borrowing would otherwise have
occurred, but adjusted for any payments received from the Borrower on or after such
date and prior to such purchase) from the Swingline Lender such participations in
the outstanding Swingline Loans as shall be necessary to cause each such Revolving
Lender to share in such Swingline Loans ratably based upon its respective Revolving
Commitment Percentage (determined before giving effect to any termination



30









 





of the
Commitments pursuant to Section 7.2); provided that (x) all interest payable
on the Swingline Loans shall be for the account of the Swingline Lender until the
date as of which the respective participation is purchased, and (y) at the time any
purchase of participations pursuant to this sentence is actually made, the
purchasing Revolving Lender shall be required to pay to the Swingline Lender
interest on the principal amount of such participation purchased for each day from
and including the day upon which the Mandatory Swingline Borrowing would otherwise
have occurred to but excluding the date of payment for such participation, at the
rate equal to, if paid within two (2) Business Days of the date of the Mandatory
Swingline Borrowing, the Federal Funds Effective Rate, and thereafter at a rate
equal to the Alternate Base Rate.




     (c) Interest on Swingline Loans. Subject to the provisions of Section 2.9(b),
Swingline Loans shall bear interest at a per annum rate equal to the Alternate Base Rate
plus the Applicable Percentage for Revolving Loans that are Alternate Base Rate
Loans. Interest on Swingline Loans shall be payable in arrears on each Interest Payment
Date.




     (d) Swingline Note. The Swingline Loans shall be evidenced by a duly executed
promissory note of the Borrower to the Swingline Lender in the original amount of the
Swingline Committed Amount and substantially in the form of Schedule 2.4(d).



       Section 2.5 Incremental Facilities.




     Subject to the terms and conditions set forth herein, the Borrower shall have the
right, from time to time prior to the date that is three years following the Closing Date,
to incur additional Indebtedness under this Credit Agreement in the form of an increase to
the Aggregate Revolving Committed Amount (the “Incremental Revolving Facility”) by
the amount of up to $5,000,000. The following terms and conditions shall apply to the
Incremental Revolving Facility: (a) the loans made under the Incremental Revolving Facility
(each an “Additional Revolving Loan”) shall constitute Credit Party Obligations and
will be secured and guaranteed with the other Credit Party Obligations on a pari passu
basis, (b) the Incremental Revolving Facility shall have the same terms (including interest
rate and maturity date) as the existing Revolving Loans, (c) any such Incremental Revolving
Facility shall be in a minimum principal amount of $2,500,000 and integral multiples of
$500,000 in excess thereof, (d) the Incremental Revolving Facility shall be entitled to the
same voting rights as the existing Revolving Loans and shall be entitled to receive proceeds
of prepayments on the same basis as the existing Revolving Loans, (e) the Incremental
Revolving Facility shall be obtained from existing Lenders or from other banks, financial
institutions or investment funds, in each case in accordance with the terms set forth below,
(f) the proceeds of the Additional Revolving Loan will be used for the purposes set forth in
Section 3.11, (g) the Borrower shall execute a Revolving Note in favor of any new Lender or
any existing Lender requesting a Revolving Note whose Revolving Committed Amount is
increased, (h) the conditions to Extensions of Credit in Section 4.2 shall have been
satisfied and (i) the Administrative Agent shall have received from the Borrower updated
financial projections and an officer’s certificate, in each case in form and substance
reasonably satisfactory to the Administrative Agent, demonstrating that, after giving effect
to the Incremental Revolving Facility on a Pro Forma Basis, the Borrower will be in
compliance with the financial covenants set forth in Section 5.9 and no Default or Event of
Default shall exist. Participation in the Incremental Revolving Facility shall be offered
first to each of the existing Lenders, but each such Lender shall have no obligation to
provide all or any portion of the Incremental Revolving Facility. If the amount of the Incremental Revolving Facility shall exceed the commitments which the
existing Lenders are willing to provide with respect to the Incremental Revolving Facility,
then the Borrower may invite other banks, financial institutions and investment funds
reasonably acceptable to the Administrative Agent to join this Credit Agreement as Lenders
hereunder for the portion of the Incremental Revolving Facility not taken by existing
Lenders, provided that such other banks, financial institutions and investment funds shall
enter into such joinder agreements to give effect thereto as the Administrative Agent may
reasonably request. The Administrative Agent is authorized to enter into, on behalf of the
Lenders, any amendment to this Credit Agreement or any other Credit Document as may be
necessary to incorporate the terms of the Incremental Revolving Facility therein.



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       Section 2.6 Fees.




     (a) Commitment Fee. In consideration of the Revolving Commitments, the
Borrower agrees to pay to the Administrative Agent, for the ratable benefit of the Revolving
Lenders, a commitment fee (the “Commitment Fee”) in an amount equal to the
Applicable Percentage per annum on the average daily unused amount of the Revolving
Committed Amount. For purposes of computation of the Commitment Fee, LOC Obligations shall
be considered usage but Swingline Loans shall not be considered usage of the Revolving
Committed Amount. The Commitment Fee shall be payable quarterly in arrears on the last
Business Day of each calendar quarter.




     (b) Letter of Credit Fees. In consideration of the LOC Commitments, the
Borrower agrees to pay to the Administrative Agent, for the ratable benefit of the Revolving
Lenders, a fee (the “Letter of Credit Fee”) equal to the Applicable Percentage for
Revolving Loans that are LIBOR Rate Loans per annum on the average daily maximum amount
available to be drawn under each Letter of Credit from the date of issuance to the date of
expiration. The Letter of Credit Fee shall each be payable quarterly in arrears on the last
Business Day of each calendar quarter.




     (c) Issuing Lender Fees. In addition to the Letter of Credit Fees payable
pursuant to subsection (b) hereof, the Borrower shall pay to the Issuing Lender for its own
account without sharing by the other Lenders the reasonable and customary charges from time
to time of the Issuing Lender with respect to the amendment, transfer, administration,
cancellation and conversion of, and drawings under, such Letters of Credit (collectively,
the “Issuing Lender Fees”). The Issuing Lender may charge, and retain for its own
account without sharing by the other Lenders, an additional facing fee (the “Letter of
Credit Facing Fee”) of one-quarter of one percent (.25%) per annum on the average daily
maximum amount available to be drawn under each such Letter of Credit issued by it. The
Issuing Lender Fees and the Letter of Credit Facing Fee shall be payable quarterly in
arrears on the last Business Day of each calendar quarter.




     (d) Administrative Fee. The Borrower agrees to pay to the Administrative Agent
the annual administrative fee as described in the Fee Letter.



       Section 2.7 Commitment Reductions.




     (a) Voluntary Reductions. The Borrower shall have the right to terminate or
permanently reduce the unused portion of the Revolving Committed Amount at any time or from
time to time upon not less than five (5) Business Days’ prior written notice to the
Administrative Agent (which shall notify the Lenders thereof as soon as practicable) of each
such termination or reduction, which notice shall specify the effective date thereof and the
amount of any such reduction which shall be in a minimum amount of $1,000,000 or a whole
multiple of $1,000,000 in excess thereof and shall be irrevocable and effective upon receipt
by the Administrative Agent; provided that no such reduction or termination shall be
permitted if after giving effect thereto, and to any prepayments of the Revolving Loans made
on the effective date thereof, the sum of the aggregate principal amount of outstanding Revolving Loans plus outstanding Swingline
Loans plus outstanding LOC Obligations would exceed the Revolving Committed Amount
then in effect.




     (b) Swingline Committed Amount. If the Revolving Committed Amount is reduced
pursuant to Section 2.8(a) below the then current Swingline Committed Amount, the Swingline
Committed Amount shall automatically be reduced by an amount such that the Swingline
Committed Amount equals the Revolving Committed Amount.




     (c) Maturity Date. The Revolving Commitments, the Swingline Commitment and the
LOC Commitment shall automatically terminate on the Maturity Date.




32










 






Section 2.8 Prepayments.




     (a) Optional Prepayments. The Borrower shall have the right to prepay Loans in
whole or in part from time to time; provided, however, that each partial
prepayment of a Revolving Loan or Term Loan shall be in a minimum principal amount of
$500,000 and integral multiples of $500,000 in excess thereof (or the remaining outstanding
principal amount), and each partial prepayment of a Swingline Loan shall be in a minimum
principal amount of $100,000 and integral multiples of $100,000 in excess thereof (or the
remaining outstanding principal amount). The Borrower shall give three Business Days’
irrevocable notice in the case of LIBOR Rate Loans and same-day irrevocable notice on any
Business Day in the case of Alternate Base Rate Loans, to the Administrative Agent (which
shall notify the Lenders thereof as soon as practicable). To the extent that the Borrower
elects to prepay the Term Loans, amounts prepaid under this Section 2.8(a) shall be (i)
applied ratably to the remaining principal installments thereof and (ii) applied to each
Lender’s portion of the Term Loan on a pro rata basis. Within the foregoing parameters,
amounts prepaid under this Section 2.8(a) shall be applied first to Alternate Base Rate
Loans and then to LIBOR Rate Loans in direct order of Interest Period maturities. All
prepayments under this Section 2.8(a) shall be subject to Section 2.17, but otherwise
without premium or penalty. Interest on the principal amount prepaid shall be payable on
the next occurring Interest Payment Date that would have occurred had such loan not been
prepaid or, at the request of the Administrative Agent, interest on the principal amount
prepaid shall be payable on any date that a prepayment is made hereunder through the date of
prepayment. Amounts prepaid on the Revolving Loans and the Swingline Loans may be
reborrowed in accordance with the terms hereof. Amounts prepaid on the Term Loan may not be
reborrowed.



     (b) Mandatory Prepayments.




     (i) Revolving Committed Amount. If at any time after the Closing Date,
the sum of the aggregate principal amount of outstanding Revolving Loans
plus outstanding Swingline Loans plus outstanding LOC Obligations
shall exceed the Revolving Committed Amount, the Borrower shall immediately prepay
the Loans in an amount sufficient to eliminate such excess (such prepayment to be
applied as set forth in clause (vii) below).




     (ii) Excess Cash Flow. Within ninety (90) days after the end of each
fiscal year (commencing with the fiscal year ending September 30, 2006), the
Borrower shall prepay the Loans in an amount equal to 75% of the Excess Cash Flow
earned during such prior fiscal year; provided, that if the Total Leverage
Ratio is less than or equal to 3.00 to 1.0 as of the end of any fiscal year, the
Borrower shall not be required to prepay the Loans on account of the Excess Cash
Flow earned during such prior fiscal year. Any payments of Excess Cash Flow shall
be applied as set forth in clause (vii) below.




     (iii) Asset Dispositions. Promptly (and in any event within one
Business Day) following any Asset Disposition (or related series of Asset
Dispositions), the Borrower shall prepay the Loans in an aggregate amount equal to
one hundred percent (100%) of the Net Cash Proceeds derived from such Asset
Disposition (or related series of Asset
Dispositions) (such prepayment to be applied as set forth in clause (vii) below);
provided, however, that, so long as no Default or Event of Default
has occurred and is continuing, such Net Cash Proceeds shall not be required to be
so applied (A) until the aggregate amount of Asset Dispositions in any fiscal year
is equal to or greater than $500,000, except in any fiscal year the Total Leverage
Ratio is equal to or less than 3:00 to 1:00 (as most recently reported hereunder),
then such minimum amount shall be $1,000,000 for the remainder of such fiscal year
and (B) to the extent the Borrower delivers to the Administrative Agent a
certificate stating that the Credit Parties intend to use such Net Cash Proceeds to
acquire assets useful to the business of the Credit Parties within 270 days of the
receipt of such Net Cash Proceeds, it being expressly agreed that Net Cash Proceeds
not so reinvested shall be applied to prepay the Loans.




     (iv) Debt Issuances. Promptly (and in any event within one Business
Day) upon receipt by any Credit Party or any of its Subsidiaries of proceeds from
any Debt Issuance, the Borrower shall prepay the Loans in an aggregate amount equal
to one hundred percent (100%) of



33









 






the Net Cash Proceeds of such Debt Issuance (such
prepayment to be applied as set forth in clause (vii) below); provided,
however, that, so long as no Default or Event of Default has occurred and is
continuing, such Net Cash Proceeds shall not be required to be so applied until the
aggregate amount of Debt Issuances in any fiscal year is equal to or greater than
$500,000, except in any fiscal year the Total Leverage Ratio is equal to or less
than 3:00 to 1:00 (as most recently reported hereunder), then such minimum amount
shall be $1,000,000 for the remainder of such fiscal year.




     (v) Issuances of Equity. Promptly (and in any event within one Business
Day) upon receipt by any Credit Party or any of its Subsidiaries of proceeds from
any Equity Issuance, the Borrower shall prepay the Loans in an aggregate amount
equal to fifty percent (50%) of the Net Cash Proceeds of such Equity Issuance (such
prepayment to be applied as set forth in clause (vii) below); provided,
however, that, so long as no Default or Event of Default has occurred and is
continuing, such Net Cash Proceeds shall not be required to be so applied until the
aggregate amount of Equity Issuances in any fiscal year is equal to or greater than
$500,000, except in any fiscal year the Total Leverage Ratio is equal to or less
than 3:00 to 1:00 (as most recently reported hereunder), then such minimum amount
shall be $1,000,000 for the remainder of such fiscal year.




     (vi) Recovery Event. Promptly (and in any event within one Business
Day) upon receipt by any Credit Party or any of its Subsidiaries of proceeds from
any Recovery Event, the Borrower shall prepay the Loans in an aggregate amount equal
to one hundred percent (100%) of the Net Cash Proceeds of such Recovery Event (such
prepayment to be applied as set forth in clause (vii) below); provided,
however, that, so long as no Default or Event of Default has occurred and is
continuing, such Net Cash Proceeds shall not be required to be so applied (A) until
the aggregate amount of such Recovery Event, in any fiscal year, is equal to or
greater than $500,000, except in any fiscal year the Total Leverage Ratio is equal
to or less than 3:00 to 1:00 (as most recently reported hereunder), then such
minimum amount shall be $1,000,000 for the remainder of such fiscal year, and (B) to
the extent the Borrower delivers to the Administrative Agent a certificate stating
that Credit Parties intend to use such Net Cash Proceeds to acquire assets useful to
the business of the Credit Parties within 270 days of the receipt of such Net Cash
Proceeds, it being expressly agreed that any Net Cash Proceeds not so reinvested
shall be applied to prepay the Loans immediately thereafter (such prepayment to be
applied as set forth in clause (vii) below).




     (vii) Application of Mandatory Prepayments. All amounts required to be
paid pursuant to this Section 2.8(b) shall be applied as follows:




     (A) with respect to all amounts prepaid pursuant to Section 2.8(b)(i),
(1) first to the outstanding Swingline Loans and (2) second
to the outstanding Revolving Loans;




     (B) with respect to all amounts prepaid pursuant to Section 2.8(b)(ii),
(1) first to the Swingline Loans (without a corresponding reduction
of the Swingline Committed Amount), (2) second to the Revolving
Loans (without a corresponding reduction of the Revolving Committed Amount)
and (3) third to the Term Loan (in inverse order of maturity); and




     (C) with respect to all amounts prepaid pursuant to Sections
2.8(b)(iii) through (vi), (1) first to the Term Loan (in inverse
order of maturity), (2) second to the Swingline Loans (without a
corresponding reduction of the Swingline Committed Amount) and (3)
third to the Revolving Loans (without a corresponding reduction of
the Revolving Committed Amount). Within the parameters of the applications
set forth above, prepayments shall be applied first to Alternate Base Rate
Loans and then to LIBOR Rate Loans in direct order of Interest Period
maturities. All prepayments under this Section 2.8(b) shall be subject to
Section 2.17 and be accompanied by interest on the principal amount prepaid
through the date of prepayment. Notwithstanding the terms of this
subsection (B) to the contrary, so long as (x) no Default or Event of
Default exists



34









 






and (y) the amount of any prepayments required under Sections
2.8(b)(ii)-(vi) has been transferred to the Administrative Agent to be held
by it as Collateral pursuant to the terms of the Security Agreement, at the
election of the Borrower, if there are not sufficient Alternate Base Rate
Loans outstanding to effect any prepayment required under Sections
2.8(b)(ii)-(vi), such prepayment may be deferred until the end of the
Interest Period of any LIBOR Rate Loan being prepaid, in respect of the
amount of such prepayment which would otherwise be required to be used to
prepay such LIBOR Rate Loan (after giving effect to any prepayment of
outstanding Alternate Base Rate Loans).



     (c) Hedging Obligations Unaffected. Any repayment or prepayment made pursuant
to this Section 2.8 shall not affect the Borrower’s obligation to continue to make payments
under any Secured Hedging Agreement, which shall remain in full force and effect
notwithstanding such repayment or prepayment, subject to the terms of such Secured Hedging
Agreement.



Section 2.9 Default Rate and Payment Dates.




     (a) If all or a portion of the principal amount of any Loan which is a LIBOR Rate Loan
shall not be paid when due or continued as a LIBOR Rate Loan in accordance with the
provisions of Section 2.10 (whether at the stated maturity, by acceleration or otherwise),
such overdue principal amount of such Loan shall be converted to an Alternate Base Rate Loan
at the end of the Interest Period applicable thereto.



     (b) (i) If all or a portion of the principal amount of any LIBOR Rate Loan shall not be
paid when due, such overdue amount shall bear interest at a rate per annum which is equal to
the rate that would otherwise be applicable thereto plus 2%, until the end of the
Interest Period applicable thereto, and thereafter at a rate per annum which is equal to the
Alternate Base Rate plus the sum of the Applicable Percentage then in effect for
Alternate Base Rate Loans and 2% (the “ABR Default Rate”) or (ii) if any interest
payable on the principal amount of any Loan or any fee or other amount, including the
principal amount of any Alternate Base Rate Loan, payable hereunder shall not be paid when
due (whether at the stated maturity, by acceleration or otherwise), such overdue amount
shall bear interest at a rate per annum which is equal to the ABR Default Rate, in each case
from the date of such non-payment until such amount is paid in full (after as well as before
judgment). Upon the occurrence, and during the continuance, of any other Event of Default
hereunder, at the option of the Required Lenders, the principal of and, to
the extent permitted by law, interest on the Loans and any other amounts owing hereunder or
under the other Credit Documents shall bear interest, payable on demand, at a per annum rate
which is (A) in the case of principal, the rate that would otherwise be applicable thereto
plus 2% or (B) in the case of interest, fees or other amounts, the ABR Default Rate
(after as well as before judgment).



     (c) Interest on each Loan shall be payable in arrears on each Interest Payment Date;
provided that interest accruing pursuant to paragraph (b) of this Section 2.9 shall
be payable from time to time on demand.



Section 2.10 Conversion Options.




     (a) The Borrower may, in the case of Revolving Loans and the Term Loan, elect from time
to time to convert Alternate Base Rate Loans to LIBOR Rate Loans, by delivering a Notice of
Conversion/Extension to the Administrative Agent at least three (3) Business Days prior to
the proposed date of conversion. In addition, the Borrower may elect from time to time to
convert all or any portion of a LIBOR Rate Loan to an Alternate Base Rate Loan by giving the
Administrative Agent irrevocable written notice thereof by 1:00 P.M. one Business Day prior
to the proposed date of conversion. If the date upon which an Alternate Base Rate Loan is
to be converted to a LIBOR Rate Loan is not a Business Day, then such conversion shall be
made on the next succeeding Business Day and during the period from such last day of an
Interest Period to such succeeding Business Day such Loan shall bear interest as if it were
an Alternate Base Rate Loan. LIBOR Rate Loans may only be converted to Alternate Base Rate
Loans on the last day of the applicable Interest Period. If the date upon which a LIBOR
Rate Loan is to be converted to an Alternate Base Rate Loan is not a Business Day, then such
conversion shall be made on the next succeeding Business Day and during the period from such
last day of an Interest Period to such succeeding



35









 




Business Day such Loan shall bear interest
as if it were an Alternate Base Rate Loan. All or any part of outstanding Alternate Base
Rate Loans may be converted as provided herein; provided that (i) no Loan may be
converted into a LIBOR Rate Loan when any Default or Event of Default has occurred and is
continuing and (ii) partial conversions shall be in an aggregate principal amount of
$1,000,000 or a whole multiple of $500,000 in excess thereof. All or any part of
outstanding LIBOR Rate Loans may be converted as provided herein; provided that
partial conversions shall be in an aggregate principal amount of $1,000,000 or a whole
multiple of $500,000 in excess thereof.




     (b) Any LIBOR Rate Loans may be continued as such upon the expiration of an Interest
Period with respect thereto by compliance by the Borrower with the notice provisions
contained in Section 2.10(a); provided, that no LIBOR Rate Loan may be continued as
such when any Default or Event of Default has occurred and is continuing, in which case such
Loan shall be automatically converted to an Alternate Base Rate Loan at the end of the
applicable Interest Period with respect thereto. If the Borrower shall fail to give timely
notice of an election to continue a LIBOR Rate Loan, or the continuation of LIBOR Rate Loans
is not permitted hereunder, such LIBOR Rate Loans shall be automatically converted to
Alternate Base Rate Loans at the end of the applicable Interest Period with respect thereto.



Section 2.11 Computation of Interest and Fees; Usury.




     (a) Interest payable hereunder with respect to any Alternate Base Rate Loan based on
the Prime Rate shall be calculated on the basis of a year of 365 days (or 366 days, as
applicable) for the actual days elapsed. All other fees, interest and all other amounts
payable hereunder shall be calculated on the basis of a 360 day year for the actual days
elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the
Lenders of each determination of a LIBOR Rate on the Business Day of the determination
thereof. Any change in the interest rate on a Loan resulting from a change in the Alternate
Base Rate shall become effective as of the opening of business on the day on which such
change in the Alternate Base
Rate shall become effective. The Administrative Agent shall as soon as practicable notify
the Borrower and the Lenders of the effective date and the amount of each such change.



     (b) Each determination of an interest rate by the Administrative Agent pursuant to any
provision of this Credit Agreement shall be conclusive and binding on the Borrower and the
Lenders in the absence of manifest error. The Administrative Agent shall, at the request of
the Borrower, deliver to the Borrower a statement showing the computations used by the
Administrative Agent in determining any interest rate.



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



36









 




extent permitted by applicable law, be amortized, prorated, allocated,
and spread throughout the full stated term (including any renewal or extension) of the Loans
so that the amount of interest on account of such Indebtedness does not exceed the maximum
nonusurious amount permitted by applicable law.




Section 2.12 Pro Rata Treatment and Payments.




     (a) Allocation of Payments Prior to Exercise of Remedies. Each borrowing of
Revolving Loans and any reduction of the Revolving Commitments shall be made pro
rata according to the respective Revolving Commitment Percentages of the Revolving
Lenders. Unless otherwise required by the terms of this Credit Agreement, each payment
under this Credit Agreement or any Note shall be applied, first, to any fees then
due and owing by the Borrower pursuant to Section 2.6, second, to interest then due
and owing hereunder and under the Notes of the Borrower and, third, to principal
then due and owing hereunder and under the Notes of the Borrower. Each payment on account
of any fees pursuant to Section 2.6 shall be made pro rata in accordance
with the respective amounts due and owing (except as to the Letter of Credit Facing Fees and
the Issuing Lender Fees). Each payment (other than prepayments) by the Borrower on account
of principal of and interest on the Revolving Loans and on the Term Loan, as applicable,
shall be applied to such Loans, as applicable, on a pro rata basis in accordance with the
terms of Section 2.8(a) hereof. Each optional prepayment on account of principal of the
Loans shall be applied in accordance with Section 2.8(a). Each mandatory prepayment on
account of principal of the Loans shall be applied in accordance with Section 2.8(b). All
payments (including prepayments) to be made by the Borrower on account of principal,
interest and fees shall be made without defense, set-off or counterclaim (except as provided
in Section
2.18(b)) and shall be made to the Administrative Agent for the account of the Lenders at the
Administrative Agent’s office specified on Section 9.2 in Dollars and in immediately
available funds not later than 1:00 P.M. on the date when due. The Administrative Agent
shall distribute such payments to the Lenders entitled thereto promptly upon receipt in like
funds as received. If any payment hereunder (other than payments on the LIBOR Rate Loans)
becomes due and payable on a day other than a Business Day, such payment shall be extended
to the next succeeding Business Day, and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension. If any payment
on a LIBOR Rate Loan becomes due and payable on a day other than a Business Day, such
payment date shall be extended to the next succeeding Business Day unless the result of such
extension would be to extend such payment into another calendar month, in which event such
payment shall be made on the immediately preceding Business Day.



     (b) Allocation of Payments After Exercise of Remedies. Notwithstanding any
other provisions of this Credit Agreement to the contrary, after the exercise of remedies
(other than the invocation of default interest pursuant to Section 2.9(b)) by the
Administrative Agent or the Lenders pursuant to Section 7.2 (or after the Commitments shall
automatically terminate and the Loans (with accrued interest thereon) and all other amounts
under the Credit Documents (including without limitation the maximum amount of all
contingent liabilities under Letters of Credit) shall automatically become due and payable
in accordance with the terms of such Section), except as otherwise required pursuant to the
terms of the Intercreditor Agreement, all amounts collected or received by the
Administrative Agent or any Lender on account of the Credit Party Obligations or any other
amounts outstanding under any of the Credit Documents or in respect of the Collateral shall
be paid over or delivered as follows (irrespective of whether the following costs, expenses,
fees, interest, premiums, scheduled periodic payments or Credit Party Obligations are
allowed, permitted or recognized as a claim in any proceeding resulting from the occurrence
of a Bankruptcy Event):




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




     SECOND, to the payment of any fees owed to the Administrative Agent;



37









 






     THIRD, to the payment of all reasonable out-of-pocket costs and expenses
(including without limitation, reasonable attorneys’ fees) of each of the Lenders in
connection with enforcing its rights under the Credit Documents or otherwise with
respect to the Credit Party Obligations owing to such Lender;




     FOURTH, to the payment of all of the Credit Party Obligations consisting of
accrued fees and interest, and including, with respect to any Secured Hedging
Agreement, any fees, premiums and scheduled periodic payments due under such Secured
Hedging Agreement and any interest accrued thereon;




     FIFTH, to the payment of the outstanding principal amount of the Credit Party
Obligations and the payment or cash collateralization of the outstanding LOC
Obligations, and including with respect to any Secured Hedging Agreement, any
breakage, termination or other payments due under such Secured Hedging Agreement and
any interest accrued thereon;




     SIXTH, to all other Credit Party Obligations and other obligations which shall
have become due and payable under the Credit Documents or otherwise and not repaid
pursuant to clauses “FIRST” through “FIFTH” above; and




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



     In carrying out the foregoing, (i) amounts received shall be applied in the numerical
order provided until exhausted prior to application to the next succeeding category; (ii)
each of the Lenders shall receive an amount equal to its pro rata share (based on the
proportion that the then outstanding Loans and LOC Obligations held by such Lender bears to
the aggregate then outstanding Loans and LOC Obligations) of amounts available to be applied
pursuant to clauses “THIRD”, “FOURTH”, “FIFTH” and “SIXTH” above; and (iii) to the extent
that any amounts available for distribution pursuant to clause “FIFTH” above are
attributable to the issued but undrawn amount of outstanding Letters of Credit, such amounts
shall be held by the Administrative Agent in a cash collateral account and applied (A)
first, to reimburse the Issuing Lender from time to time for any drawings under such Letters
of Credit and (B) then, following the expiration of all Letters of Credit, to all other
obligations of the types described in clauses “FIFTH” and “SIXTH” above in the manner
provided in this Section 2.12. Notwithstanding the foregoing terms of this Section 2.12,
only Collateral proceeds and payments under the Guaranty (as opposed to ordinary course
principal, interest and fee payments hereunder) shall be applied to obligations under any
Secured Hedging Agreement.



Section 2.13 Non-Receipt of Funds by the Administrative Agent.




     (a) Unless the Administrative Agent shall have been notified in writing by a Lender
prior to the date a Loan is to be made by such Lender (which notice shall be effective upon
receipt) that such Lender does not intend to make the proceeds of such Loan available to the
Administrative Agent, the Administrative Agent may assume that such Lender has made such
proceeds available to the Administrative Agent on such date, and the Administrative Agent may
in reliance upon such assumption (but shall not be required to) make available to the
Borrower a corresponding amount. If such corresponding amount is not in fact made available
to the Administrative Agent, the Administrative Agent shall be able to recover such
corresponding amount from such Lender. If such Lender does not pay such corresponding amount
forthwith upon the Administrative Agent’s demand therefor, the Administrative Agent will
promptly notify the Borrower, and the Borrower shall immediately pay such corresponding
amount to the Administrative Agent. The Administrative Agent shall also be entitled to
recover from the Lender or the Borrower, as the case may be, interest on such corresponding
amount in respect of each day from the date such corresponding amount was made available by
the Administrative Agent to the Borrower to the date such corresponding amount is recovered
by the Administrative Agent at a per annum rate equal to (i) from the Borrower at the
applicable rate for the applicable borrowing pursuant to the Notice of Borrowing and (ii)
from a Lender at the Federal Funds Effective Rate.



38









 






     (b) Unless the Administrative Agent shall have been notified in writing by the
Borrower, prior to the date on which any payment is due from the Borrower hereunder (which
notice shall be effective upon receipt) that the Borrower does not intend to make such
payment, the Administrative Agent may assume that the Borrower has made such payment when
due, and the Administrative Agent may in reliance upon such assumption (but shall not be
required to) make available to each Lender on such payment date an amount equal to the
portion of such assumed payment to which such Lender is entitled hereunder, and if the
Borrower has not in fact made such payment to the Administrative Agent, such Lender shall,
on demand, repay to the Administrative Agent the amount made available to such Lender. If
such amount is repaid to the Administrative Agent on a date after the date such amount was
made available to such Lender, such Lender shall pay to the Administrative Agent on demand
interest on such amount in respect of each day from the date such amount was made available
by the Administrative Agent to such Lender to the date such amount is recovered by the
Administrative Agent at a per annum rate equal to the Federal Funds Effective Rate.




     (c) A certificate of the Administrative Agent submitted to the Borrower or any Lender
with respect to any amount owing under this Section 2.13 shall be conclusive in the absence
of manifest error.



     Section 2.14 Inability to Determine Interest Rate.



     Notwithstanding any other provision of this Credit Agreement, if (i) the Administrative Agent
shall reasonably determine (which determination shall be conclusive and binding absent manifest
error) that, by reason of circumstances affecting the relevant market, reasonable and adequate
means do not exist for ascertaining LIBOR for such Interest Period, or (ii) the Required Lenders
shall reasonably determine (which determination shall be conclusive and binding absent manifest
error) that the LIBOR Rate does not adequately and fairly reflect the cost to such Lenders of
funding LIBOR Rate Loans that the Borrower has requested be outstanding as a LIBOR Tranche during
such Interest Period, the Administrative Agent shall forthwith give telephone notice of such
determination, confirmed in writing, to the Borrower, and the Lenders at least two Business Days
prior to the first day of such Interest Period. Unless the Borrower shall have notified the
Administrative Agent upon receipt of such telephone notice that it wishes to rescind or modify its
request regarding such LIBOR Rate Loans, any Loans that were requested to be made as LIBOR Rate
Loans shall be made as Alternate Base Rate Loans and any Loans that were requested to be converted
into or continued as LIBOR Rate Loans shall remain as or be converted into Alternate Base Rate
Loans. Until any such notice has been withdrawn by the Administrative Agent, no further Loans
shall be made as, continued as, or converted into, LIBOR Rate Loans for the Interest Periods so
affected.



     Section 2.15 Illegality.



     Notwithstanding any other provision of this Credit Agreement, if the adoption of or any change
in any Requirement of Law or in the interpretation or application thereof by the relevant
Governmental Authority to any Lender shall make it unlawful for such Lender or its LIBOR Lending
Office to make or maintain LIBOR Rate Loans as contemplated by this Credit Agreement or to obtain
in the interbank eurodollar market through its LIBOR Lending Office the funds with which to make
such Loans, (a) such Lender shall promptly notify the Administrative Agent and the Borrower
thereof, (b) the commitment of such Lender hereunder to make LIBOR Rate Loans or continue LIBOR
Rate Loans as such shall forthwith be suspended until the Administrative Agent shall give notice
that the condition or situation which gave rise to the suspension shall no longer exist, and (c)
such Lender’s Loans then outstanding as LIBOR Rate Loans, if any, shall be converted on the last
day of the Interest Period for such Loans or within such earlier period as required by law as
Alternate Base Rate Loans. The Borrower hereby agrees promptly to pay any Lender, upon its demand,
any additional amounts necessary to compensate such Lender for actual and direct costs (but not
including anticipated profits) reasonably incurred by such Lender in making any repayment in
accordance with this Section including, but not limited to, any interest or fees payable by such
Lender to lenders of funds obtained by it in order to make or maintain its LIBOR Rate Loans
hereunder. A certificate as to any additional amounts payable pursuant to this Section submitted
by such Lender, through the Administrative Agent, to the Borrower shall be conclusive in the
absence of manifest error. Each Lender agrees to use reasonable efforts (including reasonable
efforts to change its LIBOR Lending Office) to avoid or to minimize any amounts which may otherwise
be payable pursuant to this Section; provided, however, that such efforts shall not
cause the imposition on such Lender of any additional costs or legal or regulatory burdens deemed
by such Lender in its sole discretion to be material.



39









 





     Section 2.16 Requirements of Law.




     (a) If the adoption of or any change in any Requirement of Law or in the interpretation
or application thereof or compliance by any Lender with any request or directive (whether or
not having the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:




     (i) shall subject such Lender to any tax of any kind whatsoever with respect to
any Letter of Credit or any application relating thereto, any LIBOR Rate Loan made
by
it, or change the basis of taxation of payments to such Lender in respect thereof
(except for changes in the rate of tax on the overall net income of such Lender);




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




     (iii) shall impose on such Lender any other condition;




and the result of any of the foregoing is to increase the cost to such Lender of making or
maintaining LIBOR Rate Loans or the Letters of Credit or the Participation Interests therein
or to reduce any amount receivable hereunder or under any Note, then, in any such case, the
Credit Parties shall promptly pay such Lender, upon its demand, any additional amounts
necessary to compensate such Lender for such additional cost or reduced amount receivable
which such Lender reasonably deems to be material as determined by such Lender with respect
to its LIBOR Rate Loans or Letters of Credit. A certificate as to any additional amounts
payable pursuant to this Section submitted by such Lender, through the Administrative Agent,
to the Borrower shall be conclusive in the absence of manifest error. Each Lender agrees to
use reasonable efforts (including reasonable efforts to change its Domestic Lending Office
or LIBOR Lending Office, as the case may be) to avoid or to minimize any amounts which might
otherwise be payable pursuant to this paragraph of this Section; provided,
however, that such efforts shall not cause the imposition on such Lender of any
additional costs or legal or regulatory burdens deemed by such Lender to be material.




     (b) If any Lender shall have reasonably determined that the adoption of or any change
in any Requirement of Law regarding capital adequacy or in the interpretation or application
thereof or compliance by such Lender or any corporation controlling such Lender with any
request or directive regarding capital adequacy (whether or not having the force of law)
from any central bank or Governmental Authority made subsequent to the date hereof does or
shall have the effect of reducing the rate of return on such Lender’s or such corporation’s
capital as a consequence of its obligations hereunder to a level below that which such
Lender or such corporation could have achieved but for such adoption, change or compliance
(taking into consideration such Lender’s or such corporation’s policies with respect to
capital adequacy) by an amount reasonably deemed by such Lender to be material, then from
time to time, within fifteen (15) days after demand by such Lender, the Credit Parties shall
pay to such Lender such additional amount as shall be certified by such Lender as being
required to compensate it for such reduction. Such a certificate as to any additional
amounts payable under this Section submitted by a Lender (which certificate shall include a
description of the basis for the computation), through the Administrative Agent, to the
Borrower shall be conclusive absent manifest error.




     (c) The Borrower shall not be required to compensate a Lender pursuant to the foregoing
provisions of this Section for any additional amount incurred more than ninety (90) days
after the Lender obtains knowledge of the change in law giving rise to such additional
amount and of such Lender’s intention to claim compensation therefor (except that, if the
change in law giving rise to such additional amount is retroactive, then the ninety (90) day
period referred to above shall be extended to include the period of retroactive effect
thereof).



40









 






     (d) The agreements in this Section 2.16 shall survive the termination of this Credit
Agreement and payment of the Credit Party Obligations.



     Section 2.17 Indemnity.



     The Credit Parties hereby agree to indemnify each Lender and to hold such Lender harmless from
any funding loss or expense which such Lender may sustain or incur as a consequence of (a) default
by the Borrower in payment of the principal amount of or interest on any Loan by such Lender in
accordance with the terms hereof, (b) default by the Borrower in accepting a borrowing after the
Borrower has given a notice in accordance with the terms hereof, (c) default by the Borrower in
making any prepayment after the Borrower has given a notice in accordance with the terms hereof,
and/or (d) the making by the Borrower of a prepayment of a Loan, or the conversion thereof, on a
day which is not the last day of the Interest Period with respect thereto, in each case including,
but not limited to, any such loss or expense arising from interest or fees payable by such Lender
to lenders of funds obtained by it in order to maintain its Loans hereunder (but excluding loss of
margin). A certificate as to any additional amounts payable pursuant to this Section submitted by
any Lender, through the Administrative Agent, to the Borrower (which certificate must be delivered
to the Administrative Agent within thirty days following such default, prepayment or conversion)
shall be conclusive in the absence of manifest error. The agreements in this Section shall survive
termination of this Credit Agreement and payment of the Credit Party Obligations.



     Section 2.18 Taxes.




     (a) All payments made by the Credit Parties hereunder or under any Note shall be,
except as provided in Section 2.18(b), made free and clear of, and without deduction or
withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or
other charges of whatever nature now or hereafter imposed by any Governmental Authority or
by any political subdivision or taxing authority thereof or therein with respect to such
payments (but excluding any tax imposed on or measured by the net income or profits of a
Lender pursuant to the laws of the jurisdiction in which it is organized or the jurisdiction
in which the principal office or applicable lending office of such Lender is located or any
subdivision thereof or therein) and all interest, penalties or similar liabilities with
respect thereto (all such non-excluded taxes, levies, imposts, duties, fees, assessments or
other charges being referred to collectively as “Taxes”). If any Taxes are so
levied or imposed, the Credit Parties agree to pay the full amount of such Taxes, and such
additional amounts as may be necessary so that every payment of all amounts due under this
Credit Agreement or under any Note, after withholding or deduction for or on account of any
Taxes, will not be less than the amount provided for herein or in such Note. The Credit
Parties will furnish to the Administrative Agent as soon as practicable after the date the
payment of any Taxes is due pursuant to applicable law certified copies (to the extent
reasonably available and required by law) of tax receipts evidencing such payment by the
Credit Parties. The Credit Parties agree to indemnify and hold harmless each Lender, and
reimburse such Lender upon its written request, for the amount of any Taxes so levied or
imposed and paid by such Lender, except for, in the event such Lender or the Administrative
Agent fails to deliver notice of any assertion of Taxes to the Borrower within ninety (90)
days after it has knowledge of such assertion or imposition of Taxes, any penalties,
interest or expenses which would not have arisen but for the failure of the Lender or the
Administrative Agent to so notify the Borrower of such assertion or imposition of Taxes.




     (b) Each Lender that is not a United States person (as such term is defined in Section
7701(a)(30) of the Code) agrees to deliver to the Borrower and the Administrative Agent on
or prior to the Closing Date, or in the case of a Lender that is an assignee or transferee
of an interest under this Credit Agreement pursuant to Section 9.6(d) (unless the respective
Lender was already a Lender hereunder immediately prior to such assignment or transfer), on
the date of such assignment or transfer to such Lender two accurate and complete original
signed copies of Internal Revenue Service Form W-8BEN or W-8ECI (or successor or other
necessary or appropriate forms) certifying such Lender’s entitlement to a complete exemption
from United States withholding tax with respect to payments to be made under this Credit
Agreement and under any Note. In addition, each Lender agrees that it will deliver upon the
Borrower’s request updated versions of the foregoing, as applicable, whenever the previous
certification has
become obsolete or inaccurate in any material respect, together with such other forms as may
be required in order to confirm or establish the entitlement of such Lender to a continued
exemption from or reduction in



41









 






United States withholding tax with respect to payments under
this Credit Agreement and any Note. Notwithstanding anything to the contrary contained in
Section 2.18(a), but subject to the immediately succeeding sentence, (A) the Borrower shall
be entitled, to the extent it is required to do so by law, to deduct or withhold Taxes
imposed by the United States (or any political subdivision or taxing authority thereof or
therein) from interest, fees or other amounts payable hereunder for the account of any
Lender which is not a United States person (as such term is defined in Section 7701(a)(30)
of the Code) for U.S. Federal income tax purposes to the extent that such Lender has not
provided to the Borrower U.S. Internal Revenue Service Forms that establish a complete
exemption from such deduction or withholding and (B) the Borrower shall not be obligated
pursuant to Section 2.18(a) hereof to gross-up payments to be made to a Lender in respect of
Taxes imposed by the United States if (I) such Lender has not provided to the Borrower the
Internal Revenue Service Forms required to be provided to the Borrower pursuant to this
Section 2.18(b) or (II) in the case of a payment, other than interest, to a Lender described
in clause (ii) above, to the extent that such Forms do not establish a complete exemption
from withholding of such Taxes. Notwithstanding anything to the contrary contained in the
preceding sentence or elsewhere in this Section 2.18, the Credit Parties agree to pay
additional amounts and to indemnify each Lender in the manner set forth in Section 2.18(a)
(without regard to the identity of the jurisdiction requiring the deduction or withholding)
in respect of any amounts deducted or withheld by it as described in the immediately
preceding sentence as a result of any changes after the Closing Date in any applicable law,
treaty, governmental rule, regulation, guideline or order, or in the interpretation thereof,
relating to the deducting or withholding of Taxes.




     (c) Each Lender agrees to use reasonable efforts (including reasonable efforts to
change its Domestic Lending Office or LIBOR Lending Office, as the case may be) to avoid or
to minimize any amounts which might otherwise be payable pursuant to this Section;
provided, however, that such efforts shall not cause the imposition on such
Lender of any additional costs or legal or regulatory burdens deemed by such Lender in its
sole discretion to be material.




     (d) If the Credit Parties pay any additional amount pursuant to this Section 2.18 with
respect to a Lender, such Lender shall use reasonable efforts to obtain a refund of tax or
credit against its tax liabilities on account of such payment; provided that such
Lender shall have no obligation to use such reasonable efforts if either (i) it is in an
excess foreign tax credit position or (ii) it believes in good faith, in its sole
discretion, that claiming a refund or credit would cause adverse tax consequences to it. In
the event that such Lender receives such a refund or credit, such Lender shall pay to the
Credit Parties an amount that such Lender reasonably determines is equal to the net tax
benefit obtained by such Lender as a result of such payment by the Credit Parties. In the
event that no refund or credit is obtained with respect to the Credit Parties’ payments to
such Lender pursuant to this Section 2.18, then such Lender shall upon request provide a
certification that such Lender has not received a refund or credit for such payments.
Nothing contained in this Section 2.18 shall require a Lender to disclose or detail the
basis of its calculation of the amount of any tax benefit or any other amount or the basis
of its determination referred to in the proviso to the first sentence of this Section 2.18
to the Credit Parties or any other party.




     (e) The agreements in this Section 2.18 shall survive the termination of this Credit
Agreement and the payment of the Credit Party Obligations.



       Section 2.19 Indemnification; Nature of Issuing Lender’s Duties.




     (a) In addition to its other obligations under Section 2.3, the Credit Parties hereby
agree to protect, indemnify, pay and save the Issuing Lender harmless from and against any
and all claims, demands, liabilities, damages, losses, costs, charges and expenses
(including reasonable attorneys’ fees) that the Issuing Lender may incur or be subject to as
a consequence,
direct or indirect, of (i) the issuance of any Letter of Credit or (ii) the failure of the
Issuing Lender to honor a drawing under a Letter of Credit as a result of any act or
omission, whether rightful or wrongful, of any present or future de jure or de facto
government or Governmental Authority (all such acts or omissions, herein called
“Government Acts”).




     (b) As between the Credit Parties and the Issuing Lender, the Credit Parties shall
assume all risks of the acts, omissions or misuse of any Letter of Credit by the beneficiary
thereof. The Issuing Lender



42









 






shall not be responsible: (i) for the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in
connection with the application for and issuance of any Letter of Credit, even if it should
in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or
forged; (ii) for the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder
or proceeds thereof, in whole or in part, that may prove to be invalid or ineffective for
any reason; (iii) for failure of the beneficiary of a Letter of Credit to comply fully with
conditions required in order to draw upon a Letter of Credit; (iv) for errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail, cable,
telegraph, telex or otherwise, whether or not they be in cipher; (v) for errors in
interpretation of technical terms; (vi) for any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under a Letter of Credit or of
the proceeds thereof; and (vii) for any consequences arising from causes beyond the control
of the Issuing Lender, including, without limitation, any Government Acts. None of the
above shall affect, impair, or prevent the vesting of the Issuing Lender’s rights or powers
hereunder.




     (c) In furtherance and extension and not in limitation of the specific provisions
hereinabove set forth, any action taken or omitted by the Issuing Lender, under or in
connection with any Letter of Credit or the related certificates, if taken or omitted in the
absence of gross negligence or willful misconduct, shall not put such Issuing Lender under
any resulting liability to the Credit Parties. It is the intention of the parties that this
Credit Agreement shall be construed and applied to protect and indemnify the Issuing Lender
against any and all risks involved in the issuance of the Letters of Credit, all of which
risks are hereby assumed by the Credit Parties, including, without limitation, any and all
risks of the acts or omissions, whether rightful or wrongful, of any Government Authority.
The Issuing Lender shall not, in any way, be liable for any failure by the Issuing Lender or
anyone else to pay any drawing under any Letter of Credit as a result of any Government Acts
or any other cause beyond the control of the Issuing Lender.




     (d) Nothing in this Section 2.19 is intended to limit the Reimbursement Obligation of
the Borrower contained in Section 2.3(d) hereof. The obligations of the Credit Parties
under this Section 2.19 shall survive the termination of this Credit Agreement. No act or
omissions of any current or prior beneficiary of a Letter of Credit shall in any way affect
or impair the rights of the Issuing Lender to enforce any right, power or benefit under this
Credit Agreement.




     (e) Notwithstanding anything to the contrary contained in this Section 2.19, the Credit
Parties shall have no obligation to indemnify the Issuing Lender in respect of any liability
incurred by the Issuing Lender arising out of the gross negligence or willful misconduct of
the Issuing Lender (including action not taken by the Issuing Lender), as determined by a
court of competent jurisdiction.



     Section 2.20 Replacement of Lenders.



     If any Lender shall become affected by any of the changes or events described in Sections
2.15, 2.16, or 2.18 (any such Lender being hereinafter referred to as a “Replaced Lender”)
and shall petition the Borrower for any increased cost or amounts thereunder, then in such case,
the Borrower may, upon at least thirty (30) Business Days’ notice to the Administrative Agent and
such Replaced Lender and so long as no Default or Event of Default has occurred and is continuing,
designate a replacement lender (a “Replacement Lender”) acceptable to the Administrative
Agent in its reasonable discretion, to which such Replaced Lender shall, subject to its receipt of
all amounts owed to such Replaced Lender under
Sections 2.15, 2.16, 2.17 or 2.18, assign at par all (but not less than all) of its rights,
obligations, Loans and Commitments hereunder; provided, that all amounts owed to such
Replaced Lender by the Borrower (except liabilities which by the terms hereof survive the payment
in full of the Loans and termination of this Agreement) shall be paid in full as of the date of
such assignment. Upon any assignment by any Lender pursuant to this Section 2.20 becoming
effective, the Replacement Lender shall thereupon be deemed to be a “Lender” for all purposes of
this Agreement and such Replaced Lender shall thereupon cease to be a “Lender” for all purposes of
this Agreement and shall have no further rights or obligations hereunder (other than pursuant to
Sections 2.15, 2.16, or 2.18, and 9.5 while such Replaced Lender was a Lender). If any Replaced
Lender shall refuse to assign its rights, obligations, Loans and Commitment in accordance with the
terms of this Section 2.20, the Replaced Lender shall cease to be a “Lender” for all purposes of
this Agreement upon payment to the Replaced Lender of all amounts owing to such Replaced Lender in
accordance with the terms of this Section 2.20 without any



43









 




further action of such Replaced Lender
and so long as no Default or Event of Default shall have occurred and be continuing, the Borrower
shall have the right to designate a Replacement Lender acceptable to the Administrative Agent in
its reasonable discretion.




ARTICLE III




REPRESENTATIONS AND WARRANTIES




     To induce the Lenders to enter into this Credit Agreement and to make the Extensions of Credit
herein provided for, the Credit Parties hereby represent and warrant to the Administrative Agent
and to each Lender that:



     Section 3.1 Financial Condition.




     (a) (i) The audited Consolidated and consolidating balance sheets of the Borrower and
its Consolidated Subsidiaries as of September 30, 2002, 2003 and 2004, and the Acquired
Company and its Consolidated Subsidiaries as of November 30, 2002, 2003 and 2004, together
with the related Consolidated and consolidating statements of income or operations, and
Consolidated statements of shareholders’ equity and cash flows for the fiscal years ended on
such dates, (ii) the unaudited Consolidated and consolidating balance sheets of the Borrower
and its Consolidated Subsidiaries and of the Acquired Company as of the last day of the
month immediately preceding the Closing Date, together with the related unaudited
Consolidated and consolidating statements of income or operations and Consolidated cash
flows (to the extent available) for the twelve-month period ending on such date and (iii) an
unaudited pro forma consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries and of the Acquired Company and its Subsidiaries as of the last day of the
month immediately preceding the Closing Date:




     (A) were prepared in accordance with GAAP consistently applied throughout the
period covered thereby, except as otherwise expressly noted therein;




     (B) fairly present the financial condition of the Borrower and its Consolidated
Subsidiaries and of the Acquired Company and its Consolidated Subsidiaries as of the
date thereof (subject, in the case of the unaudited financial statements, to normal
year-end adjustments) and results of operations for the period covered thereby; and




     (C) show all material indebtedness and other liabilities, direct or contingent,
of the Borrower and its Subsidiaries and of the Acquired Company and its
Subsidiaries as of the date thereof, including liabilities for taxes, material
commitments and contingent obligations required to be included in accordance with
GAAP.




     (b) The four-year projections of the Borrower and its Subsidiaries delivered to the
Lenders on or prior to the Closing Date have been prepared in good faith based upon
reasonable assumptions.



     Section 3.2 No Change.



     Since September 30, 2004, there has been no development or event which, individually or in the
aggregate, has had or could reasonably be expected to have a Material Adverse Effect.



     Section 3.3 Corporate Existence; Compliance with Law.



     Each of the Credit Parties (a) is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization or formation, (b) has the requisite power and
authority and the legal right to own and operate all its material property, to lease the material
properties it operates as lessee and to conduct the business in which it is currently engaged, (c)
is duly qualified to conduct business and in good standing under the laws of (i) the jurisdiction
of its organization or formation, (ii) the jurisdiction where its chief executive office is located
and (iii) each other jurisdiction where its ownership, lease or operation of property or the
conduct of its business requires such qualification except to the extent that the failure to so
qualify or be in good standing could not reasonably be



44









 




expected to have a material adverse effect
on the business or operations of the Credit Parties and their Subsidiaries (in the aggregate taken
as a whole) in such jurisdiction, (d) is in compliance with all Requirements of Law, government
permits and government licenses (including, without limitation, all Food and Drug Administration
regulations and requirements) except to the extent that the failure to comply therewith could not,
individually or in the aggregate, reasonably be expected to have a Material Adverse Effect and (e)
has all material permits, licenses and governmental authorizations necessary to run their business.
The jurisdictions in which the Credit Parties as of the Closing Date are organized and qualified to
do business are described on Schedule 3.3.




     Section 3.4 Corporate Power; Authorization; Enforceable Obligations.



     Each of the Credit Parties has full power and authority and the legal right to make, deliver
and perform the Credit Documents to which it is party and has taken all necessary limited liability
company, partnership or corporate action to authorize the execution, delivery and performance by it
of the Credit Documents to which it is party. No consent or authorization of, filing with, notice
to or other act by or in respect of, any Governmental Authority or any other Person is required in
connection with the borrowings hereunder or with the execution, delivery or performance of any
Credit Document by any of the Credit Parties (other than those that have been obtained) or with the
validity or enforceability of any Credit Document against any of the Credit Parties (except such
filings as are necessary in connection with the perfection of the Liens created by such Credit
Documents). Each Credit Document to which it is a party has been duly executed and delivered on
behalf of each Credit Party. Each Credit Document to which it is a party constitutes a legal,
valid and binding obligation of each Credit Party, enforceable against such Credit Party in
accordance with its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’
rights generally and by general equitable principles (whether enforcement is sought by proceedings
in equity or at law).



     Section 3.5 No Legal Bar; No Default.



     The execution, delivery and performance by each Credit Party of the Credit Documents to which
such Credit Party is a party, the borrowings thereunder and the use of the proceeds of the Loans
will not violate any Requirement of Law or any material Contractual Obligation of any Credit Party
(except those as to which waivers or consents have been obtained), and will not result in, or
require, the creation or imposition of any Lien on any Credit Party’s properties or revenues
pursuant to any Requirement of Law or material Contractual Obligation other than the Liens arising
under or contemplated in connection with the Credit Documents. No Credit Party is in default under
or with respect to any of its material
Contractual Obligations in any material respect. No Default or Event of Default has occurred
and is continuing.



     Section 3.6 No Material Litigation.



     No litigation, investigation, claim, criminal prosecution, civil investigative demand,
imposition of criminal or civil fines and penalties, or any other proceeding of or before any
arbitrator or Governmental Authority is pending or, to the best knowledge of the Credit Parties,
threatened by or against any Credit Party or any of its Subsidiaries or against any of its or their
respective properties or revenues (a) with respect to the Credit Documents or any Loan or any of
the Transactions contemplated hereby, or (b) which, if adversely determined, could, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect.



     Section 3.7 Investment Company Act; PUHCA, Etc.



     No Credit Party is an “investment company”, or a company “controlled” by an “investment
company”, within the meaning of the Investment Company Act of 1940, as amended. No Credit Party is
a subject to regulation under the Public Utility Holding Company Act of 1935, as amended, the
Federal Power Act, the Interstate Commerce Act, or any federal or state statute or regulation
limiting its ability to incur the Credit Party Obligations.



     Section 3.8 Margin Regulations.



     No part of the proceeds of any Extension of Credit hereunder will be used directly or
indirectly for any purpose that violates, or that would be inconsistent with, the provisions of
Regulation T, U or X of the Board of



45









 




Governors of the Federal Reserve System as now and from time
to time hereafter in effect. The Credit Parties and their Subsidiaries (a) are not engaged,
principally or as one of their important activities, in the business of extending credit for the
purpose of “purchasing” or “carrying” “margin stock” within the respective meanings of each of such
terms under Regulation U and (b) taken as a group do not own “margin stock” except as identified in
the financial statements referred to in Section 3.1 and the aggregate value of all “margin stock”
owned by the Credit Parties and their Subsidiaries taken as a group does not exceed 25% of the
value of their assets.




     Section 3.9 ERISA.



     Neither a Reportable Event nor an “accumulated funding deficiency” (within the meaning of
Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to
the date on which this representation is made or deemed made with respect to any Plan, and each
Plan has complied in all material respects with the applicable provisions of ERISA and the Code,
except to the extent that any such occurrence or failure to comply could not, individually or in
the aggregate, reasonably be expected to result in liability to the Credit Parties and their
Subsidiaries in excess of $1,000,000. No termination of a Single Employer Plan has occurred
resulting in any liability in excess of $1,000,000 that has remained underfunded, and no Lien in
favor of the PBGC or a Plan has arisen, during such five-year period. The present value of all
accrued benefits under each Single Employer Plan (based on those assumptions used to fund such
Plans) did not, as of the last annual valuation date prior to the date on which this representation
is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued
benefits by an amount which, as determined in accordance with GAAP, could reasonably be expected to
have a Material Adverse Effect. Neither any Credit Party nor any Commonly Controlled Entity is
currently subject to any liability in excess of $1,000,000 for a complete or partial withdrawal
from a Multiemployer Plan.



     Section 3.10 Environmental Matters.




     (a) Except where such violation or liability could not reasonably be expected to have a
Material Adverse Effect, the facilities and properties owned, leased or operated by the
Credit
Parties or any of their Subsidiaries (the “Properties”) do not contain any
Materials of Environmental Concern in amounts or concentrations which (i) constitute a
violation of, or (ii) could give rise to liability under, any Environmental Law.




     (b) Except where such violation, contamination or non-compliance could not reasonably
be expected to have a Material Adverse Effect, the Properties and all operations of the
Credit Parties and/or their Subsidiaries at the Properties are in compliance, and have in
the last five years been in compliance with all applicable Environmental Laws, and there is
no contamination at, under or about the Properties or violation of any Environmental Law
with respect to the Properties or the business operated by the Credit Parties or any of
their Subsidiaries (the “Business”).




     (c) Neither the Credit Parties nor their Subsidiaries have received any written or
actual notice of violation, alleged violation, non-compliance, liability or potential
liability with respect to environmental matters or Environmental Laws regarding any of the
Properties or the Business, nor does the Credit Parties and their Subsidiaries have
knowledge or reason to believe that any such notice will be received or is being threatened
which could reasonably be expected to have a Material Adverse Effect.




     (d) Except where such violation or liability could not reasonably be expected to have a
Material Adverse Effect, Materials of Environmental Concern have not been transported or
disposed of from the Properties in violation of, or in a manner or to a location that could
give rise to liability under any Environmental Law, and no Materials of Environmental
Concern have been generated, treated, stored or disposed of at, on or under any of the
Properties in violation of, or in a manner that could give rise to liability under, any
applicable Environmental Law.




     (e) No judicial proceeding or governmental or administrative action is pending or, to
the knowledge of the Credit Parties and their Subsidiaries, threatened, under any
Environmental Law to which any Credit Party or any Subsidiary is or will be named as a party
with respect to the Properties or the Business, nor are there any consent decrees or other
decrees, consent orders, administrative orders or other orders, or other administrative or
judicial requirements outstanding under any Environmental Law with



46









 






respect to the Properties
or the Business which could reasonably be expected to have a Material Adverse Effect.




     (f) Except where such violation or liability could not reasonably be expected to have a
Material Adverse Effect, there has been no release or threat of release of Materials of
Environmental Concern at or from the Properties, or arising from or related to the
operations of any Credit Party or any Subsidiary in connection with the Properties or
otherwise in connection with the Business, in violation of or in amounts or in a manner that
could give rise to liability under Environmental Laws.



     Section 3.11 Use of Proceeds.



     The proceeds of the Extensions of Credit shall be used by the Borrower solely (a) to finance
the Acquisition, (b) to pay certain costs, fees and expenses in connection with the Acquisition,
(c) to refinance certain existing Indebtedness of the Borrower and the Acquired Company, (d) to pay
any fees and expenses associated with this Credit Agreement and the Second Lien Credit Agreement on
the Closing Date and (e) for working capital and other general business purposes of the Credit
Parties and their Subsidiaries (including, without limitation, Consolidated Capital Expenditures
and Permitted Acquisitions).



     Section 3.12 Subsidiaries.



     Set forth on Schedule 3.12 is a complete and accurate list of all Subsidiaries of the
Credit Parties as of the Closing Date. Information on the attached Schedule includes the
following: (a) the number of shares of each class of Capital Stock or other equity interests
outstanding; (b) the number and percentage of outstanding shares of each class of Capital Stock
owned by the Borrower or any of its
Subsidiaries; and (c) the number and effect, if exercised, of all outstanding options, warrants,
rights of conversion or purchase and similar rights. The outstanding Capital Stock and other
equity interests of all such Subsidiaries is validly issued, fully paid and non-assessable and is
owned free and clear of all Liens (other than those arising under or contemplated in connection
with the Credit Documents or Permitted Liens). The Borrower shall update Schedule 3.12
from time to time in accordance with Section 5.2(c).



     Section 3.13 Ownership.



     Each of the Credit Parties and its Subsidiaries has good and marketable title to all of its
material assets, or if any Property is leased by such Credit Party or any of its Subsidiaries, such
Person has a valid leasehold interest enforceable against the ground lessor of such Property in
accordance with the terms of such lease, and none of the assets of the Credit Parties and their
Subsidiaries is subject to any Lien other than Permitted Liens.



     Section 3.14 Indebtedness.



     Except as otherwise permitted under Section 6.1, the Credit Parties and their Subsidiaries
have no Indebtedness.



     Section 3.15 Taxes.



     Each of the Credit Parties and their Subsidiaries has filed, or caused to be filed or timely
filed for extension of payment of, all material federal and state income tax returns and all other
tax returns required to be filed and paid (a) all amounts of taxes shown thereon to be due
(including interest and penalties) and (b) all other material taxes, fees, assessments and other
governmental charges (including mortgage recording taxes, documentary stamp taxes and intangibles
taxes) owing by it, except for such taxes (i) that are not yet delinquent or (ii) that are being
contested in good faith and by proper proceedings, and against which adequate reserves are being
maintained in accordance with GAAP. None of the Credit Parties and their Subsidiaries is aware as
of the Closing Date of any proposed material tax assessments against it or any of its Subsidiaries.



     Section 3.16 Intellectual Property Rights.



     Each of the Credit Parties and their Subsidiaries owns, or has the legal right to use, all
Material IP. Set forth on Schedule 3.16 is a list of all Material IP owned by each of the
Credit Parties and their Subsidiaries or that



47









 




the Credit Parties or any of their Subsidiaries has
the right to use as of the Closing Date. Except as provided on Schedule 3.16, no material
claim has been asserted in writing and is pending by any Person challenging or questioning the use
of any such Material IP or the validity or effectiveness of any such Material IP, nor do the Credit
Parties or any of their Subsidiaries know of any such claim, and, to the knowledge of the Credit
Parties and their Subsidiaries, the use of such Material IP by the Credit Parties or any of their
Subsidiaries does not infringe on the rights of any Person in any material respect. The Borrower
may update Schedule 3.16 in accordance with the terms of Section 5.2(c).




     Section 3.17 Solvency.



     After giving effect to the Transactions, the fair saleable value of each Credit Party’s
assets, measured on a going concern basis, exceeds all probable liabilities, including those to be
incurred pursuant to this Credit Agreement. After giving effect to the Acquisition, the Second
Lien Term Loan and other Transactions contemplated by this Credit Agreement, the Credit Parties
(taken as a whole) (a) do not have unreasonably small capital in relation to the business in which
they are or propose to be engaged and (b) have not incurred, or do not believe that they will
incur, debts beyond their ability to pay such debts as they become due. In executing the Credit
Documents and consummating the Transactions, none of the Credit Parties intends to hinder, delay or
defraud either present or future creditors or other Persons to which one or more of the Credit
Parties is or will become indebted.



     Section 3.18 Investments.



     All Investments of each of the Credit Parties and their Subsidiaries are Permitted
Investments.



     Section 3.19 Location of Collateral.



     Set forth on Schedule 3.19(a) is a list of all Properties of the Credit Parties and
their Subsidiaries (other than ESI) as of the Closing Date with street address, county and state
where located. Set forth on Schedule 3.19(b) is a list of all locations not otherwise set
forth on Schedule 3.19(a) where any tangible personal property of the Credit Parties and
their Subsidiaries (other than ESI) is located as of the Closing Date, including county and state
where located. Set forth on Schedule 3.19(c) is the state of incorporation or
organization, the chief executive office and the principal place of business of each of the Credit
Parties and their Subsidiaries as of the Closing Date.



     Section 3.20 No Burdensome Restrictions.



     None of the Credit Parties and their Subsidiaries is a party to any agreement or instrument or
subject to any other obligation or any charter or corporate restriction or any provision of any
applicable law, rule or regulation which could reasonably be expected to have a Material Adverse
Effect.



     Section 3.21 Brokers’ Fees.



     Except as set forth on Schedule 3.21, none of the Credit Parties and their
Subsidiaries has any obligation to any Person in respect of any finder’s, broker’s, investment
banking or other similar fee in connection with any of the transactions contemplated under the
Credit Documents other than the closing and other fees payable pursuant to this Credit Agreement
and as set forth in the Fee Letter.



     Section 3.22 Labor Matters.



     There are no collective bargaining agreements or Multiemployer Plans in which any of the
Credit Parties or their Subsidiaries are participating employers as of the Closing Date, other than
as set forth in Schedule 3.22 hereto, and none of the Credit Parties and their Subsidiaries
(i) has suffered any strikes, walkouts, work stoppages or other material labor difficulty within
the last five (5) years prior to the Closing Date, other than as set forth in Schedule 3.22
hereto, (ii) has knowledge as of the Closing Date of any pending strike, walkout or work stoppage,
or (iii) has knowledge of any existing strike, walkout or work stoppage, except (with respect to
any specific matters set forth in clauses (i), (ii) and (iii) above) which in the aggregate could
not reasonably be expected to cause a Material Adverse Effect. Other than as set forth on
Schedule 3.22, no unfair labor practice complaint is pending against any Credit Party or
any of its Subsidiaries as of the Closing Date.



48









 





     Section 3.23 Accuracy and Completeness of Information.



     All factual information heretofore, contemporaneously or hereafter furnished by or on behalf
of any Credit Party or any of its Subsidiaries to the Administrative Agent, the Arranger or any
Lender for purposes of or in connection with this Credit Agreement or any other Credit Document, or
any transaction contemplated hereby or thereby when taken together with the Borrower’s filings with
the SEC, as modified or supplemented by other information so furnished, is or will be true and
accurate in all material respects and does not contain any material misstatement of fact or omit to
state any material fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided that, with respect to projected
financial information, the Borrower represents only that such information was prepared in good
faith based upon assumptions believed to be reasonable at the time. There are no facts now known
to the Borrower (other than matters of general economic nature) that has had, or could reasonably
be expected to have, a Material Adverse Effect, which fact has not been set forth herein, in the
financial statements of the Borrower and its Subsidiaries furnished to the Administrative Agent and
the Lenders, or in any certificate, opinion or other written statement made or furnished by or on
behalf of a Credit Party to the Administrative Agent and/or the Lenders.



     Section 3.24 Material Contracts.



     Schedule 3.24 sets forth a complete and accurate list of all Material Contracts (other
than the Second Lien Credit Documents) of the Credit Parties and their Subsidiaries (other than
ESI) in effect as of the Closing Date. As of the Closing Date, each such Material Contract is, and
after giving effect to the Transactions will be, in full force and effect in accordance with the
terms thereof. The Credit Parties and their Subsidiaries (other than ESI) have delivered to the
Administrative Agent a true and complete copy of each Material Contract, except to the extent the
disclosure of such Material Contract is then prohibited by any Requirement of Law, the directive of
any applicable Governmental Authority or any Contractual Obligation binding on any Credit Party as
of the Closing Date; provided that the Borrower may redact or summarize certain portions of
such Material Contracts containing non-financial trade secrets or non-financial proprietary
information with the consent of the Administrative Agent (such consent not to be unreasonably
withheld). Schedule 3.24 may be updated from time to time by the Borrower to include new
Material Contracts by giving written notice thereof to the Administrative Agent.



     Section 3.25 Insurance.



     The present insurance coverage of the Credit Parties and their Subsidiaries (other than ESI)
as of the Closing Date is outlined as to carrier, policy number, expiration date, type and amount
on Schedule 3.25 and such insurance coverage complies the requirements set forth in Section
5.5(b). Schedule 3.25 may be updated from time to time by the Borrower to include
additional insurance coverage by giving written notice thereof to the Administrative Agent.



     Section 3.26 Security Documents.



     The Security Documents create valid security interests in, and Liens on, the Collateral
purported to be covered thereby. Except as set forth in the Security Documents, such security
interests and Liens are perfected security interests and Liens (to the extent that such perfection
can be accomplished upon (a) the filing of appropriate financing statements with the Secretary of
State of the state of incorporation for each Credit Party, the filing of appropriate assignments or
notices with the United States Patent and Trademark Office and the United States Copyright Office,
and the recordation of the applicable Mortgage Instruments, in each case in favor of the
Administrative Agent, on behalf of the Lenders, and (b) the Administrative Agent obtaining Control
(as defined in the Security Agreement) over those items of Collateral in which a security interest
is perfected through Control), prior to all other Liens (including Liens securing the Second Lien
Obligations) other than Permitted Liens.



     Section 3.27 Regulation H.



     No Mortgaged Property is a Flood Hazard Property.



49









 





     Section 3.28 Classification of Senior Indebtedness.



     The Credit Party Obligations constitute “Senior Indebtedness” under and as defined in any
agreement governing any Subordinated Debt and the subordination provisions set forth in each such
agreement are legally valid and enforceable against the parties thereto.



     Section 3.29 Anti-Terrorism Laws.



     Neither any Credit Party nor any of its Subsidiaries is an “enemy” or an “ally of the enemy”
within the meaning of Section 2 of the Trading with the Enemy Act of the United States of America
(50 U.S.C. App. §§ 1 et seq.), as amended. Neither any Credit Party nor any or its Subsidiaries is
in violation of (a) the Trading with the Enemy Act, as amended, (b) any of the foreign assets
control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as
amended) or any enabling legislation or executive order relating thereto or (c) the Patriot Act (as
defined in Section 9.18). None of the Credit Parties (i) is a blocked person described in section
1 of the Anti-Terrorism Order or (ii) to the
best of its knowledge, engages in any dealings or transactions, or is otherwise associated,
with any such blocked person.



     Section 3.30 Compliance with OFAC Rules and Regulations.



     None of the Credit Parties or their Subsidiaries or their respective Affiliates (i) is a
Sanctioned Person, (ii) has more than 15% of its assets in Sanctioned Countries, or (iii) derives
more than 15% of its operating income from investments in, or transactions with Sanctioned Persons
or Sanctioned Countries. No part of the proceeds of any Extension of Credit hereunder will be used
directly or indirectly to fund any operations in, finance any investments or activities in or make
any payments to, a Sanctioned Person or a Sanctioned Country.



     Section 3.31 Directors; Capitalization.



     Set forth on Schedule 3.31 is a list of the directors of the Borrower’s board of
directors as of the Closing Date. As of November 25, 2005, the capitalization of the Borrower
shall be as set forth on Schedule 3.31.



     Section 3.32 Consummation of Acquisition; Representations and Warranties from Other
Documents.



     The Acquisition and related transactions have been consummated substantially in accordance
with the terms of the Acquisition Documents. As of the Closing Date, the Acquisition Documents
have not been altered, amended or otherwise modified or supplemented in any material respect or any
material condition thereof waived without the prior written consent of the Administrative Agent.
Each of the representations and warranties made in the Acquisition Documents by the Borrower and
its Subsidiaries or, to the best knowledge of the Borrower, made by any third party is true and
correct in all material respects.



     Section 3.33 Compliance with FCPA.



     To the best of its knowledge, each of the Credit Parties and their Subsidiaries (a) is in
compliance with the Foreign Corrupt Practices Act, 15 U.S.C. §§ 78dd-1, et seq., and any foreign
counterpart thereto and (b) has not made a payment, offering, or promise to pay, or authorized the
payment of, money or anything of value (i) in order to assist in obtaining or retaining business
for or with, or directing business to, any foreign official, foreign political party, party
official or candidate for foreign political office, (ii) to a foreign official, foreign political
party or party official or any candidate for foreign political office, and (iii) with the intent to
induce the recipient to misuse his or her official position to direct business wrongfully to such
Credit Party or its Subsidiary or to any other Person, in violation of the Foreign Corrupt
Practices Act, 15 U.S.C. §§ 78dd-1, et seq., in each case to the extent such non-compliance,
payment, offering or promise to pay could, individually or in the aggregate, reasonably be expected
to result in liability to the Credit Parties and their Subsidiaries in excess of $1,000,000.



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ARTICLE IV




CONDITIONS PRECEDENT




     Section 4.1 Conditions to Closing Date.



     This Credit Agreement shall become effective upon, and the obligation of each Lender to make
the initial Revolving Loans and Term Loan on the Closing Date is subject to, the satisfaction of
the following conditions precedent:




     (a) Execution of Credit Agreement and Credit Documents. The Administrative
Agent shall have received (i) counterparts of this Credit Agreement, executed by a duly
authorized
officer of each party hereto, (ii) for the account of each Lender with a Revolving
Commitment requesting a promissory note, a Revolving Note, (iii) for the account of each
Lender with a Term Loan Commitment requesting a promissory note, a Term Loan Note, (iv) for
the account of the Swingline Lender, the Swingline Note, (v) counterparts of the Security
Agreement, the Pledge Agreement and each Mortgage Instrument, in each case conforming to the
requirements of this Credit Agreement and executed by duly authorized officers of the Credit
Parties or other Person, as applicable, (vi) counterparts of the Intercreditor Agreement,
executed by a duly authorized officer of each party thereto and (vii) counterparts of any
other Credit Document, executed by the duly authorized officers of the parties thereto.




     (b) Authority Documents. The Administrative Agent shall have received the
following:




     (i) Articles of Incorporation. Copies of the articles of incorporation
or other charter documents, as applicable, of each Credit Party certified (A) by a
secretary or assistant secretary of such Credit Party (pursuant to a secretary’s
certificate in substantially the form of Schedule 4.1(b) attached hereto) as
of the Closing Date to be true and correct and in force and effect as of such date,
and (B) to be true and complete as of a recent date by the appropriate Governmental
Authority of the state of its incorporation or organization, as applicable.




     (ii) Resolutions. Copies of resolutions of the board of directors or
comparable managing body of each Credit Party approving and adopting the Credit
Documents, the transactions contemplated therein and authorizing execution and
delivery thereof, certified by a secretary or assistant secretary of such Credit
Party (pursuant to a secretary’s certificate in substantially the form of
Schedule 4.1(b) attached hereto) as of the Closing Date to be true and
correct and in force and effect as of such date.




     (iii) Bylaws. A copy of the bylaws or comparable operating agreement
of each Credit Party certified by a secretary or assistant secretary of such Credit
Party (pursuant to a secretary’s certificate in substantially the form of
Schedule 4.1(b) attached hereto) as of the Closing Date to be true and
correct and in force and effect as of such date.




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




     (v) Incumbency. An incumbency certificate of each Credit Party
certified by a secretary or assistant secretary (pursuant to a secretary’s
certificate in substantially the form of Schedule 4.1(b) attached hereto) to
be true and correct as of the Closing Date.




     (c) Legal Opinion of Counsel. The Administrative Agent shall have received an
opinion or opinions of counsel for the Credit Parties, dated the Closing Date and addressed
to the Administrative Agent and the Lenders, in form and substance reasonably acceptable to
the Administrative Agent (which



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shall include, without limitation, opinions with respect to
the due organization and valid existence of each Credit Party, opinions as to perfection of
the Liens granted to the Administrative Agent and the Control Agent pursuant to the Security
Documents and opinions as to the non-contravention of the Credit Parties’ organizational
documents and Material Contracts).




     (d) Personal Property Collateral. The Administrative Agent (or the Control
Agent in the case of Collateral where perfection of a security interest requires possession
of such Collateral) shall have received, in form and substance satisfactory to the
Administrative Agent:




     (i) (A) searches of Uniform Commercial Code filings in the jurisdiction of the
chief executive office of each Credit Party and each jurisdiction where any
Collateral is located or where a filing would need to be made in order to perfect
the Lenders’ security interest in the Collateral, copies of the financing statements
on file in such jurisdictions and evidence that no Liens exist other than Permitted
Liens and (B) tax lien, judgment and pending litigation searches as reasonably
required by the Administrative Agent;




     (ii) searches of ownership of Intellectual Property in the appropriate
governmental offices and such patent/trademark/copyright filings as reasonably
requested by the Administrative Agent in order to perfect the Administrative Agent’s
security interest in the Material IP;




     (iii) completed UCC financing statements for each appropriate jurisdiction as
is necessary, in the Administrative Agent’s sole discretion, to perfect the Lenders’
security interest in the Collateral;




     (iv) with respect to the stock or membership certificates, if any, evidencing
the Capital Stock pledged to the Administrative Agent pursuant to the Pledge
Agreement, duly executed in blank undated stock or transfer powers;




     (v) duly executed consents as are necessary, in the Administrative Agent’s sole
discretion, to perfect the Lenders’ security interest in the Collateral; and




     (vi) Deposit Account Control Agreements satisfactory to the Administrative
Agent with respect to each account set forth on Schedule 6.14, except
payroll accounts set forth thereon and to the extent otherwise determined by the
Administrative Agent.




     (e) Liability, Casualty, Property and Business Interruption Insurance. The
Administrative Agent shall have received copies of insurance policies or certificates of
insurance evidencing liability, casualty, property and business interruption insurance
meeting the requirements set forth herein or in the Security Documents. The Administrative
Agent shall be named as loss payee and/or additional insured with respect to any such
insurance providing liability coverage or coverage in respect of any Collateral, and each
provider of any such insurance shall agree, by endorsement upon the policy or policies
issued by it or by independent instruments furnished to the Administrative Agent, that it
will give thirty (30) days prior written notice before any such policy or policies shall be
cancelled.




     (f) Reports. The Administrative Agent shall have received a copy of each
material opinion and report required to be delivered pursuant to the Acquisition Documents
in connection with the Acquisition and related transactions (and the Borrower will use
reasonable efforts to obtain evidence that the Administrative Agent and the Lenders have
been authorized to rely on each such opinion and report), all in form and substance
reasonably satisfactory to the Administrative Agent.




     (g) Litigation. There shall not exist any pending litigation or investigation
affecting or relating to (i) any Credit Party or any of its Subsidiaries that in the
reasonable judgment of the Administrative Agent and Lenders could materially adversely
affect the any Credit Party or any of its Subsidiaries, this Agreement or the other Credit
Documents, that has not been settled, dismissed, vacated, discharged or terminated prior to
the Closing Date or (ii) this Agreement, the other Credit Documents, the



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Second Lien Term
Loan or the Acquisition that has not been settled, dismissed, vacated, discharged or
terminated prior to the Closing Date.




     (h) Solvency Certificate. The Administrative Agent shall have received an
officer’s certificate prepared by the chief financial officer of the Borrower as to the
financial condition, solvency and related matters of the Borrower and the Credit Parties and
their Subsidiaries, taken as a whole, after giving effect to the Acquisition, the Second
Lien Term Loan and the initial borrowings under the Credit Documents, in substantially the
form of Schedule 4.1(h) hereto.




     (i) Account Designation Letter. The Administrative Agent shall have received
the executed Account Designation Letter in the form of Schedule 1.1(a) hereto.




     (j) Notice of Borrowing. The Administrative Agent shall have received a Notice
of Borrowing with respect to the Revolving Loans to be made on the Closing Date.




     (k) Corporate Structure. The number of shares of each class of Capital Stock
issued and outstanding and the ownership thereof of the Credit Parties and their
Subsidiaries as of the Closing Date (after giving effect to the Acquisition) shall be as
described in Schedule 3.12 and Schedule 3.31, and shall otherwise be
reasonably satisfactory to the Administrative Agent. The Administrative Agent and the
Lenders shall be reasonably satisfied with the management of the Credit Parties and their
Subsidiaries and of the Acquired Company and with all legal, tax, accounting, business and
other matters relating to the Acquisition or to the Credit Parties and their Subsidiaries or
the Acquired Company, in each case after giving effect to the Acquisition.




     (l) Acquisition Documents. The Administrative Agent shall have reviewed and
approved in its sole discretion all of the Acquisition Documents and there shall not have
been any material modification, amendment, supplement or waiver to the Acquisition Documents
without the prior written consent of the Administrative Agent, and the Acquisition shall
have been consummated in accordance with the terms of the Acquisition Documents (without
waiver of any conditions precedent to the obligations of any party thereto). The
Administrative Agent shall have received a copy, certified by an officer of the Borrower as
true and complete, of each Acquisition Document as originally executed and delivered,
together with all exhibits and schedules thereto. The Administrative Agent shall have
received evidence that the estimated purchase accounting adjustments and asset write-ups
(collectively, the “Accounting Adjustments”) in connection with the Acquisition are
equal to or substantially similar to the Accounting Adjustments previously delivered to the
Administrative Agent, if any, or otherwise acceptable to the Administrative Agent. The
aggregate consideration for the Acquisition shall not exceed $114,000,000 (excluding the
GenCorp Earnout Obligations) and a portion of such consideration shall consist of the
Subordinated Seller Note in the principal amount of $25,500,000.




     (m) Consents. The Administrative Agent shall have received evidence that all
boards of directors (including, without limitation, the board of directors of the Acquired
Company prior to Acquisition), governmental, shareholder and material third party consents
and approvals necessary in connection with the Transactions have been obtained and all
applicable waiting periods have expired without any action being taken by any authority that
could restrain, prevent or impose any material adverse conditions on such transactions or
that could seek or threaten any of the foregoing.




     (n) Compliance with Laws. The Transactions contemplated hereby shall be in
compliance with all applicable laws and regulations (including all applicable securities and
banking laws, rules and regulations).




     (o) Bankruptcy. There shall be no bankruptcy or insolvency proceedings with
respect to Credit Parties or any of their Subsidiaries.




     (p) Second Lien Term Loan. The Administrative Agent shall have received duly
executed copies of the Second Lien Credit Documents, each in form and substance reasonably
acceptable to the Lenders



53









 






in their sole discretion, and evidence that the Borrower has
received gross proceeds of the Second Lien Term Loan in an amount of not less than
$20,000,000.




     (q) Existing Indebtedness of the Credit Parties. All of the existing
Indebtedness for borrowed money of the Borrower and its Subsidiaries (other than
Indebtedness permitted to exist pursuant to Section 6.1) shall be repaid in full and all
security interests related thereto shall be terminated on the Closing Date.




     (r) Financial Statements. The Administrative Agent and the Lenders shall have
received copies of the financial statements referred to in Section 3.1 hereof, each in form
and substance satisfactory to it.




     (s) No Material Adverse Change. Since September 30, 2004, there has been no
material adverse change in the business, properties, prospects, operations or condition
(financial or otherwise) of the Borrower or any of its Subsidiaries and there shall not have
occurred any material disruption or material adverse change in the financial, banking or
capital markets (including the loan syndication market) that has materially impaired or
would materially impair the Arranger’s ability to syndicate the facilities.




     (t) Financial Condition Certificate. The Administrative Agent shall have
received a certificate or certificates executed by a Responsible Officer of the Borrower as
of the Closing Date stating that (i) no action, suit, investigation or proceeding is
pending, ongoing or, to the knowledge of any Credit Party, threatened in any court or before
any other Governmental Authority that purports to affect any Credit Party or any transaction
contemplated by the Credit Documents, which action, suit, investigation or proceeding could
reasonably be expected to have a Material Adverse Effect and (ii) immediately after giving
effect to this Credit Agreement, the other Credit Documents, and all the Transactions
contemplated to occur on such date, (A) no Default or Event of Default exists, (B) all
representations and warranties contained herein and in the other Credit Documents are true
and correct in all material respects, and (C) the Credit Parties are in pro forma compliance
with each of the initial financial covenants set forth in Section 5.9 (as evidenced through
detailed calculations of such financial covenants on a schedule to such certificate) as of
the last day of the month immediately preceding the Closing Date.




     (u) Total Leverage Ratio and First Lien Leverage Ratio. The Administrative
Agent shall have received evidence that, as of the last day of the month immediately
preceding the Closing Date (i) the Total Leverage Ratio of the Credit Parties and their
Subsidiaries is not greater than 4.25 to 1.00 and (ii) the First Lien Leverage Ratio of the
Credit Parties and their Subsidiaries is not greater than 3.25 to 1.00, in each case,
calculated on a Pro Forma Basis after giving effect to the Transactions.




     (v) Consolidated EBITDA. The Administrative Agent shall have received evidence
reasonably satisfactory thereto provided by the Credit Parties that Consolidated EBITDA is
not less than $20,400,000 for the twelve month period ending as of the last day of the month
immediately preceding the Closing Date, calculated on a Pro Forma Basis after giving effect
to the Transaction.




     (w) Cash Reserves. The Administrative Agent shall have received evidence that
the Borrower shall have a minimum balance of excess unrestricted cash as of the last day of
the month immediately preceding the Closing Date equal to $24,000,000 less the amount of
Capital Expenditures funded by the Acquired Company between December 1, 2004 and the Closing
Date that exceeds $19,000,000, calculated after giving effect to the Transactions.




     (x) Subordinated Seller Note. The Administrative Agent shall have received
evidence that not less than $25,500,000 of the aggregate consideration for the Acquisition
shall have been in the form of the Subordinated Seller Note.




     (y) Material Contracts. The Administrative Agent shall have received true and
complete copies, certified by an officer of the Borrower as true and complete, of all
Material Contracts, together with all exhibits and schedules except to the extent the
disclosure of such Material Contract is then prohibited by any Requirement of Law, the
directive of any applicable Governmental Authority or any Contractual



54









 






Obligation binding on
any Credit Party as of the Closing Date; provided that the Borrower may redact
certain portions of such Material Contracts containing non-financial trade secrets or
non-financial proprietary information with the consent of the Administrative Agent (such
consent not to be unreasonably withheld).




     (z) Patriot Act Certificate. The Administrative Agent shall have received a
certificate satisfactory thereto, for benefit of itself and the Lenders, provided by the
Borrower that sets forth information required by the Patriot Act (as defined in Section
9.18) including, without limitation, the identity of the Borrower, the name and address of
the Borrower and other information that will allow the Administrative Agent or any Lender,
as applicable, to identify the Borrower in accordance with the Patriot Act.




     (aa) Fees. The Administrative Agent and the Lenders shall have received all
fees, if any, owing pursuant to the Fee Letter and Section 2.6.




     (bb) Additional Matters. All other documents and legal matters in connection
with the transactions contemplated by this Credit Agreement shall be reasonably satisfactory
in form and substance to the Administrative Agent and its counsel.



     Section 4.2 Conditions to All Extensions of Credit.



     The obligation of each Lender to make any Extension of Credit hereunder is subject to the
satisfaction of the following conditions precedent on the date of making such Extension of Credit:




     (a) Representations and Warranties. The representations and warranties made by
the Credit Parties herein, in the Security Documents or which are contained in any
certificate furnished at any time under or in connection herewith shall be true and correct
on and as of the date of such Extension of Credit as if made on and as of such date (except
for those which expressly relate to an earlier date).




     (b) No Default or Event of Default. No Default or Event of Default shall have
occurred and be continuing on such date or after giving effect to the Extension of Credit to
be made on such date unless such Default or Event of Default shall have been waived in
accordance with this Credit Agreement.




     (c) Compliance with Commitments. Immediately after giving effect to the making
of any such Extension of Credit (and the application of the proceeds thereof), (i) the sum
of the aggregate principal amount of outstanding Revolving Loans plus outstanding
Swingline Loans plus outstanding LOC Obligations shall not exceed the Revolving
Committed Amount then in effect, (ii) the LOC Obligations shall not exceed the LOC Committed
Amount and (iii) the Swingline Loans shall not exceed the Swingline Committed Amount.




     (d) Additional Conditions to Revolving Loans. If a Revolving Loan is
requested, all conditions set forth in Section 2.1 shall have been satisfied.




     (e) Additional Conditions to Term Loan. If the Term Loan is requested, all
conditions set forth in Section 2.2 shall have been satisfied.




     (f) Additional Conditions to Letters of Credit. If the issuance of a Letter of
Credit is requested, all conditions set fort in Section 2.3 shall have been satisfied.




     (g) Additional Conditions to Swingline Loans. If a Swingline Loan is
requested, all conditions set forth in Section 2.4 shall have been satisfied.




     (h) Additional Conditions to Incremental Facility. If an Additional Loan is
requested, all conditions set forth in Section 2.5 shall have been satisfied.



55









 





     Each request for an Extension of Credit and each acceptance by the Borrower of any such
Extension of Credit shall be deemed to constitute representations and warranties by the Credit
Parties as of the date of such Extension of Credit that the conditions set forth above in
paragraphs (a) through (h), as applicable, have been satisfied.



ARTICLE V




AFFIRMATIVE COVENANTS




     Each of the Credit Parties hereby covenants and agrees that on the Closing Date, and
thereafter for so long as this Credit Agreement is in effect and until the Commitments have
terminated, no Note remains outstanding and unpaid and the Credit Party Obligations and all other
amounts owing to the Administrative Agent or any Lender hereunder are paid in full (other than
inchoate indemnity obligations), such Credit Party shall, and shall cause each of its Subsidiaries
(other than in the case of Sections 5.1 or 5.2 hereof), to:



     Section 5.1 Financial Statements.



     Furnish to the Administrative Agent for distribution to the Lenders:




     (a) Annual Financial Statements. As soon as available and in any event no
later than the earlier of (i) to the extent applicable, the date the Borrower is required by
the SEC to deliver its Form 10-K for any fiscal year of the Borrower and (ii) ninety (90)
days after the end of each fiscal year of the Borrower, a copy of the consolidated and
consolidating balance sheets of the Borrower and its Consolidated Subsidiaries as at the end
of such fiscal year, the related Consolidated and consolidating statements of income or
operations and the related consolidated statements of shareholders’ equity and of cash flows
(to the extent available) of the Borrower and its Consolidated Subsidiaries for such year,
which other than in the case of the consolidating statements shall be audited by Deloitte &
Touche LLP or a firm of independent certified public accountants of nationally recognized
standing reasonably acceptable to the Administrative Agent, setting forth in each case in
comparative form the figures for the previous fiscal year, reported on without a “going
concern” or like qualification or exception, or qualification indicating that the scope of
the audit was inadequate to permit such independent certified public accountants to certify
such financial statements without such qualification;




     (b) Quarterly Financial Statements. As soon as available and in any event no
later than the earlier of (i) to the extent applicable, the date the Borrower is required by
the SEC to deliver its Form 10-Q for any fiscal quarter of the Borrower and (ii) forty-five
(45) days after the end of each fiscal quarter of the Borrower, a copy of the consolidated
and consolidating balance sheets of the Borrower and its Consolidated Subsidiaries as at the
end of such period and related consolidated and consolidating statements of income or
operations and Consolidated statements of cash flows (to the extent available) for the
Borrower and its Consolidated Subsidiaries for such quarterly period and for the portion of
the fiscal year ending with such period, in each case setting forth in comparative form
consolidated figures for the corresponding period or periods of the preceding fiscal year
(subject to normal recurring year-end audit adjustments);




     (c) Monthly Financial Statements. As soon as available and in any event no
later than thirty (30) days after the end of each fiscal month of the Borrower, a copy of
the consolidated and consolidating balance sheets of the Borrower and its Consolidated
Subsidiaries as at the end
of such period and related consolidated and consolidating statements of income or operations
and consolidated statements of cash flows (to the extent available) for the Borrower and its
Consolidated Subsidiaries for such monthly period and for the portion of the fiscal year
ending with such period, in each case setting forth in comparative form consolidated figures
for the corresponding period or periods of the preceding fiscal year (subject to normal
recurring year-end audit adjustments and in the case of statements of cash flows, if
available); and




     (d) Annual Operating Budget and Cash Flow. As soon as available, but in any
event within fifteen (15) days after the end of each fiscal year, a copy of the detailed
annual operating budget or plan



56









 






including cash flow projections of the Borrower and its
Subsidiaries for the next four fiscal quarter period prepared on a monthly basis, in form
and detail reasonably acceptable to the Administrative Agent and the Lenders, together with
a summary of the material assumptions made in the preparation of such annual budget or plan;


all such financial statements to be complete and correct in all material respects (subject, in the
case of interim statements, to normal recurring year-end audit adjustments) and to be prepared in
reasonable detail and, in the case of the annual and quarterly financial statements provided in
accordance with subsections (a) and (b) above, in accordance with GAAP applied consistently
throughout the periods reflected therein and further accompanied by a description of, and an
estimation of the effect on the financial statements on account of, a change, if any, in the
application of accounting principles as provided in Section 1.3.



Notwithstanding the foregoing, financial statements and reports required to be delivered pursuant
to the foregoing provisions of this Section may be delivered electronically and if so, shall be
deemed to have been delivered on the date on which the Administrative Agent receives such reports
from the Borrower through electronic mail; provided that, upon the Administrative Agent’s
request, the Borrower shall provide paper copies of any documents required hereby to the
Administrative Agent.




     Section 5.2 Certificates; Other Information.



     Furnish to the Administrative Agent for distribution to the Lenders:




     (a) concurrently with the delivery of the financial statements referred to in Section
5.1(a) above, a certificate of the independent certified public accountants reporting on
such financial statements stating that in making the examination necessary therefor no
knowledge was obtained of any Default or Event of Default, except as specified in such
certificate;




     (b) concurrently with the delivery of the financial statements referred to in Sections
5.1(a) and 5.1(b) above, a certificate of a Responsible Officer substantially in the form of
Schedule 5.2(b) stating that, to the best of such Responsible Officer’s knowledge,
each of the Credit Parties during such period observed or performed in all material respects
all of its covenants and other agreements, and satisfied in all material respects every
condition, contained in this Credit Agreement to be observed, performed or satisfied by it,
and that such Responsible Officer has obtained no knowledge of any Default or Event of
Default except as specified in such certificate and such certificate shall include the
calculations in reasonable detail required to indicate compliance with Section 5.9 as of the
last day of such period;




     (c) concurrently with or prior to the delivery of the financial statements referred to
in Sections 5.1(a) and 5.1(b) above, (i) an updated copy of Schedule 3.12 if the
Borrower or any of its Subsidiaries has formed or acquired a new Subsidiary since the
Closing Date or since Schedule 3.12 was last updated, as applicable, (ii) an updated
copy of Schedule 3.16 if the Borrower or any of its Subsidiaries has registered,
applied for registration of, acquired or otherwise obtained ownership of any new Material IP
since the Closing Date or since Schedule 3.16 was last updated, as applicable, and
(iii) an updated copy of Schedule 3.25 if any new
Material Contract has been entered into since the Closing Date or since Schedule
3.25 was last updated, as applicable, together with a copy of each new Material
Contract;




     (d) promptly upon their becoming available, (i) copies of all reports (other than those
otherwise provided pursuant to Section 5.1 and those which are of a promotional nature) and
other financial information which the Borrower sends to its shareholders, (ii) copies of all
reports and all registration statements and prospectuses, if any, which the Borrower may
make to, or file with, the Securities and Exchange Commission (or any successor or analogous
Governmental Authority) or any securities exchange or other private regulatory authority and
(iii) all press releases and other statements made available by any of the Credit Parties to
the public concerning material developments in the business of any of the Credit Parties;




     (e) within ninety (90) days after the end of each fiscal year of the Borrower, a
certificate containing information regarding the amount of all Asset Dispositions, Debt
Issuances, and Equity



57









 






Issuances that were made during the prior fiscal year and amounts
received in connection with any Recovery Event during the prior fiscal year together with a
statement demonstrating a calculation of Excess Cash Flow;




     (f) promptly upon receipt thereof, a copy or summary of any other report, or
“management letter” or similar report submitted by independent accountants to the Borrower
or any of its Subsidiaries in connection with any annual, interim or special audit of the
books of such Person (to the extent the Borrower is authorized to deliver such management
letter);




     (g) promptly upon receipt or delivery thereof, copies of all notices in writing (other
than notices of borrowing, extension or conversion and any notice that is duplicative of a
notice delivered hereunder) delivered to the Borrower or sent by or on behalf of the
Borrower under the Second Lien Credit Documents; and




     (h) promptly, such additional financial and other information as the Administrative
Agent, on behalf of any Lender, may from time to time reasonably request.



     Section 5.3 Payment of Taxes and Other Obligations.



     Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as
the case may be, subject, where applicable, to specified grace periods, (a) its Federal and state
income taxes and other material taxes and (b) its other material obligations and liabilities of
whatever nature in accordance with industry practice and (c) any additional material costs that are
imposed as a result of any failure to so pay, discharge or otherwise satisfy such taxes,
obligations and liabilities, except when the amount or validity of any such taxes, obligations and
liabilities is currently being contested in good faith by appropriate proceedings and reserves, if
applicable, in conformity with GAAP with respect thereto have been provided on the books of the
Credit Parties.



     Section 5.4 Conduct of Business and Maintenance of Existence.



     (a) Continue to engage in business of the same general type as now conducted by it on the
Closing Date and preserve, renew and keep in full force and effect its legal existence and take all
reasonable action to maintain all rights, privileges and franchises necessary or desirable in the
normal conduct of its business; (b) comply in all material respects with all material Contractual
Obligations; and (c) comply with all Requirements of Law applicable to it except to the extent that
failure to comply therewith could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect; provided that the Borrower may liquidate or dissolve any
Subsidiary in the exercise of its reasonable business judgment to the extent permitted hereunder
and such liquidation or dissolution is not materially adverse to the Lenders.



     Section 5.5 Maintenance of Property; Insurance.




     (a) Keep all material property useful and necessary in its business in good working
order and condition (ordinary wear and tear and obsolescence excepted).




     (b) Maintain with financially sound and reputable insurance companies liability,
casualty, property and business interruption insurance (including, without limitation,
insurance with respect to its tangible Collateral) in at least such amounts and against at
least such risks as are usually insured against in the same general area by companies
engaged in the same or a similar business; and furnish to the Administrative Agent, upon the
request of the Administrative Agent, full information as to the insurance carried. The
Administrative Agent shall be named as loss payee or mortgagee, as its interest may appear,
and/or additional insured with respect to any such casualty, property and liability
insurance, as applicable, and each provider of any such insurance shall agree, by
endorsement upon the policy or policies issued by it or by independent instruments furnished
to the Administrative Agent, that it will give the Administrative Agent thirty (30) days
prior written notice before any such policy or policies shall be altered or canceled, and
such policies shall provide that no act or default of the Credit Parties or any of their
Subsidiaries or any other Person shall affect the rights of the Administrative Agent or the
Lenders under such policy or policies.



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     (c) In case of any material loss, damage to or destruction of the Collateral of any
Credit Party or any part thereof, such Credit Party shall promptly give written notice
thereof to the Administrative Agent generally describing the nature and extent of such
damage or destruction. In case of any such material loss, damage to or destruction of the
Collateral of any Credit Party or any part thereof, if required by the Administrative Agent
or the Required Lenders, such Credit Party (whether or not the insurance proceeds, if any,
received on account of such damage or destruction shall be sufficient for that purpose), at
such Credit Party’s cost and expense, will (in the exercise of its reasonable business
judgment) promptly repair or replace the Collateral of such Credit Party so lost, damaged or
destroyed.



     Section 5.6 Inspection of Property; Books and Records; Discussions.



     Keep proper books of records and account in which full, true and correct entries in conformity
with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to
its businesses and activities; and permit, during regular business hours and upon reasonable notice
by the Administrative Agent or any Lender, the Administrative Agent or any Lender to visit and
inspect any of its properties and examine and make abstracts from any of its books and records at
any reasonable time and as often as may reasonably be desired, and to discuss any information or
other matter, unless disclosure to the Administrative Agent or any Lender (or designated
representative) is then prohibited by a Requirement of Law, a directive of any Governmental
Authority or a Contractual Obligation binding on a Credit Party as of the Closing Date;
provided, that, a representative of the Borrower may be present at such meeting.



     Section 5.7 Notices.



     Give notice in writing to the Administrative Agent (which shall promptly transmit such notice
to each Lender) of:




     (a) promptly, but in any event within two (2) Business Days after any Credit Party
knows of the occurrence of any Default or Event of Default;




     (b) promptly, any default or event of default under any material Contractual Obligation
of any Credit Party or any of their Subsidiaries which, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect or involve a monetary claim
in excess of $2,500,000;




     (c) promptly, any litigation, or any investigation or proceeding known to any Credit
Party (i) affecting any Credit Party or any of their Subsidiaries which, if adversely
determined, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect or involve a monetary claim in excess of $2,500,000, (ii) affecting
or with respect to this Credit Agreement, any other Credit Document or any security interest
or Lien created thereunder or (iii) involving an environmental claim or potential liability
under Environmental Laws which could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect;




     (d) any labor controversy that has resulted in, or threatens to result in, a strike or
other work action against any Credit Party which could reasonably be expected to have a
Material Adverse Effect;




     (e) any attachment, judgment, lien, levy or order exceeding $2,500,000 that may be
assessed against or threatened against any Credit Party other than Permitted Liens;




     (f) as soon as possible and in any event within thirty (30) days after any Credit Party
knows of: (i) the occurrence or expected occurrence of any Reportable Event with respect to
any Plan, a failure to make any material required contribution to a Plan, the creation of
any Lien in favor of the PBGC (other than a Permitted Lien) or a Plan or any withdrawal
from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan or (ii)
the institution of proceedings or the taking of any other action by the PBGC or any Credit
Party, any Commonly Controlled Entity or any Multiemployer Plan, with respect to the
withdrawal from, or the terminating, Reorganization or Insolvency of, any Plan, in either
case, resulting in any liability in excess of $1,000,000;



59









 






     (g) promptly, any notice of any violation received by any Credit Party from any
Governmental Authority including, without limitation, any notice of violation of
Environmental Laws; and




     (h) promptly, any other development or event which could reasonably be expected to have
a Material Adverse Effect.


Each notice pursuant to this Section shall be accompanied by a statement of a Responsible Officer
setting forth details of the occurrence referred to therein and stating what action the Credit
Parties propose to take with respect thereto. In the case of any notice of a Default or Event of
Default, the Borrower shall specify that such notice is a Default or Event of Default notice on the
face thereof.




     Section 5.8 Environmental Laws.




     (a) Comply in all material respects with all applicable Environmental Laws and obtain
and comply with and maintain any and all licenses, approvals, notifications, registrations
or permits required by applicable Environmental Laws where the failure to do so could
reasonably be expected to have a Material Adverse Effect;




     (b) Conduct and complete all investigations, studies, sampling and testing, and all
remedial, removal and other actions required under Environmental Laws and promptly comply
with all lawful orders and directives of all Governmental Authorities regarding
Environmental Laws, where the failure to do so could reasonably be expected to have a
Material Adverse Effect, except to the extent that the same are being contested in good
faith by appropriate proceedings; and




     (c) Defend, indemnify and hold harmless the Administrative Agent, the Control Agent and
the Lenders, and their respective employees, agents, officers and directors, from and
against any and all claims, demands, penalties, fines, liabilities, settlements, damages,
costs and expenses of whatever kind or nature known or unknown, contingent or otherwise,
arising out of, or in any way relating to the violation of, noncompliance with or liability
under, any Environmental
Law applicable to the operations of the Credit Parties or any of their Subsidiaries or the
Properties, or any orders, requirements or demands of Governmental Authorities related
thereto, including, without limitation, reasonable attorney’s and consultant’s fees,
investigation and laboratory fees, response costs, court costs and litigation expenses,
except to the extent that any of the foregoing arise out of the gross negligence, bad faith
or willful misconduct of the party seeking indemnification therefor. The agreements in this
paragraph shall survive repayment of the Credit Party Obligations and all other amounts
payable hereunder and termination of the Commitments and the Credit Documents.



     Section 5.9 Financial Covenants.



     Comply with the following financial covenants:




     (a) Total Leverage Ratio. The Total Leverage Ratio, as of the last day of each
fiscal quarter of the Borrower occurring during the periods indicated below, shall be less
than or equal to the following:



	 	 	 
	Period	 	Maximum Ratio
	Closing Date through December 31, 2005
	 	4.75 to 1.00
	January 1, 2006 through March 31, 2006
	 	4.50 to 1.00
	April 1, 2006 through June 30, 2006
	 	4.25 to 1.00
	July 1, 2006 through September 30, 2006
	 	3.75 to 1.00
	October 1, 2006 through September 30, 2007
	 	3.25 to 1.00
	October 1, 2007 through September 30, 2008
	 	3.00 to 1.00
	October 1, 2008 and thereafter
	 	2.75 to 1.00






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     (b) First Lien Leverage Ratio. The First Lien Leverage Ratio, as of the last
day of each fiscal quarter of the Borrower occurring during the periods indicated below,
shall be less than or equal to the following:



	 	 	 
	Period	 	Maximum Ratio
	Closing Date through December 31, 2005
	 	3.75 to 1.00
	January 1, 2006 through March 31, 2006
	 	3.50 to 1.00
	April 1, 2006 through June 30, 2006
	 	3.25 to 1.00
	July 1, 2006 through September 30, 2006
	 	2.75 to 1.00
	October 1, 2006 through September 30, 2007
	 	2.25 to 1.00
	October 1, 2007 and thereafter
	 	2.00 to 1.00







     (c) Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio, as of the
last day of each fiscal quarter of the Borrower occurring during the periods indicated
below, shall be greater than or equal to the following:



	 	 	 	 	 
	Period	 	 	 	Minimum Ratio
	October 1, 2006 through September 30, 2007
	 	 	 	1.30 to 1.00
	October 1, 2007 through September 30, 2008
	 	 	 	1.10 to 1.00
	October 1, 2008 through September 30, 2009
	 	 	 	1.40 to 1.00
	October 1, 2010 and thereafter
	 	 	 	No Requirement







     (d) Consolidated Capital Expenditures. Consolidated Capital Expenditures as of
the end of each period set forth below shall be less than or equal to the following:



	 	 	 	 	 
	Fiscal Year	 	 	 	Amount
	Fiscal Year 2006
	 	 	 	$28,000,000
	Fiscal Year 2007
	 	 	 	$16,500,000
	Fiscal Year 2008
	 	 	 	$25,000,000
	 
	 	 	 	30% of Consolidated EBITDA for fiscal year ending
	Fiscal Year 2009
	 	 	 	September 30, 2008
	 
	 	 	 	30% of Consolidated EBITDA for fiscal year ending
	Fiscal Year 2010
	 	 	 	September 30, 2009





; provided, however, that so long as no Default or Event of Default has occurred
and is continuing or would result from such expenditure, any amount set forth above, if not
expended in the fiscal year for which it is permitted above, may be carried over for expenditure in
the next following fiscal year (but may not be carried over for expenditure in any subsequent
fiscal year thereafter); provided, further, any Consolidated Capital Expenditure
shall be applied towards the above limit for the fiscal year in which such Consolidated Capital
Expenditure is made and then towards any carry-over amount from the immediately preceding fiscal
year.





     (e) Minimum Consolidated EBITDA. Consolidated EBITDA, as of the last day of
each fiscal quarter of the Borrower occurring during the periods indicated below, shall be
greater than or equal to the following:



	 	 	 
	Period	 	Minimum Consolidated EBITDA
	Closing Date through December 31, 2005
	 	$17,500,000
	January 1, 2006 through March 31, 2006
	 	$19,500,000
	April 1, 2006 through June 30, 2006
	 	$21,000,000
	July 1, 2006 through September 30, 2006
	 	$23,500,000






     Notwithstanding the above, the parties hereto acknowledge and agree that, for purposes of all
calculations made in determining compliance for any applicable period with the financial covenants
set forth in this Section 5.9, (i) after consummation of any Permitted Acquisition, (A) income
statement items and other balance sheet items



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(whether positive or negative) attributable to the
Target acquired in such transaction shall be included in such calculations to the extent relating
to such applicable period, subject to adjustments reasonably acceptable to the Borrower and the
Required Lenders, and (B) Indebtedness of a Target which is retired in connection with a Permitted
Acquisition shall be excluded from such calculations and deemed to have been retired as of the
first day of such applicable period and (ii) after any Asset Disposition permitted by Section
6.4(a)(vi), (A) income statement items, cash flow statement items and other balance sheet items
(whether positive or negative) attributable to the property or assets disposed of shall be excluded
in such calculations to the extent relating to such applicable period, subject to adjustments
reasonably acceptable to the Borrower and the Administrative Agent (after consultation with the
Lenders) and (B) Indebtedness that is repaid with the proceeds of such Asset Disposition shall be
excluded from such calculations and deemed to have been repaid as of the first day of such
applicable period.




     Section 5.10 Additional Guarantors.



     The Credit Parties will cause each of their Domestic Subsidiaries (other than ESI), whether
newly formed, after acquired or otherwise existing, and each other entity that guarantees the
Second Lien Term Loan to promptly (and in any event within thirty (30) days after such Domestic
Subsidiary is formed or acquired (or such longer period of time as agreed to by the Administrative
Agent in its reasonable discretion)) become a Guarantor hereunder by way of execution of a Joinder
Agreement. In connection therewith, the Credit Parties shall give notice to the Administrative
Agent not less than ten (10) days prior to creating a Domestic Subsidiary (or such shorter period
of time as agreed to by the Administrative Agent in its reasonable discretion), or acquiring the
Capital Stock of any other Person. The Credit Party Obligations shall be secured by, among other
things, a first priority perfected security interest (subject to Permitted Liens) in the Collateral
of such new Guarantor and a pledge of 100% of the Capital Stock of such new Guarantor and its
Domestic Subsidiaries and 65% (or such higher percentage that would not result in adverse tax
consequences for such new Guarantor) of the voting Capital Stock and 100% of the
non-voting Capital Stock of its first-tier Foreign Subsidiaries held by the Borrower or any
Guarantor. In connection with the foregoing, the Credit Parties shall deliver to the
Administrative Agent or the Control Agent, as applicable, with respect to each new Guarantor to the
extent applicable, substantially the same documentation required pursuant to Sections 4.1(b)-(e),
5.12 and 5.16 and such other documents or agreements as the Administrative Agent may reasonably
request.



     Section 5.11 Compliance with Law.



     Comply with all laws, rules, regulations and orders, and all applicable restrictions imposed
by all Governmental Authorities, applicable to it and its Property if noncompliance with any such
law, rule, regulation, order or restriction could reasonably be expected to have a Material Adverse
Effect.



     Section 5.12 Pledged Assets.




     (a) Cause 100% of the Capital Stock in each of its direct or indirect Domestic
Subsidiaries (other than ESI) and 65% of the voting Capital Stock and 100% of the non-voting
Capital Stock in each of its first-tier Foreign Subsidiaries, in each case, held by the
Borrower or any Guarantor, to be subject at all times to a first priority, perfected Lien
(except for Permitted Liens) in favor of the Administrative Agent or the Control Agent, as
applicable, pursuant to the terms and conditions of the Security Documents or such other
security documents as the Administrative Agent shall reasonably request; provided
that with respect to any Capital Stock of any first-tier Foreign Subsidiaries to be pledged
to the Administrative Agent, for the benefit of the Lenders, on or after the Closing Date,
the Administrative Agent, in its reasonable discretion after consultation with Borrower,
shall be entitled to determine that the cost of perfecting, in a foreign jurisdiction, the
security interest of the Administrative Agent, for the benefit of the Lenders, in such
Capital Stock is impractical, illegal or cost-prohibitive, and may agree to forego the
foreign perfection of such security interest.




     (b) If, subsequent to the Closing Date, a Credit Party shall acquire any real property
or any securities, instruments, chattel paper or other personal property required for
perfection to be delivered to the Administrative Agent or the Control Agent, as applicable,
as Collateral hereunder or under any of the Security Documents, promptly (and in any event
within three (3) Business Days) after any Responsible Officer of a Credit Party acquires
knowledge of same notify the Administrative Agent of same. Each



62









 






Credit Party shall, and
shall cause each of its Subsidiaries (other than ESI) to, take such action at its own
expense as reasonably requested by the Administrative Agent (including, without limitation,
any of the actions described in Section 4.1(d) or (e) hereof) to ensure that the
Administrative Agent or the Control Agent, as applicable, has a first priority perfected
Lien (except for Permitted Liens) to secure the Credit Party Obligations in (i) all personal
property of the Credit Parties located in the United States, (ii) to the extent deemed to be
material by the Administrative Agent or the Required Lenders in its or their sole reasonable
discretion, all other personal property of the Credit Parties, subject in each case only to
Permitted Liens; provided that, such Lien shall not result in materially adverse
tax consequences to the Borrower or its Subsidiaries, and (iii) to the extent required by
Section 5.16, all real property of the Credit Parties. Each Credit Party shall, and shall
cause each of its Subsidiaries to, adhere to the covenants set forth in the Security
Documents.



     Section 5.13 Hedging Agreements.



     Within 180 days following the Closing Date, cause at least 50% of the principal amount of the
Term Loan and the Second Lien Term Loan then outstanding, and projected to be outstanding, to be
hedged pursuant to Hedging Agreements for a term of at least two (2) years with a counterparty and
on terms reasonably acceptable to the Administrative Agent.



     Section 5.14 Covenants Regarding Patents, Trademarks and Copyrights.




     (a) Concurrently with the delivery of quarterly and annual financial statements of the
Borrower pursuant to Section 5.1 hereof, notify the Administrative Agent promptly if it
knows that any application, letters patent or registration relating to any Material IP of
the Credit Parties or any of their Subsidiaries may become abandoned, or of any material
adverse determination or development (including, without limitation, the institution of, or
any such determination or development in, any proceeding in the United States Patent and
Trademark Office or any court) regarding any Credit Party’s or any of its Subsidiary’s
ownership of any Patent or Trademark constituting Material IP, its right to patent or
register the same, or to enforce, keep and maintain the same, or its rights under any Patent
License or Trademark License constituting Material IP.




     (b) Concurrently with the delivery of quarterly and annual financial statements of the
Borrower pursuant to Section 5.1 hereof, notify the Administrative Agent promptly after it
knows of any material adverse determination or development (including, without limitation,
the institution of, or any such determination or development in, any proceeding in any
court) regarding any Copyright or Copyright License constituting Material IP of the Credit
Parties or any of their Subsidiaries, whether (i) such Copyright or Copyright License may
become invalid or unenforceable prior to its expiration or termination, or (ii) any Credit
Party’s or any of its Subsidiary’s ownership of such Copyright, its right to register the
same or to enforce, keep and maintain the same, or its rights under such Copyright License,
may become affected.




     (c) (i) Concurrently with the delivery of quarterly and annual financial statements of
the Borrower pursuant to Section 5.1 hereof, notify the Administrative Agent of any filing
by any Credit Party or any of its Subsidiaries, either itself or through any agent,
employee, licensee or designee, of any application for registration of any Material IP with
the United States Copyright Office or United States Patent and Trademark Office or any
similar office or agency in any other country or any political subdivision thereof.




     (ii) Concurrently, with the delivery of quarterly and annual financial
statements of the Borrower pursuant to Section 5.1 hereof, provide the
Administrative Agent and its counsel a complete and correct list of all Material IP
owned by or licensed to the Credit Parties or any of their Subsidiaries, that have
not been set forth as annexes of such documents and instruments showing all filings
and recordings for the protection of the security interest of the Administration
Agent therein pursuant to the agreements of the United States Patent and Trademark
Office or the United States Copyright Office.



63









 






     (iii) Upon reasonable request of the Administrative Agent, execute and deliver
any and all agreements, instruments, documents, and papers as the Administrative
Agent may reasonably request to evidence the Administrative Agent’s security
interest in the Material IP and the general intangibles referred to in clauses (i)
and (ii), including, without limitation, the goodwill of the Credit Parties and
their Subsidiaries relating thereto or represented thereby (or such other Material
IP or the general intangibles relating thereto or represented thereby as the
Administrative Agent may reasonably request.




     (d) Take all necessary actions, including, without limitation, in any proceeding before
the United States Patent and Trademark Office or the United States Copyright Office, to
maintain each item of Material IP of the Credit Parties and their Subsidiaries, including,
without limitation, payment of maintenance fees, filing of applications for renewal,
affidavits of use, affidavits of incontestability and opposition, interference and
cancellation proceedings, as shall be reasonable and appropriate in accordance with prudent
business practice.




     (e) In the event that any Credit Party becomes aware that any Material IP is infringed,
misappropriated or diluted by a third party in any material respect, notify the
Administrative Agent promptly after it learns thereof and, unless the Credit Parties shall
reasonably determine that such Material IP is not material to the business of the Credit
Parties and their Subsidiaries taken as a whole or as to which the Credit Parties reasonably
conclude that the cost or the strategic impact of such proceeding or its likelihood of
success does not justify its prosecution, promptly sue for infringement, misappropriation or
dilution and to recover any and all damages for such infringement, misappropriation or
dilution, and take such other actions as the Credit Parties shall reasonably deem
appropriate under the circumstances to protect such Intellectual Property.



     Section 5.15 Credit Facility Ratings.



     Use its best efforts to cause the credit facilities set forth in this Credit Agreement to be
rated by each of Moody’s and S&P.



     Section 5.16 Real Property Collateral.



     Within ninety (90) days of the Closing Date or within one hundred twenty (120) days of the
acquisition of any such Mortgaged Property, the Administrative Agent shall have received, in form
and substance satisfactory to the Administrative Agent and the Lenders:




     (a) fully executed and notarized Mortgage Instruments encumbering the Mortgaged
Properties listed in Schedule 3.19(d) as to properties owned by the Credit Parties
and, to the extent required by the Administrative Agent, the leasehold interest in the
Mortgaged Properties listed in Schedule 3.19(d) as to properties that are
warehouses, plants or other real properties material to the conduct of the Credit Parties’
business and are leased by the Credit Parties;




     (b) a title report in respect of each of the Mortgaged Properties;




     (c) with respect to each Mortgaged Property listed in Schedule 3.19(d), a
Mortgage Policy assuring the Administrative Agent that the Mortgage Instrument with respect
to such Mortgaged Property creates a valid and enforceable first priority mortgage lien on
such Mortgaged Property, free and clear of all defects and encumbrances except Permitted
Liens, which Mortgage Policy shall be in form and substance reasonably satisfactory to the
Administrative Agent and shall provide for affirmative insurance and such reinsurance as the
Administrative Agent may reasonably request, all of the foregoing in form and substance
reasonably satisfactory to the Administrative Agent;




     (d) evidence as to (i) whether any Mortgaged Property listed in Schedule
3.19(d) is a Flood Hazard Property and (ii) if any Mortgaged Property is a Flood Hazard
Property, (x) whether the community in which such Mortgaged Property is located is
participating in the National Flood Insurance Program, (y) the applicable Credit Party’s
written acknowledgment of receipt of written notification from the



64









 






Administrative Agent (I)
as to the fact that such Mortgaged Property is a Flood Hazard Property and (II) as to
whether the community in which each such Flood Hazard Property is located is participating
in the National Flood Insurance Program and (z) copies of insurance policies or certificates
of insurance of the Credit Parties and their Subsidiaries evidencing flood insurance
reasonably satisfactory to the Administrative Agent and naming the Administrative Agent as
loss payee on behalf of the Lenders;




     (e) maps or plats of an as-built survey (or aerial survey to the extent permitted by
the Administrative Agent) of the sites of the Mortgaged Properties listed in Schedule
3.19(d) certified to the Administrative Agent and the Title Insurance Company in a
manner reasonably satisfactory to them, dated a date satisfactory to each of the
Administrative Agent and the Title Insurance Company by an independent professional licensed
land surveyor reasonably satisfactory to each of the Administrative Agent and the Title
Insurance Company, which maps or plats and the surveys on which they are based shall be
sufficient to delete any standard printed survey exception contained in the applicable title
policy and be made in accordance with the Minimum Standard Detail Requirements for Land
Title Surveys jointly established and adopted by the
American Land Title Association and the American Congress on Surveying and Mapping in 1992,
and, without limiting the generality of the foregoing, there shall be surveyed and shown on
such maps, plats or surveys the following (to the extent applicable): (i) the locations on
such sites of all the buildings, structures and other improvements and the established
building setback lines; (ii) the lines of streets abutting the sites and width thereof;
(iii) all access and other easements appurtenant to the sites necessary to use the sites;
(iv) all roadways, paths, driveways, easements, encroachments and overhanging projections
and similar encumbrances affecting the site, whether recorded, apparent from a physical
inspection of the sites or otherwise known to the surveyor; (v) any encroachments on any
adjoining property by the building structures and improvements on the sites; and (vi) if the
site is described as being on a filed map, a legend relating the survey to said map;




     (f) satisfactory environmental reviews of all owned Mortgaged Properties listed in
Schedule 3.19(d) and, to the extent requested by the Administrative Agent, all
leased Mortgaged Properties listed in Schedule 3.19(d), including but not limited to
Phase I environmental assessments, together with reliance letters in favor of the Lenders;




     (g) opinions of counsel to the Credit Parties for each jurisdiction in which the
Mortgaged Properties are located;




     (h) to the extent available, zoning letters from each municipality or other
Governmental Authority for each jurisdiction in which the Mortgaged Properties listed in
Schedule 3.19(d) are located;




     (i) an appraisal of each owned Mortgaged Property, in form and substance satisfactory
to the Administrative Agent; and




     (j) to the extent requested by the Administrative Agent, with respect to each leased
Mortgaged Property, (i) a survey certified to the Administrative Agent by a firm of
surveyors reasonably satisfactory to the Administrative Agent and (ii) a landlord lien
waiver in form and substance satisfactory to the Administrative Agent.



     Section 5.17 Federal Assignment of Claims Act.



     Deliver such documentation as may be reasonably required by the Administrative Agent to comply
with the Federal Assignment of Claims Act; and the Credit Parties shall take such actions as may be
required by the Administrative Agent to file such documentation with the appropriate Governmental
Authorities.



     Section 5.18 Post-Closing Covenant; Further Assurances.




     (a) Landlord Waivers. Within 30 days of the Closing Date (or such extended
period of time as approved by the Administrative Agent), the Credit Parties shall use
commercially reasonable efforts to the deliver to the Administrative Agent, in the case of
any books and records or material personal property




65










 







Collateral located at premises leased by
a Credit Party, such estoppel letters, consents and waivers from the landlords on such real
property as may be reasonably required by the Administrative Agent.



     (b)
Intellectual Property. Within sixty days (60) days after the
Closing Date (or such extended period of time as agreed to by the
Administrative Agent), to the extent required by the Administrative
Agent, the Credit Parties shall provide evidence satisfactory to the
Administrative Agent, in form and substance reasonably satisfactory
to the Administrative Agent, that all chain of title issues
(including unreleased security interests related to Liens that have
previously been terminated) with respect to the Intellectual Property
have been corrected in the appropriate records of the United States
Patent and Trademark Office.


     (c)
Account Control Agreements. Within fifteen (15) days after
the Closing Date (or such extended period of time as agreed to by the
Administrative Agent), the Credit Parties shall deliver to the
Control Agent an account control agreement with respect to the
deposit accounts and/or securities accounts of the Credit Parties
held at Merrill Lynch, Pierce, Fenner & Smith Incorporated, such
account control agreement to be in form and substance reasonably
satisfactory to the Administrative Agent.



     (d) Further Assurances. Upon the reasonable request of the Administrative
Agent, promptly perform or cause to be performed any and all acts and execute or cause to be
executed any and all documents for filing under the provisions of the Uniform
Commercial Code or any other Requirement of Law which are necessary or advisable to maintain
in favor of the Administrative Agent, for the benefit of the Secured Parties, Liens on the
Collateral that are duly perfected in accordance with the requirements of, or the
obligations of the Credit Parties under, the Credit Documents and all applicable
Requirements of Law.



ARTICLE VI




NEGATIVE COVENANTS




     The Credit Parties hereby covenant and agree that on the Closing Date, and thereafter for so
long as this Credit Agreement is in effect and until the Commitments have terminated, no Note
remains outstanding and unpaid and the Credit Party Obligations and all other amounts owing to the
Administrative Agent or any Lender hereunder are paid in full (other than inchoate indemnity
obligations), that:



     Section 6.1 Indebtedness.



     The Credit Parties will not, nor will they permit any Subsidiary to, contract, create, incur,
assume or permit to exist any Indebtedness, except:




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




     (b) Indebtedness of the Credit Parties and their Subsidiaries existing as of the
Closing Date as referenced in the financial statements referenced in Section 3.1 (and set
out more specifically in Schedule 6.1(b)) hereto and renewals, refinancings or
extensions thereof in a principal amount not in excess of that outstanding as of the date of
such renewal, refinancing or extension;




     (c) Indebtedness of the Credit Parties and their Subsidiaries incurred after the
Closing Date consisting of Capital Leases or Indebtedness incurred to provide all or a
portion of the purchase price or cost of construction of an asset; provided that (i)
such Indebtedness when incurred shall not exceed the purchase price or cost of construction
of such asset; (ii) no such Indebtedness shall be refinanced for a principal amount in
excess of the principal balance outstanding thereon at the time of such refinancing; and
(iii) the total amount of all such Indebtedness shall not exceed a principal amount of
$2,000,000 at any time outstanding;




     (d) Unsecured intercompany Indebtedness among the Credit Parties; provided,
that, any such Indebtedness shall be (i) fully subordinated to the Credit Party
Obligations hereunder on terms reasonably satisfactory to the Administrative Agent and (ii)
if such intercompany Indebtedness to such Credit Party is in excess of $1,000,000, evidenced
by promissory notes which shall be pledged to the Administrative Agent as Collateral for the Credit Party Obligations;




     (e) Unsecured intercompany Indebtedness owed by AmPac ISP UK Ltd. to a Credit Party in
an amount, together with Investments pursuant to clause (l) of the definition of Permitted
Investments, in amount not to exceed $2,000,000 at any one time outstanding;
provided, that, any such Indebtedness shall be (i) fully subordinated to the
Credit Party Obligations hereunder on terms reasonably satisfactory to the Administrative
Agent and (ii) if such intercompany Indebtedness to such Credit Party is in excess of
$1,000,000, evidenced by promissory notes which shall be pledged to the Administrative Agent
as Collateral for the Credit Party Obligations;



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     (f) Indebtedness and obligations owing under Secured Hedging Agreements, Hedging
Agreements entered into in connection with the Second Lien Credit Agreement and other
Hedging Agreements entered into in order to manage existing or anticipated interest rate,
exchange rate or commodity price risks and not for speculative purposes;




     (g) Indebtedness under the Second Lien Term Loan in a principal amount not to exceed
$20,000,000 (as increased by the accrual of paid-in-kind interest) at any time outstanding
or any refinancing thereof as permitted under Section 6.11;




     (h) Indebtedness arising or existing under the Subordinated Seller Note in an aggregate
principal amount not to exceed $25,500,000 (plus any pay-in-kind interest that is
capitalized pursuant to the terms of such Subordinated Seller Note); provided that such
Indebtedness shall be unsecured and non-amortizing (except as permitted by Section 6.10);




     (i) Guaranty Obligations in respect of Indebtedness of a Credit Party to the extent
such Indebtedness is permitted to exist or be incurred pursuant to this Section 6.1;




     (j) earn out obligations owed by the Borrower to GenCorp Inc. pursuant to the
Acquisition Documents, as in effect on the Closing Date, in an aggregate amount not to
exceed $5,000,000, on terms acceptable to the Administrative Agent and as permitted
hereunder (the “GenCorp Earn Out Obligations”);




     (k) other Indebtedness incurred by the Borrower or any of its Subsidiaries arising from
agreements providing for indemnification, adjustment of purchase price or similar
obligations, or from guaranties, surety bonds or performance bonds securing the performance
of the Borrower or any such Subsidiary pursuant to such agreements, in connection with the
Acquisition, any Permitted Acquisition or any Asset Dispositions permitted pursuant to
Section 6.4 below, including Indebtedness payable pursuant to the Acquisition Documents;




     (l) other secured Indebtedness not otherwise permitted in subsections (a) through (l)
above, which does not exceed $500,000 in the aggregate principal amount at any time
outstanding;




     (m) other unsecured Indebtedness of Credit Parties not otherwise permitted in
subsections (a) through (l) above which does not exceed $1,000,000 in the aggregate at any
time outstanding;




     (n) unsecured Guaranty Obligations of the Borrower or any of its Subsidiaries with
respect to refinanced ESI Indebtedness, other than capital leases, so long as the Loans are
prepaid by an amount equal to the Net Cash Proceeds of such guaranteed ESI Indebtedness; and




     (o) unsecured letters of credit of the Borrower or any of its Subsidiaries in an
aggregate principal amount not to exceed $3,000,000 at any time outstanding.



     Section 6.2 Liens.



     The Credit Parties will not, nor will they permit any Subsidiary to, contract, create, incur,
assume or permit to exist any Lien with respect to any of their respective property or assets of
any kind (whether real or personal, tangible or intangible), whether now owned or hereafter
acquired, except for Permitted Liens.



     Section 6.3 Nature of Business.



     The Credit Parties will not, nor will they permit any Subsidiary to, alter the character of
the business of the Credit Parties and their Subsidiaries, when taken as a whole, in any material
respect from that conducted as of the Closing Date.



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     Section 6.4 Consolidation, Merger, Sale or Purchase of Assets, etc.



     The Credit Parties will not, nor will they permit any Subsidiary to,




     (a) dissolve, liquidate or wind up its affairs, or sell, transfer, lease or otherwise
dispose of its property or assets or agree to do so at a future time, except the following,
without duplication, shall be expressly permitted:




     (i) (A) the sale, transfer, lease or other disposition of inventory and
materials in the ordinary course of business and (B) the conversion of cash into
Cash Equivalents and Cash Equivalents into cash;




     (ii) Recovery Events;




     (iii) the sale, lease, transfer or other disposition of machinery, parts and
equipment no longer used or useful in the conduct of the business of the Credit
Parties or any of their Subsidiaries or where machinery, parts and equipment shall
be replaced by other machinery, parts and equipment;




     (iv) the sale, lease or transfer of property or assets (at fair value) between
the Borrower and any Guarantor;




     (v) the sale, lease or transfer of property or assets from a Credit Party other
than the Borrower to another Credit Party;




     (vi) the licenses of Intellectual Property rights in the ordinary course of
business;




     (vii) the termination of any Hedging Agreement permitted pursuant to Section
6.1;




     (viii) the ESI Sale; provided that at the time of such sale (A) no
Default or Event of Default has occurred and is continuing and no Default or Event
of Default would result therefrom and (B) such sale is for fair market value as
determined by the board of directors of the Borrower;




     (ix) the consolidation, liquidation or merger of a Credit Party into another
Credit Party or any Subsidiary into a Credit Party; provided, that (A) prior
to or simultaneously with any such consolidation, liquidation or merger, all actions
required by the Administrative Agent shall be taken to ensure the continued
perfection and priority of the Administrative Agent’s Liens on the property and
assets of each such Credit Party and (B) if such consolidation,
liquidation or merger involves the Borrower, the Borrower shall be the surviving
entity;




     (x) the dissolution, liquidation or winding up of a Subsidiary that is not a
Credit Party; provided that prior to or simultaneously with any such
dissolution, liquidation or winding up, all assets of such Subsidiary are
transferred to a Credit Party or a Subsidiary thereof;




     (xi) the liquidation of any inactive or dormant Subsidiary; and




     (xii) the sale, lease or transfer of property or assets not to exceed
$2,000,000 in the aggregate in any fiscal year.




provided that (A) with respect to clauses (i)(A), (ii), (iii) and (vi) above, at
least 75% of the consideration received therefor by the Credit Parties or any such
Subsidiary shall be in the form of cash or Cash Equivalents, (B) after giving effect to any
Asset Disposition pursuant to clause (vi) above, the Credit Parties shall
be in compliance on a Pro Forma Basis with the financial covenants set forth in Section 5.9
hereof, recalculated for the most recently ended month for which information is available,
and (C) with respect to clauses (iv), (v) and (vi) above, no Default or Event of Default
shall exist or shall result therefrom; provided, further, that with respect
to sales of assets permitted hereunder only, the



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Administrative Agent shall be entitled,
without the consent of the Required Lenders, to release its Liens relating to the particular
assets sold and, in the case of a Guarantor which is the subject of the asset sale, to
release it from its Guaranty; or




     (b) (i) purchase, lease or otherwise acquire (in a single transaction or a series of
related transactions) the property or assets of any Person, other than (A) Permitted
Acquisitions and (B) except as otherwise limited or prohibited herein, purchases or other
acquisitions of Intellectual Property, inventory, materials, property and equipment in the
ordinary course of business, or (ii) enter into any transaction of merger or consolidation,
except for (A) Investments or acquisitions permitted pursuant to Section 6.5 and (B) the
merger or consolidation of a Credit Party with and into another Credit Party;
provided that if the Borrower is a party thereto, the Borrower will be the surviving
Person.



     Section 6.5 Advances, Investments and Loans.



     The Credit Parties will not, nor will they permit any Subsidiary to, make any Investment
except for Permitted Investments.



     Section 6.6 Transactions with Affiliates.



     The Credit Parties will not, nor will they permit any Subsidiary to, enter into any
transaction or series of transactions, whether or not in the ordinary course of business, with any
officer, director, shareholder or Affiliate (other than compensation arrangements with any officer
or director that is in the ordinary course of business and consistent with
historical past practices of compensation for officers and directors, and reasonable and customary
directors’ indemnification and similar arrangements) other than on terms and conditions
substantially as favorable as would be obtainable in a comparable arm’s-length transaction with a
Person other than an officer, director, shareholder or Affiliate.



     Section 6.7 Ownership of Subsidiaries; Restrictions.



     The Credit Parties will not, nor will they permit any Subsidiary to, create, form or acquire
any Subsidiaries, except for Domestic Subsidiaries that are joined as Additional Credit Parties as
required by the terms hereof. The Credit Parties will not sell, transfer, pledge or otherwise
dispose of any Capital Stock or other equity interests in any of their Subsidiaries, nor will they
permit any of their Subsidiaries (other
than ESI) to issue, sell, transfer, pledge or otherwise dispose of any of their Capital Stock or
other equity interests, except in a transaction permitted by Section 6.4.



     Section 6.8 Corporate Changes; Material Contracts.



     No Credit Party will, nor will it permit any of its Subsidiaries to, (a) change its fiscal
year except to change the fiscal year of a Subsidiary to conform its fiscal year to the Borrower’s,
(b) amend, modify or change its articles of incorporation, certificate of designation (or corporate
charter or other similar organizational document) operating agreement or bylaws (or other similar
document) in any respect adverse to the interests of the Lenders without the prior written consent
of the Required Lenders, (c) amend, modify, cancel or terminate or fail to renew or extend or
permit the amendment, modification, cancellation or termination of any of its Material Contracts or
Acquisition Documents in any respect that could reasonably be expected to have a Material Adverse
Effect, (d) change its state of incorporation, organization or formation of a Credit Party to a
non-U.S. jurisdiction or without giving such notice as is required under the Security Agreement or
have more than one state of incorporation, organization or formation or (e) materially change its accounting
method (except in accordance with GAAP) in any manner materially adverse to the interests of the
Lenders without the prior written consent of the Required Lenders.



     Section 6.9 Limitation on Restricted Actions.



     The Credit Parties will not, nor will they permit any Subsidiary to, directly or indirectly,
create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any such Person to (a) pay dividends or make any other distributions to any Credit
Party on its Capital Stock or with respect to any other interest or participation in, or measured
by, its profits, (b) pay any Indebtedness or other obligation owed to any



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Credit Party, (c) make
loans or advances to any Credit Party, (d) sell, lease or transfer any of its properties or assets
to any Credit Party, or (e) act as a Guarantor and pledge its assets pursuant to the Credit
Documents or any renewals, refinancings, exchanges, refundings or extension thereof, except (in
respect of any of the matters referred to in clauses (a)-(d) above) for such encumbrances or
restrictions existing under or by reason of (i) this Credit Agreement and the other Credit
Documents, (ii) applicable law, (iii) any document or instrument governing Indebtedness incurred
pursuant to Section 6.1(c) (provided that any such restriction contained therein relates
only to the asset or assets constructed or acquired in connection therewith), (iv) any Permitted
Lien or any document or instrument governing any Permitted Lien (provided that any such
restriction contained therein relates only to the asset or assets subject to such Permitted Lien),
(v) customary non-assignment provisions of leases, subleases, licenses and sublicenses, (v)
restrictions in joint venture and partnership agreements (other than such existing restrictions
contained in the charter documents of ESI), (vi) restrictions on property to be transferred or
optioned that are or were created by virtue of the transfer thereof, including restrictions with
respect to the disposition or transfer of assets or property in asset sale agreements, stock sale
agreements and other similar agreements, and (vii) restrictions and conditions applicable
to any Subsidiary acquired after the date hereof if such restrictions and conditions existed at the
time such Subsidiary was acquired, were not created in anticipation of such acquisition, and apply
solely to such acquired Subsidiary.




     Section 6.10 Restricted Payments.



     The Credit Parties will not, nor will they permit any Subsidiary to, directly or indirectly,
declare, order, make or set apart any sum for or pay any Restricted Payment, except (a) to make
dividends payable solely in the same class of Capital Stock of such Person, (b) to make dividends
or other distributions payable to the Borrower (directly or indirectly through its Subsidiaries),
(c) to make non-cash payment-in-kind interest payments related to the Seller Subordinated Note and
the Second Lien Term Loan, (d) any repurchase or other acquisition of the Borrower’s
Capital Stock under the terms of stock purchase agreements or similar agreements or arrangements
pursuant to which the Borrower has or may in the future have the right to repurchase options in
respect of the Borrower’s Capital Stock from former directors or employees of, or former
consultants to, the Borrower as a result of a termination of any such person’s employment by or
service to the Borrower or otherwise in accordance with similar provisions of any option awards or
similar arrangements entered into by the Borrower from time to time, if after giving effect thereto
the aggregate amount of such purchases, redemptions, retirements and acquisitions paid or made in
any fiscal year is not in excess of $1,000,000, (e) payments made by ESI to its owners or on the
ESI Indebtedness, (f) payments on Subordinated Debt incurred pursuant to and in accordance with
Section 6.1(d) and (e), subject to the terms and conditions of any subordination agreement entered
into pursuant to Section 6.1(d) and (e) in favor of the Lenders, (g) subject to the terms of the
Intercreditor Agreement, the Borrower may make (i) regularly scheduled payments of interest and
(ii) mandatory prepayments of principal in respect of the Second Lien Term Loan if any
corresponding mandatory prepayment pursuant to Section 2.8(b) has been waived by the Required
Lenders or a “Discharge of First Lien
Obligations” (as defined in the Intercreditor Agreement) has occurred, (h) payments on the GenCorp
Earn Out Obligations so long as (i) the Administrative Agent and the Lenders have received the
audited financial statements required to be delivered pursuant to Section 5.1(a) for the fiscal
year ending September 30, 2006, (ii) proceeds of Revolving Loans or Swingline Loans are not used to
make such payments and (iii) the Borrower shall have demonstrated to the reasonable satisfaction of
the Administrative Agent that, after giving effect to any such payment on a pro forma basis, (A) no
Default or Event of Default exists, (B) the Credit Parties and their Subsidiaries are in compliance
with the financial covenants set forth in Section 5.9 and (C) the Total Leverage Ratio does not
exceed 3.00 to 1.00 (it being understood and agreed that such payment may be made up to the amount
that would not exceed a Total Leverage Ratio of 3.00 to 1.00 in the quarter with respect to which
the calculation is then being made with
additional installments to be made in subsequent quarters, if necessary, up to such amount) and (i)
to repay up to $6,500,000 of the outstanding principal amount of the Subordinated Seller Note
together with any accrued and unpaid interest on the principal amount being paid so long as (i) the
Administrative Agent and the Lenders have received the audited financial statements required to be
delivered pursuant to Section 5.1(a) for the fiscal year ending September 30, 2007, (ii) proceeds
of Revolving Loans or Swingline Loans are not used to make such payments and (iii) the Borrower
shall have demonstrated to the reasonable satisfaction of the Administrative Agent that, after
giving effect to any such payment on a pro forma basis, (A) no Default or Event of Default exists,
(B) the Credit Parties and their Subsidiaries are in compliance with the financial covenants set
forth in Section 5.9 and (C) the Total Leverage Ratio does not exceed 2.75 to 1.00.



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     Section 6.11 Amendments to Second Lien Loan Documents; Amendments to Subordinated
Debt.



     (a) Without the prior written consent of the Required Lenders, no Second Lien Loan Document
may be amended, supplemented or
otherwise modified or entered into and no obligations under the Second Lien Loan Documents may be
refinanced, except that the Second Lien Loan Documents may be amended or the obligations thereunder
may be refinanced in a manner that (i) is subject to, and in compliance with, the requirements of
the Intercreditor Agreement, and (ii) does not materially impair the ability of the Credit Parties
to perform their obligations under this Credit Agreement.



     (b) The Credit Parties will not, nor will it permit any Subsidiary to, without the prior
written consent of the Required Lenders, amend, modify, waive or extend or permit the amendment,
modification, waiver or extension of any term of any document governing or relating to any
Subordinated Debt other than the Second Lien Term Loan in a manner that is materially adverse to
the interests of the Lenders.



     Section 6.12 Sale Leasebacks.



     The Credit Parties will not, nor will they permit any Subsidiary to, directly or indirectly,
become or remain liable as lessee or as guarantor or other surety with respect to any lease,
whether an Operating lease or a Capital Lease, of any property (whether real, personal or mixed),
whether now owned or hereafter acquired, (a) which any Credit Party or any Subsidiary has sold or
transferred or is to sell or transfer to a Person which is not a Credit Party or a Subsidiary or
(b) which any Credit Party or any Subsidiary intends to use for substantially the same purpose as
any other property which has been sold or is to be sold or transferred by a Credit Party or a
Subsidiary to another Person which is not a Credit Party or a Subsidiary in connection with such
lease.



     Section 6.13 No Further Negative Pledges.



     The Credit Parties will not, nor will they permit any Subsidiary to, enter into, assume or
become subject to any agreement prohibiting or otherwise restricting the creation or assumption of
any Lien upon any of their properties or assets, whether now owned or hereafter acquired, or
requiring the grant of any security for such obligation if security is given for some other
obligation, except (a) pursuant to this Credit Agreement and the other Credit Documents, (b)
pursuant to the Second Lien Credit Documents, (c) pursuant to any document or instrument governing
Indebtedness incurred pursuant to Section 6.1(c) (provided that any such restriction
contained therein relates only to the asset or assets constructed or acquired in connection
therewith), (f) and (g), (d) any Permitted Lien or any document or instrument governing any
Permitted Lien (provided that any such restriction contained therein relates only to the
asset or assets subject to such Permitted Lien), (e) customary non-assignment provisions of leases,
subleases, licenses and sublicenses, (f) restrictions in joint venture and partnership agreements,
(g) restrictions on property to be transferred or optioned that are or were created by virtue of
the transfer thereof, including restrictions with respect to the disposition or transfer of assets
or property in asset sale agreements,
stock sale agreements and other similar agreements, and (h) restrictions and conditions applicable
to any Subsidiary acquired after the date hereof if such restrictions and conditions existed at the
time such Subsidiary was acquired, were not created in anticipation of such acquisition, and
applying solely to such acquired Subsidiary.



     Section 6.14 Deposit Account Control Agreements; Additional Bank Accounts.



     Each of the Credit Parties will not, nor will it permit any Domestic Subsidiary to, open,
maintain or otherwise have any checking, savings or other accounts at any bank or other financial
institution, or any other account where money is or may be deposited or maintained with any Person,
other than (a) the accounts set forth on Schedule 6.14, (b) demand deposit accounts
established after the Closing Date that are subject to a Deposit Account Control Agreement, (c)
other demand deposit accounts established after the Closing Date solely as payroll and other zero
balance accounts and (d) other deposit accounts so long as at any time the balance in any such
account does not exceed $100,000 and the aggregate balance in all such accounts does not exceed
$250,000.



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ARTICLE VII




EVENTS OF DEFAULT




     Section 7.1 Events of Default.



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




     (a) Payment. (i) The Borrower shall fail to pay any principal on any Loan when
due in accordance with the terms hereof; or (ii) the Borrower shall fail to reimburse the
Issuing Lender for any LOC Obligations when due in accordance with the
terms hereof; or (iii) the Borrower shall fail to pay any interest on any Loan or any fee or
other amount payable hereunder when due in accordance with the terms hereof and such failure
shall continue unremedied for three (3) Business Days; or (iv) or any Guarantor shall fail
to pay on the Guaranty in respect of any of the foregoing
or in respect of any other Guaranty Obligations hereunder (after giving effect to the grace
period in clause (iii)); or




     (b) Misrepresentation. Any representation or warranty made or deemed made
herein, in the Security Documents or in any of the other Credit Documents or which is
contained in any certificate, document or financial or other statement furnished at any time
under or in connection with this Credit Agreement shall prove to have been incorrect, false
or misleading on or as of the date made or deemed made; or




     (c) Covenant Default. (i) Any Credit Party shall fail to perform, comply with
or observe any term, covenant or agreement applicable to it contained in Sections 5.1, 5.2,
5.4, 5.7, 5.9, 5.11, 5.13 or Article VI hereof; or (ii) any Credit Party shall fail to
comply with any other covenant contained in this Credit Agreement or the other Credit
Documents or any other agreement, document or instrument among any Credit Party, the
Administrative Agent and the Lenders or executed by any Credit Party in favor of the
Administrative Agent or the Lenders (other than as described in Sections 7.1(a) or 7.1(c)(i)
above), and such breach or failure to comply is not cured within thirty (30) days of its
occurrence; or




     (d) Debt Cross-Default. (i) (A) Any Credit Party shall fail to make any
payment when due (whether by scheduled maturity, required prepayment, acceleration, demand,
or otherwise, but after the expiration of any applicable grace period) in respect of the
Second Lien Term Loan or (B) any portion of the Second Lien Term Loan is declared to be due
and payable (or automatically
become due and payable) prior to the stated maturity of the Second Lien Term Loan as a
result of a Second Lien Event of Default; (ii) any Credit Party shall default in any payment
of principal of or interest on any Indebtedness (other than the Loans, Reimbursement
Obligations and the Guaranty) in a principal amount outstanding of
at least $1,000,000 for the Borrower and any of its Subsidiaries in the aggregate beyond any
applicable grace period (not to exceed 30 days), if any, provided in the instrument or
agreement under which such Indebtedness was created; (iii) any Credit Party shall default in
the observance or performance of any other agreement or condition relating to any
Indebtedness (other than the Loans, Reimbursement Obligations and the Guaranty) in a
principal amount outstanding of at least $1,000,000 in the aggregate for the Credit Parties
and their Subsidiaries or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition exist, the effect of which
default or other event or condition is to cause, or to permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on
behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving
of notice if required, such Indebtedness to become due prior to its stated maturity; or (iv)
any Credit Party shall breach or default any Secured Hedging Agreement; or




     (e) Other Cross-Defaults. The Credit Parties or any of their Subsidiaries
shall default in (i) the payment when due under any Material Contract or (ii) in the
performance or observance, of any obligation or condition of any Material Contract and such
failure to perform or observe such other obligation or condition continues unremedied for a
period of thirty (30) days after notice of the occurrence of such default, unless the
existence of any such default is being contested by the Credit Parties in good faith and, if
applicable, by appropriate proceedings, adequate reserves in respect thereof have been



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established on the books of the Credit Parties to the extent required by GAAP and the
existence of such default could not reasonably be expected to have a Material Adverse Effect; or




     (f) Bankruptcy Default. (i) A Credit Party or any of its Subsidiaries shall
commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts (other than such events
occurring in accordance with the terms of Section 6.4), or (B) seeking appointment of a
receiver, trustee, custodian, conservator or other similar official for it or for all or any
substantial part of its assets, or a Credit Party or any of its Subsidiaries shall make a
general assignment for the benefit of its creditors; or (ii) there shall be commenced
against a Credit Party or any of its Subsidiaries any case, proceeding or other action of a
nature referred to in clause (i) above which (A) results in the entry of an order for relief
or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded
for a period of 60 days; or (iii) there shall be commenced against a Credit Party or any of
its Subsidiaries any case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any substantial part of
their assets which results in the entry of an order for any such relief which shall not have
been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry
thereof; or (iv) a Credit Party or any of its Subsidiaries shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the
acts set forth in clause (i), (ii), or (iii) above; or (v) a Credit Party or any of its
Subsidiaries shall generally not, or shall be unable to, or shall admit in writing their
inability to, pay its debts as they become due; or




     (g) Judgment Default. One or more judgments or decrees shall be entered
against a Credit Party or any of its Subsidiaries involving in the aggregate a liability (to
the extent not covered by insurance) of $1,000,000 or more and all such judgments or decrees
shall not have been paid and satisfied, vacated, discharged,
stayed or bonded pending appeal within 30 Business Days from the entry thereof or any
injunction, temporary restraining order or similar decree shall be issued against a Credit
Party or any of its Subsidiaries that could reasonably be expected to result in a Material
Adverse Effect; or




     (h) ERISA Default. (i) Any Person shall engage in any “prohibited transaction”
(as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan with
liability to the Credit Parties and their Subsidiaries in excess of $1,000,000 in the
aggregate, (ii) any “accumulated funding deficiency” (as defined in Section 302 of ERISA)
with liability to the Credit Parties and their Subsidiaries in excess of $1,000,000 in the
aggregate, whether or not waived, shall exist with respect to any Plan or any Lien in favor
of the PBGC or a Plan (other than a Permitted Lien) shall arise on the assets of the Credit
Parties or any Commonly Controlled Entity, (iii) a Reportable Event with liability to the
Credit Parties and their Subsidiaries in excess of $1,000,000 in the aggregate shall occur
with respect to, or proceedings shall commence to have a trustee appointed, or a trustee
shall be appointed, to administer or to terminate, any Single Employer Plan, which
Reportable Event or commencement of proceedings or appointment of a trustee is, in the
reasonable opinion of the Required Lenders, likely to result in the termination of such Plan
for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for
purposes of Title IV of ERISA, or (v) a Credit Party, any of its Subsidiaries or any
Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders is
likely to, incur any liability in connection with a withdrawal from, or the Insolvency or
Reorganization of, any Multiemployer Plan by an
amount which, as determined in accordance with GAAP, could reasonably be expected to have a
Material Adverse Effect; or




     (i) Change of Control. There shall occur a Change of Control; or




     (j) Invalidity of Guaranty. At any time after the execution and delivery
thereof, the Guaranty, for any reason other than the satisfaction in full of all Credit
Party Obligations, shall cease to be in full force and effect (other than in accordance with
its terms) or shall be declared to be null and void, or any Credit Party shall contest the
validity or enforceability of the Guaranty or any Credit Document in writing or deny in
writing that it has any further liability, including with respect to future advances by the
Lenders, under any Credit Document to which it is a party; or



73









 






     (k) Invalidity of Credit Documents. Any other Credit Document shall fail to be
in full force and effect or to give the Administrative Agent and/or the Lenders the security
interests, liens, rights, powers and privileges purported to be created thereby (except as
such documents may be terminated or no longer in force and effect in accordance with the
terms thereof, other than those indemnities and provisions which by their terms shall
survive) or any Lien shall fail to be a first priority, perfected Lien on a material portion
of the Collateral; or




     (l) Hedging Agreement. Any termination payment shall be due by a Credit Party
under any Hedging Agreement and such amount is not paid within the later to occur of five
(5) Business Days after the due date thereof or the expiration of grace periods, if any, in
such Hedging Agreement; or




     (m) Subordinated Debt. Any default (which is not waived or cured within the
applicable period of grace) or event of default shall occur under any Subordinated Debt or
the subordination
provisions contained therein shall cease to be in full force and effect or to give the
Lenders the rights, powers and privileges purported to be created thereby;




     (n) Uninsured Loss. Any uninsured damage to or loss, theft or destruction of
any assets of the Credit Parties or any of their Subsidiaries shall occur that is in excess
of $2,500,000; or




     (o) Government Contracts. (i) The Borrower or any Subsidiary thereof is
debarred or suspended from contracting with any Governmental Authority which individually,
or together with any other pending or suspected debarments or suspensions could reasonably
be expected to have a Material Adverse Effect; or (ii) an investigation by any Governmental
Authority relating to the Borrower or any Subsidiary thereof and involving fraud, deception
or willful misconduct shall have been commenced in connection with any Government Contract
or the Borrower’s or any Subsidiary’s activities that could reasonably be expected to have a
Material Adverse Effect; or (iii) the actual termination of a Government Contract due to
alleged fraud, deception or willful misconduct that could reasonably be expected to have a
Material Adverse Effect.



     Section 7.2 Acceleration; Remedies.



     Upon the occurrence and during the continuance of an Event of Default, then, and in any such
event, (a) if such event is an Event of Default specified in Section 7.1(e) above, automatically
the Commitments shall immediately terminate and the Loans (with accrued interest thereon), and all
other amounts under the Credit Documents (including without limitation the maximum amount of all
contingent liabilities under Letters of Credit) shall immediately become due and payable, and (b)
if such event is any other Event of Default, any or all of the following actions may be taken: (i)
with the written consent of the Required Lenders, the Administrative Agent may, or upon the written
request of the Required Lenders, the Administrative Agent shall, declare the Commitments to be
terminated forthwith, whereupon the Commitments shall immediately terminate; (ii) the
Administrative Agent may, or upon the written request of the Required Lenders, the
Administrative Agent shall, declare the Loans (with accrued interest thereon) and all other amounts
owing under this Credit Agreement and the Notes to be due and payable forthwith and direct the
Borrower to pay to the Administrative Agent cash collateral as security for the LOC Obligations for
subsequent drawings under then outstanding Letters of Credit an amount equal to the maximum amount
of which may be drawn under Letters of Credit then outstanding, whereupon the same shall
immediately become due and payable; and/or (iii) with the written consent of the Required Lenders,
the Administrative Agent may, or upon the written request of the Required Lenders, the
Administrative Agent shall, exercise such other rights and remedies as provided under the Credit
Documents and under applicable law.



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ARTICLE VIII




THE ADMINISTRATIVE AGENT




     Section 8.1 Appointment.



     Each Lender hereby irrevocably designates and appoints Wachovia as the Administrative Agent of
such Lender under this Credit Agreement, and each such Lender irrevocably authorizes Wachovia, as
the Administrative Agent for such Lender, to take such action on its behalf under the provisions of
this Credit Agreement and to exercise such powers and perform such duties as are expressly
delegated to the Administrative Agent by the terms of this Credit Agreement, together with such
other powers as are reasonably incidental thereto. Each Lender acknowledges that the Credit
Parties may rely on each action taken by the Administrative Agent on behalf of the Lenders
hereunder. Notwithstanding any provision to the contrary elsewhere in this Credit
Agreement, the Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender, and no implied
covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this Credit Agreement or
otherwise exist against the Administrative Agent.



     Section 8.2 Delegation of Duties.



     The Administrative Agent may execute any of its duties under this Credit Agreement by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Administrative Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.
Without limiting the foregoing, the Administrative Agent may appoint one of its affiliates as its
agent to perform the functions of the Administrative Agent hereunder relating to the advancing of
funds to the Borrower and distribution of funds to the Lenders and to perform such other related
functions of the Administrative Agent hereunder as are reasonably incidental to such functions.



     Section 8.3 Exculpatory Provisions.



     Neither the Administrative Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact, Subsidiaries or affiliates shall be (a) liable for any action lawfully taken or
omitted to be taken by it or such Person under or in connection with this Credit Agreement (except
for its or such Person’s own gross negligence or willful misconduct) or (b) responsible in any
manner to any of the Lenders for any recitals, statements, representations or warranties made by
any Credit Party or any officer thereof contained in this Credit Agreement or in any certificate,
report, statement or other document referred to or provided for in, or received by the
Administrative Agent under or in connection with, this Credit Agreement or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of any of the Credit
Documents or for any failure of any Credit Party to perform its obligations hereunder or
thereunder. The Administrative Agent shall not be under any obligation to any Lender to ascertain
or to inquire as to the
observance or performance by any Credit Party of any of the agreements contained in, or conditions
of, this Credit Agreement, or to inspect the properties, books or records of any Credit Party.



     Section 8.4 Reliance by Administrative Agent.




     (a) The Administrative Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate, affidavit,
letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other
document or conversation believed by it in good faith to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Credit Parties), independent
accountants and other experts selected by the Administrative Agent. The Administrative
Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless
an executed Assignment Agreement has been filed with the Administrative Agent pursuant to
Section 9.6(c) with respect to the Loans evidenced by such Note. The Administrative Agent
shall be fully justified in failing or refusing to take any action under this Credit
Agreement unless it shall first receive such advice or concurrence of the Required Lenders
as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Administrative Agent shall in all cases be fully



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protected in acting, or in refraining from acting, under any of the Credit Documents in
accordance with a request of the Required Lenders or all of the Lenders, as may be required
under this Credit Agreement, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders and all future holders of the Notes.




     (b) For purposes of determining compliance with the conditions specified in Section
4.1, each Lender that has signed
this Credit Agreement shall be deemed to have consented to, approved or accepted or to
be satisfied with, each document or other matter required thereunder to be consented to or
approved by or acceptable or satisfactory to a Lender.



     Section 8.5 Notice of Default.



     The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of
any Default or Event of Default hereunder unless the Administrative Agent has received notice from
a Lender or the Borrower referring to this Credit Agreement, describing such Default or Event of
Default and stating that such notice is a “notice of default”. In the event that the
Administrative Agent receives such a notice, the Administrative Agent shall give prompt notice
thereof to the Lenders. The Administrative Agent shall take such action with respect to such
Default or Event of Default as shall be reasonably directed by the Required Lenders;
provided, however, that unless and until the Administrative Agent shall have
received such directions, the Administrative Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Default or Event of Default as it
shall deem advisable in the best interests of the Lenders except to the extent that this Credit
Agreement expressly requires that such action be taken, or not taken, only with the consent or upon
the authorization of the Required Lenders, or all of the Lenders, as the case may be.



     Section 8.6 Non-Reliance on Administrative Agent and Other Lenders.



     Each Lender expressly acknowledges that neither the Administrative Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representation
or warranty to it and that no act by the Administrative Agent hereinafter taken, including any review
of the affairs of any Credit Party, shall be deemed to constitute any representation or warranty by
the Administrative Agent to any Lender. Each Lender represents to the Administrative Agent that it
has, independently and without reliance upon the Administrative Agent or any other Lender, and
based on such documents and information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other condition and
creditworthiness of the Borrower or any other Credit Party and made its own decision to make its
Loans hereunder and enter into this Credit Agreement. Each Lender also represents that it will,
independently and without reliance upon the Administrative Agent or any other Lender, and based on
such documents and information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under this Credit
Agreement, and to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and creditworthiness of the Borrower
and the other Credit Parties. Except for notices, reports and other documents expressly required
to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent
shall not have any duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, condition (financial or otherwise),
prospects or creditworthiness of the Borrower or any other Credit Party which may come into the
possession of the Administrative Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.



     Section 8.7 Indemnification.



     The Lenders agree to indemnify the Administrative Agent, the Control Agent, the Issuing Lender
and their Affiliates and their respective officers, directors, agents and employees (to the extent
not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so),
ratably according to their respective Revolving
Commitment Percentages in effect on the date on which indemnification is sought under this Section,
from and against any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time (including, without
limitation, at any time following the payment of the Credit Party Obligations) be imposed on,
incurred by or asserted against any such indemnitee in any way relating to or arising out of any
Credit Document or any documents contemplated by or



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referred to herein or therein or the
transactions contemplated hereby or thereby or any action taken or omitted by any such indemnitee
under or in connection with any of the foregoing; provided, however, that no Lender
shall be liable for the payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements to the extent resulting from
such indemnitee’s gross negligence or willful misconduct, as determined by a court of competent
jurisdiction. The agreements in this Section 8.7 shall survive the termination of this Credit
Agreement and payment of the Notes and all other amounts payable hereunder.




     Section 8.8 Administrative Agent in Its Individual Capacity.



     The Administrative Agent and its affiliates may make loans to, accept deposits from and
generally engage in any kind of business with the Borrower as though the Administrative Agent were
not the Administrative Agent hereunder. With respect to its Loans made or renewed by it and any
Note issued to it, the Administrative Agent shall have the same rights and powers under this Credit
Agreement as any Lender and may exercise the same as though it were not the Administrative Agent,
and the terms “Lender” and “Lenders” shall include the Administrative Agent in its individual
capacity.



     Section 8.9 Successor Administrative Agent.



     The Administrative Agent may resign as Administrative Agent upon 30 days’ prior notice to the
Borrower and the Lenders. If the Administrative Agent shall resign as Administrative Agent under
this Credit Agreement and the Notes or if the Administrative Agent enters or
becomes subject to receivership, then the Required Lenders shall appoint from among the Lenders a
successor agent for the Lenders, which successor agent shall be approved by the Borrower with such
approval not to be unreasonably withheld (provided, however, if an Event of Default
shall exist at such time, no approval of the Borrower shall be required hereunder), whereupon such
successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the
term “Administrative Agent” shall mean such successor agent effective upon such appointment and
approval, and the former Administrative Agent’s rights, powers and duties as Administrative Agent
shall be terminated, without any other or further act or deed on the part of such former
Administrative Agent or any of the parties to this Credit Agreement or any holders of the Notes.
After any retiring Administrative Agent’s resignation as Administrative Agent, the provisions of
this Section 8.9 shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent under this Credit Agreement.



     Section 8.10 Nature of Duties.



     Except as otherwise expressly stated herein, any agent (other than the Administrative Agent)
or co-lead arranger listed from time to time on the cover page of this Credit Agreement shall have
no obligations, responsibilities or duties under this Credit Agreement or under any other Credit
Document other than obligations, responsibilities and duties applicable to all Lenders in their
capacity as Lenders; provided, however, that such agents and co-lead arrangers
shall be entitled to the same rights, protections, exculpations and indemnifications granted to the
Administrative Agent under this Article VIII in their capacity as an agent or co-lead arranger.



     Section 8.11 Intercreditor Agreement.



     Each of the Lenders hereby acknowledges that it has received and reviewed the Intercreditor
Agreement and agrees to be bound by the terms thereof. Each Lender (and each Person that becomes a
Lender
hereunder pursuant to Section 9.6(c)) hereby authorizes the Administrative Agent to enter into
the Intercreditor Agreement on behalf of such Lender and agrees that the Administrative Agent may
take such actions on its behalf as is contemplated by the terms of the Intercreditor Agreement.
Each Lender (and each Person that becomes a Lender hereunder pursuant to Section 9.6(c)) hereby (i)
acknowledges that Wachovia is acting under the Intercreditor Agreement in multiple capacities as
the Administrative Agent, the Second Lien Administrative Agent and the Control Agent and (ii)
waives any conflict of interest, now contemplated or arising hereafter, in connection therewith and
agrees not to assert against Wachovia any claims, causes of action, damages or liabilities of
whatever kind or nature relating thereto.



     Section 8.12 Releases.



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     The Administrative Agent will release any Guarantor and any Lien on any Collateral that is
sold as permitted by the Credit Agreement or as otherwise permitted by the Lenders or Required
Lenders, as applicable.



     In connection with the granting of Liens of the type described in clause (c) of the definition
of “Permitted Liens”, by the Borrower or any of its Subsidiaries, at the reasonable request of the
Borrower, and at the Borrower’s expense, the Administrative Agent shall take (and is hereby
authorized to take) any actions reasonably requested by the Borrower in connection therewith
(including, without limitation, executing appropriate lien subordinations in favor of the holder or
holders of such Liens solely with respect to the item or items of equipment or other assets subject
to such Liens).



ARTICLE IX




MISCELLANEOUS




Section 9.1 Amendments, Waivers and Release of Collateral.




     Neither this Credit Agreement nor any of the other Credit Documents, nor any terms hereof or
thereof may be amended, supplemented, waived or modified (by amendment, waiver, consent or
otherwise) except in accordance with the provisions of this Section nor may Collateral be released
except as specifically provided herein or in the Security Documents or in accordance with the
provisions of this Section 9.1. The Required Lenders may or, with the written consent of the
Required Lenders, the Administrative Agent may, from time to time, (x) enter into with the Borrower
written amendments, supplements or modifications hereto and to the other Credit Documents for the
purpose of adding any provisions to this Credit Agreement or the other Credit Documents or changing
in any manner the rights of the Lenders or of the Borrower hereunder or thereunder or (b) waive or
consent to the departure from, on such terms and conditions as the Required Lenders may specify in
such instrument, any of the requirements of this Credit Agreement or the other Credit Documents or
any Default or Event of Default and its consequences; provided, however, that no
such amendment, supplement, modification, release, waiver or consent shall:




     (i) reduce the amount or extend the scheduled date of maturity of any Loan or
Note or any installment thereon, or reduce the stated rate of any interest or fee
payable hereunder (except in connection with a waiver of interest at the increased
post-default rate set forth in Section 2.9 which shall be determined by a vote of
the Required Lenders) or extend the scheduled date of any payment thereof or
increase the amount or extend the expiration date of any Lender’s
Commitment, in each case without the written consent of each Lender directly
affected thereby; provided that, it is understood and agreed that (A) no
waiver, reduction or deferral of a mandatory prepayment required pursuant to Section
2.8(b), nor any amendment of Section 2.8(b) or the
definitions of Asset Disposition, Debt Issuance, Equity Issuance, Excess Cash Flow,
or Recovery Event, or any definitions incorporated in the foregoing defined terms,
shall constitute a reduction of the amount of, or an extension of the scheduled date
of, the scheduled date of maturity of, or any installment of, any Loan or Note, (B)
any reduction in the stated rate of interest on Revolving Loans shall only require
the written consent of each Lender holding a Revolving Commitment and (C) any
reduction in the stated rate of interest on the Term Loan shall only require the
written consent of each Lender holding a portion of the outstanding Term Loan; or




     (ii) amend, modify or waive any provision of this Section 9.1 or reduce the
percentage specified in the definition of Required Lenders, without the written
consent of all the Lenders; or




     (iii) amend, modify or waive any provision of Article VIII without the written
consent of the then Administrative Agent; or




     (iv) release the Borrower or all or substantially all of the Guarantors from
obligations under the Guaranty, without the written consent of all of the Lenders
and Hedging Agreement Providers; or



78









 






     (v) release all or substantially all of the Collateral without the written
consent of all of the Lenders and Hedging Agreement Providers; or




     (vi) subordinate the Loans to any other Indebtedness without the written
consent of all of the Lenders; or




     (vii) permit a Letter of Credit to have an original expiry date more than
twelve (12) months from the date of issuance without the consent of each of the
Revolving Lenders; provided, that the expiry date of any Letter of Credit
may be extended in accordance with the terms of Section 2.3(a); or




     (viii) permit the Borrower to assign or transfer any of its rights or
obligations under this Credit Agreement or other Credit Documents without the
written consent of all of the Lenders; or




     (ix) amend, modify or waive any provision of the Credit Documents requiring
consent, approval or request of the Required Lenders or all Lenders without the
written consent of the Required Lenders or all the Lenders as appropriate; or




     (x) without the consent of Revolving Lenders holding in the aggregate more than
50% of the outstanding Revolving Commitments (or if the Revolving Commitments have
been terminated, the aggregate principal amount of outstanding Revolving Loans),
amend, modify or waive any provision in Section 4.2 or waive any Default or Event of
Default (or amend any Credit Document to effectively waive any Default or Event of
Default) if the effect of such amendment, modification or waiver is that the
Revolving Lenders shall be required to fund Revolving Loans when such Lenders would
otherwise not be required to do so; or




     (xi) amend, modify or waive any provision of the Credit Documents requiring
consent, approval or request of the Required Lenders or all Lenders, without the
written consent of all of the Required Lenders or Lenders as appropriate; or




     (xii) amend, modify or waive any provision of the Credit Documents affecting
the rights or duties of the Administrative Agent, the Issuing Lender or the
Swingline Lender under any Credit Document without the written consent of the
Administrative Agent, the Issuing Lender and/or the Swingline Lender, as applicable,
in addition to the Lenders required hereinabove to take such action; or




     (xiii) amend, modify or waive the order in which Credit Party Obligations are
paid in Section 2.13(b) without the written consent of each Lender and each Hedging
Agreement Provider directly affected thereby; or




     (xiv) amend the definitions of “Hedging Agreement,” “Secured Hedging
Agreement,” or “Hedging Agreement Provider” without the consent of any Hedging
Agreement Provider that would be adversely affected thereby; or




     (xv) amend, modify or waive any provision of Article XI, without the written
consent of all the Lenders (other than for purposes of curing any formal defect,
omission or ambiguity).



     provided, further, that no amendment, waiver or consent affecting the rights
or duties of the Administrative Agent, the Issuing Lender or the Swingline Lender under any Credit
Document shall in any event be effective, unless in writing and signed by the Administrative Agent,
the Issuing Lender and/or the Swingline Lender, as applicable, in addition to the Lenders required
hereinabove to take such action.



     Any such waiver, any such amendment, supplement or modification and any such release shall
apply equally to each of the Lenders and shall be binding upon the Borrower, the other Credit
Parties, the Lenders, the Administrative Agent and all future holders of
the Notes. In the case of any waiver, the Borrower, the other Credit



79









 




Parties, the Lenders and the
Administrative Agent shall be restored to their former position and rights hereunder and under the
outstanding Loans and Notes and other Credit Documents, and any Default or Event of Default waived
shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent
or other Default or Event of Default, or impair any right consequent thereon.




     Notwithstanding any of the foregoing to the contrary, the consent of the Borrower and the
other Credit Parties shall not be required for any amendment, modification or waiver of the
provisions of Article VIII (other than the provisions of Section 8.9) ); provided,
however, that the Administrative Agent shall provide written notice to the Borrower of any
such amendment, modification or waiver.



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



     Section 9.2 Notices.




     (a) Except as otherwise provided in Article II, all notices, requests and demands to or
upon the respective parties hereto to be effective shall be in writing (including by
telecopy or other electronic communications as provided below), and, unless
otherwise expressly provided herein, shall be deemed to have been duly given or made (a)
when delivered by hand, (b) when transmitted via telecopy (or other facsimile device) to the
number set out herein, (c) the Business Day following the day on which the same has been
delivered prepaid (or pursuant to an invoice
arrangement) to a reputable national overnight air courier service, or (d) the third
Business Day following the day on which the same is sent by certified or registered mail,
postage prepaid, in each case, addressed as follows in the case of the Borrower, the other
Credit Parties and the Administrative Agent, and, in the case of each of the Lenders, as set
forth in such Lender’s Administrative Details Form, or to such other address as may be
hereafter notified by the respective parties hereto and any future holders of the Notes:



	 	 	 	 	 
	 

	 	The Borrower
	 	American Pacific Corporation
	 

	 	and the other

Credit Parties:
	 	3770 Howard Hughes Parkway #300

Las Vegas, Nevada 89109
	 
	 	 	 	 
	 

	 	 	 	Attention: Seth L. Van Voorhees, Vice President, Chief
	 

	 	 	 	Financial Officer and Treasurer
	 

	 	 	 	Telecopier: (702) 699-4181
	 

	 	 	 	Telephone: (702) 699-4166
	 
	 	 	 	 
	 

	 	The Administrative Agent:	 	Wachovia Bank, National Association, as Administrative Agent
	 

	 	 	 	Charlotte Plaza
	 

	 	 	 	201 South College Street, CP8
	 

	 	 	 	Charlotte, North Carolina 28288-0680
	 

	 	 	 	Attention: Syndication Agency Services
	 

	 	 	 	Telecopier: (704) 383-0288
	 

	 	 	 	Telephone: (704) 374-2698






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	 	 	 	with a copy to:
	 
	 	 	 	 
	 

	 	 	 	Wachovia Bank, National Association
	 

	 	 	 	1339 Chestnut Street
	 

	 	 	 	Mailcode PA4152
	 

	 	 	 	Philadelphia, Pennsylvania 19107
	 
	 	 	 	 
	 

	 	 	 	Attention: James M. Travagline
	 

	 	 	 	Telecopier: 267-321-6702
	 

	 	 	 	Telephone: 267-321-6711







provided, that notices given by the Borrower pursuant to Section 2.1 or Section 2.10
hereof shall be effective only upon receipt thereof by the Administrative Agent.




     (b) Notices and other communications to the Lenders or the Administrative Agent
hereunder may be delivered or furnished by electronic communication (including e-mail and
Internet or intranet websites) pursuant to procedures approved by the Administrative Agent;
provided that the foregoing shall not apply to notices to any Lender pursuant to
Article II if such Lender, as applicable, has notified the Administrative Agent that it is
incapable of receiving notices under such Section by electronic communication. The
Administrative Agent or the Borrower may, in its discretion, agree to accept notices and
other communications to it hereunder by electronic communications pursuant to procedures
approved by it; provided that approval of such procedures may be limited to
particular notices or communications.




     Unless the Administrative Agent otherwise prescribes, (i) notices and other
communications sent to an e-mail address shall be deemed received upon the sender’s receipt
of an acknowledgement from the intended recipient (such as by the “return receipt requested”
function, as available, return e-mail or
other written acknowledgement); provided that if such notice or other communication
is not sent during the normal business hours of the recipient, such notice or communication
shall be deemed to have been sent at the opening of business on the next business day for
the recipient, and (ii) notices or communications posted to an Internet or intranet website
shall be deemed received upon the deemed receipt by the intended recipient at its e-mail
address as described in the foregoing clause (i) of notification that such notice or
communication is available and identifying the website address therefor.



     Section 9.3 No Waiver; Cumulative Remedies.



     No failure to exercise and no delay in exercising, on the part of the Administrative Agent or
any Lender, any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by law.



     Section 9.4 Survival of Representations and Warranties.



     All representations and warranties made hereunder and in any document, certificate or
statement delivered pursuant hereto or in connection herewith shall survive the execution and
delivery of this Credit Agreement and the Notes and the making of the Loans; provided that
all such representations and warranties shall terminate on the date upon which the Commitments have
been terminated and all amounts owing hereunder and under any Notes have been paid in full.



     Section 9.5 Payment of Expenses and Taxes.



     The Credit Parties agree (a) to pay or reimburse the Administrative Agent, the Control Agent
and the Arranger for all their reasonable out-of-pocket costs and expenses incurred in connection
with the development, preparation, negotiation, printing and execution of, and any amendment,
supplement or modification to, this Credit Agreement and the other Credit Documents and any other
documents prepared in connection herewith or therewith, and the consummation and administration of
the transactions contemplated hereby and thereby, together with the



81









 




reasonable fees and
disbursements of counsel to the Administrative Agent, the Control Agent and the Arranger, (b) to
pay or reimburse each Lender, the Administrative Agent and the Control Agent for all its costs and
expenses incurred in connection with the enforcement or preservation of any rights under this
Credit Agreement and the other Credit Documents, including, without limitation, the reasonable fees
and disbursements of counsel to the Administrative Agent, the Control Agent and to the Lenders
(including reasonable allocated costs of in-house legal counsel), and (c) on demand, to pay,
indemnify, and hold each Lender, the Administrative Agent, the Control Agent and the Arranger
harmless from, any and all recording and filing fees and any and all liabilities with respect to,
or resulting from any delay in paying, stamp, excise and other similar taxes, if any, which may be
payable or determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of, the Credit
Documents and any such other documents, (d) to pay, indemnify, and hold each Lender, the
Administrative Agent, the Control Agent, the Arranger and their Affiliates and their respective
officers, directors, employees, partners, members, counsel, agents, representatives, advisors and
affiliates (collectively called the “Indemnitees”) harmless from and against, any and all
other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of the Credit Documents and any such other documents
and the use, or proposed use, of proceeds of the Loans and (e) to pay any civil penalty or fine
assessed by the U.S. Department of the Treasury’s Office of Foreign Assets Control against, and all
reasonable costs and expenses (including counsel fees and disbursements) incurred in connection
with defense thereof by the Administrative Agent, the Control Agent or any Lender as a result of
the funding of Loans, the issuance of Letters of Credit, the acceptance of payments or of
Collateral due under the Credit Documents (all of the foregoing, collectively, the “Indemnified
Liabilities”); provided, however, that the Borrower shall not have any
obligation hereunder to an Indemnitee with respect to Indemnified Liabilities arising from the
gross negligence or willful misconduct of such Indemnitee, as determined by a court of competent
jurisdiction pursuant to a final non-appealable judgment. The agreements in this Section 9.5 shall
survive repayment of the Loans, Notes and all other amounts hereunder.




     Section 9.6 Successors and Assigns; Participations; Purchasing Lenders.




     (a) This Credit Agreement shall be binding upon and inure to the benefit of the Credit
Parties, the Lenders, the Administrative Agent, all future holders of the Notes and their
respective successors and assigns, except that the Credit Parties may not assign or transfer
any of their rights or obligations under this Credit Agreement or the other Credit Documents
without the prior written consent of each Lender.




     (b) Any Lender may, in the ordinary course of its business and in accordance with
applicable law, at any time sell to one or more banks or other entities
(“Participants”) participating interests in any Loan owing to such Lender, any Note
held by such Lender, any Commitment of such Lender, or any other interest of such Lender
hereunder. In the event of any such sale by a Lender of participating interests to a
Participant, such Lender’s obligations
under this Credit Agreement to the other parties to this Credit Agreement shall remain
unchanged, such Lender shall remain solely responsible for the performance thereof, such
Lender shall remain the holder of any such Note for all purposes under this Credit
Agreement, and the Borrower and the Administrative Agent shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights and obligations under this
Credit Agreement. No Lender shall transfer or grant any participation under which the
Participant shall have rights to approve any amendment to or waiver of this Credit Agreement
or any other Credit Document except to the extent such amendment or waiver would (i) extend
the scheduled maturity of any Loan or Note or any installment thereon in which such
Participant is participating, or reduce the stated rate or extend the time of payment of
interest or fees thereon (except in connection with a waiver of interest at the increased
post-default rate set forth in Section 2.10 which shall be determined by a vote of the
Required Lenders) or reduce the principal amount thereof, or increase the amount of the
Participant’s participation over the amount thereof then in effect; provided that,
it is understood and agreed that (A) no waiver, reduction or deferral of a mandatory
prepayment required pursuant to Section 2.8(b), nor any amendment of Section 2.8(b) or the
definitions of Asset Disposition, Debt Issuance, Equity Issuance, Excess Cash Flow, or
Recovery Event, or any definitions incorporated in the foregoing defined terms, shall
constitute a reduction of the amount of, or an extension of the scheduled date of, the
scheduled date of maturity of, or any installment of, any Loan or Note, (B) a



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waiver of any
Default or Event of Default shall not constitute a change in the terms of such
participation, and (C) an increase in any Commitment or Loan shall be permitted without
consent of any participant if the Participant’s participation is not increased as a result
thereof, (ii) release all or substantially all of the Guarantors from their obligations
under the Guaranty, (iii) release all or substantially all of the Collateral, or (iv)
consent to the assignment or transfer by
the Borrower of any of its rights and obligations under this Credit Agreement. In the case
of any such participation, the Participant shall not have any rights under this Credit
Agreement or any of the other Credit Documents (the Participant’s rights against such Lender
in respect of such participation to be those set forth in the agreement executed by such
Lender in favor of the Participant relating thereto) and all amounts payable by the Borrower
hereunder shall be determined as if such Lender had not sold such participation;
provided that each Participant shall be entitled to the benefits of Sections 2.16,
2.17, 2.18 and 9.5 with respect to its participation in the Commitments and the Loans
outstanding from time to time; provided further, that no Participant shall
be entitled to receive any greater amount pursuant to such Sections than the transferor
Lender would have been entitled to receive in respect of the amount of the participation
transferred by such transferor Lender to such Participant had no such transfer occurred.




     (c) Any Lender may, in accordance with applicable law, at any time, sell or assign to
any Lender or any Affiliate or Approved Fund thereof and to one or more additional banks,
insurance companies, financial institutions, investment funds or other entities
(“Purchasing Lenders”), all or any part of its rights and obligations under this
Credit Agreement and the Notes in minimum amounts of (i) $1,000,000 (or such lesser amount
approved by the Administrative Agent) with respect to its Revolving Commitment and its
Revolving Loans (or, if less, the entire amount of such Lender’s Revolving Commitment and
Revolving Loans) and (ii) $1,000,000 (or such lesser amount approved by the Administrative
Agent) with respect to its Term Loans (or, if less, the entire amount of such Lender’s Term
Loans), pursuant to an Assignment Agreement, executed by such Purchasing Lender, such
transferor Lender, the Administrative Agent, the Issuing Lender and the Borrower (to the
extent required), and delivered to the Administrative Agent for its acceptance and recording
in the Register; provided, however, that (A) any sale or assignment to an
existing Lender, or Affiliate or Approved Fund thereof, shall not require the consent of the
Borrower nor shall any such sale or assignment be subject to the minimum assignment amounts
specified herein, (B) so long as no Default or Event of Default shall have occurred and be
continuing, any sale or assignment of a portion of the Revolving Loans and a Revolving Loan
Commitment shall require the consent of the Borrower (such consent not to be unreasonably
withheld) and (C) any sale or assignment of a portion of the Term Loan and a Term Loan
Commitment shall not require the consent of the Borrower. Upon such execution, delivery,
acceptance and recording, from and after the Transfer Effective Date specified in such
Assignment Agreement, (1) the Purchasing Lender thereunder shall be a party hereto and, to
the extent provided in such Assignment Agreement, have the rights and obligations of a
Lender hereunder with a Commitment as set forth therein, and (2) the transferor Lender
thereunder shall, to the extent provided in such Assignment Agreement, be released from its
obligations under this Credit Agreement (and, in the case of an Assignment Agreement
covering all or the remaining portion of a transferor Lender’s rights and obligations under
this Credit Agreement, such transferor Lender shall cease to be a party hereto;
provided, however, that such Lender shall continue to be entitled to any
indemnification rights that expressly survive hereunder). Such Assignment Agreement shall
be deemed to amend this Credit Agreement to the extent, and only to the extent, necessary to
reflect the addition of such Purchasing Lender and the resulting adjustment of Commitment
Percentages arising from the purchase by such Purchasing Lender of all or a portion of the
rights and obligations of such transferor Lender under this Credit Agreement and the Notes.
On or prior to the Transfer Effective Date specified in such Assignment Agreement, the
Borrower, at its own expense, shall execute and deliver to the Administrative Agent in
exchange for the Notes delivered to the Administrative Agent pursuant to such Assignment
Agreement new Notes to the order of such Purchasing Lender in an
amount equal to the Commitment assumed by it pursuant to such Assignment Agreement and,
unless the transferor Lender has not retained a Commitment hereunder, new Notes to the order
of the transferor Lender in an amount equal to the Commitment retained by it hereunder.
Such new Notes shall be dated the Closing Date and shall otherwise be in the form of the
Notes replaced thereby. Notwithstanding anything to the contrary contained in this Section
9.6, a Lender may assign any or all of its rights under this Credit Agreement to an
Affiliate or a Approved Fund of such Lender without delivering an Assignment Agreement to
the Administrative Agent; provided, however, that (x) the Credit Parties and
the Administrative Agent may continue to deal solely and directly with such



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assigning Lender
until an Assignment Agreement has been delivered to the Administrative Agent for recordation
on the Register, (y) the failure of such assigning lender to deliver a Assignment Agreement
to the Administrative Agent shall not affect the legality, validity or binding effect of
such assignment and (z) an Assignment Agreement between the assigning Lender an Affiliate or
Approved Fund of such Lender shall be effective as of the date specified in such Assignment
Agreement.




     (d) The Administrative Agent shall maintain at its address referred to in Section 9.2 a
copy of each Assignment Agreement delivered to it and a register (the “Register”)
for the recordation of the names and addresses of the Lenders and the Commitment of, and
principal amount of the Loans owing to, each Lender from time to time. A Loan (and the
related Note) recorded on the Register may be assigned or sold in whole or in part upon
registration of such assignment or sale on the Register. The entries in the Register shall
be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent
and the Lenders may treat each Person whose name is recorded in the Register as the owner of
the Loan recorded therein for all purposes of this Credit Agreement. The Register shall be
available for inspection
by the Borrower or any Lender at any reasonable time and from time to time upon reasonable
prior notice. In the case of an assignment pursuant to the last sentence of Section 9.6(c)
as to which an Assignment Agreement is not delivered to the Administrative Agent, the
assigning Lender shall, acting solely for this purpose as a non-fiduciary agent of the
Credit Parties, maintain a comparable register on behalf of the Credit Parties. In the
event that any Lender sells participations in a Loan recorded on the Register, such Lender
shall maintain a register on which it enters the name of all participants in such Loans held
by it (the “Participant Register”). A Loan recorded on the Register (and the
registered Note, if any, evidencing the same) may be participated in whole or in part only
by registration of such participation on the Participant Register (and each registered Note
shall expressly so provide). Any participation of such Loan recorded on the Register (and
the registered Note, if any, evidencing the same) may be effected only by the registration
of such participation on the Participant Register.




     (e) Upon its receipt of a duly executed Assignment Agreement, together with payment to
the Administrative Agent by the transferor Lender or the Purchasing Lender, as agreed
between them, of a registration and processing fee of $3,500 for each Purchasing Lender
(other than a Purchasing Lender that is an Affiliate or Approved Fund of the transferor
Lender) listed in such Assignment Agreement and the Notes subject to such Assignment
Agreement, the Administrative Agent shall (i) accept such Assignment Agreement, (ii) record
the information contained therein in the Register and (iii) give prompt notice of such
acceptance and recordation to the Lenders and the Borrower.




     (f) The Borrower authorizes each Lender to disclose to any Participant or Purchasing
Lender (each, a “Transferee”) and any prospective Transferee any and all financial
information in such Lender’s possession concerning the Borrower and its Subsidiaries
which has been delivered to such Lender by or on behalf of the Borrower pursuant to this
Credit Agreement or which has been delivered to such Lender by or on behalf of the Borrower
in connection with such Lender’s credit evaluation of the Borrower and its Affiliates prior
to becoming a party to this Credit Agreement, in each case subject to Section 9.15.




     (g) At the time of each assignment pursuant to this Section 9.6 to a Person which is
not already a Lender hereunder and which is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) for Federal income tax purposes, the respective
assignee Lender shall provide to the Borrower and the Administrative Agent the appropriate
Internal Revenue Service Forms described in Section 2.18.




     (h) Nothing herein shall prohibit any Lender from pledging or assigning any of its
rights under this Credit Agreement (including, without limitation, any right to payment of
principal and interest under any Note) to secure obligations of such Lender, including
without limitation, (i) any pledge or assignment to secure obligations to a Federal Reserve
Bank and (ii) in the case of any Lender that is a fund or trust or entity that invests in
commercial bank loans in the ordinary course of business, any pledge or assignment to any
holders of obligations owed, or securities issued, by such Lender including to any trustee
for, or any other representative of, such holders; it being understood that the requirements
for assignments set forth in this Section 9.6 shall not apply to any such pledge or
assignment of a security interest, except with respect to any foreclosure or similar action
taken by such pledgee or assignee with respect to such



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pledge or assignment; provided that
no such pledge or assignment of a security interest shall release a Lender from any of its
obligations hereunder or substitute any such pledgee or assignee for such Lender as a party
hereto and no such pledgee or assignee shall have any voting rights under this Credit
Agreement unless and
until the requirements for assignments set forth in this Section 9.6 are complied with in
connection with any foreclosure or similar action taken by such pledgee or assignee.



     Section 9.7 Adjustments; Set-off.




     (a) Each Lender agrees that if any Lender (a “benefited Lender”) shall at any
time receive any payment of all or part of its Loans, or interest thereon, or receive any
collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to
a Bankruptcy Event or otherwise) in a greater proportion than any such payment to or
collateral received by any other Lender, if any, in respect of such other Lender’s Loans, or
interest thereon, such benefited Lender shall purchase for cash from the other Lenders a
participating interest in such portion of each such other Lender’s Loan, or shall provide
such other Lenders with the benefits of any such collateral, or the proceeds thereof, as
shall be necessary to cause such benefited Lender to share the excess payment or benefits of
such collateral or proceeds ratably with each of the Lenders; provided,
however, that if all or any portion of such excess payment or benefits is thereafter
recovered from such benefited Lender, such purchase shall be rescinded, and the purchase
price and benefits returned, to the extent of such recovery, but without interest. The
Borrower agrees that each Lender so purchasing a portion of another Lender’s Loans may
exercise all rights of payment (including, without limitation, rights of set-off) with
respect to such portion as fully as if such Lender were the direct holder of such portion.




     (b) In addition to any rights and remedies of the Lenders provided by law (including,
without limitation, other rights of set-off), each Lender shall have the right, without
prior notice to the Borrower or the applicable Credit Party, any such notice being expressly
waived by the Credit Parties to the extent permitted by applicable law, upon the occurrence
of any Event of Default, to
setoff and appropriate and apply any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or claims, in
any currency, in each case whether direct or indirect, absolute or contingent, matured or
unmatured, at any time held by or owing to such Lender or any branch or agency thereof to or
for the credit or the account of the Borrower or any other Credit Party, or any part thereof
in such amounts as such Lender may elect, against and on account of the Loans and other
Credit Party Obligations of the Borrower and the other Credit Parties to the Administrative
Agent and the Lenders and claims of every nature and description of the Administrative Agent
and the Lenders against the Borrower and the other Credit Parties, in any currency, whether
arising hereunder, under any other Credit Document or any Secured Hedging Agreement pursuant
to the terms of this Credit Agreement, as such Lender may elect, whether or not the
Administrative Agent or the Lenders have made any demand for payment and although such
obligations, liabilities and claims may be contingent or unmatured. The aforesaid right of
set-off may be exercised by such Lender against the Borrower, any other Credit Party or
against any trustee in bankruptcy, debtor in possession, assignee for the benefit of
creditors, receiver or execution, judgment or attachment creditor of the Borrower or any
other Credit Party, or against anyone else claiming through or against the Borrower, any
other Credit Party or any such trustee in bankruptcy, debtor in possession, assignee for the
benefit of creditors, receiver, or execution, judgment or attachment creditor,
notwithstanding the fact that such right of set-off shall not have been exercised by such
Lender prior to the occurrence of any Event of Default. Each Lender agrees promptly to
notify the Borrower and the Administrative Agent after any such set-off and application made
by such Lender; provided, however, that the failure to give such notice
shall not affect the validity of such set-off and application.



     Section 9.8 Table of Contents and Section Headings.



     The table of contents and the Section and subsection headings herein are intended for
convenience only and shall be ignored in construing this Credit Agreement.



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     Section 9.9 Counterparts.



     This Credit Agreement may be executed by one or more of the parties to this Credit Agreement
on any number of separate counterparts, and all of said counterparts taken together shall be deemed
to constitute one and the same instrument. A set of the copies of this Credit Agreement signed by
all the parties shall be lodged with the Borrower and the Administrative Agent.



     Section 9.10 Effectiveness.



     This Credit Agreement shall become effective on the date on which all of the parties have
signed a copy hereof (whether the same or different copies) and shall have delivered the same to
the Administrative Agent pursuant to Section 9.2 or, in the case of the Lenders, shall have
given to the Administrative Agent written, telecopied or telex notice (actually received) at such
office that the same has been signed and mailed to it.



     Section 9.11 Severability.



     Any provision of this Credit Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.



     Section 9.12 Integration.



     This Credit Agreement and the other Credit Documents represent the agreement of the Borrower,
the other Credit Parties, the Administrative Agent and the Lenders with respect to the subject
matter hereof, and there are no promises, undertakings, representations or warranties by the
Administrative Agent, the Borrower, the other Credit Parties, or any Lender relative to the subject
matter hereof not expressly set forth or referred to herein or therein.



     Section 9.13 Governing Law.



     This Credit Agreement and, unless otherwise specified therein, each other Credit Document and
the rights and obligations of the parties under this Credit Agreement and such other Credit
Document shall be governed by, and construed and interpreted in accordance with, the law of the
State of New York without regard to conflict of laws principles thereof (other than Sections 5-1401
and 5-1402 of The New York General Obligations Law).



     Section 9.14 Consent to Jurisdiction and Service of Process.



     All judicial proceedings brought against the Borrower and/or any other Credit Party with
respect to this Credit Agreement, any Note or any of the other Credit Documents may be brought in
any state or federal court of competent jurisdiction in the State of New York, and, by execution
and delivery of this Credit Agreement, the Borrower and each of the other Credit Parties accepts,
for itself and in connection with its properties, generally and unconditionally, the non-exclusive
jurisdiction of the aforesaid courts and irrevocably agrees to be bound by any final judgment
rendered thereby in connection with this Credit Agreement from which no appeal has been taken or is
available. The Borrower and each of the other Credit Parties irrevocably agree that all service of
process in any such proceedings in any such court may be effected by mailing a copy thereof by
registered or certified mail (or any
substantially similar form of mail), postage prepaid, to it at its address set forth in Section 9.2
or at such other address of which the Administrative Agent shall have been notified pursuant
thereto, such service being hereby acknowledged by the Borrower and the other Credit Parties to be
effective and binding service in every respect. The Borrower, the other Credit Parties, the
Administrative Agent and the Lenders irrevocably waive any objection, including, without
limitation, any objection to the laying of venue or based on the grounds of forum non conveniens
which it may now or hereafter have to the bringing of any such action or proceeding in any such
jurisdiction. Nothing herein shall affect the right to serve process in any other manner permitted
by law or shall limit the right of any Lender to bring proceedings against the Borrower or the
other Credit Parties in the court of any other jurisdiction.



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     Section 9.15 Confidentiality.



     The Administrative Agent and each of the Lenders agrees that it will use its best efforts not
to disclose without the prior consent of the Borrower any information (the “Information”)
with respect to the Credit Parties and their Subsidiaries which is furnished pursuant to this
Credit Agreement, any other Credit Document or any documents contemplated by or referred to herein
or therein and which is designated by the Borrower to the Lenders in writing as confidential or as
to which it is otherwise reasonably clear such information is not public, except that any Lender
may disclose any such Information (a) to its employees, affiliates, auditors or counsel or to
another Lender, (b) as has become generally available to the public other than by a breach of this
Section 9.15, (c) as may be required or appropriate in any report, statement or testimony submitted
to any municipal, state or federal regulatory body having or claiming to have jurisdiction over
such Lender or to the Federal Reserve Board or the Federal Deposit Insurance Corporation or the
Office of the Comptroller of the Currency or the National Association of Insurance Commissioners or
similar organizations (whether in the United States or elsewhere) or their
successors, (d) as may be required or appropriate in response to any summons or subpoena or any
law, order, regulation or ruling applicable to such Lender, (e) to (i) any prospective Participant
or assignee in connection with any contemplated transfer pursuant to Section 9.6 or (ii) any actual
or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the
Borrower, provided that such prospective transferee shall have been made aware of this
Section 9.15 and shall have agreed to be bound by its provisions as if it were a party to this
Credit Agreement, (f) to Gold Sheets and other similar bank trade publications; such
information to consist of deal terms and other information regarding the credit facilities
evidenced by this Credit Agreement customarily found in such publications, (g) in connection with
any suit, action or proceeding for the purpose of defending itself, reducing its liability, or
protecting or exercising any of its claims, rights, remedies or interests under or in connection
with the Credit Documents or any Secured Hedging Agreement, (h) to any direct or indirect
contractual counterparty in swap agreements or such contractual counterparty’s professional advisor
(so long as such contractual counterparty or professional advisor to such contractual counterparty
agrees to be bound by the provisions of this Section 9.15), (i) any nationally recognized rating
agency that requires access to information about a Lender’s investment portfolio in connection with
ratings issued with respect to such Lender, (j) to a Person that is an investor or prospective
investor in a Securitization (as defined below) that agrees that its access to information
regarding the Borrower and the Loans is solely for purposes of evaluating an investment in such
Securitization; provided that such Person shall have been made aware of this Section 9.15
and shall have agreed to be bound by its provisions as if it were a party to this Credit Agreement,
or (k) to a Person that is a trustee, collateral manager, servicer, noteholder or secured party in
a Securitization in connection with the administration, servicing and reporting on the assets
serving as collateral for such Securitization; provided that such Person shall have been
made aware of this Section 9.15 and shall have agreed to be bound by its provisions as if it were a
party to this Credit Agreement. For purposes of this Section
“Securitization” shall mean a public or private offering by a Lender or any of its
affiliates or their respective successors and assigns, of securities which represent an interest
in, or which are collateralized in whole or in part by, the Loans.



     Section 9.16 Acknowledgments.



     The Borrower and the other Credit Parties each hereby acknowledges that:




     (a) it has been advised by counsel in the negotiation, execution and delivery of each
Credit Document;




     (b) neither the Administrative Agent nor any Lender has any fiduciary relationship with
or duty to the Borrower or any other Credit Party arising out of or in connection with this
Credit Agreement and the relationship between the Administrative Agent and the Lenders, on
one hand, and the Borrower and the other Credit Parties, on the other hand, in connection
herewith is solely that of debtor and creditor; and




     (c) no joint venture exists among the Lenders or among the Borrower or the other Credit
Parties and the Lenders.



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     Section 9.17 Waivers of Jury Trial; Waiver of Consequential Damages.



     THE BORROWER, THE OTHER CREDIT PARTIES, THE ADMINISTRATIVE AGENT AND THE LENDERS HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS CREDIT AGREEMENT OR ANY OTHER CREDIT DOCUMENT AND
FOR ANY COUNTERCLAIM THEREIN. Each of the Borrower, the other Credit Parties, the Administrative
Agent and the Lenders agree
not to assert any claim against any other party to this Credit Agreement or any their respective
directors, officers, employees, attorneys, Affiliates or agents, on any theory of liability, for
special, indirect, consequential or punitive damages arising out of or otherwise relating to any of
the transactions contemplated herein.



     Section 9.18 Patriot Act Notice.



     Each Lender and the Administrative Agent (for itself and not on behalf of any other party)
hereby notifies the Borrower that, pursuant to the requirements of the USA Patriot Act, Title III
of Pub. L. 107-56, signed into law October 26, 2001 (the “Patriot Act”), it is required to
obtain, verify and record information that identifies the Borrower, which information includes the
name and address of the Borrower and other information that will allow such Lender or the
Administrative Agent, as applicable, to identify the Borrower in accordance with the Patriot Act.



ARTICLE X




GUARANTY




     Section 10.1 The Guaranty.



     In order to induce the Lenders to enter into this Credit Agreement and any Hedging Agreement
Provider to enter into any Secured Hedging Agreement and to extend credit hereunder and thereunder
and in recognition of the direct benefits to be received by the Guarantors from the Extensions of
Credit hereunder and any Secured Hedging Agreement, each of the Guarantors hereby agrees with the
Administrative Agent, the Lenders and the Hedging Agreement Providers as follows: the Guarantor
hereby unconditionally and irrevocably jointly and severally guarantees as primary obligor and not
merely as surety the full and prompt payment when due, whether upon maturity, by acceleration or
otherwise, of any and all Credit Party
Obligations. If any or all of the indebtedness becomes due and payable hereunder or under any
Secured Hedging Agreement, each Guarantor unconditionally promises to pay such indebtedness to the
Administrative Agent, the Lenders, the Hedging Agreement Providers, or their respective order, or
demand, together with any and all reasonable expenses which may be incurred by the Administrative
Agent or the Lenders in collecting any of the Credit Party Obligations. The Guaranty set forth in
this Article X is a guaranty of timely payment and not of collection.



     Notwithstanding any provision to the contrary contained herein or in any other of the Credit
Documents, to the extent the obligations of a Guarantor shall be adjudicated to be invalid or
unenforceable for any reason (including, without limitation, because of any applicable state or
federal law relating to fraudulent conveyances or transfers) then the obligations of each such
Guarantor hereunder shall be limited to the maximum amount that is permissible under applicable law
(whether federal or state and including, without limitation, the Bankruptcy Code).



     Section 10.2 Bankruptcy.



     Additionally, each of the Guarantors unconditionally and irrevocably guarantees jointly and
severally the payment of any and all Credit Party Obligations of the Borrower to the Lenders and
any Hedging Agreement Provider whether or not due or payable by the Borrower upon the occurrence of
any of the events specified in Section 7.1(f), and unconditionally promises to pay such Credit
Party Obligations to the Administrative Agent for the account of the Lenders and to any such
Hedging Agreement Provider, or order, on demand, in lawful money of the United States. Each of the
Guarantors further agrees that to the extent that the Borrower or a Guarantor shall make a payment
or a transfer of an interest in any property to the Administrative Agent, any Lender or any Hedging
Agreement Provider, which payment or transfer or any part thereof is subsequently invalidated,
declared to be fraudulent or preferential, or otherwise is avoided, and/or required to be
repaid to the Borrower or a Guarantor, the



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estate of the Borrower or a Guarantor, a trustee,
receiver or any other party under any bankruptcy law, state or federal law, common law or equitable
cause, then to the extent of such avoidance or repayment, the obligation or part thereof intended
to be satisfied shall be revived and continued in full force and effect as if said payment had not
been made.




     Section 10.3 Nature of Liability.



     The liability of each Guarantor hereunder is exclusive and independent of any security for or
other guaranty of the Credit Party Obligations of the Borrower whether executed by any such
Guarantor, any other guarantor or by any other party, and no Guarantor’s liability hereunder shall
be affected or impaired by (a) any direction as to application of payment by the Borrower or by any
other party, or (b) any other continuing or other guaranty, undertaking or maximum liability of a
guarantor or of any other party as to the Credit Party Obligations of the Borrower, or (c) any
payment on or in reduction of any such other guaranty or undertaking, or (d) any dissolution,
termination or increase, decrease or change in personnel by the Borrower, or (e) any payment made
to the Administrative Agent, the Lenders or any Hedging Agreement Provider on the Credit Party
Obligations which the Administrative Agent, such Lenders or such Hedging Agreement Provider repay
the Borrower pursuant to court order in any bankruptcy, reorganization, arrangement, moratorium or
other debtor relief proceeding, and each of the Guarantors waives any right to the deferral or
modification of its obligations hereunder by reason of any such proceeding.



     Section 10.4 Independent Obligation.



     The obligations of each Guarantor hereunder are independent of the obligations of any other
Guarantor or the Borrower, and a separate action or actions may be brought and prosecuted against
each Guarantor whether or not action is brought against any other Guarantor or the
Borrower and whether or not any other Guarantor or the Borrower is joined in any such action or
actions.



     Section 10.5 Authorization.



     Each of the Guarantors authorizes the Administrative Agent, each Lender and each Hedging
Agreement Provider without notice or demand (except as shall be required by applicable statute and
cannot be waived), and without affecting or impairing its liability hereunder, from time to time to
(a) renew, compromise, extend, increase, accelerate or otherwise change the time for payment of, or
otherwise change the terms of the Credit Party Obligations or any part thereof in accordance with
this Credit Agreement and any Secured Hedging Agreement, as applicable, including any increase or
decrease of the rate of interest thereon, (b) take and hold security from any Guarantor or any
other party for the payment of this Guaranty or the Credit Party Obligations and exchange, enforce
waive and release any such security, (c) apply such security and direct the order or manner of sale
thereof as the Administrative Agent and the Lenders in their discretion may determine and (d)
release or substitute any one or more endorsers, Guarantors, the Borrower or other obligors.



     Section 10.6 Reliance.



     It is not necessary for the Administrative Agent, the Lenders or any Hedging Agreement
Provider to inquire into the capacity or powers of the Borrower or the officers, directors,
members, partners or agents acting or purporting to act on its behalf, and any Credit Party
Obligations made or created in reliance upon the professed exercise of such powers shall be
guaranteed hereunder.



     Section 10.7 Waiver.




     (a) Each of the Guarantors waives any right (except as shall be required by applicable
statute and cannot be waived) to require the Administrative Agent, any Lender or any Hedging
Agreement Provider to (i) proceed against the Borrower, any other guarantor or any other
party, (ii) proceed against or exhaust any security held from the Borrower, any other
guarantor or any other party, or (iii) pursue any other remedy in the Administrative
Agent’s, any Lender’s or any Hedging Agreement Provider’s power whatsoever. Each of the
Guarantors waives any defense based on or arising out of any defense of the Borrower, any
other guarantor or any other party other than payment in full of the Credit Party
Obligations



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(other than contingent indemnity obligations), including without limitation any
defense based on or arising out of the disability of the Borrower, any other guarantor or
any other party, or the unenforceability of the Credit Party Obligations or any part thereof
from any cause, or the cessation from any cause of the liability of the Borrower other than
payment in full of the Credit Party Obligations. The Administrative Agent may, at its
election, foreclose on any security held by the Administrative Agent by one or more judicial
or nonjudicial sales (to the extent such sale is permitted by applicable law), or exercise
any other right or remedy the Administrative Agent or any Lender may have against the
Borrower or any other party, or any security, without affecting or impairing in any way the
liability of any Guarantor hereunder except to the extent the Credit Party Obligations have
been paid in full and the Commitments have been terminated. Each of the Guarantors waives
any defense arising out of any such election by the Administrative Agent or any of the
Lenders, even though such election operates to impair or extinguish any right of
reimbursement or subrogation or other right or remedy of the Guarantors against the Borrower
or any other party or any security.




     (b) Each of the Guarantors waives all presentments, demands for performance, protests
and notices, including without limitation notices of nonperformance, notice of protest,
notices of dishonor, notices of acceptance of this Guaranty, and notices of the existence,
creation or incurring of new or additional Credit Party
Obligations. Each Guarantor assumes all responsibility for being and keeping itself
informed of the Borrower’s financial condition and assets, and of all other circumstances
bearing upon the risk of nonpayment of the Credit Party Obligations and the nature, scope
and extent of the risks which such Guarantor assumes and incurs hereunder, and agrees that
neither the Administrative Agent nor any Lender shall have any duty to advise such Guarantor
of information known to it regarding such circumstances or risks.




     (c) Each of the Guarantors hereby agrees it will not exercise any rights of subrogation
which it may at any time otherwise have as a result of this Guaranty (whether contractual,
under Section 509 of the U.S. Bankruptcy Code, or otherwise) to the claims of the Lenders or
any Hedging Agreement Provider against the Borrower or any other guarantor of the Credit
Party Obligations of the Borrower owing to the Lenders or such Hedging Agreement Provider
(collectively, the “Other Parties”) and all contractual, statutory or common law
rights of reimbursement, contribution or indemnity from any Other Party which it may at any
time otherwise have as a result of this Guaranty until such time as the Credit Party
Obligations shall have been paid in full and the Commitments have been terminated. Each of
the Guarantors hereby further agrees not to exercise any right to enforce any other remedy
which the Administrative Agent, the Lenders or any Hedging Agreement Provider now have or
may hereafter have against any Other Party, any endorser or any other guarantor of all or
any part of the Credit Party Obligations of the Borrower and any benefit of, and any right
to participate in, any security or collateral given to or for the benefit of the Lenders
and/or the Hedging Agreement Providers to secure payment of the Credit Party Obligations of
the Borrower until such time as the Credit Party Obligations (other than contingent
indemnity obligations) shall have been paid in full and the Commitments have been
terminated.



     Section 10.8 Limitation on Enforcement.



     The Lenders and the Hedging Agreement Providers agree that this Guaranty may be enforced only
by the action of the Administrative Agent acting upon the instructions of the Required Lenders or
such Hedging Agreement Provider (only with respect to obligations under the applicable Secured
Hedging Agreement) and that no Lender or Hedging Agreement Provider shall have any right
individually to seek to enforce or to enforce this Guaranty, it being understood and agreed that
such rights and remedies may be exercised by the Administrative Agent for the benefit of the
Lenders under the terms of this Credit Agreement and for the benefit of any Hedging Agreement
Provider under any Secured Hedging Agreement. The Lenders and the Hedging Agreement Providers
further agree that this Guaranty may not be enforced against any director, officer, employee or
stockholder of the Guarantors.



     Section 10.9 Confirmation of Payment.



     The Administrative Agent and the Lenders will, upon request after payment of the Credit Party
Obligations which are the subject of this Guaranty and termination of the Commitments relating
thereto, confirm to the



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Borrower, the Guarantors or any other Person that such indebtedness and
obligations have been paid and the Commitments relating thereto terminated, subject to the
provisions of Section 10.2.




[Signature Pages Follow]






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     IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to be duly executed
and delivered by its proper and duly authorized officers as of the day and year first above
written.



	 	 	 	 	 	 	 
	BORROWER:	 	AMERICAN PACIFIC CORPORATION,	 	 
	 	 	a Delaware corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/  Seth L. VanVoorhees	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:	 	Seth L. VanVoorhees	 	 
	 

	 	Title:	 	Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	GUARANTORS:	 	AMERICAN PACIFIC CORPORATION,	 	 
	 	 	a Nevada corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/  Seth L. VanVoorhees	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:	 	Seth L. VanVoorhees	 	 
	 

	 	Title:	 	Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	AMPAC FINE CHEMICALS LLC,
	 	 
	 	 	a California limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/  Seth L. VanVoorhees	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Seth L. VanVoorhees	 	 
	 

	 	Title:	 	Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	ENERGETIC ADDITIVES INC., LLC,	 	 
	 	 	a Nevada limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/  Seth L. VanVoorhees	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Seth L. VanVoorhees	 	 
	 

	 	Title:	 	Manager	 	 
	 
	 	 	 	 	 	 
	 	 	AMPAC-ISP CORP.,
	 	 
	 	 	a Delaware corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/  Seth L. VanVoorhees	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Seth L. VanVoorhees	 	 
	 

	 	Title:	 	Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	AMERICAN AZIDE CORPORATION,
	 	 
	 	 	a Nevada corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/  Seth L. VanVoorhees	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Seth L. VanVoorhees	 	 
	 

	 	Title:	 	Treasurer	 	 
	 
	 	 	 	 	 	 
	 	 	AMPAC FARMS, INC.,
	 	 
	 	 	a Nevada corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/  Seth L. VanVoorhees	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Seth L. VanVoorhees	 	 
	 

	 	Title:	 	Treasurer	 	 
	 
	 	 	 	 	 	 






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	ADMINISTRATIVE AGENT
	 	 	 	 	 	 
	AND LENDERS:	 	WACHOVIA BANK, NATIONAL	 	 
	 	 	ASSOCIATION,	 	 
	 	 	as Administrative Agent and as a Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/  William F. Fox	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	William F. Fox	 	 
	 

	 	Title:	 	Director	 	 





(excluding schedules and
exhibits, which the Registrant agrees to furnish supplementally
to
the Securities and Exchange Commission upon request)