**Exhibit10.1**

 

 

**CREDIT AND SECURITY AGREEMENT**

 

**among**

 

**EPIQ SYSTEMS, INC.,**

***as Borrower,***

 

**THE LENDERS NAMED HEREIN,**

***as Lenders*,**

 

**and**

 

**KEYBANK NATIONAL ASSOCIATION,**

***as Lead Arranger, Sole Book Runner and Administrative Agent***

 

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**dated as of**

**July 20, 2004**

 

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**TABLEOF CONTENTS**

 
| ARTICLE I.  DEFINITIONS                                                                     |                                                                                  |
|-------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------|
|                                                                                                  | Section 1.1.  Definitions                                                   |   |
|                                                                                                  | Section 1.2.  Accounting Terms                                              |   |
|                                                                                                  | Section 1.3.  Terms Generally                                               |   |
|                                                                                                  |                                                                                  |   |
| ARTICLE II.  AMOUNT AND TERMS OF CREDIT                                                     |                                                                                  |
|                                                                                                  | Section 2.1.  Amount and Nature of Credit                                   |   |
|                                                                                                  | Section 2.2.  Revolving Credit                                              |   |
|                                                                                                  | Section 2.3.  Term Loan                                                     |   |
|                                                                                                  | Section 2.4.  Interest                                                      |   |
|                                                                                                  | Section 2.5.  Evidence of Indebtedness                                      |   |
|                                                                                                  | Section 2.6.  Notice of Credit Event; Funding of Loans                      |   |
|                                                                                                  | Section 2.7.  Payment on Loans and Other Obligations                        |   |
|                                                                                                  | Section 2.8.  Prepayment                                                    |   |
|                                                                                                  | Section 2.9.  Commitment and Other Fees                                     |   |
|                                                                                                  | Section 2.10.  Modifications of Commitment                                  |   |
|                                                                                                  | Section 2.11.  Computation of Interest and Fees                             |   |
|                                                                                                  | Section 2.12.  Mandatory Payment                                            |   |
|                                                                                                  | Section 2.13.  Extension of Commitment                                      |   |
|                                                                                                  |                                                                                  |   |
| ARTICLE III.  ADDITIONAL PROVISIONS RELATING TO  EURODOLLAR LOANS; INCREASED CAPITAL; TAXES |                                                                                  |
|                                                                                                  | Section 3.1.  Requirements of Law                                           |   |
|                                                                                                  | Section 3.2.  Taxes                                                         |   |
|                                                                                                  | Section 3.3.  Funding Losses                                                |   |
|                                                                                                  | Section 3.4.  Change of Lending Office                                      |   |
|                                                                                                  | Section 3.5.  Eurodollar Rate Lending Unlawful; Inability to Determine Rate |   |
|                                                                                                  | Section 3.6.  Replacement of Lenders                                        |   |
|                                                                                                  |                                                                                  |   |
| ARTICLE IV.  CONDITIONS PRECEDENT                                                           |                                                                                  |
|                                                                                                  | Section 4.1.  Conditions to Each Credit Event                               |   |
|                                                                                                  | Section 4.2.  Conditions to the First Credit Event                          |   |
|                                                                                                  | Section 4.3.  Post-Closing Conditions                                       |   |
|                                                                                                  |                                                                                  |   |
| ARTICLE V.  COVENANTS                                                                       |                                                                                  |
|                                                                                                  | Section 5.1.  Insurance                                                     |   |
|                                                                                                  | Section 5.2.  Money Obligations                                             |   |
|                                                                                                  | Section 5.3.  Financial Statements and Information                          |   |
|                                                                                                  | Section 5.4.  Financial Records                                             |   |
|                                                                                                  | Section 5.5.  Franchises; Change in Business                                |   |
|                                                                                                  | Section 5.6.  ERISA Compliance                                              |   |
|                                                                                                  | Section 5.7.  Financial Covenants                                           |   |
|                                                                                                  | Section 5.8.  Borrowing                                                     |   |
|                                                                                                  | Section 5.9.  Liens                                                         |   |
|                                                                                                  | Section 5.10.  Regulations T, U and X                                       |   |
|                                                                                                  | Section 5.11.  Investments and Loans                                        |   |

 

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|                                                  | Section 5.12.  Merger and Sale of Assets                                                                 |   |
|-------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------|--------|
|                                                  | Section 5.13.  Acquisitions                                                                              |   |
|                                                  | Section 5.14.  Notice                                                                                    |   |
|                                                  | Section 5.15.  Capital Distributions; Restricted Payments                                                |   |
|                                                  | Section 5.16.  Environmental Compliance                                                                  |   |
|                                                  | Section 5.17.  Affiliate Transactions                                                                    |   |
|                                                  | Section 5.18.  Use of Proceeds                                                                           |   |
|                                                  | Section 5.19.  Corporate Names                                                                           |   |
|                                                  | Section 5.20.  Subsidiary Guaranties, Security Documents                                                 |   |
|                                                  | Section 5.21.  Restrictive Agreements                                                                    |   |
|                                                  | Section 5.22.  Other Covenants                                                                           |   |
|                                                  | Section 5.23.  Note Agreement                                                                            |   |
|                                                  | Section 5.24.  Amendment of Organizational Documents                                                     |   |
|                                                  | Section 5.25.  Collateral                                                                                |   |
|                                                  | Section 5.26.  Property Acquired Subsequent to the  Closing Date and Right to Take Additional Collateral |   |
|                                                  |                                                                                                               |   |
| ARTICLE VI.  REPRESENTATIONS AND WARRANTIES |                                                                                                               |
|                                                  | Section 6.1.  Corporate Existence; Subsidiaries; Foreign Qualification                                   |   |
|                                                  | Section 6.2.  Corporate Authority                                                                        |   |
|                                                  | Section 6.3.  Compliance with Laws and Contracts                                                         |   |
|                                                  | Section 6.4.  Litigation and Administrative Proceedings                                                  |   |
|                                                  | Section 6.5.  Title to Assets                                                                       |   |
|                                                  | Section 6.6.  Liens and Security Interests                                                               |   |
|                                                  | Section 6.7.  Tax Returns                                                                                |   |
|                                                  | Section 6.8.  Environmental Laws                                                                         |   |
|                                                  | Section 6.9.  Locations                                                                                  |   |
|                                                  | Section 6.10.  Employee Benefits Plans                                                                   |   |
|                                                  | Section 6.11.  Consents or Approvals                                                                     |   |
|                                                  | Section 6.12.  Solvency                                                                                  |   |
|                                                  | Section 6.13.  Financial Statements                                                                      |   |
|                                                  | Section 6.14.  Regulations                                                                               |   |
|                                                  | Section 6.15.  Material Agreements                                                                       |   |
|                                                  | Section 6.16.  Intellectual Property                                                                     |   |
|                                                  | Section 6.17.  Insurance                                                                                 |   |
|                                                  | Section 6.18.  Deposit Accounts                                                                          |   |
|                                                  | Section 6.19.  Accurate and Complete Statements                                                          |   |
|                                                  | Section 6.20.  Note Agreement                                                                            |   |
|                                                  | Section 6.21.  Investment Company; Holding Company                                                       |   |
|                                                  | Section 6.22.  Defaults                                                                                  |   |
|                                                  |                                                                                                               |   |
| ARTICLE VII.  SECURITY                           |                                                                                                               |
|                                                  | Section 7.1.  Security Interest in Collateral                                                            |   |
|                                                  | Section 7.2.  Collections and Receipt of Proceeds by Borrower                                            |   |
|                                                  | Section 7.3.  Collections and Receipt of Proceeds by Agent                                               |   |
|                                                  | Section 7.4.  Use of Inventory and Equipment                                                             |   |

 

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| ARTICLE VIII.  EVENTS OF DEFAULT   |                                                                    |
|----------------------------------------------|-------------------------------------------------------------------------|
|                                         | Section 8.1.  Payments                                        |   |
|                                         | Section 8.2.  Special Covenants                               |   |
|                                         | Section 8.3.  Other Covenants                                 |   |
|                                         | Section 8.4.  Representations and Warranties                  |   |
|                                         | Section 8.5.  Cross Default                                   |   |
|                                         | Section 8.6.  ERISA Default                                   |   |
|                                         | Section 8.7.  Change in Control                               |   |
|                                         | Section 8.8.  Money Judgment                                  |   |
|                                         | Section 8.9.  Security                                        |   |
|                                         | Section 8.10.  Validity of Loan Documents                     |   |
|                                         | Section 8.11.  Solvency                                       |   |
|                                         |                                                                    |   |
| ARTICLE IX.  REMEDIES UPON DEFAULT |                                                                    |
|                                         | Section 9.1.  Optional Defaults                               |   |
|                                         | Section 9.2.  Automatic Defaults                              |   |
|                                         | Section 9.3.  Letters of Credit                               |   |
|                                         | Section 9.4.  Offsets                                         |   |
|                                         | Section 9.5.  Equalization Provision                          |   |
|                                         | Section 9.6.  Collateral                                      |   |
|                                         | Section 9.7.  Other  Remedies                                 |   |
|                                         | Section 9.8.  Application of Proceeds                         |   |
|                                         |                                                                    |   |
| ARTICLE X.  THE AGENT              |                                                                    |
|                                         | Section 10.1.  Appointment and Authorization                  |   |
|                                         | Section 10.2.  Note Holders                                   |   |
|                                         | Section 10.3.  Consultation With Counsel                      |   |
|                                         | Section 10.4.  Documents                                      |   |
|                                         | Section 10.5.  Agent and Affiliates                           |   |
|                                         | Section 10.6.  Knowledge of Default                           |   |
|                                         | Section 10.7.  Action by Agent                                |   |
|                                         | Section 10.8.  Release of Collateral or Guarantor of  Payment |   |
|                                         | Section 10.9.  Notice of Default                              |   |
|                                         | Section 10.10.   Indemnification of Agent                     |   |
|                                         | Section 10.11.  Successor  Agent                              |   |
|                                         |                                                                    |   |
| ARTICLE XI.   MISCELLANEOUS        |                                                                    |
|                                         | Section 11.1.  Lenders’ Independent Investigation        |   |
|                                         | Section 11.2.  No Waiver; Cumulative Remedies                 |   |
|                                         | Section 11.3.  Amendments, Consents                           |   |
|                                         | Section 11.4.  Notices                                        |   |
|                                         | Section 11.5.  Costs, Expenses and Taxes                      |   |
|                                         | Section 11.6.  Indemnification                                |   |
|                                         | Section 11.7.  Obligations Several; No Fiduciary  Obligations |   |
|                                         | Section 11.8.  Execution in Counterparts                      |   |
|                                         | Section 11.9.  Binding Effect; Borrower’s Assignment     |   |
|                                         | Section 11.10.  Lender  Assignments                           |   |

 

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|   | Section 11.11.  Sale of  Participations                            |   |
|--------|------------------------------------------------------------------------------|--------|
|   | Section 11.12.   Severability of Provisions; Captions; Attachments |   |
|   | Section 11.13.   Investment Purpose                                |   |
|   | Section 11.14.  Entire  Agreement                                  |   |
|   | Section 11.15.  Legal  Representation of Parties                   |   |
|   | Section 11.16.  Governing  Law; Submission to Jurisdiction         |   |
|   | Jury Trial Waiver                                                            |   |

 

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This CREDIT AND SECURITYAGREEMENT (as the same may from time to time be amended, restated or otherwisemodified, this “Agreement”) is made effective as of the 20th day ofJuly, 2004, among:

 

(a)                                  EPIQSYSTEMS, INC., a Missouri corporation (“Borrower”);

 

(b)                                 thelenders listed on Schedule 1 hereto and each other EligibleTransferee, as hereinafter defined, that becomes a party hereto pursuant toSection 2.10(b) or 11.10 hereof (collectively, the “Lenders” and,individually, each a “Lender”); and

 

(c)                                  KEYBANKNATIONAL ASSOCIATION, as lead arranger, sole book runner and administrativeagent for the Lenders under this Agreement (“Agent”).

 

WITNESSETH:

 

WHEREAS, Borrower, Agentand the Lenders desire to contract for the establishment of credits in theaggregate principal amounts hereinafter set forth, to be made available toBorrower upon the terms and subject to the conditions hereinafter set forth;

 

NOW, THEREFORE, it ismutually agreed as follows:

 

ARTICLE I.  DEFINITIONS

 

Section 1.1.  Definitions.  As used in this Agreement, the followingterms shall have the following meanings:

 

“Accelerated MaturityDate” shall mean the date that is sixty (60) days prior to the stated maturity(or date when scheduled principal payments are due), as in effect from time totime, of the Convertible Subordinated Notes or any replacement notes.

 

“AcceptableNon-Acceleration Event” shall mean any of the following events: (a) if Borrowerrefinances the all of the outstanding Convertible Subordinated Indebtednesswith new Subordinated Indebtedness that, by its terms, has a stated maturity(or has scheduled principal payments due) no earlier than sixty (60) days afterthe Facility Maturity Date; (b) all of the Convertible Subordinated Notes areconverted into equity; (c) for the period commencing sixty (60) days prior tothe Facility Maturity Date through the Facility Maturity Date (or, if earlier,until the repayment or conversion of all of the outstanding ConvertibleSubordinated Notes), the Available Liquidity is, at all times, no less than anamount equal to one hundred percent (100%) of the outstanding principal amountof the Convertible Subordinated Notes; or (d) the Convertible SubordinatedNoteholders agree in writing (in form and substance reasonably acceptable toAgent) to extend the stated maturity (or date when scheduled principal paymentsare due) of the Convertible Subordinated Notes to a date that is no earlierthan sixty (60) days after the Facility Maturity Date.

 

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“Account” shall mean allaccounts, as defined in the U.C.C.

 

“Account Debtor” shallmean any Person obligated to pay all or any part of any Account in any mannerand includes (without limitation) any Guarantor thereof.

 

“Acquisition” shall meanany transaction or series of related transactions for the purpose of orresulting, directly or indirectly, in (a) the acquisition of all orsubstantially all of the assets of any Person (other than a Company), or anybusiness or division of any Person (other than a Company), (b) theacquisition of in excess of fifty percent (50%) of the stock (or other equityinterest) of any Person (other than a Company), or (c) the acquisition ofanother Person (other than a Company) by a merger, amalgamation or consolidationor any other combination with such Person.

 

“Additional Commitment”shall mean that term as defined in Section 2.10(b) hereof.

 

“Additional Lender” shallmean an EligibleTransferee that shall become a Revolving Lender hereunder during theCommitment Increase Period pursuant to Section 2.10(b) hereof.

 

“Additional LenderAssumption Agreement” shall mean an additional lender assumption agreement, inform and substance satisfactory to Agent, wherein an Additional Lender shallbecome a Revolving Lender hereunder.

 

“Additional LenderAssumption Effective Date” shall mean that term as defined inSection 2.10(b) hereof.

 

“Advantage”shall mean any payment (whether made voluntarily or involuntarily, by offset ofany deposit or other indebtedness or otherwise) received by any Lender inrespect of the Applicable Debt, if such payment results in that Lender havingless than its pro rata share (based upon its Applicable Commitment Percentageand, in the case of an Equalization Event, based upon its EqualizationPercentage of the Obligations) of the Applicable Debt then outstanding, thanwas the case immediately before such payment.

 

“Affiliate” shall meanany Person, directly or indirectly, controlling, controlled by or under commoncontrol with a Company and “control” (including the correlative meanings, theterms “controlling”, “controlled by” and “under common control with”) shallmean the power, directly or indirectly, to direct or cause the direction of themanagement and policies of a Company, whether through the ownership of votingsecurities, by contract or otherwise.

 

“Agent Fee Letter” shallmean the Agent Fee Letter between Borrower and Agent, dated as of the ClosingDate, as the same may from time to time be amended, restated or otherwisemodified.

 

“Applicable CommitmentFee Rate” shall mean:

 

(a)                                  forthe period from the Closing Date through August 31, 2004, forty-five (45)basis points; and

 

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(b)                                 commencingwith the Consolidated financial statements of Borrower for the fiscal quarterending June 30, 2004, the number of basis points set forth in thefollowing matrix, based upon the result of the computation of the LeverageRatio, shall be used to establish the number of basis points that will go intoeffect on September 1, 2004 and thereafter:

 
| **Leverage Ratio**                                           |   | **Applicable  Commitment Fee Rate** |   |
|-------------------------------------------------------------------|--------|-------------------------------------|--------|
| Greater  than or equal to 2.00 to 1.00                            |   | 50.00 basis  points                 |   |
| Greater  than or equal to 1.50 to 1.00 but less than 2.00 to 1.00 |   | 45.00 basis  points                 |   |
| Greater  than or equal to 1.00 to 1.00 but less than 1.50 to 1.00 |   | 40.00 basis  points                 |   |
| Less  than 1.00 to 1.00                                           |   | 35.00 basis  points                 |   |

 

After September 1,2004, changes to the Applicable Commitment Fee Rate shall be effective on thefirst day of each month following the date upon which Agent received, or, ifearlier, Agent should have received, pursuant to Section 5.3(a) or(b) hereof, the financial statements of Borrower.  The above matrix does not modify or waive,in any respect, the requirements of Section 5.7 hereof, the rights of Agentand the Lenders to charge the Default Rate, or the rights and remedies of Agentand the Lenders pursuant to Articles VIII and IX hereof.  Notwithstanding anything herein to thecontrary, during any period when Borrower shall have failed to timely deliverthe financial statements pursuant to Section 5.3(a) or(b) hereof, or the Compliance Certificate pursuant to Section 5.3(c)hereof, and such failure has continued for five Business Days, until such timeas the appropriate financial statements and Compliance Certificate aredelivered, the Applicable Commitment Fee Rate shall be the highest rate perannum indicated in the above pricing grid regardless of the Leverage Ratio atsuch time.

 

“Applicable CommitmentPercentage” shall mean, for each Lender:

 

(a)                                  withrespect to the Revolving Credit Commitment, the percentage, if any, set forthopposite such Lender’s name under the column headed “Revolving CreditCommitment Percentage”, as listed in Schedule 1 hereto; and

 

(b)                                 withrespect to the Term Loan Commitment, the percentage, if any, set forth oppositesuch Lender’s name under the column headed “Term Loan Commitment Percentage”,as listed in Schedule 1 hereto.

 

“Applicable Debt” shallmean:

 

(a)                                  withrespect to the Revolving Credit Commitment, collectively, (i) all Indebtednessincurred by Borrower to the Revolving Lenders pursuant to this Agreement andthe other Loan Documents, and includes, without limitation, the principal ofand interest on all Revolving Credit Notes and the Swing Line Note and all obligationswith respect to Letters of Credit, (ii) each extension, renewal or refinancingthereof, in whole or in part, (iii) the commitment, prepayment and other feesand amounts payable hereunder in connection with the

 

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Revolving CreditCommitment, and (iv) all Related Expenses incurred in connection with theforegoing; and

 

(b)                                 withrespect to the Term Loan Commitment, collectively, (i) all Indebtednessincurred by Borrower to the Term Lenders pursuant to this Agreement and theother Loan Documents, and includes, without limitation, the principal of andinterest on all Term Notes, (ii) each extension, renewal or refinancing thereofin whole or in part, (iii) all prepayment and other fees and amounts payable hereunderin connection with the Term Loan Commitment, and (iv) all Related Expensesincurred in connection with the foregoing.

 

“Applicable Margin” shallmean:

 

(a)                                  forthe period from the Closing Date through August 31, 2004, (i) two hundredfifty (250) basis points for Eurodollar Loans, and (ii) seventy-five (75) basispoints for Base Rate Loans; and

 

(b)                                 commencingwith the Consolidated financial statements of Borrower for the fiscal quarterending June 30, 2004, the number of basis points (depending upon whetherLoans are Eurodollar Loans or Base Rate Loans) set forth in the followingmatrix, based upon the result of the computation of the Leverage Ratio, shallbe used to establish the number of basis points that will go into effect onSeptember 1, 2004 and thereafter:

 
| **Leverage Ratio**                                                |   | **Applicable  Basis  Points for  Eurodollar Loans** |   | **Applicable  Basis  Points for   Base Rate Loans** |   |
|-------------------------------------------------------------------|--------|-----------------------------------------------------|--------|-----------------------------------------------------|--------|
| Greater  than or equal to 2.50 to 1.00                            |   | 300.00                                              |   | 125.00                                              |   |
| Greater  than or equal to 2.00 to 1.00 but less than 2.50 to 1.00 |   | 275.00                                              |   | 100.00                                              |   |
| Greater  than or equal to 1.50 to 1.00 but less than 2.00 to 1.00 |   | 250.00                                              |   | 75.00                                               |   |
| Greater  than or equal to 1.00 to 1.00 but less than 1.50 to 1.00 |   | 225.00                                              |   | 50.00                                               |   |
| Less  than 1.00 to 1.00                                           |   | 200.00                                              |   | 25.00                                               |   |

 

After September 1,2004, changes to the Applicable Margin shall be effective on the first day ofeach month following the date upon which Agent received, or, if earlier, Agentshould have received, pursuant to Section 5.3(a) or (b) hereof, thefinancial statements of Borrower.  Theabove matrix does not modify or waive, in any respect, the requirements ofSection 5.7 hereof, the rights of Agent and the Lenders to charge theDefault Rate, or the rights and remedies of Agent and the Lenders pursuant toArticles VIII and IX hereof.  Notwithstandinganything herein to the contrary, during any period when Borrower shall havefailed to timely deliver the financial statements pursuant toSection 5.3(a) or (b) hereof, or the Compliance Certificate pursuant toSection 5.3(c) hereof, and such failure has continued for five BusinessDays, until such time as the appropriate financial statements and ComplianceCertificate are delivered, the Applicable

 

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Margin shall be thehighest rate per annum indicated in the above pricing grid regardless of theLeverage Ratio at such time.

 

“Assignment Agreement”shall mean an Assignment and Acceptance Agreement in the form of the attached Exhibit F.

 

“Authorized Officer”shall mean a Financial Officer or other individual authorized by a FinancialOfficer in writing (with a copy to Agent) to handle certain administrativematters in connection with this Agreement.

 

“Available Liquidity”shall mean, at any date, the sum of (a) cash on hand of Borrower held atfinancial institutions located in the United States plus Cash Equivalents inexcess of Ten Million Dollars ($10,000,000), plus (b) Revolving CreditAvailability.

 

“Base Rate” shall mean arate per annum equal to the greater of (a) the Prime Rate or(b) one-half of one percent (.50%) in excess of the Federal FundsEffective Rate.  Any change in the BaseRate shall be effective immediately from and after such change in the BaseRate.

 

“Base Rate Loan” shallmean a Revolving Loan or a portion of the Term Loan described inSection 2.2(a) or 2.3 hereof that shall be denominated in Dollars and onwhich Borrower shall pay interest at a rate based on the Derived Base Rate.

 

“Business Day” shall meanany day that is not a Saturday, Sunday or other day on which national banks areauthorized or required to close, and, if the applicable Business Day relates toa Eurodollar Loan, a day of the year on which dealings in deposits are carriedon in the London interbank Eurodollar market.

 

“Capital Distribution”shall mean a payment made, liability incurred or other consideration given by aCompany to any Person that is not a Company, for the purchase, acquisition,redemption, repurchase or retirement of any capital stock or other equityinterest of such Company or as a dividend, return of capital or otherdistribution (other than any stock dividend, stock split or other equitydistribution payable only in capital stock or other equity of such Company) inrespect of such Company’s capital stock or other equity interest.

 

“Capitalized LeaseObligations” shall mean obligations of the Companies for the payment of rentfor any real or personal property under leases or agreements to lease that, inaccordance with GAAP, have been or should be capitalized on the books of thelessee and, for purposes hereof, the amount of any such obligation shall be thecapitalized amount thereof determined in accordance with GAAP.

 

“Cash Collateral Account”shall mean a commercial Deposit Account designated “cash collateral account”and maintained by Borrower with Agent, without liability by Agent or theLenders to pay interest thereon, from which account Agent, on behalf of theLenders, subject to the provisions of Section 7.2 hereof, shall have theexclusive right to withdraw funds until all of the Secured Obligations are paidin full.

 

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“Cash Equivalents” shallmean, as to any Person, (a) securities issued by, or directly, unconditionallyand fully guaranteed or insured by, the United States or any agency or instrumentalitythereof (provided that the full faith and credit of the United States ispledged in support thereof) having maturities of not more than one year fromthe date of acquisition by such Person; (b) securities issued by, or directly,unconditionally and fully guaranteed or insured by, any state of the UnitedStates of America or any political subdivision of any such state or any publicinstrumentality thereof maturing within one year from the date of acquisitionthereof and, at the time of acquisition, having one of the two highest ratingsobtainable from either Standard & Poor’s or Moody’s; (c) time deposits,certificates of deposit or bankers’ acceptances of any commercial bank having,or which is the principal banking subsidiary of a bank holding companyorganized under the laws of the United States, any state thereof or theDistrict of Columbia or any United States branch of a foreign bank having,capital and surplus aggregating in excess of Five Hundred Million Dollars($500,000,000) and a rating of “A” (or such other similar equivalent rating) orhigher by at least one nationally recognized statistical rating organization(as defined in Rule 436 under the Securities Act) with maturities of not morethan one year from the date of acquisition by such Person; (d) repurchaseobligations with a term of not more than thirty (30) days for underlyingsecurities of the types described in subpart (a) above entered into with anybank meeting the qualifications specified in subpart (c) above, which repurchaseobligations are secured by a valid perfected security interest in theunderlying securities; (e) commercial paper issued by any Person incorporatedin the United States rated at least A-2 or the equivalent thereof by Standard& Poor’s or at least P-2 or the equivalent thereof by Moody’s, and in eachcase maturing not more than one year after the date of acquisition by suchPerson; (f) investments in money market funds substantially all of whose assetsare comprised of securities of the types described in subparts (a) through (e)above; and (g) demand deposit accounts maintained in the ordinary course ofbusiness.

 

“Cash Security” shallmean all cash, instruments, Deposit Accounts and other cash equivalents,whether matured or unmatured, whether collected or in the process ofcollection, upon which a Company presently has or may hereafter have any claim,wherever located, including but not limited to any of the foregoing that arepresently or may hereafter be existing or maintained with, issued by, drawn upon,or in the possession of Agent or any Lender.

 

“Change in Control” shallmean (a) the acquisition of, or, if earlier, the shareholder or directorapproval of the acquisition of, ownership or voting control, directly orindirectly, beneficially or of record, on or after the Closing Date, by anyPerson (other than Tom Olofson or Christopher Olofson) or group (within themeaning of Rule 13d-3 of the SEC under the Securities Exchange Act of 1934, asthen in effect), of shares representing more than thirty percent (30%) of theaggregate ordinary Voting Power represented by the issued and outstandingcapital stock of Borrower; (b) the occupation of a majority of the seats(other than vacant seats) on the board of directors or other governing body ofBorrower by Persons who were neither (i) nominated by the board ofdirectors or other governing body of Borrower nor (ii) appointed orapproved by directors so nominated; or (c) the occurrence of a change incontrol, or other similar provision, as defined in any Material IndebtednessAgreement.

 

“Closing CommitmentAmount” shall mean Seventy-Five Million Dollars ($75,000,000).

 

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“Closing Date” shall meanthe effective date of this Agreement as set forth in the first paragraph ofthis Agreement.

 

“Closing RevolvingAmount” shall mean Fifty Million Dollars ($50,000,000).

 

“Code” shall mean theInternal Revenue Code of 1986, as amended, together with the rules andregulations promulgated thereunder.

 

“Collateral” shall meanall of Borrower’s existing and future (a) personal property; (b) Accounts,instruments, contract rights, supporting obligations, chattel paper, documents,Investment Property, letter-of-credit rights, commercial tort claims, GeneralIntangibles, Inventory and Equipment (other than the following, but exclusiveof proceeds of any of the following, (i) computer equipment provided tobankruptcy trustees and located on their premises in the ordinary course ofBorrower’s business, (ii) fractional interests in aircraft where a pledge isprohibited by the agreement among the holders of such interests, (iii) equityinterests in (A) any direct Foreign Subsidiary in excess of sixty-five percent(65%) of the total outstanding equity interest of such direct Foreign Subsidiary,and (B) any indirect Foreign Subsidiary, (iv) licenses and contracts which bythe terms of such licenses and contracts prohibit the assignment of suchagreements (to the extent such prohibition is enforceable at law), and (v)fixed assets subject to a purchase money lien with an underlying contract oragreement that prohibits the granting of a second lien on such fixed assets,but only to the extent such prohibition is enforceable at law and only as longas such liens attach to such fixed assets); (c) funds now or hereafter ondeposit in the Cash Collateral Account, if any; (d) Cash Security (other thantrust and payroll bank accounts); (e) the Real Property; and (f) Proceeds ofany of the foregoing.

 

“Commitment” shall meanthe obligation hereunder of the Lenders, to make Loans and to participate inthe issuance of Letters of Credit pursuant to the Revolving Credit Commitmentand the Term Loan Commitment, up to the Total Commitment Amount.

 

“Commitment IncreasePeriod” shall mean the period from the Closing Date to the date that is thirty(30) days prior to the last day of the Commitment Period.

 

“Commitment Period” shallmean the period from the Closing Date to the earlier of the AcceleratedMaturity Date or July 19, 2008 (or such earlier date on which theCommitment shall have been terminated pursuant to Article IX hereof);provided that there shall be no Accelerated Maturity Date if an AcceptableNon-Acceleration Event shall occur prior to the Accelerated Maturity Date.

 

“Companies” shall meanBorrower and all Subsidiaries.

 

“Company” shall meanBorrower or a Subsidiary.

 

“Compliance Certificate”shall mean a certificate, substantially in the form of the attached Exhibit E.

 

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“Consideration” shall mean,in connection with an Acquisition, the aggregate consideration paid, includingborrowed funds, cash, the issuance of securities or notes, the assumption orincurring of liabilities (direct or contingent), the payment of consulting feesor fees for a covenant not to compete and any other consideration paid for suchAcquisition.

 

“Consolidated” shall meanthe resultant consolidation of the financial statements of Borrower and itsSubsidiaries in accordance with GAAP, including principles of consolidation consistentwith those applied in preparation of the consolidated financial statementsreferred to in Section 6.13 hereof.

 

“Consolidated CapitalExpenditures” shall mean, for any period, the amount of capital expenditures ofBorrower (specifically including software development costs, but excludingcapital expenditures directly financed through a capitalized lease (withacceptable documentation available upon request of Agent or any Lender)), asdetermined on a Consolidated basis and in accordance with GAAP.

 

“Consolidated CurrentAssets” shall mean, at any date, the current assets of Borrower, as determinedon a Consolidated basis and in accordance with GAAP.

 

“Consolidated CurrentLiabilities” shall mean, at any date, the current liabilities of Borrower, asdetermined on a Consolidated basis and in accordance with GAAP.

 

“ConsolidatedDepreciation and Amortization Charges” shall mean, for any period, theaggregate of all depreciation and amortization charges of Borrower for suchperiod, as determined on a Consolidated basis and in accordance with GAAP;provided that, notwithstanding the foregoing, Consolidated Depreciation andAmortization Charges shall include any component of Consolidated InterestExpense resulting from the amortization of any loan fees and ConsolidatedInterest Expense resulting from imputed interest that is added to the principalbalance of the underlying Indebtedness.

 

“Consolidated EBITDA”shall mean, for any period, on a Consolidated basis and in accordance withGAAP, Consolidated Net Earnings for such period plus the aggregate amountsdeducted in determining such Consolidated Net Earnings in respect of(a) Consolidated Interest Expense, (b) Consolidated Income TaxExpense, (c) Consolidated Depreciation and Amortization Charges, (d) (i)extraordinary or unusual non-cash losses not incurred in the ordinary course ofbusiness but that were counted in the net income calculation for such period,minus (ii) extraordinary or unusual non-cash gains not incurred in the ordinarycourse of business but that were counted in the net income calculation for suchperiod, (e) unamortized costs, fees and expenses incurred in connection withthe transactions contemplated by this Agreement and any Acquisition (occurringprior to, on or subsequent to the Closing Date), (f) expenses and charges whichwill be indemnified or reimbursed to the extent such amounts are covered byfunds in a valid escrow account or similar arrangement, (g) any othercomponent of net income (or net loss) which is non-cash and will not convert tocash within one year, including without exception any charges related to thegranting of share-based payments to employees or directors; provided, however,that any time an Acquisition on an on-going business is made pursuant toSection 5.13 hereof, Consolidated EBITDA shall be recalculated to includethe

 

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EBITDA of the acquiredcompany as if such Acquisition had been completed on the first day of therelevant measuring period, and (h) Acquisition-related expenses, in theaggregate for all Companies, up to Four Million Dollars ($4,000,000) during anytwelve (12) month period; provided that, for purposes of calculatingConsolidated EBITDA, Consolidated EBITDA shall be deemed to be (A) Fourteen MillionNine Hundred Ninety-Nine Thousand Dollars ($14,999,000) for the fiscal quarterof Borrower ending September 30, 2003, (B) Twelve Million Eight HundredThousand Dollars ($12,800,000) for the fiscal quarter of Borrower endingDecember 31, 2003, and (C) Ten Million Six Hundred Twenty-Six ThousandDollars ($10,626,000) for the fiscal quarter of Borrower ending March 31,2004.

 

“Consolidated FixedCharges” shall mean, for any period, on a Consolidated basis and in accordancewith GAAP, without duplication, the aggregate of (a) Consolidated InterestExpense (including, without limitation, the “imputed interest” portion ofCapitalized Lease Obligations, synthetic leases and asset securitizations, ifany, and excluding (i) any fees (including underwriting fees) and expenses paidin connection with the consummation of Acquisitions (occurring prior to, on orsubsequent to the Closing Date), (ii) any payments made to obtain a HedgeAgreement, and (iii) any agent or collateral monitoring fees paid or requiredto be paid pursuant to this Agreement) paid in cash, (b) ConsolidatedIncome Tax Expense paid in cash, (c) scheduled principal payments onConsolidated Funded Indebtedness (other than optional prepayments of theRevolving Credit Notes and scheduled payments on the Convertible SubordinatedIndebtedness), and (d) Capital Distributions.

 

“ConsolidatedFunded Indebtedness” shall mean, at any date, all Indebtedness (including,but not limited to, current, long-term and Subordinated Indebtedness, if any) of Borrower, as determined on a Consolidatedbasis and in accordance with GAAP.

 

“Consolidated Income TaxExpense” shall mean, for any period, all provisions for taxes based on the netincome of Borrower (including, without limitation, any additions to such taxes,and any penalties and interest with respect thereto), and all franchise taxesof Borrower to the extent such taxes have been imposed in lieu of income taxes,as determined on a Consolidated basis and in accordance with GAAP.

 

“Consolidated InterestExpense” shall mean, for any period, the interest expense of Borrower for suchperiod, as determined on a Consolidated basis and in accordance with GAAP;provided that, notwithstanding the foregoing, Consolidated Interest Expenseshall exclude any interest expense resulting from the amortization of any loanfees, and interest expense resulting from imputed interest that is added to theprincipal balance of the underlying Indebtedness.

 

“Consolidated NetEarnings” shall mean, for any period, the net income (loss) of Borrower forsuch period, as determined on a Consolidated basis and in accordance with GAAP.

 

“Consolidated Net Worth”shall mean, at any date, the stockholders’ equity of Borrower, determined as ofsuch date on a Consolidated basis and in accordance with GAAP.

 

“Consolidated SeniorFunded Indebtedness” shall mean, at any date, Consolidated Funded Indebtednessless Subordinated Indebtedness of the Companies.

 

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“Control Agreement” shallmean each Control Agreement among a Credit Party, Agent and a depositoryinstitution, dated on or after the Closing Date, as the same may from time totime be amended, restated or otherwise modified.

 

“Controlled Group” shallmean a Company and each Person required to be aggregated with a Company underCode Section 414(b), (c), (m) or (o).

 

“Convertible SubordinatedDocuments” shall mean the Note Agreement, the Convertible Subordinated Notes,and any other agreement entered into or delivered in connection therewith.

 

“Convertible SubordinatedIndebtedness” shall mean the Subordinated Indebtedness under or in respect ofthe Convertible Subordinated Notes, in the original principal amount of up toFifty Million Dollars ($50,000,000).

 

“Convertible SubordinatedNoteholders” shall mean any Buyer, as defined in the Note Agreement, and anyholder of the Convertible Subordinated Notes.

 

“Convertible SubordinatedNotes” shall mean those certain $50,000,000 4% Contingent ConvertibleSubordinated Notes due June 15, 2007, issued pursuant to the NoteAgreement, as the same may from time to time be amended, restated or otherwisemodified with the prior written consent of the Required Lenders.

 

“Credit Event” shall meanthe making by the Lenders of a Loan, the conversion by the Lenders of a BaseRate Loan to a Eurodollar Loan, the continuation by the Lenders of a EurodollarLoan after the end of the applicable Interest Period, the making by the SwingLine Lender of a Swing Loan, or the issuance by the Fronting Lender of a Letterof Credit.

 

“Credit Party” shall meanBorrower and any Subsidiary or other Affiliate that is a Guarantor of Payment.

 

“Current Ratio” shallmean, at any time, as determined on a Consolidated basis and in accordance withGAAP, the ratio of (a) Consolidated Current Assets (for the most recentlycompleted fiscal quarter of Borrower) to (b) Consolidated CurrentLiabilities (for the most recently completed fiscal quarter of Borrower);provided, however, that, for purposes of calculating the Current Ratio,Consolidated Current Liabilities shall exclude the current portion ofSubordinated Indebtedness and the Revolving Credit Exposure.

 

“Default” shall mean anevent or condition that constitutes, or with the lapse of any applicable graceperiod or the giving of notice or both would constitute, an Event of Default,and that has not been waived by the Required Lenders in writing.

 

“Default Rate” shall mean(a) with respect to any Loan, a rate per annum equal to two percent (2%)in excess of the rate otherwise applicable thereto, and (b) with respectto any other amount, if no rate is specified or available, a rate per annumequal to two percent (2%) in excess of the Derived Base Rate from time to timein effect.

 

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“Deposit Account” shallmean (a) a deposit account, as defined in the U.C.C., (b) any other depositaccount, and (c) any demand, time, savings, checking, passbook, or a similaraccount maintained with a bank, savings and loan association, credit union, orsimilar organization.

 

“Derived Base Rate” shallmean a rate per annum equal to the sum of the Applicable Margin (from time totime in effect) for Base Rate Loans plus the Base Rate.

 

“Derived Eurodollar Rate”shall mean a rate per annum equal to the sum of the Applicable Margin (fromtime to time in effect) for Eurodollar Loans plus the Eurodollar Rate.

 

“Disposition” shall meanthe lease, transfer or other disposition of assets (whether in one or moretransaction) by a Company, other than a sale, lease, transfer or other dispositionmade by a Company in the ordinary course of business.

 

“Dollar” or the sign $shall mean lawful money of the United States of America.

 

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

 

“Dormant Subsidiary”shall mean a Company that (a) is not a Credit Party, (b) hasaggregate assets of less than Two Hundred Fifty Thousand Dollars ($250,000),and (c) has no direct or indirect Subsidiaries with aggregate assets forall such Subsidiaries of more than Two Hundred Fifty Thousand Dollars($250,000).

 

“EBITDA” shall mean, forany period, in accordance with GAAP, the net earnings of a Person for suchperiod plus the aggregate amounts deducted in determining such net earnings inrespect of (a) interest expense of such Person, (b) income taxes of suchPerson, and (c) the aggregate of all depreciation and amortization charges ofsuch Person, (d) (i) extraordinary or unusual non-cash losses not incurred inthe ordinary course of business of such Person but that were counted in the netincome calculation for such period, minus (ii) extraordinary or unusualnon-cash gains not incurred in the ordinary course of business of such Personbut that were counted in the net income calculation for such period, (e)expenses and charges which will be indemnified or reimbursed to the extent suchamounts are covered by funds in a valid escrow account or similar arrangement,and (f) any other component of net income (or net loss) which is non-cashand will not convert to cash within one year, including without exception anycharges related to the granting of share-based payments to employees ordirectors.

 

“Eligible Transferee”shall mean a commercial bank, financial institution or other “accreditedinvestor” (as defined in SEC Regulation D) that is not Borrower, a Subsidiaryor an Affiliate.

 

“EnvironmentalLaws” shall mean all provisions of law (including the common law), statutes,ordinances, codes, rules, guidelines, policies, procedures, orders-in-council,regulations, permits, licenses, judgments, writs, injunctions, decrees, orders,awards and standards which are legally binding and promulgated by aGovernmental Authority or by any court, agency,

 

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instrumentality,regulatory authority or commission of any of the foregoing concerningenvironmental health or safety and protection of, or regulation of thedischarge of substances into, the environment.

 

“Equalization Event”shall mean the earlier of (a) the occurrence of an Event of Default under Section 8.11hereof, or (b) the acceleration of the maturity of the Obligations afterthe occurrence of an Event of Default.

 

“Equalization Percentage”shall mean that term as defined in Section 9.5 hereof.

 

“Equipment” shall meanall equipment, as defined in the U.C.C.

 

“ERISA” shall mean theEmployee Retirement Income Security Act of 1974, as amended from time to time,and the regulations promulgated pursuant thereto.

 

“ERISA Event” shall mean(a) the existence of a condition or event with respect to an ERISA Planthat would reasonably be expected to result in the imposition of an excise taxor any other liability on a Company or of the imposition of a Lien on theassets of a Company; (b) the engagement by a Controlled Group member in anon-exempt “prohibited transaction” (as defined under ERISA Section 406 orCode Section 4975) or a breach of a fiduciary duty under ERISA that couldreasonably be expected to result in liability to a Company; (c) theapplication by a Controlled Group member for a waiver from the minimum fundingrequirements of Code Section 412 or ERISA Section 302 or a ControlledGroup member is required to provide security under Code Section 401(a)(29)or ERISA Section 307; (d) the occurrence of a Reportable Event withrespect to any Pension Plan as to which notice is required to be provided tothe PBGC; (e) the withdrawal by a Controlled Group member from aMultiemployer Plan in a “complete withdrawal” or a “partial withdrawal” (assuch terms are defined in ERISA Sections 4203 and 4205, respectively); (f)notice that any Multiemployer Plan is in reorganization under ERISASection 4241; (g) the taking by the PBGC of any steps to terminate aPension Plan or appoint a trustee to administer a Pension Plan, or the takingby a Controlled Group member of any steps to terminate a Pension Plan; (h) thecommencement, existence or threatening of a claim, action, suit, audit orinvestigation with respect to an ERISA Plan, other than a routine claim forbenefits; or (i) any incurrence by a Controlled Group member of any liabilityfor post-retirement benefits under any Welfare Plan, other than as required byERISA Section 601, et.seq. or Code Section 4980B.

 

“ERISA Plan” shall meanan “employee benefit plan” (within the meaning of ERISA Section 3(3)) thata Controlled Group member at any time sponsors, maintains, contributes to, hasliability with respect to or has an obligation to contribute to such plan.

 

“EurocurrencyLiabilities” shall have the meaning assigned to that term in Regulation D ofthe Board of Governors of the Federal Reserve System, as in effect from time totime.

 

“Eurodollar” shall mean aDollar denominated deposit in a bank or branch outside of the United States.

 

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“Eurodollar Loan” shallmean a Revolving Loan or a portion of the Term Loan described inSection 2.2(a) or 2.3 hereof that shall be denominated in Dollars and onwhich Borrower shall pay interest at a rate based upon the Derived EurodollarRate.

 

“Eurodollar Rate” shallmean, with respect to a Eurodollar Loan, for any Interest Period, a rate perannum equal to the quotient obtained (rounded upwards, if necessary, to thenearest 1/16th of 1%) by dividing (a) the rate of interest,determined by Agent in accordance with its usual procedures (whichdetermination shall be conclusive absent manifest error) as of approximately11:00 A.M. (London time) two Business Days prior to the beginning of suchInterest Period pertaining to such Eurodollar Loan, as listed on BritishBankers Association Interest Rate LIBOR 01 or 02 as provided by Reuters (or, iffor any reason such rate is unavailable from Reuters, from any other similarcompany or service that provides rate quotations comparable to those currentlyprovided by Reuters) as the rate in the London interbank market for Dollardeposits in immediately available funds with a maturity comparable to suchInterest Period, provided that, in the event that such rate quotation is notavailable for any reason, then the Eurodollar Rate shall be the average(rounded upward to the nearest 1/16th of 1%) of the per annum rates at whichdeposits in immediately available funds in Dollars for the relevant InterestPeriod and in the amount of the Eurodollar Loan to be disbursed or to remainoutstanding during such Interest Period, as the case may be, are offered toAgent (or an affiliate of Agent, in Agent’s discretion) by prime banks in anyEurodollar market reasonably selected by Agent, determined as of 11:00 A.M.(London time) (or as soon thereafter as practicable), two Business Days priorto the beginning of the relevant Interest Period pertaining to such EurodollarLoan hereunder; by (b) 1.00 minus the Reserve Percentage.

 

“Event of Default” shallmean an event or condition that shall constitute an event of default as definedin Article VII hereof.

 

“Excluded Taxes” shallmean net income taxes (and franchise taxes imposed in lieu of net income taxes)imposed on Agent or any Lender by the Governmental Authority located in thejurisdiction where Agent or such Lender is organized or conducts business(other than any such connection arising solely from Agent or such Lender havingexecuted, delivered or performed its obligations or received a payment under,or enforced, this Agreement or any other Loan Document).

 

“Existing Letter ofCredit” shall mean that term as defined in Section 2.2(b)(vi) hereof.

 

“Facility Maturity Date”shall mean the last day of the Commitment Period.

 

“Federal Funds EffectiveRate” shall mean, for any day, the rate per annum (rounded upward to thenearest one one-hundredth of one percent (1/100 of 1%)) announced by theFederal Reserve Bank of New York (or any successor) on such day as being theweighted average of the rates on overnight federal funds transactions arrangedby federal funds brokers on the previous trading day, as computed and announcedby such Federal Reserve Bank (or any successor) in substantially the samemanner as such Federal Reserve Bank computes and announces the weighted averageit refers to as the “Federal Funds Effective Rate” as of the Closing Date.

 

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“Financial Officer” shallmean any of the following officers: chief executive officer, president, chieffinancial officer or treasurer.  Unlessotherwise qualified, all references to a Financial Officer in this Agreementshall refer to a Financial Officer of Borrower.

 

“Fixed Charge CoverageRatio” shall mean, as determined for the most recently completed four fiscalquarters of Borrower, on a Consolidated basis and in accordance with GAAP, theratio of (a) (i) Consolidated EBITDA minus (ii) Consolidated CapitalExpenditures (excluding Consolidated Capital Expenditures that are made (A) inconnection with an Acquisition permitted pursuant to Section 5.13 hereof,(B) in connection with leasehold improvements (but only to the extent suchimprovements are reimbursable by the landlord), or (C) with the net proceeds ofDispositions of capital assets (excluding real estate), to(b) Consolidated Fixed Charges.

 

“Foreign Subsidiary”shall mean a Subsidiary that is organized outside of the United States.

 

“Fronting Lender” shallmean, as to any Letter of Credit transaction hereunder, Agent as issuer of theLetter of Credit, or, in the event that Agent either shall be unable to issueor shall agree that another Revolving Lender may issue, a Letter of Credit,such other Revolving Lender as shall agree to issue the Letter of Credit in itsown name, but on behalf of the Revolving Lenders hereunder.

 

“GAAP” shall meangenerally accepted accounting principles in the United States as then ineffect, which shall include the official interpretations thereof by theFinancial Accounting Standards Board (or agencies within the United States.accounting profession with similar or delegated functions and recognized by theFinancial Accounting Standards Board as having authority to issue suchinterpretations), applied on a basis consistent with the past accountingpractices and procedures of Borrower and the SEC, which are applicable to thecircumstances as of the date of determination.

 

“General Intangibles”shall mean all (a) general intangibles, as defined in the U.C.C.; (b) choses inaction, causes of action, all customer lists, corporate or other businessrecords, inventions, designs, patents, patent applications, service marks,registrations, trade names, trademarks, copyrights, licenses, goodwill,computer software, rights to indemnification and tax refunds; and (c) Proceedsof any of the foregoing, irrespective of the form or kind thereof.

 

“Governmental Authority”shall mean any nation or government, any state, province or territory or otherpolitical subdivision thereof, any governmental agency, department, authority,instrumentality, regulatory body, court, central bank or other governmentalentity exercising executive, legislative, judicial, taxing, regulatory oradministrative functions of or pertaining to government, any securitiesexchange and any self-regulatory organization.

 

“Guarantor” shall mean aPerson that shall have pledged its credit or property in any manner for thepayment or other performance of the indebtedness, contract or other obligationof another and includes (without limitation) any guarantor (whether of paymentor of collection),

 

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surety, co-maker,endorser or Person that shall have agreed conditionally or otherwise to makeany purchase, loan or investment in order thereby to enable another to preventor correct a default of any kind.

 

“Guarantor of Payment”shall mean each of the Companies set forth on Schedule 2 hereto,that are each executing and delivering a Guaranty of Payment, or any otherPerson that shall deliver a Guaranty of Payment to Agent subsequent to theClosing Date.

 

“Guaranty of Payment”shall mean each Guaranty of Payment executed and delivered on or after theClosing Date in connection with this Agreement by the Guarantors of Payment, asthe same may from time to time be amended, restated or otherwise modified.

 

“Hedge Agreement” shallmean any (a) hedge agreement, interest rate swap, basis swap agreement, cap,collar or floor agreement, or other interest rate management device (includingforward rate agreements) entered into by a Company with any Person inconnection with any Indebtedness of such Company, or (b) currency swapagreement, forward currency purchase agreement or similar arrangement oragreement designed to protect against fluctuations in currency exchange ratesentered into by a Company with any Person.

 

“Indebtedness” shallmean, for any Company (excluding in all cases trade payables payable in theordinary course of business by such Company and accrued expenses), withoutduplication, (a) all obligations to repay borrowed money, direct orindirect, incurred or assumed, (b) all obligations for the deferredpurchase price of capital assets, (c) all obligations under conditionalsales or other title retention agreements, (d) all obligations (contingentor otherwise) under any letter of credit or banker’s acceptance, (e) allnet obligations under any currency swap agreement, interest rate swap, cap,collar or floor agreement or other interest rate management device or any HedgeAgreement, (f) all synthetic leases, (g) all lease obligations that have beenor should be capitalized on the books of such Company in accordance with GAAP,(h) all obligations of such Company with respect to asset securitizationfinancing programs, (i) all obligations to advance funds to, or topurchase assets, property or services from, any other Person in order to maintainthe financial condition of such Person, (j) all indebtedness secured by a Lienon the property of a Company, whether or not such indebtedness shall have beenassumed by such Company, provided that if such Company has not assumed orotherwise become liable for such indebtedness, such indebtedness shall bemeasured at the fair market value of such property securing such indebtednessat the time of determination, (k) all indebtedness of any partnership of whichany Company is a general partner, (l) any other transaction (including forwardsale or purchase agreements) having the commercial effect of a borrowing ofmoney entered into by such Company to finance its operations or capitalrequirements, and (m) anyguaranty of any obligation described in subparts (a) through (l) hereof.

 

“Intellectual PropertyCollateral Assignment Agreement” shall mean an Intellectual Property CollateralAssignment Agreement executed and delivered on or after the Closing Date byBorrower or a Guarantor of Payment, wherein Borrower or such Guarantor ofPayment, as the case may be, has granted to Agent, for the benefit of theLenders, a security interest in and a collateral assignment of all intellectualproperty owned by Borrower or such Guarantor of Payment, as the same may fromtime to time be amended, restated or otherwise modified.

 

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“Interest AdjustmentDate” shall mean the last day of each Interest Period.

 

“Interest Period” shallmean, with respect to a Eurodollar Loan, the period commencing on the date suchEurodollar Loan is made and ending on the last day of such period, as selectedby Borrower pursuant to the provisions hereof, and, thereafter (unless suchEurodollar Loan is converted to a Base Rate Loan), each subsequent periodcommencing on the last day of the immediately preceding Interest Period andending on the last day of such period, as selected by Borrower pursuant to theprovisions hereof.  The duration of eachInterest Period for a Eurodollar Loan shall be one month, two months, threemonths or six months in each case as Borrower may select upon notice, as setforth in Section 2.6 hereof; provided that, if Borrower shall fail to soselect the duration of any Interest Period for a Eurodollar Loan at least threeBusiness Days prior to the Interest Adjustment Date applicable to suchEurodollar Loan, Borrower shall be deemed to have converted such EurodollarLoan to a Base Rate Loan at the end of the then current Interest Period.

 

“Inventory” shall meanall inventory, as defined in the U.C.C.

 

“Investment Property”shall mean all investment property, as defined in the U.C.C., unless theUniform Commercial Code as in effect in another jurisdiction would govern theperfection and/or priority of a security interest in investment property, and,in such case, “investment property” shall be defined in accordance with the lawof that jurisdiction as in effect from time to time.

 

“Lender Credit Exposure”shall mean, for any Lender, at any time, the aggregate of such Lender’srespective pro rata shares of the Revolving Credit Exposure and the Term LoanExposure.

 

“Letter of Credit” shallmean a standby letter of credit that shall be issued by the Fronting Lender forthe account of Borrower or a Guarantor of Payment, including amendmentsthereto, if any, and shall have an expiration date no later than the earlier of(a) one year after its date of issuance or (b) fifteen (15) daysprior to the last day of the Commitment Period.

 

“Letter of CreditCommitment” shall mean the commitment of the Fronting Lender, on behalf of theRevolving Lenders, to issue Letters of Credit in an aggregate face amount of upto Ten Million Dollars ($10,000,000).

 

“Letter of CreditExposure” shall mean, at any time, the sum of (a) the aggregate undrawn faceamount of all issued and outstanding Letters of Credit, and (b) theaggregate of the draws made on Letters of Credit that have not been reimbursedby Borrower or converted to a Revolving Loan pursuant toSection 2.2(b)(iv) hereof.

 

“Leverage Ratio” shallmean, as determined on a Consolidated basis and in accordance with GAAP, theratio of (a) Consolidated Funded Indebtedness (for the most recently completedfiscal quarter of Borrower) to (b) Consolidated EBITDA (for the most recentlycompleted four fiscal quarters of Borrower).

 

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“Lien” shall mean anymortgage, deed of trust, security interest, lien (statutory or other), charge,encumbrance on, pledge or deposit of, or conditional sale, leasing, sale with aright of redemption or other title retention agreement and any capitalizedlease with respect to any property (real or personal) or asset.

 

“Liquidity” shall mean,at any date, an amount equal to the sum of (a) cash, (b) Cash Equivalentshaving maturities of not more than one year from the date of acquisition; and(c) the Revolving Credit Availability.

 

“Loan” shall mean aRevolving Loan, a Swing Loan or the Term Loan granted to Borrower by theLenders in accordance with Section 2.2 or 2.3 hereof.

 

“Loan Documents” shallmean, collectively, this Agreement, each Note, each Guaranty of Payment, alldocumentation relating to each Letter of Credit, each Security Document and theAgent Fee Letter, as any of the foregoing may from time to time be amended, restatedor otherwise modified or replaced, and any other document delivered pursuantthereto.

 

“Material Adverse Effect”shall mean a material adverse effect on (a) the business, operations,property, condition (financial or otherwise) or prospects of Borrower,(b) the business, operations, property, condition (financial or otherwise)or prospects of the Companies taken as a whole, (c) the ability of Borrower or the Companiesto perform its or their obligations under this Agreement or any of the otherLoan Documents, or (d) the validity or enforceability of the LoanDocuments or the rights and remedies of Agent or the Lenders hereunder orthereunder.

 

“Material IndebtednessAgreement” shall mean any debt instrument, lease (capital, operating orotherwise), guaranty, contract, commitment, agreement or other arrangementevidencing any Indebtedness of any Company or the Companies in excess of theamount of Three Million Dollars ($3,000,000).

 

“Maximum Amount” shallmean, for each Lender, the amount set forth opposite such Lender’s name underthe column headed “Maximum Amount” as set forth on Schedule 1hereto, subject to decreases determined pursuant to Section 2.10(a)hereof, increases pursuant to Section 2.10(b) hereof and assignments ofinterests pursuant to Section 11.10 hereof; provided, however, that theMaximum Amount for the Swing Line Lender shall exclude the Swing LineCommitment (other than its pro rata share), and the Maximum Amount of theFronting Lender shall exclude the Letter of Credit Commitment (other than itspro rata share).

 

“Maximum CommitmentAmount” shall mean One Hundred Million Dollars ($100,000,000).

 

“Maximum RevolvingAmount” shall mean Seventy-Five Million Dollars ($75,000,000).

 

“Moody’s” shall meanMoody’s Investors Service, Inc., or any successor to such company.

 

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“Mortgage” shall meaneach Open-End Mortgage, Assignment of Leases and Rents and Security Agreement(or comparable document), relating to the Real Property, executed and deliveredby a Credit Party, to further secure the obligations under the Loan Documents,as the same may from time to time be amended, restated or otherwise modified.

 

“Multiemployer Plan”shall mean a Pension Plan that is subject to the requirements of Subtitle E ofTitle IV of ERISA.

 

“Note” shall mean aRevolving Credit Note, the Swing Line Note or a Term Note, or any otherpromissory note delivered pursuant to this Agreement.

 

“Note Agreement” shallmean the Security Purchase Agreement, dated as of June 10, 2004, by andamong Borrower and the Buyers, as defined therein, as the same may from time totime be amended, restated or otherwise modified with the prior written consentof the Required Lenders.

 

“Notice of Loan” shallmean a Notice of Loan in the form of the attached Exhibit D.

 

“Obligations” shall mean,collectively, (a) all Indebtedness and other obligations incurred by Borrowerto Agent, the Fronting Lender, the Swing Line Lender, or any Lender pursuant tothis Agreement and includes the principal of and interest on all Loans and allobligations pursuant to Letters of Credit, (b) each extension, renewal orrefinancing of the foregoing, in whole or in part, (c) the commitment and otherfees and any prepayment fees payable hereunder, and all fees and charges inconnection with Letters of Credit, and (d) all Related Expenses.

 

“OrganizationalDocuments” shall mean, with respect to any Person (other than an individual),such Person’s Articles (Certificate) of Incorporation, operating agreementor equivalent formation documents, and Regulations (Bylaws), or equivalentgoverning documents, and any amendments to any of the foregoing.

 

“Other Taxes” shall meanany and all present or future stamp or documentary taxes or any other excise,ad valorem or property taxes, goods and services taxes, harmonized sales taxesand other sales taxes, use taxes, value added taxes, charges or similar taxesor levies arising from any payment made hereunder or from the execution,delivery or enforcement of, or otherwise with respect to, this Agreement or anyother Loan Document.

 

“Overall CommitmentPercentage” shall mean a Lender’s percentage of the Total Commitment Amountbased upon such Lender’s Maximum Amount of the Total Commitment Amount.

 

“PBGC” shall mean thePension Benefit Guaranty Corporation, or its successor.

 

“Pension Plan” shall meanan ERISA Plan that is a “pension plan” (within the meaning of ERISASection 3(2)).

 

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“Person” shall mean anyindividual, sole proprietorship, partnership, joint venture, unincorporatedorganization, corporation, limited liability company, unlimited liabilitycompany, institution, trust, estate, government or other agency or politicalsubdivision thereof or any other entity.

 

“Pledge Agreement” shallmean each of the Pledge Agreements, relating to the Pledged Securities,executed and delivered by Borrower and each Domestic Subsidiary in favor ofAgent, for the benefit of the Lenders, dated as of the Closing Date, and anyother Pledge Agreement executed by any other Domestic Subsidiary on or afterthe Closing Date, as any of the foregoing may from time to time be amended,restated or otherwise modified.

 

“Pledged Securities”shall mean all of the shares of capital stock or other equity interest of aSubsidiary of Borrower, whether now owned or hereafter acquired or created, andall proceeds thereof; provided, however, that Pledged Securities shall onlyinclude up to sixty-five percent (65%) of the shares of capital stock or otherequity interest of any first-tier Foreign Subsidiary.

 

“Prime Rate” shall meanthe interest rate established from time to time by Agent as Agent’s prime rate,whether or not such rate shall be publicly announced; the Prime Rate may not bethe lowest interest rate charged by Agent for commercial or other extensions ofcredit. Each change in the Prime Rate shall be effective immediately from andafter such change.

 

“Proceeds” shall mean (a)proceeds as defined in the U.C.C., and any other proceeds, and (b) whatever is receivedupon the sale, exchange, collection or other disposition of Collateral orproceeds, whether cash or non-cash. Cash proceeds includes, without limitation, moneys, checks and DepositAccounts.  Proceeds includes, withoutlimitation, any Account arising when the right to payment is earned under acontract right, any insurance payable by reason of loss or damage to theCollateral, and any return or unearned premium upon any cancellation ofinsurance.  Except as expresslyauthorized in this Agreement, the right of Agent and the Lenders to Proceedsspecifically set forth herein or indicated in any financing statement shallnever constitute an express or implied authorization on the part of Agent orany Lender to a Company’s sale, exchange, collection or other disposition ofany or all of the Collateral.

 

“Real Property” shallmean the real estate owned by a Credit Party, as set forth on Schedule 4hereto, together with all improvements and buildings thereon and allappurtenances, easements or other rights thereto belonging, and being definedcollectively as the “Property” in each of the Mortgages.

 

“Regularly ScheduledPayment Date” shall mean the last day of each March, June, September andDecember of each year.

 

“Related Expenses” shallmean any and all reasonable out-of-pocket costs, liabilities and expenses(including, without limitation, losses, damages, penalties, claims, actions,attorneys’ fees, legal expenses, judgments, suits and disbursements)(a) incurred by Agent, or imposed upon or asserted against Agent or anyLender in any attempt by Agent and the Lenders to (i) obtain, preserve,perfect or enforce any Loan Document or any security interest evidenced by

 

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any Loan Document;(ii) obtain payment, performance or observance of any and all of theObligations; or (iii) maintain, insure, audit, collect, preserve,repossess or dispose of any of the collateral securing the Obligations or anypart thereof, including, without limitation, costs and expenses for appraisals,assessments and audits of any Company or any such collateral; or(b) incidental or related to (a) above, including, withoutlimitation, interest thereupon from the date incurred, imposed or asserteduntil paid at the Default Rate.

 

“Related Writing” shallmean each Loan Document and any other assignment, mortgage, security agreement,guaranty agreement, subordination agreement, financial statement, audit reportor other writing furnished by any Credit Party, or any of its officers, to Agentor the Lenders pursuant to or otherwise in connection with this Agreement.

 

“Reportable Event” shallmean a reportable event as that term is defined in Title IV of ERISA,except actions of general applicability by the Secretary of Labor underSection 110 of such Act.

 

“Request for Extension”shall mean a notice, substantially in the form of the attached Exhibit G.

 

“Required Lenders” shallmean the holders of at least fifty-one percent (51%) of the sum of (a) theprincipal outstanding under the Term Notes, and (b) (i) during the CommitmentPeriod, the Revolving Amount, or (ii) after the Commitment Period, theaggregate amount outstanding under all of the Revolving Credit Notes (otherthan the Swing Line Note) and the Letter of Credit Exposure and the Swing LineExposure; provided, however, that, if there shall be two or more Lenders,Required Lenders shall constitute at least two Lenders.

 

“Requirementof Law” shall mean, as to any Person, any law, treaty, rule or regulation ordetermination or policy statement or interpretation of an arbitrator or a courtor other Governmental Authority, in each case applicable to or binding uponsuch Person or any of its property.

 

“Reserve Percentage”shall mean for any day that percentage (expressed as a decimal) that is ineffect on such day, as prescribed by the Board of Governors of the FederalReserve System (or any successor) for determining the maximum reserverequirement (including, without limitation, all basic, supplemental, marginaland other reserves and taking into account any transitional adjustments orother scheduled changes in reserve requirements) for a member bank of theFederal Reserve System in Cleveland, Ohio, in respect of EurocurrencyLiabilities.  The Eurodollar Rate shallbe adjusted automatically on and as of the effective date of any change in theReserve Percentage.

 

“Restricted Payment”shall mean, with respect to any Company, (a) any amount paid in redemption(including any mandatory redemption or optional redemption), retirement,repurchase, direct or indirect, of the Convertible Subordinated Notes or anyother Subordinated Indebtedness; or (b) the exercise by such Company of anyright of defeasance or covenant defeasance or similar right with respect to theConvertible Subordinated Notes or any other Subordinated Indebtedness.

 

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“Revolving Amount” shallmean the Closing Revolving Amount, as such amount may be increased up to theMaximum Revolving Amount pursuant to Section 2.10(b) hereof, or decreasedpursuant to Section 2.10(a) hereof.

 

“Revolving CreditAvailability” shall mean, at any time, the amount equal to the Revolving CreditCommitment minus the Revolving Credit Exposure.

 

“Revolving CreditCommitment” shall mean the obligation hereunder, during the Commitment Period,of (a) each Revolving Lender to make Revolving Loans, (b) theFronting Lender to issue and each Revolving Lender to participate in Letters ofCredit pursuant to the Letter of Credit Commitment, and (c) the Swing LineLender to make and each Revolving Lender to participate in Swing Loans pursuantto the Swing Line Commitment; up to an aggregate principal amount outstandingat any time equal to the Revolving Amount.

 

“Revolving CreditExposure” shall mean, at any time, the sum of (a) the aggregate principalamount of all Revolving Loans outstanding, (b) the Swing Line Exposure,and (c) the Letter of Credit Exposure.

 

“Revolving Credit Note”shall mean a Revolving Credit Note executed and delivered pursuant toSection 2.5(a) hereof.

 

“Revolving Lender” shallmean a Lender with a percentage of the Revolving Credit Commitment as setforth on Schedule 1 hereto.

 

“Revolving Loan” shallmean a Loan granted to Borrower by the Revolving Lenders in accordance withSection 2.2 hereof.

 

“SEC” shall mean theUnited States Securities and Exchange Commission, or any governmental body oragency succeeding to any of its principle functions.

 

“Secured Obligations”shall mean, collectively, (a) the Obligations, and (b) all obligations andliabilities now existing or hereafter incurred by a Company under a HedgeAgreement with a Lender.

 

“Security Agreement”shall mean each Security Agreement, executed and delivered by a Guarantor ofPayment in favor of Agent, for the benefit of the Lenders, dated as of theClosing Date, and any other Security Agreement executed on or after the ClosingDate, as the same may from time to time be amended, restated or otherwisemodified.

 

“Security Documents”shall mean each Security Agreement, each Pledge Agreement, each IntellectualProperty Collateral Assignment Agreement, each Mortgage, each ControlAgreement, each U.C.C. Financing Statement or similar filing as to ajurisdiction located outside of the United States of America filed inconnection herewith or perfecting any interest created in any of the foregoingdocuments, and any other document pursuant to which any Lien is granted by aCompany to Agent, for the benefit of the Lenders, as security for the SecuredObligations,

 

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or any part thereof, asany of the foregoing may from time to time be amended, restated or otherwisemodified or replaced.

 

“Senior Leverage Ratio”shall mean, at any time, as determined on a Consolidated basis and inaccordance with GAAP, the ratio of (a) Consolidated Senior Funded Indebtedness(for the most recently completed fiscal quarter of Borrower) to (b)Consolidated EBITDA (for the most recently completed four fiscal quarters ofBorrower).

 

“Specific Commitment”shall mean the Revolving Credit Commitment or the Term Loan Commitment.

 

“Standard &Poor’s” shall mean Standard & Poor’s Ratings Group, a division ofMcGraw-Hill, Inc., or any successor to such company.

 

“Subordinated” shallmean, as applied to Indebtedness, Indebtedness that shall have beensubordinated (by written terms or written agreement being, in either case, inform and substance reasonably satisfactory to Agent and the Required Lenders)in favor of the prior payment in full of the Obligations (other than contingentindemnity obligations).

 

“Subsidiary” of a Companyshall mean (a) a corporation more than fifty percent (50%) of the VotingPower of which is owned, directly or indirectly, by such Company or by one ormore other subsidiaries of such Company or by such Company and one or moresubsidiaries of such Company, (b) a partnership or limited liabilitycompany of which such Company, one or more other subsidiaries of such Companyor such Company and one or more subsidiaries of such Company, directly orindirectly, is a general partner or managing member, as the case may be, orotherwise has an ownership interest greater than fifty percent (50%) of all ofthe ownership interests in such partnership or limited liability company, or(c) any other Person (other than a corporation, partnership or limitedliability company) in which such Company, one or more other subsidiaries ofsuch Company or such Company and one or more subsidiaries of such Company,directly or indirectly, has at least a majority interest in the Voting Power orthe power to elect or direct the election of a majority of directors or othergoverning body of such Person.

 

“Swing Line Commitment”shall mean the commitment of the Swing Line Lender to make Swing Loans toBorrower up to the aggregate amount at any time outstanding of Five MillionDollars ($5,000,000).

 

“Swing Line Exposure”shall mean, at any time, the aggregate principal amount of all Swing Loansoutstanding.

 

“Swing Line Lender” shallmean KeyBank National Association, as holder of the Swing Line Commitment.

 

“Swing Line Note” shallmean the Swing Line Note executed and delivered pursuant to Section 2.5(b)hereof.

 

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“Swing Loan” shall mean aloan that shall be denominated in Dollars granted to Borrower by the Swing LineLender under the Swing Line Commitment.

 

“Swing Loan MaturityDate” shall mean, with respect to any Swing Loan, the earlier of(a) thirty (30) days after the date such Swing Loan is made, or(b) the last day of the Commitment Period.

 

“Taxes” shall mean anyand all present or future taxes of any kind, including but not limited to,levies, imposts, duties, charges, fees, deductions or withholdings now orhereafter imposed, levied, collected, withheld or assessed by any Governmental Authority(together with any interest, penalties, additions to taxes or similarliabilities with respect thereto) other than Excluded Taxes.

 

“Term Lender” shall meana Lender with a percentage of the Term Loan Commitment as set forthon Schedule 1 hereto.

 

“Term Loan” shall meanthe Loan granted to Borrower by the Term Lenders in accordance withSection 2.3 hereof.

 

“Term Loan Commitment”shall mean the obligation hereunder of the Term Lenders to make a Term Loan inthe original principal amount of Twenty-Five Million Dollars ($25,000,000),with each Term Lender’s obligation to participate therein being in the amountset forth opposite such Term Lender’s name under the column headed “Term LoanCommitment Amount” as set forth on Schedule 1 hereto.

 

“Term Note” shall mean aTerm Note executed and delivered pursuant to Section 2.5(c) hereof.

 

“Total Commitment Amount”shall mean the Closing Commitment Amount, as such amount may be increased up tothe Maximum Commitment Amount pursuant to Section 2.10(b) hereof, ordecreased pursuant to Section 2.10(a) hereof.

 

“U.C.C.” shall mean theUniform Commercial Code, as in effect from time to time in Ohio.

 

“U.C.C. FinancingStatement” shall mean a financing statement filed or to be filed in accordancewith the Uniform Commercial Code, as in effect from time to time, in therelevant state or states.

 

“Voting Power” shallmean, with respect to any Person, the exclusive ability to control, through theownership of shares of capital stock, partnership interests, membership interestsor otherwise, the election of members of the board of directors or othersimilar governing body of such Person. The holding of a designated percentage of Voting Power of a Person meansthe ownership of shares of capital stock, partnership interests, membershipinterests or other interests of such Person sufficient to control exclusivelythe election of that percentage of the members of the board of directors orsimilar governing body of such Person.

 

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“Welfare Plan” shall meanan ERISA Plan that is a “welfare plan” within the meaning of ERISASection 3(l).

 

“Wholly-Owned Subsidiary”shall mean, with respect to any Person, any corporation, limited liabilitycompany or other entity, all of the securities or other ownership interest ofwhich having ordinary Voting Power to elect a majority of the board ofdirectors, or other persons performing similar functions, are at the timedirectly or indirectly owned by such Person.

 

Section 1.2.  Accounting Terms.  Any accounting term not specifically definedin this Article I shall have the meaning ascribed thereto by GAAP.  In the event that any “Accounting Change”(as defined below) shall occur and such change results in a change in themethod of calculation of financial covenants, standards or terms in thisAgreement, then Borrower, Agent and the Required Lenders agree to enter intonegotiations in order to amend such provisions of this Agreement so as toequitably reflect such Accounting Changes with the desired result that thecriteria for evaluating Borrower’s financial condition shall be the same aftersuch Accounting Changes as if such Accounting Changes had not been made.  Until such time as such an amendment shallhave been executed and delivered by Borrower, Agent and the Required Lenders,all financial covenants, standards and terms in this Agreement shall continueto be calculated and construed as if such Accounting Changes had notoccurred.  “Accounting Changes” refersto changes in accounting principles required by the promulgation of any rule,regulation, pronouncement or opinion by the Financial Accounting StandardsBoard of the American Institute of Certified Public Accountants or, ifapplicable, the SEC (or successors thereto or agencies with similar functions).

 

Section 1.3.  Terms Generally.  The foregoing definitions shall beapplicable to the singular and plurals of the foregoing defined terms.  Unless otherwise defined in thisArticle I, terms that are defined in the U.C.C. are used herein as sodefined.

 

ARTICLE II.  AMOUNT AND TERMS OF CREDIT

 

Section 2.1.  Amount and Nature of Credit.

 

(a)                                  Subjectto the terms and conditions of this Agreement, the Lenders, during theCommitment Period and to the extent hereinafter provided, shall make Loans toBorrower, participate in Swing Loans made by the Swing Line Lender to Borrower,and issue or participate in Letters of Credit at the request of Borrower, insuch aggregate amount as Borrower shall request pursuant to the Commitment;provided, however, that in no event shall the aggregate principal amount of allLoans and Letters of Credit outstanding under this Agreement be in excess ofthe Total Commitment Amount.

 

(b)                                 EachLender, for itself and not one for any other, agrees to make Loans, participatein Swing Loans, and issue or participate in Letters of Credit, during theCommitment Period, on such basis that, immediately after the completion of anyborrowing by Borrower or the issuance of a Letter of Credit:

 

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(i)                                     theaggregate outstanding principal amount of Loans made by such Lender (other thanSwing Loans made by the Swing Line Lender), when combined with such Lender’spro rata share, if any, of the Letter of Credit Exposure and the Swing LineExposure, shall not be in excess of the Maximum Amount for such Lender; and

 

(ii)                                  withrespect to each Specific Commitment, the aggregate outstanding principal amountof Loans (other than Swing Loans) made by such Lender with respect to suchSpecific Commitment shall represent that percentage of the aggregate principalamount then outstanding on all Loans (other than Swing Loans) within suchSpecific Commitment that shall be such Lender’s Applicable CommitmentPercentage.

 

Within each SpecificCommitment, each borrowing (other than Swing Loans) from the Lenders hereundershall be made pro rata according to the respective Applicable CommitmentPercentages of the Lenders.

 

(c)                                  TheLoans may be made as Revolving Loans as described in Section 2.2(a)hereof, as a Term Loan as described in Section 2.3 hereof, and as SwingLoans as described in Section 2.2(c) hereof, and Letters of Credit may beissued in accordance with Section 2.2(b) hereof.

 

Section 2.2.  Revolving Credit.

 

(a)                                  RevolvingLoans.  Subject to the terms andconditions of this Agreement, during the Commitment Period, the RevolvingLenders shall make a Revolving Loan or Revolving Loans to Borrower in suchamount or amounts as Borrower may from time to time request, but not exceedingin aggregate principal amount at any time outstanding hereunder the RevolvingCredit Commitment, when such Revolving Loans are combined with the Letter ofCredit Exposure and the Swing Line Exposure. Borrower shall have the option, subject to the terms and conditions setforth herein, to borrow Revolving Loans, maturing on the last day of theCommitment Period, by means of any combination of Base Rate Loans or EurodollarLoans.  Subject to the provisions ofthis Agreement, Borrower shall be entitled under thisSection 2.2(a) to borrow funds, repay the same in whole or in partand re-borrow hereunder at any time and from time to time during the CommitmentPeriod.

 

(b)                                 Lettersof Credit.

 

(i)                                     Generally.  Subject to the terms and conditions of thisAgreement, during the Commitment Period, the Fronting Lender shall, in its ownname, on behalf of the Revolving Lenders, issue such Letters of Credit for theaccount of a Credit Party, as Borrower may from time to time request.  Borrower shall not request any Letter ofCredit (and the Fronting Lender shall not be obligated to issue any Letter ofCredit) if, after giving effect thereto, (A) the Letter of Credit Exposurewould exceed the Letter of Credit Commitment or (B) the Revolving CreditExposure would exceed the Revolving Credit Commitment.  The issuance of each Letter of Credit shallconfer upon each Revolving Lender the benefits and liabilities of aparticipation consisting of an undivided pro rata

 

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 interest in the Letter of Credit to the extentof such Revolving Lender’s Applicable Commitment Percentage.

 

(ii)                                  Requestfor Letter of Credit.  Each requestfor a Letter of Credit shall be delivered to Agent (and to the Fronting Lender,if the Fronting Lender is a Lender other than Agent) by an Authorized Officernot later than 11:00 A.M. (Eastern time) three Business Days prior to the dayupon which the Letter of Credit is to be issued.  Each such request shall be in a form reasonably acceptable toAgent (and to the Fronting Lender, if the Fronting Lender is a Lender otherthan Agent) and shall specify the face amount thereof, the account party, thebeneficiary, the intended date of issuance, the expiry date thereof, and thenature of the transaction to be supported thereby.  Concurrently with each such request, Borrower, and any CreditParty for whose account the Letter of Credit is to be issued, shall execute anddeliver to the Fronting Lender an appropriate application and agreement, beingin the standard form of the Fronting Lender for such letters of credit, asamended to conform to the provisions of this Agreement if required byAgent.  Agent shall give the FrontingLender and each Revolving Lender notice of each such request for a Letter ofCredit.

 

(iii)                               Letterof Credit Fees.  With respect toeach Letter of Credit and the drafts thereunder, if any, whether issued for theaccount of Borrower or any other Credit Party, Borrower agrees to (A) pay toAgent, for the pro rata benefit of the Revolving Lenders, a non-refundablecommission based upon the face amount of such Letter of Credit, which shall bepaid quarterly in arrears, on each Regularly Scheduled Payment Date, at therate per annum of the Applicable Margin for Eurodollar Loans (in effect on thedate such payment is to be made) multiplied by the face amount of such Letterof Credit; (B) pay to Agent, for the sole benefit of the Fronting Lender, anadditional Letter of Credit fee, which shall be paid on each date that suchLetter of Credit shall be issued, amended or renewed at the rate of one-eighthpercent (1/8%) of the face amount of such Letter of Credit; and (C) pay toAgent, for the sole benefit of the Fronting Lender, such other issuance,amendment, negotiation, draw, acceptance, telex, courier, postage and similartransactional fees as are generally charged by the Fronting Lender under itsfee schedule as in effect from time to time.

 

(iv)                              Refundingof Letters of Credit with Revolving Loans. Whenever a Letter of Credit shall be drawn, Borrower shall promptlyreimburse the Fronting Lender for the amount drawn.  In the event that the amount drawn shall not have been reimbursedby Borrower on the date of the drawing of such Letter of Credit, at the soleoption of Agent (and the Fronting Lender, if the Fronting Lender is a Lenderother than Agent), Borrower shall be deemed to have requested a Revolving Loan,subject to the provisions of Section 2.2 and 2.6 hereof (other than therequirement set forth in Section 2.6(d) hereof), in the amount drawn.  Such Revolving Loan shall be evidenced bythe Revolving Credit Notes.  EachRevolving Lender agrees to make a Revolving Loan on the date of such notice,subject to no conditions precedent whatsoever. Each Revolving Lender acknowledges and agrees that its obligation tomake a Revolving Loan pursuant to Section 2.2(a) hereof when required bythis Section 2.2(b) shall be absolute and unconditional and shall not beaffected by any circumstance whatsoever, including,

 

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without limitation, theoccurrence and continuance of a Default or Event of Default, and that itspayment to Agent, for the account of the Fronting Lender, of the proceeds ofsuch Revolving Loan shall be made without any offset, abatement, recoupment,counterclaim, withholding or reduction whatsoever and whether or not theRevolving Credit Commitment shall have been reduced or terminated.  Borrower irrevocably authorizes andinstructs Agent to apply the proceeds of any borrowing pursuant to thissubsection (iv) to reimburse, in full, the Fronting Lender for the amountdrawn on such Letter of Credit.  Eachsuch Revolving Loan shall be deemed to be a Base Rate Loan unless otherwiserequested by and available to Borrower hereunder.  Each Revolving Lender is hereby authorized to record on itsrecords relating to its Revolving Credit Note such Revolving Lender’s pro ratashare of the amounts paid and not reimbursed on the Letters of Credit.

 

(v)                                 Participationin Letters of Credit.  If, for anyreason, Agent (and the Fronting Lender, if the Fronting Lender is a Lenderother than Agent) shall be unable to or, in the opinion of Agent, it shall beimpracticable to, convert any Letter of Credit to a Revolving Loan pursuant tothe preceding subsection, Agent (and the Fronting Lender, if the FrontingLender is a Lender other than Agent) shall have the right to request that eachRevolving Lender purchase a participation in the amount due with respect tosuch Letter of Credit, and Agent shall promptly notify each Revolving Lenderthereof (by facsimile or telephone, confirmed in writing).  Upon such notice, but without furtheraction, the Fronting Lender hereby agrees to grant to each Revolving Lender,and each Revolving Lender hereby agrees to acquire from the Fronting Lender, anundivided participation interest in the amount due with respect to such Letterof Credit in an amount equal to such Revolving Lender’s Applicable CommitmentPercentage of the principal amount due with respect to such Letter ofCredit.  In consideration and infurtherance of the foregoing, each Revolving Lender hereby absolutely andunconditionally agrees, upon receipt of notice as provided above, to pay toAgent, for the account of the Fronting Lender, such Revolving Lender’s ratableshare of the amount due with respect to such Letter of Credit (determined inaccordance with such Revolving Lender’s Applicable Commitment Percentage).  Each Revolving Lender acknowledges andagrees that its obligation to acquire participations in the amount due underany Letter of Credit that is drawn but not reimbursed by Borrower pursuant tothis subsection (v) shall be absolute and unconditional and shall not beaffected by any circumstance whatsoever, including, without limitation, theoccurrence and continuance of a Default or Event of Default, and that each suchpayment shall be made without any offset, abatement, recoupment, counterclaim,withholding or reduction whatsoever and whether or not the Revolving CreditCommitment shall have been reduced or terminated.  Each Revolving Lender shall comply with its obligation under thissubsection (v) by wire transfer of immediately available funds in the samemanner as provided in Section 2.6 hereof with respect to RevolvingLoans.  Each Revolving Lender is herebyauthorized to record on its records such Revolving Lender’s pro rata share ofthe amounts paid and not reimbursed on the Letters of Credit.  Inaddition, each Lender agrees to risk participate in the Existing Lettersof Credit as provided in subsection (vi) below.

 

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(vi)                              ExistingLetters of Credit.  Schedule 2.2hereto contains a description of all letters of credit outstanding on, and tocontinue in effect after, the Closing Date. Each such letter of credit issued by a bank that is or becomes a Lenderunder this Agreement on the Closing Date (each, an “Existing Letter of Credit”)shall constitute a “Letter of Credit” for all purposes of this Agreement,issued, for purposes of Section 2.2(a)(v) hereof, on the Closing Date.  Borrower, Agent and the applicable Lendershereby agree that, from and after such date, the terms of this Agreement shallapply to the Existing Letters of Credit, superseding any other agreementtheretofore applicable to them to the extent inconsistent with the termshereof.  Notwithstanding anything to thecontrary in any reimbursement agreement applicable to the Existing Letters ofCredit, the fees payable in connection with each Existing Letter of Credit tobe shared with the Lenders shall accrue from the Closing Date at the rateprovided in this Section 2.2.

 

(c)                                  SwingLoans.

 

(i)                                     Generally.  Subject to the terms and conditions of thisAgreement, during the Commitment Period, the Swing Line Lender shall make aSwing Loan or Swing Loans to Borrower in such amount or amounts as Borrower,through an Authorized Officer, may from time to time request; provided thatBorrower shall not request any Swing Loan if, after giving effect thereto, (A)the Revolving Credit Exposure would exceed the Revolving Credit Commitment, or(B) the Swing Line Exposure would exceed the Swing Line Commitment.  Each Swing Loan shall be due and payable onthe Swing Loan Maturity Date applicable thereto.

 

(ii)                                  Refundingof Swing Loans.  If the Swing LineLender so elects, by giving notice to Borrower and the Revolving Lenders,Borrower agrees that the Swing Line Lender shall have the right, in its solediscretion, to require that any Swing Loan be refinanced as a RevolvingLoan.  Such Revolving Loan shall be aBase Rate Loan unless otherwise requested by and available to Borrowerhereunder.  Upon receipt of such noticeby Borrower and the Revolving Lenders, Borrower shall be deemed, on such day,to have requested a Revolving Loan in the principal amount of the Swing Loan inaccordance with subsection (a) of this Section 2.2 and 2.6 hereof(other than the requirement set forth in Section 2.6(d) hereof).  Such Revolving Loan shall be evidenced bythe Revolving Credit Notes.  EachRevolving Lender agrees to make a Revolving Loan on the date of such notice,subject to no conditions precedent whatsoever. Each Revolving Lender acknowledges and agrees that such RevolvingLender’s obligation to make a Revolving Loan pursuant to subsection (a) ofthis Section 2.2 hereof when required by this subsection (ii) isabsolute and unconditional and shall not be affected by any circumstancewhatsoever, including, without limitation, the occurrence and continuance of aDefault or Event of Default, and that its payment to Agent, for the account ofthe Swing Line Lender, of the proceeds of such Revolving Loan shall be madewithout any offset, abatement, recoupment, counterclaim, withholding orreduction whatsoever and whether or not the Revolving Credit Commitment shallhave been reduced or terminated. Borrower irrevocably authorizes and instructs Agent to apply theproceeds of any borrowing pursuant to this subsection (ii) to repayin full such Swing Loan.  Each

 

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RevolvingLender is hereby authorized to record on its records such Revolving Lender’spro rata share of the amounts paid to refund such Swing Loan.

 

(iii)                               Participationin Swing Loans.  If, for any reason,Agent is unable to or, in the opinion of Agent, it is impracticable to, convertany Swing Loan to a Revolving Loan pursuant to the precedingsubsection (ii), then on any day that a Swing Loan is outstanding (whetherbefore or after the maturity thereof), Agent shall have the right to requestthat each Revolving Lender purchase a participation in such Swing Loan, andAgent shall promptly notify each Revolving Lender thereof (by facsimile ortelephone, confirmed in writing).  Uponsuch notice, but without further action, the Swing Line Lender hereby agrees togrant to each Revolving Lender, and each Revolving Lender hereby agrees toacquire from the Swing Line Lender, an undivided participation interest in suchSwing Loan in an amount equal to such Revolving Lender’s Applicable CommitmentPercentage of the principal amount of such Swing Loan.  In consideration and in furtherance of theforegoing, each Revolving Lender hereby absolutely and unconditionally agrees,upon receipt of notice as provided above, to pay to Agent, for the benefit ofthe Swing Line Lender, such Revolving Lender’s ratable share of such Swing Loan(determined in accordance with such Revolving Lender’s Applicable CommitmentPercentage).  Each Revolving Lenderacknowledges and agrees that its obligation to acquire participations in SwingLoans pursuant to this subsection (iii) is absolute and unconditionaland shall not be affected by any circumstance whatsoever, including, withoutlimitation, the occurrence and continuance of a Default or an Event of Default,and that each such payment shall be made without any offset, abatement,recoupment, counterclaim, withholding or reduction whatsoever and whether ornot the Revolving Credit Commitment shall have been reduced or terminated.  Each Revolving Lender shall comply with itsobligation under this subsection (iii) by wire transfer of immediatelyavailable funds, in the same manner as provided in Section 2.6 hereof withrespect to Revolving Loans to be made by such Revolving Lender.

 

Section 2.3.  Term Loan.

 

Subject to the terms andconditions of this Agreement, the Term Lenders shall make the Term Loan toBorrower on the Closing Date, in the amount of the Term Loan Commitment.  The Term Loan shall be payable in fifteen(15) consecutive quarter annual installments of One Million Five HundredSixty-Two Thousand Five Hundred Dollars ($1,562,500) each, commencing September 30,2004, and continuing on each Regularly Scheduled Payment Date thereafter, withthe balance thereof payable in full on June 30, 2008.  Borrower shall notify Agent, in accordancewith the notice provisions of Section 2.6 hereof, whether the Term Loanwill be a Base Rate Loan or Eurodollar Loans. The Term Loan may be a mixture of a Base Rate Loan and Eurodollar Loans.

 

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Section 2.4.  Interest.

 

(a)                                  RevolvingLoans.

 

(i)                                     BaseRate Loan.  Borrower shall payinterest on the unpaid principal amount of a Base Rate Loan outstanding fromtime to time from the date thereof until paid at the Derived Base Rate fromtime to time in effect.  Interest onsuch Base Rate Loan shall be payable, commencing September 30, 2004, andon each Regularly Scheduled Payment Date thereafter and at the maturitythereof.

 

(ii)                                  EurodollarLoans.  Borrower shall pay intereston the unpaid principal amount of each Eurodollar Loan outstanding from time totime, fixed in advance on the first day of the Interest Period applicablethereto through the last day of the Interest Period applicable thereto (butsubject to changes in the Applicable Margin), at the Derived EurodollarRate.  Interest on such Eurodollar Loanshall be payable on each Interest Adjustment Date with respect to an InterestPeriod (provided that if an Interest Period shall exceed three months, theinterest must be paid every three months, commencing three months from thebeginning of such Interest Period).

 

(b)                                 SwingLoans.  Borrower shall pay interestto Agent, for the sole benefit of the Swing Line Lender (and any RevolvingLender that shall have purchased a participation in such Swing Loan), on theunpaid principal amount of each Swing Loan outstanding from time to time fromthe date thereof until paid at the Derived Base Rate.  Interest on each Swing Loan shall be payable on the Swing LoanMaturity Date applicable thereto. Each Swing Loan shall bear interest for aminimum of one day.

 

(c)                                  TermLoan.

 

(i)                                     BaseRate Loan.  With respect to anyportion of the Term Loan that shall be a Base Rate Loan, Borrower shall payinterest on the unpaid principal amount thereof outstanding from time to timefrom the date thereof until paid, commencing September 30, 2004, andcontinuing on each Regularly Scheduled Payment Date thereafter and at thematurity thereof, at the Derived Base Rate from time to time in effect.

 

(ii)                                  EurodollarLoans.  With respect to any portionof the Term Loan that shall be a Eurodollar Loan, Borrower shall pay intereston the unpaid principal amount of such Eurodollar Loan outstanding from time totime, fixed in advance on the first day of the Interest Period applicablethereto through the last day of the Interest Period applicable thereto (butsubject to changes in the Applicable Margin), at the Derived EurodollarRate.  Interest on such Eurodollar Loanshall be payable on each Interest Adjustment Date with respect to an InterestPeriod (provided that if an Interest Period shall exceed three months, the interestmust be paid every three months, commencing three months from the beginning ofsuch Interest Period).

 

(d)                                 DefaultRate.  Anything herein to thecontrary notwithstanding, if an Event of Default pursuant to Section 8.1or 8.11 hereof shall occur and be continuing, upon the election of the RequiredLenders (i) the principal of each Loan and the unpaid interest thereonshall bear interest, until paid, at the Default Rate, (ii) the fee for theaggregate undrawn face amount of all issued and outstanding Letters of Creditshall be increased by two percent (2%) in excess of the rate otherwiseapplicable thereto, and (iii) in the case of any other amount due fromBorrower

 

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hereunder or under anyother Loan Document, such amount shall bear interest at the Default Rate;provided that, during an Event of Default under Section 8.11 hereof, theapplicable Default Rate shall apply without any election or action on the partof Agent or any Lender.

 

(e)                                  Limitationon Interest.  In no event shall therate of interest hereunder exceed the maximum rate allowable by law.    Notwithstanding anything to the contrarycontained in any Loan Document, the interest paid or agreed to be paid underthe Loan Documents shall not exceed the maximum rate of non-usurious interestpermitted by applicable Law (the “Maximum Rate”).  If Agent or any Lender shall receive interest in an amount thatexceeds the Maximum Rate, the excess interest shall be applied to the principalof the Loans or, if it exceeds such unpaid principal, refunded toBorrower.  In determining whether theinterest contracted for, charged, or received by Agent or a Lender exceeds theMaximum Rate, such Person may, to the extent permitted by applicable law, (i)characterize any payment that is not principal as an expense, fee, or premiumrather than interest, (ii) exclude voluntary prepayments and the effectsthereof, and (iii) amortize, prorate, allocate, and spread in equal or unequalparts the total amount of interest throughout the contemplated term of theObligations.

 

Section 2.5.  Evidence of Indebtedness.

 

(a)                                  RevolvingLoans.  The obligation of Borrowerto repay the Revolving Loans made by each Revolving Lender and to pay interestthereon shall be evidenced by a Revolving Credit Note of Borrower in the formof the attached Exhibit A, payable to the order of such RevolvingLender in the principal amount of its Applicable Commitment Percentage of theRevolving Credit Commitment, or, if less, the aggregate unpaid principal amountof Revolving Loans made by such Revolving Lender.

 

(b)                                 SwingLoan.  The obligation of Borrower torepay the Swing Loans and to pay interest thereon shall be evidenced by a SwingLine Note of Borrower in the form of the attached Exhibit B, and payableto the order of the Swing Line Lender in the principal amount of the Swing LineCommitment, or, if less, the aggregate unpaid principal amount of Swing Loansmade by the Swing Line Lender.

 

(c)                                  TermLoan.  The obligation of Borrower torepay the portion of the Term Loan made by each Term Lender and to pay interestthereon shall be evidenced by a Term Note of Borrower in the form of theattached Exhibit C, payable to the order of such Term Lender in theprincipal amount of its Commitment Percentage of the Term Loan.

 

Section 2.6.  Notice of Credit Event; Funding of Loans.

 

(a)                                  Noticeof Credit Event.  Borrower, throughan Authorized Officer, shall provide to Agent a Notice of Loan prior to(i) 12:00 noon (Eastern time) on the proposed date of borrowing orconversion of any Base Rate Loan, (ii) 12:00 noon (Eastern time) threeBusiness Days prior to the proposed date of borrowing, conversion orcontinuation of any Eurodollar Loan, and (iii) 3:00 P.M. (Eastern time) onthe proposed date of borrowing of any Swing Loan.  Borrower shall comply with the notice provisions set forth inSection 2.2(b) hereof with respect to Letters of Credit.

 

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(b)                                 Fundingof Loans.  Agent shall notify eachRevolving Lender of the date, amount and Interest Period (if applicable)promptly upon the receipt of a Notice of Loan, and, in any event, by 2:00 P.M.(Eastern time) on the date such notice is received.  On the date that the Credit Event set forth in such notice is tooccur, each such Lender shall provide to Agent, not later than 3:00 P.M.(Eastern time), the amount in Dollars in federal or other immediately availablefunds, required of it.  If Agent shallelect to advance the proceeds of such Loan prior to receiving funds from suchRevolving Lender, Agent shall have the right, upon prior notice to Borrower, todebit any account of Borrower or otherwise receive such amount from Borrower,promptly after demand, in the event that such Revolving Lender shall fail toreimburse Agent in accordance with this subsection.  Agent shall also have the right to receive interest from suchRevolving Lender at the Federal Funds Effective Rate in the event that suchRevolving Lender shall fail to provide its portion of the Loan on the daterequested and Agent shall elect to provide such funds.

 

(c)                                  Conversionof Loans.  At the request ofBorrower to Agent, subject to the notice and other provisions of thisSection 2.6, the appropriate Lenders shall convert a Base Rate Loan to oneor more Eurodollar Loans at any time and shall convert a Eurodollar Loan to aBase Rate Loan on any Interest Adjustment Date applicable thereto.  Swing Loans may be converted by the SwingLine Lender to Revolving Loans in accordance withSection 2.2(c)(ii) hereof.

 

(d)                                 MinimumAmount.  Each request for:

 

(i)                                     aBase Rate Loan shall be in an amount of not less than Two Million Dollars($2,000,000), increased by increments of One Million Dollars ($1,000,000);

 

(ii)                                  aEurodollar Loan shall be in an amount of not less than Two Million Dollars($2,000,000), increased by increments of One Million Dollars ($1,000,000); and

 

(iii)                               aSwing Loan shall be in an amount not less than One Hundred Thousand Dollars($100,000).

 

(e)                                  InterestPeriods.  At no time shall Borrowerrequest that Eurodollar Loans be outstanding for more than eight differentInterest Periods.

 

Section 2.7.  Payment on Loans and Other Obligations.

 

(a)                                  PaymentsGenerally.  Each payment madehereunder by Borrower shall be made without any offset, abatement, recoupment, counterclaim,withholding or reduction whatsoever.

 

(b)                                 Paymentsfrom Borrower.  All payments(including prepayments) to Agent of the principal of or interest on any Loan orother payment, including but not limited to principal, interest, fees or anyother amount owed by Borrower under this Agreement, shall be made inDollars.  All payments described in thissubsection (b) shall be remitted to Agent, at the address of Agent fornotices referred to in Section 11.4 hereof, for the account of theRevolving Lenders (or the Fronting Lender or the Swing Line Lender, asappropriate) not later than 1:00 P.M.

 

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(Eastern time) on the duedate thereof in immediately available funds. Any such payments received by Agent after 1:00 P.M. (Eastern time) shallbe deemed to have been made and received on the next Business Day.

 

(c)                                  Paymentsto Lenders.  Upon Agent’s receipt ofpayments hereunder, Agent shall immediately distribute to the appropriateLenders (except with respect to Swing Loans, which shall be paid to the SwingLine Lender or, with respect to Letters of Credit, certain of which paymentsshall only be paid to the Fronting Lender) their respective ratable shares, ifany, of the amount of principal, interest, and commitment and other feesreceived by Agent for the account of such Lender.  Payments received by Agent shall be delivered to the Lenders inimmediately available funds.  Each Lender,as appropriate, shall record any principal, interest or other payment, theprincipal amounts of Base Rate Loans, Eurodollar Loans, Swing Loans and Lettersof Credit, all prepayments and the applicable dates, including InterestPeriods, with respect to the Loans made, and payments received by such Lender,by such method as such Lender may generally employ; provided, however, thatfailure to make any such entry shall in no way detract from the obligations ofBorrower under this Agreement or any Note. The aggregate unpaid amount of Loans, types of Loans, Interest Periodsand similar information with respect to the Loans and Letters of Credit setforth on the records of Agent shall be rebuttably presumptive evidence withrespect to such information, including the amounts of principal and interestowing to each Lender.

 

(d)                                 Timingof Payments.  Whenever any paymentto be made hereunder, including, without limitation, any payment to be made onany Loan, shall be stated to be due on a day that is not a Business Day, suchpayment shall be made on the next Business Day and such extension of time shallin each case be included in the computation of the interest payable on suchLoan; provided, however, that, with respect to any Eurodollar Loan, if the nextBusiness Day shall fall in the succeeding calendar month, such payment shall bemade on the preceding Business Day and the relevant Interest Period shall beadjusted accordingly.

 

Section 2.8.  Prepayment.

 

(a)                                  Rightto Prepay.  Borrower shall have theright at any time or from time to time to prepay, on a pro rata basis for allof the appropriate Lenders (except with respect to Swing Loans, which shall bepaid to the Swing Line Lender), all or any part of the principal amount of theLoans, as designated by Borrower.  Suchpayment shall include interest accrued on the amount so prepaid to the date ofsuch prepayment and any amount payable under Article III hereof withrespect to the amount being prepaid. Prepayments of Base Rate Loans shall bewithout any premium or penalty, other than any prepayment fees, penalties orother charges that may be contained in any Hedge Agreement.  Each prepayment of the Term Loan shall beapplied to the principal installments thereof on a pro rata basis among theremaining principal installments.

 

(b)                                 Noticeof Prepayment.  Borrower shall giveAgent notice of prepayment of a Base Rate Loan or Swing Loan by not later than11:00 A.M. (Eastern time) on the Business Day on which such prepayment is to bemade and written notice of the prepayment of any Eurodollar

 

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Loan not later than 1:00P.M. (Eastern time) three Business Days before the Business Day on which suchprepayment is to be made.

 

(c)                                  MinimumAmount.  Each prepayment of aEurodollar Loan shall be in the principal amount of not less than Five HundredThousand Dollars ($500,000), increased by increments of Two Hundred FiftyThousand Dollars ($250,000), or, with respect to a Swing Loan, the principalbalance of such Swing Loan, except in the case of a mandatory payment pursuantto Section 2.12 or Article III hereof.

 

Section 2.9.  Commitment and Other Fees.

 

(a)                                  CommitmentFee.  Borrower shall pay to Agent,for the ratable account of the Revolving Lenders, as a consideration for theRevolving Credit Commitment, a commitment fee from the Closing Date to and includingthe last day of the Commitment Period, payable quarterly, at a rate per annumequal to (i) the Applicable Commitment Fee Rate in effect on the paymentdate, times (ii) (A) the average daily Revolving Amount in effect during suchquarter, minus (B) the average daily Revolving Credit Exposure (exclusive ofthe Swing Line Exposure) during such quarter. The commitment fee shall be payable in arrears, on September 30,2004 and on each Regularly Scheduled Payment Date thereafter, and on the lastday of the Commitment Period.

 

(b)                                 AgentFee.  Borrower shall pay to Agent,for its sole benefit, the fees set forth in the Agent Fee Letter.

 

Section 2.10.  Modifications of Commitment.

 

(a)                                  OptionalReduction of Commitment.  Borrowermay at any time and from time to time permanently reduce in whole or ratably inpart the Revolving Credit Commitment to an amount not less than the thenexisting Revolving Credit Exposure, by giving Agent not fewer than threeBusiness Days’ written notice of such reduction, provided that any such partialreduction shall be in an aggregate amount, for all of the Revolving Lenders, ofnot less than Five Million Dollars ($5,000,000).  Agent shall promptly notify each Revolving Lender of the date ofeach such reduction and such Revolving Lender’s proportionate sharethereof.  After each such reduction, thecommitment fees payable hereunder shall be calculated upon the Revolving Amountas so reduced.  If Borrower reduces inwhole the Revolving Credit Commitment, on the effective date of such reduction(Borrower having prepaid in full the unpaid principal balance, if any, of theLoans, together with all interest and commitment and other fees accrued andunpaid, and provided that no Letter of Credit Exposure or Swing Line Exposureshall exist), all of the Notes shall be delivered to Agent marked “Canceled”and Agent shall redeliver such Notes to Borrower.  Any partial reduction in the Revolving Amount shall be effectiveduring the remainder of the Commitment Period.

 

(b)                                 Increasein Commitment.  At any time duringthe Commitment Increase Period, Borrower may request that Agent increase theRevolving Amount from the Closing Revolving Amount up to the Maximum RevolvingAmount by either (i) proportionally increasing, for one or more RevolvingLenders, with their prior written consent, their respective Applicable

 

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Commitment Percentage ofthe Revolving Credit Commitment, or (ii) including one or more AdditionalLenders, each with a new commitment under the Revolving Credit Commitment, as aparty to this Agreement (collectively, the “Additional Commitment”).  During the Commitment Increase Period, theLenders agree that Agent shall permit one or more Additional Commitments uponsatisfaction of the following requirements: (A) each Additional Lender, if any,shall execute an Additional Lender Assumption Agreement, (B) Agent shallprovide to Borrower and each Revolving Lender a revised Schedule 1to this Agreement, including revised Applicable Commitment Percentages for eachof the Revolving Lenders with respect to the Revolving Credit Commitment(revised so that each Revolving Lender will have a new Applicable CommitmentPercentage for the Revolving Credit Commitment), at least three Business Daysprior to the date of the effectiveness of such Additional Commitments (each an“Additional Lender Assumption Effective Date”), (C) Borrower shall execute anddeliver to Agent and the Revolving Lenders such replacement or additionalRevolving Credit Notes as shall be required by Agent, and (D) Borrower shall,on the Additional Lender Assumption Effective Date, deliver to Agent, for thebenefit of the Lenders, (1) written confirmation (in form and substancereasonably satisfactory to Agent) that Borrower shall have given written noticeto each Convertible Subordinated Noteholder that the Obligations incurredpursuant to the Additional Commitments are being designated as SeniorIndebtedness (as defined in the Convertible Subordinated Notes), and (2) acertificate and any other reasonable evidence required by Agent or the RequiredLenders demonstrating that all terms and conditions for designating SeniorIndebtedness (as defined in the Convertible Subordinated Notes) under theConvertible Subordinated Notes are being met. The Revolving Lenders hereby authorize Agent to execute each AdditionalLender Assumption Agreement on behalf of the Revolving Lenders.  On each Additional Lender AssumptionEffective Date, the Revolving Lenders shall make adjustments among themselves withrespect to the Revolving Loans then outstanding and amounts of principal,interest, commitment fees and other amounts paid or payable with respectthereto as shall be necessary, in the opinion of Agent, in order to reallocateamong such Revolving Lenders such outstanding amounts, based on the revisedApplicable Commitment Percentages and to otherwise carry out fully the intentand terms of this subsection (b). In connection therewith, it is understood and agreed that the MaximumAmount of any Revolving Lender will not be increased (or decreased exceptpursuant to Section 2.10(a) hereof) without the prior written consentof such Revolving Lender.  Borrowershall not request any increase in the Total Commitment Amount (or the RevolvingAmount) pursuant to this subsection (b) if a Default or an Event ofDefault shall then exist, or immediately after giving effect to any suchincrease would exist.  Upon the increaseof the Revolving Amount, the Total Commitment Amount shall be proportionallyincreased from the Closing Commitment Amount to the Maximum Commitment Amount.

 

Section 2.11.  Computation of Interest and Fees.  With the exception of Base Rate Loans,interest on Loans, Related Expenses and commitment and other fees and chargeshereunder shall be computed on the basis of a year having three hundred sixty(360) days and calculated for the actual number of days elapsed.  With respect to Base Rate Loans, interestshall be computed on the basis of a year having three hundred sixty-five (365)days or three hundred sixty-six (366) days, as the case may be, and calculatedfor the actual number of days elapsed.

 

Section 2.12.  Mandatory Payment.

 

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(a)                                  RevolvingCredit Exposure.  If, at any time,the Revolving Credit Exposure shall exceed the Revolving Credit Commitment,Borrower shall, as promptly as practicable, but in no event later than the nextBusiness Day, prepay an aggregate principal amount of the Revolving Loanssufficient to bring the Revolving Credit Exposure within the Revolving CreditCommitment.

 

(b)                                 SwingLine Exposure.  If, at any time, theSwing Line Exposure shall exceed the Swing Line Commitment, Borrower shall, aspromptly as practicable, but in no event later than the next Business Day,prepay an aggregate principal amount of the Swing Loans sufficient to bring theSwing Line Exposure within the Swing Line Commitment.

 

(c)                                  MandatoryPayments Generally.  Unlessotherwise designated by Borrower, each prepayment pursuant tosubsection (a) hereof shall be applied in the following order(i) first, to the outstanding Base Rate Loans, and (ii) second, to theoutstanding Eurodollar Loans, provided that if the outstanding principal amountof any Eurodollar Loan shall be reduced to an amount less than the minimumamount set forth in Section 2.6 hereof as a result of such prepayment,then such Eurodollar Loan shall be converted into a Base Rate Loan on the dateof such prepayment.  Any prepayment of aEurodollar Loan or Swing Loan pursuant to this Section 2.12 shall besubject to the prepayment provisions set forth in Article III hereof.

 

Section 2.13.  Extension of Commitment.  Contemporaneously with the delivery of thefinancial statements required pursuant to Section 5.3(b) hereof (beginningwith the financial statements for the fiscal year of Borrower endingDecember 31, 2004, Borrower may deliver a Request for Extension,requesting that the Revolving Lenders extend the maturity of the RevolvingCredit Commitment for an additional year. Each such extension shall require the unanimous written consent of allof the Revolving Lenders and shall be upon such terms and conditions as may beagreed to by Agent, Borrower and the Revolving Lenders.  Borrower shall pay any attorneys’ fees orother expenses of Agent in connection with the documentation of any suchextension, as well as such other fees as may be agreed upon between Borrowerand Agent.

 

ARTICLE III.  ADDITIONAL PROVISIONS RELATING TOEURODOLLAR LOANS; INCREASED CAPITAL; TAXES

 

Section 3.1.  Requirements of Law.

 

(a)                                  If,after the Closing Date (i) the adoption of or any change in anyRequirement of Law or in the interpretation or application thereof or(ii) the compliance by any Lender with any request or directive (whetheror not having the force of law) from any central bank or other GovernmentalAuthority:

 

(A)                              shallsubject any Lender to any tax of any kind whatsoever with respect to thisAgreement, any Letter of Credit or any Eurodollar Loan made by it, or changethe basis of taxation of payments to such Lender in respect thereof (except forTaxes and Excluded Taxes which are governed by Section 3.2 hereof);

 

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(B)                                shallimpose, modify or hold applicable any reserve, special deposit, compulsory loanor similar requirement against assets held by, deposits or other liabilities inor for the account of, advances, loans or other extensions of credit by, or anyother acquisition of funds by, any office of such Lender that is not otherwiseincluded in the determination of the Eurodollar Rate; or

 

(C)                                shallimpose on such Lender any other condition;

 

and the result of any ofthe foregoing is to increase the cost to such Lender of making, convertinginto, continuing or maintaining Eurodollar Loans or issuing or participating inLetters of Credit, or to reduce any amount receivable hereunder in respectthereof, then, in any such case, Borrower shall pay to such Lender, promptlyafter receipt of a written request (or, if required by Borrower, a certificateof such Lender specifying the basis for such request) therefor, any additionalamounts necessary to compensate such Lender for such increased cost or reducedamount receivable.  If any Lenderbecomes entitled to claim any additional amounts pursuant to this subsection (a),such Lender shall promptly notify Borrower (with a copy to Agent) of the eventby reason of which it has become so entitled.

 

(b)                                 Ifany Lender shall have determined that, after the Closing Date, the adoption ofor any change in any Requirement of Law regarding capital adequacy or in theinterpretation or application thereof or compliance by such Lender or anycorporation controlling such Lender with any request or directive regardingcapital adequacy (whether or not having the force of law) from any GovernmentalAuthority shall have the effect of reducing the rate of return on such Lender’sor such corporation’s capital as a consequence of its obligations hereunder, orunder or in respect of any Letter of Credit, to a level below that which such Lenderor such corporation could have achieved but for such adoption, change orcompliance (taking into consideration the policies of such Lender orcorporation with respect to capital adequacy), then from time to time, uponsubmission by such Lender to Borrower (with a copy to Agent) of a writtenrequest therefor (which shall include the method for calculating such amount inreasonable detail), Borrower shall promptly pay or cause to be paid to suchLender such additional amount or amounts as will compensate such Lender forsuch reduction.

 

(c)                                  Acertificate as to any additional amounts payable pursuant to thisSection 3.1 submitted by any Lender to Borrower (with a copy to Agent)shall be conclusive absent manifest error. In determining any such additional amounts, such Lender may use anymethod of averaging and attribution that it (in its sole discretion) shall deemapplicable.  The obligations of Borrowerpursuant to this Section 3.1 shall survive the termination of thisAgreement and the payment of the Loans and all other amounts payable hereunder.

 

(d)                                 Notwithstandingthe foregoing, no Lender shall be entitled to any indemnification orreimbursement pursuant to this Section 3.1 to the extent such Lender hasnot made demand therefore (as set forth above) within two hundred seventy (270)days after the occurrence of the event giving rise to such entitlement or, iflater, such Lender having knowledge of such event.

 

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Section 3.2.  Taxes.

 

(a)                                  Allpayments made by any Credit Party under any Loan Document shall be made freeand clear of, and without deduction or withholding for or on account of anyTaxes or Other Taxes.  If any Taxes orOther Taxes are required to be deducted or withheld from any amounts payable toAgent or any Lender hereunder, the amounts so payable to Agent or such Lendershall be increased to the extent necessary to yield to Agent or such Lender(after deducting, withholding and payment of all Taxes and Other Taxes)interest or any such other amounts payable hereunder at the rates or in theamounts specified in the Loan Documents.

 

(b)                                 Inaddition, the Credit Parties shall pay Taxes and Other Taxes to the relevantGovernmental Authority in accordance with applicable law.

 

(c)                                  Wheneverany Taxes or Other Taxes are required to be withheld and paid by a CreditParty, such Credit Party shall timely withhold and pay such taxes to therelevant Governmental Authorities.  Aspromptly as possible thereafter, such Credit Party shall send to Agent for itsown account or for the account of the relevant Lender, as the case may be, acertified copy of an original official receipt received by such Credit Partyshowing payment thereof or otherevidence of payment reasonably acceptable to Agent or such Lender.  If such Credit Party shall fail to pay anyTaxes or Other Taxes when due to the appropriate Governmental Authority orfails to remit to Agent the required receipts or other required documentaryevidence, such Credit Party shall indemnify Agent and the Lenders on demand forany incremental taxes, interest or penalties that may become payable by Agentor any Lender as a result of any such failure.

 

(d)                                 Ifany Lender shall be so indemnified by a Credit Party, such Lender shall usereasonable efforts to obtain the benefits of any refund, deduction or creditfor any taxes or other amounts with respect to the amount paid by such CreditParty and shall reimburse such Credit Party to the extent, but only to theextent, that such Lender shall receive a refund with respect to the amount paidby such Credit Party or an effective net reduction in taxes or othergovernmental charges (including any taxes imposed on or measured by the totalnet income of such Lender) of the United States or any state or subdivision or anyother Governmental Authority thereof by virtue of any such deduction or credit,after first giving effect to all other deductions and credits otherwiseavailable to such Lender.  If, at thetime any audit of such Lender’s income tax return is completed, such Lenderdetermines, based on such audit, that it shall not have been entitled to thefull amount of any refund reimbursed to such Credit Party as aforesaid or thatits net income taxes shall not have been reduced by a credit or deduction forthe full amount reimbursed to such Credit Party as aforesaid, such CreditParty, upon request of such Lender, shall promptly pay to such Lender theamount so refunded to which such Lender shall not have been so entitled, or theamount by which the net income taxes of such Lender shall not have been soreduced, as the case may be.

 

(e)                                  EachLender that is not (i) a citizen or resident of the United States ofAmerica, (ii) a corporation, partnership or other entity created ororganized in or under the laws of the United States of America (or anyjurisdiction thereof), or (iii) an estate or trust that is subject tofederal income taxation regardless of the source of its income (any suchPerson, a “Non-U.S.

 

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Lender”) shall deliver toBorrower and Agent two copies of either U.S. Internal Revenue Service FormW-8BEN, W-8IMY or Form W-8ECI, or, in the case of a Non-U.S. Lender claimingexemption from U.S. federal withholding tax under Section 871(h) or881(c) of the Code with respect to payments of “portfolio interest”, acertification with respect to such interest and two copies of Form W-8BEN, orany subsequent versions thereof or successors thereto, properly completed andduly executed by such Non-U.S. Lender claiming complete exemption from, or areduced rate of, U.S. federal withholding tax on all payments by Credit Partiesunder this Agreement and the other Loan Documents.  Such forms shall be delivered by each Non-U.S. Lender on orbefore the date it becomes a party to this Agreement or such other LoanDocument.  In addition, each Non-U.S.Lender shall deliver such forms or appropriate replacements promptly upon theexpiration, obsolescence or invalidity of any form previously delivered by suchNon-U.S. Lender.  Each Non-U.S. Lendershall promptly notify Borrower at any time it determines that such Lender is nolonger in a position to provide any previously delivered certificate toBorrower (or any other form of certification adopted by the U.S. taxingauthorities for such purpose). Notwithstanding any other provision of this subsection (e), aNon-U.S. Lender shall not be required to deliver any form pursuant to thissubsection (e) that such Non-U.S. Lender is not legally able todeliver.

 

(f)                                    Theagreements in this Section 3.2 shall survive the termination of the LoanDocuments and the payment of the Loans and all other amounts payable hereunder.

 

(g)                                 Forany period with respect to which a Non-U.S. Lender has failed to provideBorrower with the appropriate form, statement or other document described insubsection (e) above (other than if such failure is due to a change inlaw, or in the interpretation or application thereof, occurring subsequent tothe date on which the form otherwise is not required under subsection (e) above),such Non-U.S. Lender shall not be entitled to indemnification underSection 3.2(a), (b) or (c) with respect to any additional Taxes imposed bythe United States solely by reason of such failure.

 

(h)                                 Ifany Lender is entitled to a reduction in (and not a complete exemption from)the applicable withholding tax and the Company shall have previously paid infull such withholding tax prior to such reduction, the Company may withholdfrom any interest payment to such Lender an amount equivalent to the reductionin the applicable withholding tax.

 

Section 3.3.  Funding Losses.  Borrower agrees to indemnify each Lender,promptly after receipt of a written, reasonably detailed certification andrequest therefor, and to hold each Lender harmless from, any loss or expensethat such Lender may sustain or incur as a consequence of (a) default byBorrower in making a borrowing of, conversion into or continuation ofEurodollar Loans after Borrower has given a notice requesting the same inaccordance with the provisions of this Agreement, (b) default by Borrowerin making any prepayment of or conversion from Eurodollar Loans after Borrowerhas given a notice thereof in accordance with the provisions of this Agreement,(c) the making of a prepayment of a Eurodollar Loan on a day that is notthe last day of an Interest Period applicable thereto, or (d) any conversion ofa Eurodollar Loan to a Base Rate Loan pursuant to Section 2.6 hereof on aday that is not the last day of an Interest Period applicable thereto.  Such indemnification shall be in an amountequal to the excess, if any, of (i) the amount of interest that would haveaccrued on

 

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the amounts so prepaid,or not so borrowed, converted or continued, for the period from the date ofsuch prepayment or of such failure to borrow, convert or continue to the lastday of such Interest Period (or, in the case of a failure to borrow, convert orcontinue, the Interest Period that would have commenced on the date of such failure)at the applicable rate of interest for such Loans provided for herein(excluding, however, the Applicable Margin included therein, if any) over(ii) the amount of interest (as reasonably determined by such Lender) thatwould have accrued to such Lender on such amount by placing such amount ondeposit for a comparable period with leading banks in the appropriate Londoninterbank market, along with any administration fee charged by suchLender.  A certificate as to any amountspayable pursuant to this Section 3.3 submitted to Borrower (with a copy toAgent) by any Lender shall be conclusive absent manifest error.  The obligations of Borrower pursuant to thisSection 3.3 shall survive the termination of this Agreement and thepayment of the Loans and all other amounts payable hereunder.  Notwithstanding the foregoing, no Lendershall be entitled to any indemnification or reimbursement pursuant to thisSection 3.3 to the extent such Lender has not made demand therefore (asset forth above) within two hundred seventy (270) days after the occurrence ofthe event giving rise to such entitlement or, if later, such Lender havingknowledge of such event.

 

Section 3.4.  Change of Lending Office.  Each Lender agrees that, upon the occurrenceof any event giving rise to the operation of Section 3.1 or 3.2(a) hereofwith respect to such Lender, it will, if requested by Borrower, use reasonableefforts (subject to overall policy considerations of such Lender) to designateanother lending office (or an affiliate of such Lender, if practical for suchLender) for any Loans affected by such event with the object of avoiding theconsequences of such event; provided, that such designation is made on termsthat, in the sole judgment of such Lender, cause such Lender and its lendingoffice(s) to suffer no economic, legal or regulatory disadvantage; andprovided, further, that nothing in this Section shall affect or postponeany of the obligations of Borrower or the rights of any Lender pursuant toSection 3.1 or 3.2(a) hereof.

 

Section 3.5.  Eurodollar Rate Lending Unlawful;Inability to Determine Rate.

 

(a)                                  Ifany Lender shall reasonably determine (which determination shall, upon noticethereof to Borrower and Agent, be conclusive and binding on Borrower) that,after the Closing Date, (i) the introduction of or any change in or in theinterpretation of any law makes it unlawful, or (ii) any GovernmentalAuthority asserts that it is unlawful, for such Lender to make or continue anyLoan as, or to convert (if permitted pursuant to this Agreement) any Loan into,a Eurodollar Loan, the obligations of such Lender to make, continue or convertany such Eurodollar Loan shall, upon such determination, be suspended untilsuch Lender shall notify Agent that the circumstances causing such suspensionno longer exist, and all outstanding Eurodollar Loans payable to such Lendershall automatically convert (if conversion is permitted under this Agreement)into a Base Rate Loan, or be repaid (if no conversion is permitted) at the endof the then current Interest Periods with respect thereto or sooner, ifrequired by law or such assertion.

 

(b)                                 IfAgent or the Required Lenders reasonably determine that for any reason adequateand reasonable means do not exist for determining the Eurodollar Rate for anyrequested Interest Period with respect to a proposed Eurodollar Loan, or thatthe Eurodollar Rate for any requested Interest Period with respect to aproposed Eurodollar Loan does not adequately

 

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and fairly reflect thecost to the Lenders of funding such Loan, Agent will promptly so notifyBorrower and each Lender.  Thereafter,the obligation of the Lenders to make or maintain such Eurodollar Loan shall besuspended until Agent (upon the instruction of the Required Lenders) revokessuch notice.  Upon receipt of suchnotice, Borrower may revoke any pending request for a borrowing of, conversionto or continuation of such Eurodollar Loan or, failing that, will be deemed tohave converted such request into a request for a borrowing of a Base Rate Loanin the amount specified therein.

 

Section 3.6.  Replacement of Lenders.  Borrower shall be permitted to replace anyLender that requests reimbursement for amounts owing pursuant toSection 3.1 or 3.2(a) hereof, or asserts its inability to make a LIBORFixed Rate Loan pursuant to Section 3.5 hereof; provided that(a) such replacement does not conflict with any Requirement of Law,(b) no Default or Event of Default shall have occurred and be continuingat the time of such replacement, (c) prior to any such replacement, suchLender shall have taken no action under Section 3.4 hereof so as toeliminate the continued need for payment of amounts owing pursuant toSection 3.1 or 3.2(a) hereof or, if it has taken any action, such requesthas still been made, (d) the replacement financial institution shallpurchase, at par, all Loans and other amounts owing to such replaced Lender onor prior to the date of replacement and assume all commitments and obligationsof such replaced Lender, (e) Borrower shall be liable to such replacedLender under Section 3.3 hereof if any Alternate Currency Loan owing tosuch replaced Lender shall be purchased other than on the last day of theInterest Period relating thereto, (f) the replacement financialinstitution, if not already a Lender, shall be reasonably satisfactory toAgent, (g) the replaced Lender shall be obligated to make such replacementin accordance with the provisions of Section 10.10 hereof (provided thatBorrower (or the succeeding Lender, if such Lender is willing) shall beobligated to pay the assignment fee referred to therein), and (h) until suchtime as such replacement shall be consummated, Borrower shall pay alladditional amounts (if any) required pursuant to Section 3.1 or 3.2(a)hereof, as the case may be.

 

ARTICLE IV.  CONDITIONS PRECEDENT

 

Section 4.1.  Conditions to Each Credit Event.  The obligation of the Lenders, the FrontingLender and the Swing Line Lender to participate in any Credit Event shall beconditioned, in the case of each Credit Event, upon the following:

 

(a)                                  allconditions precedent as listed in Section 4.2 hereof required to besatisfied prior to the first Credit Event shall have been satisfied prior to oras of the first Credit Event;

 

(b)                                 Borrowershall have submitted a Notice of Loan (or with respect to a Letter of Credit,complied with the provisions of Section 2.2(b) hereof) and otherwisecomplied with Section 2.6 hereof;

 

(c)                                  noDefault or Event of Default shall then exist or immediately after such CreditEvent would exist;

 

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(d)                                 nocondition or event shall have occurred that Agent or the Required Lendersdetermine has or is reasonably likely to have a Material Adverse Effect; and

 

(e)                                  eachof the representations and warranties contained in Article VI hereof shallbe true in all material respects as if made on and as of the date of suchCredit Event, except to the extent that any thereof expressly relate to anearlier date.

 

Each request by Borrowerfor a Credit Event shall be deemed to be a representation and warranty byBorrower as of the date of such request as to the satisfaction of theconditions precedent specified in subsections (c), (d) and (e) above.

 

Section 4.2.  Conditions to the First Credit Event.  The obligation of the Lenders, the FrontingLender and the Swing Line Lender to participate in the first Credit Event issubject to Borrower satisfying each of the following conditions prior to orconcurrently with such Credit Event (unless waived in writing by Agent):

 

(a)                                  Notes.  Borrower shall have executed and deliveredto (i) each Revolving Lender its Revolving Credit Note, (ii) each Term Lenderits Term Note, and (iii) the Swing Line Lender the Swing Line Note.

 

(b)                                 Guarantiesof Payment.  Each Guarantor ofPayment shall have executed and delivered to Agent a Guaranty of Payment.

 

(c)                                  SecurityAgreements.  Each Guarantor ofPayment shall have executed and delivered to Agent, for the benefit of theLenders, a Security Agreement and such other documents or instruments, as maybe reasonably required by Agent to create the Liens of Agent, for the benefitof the Lenders, in the assets of such Guarantor of Payment, all to be in formand substance reasonably satisfactory to Agent and the Lenders.

 

(d)                                 PledgeAgreement.  Each Company that has aSubsidiary shall have executed and delivered to Agent, for the benefit of theLenders, a Pledge Agreement, in form and substance reasonably satisfactory toAgent, that provides, among other things, for a pledge of all of the capitalstock of each Subsidiary.

 

(e)                                  IntellectualProperty Collateral Assignment Agreement. Borrower shall have executed and delivered to Agent, for the benefit ofthe Lenders, an Intellectual Property Collateral Assignment Agreement, in formand substance reasonably satisfactory to Agent.

 

(f)                                    Officer’sCertificate, Resolutions, Organizational Documents.  Each Credit Party shall have delivered toAgent an officer’s certificate (or comparable domestic or foreign documents)certifying the names of the officers of such Credit Party authorized to signthe Loan Documents, together with the true signatures of such officers andcertified copies of (i) the resolutions of the board of directors (orcomparable domestic or foreign documents) of such Credit Party evidencingapproval of the execution and delivery of the Loan Documents and the executionof other Related Writings to which such Credit Party is a party, and(ii) the Organizational Documents of such Credit Party.

 

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(g)                                 GoodStanding and Full Force and Effect Certificates.  Borrower shall have delivered to Agent a good standingcertificate or full force and effect certificate, as the case may be, for eachCredit Party, issued on or about the Closing Date by the Secretary of State inthe state or states where such Credit Party is incorporated or formed orqualified as a foreign entity.

 

(h)                                 LegalOpinion.  Borrower shall havedelivered to Agent an opinion of counsel for each Credit Party, in form andsubstance reasonably satisfactory to Agent and the Lenders.

 

(i)                                     LegalFees; Agent Fee Letter.  Borrowershall have (i) executed and delivered to Agent, the Agent Fee Letter and paidto Agent, for its sole account, the fees stated therein, and (ii) paid alllegal fees and expenses of Agent in connection with the preparation andnegotiation of the Loan Documents.

 

(j)                                     LienSearches.  With respect to theproperty owned or leased by Borrower and each Guarantor of Payment and anyother property securing the Obligations, Borrower, shall have caused to bedelivered to Agent (i) the results of Uniform Commercial Code lien searches, satisfactory to Agent andthe Lenders, (ii) the results of federal and state tax lien and judiciallien searches, satisfactory to Agent and the Lenders, and (iii) Uniform Commercial Code terminationstatements reflecting termination of all financing statements previously filedby any Person and not expressly permitted pursuant to Section 5.9 hereof.

 

(k)                                  ExistingCredit Agreement.  Borrower shallhave terminated the Credit Agreement between Borrower and LaSalle Bank NationalAssociation, as agent, dated as of January 30, 2004, as amended, whichtermination shall be deemed to have occurred upon payment in full of all of theIndebtedness outstanding thereunder and termination of the commitmentsestablished therein.

 

(l)                                     ClosingCertificate.  Borrower shall havedelivered to Agent and the Lenders an officer’s certificate certifying that, asof the Closing Date, (i) all conditions precedent set forth in thisArticle IV have been satisfied, (ii) no Default or Event of Defaultexists nor immediately after the making of the first Loan or the issuance ofthe first Letter of Credit will exist, and (iii) each of the representationsand warranties contained in Article VI hereof are true and correct in allmaterial respects as of the Closing Date.

 

(m)                               Letterof Direction.  Borrower shall havedelivered to Agent a letter of direction authorizing Agent, on behalf of theLenders, to disburse the proceeds of the Loans, which includes the transfer offunds under this Agreement and wire instructions setting forth the locations towhich such funds shall be sent.

 

(n)                                 Designationof Senior Indebtedness.  Borrowershall, on the Closing Date, deliver to Agent, for the benefit of the Lenders,written confirmation (in form and substance reasonably satisfactory to Agent)that Borrower shall have given written notice to each Convertible SubordinatedNoteholder that the Secured Obligations are being designated as SeniorIndebtedness (as defined in the Convertible Subordinated Notes).

 

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(o)                                 Miscellaneous.  Borrower shall have provided to Agent andthe Lenders such other items and shall have satisfied such other conditions asmay be reasonably required by Agent or the Lenders.

 

Section 4.3.  Post-Closing Conditions.  On or before each of the dates specified inthis Section 4.3, Borrower shall satisfy each of the items specified inthe subsections below:

 

(a)                                  ControlAgreement.  No later than thirty(30) days after the Closing Date (unless a longer period is agreed to byAgent), Borrower shall have delivered to Agent an executed copy of a ControlAgreement, in form and substance reasonably satisfactory to Agent, for eachdeposit account maintained by a Company, unless otherwise agreed by Agent;provided, that in the event Borrower is not able to deliver such ControlAgreements, Borrower shall use its best efforts to move such accounts to adepository institution that can provide such Control Agreements as soon aspracticable.

 

(b)                                 RealEstate Matters.  No later thanforty-five (45) days after the Closing Date (unless a longer period is agreedto by Agent), with respect to each parcel of the Real Property, Borrower shallhave provided to Lender:

 

(i)                                     anupdated Loan Policy of title insurance, ALTA 1970 Form B (amended 10/17/70 and10/17/84) issued to Lender by a title company acceptable to Lender (the“Title Company”), in an amount equal to the appraised value of the RealProperty insuring the Mortgage to be a valid, first-priority lien in the RealProperty, free and clear of all defects and encumbrances except such matters ofrecord as accepted by Lender, in its sole discretion, and shown as PermittedEncumbrances in “Exhibit B” to the Mortgage, with such endorsements andaffirmative insurance as Lender may require, including without limitation:

 

(A)                              thedeletion of all so-called “standard exceptions” from such policy;

 

(B)                                aso-called “comprehensive” endorsement in form and substance acceptable toLender;

 

(C)                                affirmativeinsurance coverage regarding access, compliance with respect to restrictivecovenants and any other matters to which Lender may have objection or requireaffirmative insurance coverage; and

 

(D)                               theresults of a federal tax lien search in the county wherein the Real Property islocated and such Credit Party has its principal place of business;

 

(ii)                                  evidenceto Lender’s satisfaction in its sole discretion that no portion of the RealProperty is located in a Special Flood Hazard Area or is otherwise classifiedas Class A or Class BX on the Flood Maps maintained by the Federal EmergencyManagement Agency; and

 

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(iii)                               twofully executed originals of the Mortgage.

 

ARTICLE V. COVENANTS

 

Section 5.1.  Insurance.  Each Company shall (a) maintain insurance to such extent andagainst such hazards and liabilities as should be maintained in accordance withits reasonable business judgment; and (b) within ten days of any Lender’swritten request, furnish to such Lender such information about such Company’sinsurance as that Lender may from time to time reasonably request, whichinformation shall be prepared in form and detail reasonably satisfactory to suchLender.

 

Section 5.2.  Money Obligations.  Each Company shall pay in full(a) prior in each case to the date when penalties would attach, all taxes,assessments and governmental charges and levies (except only those so long asand to the extent that the same shall be contested in good faith by appropriateand timely proceedings and for which adequate provisions have been establishedin accordance with GAAP) for which it may be or become liable or to which anyor all of its properties may be or become subject; (b) all of its wageobligations to its employees in compliance with the Fair Labor Standards Act(29 U.S.C. §§ 206-207) or any comparable provisions; and (c) all ofits other obligations calling for the payment of money (except only those solong as and to the extent that the same shall be contested in good faith andfor which adequate provisions have been established in accordance with GAAP)before such payment becomes overdue; except in the case of (a), (b) or (c), aswould not reasonably be expected to have a Material Adverse Effect.

 

Section 5.3.  Financial Statements and Information.

 

(a)                                  QuarterlyFinancials.  Borrower shall deliverto Agent, within forty-five (45) days after the end of each of the firstthree quarter-annual periods of each fiscal year of Borrower, balance sheets ofthe Companies as of the end of such period and statements of income (loss),stockholders’ equity and cash flow for the quarter and fiscal year to dateperiods, all prepared on a Consolidated basis, in accordance with GAAP, andcertified by a Financial Officer of Borrower.

 

(b)                                 AnnualAudit Report.  Borrower shalldeliver to Agent, within ninety (90) days after the end of each fiscal year ofBorrower, an annual audit report of the Companies for that year prepared on aConsolidated basis, in accordance with GAAP, and certified by an independentnationally recognized public accountant, which report shall include balancesheets and statements of income (loss), stockholders’ equity and cash-flow forthat period.

 

(c)                                  Compliance Certificate.  Borrowershall deliver to Agent, concurrently with the delivery of the financialstatements set forth in subsections (a) and (b) above, aCompliance Certificate.

 

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(d)                                 AnnualBudget.  Borrower shall deliver toAgent, within thirty (30) days after the end of each fiscal year of Borrower,an annual budget for the current fiscal year, to be in a form reasonablyacceptable to Lender.

 

(e)                                  ManagementReport.  Borrower shall deliver toAgent, concurrently with the delivery of the quarterly and annual financialstatements set forth in subsection (a) and (b) above, a copy of anymanagement report, letter or similar writing furnished to the Companies by theaccountants in respect of the Companies’ systems, operations, financialcondition or properties.

 

(f)                                    Shareholderand SEC Documents.  Borrower shalldeliver to Agent, as soon as available, copies of all material notices,reports, definitive proxy or other statements and other documents sent byBorrower to its shareholders generally, to the holders of any of its debenturesor bonds generally or the trustee of any indenture securing the same orpursuant to which they are issued, or sent by Borrower (in final form) to anysecurities exchange or over the counter authority or system, or to the SEC orany similar federal agency having regulatory jurisdiction over the issuance ofBorrower’s securities.

 

(g)                                 FinancialInformation of Companies.  Borrowershall use commercially reasonable efforts to deliver to Agent, within ten daysof the written request of Agent or any Lender, such other information about thefinancial condition, properties and operations of any Company as Agent or suchLender may from time to time reasonably request, which information shall besubmitted in form and detail reasonably satisfactory to Agent or such Lender.

 

Section 5.4.  Financial Records.  Each Company shall at all times maintainrecords and books of account which are true and correct in all materialrespects, including, without limiting the generality of the foregoing,appropriate provisions for possible losses and liabilities, all in accordancewith GAAP, and at all reasonable times (during normal business hours and uponreasonable notice to such Company) permit Agent, or any representative ofAgent, to examine such Company’s books and records and to make excerptstherefrom and transcripts thereof; provided, however, that, except during thecontinuance of an Event of Default, such examinations shall be limited to oneper year.

 

Section 5.5.  Franchises; Change in Business.

 

(a)                                  Exceptas otherwise permitted pursuant to Section 5.12 hereof, each Company(other than a Dormant Subsidiary) shall preserve and maintain at all times itsexistence, rights and franchises.

 

(b)                                 NoCompany shall engage in any business if, as a result thereof, the generalnature of the business of the Companies taken as a whole would be substantiallychanged from the general nature of the business the Companies are engaged in onthe Closing Date.

 

Section 5.6.  ERISACompliance.  Except to theextent a failure to comply would reasonably be expected to result in a MaterialAdverse Effect, no Company shall incur any accumulated funding deficiencywithin the meaning of ERISA, or any liability to the PBGC, establishedthereunder in connection with any ERISA Plan. Borrower shall furnish to the

 

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Lenders (a) as soonas possible and in any event within thirty (30) days after any Company knows orhas reason to know that any Reportable Event with respect to any ERISA Plan hasoccurred, a statement of a Financial Officer of such Company, setting forthdetails as to such Reportable Event and the action that such Company proposesto take with respect thereto, together with a copy of the notice of suchReportable Event given to the PBGC if a copy of such notice is available tosuch Company, and (b) promptly after receipt thereof a copy of any noticesuch Company, or any member of the Controlled Group may receive from the PBGCor the Internal Revenue Service with respect to any ERISA Plan administered bysuch Company; provided, that this latter clause shall not apply to noticesof general application promulgated by the PBGC or the Internal Revenue Service.  Borrower shall promptly notify the Lendersof any material taxes assessed, proposed to be assessed or that Borrower hasreason to believe may be assessed against a Company by the Internal RevenueService with respect to any ERISA Plan. As used in this Section 5.6, “material” means the measure of amatter of significance that shall be determined as being an amount equal tofive percent (5%) of Consolidated Net Worth. As soon as practicable, and in any event within twenty (20) days, afterany Company shall become aware that an ERISA Event shall have occurred thatcould reasonably be expected to result in a Material Adverse Effect, suchCompany shall provide Agent with notice of such ERISA Event with a certificateby a Financial Officer of such Company setting forth the details of the eventand the action such Company or another Controlled Group member proposes to takewith respect thereto.  Borrower shall,at the reasonable request of Agent, deliver or cause to be delivered to Agenttrue and correct copies of any documents relating to the ERISA Plan of anyCompany.

 

Section 5.7.  Financial Covenants.

 

(a)                                  LeverageRatio.  The Companies shall notsuffer or permit at any time the Leverage Ratio to exceed 3.00 to 1.00.

 

(b)                                 SeniorLeverage Ratio.  The Companies shallnot suffer or permit at any time the Senior Leverage Ratio to exceed 1.50 to1.00.

 

(c)                                  FixedCharge Coverage Ratio.  TheCompanies shall not suffer or permit at any time the Fixed Charge CoverageRatio to be less than (i) 1.10 to 1.00 on the Closing Date through March 30,2006, (ii) 1.15 to 1.00 on March 31, 2006 through March 30, 2007, and(iii) 1.25 to 1.00 on March 31, 2007 and thereafter; provided that, forpurposes of calculating Consolidated Fixed Charges, the Company shall be deemedto have made principal payments on Consolidated Funded Indebtedness totalingOne Million Five Hundred Sixty-Two Thousand Five Hundred Dollars ($1,562,500)during the fiscal quarter of Borrower ended June 30, 2004.

 

(d)                                 CurrentRatio.  The Companies shall notsuffer or permit at any time the Current Ratio to be less than 1.50 to 1.00.

 

Section 5.8.  Borrowing.  No Company shall create, incur or have outstanding anyIndebtedness of any kind; provided, that this Section 5.8 shall not applyto the following:

 

(a)                                  theLoans, the Letters of Credit or any other Indebtedness under this Agreement;

 

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(b)                                 anyloans granted to or capital leases entered into by any Company for the purchaseor lease of fixed assets (and refinancings of such loans or capital leases),which loans and capital leases shall only be secured by the fixed assets beingpurchased, so long as the aggregate principal amount of all such loans andleases for all Companies shall not exceed Five Million Dollars ($5,000,000) atany time outstanding;

 

(c)                                  theIndebtedness existing on the Closing Date, in addition to the otherIndebtedness permitted to be incurred pursuant to this Section 5.8, as setforth in Schedule 5.8 hereto (and any extension, renewal orrefinancing thereof so long as the principal amount thereof shall not beincreased after the Closing Date);

 

(d)                                 loansto a Company from a Company so long as each such Company is a Credit Party;

 

(e)                                  Indebtednessunder any Hedge Agreement, so long as such Hedge Agreement shall have beenentered into in the ordinary course of business and not for speculativepurposes;

 

(f)                                    otherSubordinated Indebtedness, in additional to Subordinated Indebtedness existingas of the Closing Date and referenced on Schedule 5.8 hereto, up toan aggregate principal amount for all Companies not to exceed Ten MillionDollars ($10,000,000) at any time outstanding, so long as such SubordinatedIndebtedness is permitted under the Note Agreement and the ConvertibleSubordinated Notes; and

 

(g)                                 otherIndebtedness, in addition to the Indebtedness listed above, in an aggregateprincipal amount for all Companies not to exceed Two Million Dollars($2,000,000) at any time outstanding, so long as such Indebtedness is permittedunder the Note Agreement and the Convertible Subordinated Notes.

 

Section 5.9. Liens. No Company shall create, assume or suffer to exist any Lien upon any ofits property or assets, whether now owned or hereafter acquired; provided thatthis Section 5.9 shall not apply to the following:

 

(a)                                  Liensfor taxes not yet due or that are being actively contested in good faith byappropriate proceedings and for which adequate reserves shall have beenestablished in accordance with GAAP;

 

(b)                                 otherstatutory or common law incidental to the conduct of its business or theownership of its property and assets that (i) were incurred in the ordinarycourse of business, (ii) were not incurred in connection with theborrowing of money or the obtaining of advances or credit, and (iii) donot in the aggregate materially detract from the value of its property orassets or materially impair the use thereof in the operation of the business ofany Company;

 

(c)                                  Lienson property or assets of a Subsidiary to secure obligations of such Subsidiaryto a Credit Party;

 

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(d)                                 purchasemoney Liens on fixed assets securing the loans and capitalized leases pursuantto Section 5.8(b) hereof, provided that such Lien is limited to thepurchase price (including shipping costs and taxes) and only attaches to theproperty being acquired;

 

(e)                                  anyLien granted to Agent, for the benefit of the Lenders;

 

(f)                                    theLiens existing on the Closing Date as set forth in Schedule 5.9hereto and replacements, extensions, renewals, refundings or refinancingsthereof, but only to the extent that the amount of debt secured thereby shallnot be increased;

 

(g)                                 easementsor other minor defects or irregularities in title of real property notinterfering in any material respect with the use of such property in thebusiness of any Company;

 

(h)                                 attachment,appeal bonds, judgments and other similar Liens to the extent such judgmentsand Liens do not, in the aggregate for all Companies, exceed Five HundredThousand Dollars ($500,000) at any time;

 

(i)                                     Liensof a broker or depository institution encumbering deposit, margin, commoditytrading or brokerage accounts held by such broker or depository institutionincurred in the ordinary course of business; or

 

(j)                                     otherLiens, in addition to the Liens listed above, securing amounts, in theaggregate for all Companies, not to exceed Five Hundred Thousand Dollars($500,000).

 

No Company shall enterinto any contract or agreement (other than a contract or agreement entered intoin connection with the purchase or lease of fixed assets that prohibits Lienson such fixed assets or intellectual property licensing agreements) that wouldprohibit Agent or the Lenders from acquiring a security interest, mortgage orother Lien on, or a collateral assignment of, any of the property or assets ofsuch Company.

 

Section 5.10.  Regulations T, U and X.  No Company shall take any action that wouldresult in any non-compliance of the Loans or Letters of Credit with RegulationsT, U or X, or any other applicable regulation, of the Board of Governors of theFederal Reserve System.

 

Section 5.11.  Investments and Loans.  No Company shall (a) create, acquire orhold any Subsidiary, (b) make or hold any investment in any stocks, bondsor securities of any kind, (c) be or become a party to any joint ventureor other partnership, (d) make or keep outstanding any advance or loan toany Person (other than accounts receivable incurred in the ordinary course ofbusiness), or (e) be or become a Guarantor of any kind; provided that thisSection 5.11 shall not apply to the following:

 

(i)                                     anyendorsement of a check or other medium of payment for deposit or collectionthrough normal banking channels or similar transaction in the normal course ofbusiness;

 

(ii)                                  investmentsof the Companies in Cash Equivalents;

 

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(iii)                               loansto and guaranties of the Indebtedness (permitted under Section 5.8 hereof)of, a Company from or by a Company so long as each such Company is a CreditParty;

 

(iv)                              theholding of each of the Subsidiaries listed on Schedule 6.1 hereto,and the creation, acquisition and holding of any new Subsidiary after theClosing Date so long as such new Subsidiary shall have been created, acquiredor held in accordance with the terms and conditions of this Agreement;

 

(v)                                 thepurchase or holding of any stock or other equity interest that has beenacquired pursuant to an Acquisition permitted by Section 5.13 hereof;

 

(vi)                              anyadvance or loan to an officer or employee of a Company made in the ordinary courseof such Company’s business, so long as all such advances and loans from allCompanies aggregate not more than the maximum principal sum of One HundredThousand Dollars ($100,000) at any time outstanding;

 

(vii)                           anysecurities (whether debt or equity) received by a Company in the ordinarycourse of business in connection with the bankruptcy or reorganization of anycustomer or supplier of such Company;

 

(viii)                        anyinvestment received in connection with Dispositions permitted pursuant toSection 5.12 hereof, so long as any such investments that shall besecurities are promptly pledged to Agent, for the benefit of the Lenders;

 

(ix)                                tothe extent permitted by applicable law, notes from officers and employees inexchange for capital stock of a Company purchased by such officers or employeespursuant to a stock ownership or purchase plan or compensation plan; and

 

(x)                                   otherInvestments not specifically listed above in an aggregate amount, for allCompanies, not to exceed Two Million Dollars ($2,000,000) at any time.

 

For purposes of thisSection 5.11, the amount of any investment in equity interests shall bebased upon the initial amount invested and shall not include any appreciationin value or return on such investment.

 

Section 5.12.  Merger and Sale of Assets.  No Company shall merge, amalgamate orconsolidate with any other Person, or sell, lease or transfer or otherwisedispose of any assets to any Person other than in the ordinary course ofbusiness, except that, if no Default or Event of Default shall then exist orimmediately thereafter shall begin to exist:

 

(a)                                  anySubsidiary (other than Borrower) may merge with (i) Borrower (providedthat Borrower shall be the continuing or surviving Person) or (ii) any oneor more Guarantors of Payment;

 

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(b)                                 anyCompany may sell, lease, transfer or otherwise dispose of any of its assets to(i) Borrower or (ii) any Guarantor of Payment;

 

(c)                                  anyCompany may sell, lease, transfer or otherwise dispose of any assets that areobsolete or no longer used in such Company’s business for fair market value, asdetermined by the board of directors of Borrower;

 

(d)                                 anysale or other Disposition (including cancellation of Indebtedness) of CashEquivalents or non-core assets acquired pursuant to Acquisitions) in theordinary course of business for fair market value, as determined by the boardof directors of Borrower; or

 

(e)                                  Acquisitionsmay be effected in accordance with the provisions of Section 5.13 hereof.

 

Section 5.13.  Acquisitions.  No Company shall effect an Acquisition;provided, however, that a Credit Party may effect an Acquisition with the priorwritten consent of the Required Lenders or so long as:

 

(a)                                  inthe case of a merger, amalgamation or other combination including Borrower,Borrower shall be the surviving entity;

 

(b)                                 inthe case of a merger, amalgamation or other combination including a CreditParty (other than Borrower), a Credit Party shall be the surviving entity;

 

(c)                                  thebusiness to be acquired shall be reasonably similar to that of the CreditParties or a reasonable extension thereof;

 

(d)                                 Borrowershall have provided to Agent and the Lenders, at least ten (10) Business Daysprior to such Acquisition, historical financial statements of the target entityand a pro forma financial statement of the Companies accompanied by acertificate of a Financial Officer of Borrower showing (i) pro forma compliancewith Section 5.7 hereof, both before and after the proposed Acquisition,(it being understood that, in the calculation of Fixed Charge Coverage Ratio,(A) the EBITDA of the business to be acquired shall be included in ConsolidatedEBITDA as if the Acquisition had been completed on the first day of themeasurement period, (B) Consolidated Interest Expense shall be recalculated asif any debt incurred or assumed as a result of the Acquisition had been inplace for the entire measurement period, and (C) aside from the adjustment insubparts (A) and (B) above, the fixed charges of the business to be acquiredshall not be included in the calculation of Fixed Charge Coverage Ratio, and(ii) positive EBITDA for the acquired entity during the most recently completedfour fiscal quarters of such entity;

 

(e)                                  noDefault or Event of Default shall exist prior to or after giving effect to suchAcquisition;

 

(f)                                    suchAcquisition is not actively opposed by the board of directors (or similargoverning body) of the selling Persons or the Persons whose equity interestsare to be acquired;

 

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(g)                                 Borrowershall have Liquidity of no less than Ten Million Dollars ($10,000,000) aftergiving effect to such Acquisition;

 

(h)                                 theaggregate amount of Consideration paid for any such Acquisition (or relatedseries of Acquisitions) would not exceed Sixty-Five Million Dollars($65,000,000);

 

(i)                                     theaggregate Consideration (exclusive of the issuance of equity) paid for allAcquisitions for all Companies, during the Commitment Period, would not exceedSeventy-Five Million Dollars ($75,000,000); and

 

(j)                                     theaggregate Consideration paid for all Acquisitions for all Companies, during theCommitment Period, would not exceed One Hundred Fifty Million Dollars($150,000,000).

 

Section 5.14.  Notice.

 

(a)                                  Borrowershall cause a Financial Officer of Borrower to promptly notify Agent and theLenders in writing whenever any Default or Event of Default may occur hereunderor any representation or warranty made in Article VI hereof or elsewherein this Agreement or in any Related Writing may for any reason cease in anymaterial respect to be true and complete.

 

(b)                                 Borrowershall provide written notice to Agent and the Lenders contemporaneously withany notice provided to the Convertible Subordinated Noteholders under any ofthe Convertible Subordinated Documents.

 

Section 5.15.  Capital Distributions; RestrictedPayments.

 

(a)                                  Solong as no Default or Event of Default shall then exist or immediatelythereafter shall begin to exist, any Company may make Capital Distributions.

 

(b)                                 NoCompany shall make or commit itself to make any Restricted Payment at any time,except that, so long as no Default or Event of Default shall then exist orimmediately thereafter shall begin to exist, Borrower may:

 

(i)                                     makeregularly scheduled payments of interest on the Convertible Subordinated Notes;

 

(ii)                                  convertthe Convertible Subordinated Notes into equity of Borrower; and

 

(iii)                               ifthe Available Liquidity is equal to or greater than an amount equal to onehundred percent (100%) of the outstanding principal amount of the ConvertibleSubordinated Notes, prepay any amount of principal of the ConvertibleSubordinated Notes.

 

Section 5.16.  EnvironmentalCompliance.  Each Companyshall comply in all material respects with any and all material EnvironmentalLaws including, without limitation, all

 

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Environmental Laws injurisdictions in which such Company owns or operates a facility or site,arranges for disposal or treatment of hazardous substances, solid waste orother wastes, accepts for transport any hazardous substances, solid waste orother wastes or holds any interest in real property or otherwise.  Borrower shall furnish to the Lenders,promptly after receipt thereof, a copy of any notice such Company may receivefrom any Governmental Authority, private Person or otherwise that any materiallitigation or proceeding pertaining to any environmental, health or safetymatter has been filed or is threatened against such Company, any real propertyin which such Company holds any interest or any past or present operation ofsuch Company.  No Company shall allowthe release or disposal of hazardous waste, solid waste or other wastes on,under or to any real property in which any Company holds any interest orperforms any of its operations, in material violation of any materialEnvironmental Law.  As used in thisSection, “litigation or proceeding” means any demand, claim, notice, suit, suitin equity action, administrative action, investigation or inquiry whetherbrought by any Governmental Authority, private Person or otherwise.  Borrower shall defend, indemnify and holdAgent and the Lenders harmless against all costs, expenses, claims, damages,penalties and liabilities of every kind or nature whatsoever (includingattorneys’ fees) arising out of or resulting from the noncompliance of anyCompany with any Environmental Law. Such indemnification shall survive any termination of this Agreement.

 

Section 5.17.  AffiliateTransactions.  No Companyshall, directly or indirectly, enter into or permit to exist any transaction(including, without limitation, the purchase, sale, lease or exchange of anyproperty or the rendering of any service) with any Affiliate (other than aCompany that is a Credit Party) on terms that shall be less favorable to suchCompany than those that might be obtained at the time in a transaction with anon-Affiliate; provided, however, that the foregoing shall not prohibit (a) thepayment of customary and reasonable directors’ fees, (b) the payment ofreasonable compensation and expense reimbursement to officers and employees forservice actually rendered to any such Company, (c) indemnities andreimbursement paid to directors, (d) stock option and compensation plans of theCompanies, (e) employment contracts with officers and management of theCompanies, (f) transactions among Companies, (g) the repurchase of equityinterests from former officers, directors and employees to the extent permittedby this Agreement, (h) advances and loans to officers and employees of the Companiesto the extent permitted by this Agreement, and (i) other transactionsspecifically permitted under this Agreement.

 

Section 5.18.  Use of Proceeds.  Borrower’s use of the proceeds of the Notesshall be solely for working capital and other general corporate purposes of theCompanies and for the refinancing of existing Indebtedness.

 

Section 5.19.  Corporate Names.  No Company shall change its corporate name,unless, in each case, such Company shall provide Agent and the Lenders with atleast thirty (30) days prior written notice thereof.  Borrower shall also promptly notify Agentand the Lenders of (a) any material change in any location where any Company’sInventory or Equipment is maintained, and any new locations where any materialamount of a Company’s Inventory or Equipment is to be maintained; (b) anychange in the location of the office where any Company’s records pertaining toits Accounts are kept; (c) the location of any new places of business and thechanging or closing of any of its existing places of business; and (d) anychange

 

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in the location of anyCompany’s chief executive office.  Inthe event of any of the foregoing or if otherwise deemed appropriate by Agent,Agent is hereby authorized to file new U.C.C. Financing Statements describingthe Collateral and otherwise in form and substance sufficient for recordationwherever necessary or appropriate, as determined in Agent’s sole discretion, toperfect or continue perfected the security interest of Agent, for the benefitof the Lenders, in the Collateral. Borrower shall pay all filing and recording fees and taxes in connectionwith the filing or recordation of such U.C.C. Financing Statements and shallpromptly reimburse Agent therefore if Agent pays the same.  Such amounts shall be Related Expenseshereunder.

 

Section 5.20.  Subsidiary Guaranties, Security Documents.  Each Domestic Subsidiary of a Company (thatis not a Dormant Subsidiary) created, acquired or held subsequent to the ClosingDate, shall promptly execute and deliver to Agent, for the benefit of theLenders, a Guaranty of Payment of all of the Obligations and a SecurityAgreement, such agreements to be in form and substance reasonably acceptable toAgent, along with any such other supporting documentation, Security Documents,corporate governance and authorization documents, and an opinion of counsel asmay be deemed necessary or advisable by Agent. At such time that a Subsidiary (that has been classified as a DormantSubsidiary) no longer meets the requirements of a Dormant Subsidiary, Borrowershall provide to Agent prompt written notice thereof, and shall provide, withrespect to such Subsidiary, all of the documents referenced in the foregoingsentence.  In addition, each Subsidiarythat acquires a Subsidiary after the Closing Date, shall execute and deliver toAgent, for the benefit of the Lenders, a Pledge Agreement and deliver all ofthe share certificates (or other evidence of equity) owned by such Subsidiary;provided, however, that no Company shall be required to pledge more thansixty-five percent (65%) of the outstanding shares or other ownership interestof any direct Foreign Subsidiary and shall not be required to pledge anyownership interest in any indirect Foreign Subsidiary.

 

Section 5.21.  RestrictiveAgreements.  Except as set forth inthis Agreement, Borrower shall not, and shall not permit any of itsSubsidiaries to, directly or indirectly, create or otherwise cause or suffer toexist or become effective any encumbrance or restriction on the ability of anySubsidiary to (a) make, directly or indirectly, any Capital Distributionto Borrower, (b) make, directly or indirectly, loans or advances orcapital contributions to Borrower or (c) transfer, directly or indirectly,any of the properties or assets of such Subsidiary to Borrower; except for suchencumbrances or restrictions existing under or by reason of (i) applicablelaw, (ii) non-assignment provisions in leases or other agreements enteredin the ordinary course of business, or (iii) customary restrictions insecurity agreements or mortgages securing Indebtedness or capital leases, of aCompany to the extent such restrictions shall only restrict the transfer of theproperty subject to such security agreement, mortgage or lease.

 

Section 5.22.  OtherCovenants.  In the event that anyCompany shall enter into, or shall have entered into, the Note Agreement (orthe Convertible Subordinated Documents), or any agreement evidencingIndebtedness of any Company or the Companies in excess of the amount of TenMillion Dollars ($10,000,000), wherein the covenants contained therein shall bemore restrictive than the covenants set forth herein, then the Companies shallbe bound hereunder by such more restrictive covenants with the same force andeffect as if such covenants were written herein.

 

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Section 5.23.  Note Agreement.

 

(a)                                  Modifications.  Borrower shall not, without the priorwritten consent of Agent and the Required Lenders, amend, restate, supplementor otherwise modify any of the Convertible Subordinated Documents to (i)increase the principal amount outstanding thereunder, or (ii) change the dateof any principal or interest payment to an earlier date.

 

(b)                                 NoDefault.  No “Default” or “Event ofDefault”, as each term is defined in the Convertible Subordinated Documents,(i) shall exist, or (ii) shall exist immediately after the granting orcontinuation of any Loan.

 

(c)                                  SeniorIndebtedness.  The SecuredObligations shall at all times constitute indebtedness permitted under theterms of the Convertible Subordinated Documents and “Senior Indebtedness”, asdefined in the Convertible Subordinated Documents, and permitted to be securedunder the Convertible Subordinated Documents.

 

(d)                                 SubordinatedIndebtedness.  The SecuredObligations constitute shall at all times constitute senior indebtedness whichis entitled to the benefits of the subordination provisions of all outstandingSubordinated Indebtedness, including, but not limited to, the ConvertibleSubordinated Indebtedness.

 

Section 5.24.  Amendmentof Organizational Documents.  NoCompany shall amend its Organizational Documents to change its state oforganization, or otherwise amend its Organizational Documents in any manneradverse to Lenders, without the prior written consent of Agent.

 

Section 5.25.  Collateral.  Borrower shall:

 

(a)                                  atall reasonable times and after reasonable prior notice, allow Agent or anyLender by or through any of its officers, agents, employees, attorneys, oraccountants to (i) examine, inspect, and make extracts from Borrower’s booksand other records, including, without limitation, the tax returns of Borrower;(ii) arrange for verification of Borrower’s Accounts, under reasonableprocedures; and (iii) examine and inspect Borrower’s Inventory and Equipment,wherever located, under reasonable procedures; provided that any suchexamination or verification shall be limited, except during the continuance ofan Event of Default, to one visit per year;

 

(b)                                 usecommercial reasonable efforts to promptly furnish to Agent or any Lender uponreasonable request (i) additional statements and information with respect tothe Collateral, and all writings and information relating to or evidencing anyof Borrower’s Accounts (including, without limitation, computer printouts ortypewritten reports listing the mailing addresses of all present AccountDebtors), and (ii) any other writings and information as Agent or such Lendermay reasonably request;

 

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(c)                                  notifyAgent in writing immediately upon the creation by any Company of a DepositAccount not listed on Schedule 6.18 hereto and provide for theexecution of a Control Agreement with respect thereto, if required by Agent orthe Required Lenders;

 

(d)                                 maintainBorrower’s Equipment (that is necessary in the business of the Companies) ingood operating condition and repair, ordinary wear and tear and casualty lossexcepted, making all necessary replacements thereof in its reasonable businessjudgment so that the value and operating efficiency thereof shall at all timesbe maintained and preserved;

 

(e)                                  deliverto Agent to hold as security for the Secured Obligations, within ten BusinessDays upon the written request of Agent, all certificated Investment Propertyowned by a Credit Party, in suitable form for transfer by delivery, oraccompanied by duly executed instruments of transfer or assignment in blank,all in form and substance reasonably satisfactory to Agent, or in the eventsuch Investment Property is in the possession of a securities intermediary orcredited to a securities account, execute with the related securitiesintermediary an investment property control agreement over such securitiesaccount in favor of Agent, for the benefit of the Lenders, in form andsubstance reasonably satisfactory to Agent; and

 

(f)                                    uponthe reasonable request of Agent, promptly take such action and promptly make,execute, and deliver all such additional and further items, deeds, assurances,instruments and any other writings as Agent may from time to time reasonablydeem necessary, including, without limitation, chattel paper, to carry intoeffect the intention of this Agreement or so as to completely vest in andensure to Agent and the Lenders their respective rights hereunder and in or tothe Collateral or the Real Property.

 

Borrower hereby authorizesAgent, on behalf of the Lenders, to file U.C.C. Financing Statements withrespect to the Collateral. All Related Expenses are payable to Agent withinthirty (30) days after demand therefor; after the occurrence of an Event ofDefault, Agent may, at its option, debit Related Expenses directly to anydeposit account of a Company located at Agent or the Revolving Credit Notes.

 

Section 5.26.  Property Acquired Subsequent to theClosing Date and Right to Take Additional Collateral.  Borrower shall provide Agent with promptwritten notice with respect to any real property acquired by any Companysubsequent to the Closing Date with an individual value in excess of OneMillion Dollars ($1,000,000).  Inaddition to any other right Agent and the Lenders may have pursuant to thisAgreement or otherwise, upon written request of Agent, whenever made, Borrowershall grant to Agent as additional security for the Secured Obligations, asecurity interest in or Lien on such real property of Borrower.  Borrower agrees, promptly after the date ofsuch written request, to secure all of such Indebtedness by delivering to Agentsecurity agreements, mortgages (or deeds of trust, if applicable) or otherdocuments, instruments or agreements or such thereof as Agent may require.  In addition, if any Subsidiary acquires anyfederally registered intellectual property (including, without limitation, anypatents, patent applications, trademarks, service marks, copyrights, licenses,and rights with respect to the foregoing) subsequent to the Closing Date,Borrower shall promptly provide written notice to Agent and such Subsidiaryshall promptly execute and deliver an Intellectual Property Collateral

 

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Assignment Agreement withrespect to such federally registered intellectual property.  Borrower shall pay all recordation, legaland other expenses in connection with the foregoing.

 

ARTICLE VI.  REPRESENTATIONS AND WARRANTIES

 

Section 6.1.  Corporate Existence; Subsidiaries;Foreign Qualification.  Each Companyis duly organized, validly existing, and in good standing under the laws of itsstate or jurisdiction of incorporation or organization, and is duly qualifiedand authorized to do business and is in good standing as a foreign entity inthe jurisdictions set forth opposite its name on Schedule 6.1hereto, which are all of the states or jurisdictions where the character of itsproperty or its business activities makes such qualification necessary, exceptwhere a failure to qualify or be in good standing would not reasonably beexpected to result in a Material Adverse Effect.  Schedule 6.1 hereto sets forth, as of the ClosingDate, each Subsidiary of Borrower (and whether such Subsidiary is a DormantSubsidiary), its state of formation, its relationship to Borrower, includingthe percentage of each class of stock or membership interests owned by aCompany, the location of its chief executive office and its principal place ofbusiness.  Borrower owns all of theequity interests of each of its Subsidiaries.

 

Section 6.2.  Corporate Authority.  Each Credit Party has the right and powerand is duly authorized and empowered to enter into, execute and deliver theLoan Documents to which it is a party and to perform and observe the provisionsof the Loan Documents.  The LoanDocuments to which each Credit Party is a party have been duly authorized andapproved by such Credit Party’s board of directors or other governing body, asapplicable, and are the valid and binding obligations of such Credit Party,enforceable against such Credit Party in accordance with their respectiveterms, except as enforceability thereofmay be limited by bankruptcy, insolvency, moratorium and similar laws and byequitable principles, whether considered at law or in equity.    The execution, delivery and performance of the Loan Documentswill not conflict with nor result in any breach in any of the provisions of, orconstitute a default under, or result in the creation of any Lien (other thanLiens permitted under Section 5.9 hereof) upon any assets or property ofany Company under the provisions of, such Company’s Organizational Documents orany material agreement.

 

Section 6.3.  Compliance with Laws and Contracts.  Except as would not reasonably be expectedto result in a Material Adverse Effect, each Company:

 

(a)                                  holdspermits, certificates, licenses, orders, registrations, franchises,authorizations, and other approvals from any Governmental Authority necessaryfor the conduct of its business and is in compliance with all applicable lawsrelating thereto;

 

(b)                                 isin compliance with all federal, state, local, or foreign applicable statutes,rules, regulations, and orders including, without limitation, those relating tooccupational safety and health and equal employment practices; and

 

(c)                                  isnot in violation of or in default under any agreement to which it is a party orby which its assets are subject or bound.

 

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Section 6.4.  Litigation and Administrative Proceedings.  Except as disclosed on Schedule 6.4hereto and would not reasonably be expected to result in a Material AdverseEffect, as of the Closing Date, there are (a) no lawsuits, actions,investigations, or other proceedings pending or, to the knowledge of eachCompany, threatened against any Company, or in respect of which any Company mayhave any liability, in any court or before any Governmental Authority,arbitration board, or other tribunal, (b) no orders, writs, injunctions,judgments, or decrees of any court or government agency or instrumentality towhich any Company is a party or by which the property or assets of any Companyare bound, or (c) no grievances, disputes, or controversies outstandingwith any union or other organization of the employees of any Company, orthreats of work stoppage, strike, or pending demands for collective bargaining.

 

Section 6.5.  Title to Assets.  Each Company has good title to and ownershipof all property it purports to own, which property is free and clear of allLiens, except those permitted under Section 5.9 hereof.

 

Section 6.6.  Liens and Security Interests.  On and after the Closing Date, except forLiens permitted pursuant to Section 5.9 hereof, (a) there is and willbe no U.C.C. Financing Statement or similar notice of Lien outstanding coveringany personal property of any Company, other than a U.C.C. Financing Statementin favor of Agent for the benefit of the Lenders; (b) there is and will beno mortgage outstanding covering any real property of any Company, other than amortgage in favor of Agent for the benefit of the Lenders; and (c) no realor personal property of any Company is subject to any security interest or Lienof any kind, other than any security interest or Lien that may be granted toAgent, for the benefit of the Lenders. No Company has entered into any contract or agreement (other than acontract or agreement entered into in connection with the purchase or lease offixed assets or an intellectual property licensing agreement that prohibitsLiens on such assets) that exists on or after the Closing Date that wouldprohibit Agent or the Lenders from acquiring a Lien on, or a collateralassignment of, any of the property or assets of any Company.

 

Section 6.7.  Tax Returns.  All federal and all material state and localtax returns and other reports required by law to be filed in respect of theincome, business, properties and employees of each Company have been filed andall taxes, assessments, fees and other governmental charges that are due andpayable have been paid, except as otherwise permitted herein.  The provision for taxes on the books of eachCompany is adequate for all years not closed by applicable statutes and for thecurrent fiscal year.

 

Section 6.8.  Environmental Laws.  Each Company is in material compliance withall material Environmental Laws, including, without limitation, allEnvironmental Laws in all jurisdictions in which any Company owns or operates,or has owned or operated, a facility or site, arranges or has arranged fordisposal or treatment of hazardous substances, solid waste or other wastes,accepts or has accepted for transport any hazardous substances, solid waste orother wastes or holds or has held any interest in real property or otherwise.  No material litigation or proceeding arisingunder, relating to or in connection with any Environmental Law is pending or,to the best knowledge of any officer of any Company, threatened, against anyCompany, any real property in which any Company holds or has held an interestor any past or present operation of

 

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any Company.  No release, threatened release or disposalof hazardous waste, solid waste or other wastes is occurring, or has occurred(other than those that are currently being cleaned up in accordance withEnvironmental Laws), on, under or to any real property in which any Companyholds any interest or performs any of its operations, in material violation ofany material Environmental Law.  As usedin this Section 6.8, “litigation or proceeding” means any demand, claim,notice, suit, suit in equity, action, administrative action, investigation orinquiry whether brought by any Governmental Authority or private Person, orotherwise.

 

Section 6.9.  Locations.  As of the Closing Date, the Companies have places of business ormaintain their Accounts, Inventory and Equipment at the locations set forth on Schedule 6.9hereto.  Each Company’s chief executiveoffice is set forth on Schedule 6.9 hereto.  Schedule 6.9 further specifieswhether each location, as of the Closing Date, (a) is owned by theCompanies, or (b) is leased by a Company from a third party.  Schedule 6.9 correctlyidentifies the name and address of each third party location where assets ofthe Companies with a value in excess of One Million Dollars ($1,000,000) arelocated.

 

Section 6.10.  Employee Benefits Plans.  Schedule 6.10 hereto identifieseach ERISA Plan as of the Closing Date. Except as would not reasonably be expected to result in a MaterialAdverse Effect:

 

(a)                                  noERISA Event has occurred or is expected to occur with respect to an ERISA Plan;

 

(b)                                 fullpayment has been made of all amounts that a Controlled Group member isrequired, under applicable law or under the governing documents, to have paidas a contribution to or a benefit under each ERISA Plan;

 

(c)                                  theliability of each Controlled Group member with respect to each ERISA Plan hasbeen fully funded based upon reasonable and proper actuarial assumptions, hasbeen fully insured, or has been fully reserved for on its financial statementsin accordance with GAAP;

 

(d)                                 nochanges have occurred or are expected to occur that would cause a materialincrease in the cost of providing benefits under the ERISA Plan;

 

(e)                                  withrespect to each ERISA Plan that is intended to be qualified under CodeSection 401(a), (i) the ERISA Plan and any associated trustoperationally comply with the applicable requirements of CodeSection 401(a); (ii)  the ERISA Plan and any associated trust havebeen amended to comply with all such requirements as currently in effect, otherthan those requirements for which a retroactive amendment can be made withinthe “remedial amendment period” available under CodeSection 401(b) (as extended under Treasury Regulations and other Treasurypronouncements upon which taxpayers may rely); (iii) the ERISA Plan andany associated trust have received a favorable determination letter from theInternal Revenue Service stating that the ERISA Plan qualifies under CodeSection 401(a), that the associated trust qualifies under CodeSection 501(a) and, if applicable, that any cash or deferredarrangement under the ERISA Plan qualifies under Code Section 401(k),unless the ERISA Plan was first adopted at a time for which the above-described“remedial amendment period” has not yet

 

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expired; (iv) theERISA Plan currently satisfies the requirements of Code Section 410(b),without regard to any retroactive amendment that may be made within theabove-described “remedial amendment period”; and (v) no contribution madeto the ERISA Plan is subject to an excise tax under Code Section 4972; and

 

(f)                                    withrespect to any Pension Plan, the “accumulated benefit obligation” of ControlledGroup members with respect to the Pension Plan (as determined in accordancewith Statement of Accounting Standards No. 87, “Employers’ Accounting forPensions”) does not exceed the fair market value of Pension Plan assets.

 

Section 6.11.  Consents or Approvals.  No material consent, approval orauthorization of, or filing, registration or qualification with, anyGovernmental Authority or any other Person is required to be obtained orcompleted by any Company in connection with the execution, delivery orperformance of any of the Loan Documents, that has not already been obtained orcompleted.

 

Section 6.12.  Solvency.  Borrower has received consideration that is the reasonableequivalent value of the obligations and liabilities that Borrower has incurredto Agent and the Lenders.  Borrower isnot insolvent as defined in any applicable state, federal or relevant foreignstatute, nor will Borrower be rendered insolvent by the execution and deliveryof the Loan Documents to Agent and the Lenders.  Borrower is not engaged or about to engage in any business ortransaction for which the assets retained by it are or will be an unreasonablysmall amount of capital, taking into consideration the obligations to Agent andthe Lenders incurred hereunder. Borrower does not intend to, nor does it believe that it will, incurdebts beyond its ability to pay such debts as they mature.

 

Section 6.13.  Financial Statements.  The Consolidated financial statements ofBorrower for the fiscal year ended December 31, 2003 and the quarter endedMarch 31, 2004, furnished to Agent and the Lenders, are true and completein all material respects, have been prepared in accordance with GAAP, andfairly present in all material respects the financial condition of theCompanies as of the dates of such financial statements and the results of theiroperations for the periods then ending. As of the Closing Date, since the dates of such statements, there hasbeen no material adverse change in any Company’s financial condition,properties or business or any change in any Company’s accounting procedures.

 

Section 6.14.  Regulations.  No Company is engaged principally or as oneof its important activities, in the business of extending credit for thepurpose of purchasing or carrying any “margin stock” (within the meaning ofRegulation U of the Board of Governors of the Federal Reserve System of theUnited States of America).  Neither thegranting of any Loan (or any conversion thereof) or Letter of Credit nor theuse of the proceeds of any Loan or Letter of Credit will violate, or be inconsistentwith, the provisions of Regulation T, U or X or any other Regulation of suchBoard of Governors.

 

Section 6.15.  Material Agreements.  Except as disclosed on Schedule 6.15hereto, on the Closing Date, no Company is a party to any (a) debt instrument(excluding the Loan Documents); (b) real estate lease, whether as lesseeor lessor thereunder; (c) contract, commitment, agreement, or otherarrangement with any of its “Affiliates” (as such term is

 

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defined in the SecuritiesExchange Act of 1934, as amended) other than a Company; (d) management oremployment contract or contract for personal services with any of itsAffiliates that is not otherwise terminable at will or on less than ninety (90)days’ notice without liability; or (e) collective bargaining agreement.

 

Section 6.16.  Intellectual Property.  Each Company owns or has the right to useall of its material patents, patent applications, industrial designs,trademarks, service marks, copyrights and licenses, and rights with respect tothe foregoing necessary for the conduct of its business, without any knownsignificant conflict with the rights of others.  As of the Closing Date, no Subsidiary owns any federallyregistered intellectual property, including, without limitation, any patents,patent applications, trademarks, service marks, copyrights, licenses, andrights with respect to the foregoing.

 

Section 6.17.  Insurance.  Each Company maintains with financially sound and reputableinsurers insurance with coverage and limits as required by law and as iscustomary with Persons engaged in the same businesses as the Companies.  Schedule 6.17 hereto sets forthall insurance carried by the Companies on the Closing Date, setting forth indetail the amount and type of such insurance.

 

Section 6.18.  Deposit Accounts.  Schedule 6.18 hereto lists allbanks (other than payroll, tax withholding or trust accounts) and otherfinancial institutions at which any Company maintains deposit or other accountsas of the Closing Date, and Schedule 6.18 hereto correctlyidentifies the name, address and telephone number of each depository, the namein which the account is held, a description of the purpose of the account, andthe complete account number therefor.

 

Section 6.19.  Accurate and Complete Statements.  Neither the Loan Documents nor any writtenstatement made by any Company in connection with any of the Loan Documents(excluding budgets and projections), contains any untrue statement of amaterial fact or omits a material fact necessary to make the statementscontained therein or in the Loan Documents not materially misleading.  On the Closing Date, after due inquiry byBorrower, there is no known fact that any Company has not disclosed to Agentand the Lenders that has or is likely to have a Material Adverse Effect.

 

Section 6.20.  Note Agreement.  No Event of Default (as defined in the NoteAgreement) or Default (as defined in the Note Agreement) exists, nor will anysuch Event of Default or Default exist immediately after the granting of anyLoan or the issuance of any Letter of Credit under this Agreement.

 

Section 6.21.  Investment Company; Holding Company.  No Company is (a) an “investmentcompany” or a company “controlled” by an “investment company” required to beregistered as such within the meaning of the Investment Company Act of 1940, asamended, or (b) subject to regulation under the Public Utility HoldingCompany Act of 1935 or the Federal Power Act, each as amended, or any foreign,federal, state or local statute or regulation limiting its ability to incurIndebtedness.

 

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Section 6.22.  Defaults.  No Default or Event of Default exists hereunder, nor will anybegin to exist immediately after the execution and delivery hereof.

 

ARTICLE VII. SECURITY

 

Section 7.1.  Security Interest in Collateral.  In consideration of and as security for thefull and complete payment of all of the Secured Obligations, Borrower herebygrants to Agent for the benefit of the Lenders a security interest in theCollateral.

 

Section 7.2.  Collections and Receipt of Proceeds byBorrower.

 

(a)                                  Uponwritten notice to Borrower from Agent, at the election of the Required Lenders,after the occurrence and during the continuance of an Event of Default, a CashCollateral Account shall be opened by Borrower at the main office of Agent (orsuch other office as shall be designated by Agent) and all such lawfulcollections of Borrower’s Accounts and such Proceeds of Borrower’s Accounts andInventory shall be remitted daily by Borrower to Agent in the form in whichthey are received by Borrower, either by mailing or by delivering suchcollections and Proceeds to Agent, appropriately endorsed for deposit in theCash Collateral Account.  In the eventthat such notice is given to Borrower from Agent, Borrower shall not comminglesuch collections or Proceeds with any of Borrower’s other funds or property,but shall hold such collections and Proceeds separate and apart therefrom uponan express trust for Agent, for the benefit of the Lenders.  In such case, Agent may, in its solediscretion, and shall, at the request of the Required Lenders, at any time andfrom time to time after the occurrence and during the continuance of an Eventof Default, apply all or any portion of the account balance in the CashCollateral Account as a credit against (i) the outstanding principal orinterest of the Loans, or (ii) any other Secured Obligations.  If any remittance shall be dishonored, orif, upon final payment, any claim with respect thereto shall be made againstAgent on its warranties of collection, Agent may charge the amount of such itemagainst the Cash Collateral Account or any other Deposit Account (other than atrust, tax withholding or payroll account) maintained by Borrower with Agent orwith any other Lender, and, in any event, retain the same and Borrower’sinterest therein as additional security for the Secured Obligations.  Agent may, in its sole discretion, at anytime and from time to time, release funds from the Cash Collateral Account toBorrower for use in Borrower’s business. The balance in the Cash Collateral Account may be withdrawn by Borrowerupon termination of this Agreement and payment in full of all of the SecuredObligations (other than contingent indemnity obligations).

 

(b)                                 AtAgent’s request after the occurrence and during the continuance of an Event ofDefault, Borrower shall cause all remittances representing collections andProceeds of Collateral to be mailed to a lock box at a location acceptable toAgent, to which Agent shall have access for the processing of such items inaccordance with the provisions, terms and conditions of the customary lock boxagreement of Agent.

 

(c)                                  Agent,or Agent’s designated agent, is hereby constituted and appointed Borrower’sattorney-in-fact with authority and power to endorse, after the occurrence andduring the continuance of an Event of Default, any and all instruments,documents, and chattel paper

 

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upon Borrower’s failureto do so.  Such authority and power,being coupled with an interest, shall be (i) irrevocable until all of theSecured Obligations (other than contingent indemnity obligations) are paid,(ii) exercisable by Agent at any time and without any request upon Borrower byAgent to so endorse, and (iii) exercisable in Agent’s name or Borrower’sname.  Borrower hereby waivespresentment, demand, notice of dishonor, protest, notice of protest, and anyand all other similar notices with respect thereto, regardless of the form ofany endorsement thereof.  Agent and theLenders shall not be bound or obligated to take any action to preserve anyrights therein against prior parties thereto.

 

Section 7.3.  Collections and Receipt of Proceeds byAgent.  Borrower hereby constitutesand appoints Agent, or Agent’s designated agent, as Borrower’s attorney-in-factto exercise, at any time after the occurrence and during the continuance of anEvent of Default, all or any of the following powers which, being coupled withan interest, shall be irrevocable until the complete and full payment of all ofthe Secured Obligations (other than contingent indemnity obligations):

 

(a)                                  toreceive, retain, acquire, take, endorse, assign, deliver, accept, and deposit,in the name of Agent or Borrower, any and all of Borrower’s cash, instruments,chattel paper, documents, Proceeds of Accounts, Proceeds of Inventory,collection of Accounts, and any other writings relating to any of theCollateral;

 

(b)                                 totransmit to Account Debtors, on any or all of Borrower’s Accounts, notice ofassignment to Agent, for the benefit of the Lenders, security interest thereinof Agent, for the benefit of the Lenders, and to request from such AccountDebtors at any time, in the name of Agent or Borrower, information concerningBorrower’s Accounts and the amounts owing thereon;

 

(c)                                  totransmit to purchasers of any or all of Borrower’s Inventory, notice of Agent’ssecurity interest therein, and to request from such purchasers at any time, inthe name of Agent or Borrower, information concerning Borrower’s Inventory andthe amounts owing thereon by such purchasers;

 

(d)                                 tonotify and require Account Debtors on Borrower’s Accounts and purchasers ofBorrower’s Inventory to make payment of their indebtedness directly to Agent;

 

(e)                                  totake or bring, in the name of Agent or Borrower, all steps, actions, suits, orproceedings deemed by Agent necessary or desirable to effect the receipt,enforcement, and collection of the Collateral; and

 

(f)                                    toaccept all collections in any form relating to the Collateral, includingremittances that may reflect deductions, and to deposit the same, intoBorrower’s Cash Collateral Account or, at the option of Agent, to apply them asa payment against the Loans or any other Secured Obligations in accordance withthis Agreement.

 

Section 7.4.  Use of Inventory and Equipment.  Until the exercise by Agent and the RequiredLenders of their rights under Article IX hereof, Borrower may (a) retainpossession of and use its Inventory and Equipment in any lawful manner notinconsistent with this Agreement

 

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or with the terms,conditions, or provisions of any policy of insurance thereon; (b) sell or leaseits Inventory in the ordinary course of business; provided, however, that asale or lease in the ordinary course of business does not include a transfer inpartial or total satisfaction of an Indebtedness; and (c) use and consume anyraw materials or supplies, the use and consumption of which are necessary inorder to carry on Borrower’s business.

 

ARTICLE VIII.  EVENTS OF DEFAULT

 

Each of the followingshall constitute an Event of Default hereunder:

 

Section 8.1.  Payments.  If (a) the interest on any Loan, any commitment or other feeor any other Obligation (other than those specified in subpart (b) hereof)shall not be paid in full when due and payable or within three Business Daysthereafter, or (b) the principal of any Loan, or any reimbursement obligationunder any Letter of Credit that has been drawn, shall not be paid in full whendue and payable.

 

Section 8.2.  Special Covenants.  If any Company shall fail or omit to performand observe Section 5.7, 5.8, 5.9, 5.11, 5.12, 5.13, 5.15, 5.22 or5.23(b), (c) or (d) hereof.

 

Section 8.3.  Other Covenants.  If any Company shall fail or omit to performand observe any agreement or other provision (other than those referred to inSection 8.1 or 8.2 hereof) contained or referred to in this Agreement orany Related Writing that is on such Company’s part to be complied with, andthat Default shall not have been fully corrected within thirty (30) days after the earlier of (a) any FinancialOfficer of such Company becomes aware of the occurrence thereof, or (b) thegiving of written notice thereof to Borrower by Agent or the Required Lendersthat the specified Default is to be remedied.

 

Section 8.4.  Representations and Warranties.  If any representation or warranty made inany Loan Document shall be false or misleading in any material respect.

 

Section 8.5.  CrossDefault.

 

(a)                                  Convertible Subordinated Indebtedness.  If(i) any event of default (as each term or similar term is defined in anyConvertible Subordinated Document) shall occur under any ConvertibleSubordinated Document or any agreement executed in connection therewith, or(ii) the Indebtedness incurred in connection with any ConvertibleSubordinated Note shall be accelerated for any reason.

 

(b)                                 Other Cross Defaults.  Ifany Company shall default in the payment of principal or interest due and owing(i) in an amount in excess of One Million Dollars ($1,000,000) beyond anyperiod of grace provided with respect thereto; or (ii) under any MaterialIndebtedness Agreement beyond any period of grace provided with respect theretoor in the performance or observance of any other agreement, term or conditioncontained in any agreement under which such obligation is created, if theeffect of such default is to allow the acceleration of the maturity

 

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ofsuch Indebtedness or to permit the holder thereof to cause such Indebtedness tobecome due prior to its stated maturity.

 

Section 8.6.  ERISA Default.  The occurrence of one or more ERISA Eventsthat (a) the Required Lenders reasonably determine would have a MaterialAdverse Effect, or (b) results in a Lien on assets of the Companies inexcess of Two Million Dollars ($2,000,000).

 

Section 8.7.  Change in Control.  If any Change in Control shall occur.

 

Section 8.8.  Money Judgment.  A final judgment or order for the payment ofmoney shall be rendered against any Company by a court of competentjurisdiction, that remains unpaid or unstayed and undischarged for a period(during which execution shall not be effectively stayed) of sixty (60) daysafter the date on which the right to appeal has expired; provided that theaggregate of all such judgments for all such Companies shall exceed One MillionDollars ($1,000,000) (less (a) anyamount that will be covered by the proceeds of insurance and is not subject todispute by the insurance provider and (b) any money judgment to the extent suchamounts are provided by funds in a valid escrow account or similar arrangement).

 

Section 8.9.  Security.  If any Lien granted in this Agreement or any other Loan Documentin favor of Agent, for the benefit of the Lenders, shall be determined to be(a) void, voidable or invalid, or is subordinated or not otherwise given thepriority contemplated by this Agreement with respect to any material amount ofCollateral and the Credit Parties have failed to promptly execute appropriatedocuments to correct such matters, or (b) unperfected as to any material amountof Collateral (as determined by Agent, in its reasonable discretion).

 

Section 8.10.  Validity of Loan Documents.  (a) Any material provision of anymaterial Loan Document shall at any time for any reason cease to be valid,binding and enforceable against any Credit Party; (b) the validity,binding effect or enforceability of any Loan Document against any Credit Partyshall be contested by any Credit Party; (c) any Credit Party shall denythat it has any or further liability or obligation under any Loan Document; or(d) any Loan Document shall be terminated, invalidated or set aside, or bedeclared ineffective or inoperative in any material respect or in any materialway cease to give or provide to Agent and the Lenders the benefits purported tobe created thereby.  In addition to anyother material Loan Documents, this Agreement, each Note and each Guaranty ofPayment shall be deemed to be “material”.

 

Section 8.11.  Solvency.  If Borrower, Poorman-Douglas Corporation orany other Company with assets over Five Million Dollars ($5,000,000) shall(a)  except as permitted pursuant to Section 5.12 hereof, discontinuebusiness, (b) generally not pay its debts as such debts become due,(c) make a general assignment for the benefit of creditors, (d) applyfor or consent to the appointment of an interim receiver, a receiver andmanager, an administrator, sequestrator, monitor, a custodian, a trustee, aninterim trustee, liquidator, agent or other similar official of all or asubstantial part of its assets or of such Company, (e) be adjudicated adebtor or insolvent or have entered against it an order for relief under Title11 of the United States Code, or under any other bankruptcy insolvency,liquidation, winding-up, corporate or similar statute or law, foreign, federal,state or provincial, in any applicable jurisdiction, now or hereafter existing,as any of the foregoing the same may be amended from time to time, or otherapplicable statute

 

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forjurisdictions outside of the United States, as the case may be, (f) file avoluntary petition in bankruptcy, or file a proposal or notice of intention tofile a proposal or have an involuntary proceeding filed against it and the sameshall continue undismissed for a period of sixty (60) days from commencement ofsuch proceeding or case, or file a petition or an answer or an application or aproposal seeking reorganization or an arrangement with creditors or seeking totake advantage of any other law (whether federal, provincial or state, or, ifapplicable, other jurisdiction) relating to relief of debtors, or admit (byanswer, by default or otherwise) the material allegations of a petition filedagainst it in any bankruptcy, reorganization, insolvency or other proceeding(whether federal, provincial or state, or, if applicable, other jurisdiction)relating to relief of debtors, (g) suffer or permit or to continueunstayed and in effect for sixty (60) consecutive days any judgment, decree ororder entered by a court of competent jurisdiction, that approves a petition oran application or a proposal seeking its reorganization or appoints an interimreceiver, a receiver and manager, an administrator, custodian, trustee, interimtrustee or liquidator of all or a substantial part of its assets, or of suchCompany, or (h) take, or omit to take, any action in order thereby to effectany of the foregoing.

 

ARTICLE IX.  REMEDIES UPON DEFAULT

 

Notwithstanding anycontrary provision or inference herein or elsewhere:

 

Section 9.1.  Optional Defaults.  If any Event of Default referred to inSection 8.1, 8.2, 8.3, 8.4, 8.5, 8.6, 8.7, 8.8, 8.9, or 8.10 hereof shalloccur, Agent may, with the consent of the Required Lenders, and shall, at thewritten request of the Required Lenders, give written notice to Borrower, to:

 

(a)                                  terminatethe Commitment, if not previously terminated, and, immediately upon suchelection, the obligations of the Lenders, and each thereof, to make any furtherLoan and the obligation of the Fronting Lender to issue any Letter of Creditimmediately shall be terminated; and/or

 

(b)                                 acceleratethe maturity of all of the Obligations (if the Obligations are not already dueand payable), whereupon all of the Obligations shall become and thereafter beimmediately due and payable in full without any presentment or demand andwithout any further or other notice of any kind, all of which are hereby waivedby Borrower.

 

Section 9.2.  Automatic Defaults.  If any Event of Default referred to inSection 8.11 hereof shall occur:

 

(a)                                  allof the Commitment shall automatically and immediately terminate, if notpreviously terminated, and no Lender thereafter shall be under any obligationto grant any further Loan, nor shall the Fronting Lender be obligated to issueany Letter of Credit; and

 

(b)                                 theprincipal of and interest then outstanding on all of the Loans, and all of theother Obligations, shall thereupon become and thereafter be immediately due andpayable in full

 

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(if the Obligations arenot already due and payable), all without any presentment, demand or notice ofany kind, which are hereby waived by Borrower.

 

Section 9.3.  Letters of Credit.  If the maturity of the Obligations shall beaccelerated pursuant to Section 9.1 or 9.2 hereof, Borrower shallimmediately deposit with Agent, as security for the obligations of Borrower andany Guarantor of Payment to reimburse Agent and the Revolving Lenders for anythen outstanding Letters of Credit, cash equal to the sum of the aggregateundrawn balance of any then outstanding Letters of Credit.  Agent and the Lenders are hereby authorized,at their option, to deduct any and all such amounts from any deposit balancesthen owing by any Lender (or any affiliate of such Revolving Lender, whereverlocated) to or for the credit or account of any Company, as security for theobligations of Borrower and any Guarantor of Payment to reimburse Agent and theRevolving Lenders for any then outstanding Letters of Credit.

 

Section 9.4.  Offsets.  If there shall occur or exist any Event of Default referred to inSection 8.11 hereof or if the maturity of the Obligations is acceleratedpursuant to Section 9.1 or 9.2 hereof, each Lender shall have the right atany time to set off against, and to appropriate and apply toward the paymentof, any and all of the Obligations then owing by Borrower to such Lender(including, without limitation, any participation purchased or to be purchasedpursuant to Section 2.2 or 9.5 hereof), whether or not the same shall thenhave matured, any and all deposit (general or special (but excluding trust, taxwithholding and payroll accounts) balances and all other indebtedness then heldor owing by such Lender (including, without limitation, by branches andagencies or any affiliate of such Lender) to or for the credit or account ofBorrower or any Guarantor of Payment, all without notice to or demand uponBorrower or any other Person, all such notices and demands being herebyexpressly waived by Borrower.

 

Section 9.5.  Equalization Provision.

 

(a)                                  EqualizationWithin Commitments Prior to an Equalization Event.  Each Revolving Lender agrees with the otherRevolving Lenders that if it, at any time, shall obtain any Advantage over theother Revolving Lenders, or any thereof, in respect of the Applicable Debt(except as to Swing Loans, Letters of Credit and amounts under Article IIIhereof), such Revolving Lender shall purchase from the other Revolving Lenders,for cash and at par, such additional participation in the Applicable Debt asshall be necessary to nullify the Advantage. Each Term Lender agrees with the other Term Lenders that if it, at anytime, shall obtain any Advantage over the other Term Lenders, or any thereof,in respect of the Applicable Debt (except as to amounts under Article IIIhereof), such Term Lender shall purchase from the other Term Lenders, for cashand at par, such additional participation in the Applicable Debt as shall benecessary to nullify the Advantage.

 

(b)                                 EqualizationBetween Commitments After an Equalization Event.  After the occurrence of an Equalization Event, each Lender agreeswith the other Lenders that if such Lender, at any time, shall obtain anyAdvantage over the other Lenders or any thereof determined in respect of theObligations (including Swing Loans and Letters of Credit but excluding amountsunder Article III hereof) then outstanding, such Lender shall purchasefrom the other Lenders, for cash and at par, such additional participation inthe Obligations as shall be

 

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necessary to nullify theAdvantage in respect of the Obligations. For purposes of determining whether or not, after the occurrence of anEqualization Event, an Advantage in respect of the Obligations shall exist,Agent shall, as of the date that the Equalization Event occurs:

 

(i)                                     addthe Revolving Credit Exposure and the Term Loan Exposure to determine theequalization maximum amount (the “Equalization Maximum Amount”); and

 

(ii)                                  determinean equalization percentage (the “Equalization Percentage”) for each Lender bydividing the aggregate amount of its Lender Credit Exposure by the EqualizationMaximum Amount.

 

After the date of anEqualization Event, Agent shall determine whether an Advantage exists among theLenders by using the Equalization Percentage. Such determination shall be conclusive absent manifest error.

 

(c)                                  Recoveryof Amount.  If any such Advantageresulting in the purchase of an additional participation as set forth insubsections (a) or (b) hereof shall be recovered in whole or in part from theLender receiving the Advantage, each such purchase shall be rescinded, and thepurchase price restored (but without interest unless the Lender receiving theAdvantage is required to pay interest on the Advantage to the Person recoveringthe Advantage from such Lender) ratably to the extent of the recovery.

 

(d)                                 Applicationand Sharing of Set-Off Amounts. Each Lender further agrees with the other Lenders that, if it at anytime shall receive any payment for or on behalf of Borrower on any Indebtednessowing by Borrower to that Lender (whether by voluntary payment, by realizationupon security, by reason of offset of any deposit or other Indebtedness, bycounterclaim or cross action, by enforcement of any right under any LoanDocument, or otherwise), it shall apply such payment first to any and allIndebtedness owing by Borrower to that Lender pursuant to this Agreement(including, without limitation, any participation purchased or to be purchasedpursuant to this Section or any other Section of thisAgreement).  Each Credit Party agreesthat any Lender so purchasing a participation from the other Lenders, or anythereof, pursuant to this Section 9.5 may exercise all of its rights ofpayment (including the right of set-off) with respect to such participation asfully as if such Lender were a direct creditor of such Credit Party in the amountof such participation.

 

Section 9.6.  Collateral.  Upon the occurrence and during the continuance of an Event ofDefault and at all times thereafter, Agent and the Lenders shall have therights and remedies of a secured party under the Ohio Revised Code as in effectfrom time to time, in addition to the rights and remedies of a secured partyprovided elsewhere within this Agreement, in any other Related Writing executedby Borrower or otherwise provided in law or equity.  Agent may require Borrower to assemble the Collateral, whichBorrower agrees to do, and make it available to Agent and the Lenders at areasonably convenient place to be designated by Agent. Agent may, with orwithout notice to or demand upon Borrower and with or without the aid of legalprocess, make use of such force as may be necessary to enter any premises wherethe Collateral, or any thereof, may be found and to take possession thereof(including anything found in or on

 

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the Collateral that isnot specifically described in this Agreement, each of which findings shall beconsidered to be an accession to and a part of the Collateral) and for thatpurpose may pursue the Collateral wherever the same may be found, withoutliability for trespass or damage caused thereby to Borrower.  After any delivery or taking of possessionof the Collateral, or any thereof, pursuant to this Agreement, then, with orwithout resort to Borrower personally or any other Person or property, all ofwhich Borrower hereby waives, and upon such terms and in such manner as Agentmay deem advisable, Agent, in its discretion, may sell, assign, transfer anddeliver any of the Collateral at any time, or from time to time.  No prior notice need be given to Borrower orto any other Person in the case of any sale of Collateral that Agent determinesto be perishable or to be declining speedily in value or that is customarilysold in any recognized market, but in any other case Agent shall give Borrowernot fewer than ten days prior notice of either the time and place of any publicsale of the Collateral or of the time after which any private sale or otherintended disposition thereof is to be made. Borrower waives advertisement of any such sale and (except to the extentspecifically required by the preceding sentence) waives notice of any kind inrespect of any such sale.  At any suchpublic sale, Agent or the Lenders may purchase the Collateral, or any partthereof, free from any right of redemption, all of which rights Borrower herebywaives and releases.  After deductingall Related Expenses, and after paying all claims, if any, secured by Lienshaving precedence over this Agreement, Agent may apply the net proceeds of eachsuch sale to or toward the payment of the Secured Obligations, whether or notthen due, in such order and by such division as Agent, in its sole discretion,may deem advisable. Any excess, to the extent permitted by law, shall be paidto Borrower, and Borrower shall remain liable for any deficiency.  In addition, Agent shall at all times havethe right to obtain new appraisals of Borrower or the Collateral, the cost ofwhich shall be paid by Borrower.

 

Section 9.7.  Other Remedies.  The remedies in this Article IX are inaddition to, not in limitation of, any other right, power, privilege, orremedy, either in law, in equity, or otherwise, to which the Lenders may beentitled.  Agent shall exercise therights under this Article IX and all other collection efforts on behalf ofthe Lenders and no Lender shall act independently with respect thereto, exceptas otherwise specifically set forth in this Agreement.

 

Section 9.8.  Application of Proceeds.

 

(a)                                  PaymentsPrior to Exercise of Remedies. Prior to the exercise by Agent on behalf of the Lenders of remediesunder this Agreement or the other Loan Documents, all monies received by Agentshall be applied, unless otherwise required by the terms of the other LoanDocuments or by applicable law, as follows (provided that Agent shall have theright at all times to apply any payment received from Borrowers first to thepayment of all obligations (to the extent not paid by Borrowers) incurred byAgent pursuant to Section 11.5 hereof and to the payment of RelatedExpenses):

 

(i)                                     withrespect to payments received in connection with the Revolving CreditCommitment, to the Revolving Credit Lenders (or the Swing Line Lender or theFronting Lender, as appropriate); and

 

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(ii)                                  withrespect to payments received in connection with the Term Loan Commitment, tothe Term Lenders.

 

(b)                                 PaymentsSubsequent to Exercise of Remedies. After the exercise by Agent or the Required Lenders of remedies underthis Agreement or the other Loan Documents, all monies received by Agent shall beapplied, unless otherwise required by the terms of the other Loan Documents orby applicable law, as follows:

 

(i)                                     first,to the payment of all obligations (to the extent not paid by Borrowers)incurred by Agent pursuant to Section 11.5 hereof and to the payment ofRelated Expenses;

 

(ii)                                  second,to the payment pro rata of (A) interest then accrued and payable on theoutstanding Loans, (B) any fees then accrued and payable to Agent, and(C) any fees then accrued and payable to any Fronting Lender or the holdersof the Letter of Credit Commitment in respect of the Letter of Credit Exposure;

 

(iii)                               third,(A) to the Lenders, on a pro rata basis, based upon each such Lender’s OverallCommitment Percentage; provided that the amounts payable in respect of the Letterof Credit Exposure shall be held and applied by Agent as security for thereimbursement obligations in respect thereof, and, if any Letter of Creditshall expire without being drawn, then the amount with respect to such Letterof Credit shall be distributed to the Lenders, on a pro rata basis inaccordance with this subsection (iii), and (B) the Indebtedness under anyHedge Agreement, such amount to be based upon the net termination obligation ofBorrower under such Hedge Agreement; with such payment to be pro rata between(A) and (B) hereof; and

 

(iv)                              finally,any remaining surplus after all of the Secured Obligations have been paid infull, to Borrower or to whomsoever shall be lawfully entitled thereto.

 

ARTICLE X.  THE AGENT

 

The Lenders authorizeKeyBank National Association and KeyBank National Association hereby agrees toact as agent for the Lenders in respect of this Agreement upon the terms andconditions set forth elsewhere in this Agreement, and upon the following termsand conditions:

 

Section 10.1.  Appointment and Authorization.  Each Lender hereby irrevocably appoints andauthorizes Agent to take such action as agent on its behalf and to exercisesuch powers hereunder as are delegated to Agent by the terms hereof, togetherwith such powers as are reasonably incidental thereto.  Neither Agent nor any of its affiliates,directors, officers, attorneys or employees shall (a) be liable for anyaction taken or omitted to be taken by it or them hereunder or in connectionherewith, except for its or their own gross negligence or willful misconduct(as determined by a court of competent jurisdiction), or be responsible in anymanner to any of the Lenders for the effectiveness, enforceability,genuineness, validity or due execution

 

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of this Agreement or anyother Loan Documents, (b) be under any obligation to any Lender toascertain or to inquire as to the performance or observance of any of theterms, covenants or conditions hereof or thereof on the part of Borrower or anyother Company, or the financial condition of Borrower or any other Company, or(c) be liable to any of the Companies for consequential damages resultingfrom any breach of contract, tort or other wrong in connection with the negotiation,documentation, administration or collection of the Loans or Letters of Creditor any of the Loan Documents.

 

Section 10.2.  Note Holders.  Agent may treat the payee of any Note as theholder thereof until written notice of transfer shall have been filed withAgent, signed by such payee and in form satisfactory to Agent.

 

Section 10.3.  Consultation With Counsel.  Agent may consult with legal counselselected by Agent and shall not be liable for any action taken or suffered ingood faith by it in accordance with the opinion of such counsel.

 

Section 10.4.  Documents.  Agent shall not be under any duty to examine into or pass uponthe validity, effectiveness, genuineness or value of any Loan Document or anyother Related Writing furnished pursuant hereto or in connection herewith orthe value of any collateral obtained hereunder, and Agent shall be entitled toassume that the same are valid, effective and genuine and what they purport tobe.

 

Section 10.5.  Agent and Affiliates.  With respect to the Loans, Agent shall havethe same rights and powers hereunder as any other Lender and may exercise thesame as though it were not Agent, and Agent and its affiliates may acceptdeposits from, lend money to and generally engage in any kind of business withany Company or any Affiliate.

 

Section 10.6.  Knowledge of Default.  It is expressly understood and agreed thatAgent shall be entitled to assume that no Default or Event of Default hasoccurred, unless Agent has been notified by a Lender in writing that suchLender believes that a Default or Event of Default has occurred and iscontinuing and specifying the nature thereof or has been notified by Borrowerpursuant to Section 5.14 hereof.

 

Section 10.7.  Action by Agent.  Subject to the other terms and conditionshereof, so long as Agent shall be entitled, pursuant to Section 10.6hereof, to assume that no Default or Event of Default shall have occurred andbe continuing, Agent shall be entitled to use its discretion with respect toexercising or refraining from exercising any rights that may be vested in itby, or with respect to taking or refraining from taking any action or actionsthat it may be able to take under or in respect of, this Agreement.  Agent shall incur no liability under or inrespect of this Agreement by acting upon any notice, certificate, warranty orother paper or instrument believed by it to be genuine or authentic or to besigned by the proper party or parties, or with respect to anything that it maydo or refrain from doing in the reasonable exercise of its judgment, or thatmay seem to it to be necessary or desirable in the premises.

 

Section 10.8.  Release of Collateral or Guarantor ofPayment.  In the event of a sale ofassets permitted by Section 5.12 hereof (or otherwise permitted pursuantto this Agreement)

 

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where the proceeds ofsuch sale or sales are applied in accordance with the terms of this Agreementto the extent required to be so applied, Agent, at the request and expense of Borrower,is hereby authorized by the Lenders to (a) release such Collateral fromthis Agreement, (b) release a Guarantor of Payment in connection with anasset sale permitted hereunder, and (c) duly assign, transfer and deliverto the affected Company (without recourse and without any representation orwarranty) such Collateral as is then (or has been) so sold or released and asmay be in possession of Agent and has not theretofore been released pursuant tothis Agreement.

 

Section 10.9.  Notice of Default.  In the event that Agent shall have acquiredactual knowledge of any Default or Event of Default, Agent shall promptlynotify the Lenders and shall take such action and assert such rights under thisAgreement as the Required Lenders shall direct and Agent shall inform the otherLenders in writing of the action taken. Agent may take such action and assert such rights as it deems to beadvisable, in its discretion, for the protection of the interests of theholders of the Obligations.

 

Section 10.10.  Indemnification of Agent.  The Lenders agree to indemnify Agent (to theextent not reimbursed by Borrower) ratably, according to their respectiveOverall Commitment Percentages, from and against any and all liabilities,obligations, losses, damages, penalties, actions, judgments, suits, costs,expenses (including attorneys’ fees) or disbursements of any kind or naturewhatsoever that may be imposed on, incurred by or asserted against Agent in itscapacity as agent in any way relating to or arising out of this Agreement orany Loan Document or any action taken or omitted by Agent with respect to thisAgreement or any Loan Document, provided that no Lender shall be liable for anyportion of such liabilities, obligations, losses, damages, penalties, actions,judgments, suits, costs, expenses (including attorneys’ fees) or disbursementsresulting from Agent’s gross negligence or willful misconduct as determined bya court of competent jurisdiction, or from any action taken or omitted by Agentin any capacity other than as agent under this Agreement or any other LoanDocument.

 

Section 10.11.  Successor Agent.  Agent may resign as agent hereunder bygiving not fewer than thirty (30) days prior written notice to Borrower and theLenders.  If Agent shall resign underthis Agreement, then either (a) the Required Lenders shall appoint fromamong the Lenders a successor agent for the Lenders (with the consent ofBorrower, so long as an Event of Default has not occurred and is continuing,and which consent shall not be unreasonably withheld), or (b) if asuccessor agent shall not be so appointed and approved within the thirty (30)day period following Agent’s notice to the Lenders of its resignation, thenAgent shall appoint a successor agent that shall serve as agent until such timeas the Required Lenders appoint a successor agent.  Upon its appointment, such successor agent shall succeed to therights, powers and duties as agent, and the term “Agent” shall mean suchsuccessor effective upon its appointment, and the former agent’s rights, powersand duties as agent shall be terminated without any other or further act ordeed on the part of such former agent or any of the parties to this Agreement.

 

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ARTICLE XI. MISCELLANEOUS

 

Section 11.1.  Lenders’ Independent Investigation.  Each Lender, by its signature to thisAgreement, acknowledges and agrees that Agent has made no representation orwarranty, express or implied, with respect to the creditworthiness, financialcondition, or any other condition of any Company or with respect to thestatements contained in any information memorandum furnished in connectionherewith or in any other oral or written communication between Agent and suchLender.  Each Lender represents that ithas made and shall continue to make its own independent investigation of thecreditworthiness, financial condition and affairs of the Companies inconnection with the extension of credit hereunder, and agrees that Agent has noduty or responsibility, either initially or on a continuing basis, to provideany Lender with any credit or other information with respect thereto (otherthan such notices as may be expressly required to be given by Agent to theLenders hereunder), whether coming into its possession before the first CreditEvent hereunder or at any time or times thereafter.  Each Lender further represents that it has reviewed each of theLoan Documents, and has received copies of and reviewed the Convertible SubordinatedDocuments, including but not limited to, the conditions relating to the statusof the Obligations as Senior Indebtedness (as defined in the ConvertibleSubordinated Notes).

 

Section 11.2.  No Waiver; Cumulative Remedies.  No omission or course of dealing on the partof Agent, any Lender or the holder of any Note in exercising any right, poweror remedy hereunder or under any of the Loan Documents shall operate as awaiver thereof; nor shall any single or partial exercise of any such right,power or remedy preclude any other or further exercise thereof or the exerciseof any other right, power or remedy hereunder or under any of the LoanDocuments.  The remedies herein providedare cumulative and in addition to any other rights, powers or privileges heldby operation of law, by contract or otherwise.

 

Section 11.3.  Amendments, Consents.  No amendment, modification, termination, orwaiver of any provision of any Loan Document nor consent to any variancetherefrom, shall be effective unless the same shall be in writing and signed bythe Required Lenders and then such waiver or consent shall be effective only inthe specific instance and for the specific purpose for which given.  Anything herein to the contrarynotwithstanding, unanimous consent of the Lenders shall be required withrespect to (a) any increase in the Commitment hereunder (except asspecified in Section 2.10(b) hereof), (b) the extension ofmaturity of the Loans, the payment date of interest or scheduled principalthereunder, or the payment date of commitment or other fees or amounts payablehereunder, (c) any reduction in the rate of interest on the Loans(provided that the institution of the Default Rate and a subsequent removal ofthe Default Rate shall not constitute a decrease in interest rate of thisSection), or in any amount of scheduled principal or interest due on any Loan,or the payment of commitment or other fees hereunder or any change in themanner of pro rata application of any payments made by Borrower to the Lendershereunder, (d) any change in any percentage voting requirement, votingrights, or the Required Lenders definition in this Agreement, (e) therelease of any Guarantor of Payment or material amount of Collateral securingthe Obligations, except as specifically permitted hereunder, or (f) any amendmentto this Section 11.3 or Section 9.5 hereof.  Notice of amendments or consents ratified by the Lendershereunder shall be forwarded by Agent to all of the Lenders.  Each Lender or other holder of a Note (orinterest in any Loan) shall be bound by any amendment, waiver or consentobtained as authorized by this Section, regardless of its failure to agreethereto.

 

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Section 11.4.  Notices.  All notices, requests, demands and other communications providedfor hereunder shall be in writing and, if to Borrower, mailed or delivered toit, addressed to it at the address specified on the signature pages ofthis Agreement, if to a Lender, mailed or delivered to it, addressed to theaddress of such Lender specified on the signature pages of this Agreement,or, as to each party, at such other address as shall be designated by suchparty in a written notice to each of the other parties.  All notices, statements, requests, demandsand other communications provided for hereunder shall be deemed to be given ormade when delivered or two Business Days after being deposited in the mailswith postage prepaid by registered or certified mail, addressed as aforesaid,or sent by facsimile with telephonic confirmation of receipt, except thatnotices from Borrower to Agent or the Lenders pursuant to any of the provisionshereof shall not be effective until received by Agent or the Lenders, as thecase may be.

 

Section 11.5.  Costs, Expenses and Taxes.  Borrower agrees to pay on demand allreasonable out-of-pocket costs and expenses of Agent and all Related Expenses,including, but not limited to, (a) syndication, administration, travel andout-of-pocket expenses, including but not limited to attorneys’ fees andexpenses (excluding allocated costs of in-house counsel), of Agent inconnection with the preparation, negotiation and closing of the Loan Documentsand the administration of the Loan Documents, the collection and disbursementof all funds hereunder and the other instruments and documents to be deliveredhereunder, (b) extraordinary expenses of Agent in connection with theadministration of the Loan Documents and the other instruments and documents tobe delivered hereunder, and (c) the reasonable fees and out-of-pocket expensesof special counsel for Agent, with respect to the foregoing, and of localcounsel, if any, who may be retained by said special counsel with respectthereto.  Borrower also agrees to pay ondemand all costs and expenses of Agent and the Lenders, including reasonableattorneys’ fees and expenses, in connection with the restructuring orenforcement of the Obligations, this Agreement or any Related Writing.  In addition, Borrower shall pay any and allstamp and other taxes and fees payable or determined to be payable inconnection with the execution and delivery of the Loan Documents, and the otherinstruments and documents to be delivered hereunder, and agrees to hold Agentand each Lender harmless from and against any and all liabilities with respectto or resulting from any delay in paying or failure to pay such taxes or fees.

 

Section 11.6.  Indemnification.  Borrower agrees to defend, indemnify andhold harmless Agent and the Lenders (and their respective affiliates, officers,directors, attorneys, agents and employees) from and against any and allliabilities, obligations, losses, damages, penalties, actions, judgments,suits, costs, expenses (including attorneys’ fees but excluding anticipatedprofits) or disbursements of any kind or nature whatsoever that may be imposedon, incurred by or asserted against Agent or any Lender in connection with anyinvestigative, administrative or judicial proceeding (whether or not suchLender or Agent shall be designated a party thereto) or any other claim by anyPerson relating to or arising out of any Loan Document or any actual orproposed use of proceeds of the Loans or any of the Obligations, or anyactivities of any Company or its Affiliates; provided that no Lender nor Agentshall have the right to be indemnified under this Section 11.6 for its owngross negligence or willful misconduct as

 

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determined by a court ofcompetent jurisdiction.  All obligationsprovided for in this Section 11.6 shall survive any termination of thisAgreement.

 

Section 11.7.  Obligations Several; No FiduciaryObligations.  The obligations of theLenders hereunder are several and not joint. Nothing contained in this Agreement and no action taken by Agent or theLenders pursuant hereto shall be deemed to constitute Agent or the Lenders apartnership, association, joint venture or other entity.  No default by any Lender hereunder shallexcuse the other Lenders from any obligation under this Agreement; but noLender shall have or acquire any additional obligation of any kind by reason ofsuch default.  The relationship betweenBorrower and the Lenders with respect to the Loan Documents and the RelatedWritings is and shall be solely that of debtor and creditors, respectively, andneither Agent nor any Lender shall have any fiduciary obligation toward anyCredit Party with respect to any such documents or the transactionscontemplated thereby.

 

Section 11.8.  Execution in Counterparts.  This Agreement may be executed in any numberof counterparts and by different parties hereto in separate counterparts and byfacsimile signature, each of which counterparts when so executed and deliveredshall be deemed to be an original and all of which taken together shallconstitute but one and the same agreement.

 

Section 11.9.  Binding Effect; Borrower’s Assignment.  This Agreement shall become effective whenit shall have been executed by Borrower, Agent and each Lender and thereaftershall be binding upon and inure to the benefit of Borrower, Agent and each ofthe Lenders and their respective successors and permitted assigns, except thatBorrower shall not have the right to assign its rights hereunder or anyinterest herein without the prior written consent of Agent and all of theLenders.

 

Section 11.10.  Lender Assignments.

 

(a)                                  Assignmentsof Commitments.  Each Lender shallhave the right at any time or times to assign to an Eligible Transferee (otherthan to a Lender that shall not be in compliance with this Agreement), withoutrecourse, all or a percentage of all of the following: (i) such Lender’sCommitment, (ii) all Loans made by that Lender, (iii) such Lender’s Notes, and(iv) such Lender’s interest in any Letter of Credit or Swing Loan, and anyparticipation purchased pursuant to Section 2.2 or 9.5 hereof.

 

(b)                                 PriorConsent.  No assignment may beconsummated pursuant to this Section 11.10 without the prior writtenconsent of Borrower and Agent (other than an assignment by any Lender to anyaffiliate of such Lender which affiliate is an Eligible Transferee and eitherwholly-owned by a Lender or is wholly-owned by a Person that wholly owns,either directly or indirectly, such Lender), which consent of Borrower andAgent shall not be unreasonably withheld; provided, however, that Borrower’sconsent shall not be required if, at the time of the proposed assignment, anyDefault or Event of Default shall then exist. Anything herein to the contrary notwithstanding, any Lender may at anytime make a collateral assignment of all or any portion of its rights under theLoan Documents to a Federal Reserve Bank, and no such assignment shall releasesuch assigning Lender from its obligations hereunder.

 

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(c)                                  MinimumAmount.  Each such assignment shallbe in a minimum amount of the lesser of Five Million Dollars ($5,000,000) ofthe assignor’s Commitment and interest herein or the entire amount of theassignor’s Commitment and interest herein.

 

(d)                                 AssignmentFee.  Unless the assignment shall beto an affiliate of the assignor or the assignment shall be due to merger of theassignor or for regulatory purposes, either the assignor or the assignee shallremit to Agent, for its own account, an administrative fee of Three ThousandFive Hundred Dollars ($3,500).

 

(e)                                  AssignmentAgreement.  Unless the assignmentshall be due to merger of the assignor or a collateral assignment forregulatory purposes, the assignor shall (i) cause the assignee to executeand deliver to Borrower and Agent an Assignment Agreement, and(ii) execute and deliver, or cause the assignee to execute and deliver, asthe case may be, to Agent such additional amendments, assurances and otherwritings as Agent may reasonably require.

 

(f)                                    Non-U.S.Assignee.  If the assignment is tobe made to an assignee that is organized under the laws of any jurisdictionother than the United States or any state thereof, the assignor Lender shallcause such assignee, at least five Business Days prior to the effective date ofsuch assignment, (i) to represent to the assignor Lender (for the benefitof the assignor Lender, Agent and Borrower) that under applicable law andtreaties no taxes will be required to be withheld by Agent, Borrower or theassignor with respect to any payments to be made to such assignee in respect ofthe Loans hereunder, (ii) to furnish to the assignor Lender (and, in thecase of any assignee registered in the Register (as defined below), Agent andBorrower) either U.S. Internal Revenue Service Form W-8ECI or U.S. InternalRevenue Service Form W-8BEN, as applicable (wherein such assignee claimsentitlement to complete exemption from U.S. federal withholding tax on allpayments hereunder), and (iii) to agree (for the benefit of the assignor,Agent and Borrower) to provide to the assignor Lender (and, in the case of anyassignee registered in the Register, to Agent and Borrower) a new Form W-8ECI,Form W-8IMY or Form W-8BEN, as applicable, upon the expiration or obsolescenceof any previously delivered form and comparable statements in accordance withapplicable U.S. laws and regulations and amendments duly executed and completedby such assignee, and to comply from time to time with all applicable U.S. lawsand regulations with regard to such withholding tax exemption.

 

(g)                                 Deliveriesby Borrower.  Upon satisfaction ofall applicable requirements specified in subsections (a) through (f)above, Borrower shall execute and deliver (i) to Agent, the assignor andthe assignee, any consent or release (of all or a portion of the obligations ofthe assignor) required to be delivered by Borrower in connection with theAssignment Agreement, and (ii) to the assignee and the assignor, ifapplicable, an appropriate Note or Notes. After delivery of the new Note or Notes, the assignor’s Note or Notesbeing replaced shall be returned to Borrower marked “replaced”.

 

(h)                                 Effectof Assignment.  Upon satisfaction ofall applicable requirements set forth in subsections (a) through (g)above, and any other condition contained in this Section 11.10,(i) the assignee shall become and thereafter be deemed to be a “Lender”for the purposes of this Agreement, (ii) the assignor shall be releasedfrom its obligations hereunder to the extent that its

 

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interest has beenassigned, (iii) in the event that the assignor’s entire interest has beenassigned, the assignor shall cease to be and thereafter shall no longer bedeemed to be a “Lender” and (iv) the signature pages hereto and Schedule 1hereto shall be automatically amended, without further action, to reflect theresult of any such assignment.

 

(i)                                     Agentto Maintain Register.  Agent shallmaintain at the address for notices referred to in Section 11.4 hereof acopy of each Assignment Agreement delivered to it and a register (the“Register”) for the recordation of the names and addresses of the Lenders andthe Commitment of, and principal amount of the Loans owing to, each Lender fromtime to time.  The entries in theRegister shall be conclusive, in the absence of manifest error, and Borrower,Agent and the Lenders may treat each Person whose name is recorded in theRegister as the owner of the Loan recorded therein for all purposes of thisAgreement.  The Register shall beavailable for inspection by Borrower or any Lender at any reasonable time andfrom time to time upon reasonable prior notice.

 

Section 11.11.  Sale of Participations.  Any Lender may, in the ordinary course ofits commercial banking business and in accordance with applicable law, at anytime sell participations to one or more Eligible Transferees (each a“Participant”) in all or a portion of its rights or obligations under thisAgreement and the other Loan Documents (including, without limitation, all or aportion of the Commitment and the Loans and participations owing to it and theNote held by it); provided, that:

 

(a)                                  anysuch Lender’s obligations under this Agreement and the other Loan Documentsshall remain unchanged;

 

(b)                                 suchLender shall remain solely responsible to the other parties hereto for theperformance of such obligations;

 

(c)                                  theparties hereto shall continue to deal solely and directly with such Lender inconnection with such Lender’s rights and obligations under this Agreement andeach of the other Loan Documents;

 

(d)                                 suchParticipant shall be bound by the provisions of Section 9.5 hereof, andthe Lender selling such participation shall obtain from such Participant awritten confirmation of its agreement to be so bound; and

 

(e)                                  noParticipant (unless such Participant is itself a Lender) shall be entitled torequire such Lender to take or refrain from taking action under this Agreementor under any other Loan Document, except that such Lender may agree with suchParticipant that such Lender will not, without such Participant’s consent, takeaction of the type described as follows:

 

(i)                                     increasethe portion of the participation amount of any Participant over the amountthereof then in effect, or extend the Commitment Period, without the writtenconsent of each Participant affected thereby; or

 

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(ii)                                  reducethe principal amount of or extend the time for any payment of principal of anyLoan, or reduce the rate of interest or extend the time for payment of intereston any Loan, or reduce the commitment fee, without the written consent of eachParticipant affected thereby.

 

Borrower agrees that anyLender that sells participations pursuant to this Section shall still beentitled to the benefits of Article III hereof, notwithstanding any suchtransfer; provided, however, that the obligations of Borrower shall notincrease as a result of such transfer and Borrower shall have no obligation toany Participant.

 

Section 11.12.  Severability of Provisions; Captions;Attachments.  Any provision of thisAgreement that shall be prohibited or unenforceable in any jurisdiction shall,as to such jurisdiction, be ineffective to the extent of such prohibition orunenforceability without invalidating the remaining provisions hereof oraffecting the validity or enforceability of such provision in any otherjurisdiction.  The several captions toSections and subsections herein are inserted for convenience only andshall be ignored in interpreting the provisions of this Agreement.  Each schedule or exhibit attached tothis Agreement shall be incorporated herein and shall be deemed to be a parthereof.

 

Section 11.13.  Investment Purpose.  Each of the Lenders represents and warrantsto Borrower that it is entering into this Agreement with the present intentionof acquiring any Note issued pursuant hereto for investment purposes only andnot for the purpose of distribution or resale, it being understood, however,that each Lender shall at all times retain full control over the disposition ofits assets.

 

Section 11.14.  Entire Agreement.  This Agreement, any Note and any other LoanDocument or other agreement, document or instrument attached hereto or executedon or as of the Closing Date integrate all of the terms and conditionsmentioned herein or incidental hereto and supersede all oral representationsand negotiations and prior writings with respect to the subject matter hereof.

 

Section 11.15.  Legal Representation of Parties.  The Loan Documents were negotiated by theparties with the benefit of legal representation and any rule of constructionor interpretation otherwise requiring this Agreement or any other Loan Documentto be construed or interpreted against any party shall not apply to anyconstruction or interpretation hereof or thereof.

 

Section 11.16.  Governing Law; Submission to Jurisdiction.  This Agreement, each of the Notes and anyRelated Writing shall be governed by and construed in accordance with the lawsof the State of Ohio and the respective rights and obligations of Borrower,Agent, and the Lenders shall be governed by Ohio law, without regard toprinciples of conflicts of laws. Borrower hereby irrevocably submits to the non-exclusive jurisdiction ofany Ohio state or federal court sitting in Cleveland, Ohio, over any action orproceeding arising out of or relating to this Agreement, the Obligations or anyRelated Writing, and Borrower hereby irrevocably agrees that all claims inrespect of such action or proceeding may be heard and determined in such Ohiostate or federal court.  Borrower, onbehalf of itself and its Subsidiaries, hereby

 

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irrevocably waives, tothe fullest extent permitted by law, any objection it may now or hereafter haveto the laying of venue in any action or proceeding in any such court as well asany right it may now or hereafter have to remove such action or proceeding,once commenced, to another court on the grounds of FORUM NON CONVENIENS orotherwise.  Borrower agrees that afinal, nonappealable judgment in any such action or proceeding shall be conclusiveand may be enforced in other jurisdictions by suit on the judgment or in anyother manner provided by law.

 

[Remainder ofpage left intentionally blank]

 

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JURY TRIAL WAIVER.  TO THE EXTENT PERMITTED BY LAW, BORROWER,AGENT AND EACH LENDER WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVINGANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWER,AGENT AND THE LENDERS, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATEDTO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITHTHIS AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTEDOR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.

 

IN WITNESS WHEREOF, theparties have executed and delivered this Agreement as of the date first setforth above.

 
| Address: | 501 Kansas Avenue                 | EPIQ SYSTEMS, INC.                     |
|----------|----------------------------------------|---------------------------------------------|
|     | Kansas City,  Kansas  66105  |                                        |   |
|     | Attn: Elizabeth Braham                 | By:                                         |    /s/   Elizabeth  Braham  |
|     |                                   |                                        | Elizabeth Braham  |
|     |                                   |                                        | Secretary |
|     |                                   |                                        |   |
| Address: | 127 Public Square                 | KEYBANK NATIONAL  ASSOCIATION,              |
|     | Cleveland, Ohio  44114-1306  |   as Agent  and as a Lender  |
|     | Attn:  Institutional Banking      |                                        |   |
|     |                                   | By:                                         |    /s/   Jeff  Kalinowski |
|     |                                   | Name:                                       | Vice President |
|     |                                   | Title:                                      | Jeff Kalinowski |
|          |                                        |                                             |  |  |  |  |  |

 

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SCHEDULE 1

 
| **LENDERS**                   |   | **REVOLVING  CREDIT  COMMITMENT  PERCENTAGE** |   | **REVOLVING  CREDIT  COMMITMENT  AMOUNT** |       | **TERM LOAN  COMMITMENT  PERCENTAGE** |   | **TERM LOAN  COMMITMENT  AMOUNT** |   | **MAXIMUM  AMOUNT** |   |
|-------------------------------|--------|-----------------------------------------------|--------|-------------------------------------------|------------|---------------------------------------|--------|-----------------------------------|--------|---------------------|--------|
| KeyBank  National Association |   | 100                                           | %      | $                                         | 50,000,000 |                                  | 100    | %                                 | $      | 25,000,000          |   | $ | 75,000,000 |   |
| Total  Commitment Amount      |   | 100                                           | %      | $                                         | 50,000,000 |                                  | 100    | %                                 | $      | 25,000,000          |   | $ | 75,000,000 |   |

 

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EXHIBIT A

FORM OF

REVOLVING CREDITNOTE

 
| $                      |   | Cleveland, Ohio     |
|---------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|
|                                                                                                                            |   | July 20,  2004 |

 

FOR VALUE RECEIVED, theundersigned, EPIQ SYSTEMS, INC., a Missouri corporation (“Borrower”), promisesto pay, on the last day of the Commitment Period, as defined in the Credit andSecurity Agreement (as hereinafter defined), to the order of[                                             ](“Lender”) at the main office of KEYBANK NATIONAL ASSOCIATION, as Agent, ashereinafter defined, 127 Public Square, Cleveland, Ohio 44114-1306 theprincipal sum of

 
|                                                                                                                                                                                                | DOLLARS |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|

 

or the aggregate unpaidprincipal amount of all Revolving Loans, as defined in the Credit and SecurityAgreement made by Lender to Borrower pursuant to Section 2.2 of the Creditand Security Agreement, whichever is less, in lawful money of the United Statesof America.

 

As used herein, “Creditand Security Agreement” means the Credit and Security Agreement dated as ofJuly 20, 2004, among Borrower, the Lenders, as defined therein, andKeyBank National Association, as lead arranger, sole book runner andadministrative agent for the Lenders (“Agent”), as the same may from time totime be amended, restated or otherwise modified.  Each capitalized term used herein that is defined in the Creditand Security Agreement and not otherwise defined herein shall have the meaningascribed to it in the Credit and Security Agreement.

 

Borrower also promises topay interest on the unpaid principal amount of each Revolving Loan from time totime outstanding, from the date of such Revolving Loan until the payment infull thereof, at the rates per annum that shall be determined in accordancewith the provisions of Section 2.4(a) of the Credit and SecurityAgreement.  Such interest shall bepayable on each date provided for in such Section 2.4(a); provided,however, that interest on any principal portion that is not paid when due shallbe payable on demand.

 

The portions of theprincipal sum hereof from time to time representing Base Rate Loans andEurodollar Loans, and payments of principal of any thereof, shall be shown onthe records of Lender by such method as Lender may generally employ; provided,however, that failure to make any such entry shall in no way detract from theobligations of Borrower under this Note.

 

If this Note shall not bepaid at maturity, whether such maturity occurs by reason of lapse of time or byoperation of any provision for acceleration of maturity contained in the Creditand Security Agreement, the principal hereof and the unpaid interest thereonshall bear interest, until paid, at a rate per annum equal to the Default Rate.  All payments of principal of and interest onthis Note shall be made in immediately available funds.

 

This Note is one of theRevolving Credit Notes referred to in the Credit and Security Agreement.  Reference is made to the Credit and SecurityAgreement for a description of the

 

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right of the undersignedto anticipate payments hereof, the right of the holder hereof to declare thisNote due prior to its stated maturity, and other terms and conditions uponwhich this Note is issued.

 

Borrower herebydesignates all Indebtedness and other obligations now or hereafter incurred orotherwise outstanding under this Note, the Credit and Security Agreement andthe other Loan Documents, as defined in the Credit and Security Agreement, tobe “Senior Indebtedness” as defined in the Note Agreement.

 

Except as expresslyprovided in the Credit and Security Agreement, Borrower expressly waivespresentment, demand, protest and notice of any kind.  This Note shall be governed by and construed in accordance withthe laws of the State of Ohio, without regard to conflicts of laws provisions.

 

JURY TRIAL WAIVER.  BORROWER, TO THE EXTENT PERMITTED BY LAW,HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWER, AGENT AND THELENDERS, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, ORINCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THISAGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED ORDELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.

 
|   | EPIQ SYSTEMS, INC. |
|--------|--------------------|
|   |               |
|   | By:                |   |
|   | Name:              |   |
|   | Title:             |   |
|        |                    |  |  |  |

 

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EXHIBIT B

FORM OF

SWING LINE NOTE

 
| $5,000,000 |   | Cleveland, Ohio     |
|------------|--------|---------------------|
|       |   | July 20,  2004 |

 

FOR VALUE RECEIVED, theundersigned, EPIQ SYSTEMS, INC., a Missouri corporation (“Borrower”), promisesto pay to the order of KEYBANK NATIONAL ASSOCIATION (“Lender”) at the mainoffice of KEYBANK NATIONAL ASSOCIATION, as Agent, as hereinafter defined, 127Public Square, Cleveland, Ohio 44114-1306 the principal sum of

 
| FIVE MILLION AND  00/100                                                                                                                                              | DOLLARS |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|

 

or the aggregate unpaidprincipal amount of all Swing Loans, as defined in the Credit and SecurityAgreement (as hereinafter defined) made by Lender to Borrower pursuant toSection 2.2(c) of the Credit and Security Agreement, whichever is less, inlawful money of the United States of America on the earlier of the last day ofthe Commitment Period, as defined in the Credit and Security Agreement, or,with respect to each Swing Loan, the Swing Loan Maturity Date applicablethereto.

 

As used herein, “Creditand Security Agreement” means the Credit and Security Agreement dated as ofJuly 20 2004, among Borrower, the Lenders, as defined therein, and KeyBankNational Association, as lead arranger, sole book runner and administrativeagent for the Lenders (“Agent”), as the same may from time to time be amended,restated or otherwise modified.  Eachcapitalized term used herein that is defined in the Credit and SecurityAgreement and not otherwise defined herein shall have the meaning ascribed toit in the Credit and Security Agreement.

 

Borrower also promises topay interest on the unpaid principal amount of each Swing Loan from time totime outstanding, from the date of such Swing Loan until the payment in fullthereof, at the rates per annum that shall be determined in accordance with theprovisions of Section 2.4(b) of the Credit and Security Agreement.  Such interest shall be payable on each dateprovided for in such Section 2.4(b); provided, however, that interest onany principal portion which is not paid when due shall be payable on demand.

 

The principal sum hereoffrom time to time and the payments of principal and interest thereon, shall beshown on the records of Lender by such method as Lender may generally employ;provided, however, that failure to make any such entry shall in no way detractfrom the obligation of Borrower under this Note.

 

If this Note shall not bepaid at maturity, whether such maturity occurs by reason of lapse of time or byoperation of any provision for acceleration of maturity contained in the Creditand Security Agreement, the principal hereof and the unpaid interest thereonshall bear interest, until paid, at a rate per annum equal to the DefaultRate.  All payments of principal of andinterest on this Note shall be made in immediately available funds.

 

B-1

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This Note is the SwingLine Note referred to in the Credit and Security Agreement.  Reference is made to the Credit and SecurityAgreement for a description of the right of the undersigned to anticipatepayments hereof, the right of the holder hereof to declare this Note due priorto its stated maturity, and other terms and conditions upon which this Note isissued.

 

Borrower herebydesignates all Indebtedness and other obligations now or hereafter incurred orotherwise outstanding under this Note, the Credit and Security Agreement andthe other Loan Documents, as defined in the Credit and Security Agreement, tobe “Senior Indebtedness” as defined in the Note Agreement.

 

Except as expresslyprovided in the Credit and Security Agreement, Borrower expressly waivespresentment, demand, protest and notice of any kind.  This Note shall be governed by and construed in accordance withthe laws of the State of Ohio, without regard to conflicts of laws provisions.

 

JURY TRIAL WAIVER.  BORROWER, TO THE EXTENT PERMITTED BY LAW,HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWER, AGENT AND THELENDERS, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, ORINCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THISNOTE OR ANY OTHER NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED ORDELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.

 
|   | EPIQ SYSTEMS, INC. |
|--------|--------------------|
|   |               |
|   | By:                |   |
|   | Name:              |   |
|   | Title:             |   |
|        |                    |  |  |  |

 

B-2

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EXHIBIT C

FORM OF

TERM NOTE

 
| $                           |   | Cleveland, Ohio     |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|
|                                                                                                                                                          |   | July 20,  2004 |

 

FOR VALUE RECEIVED, theundersigned, EPIQ SYSTEMS, INC., a Missouri corporation (“Borrower”), promisesto pay to the order of[                                                  ](“Lender”) at the main office of KEYBANK NATIONAL ASSOCIATION, as Agent, ashereinafter defined, 127 Public Square, Cleveland, Ohio 44114-1306 theprincipal sum of

 
|                                                                                                                                                                                                | DOLLARS |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|

 

in lawful money of theUnited States of America in consecutive principal payments as set forth in theCredit and Security Agreement.

 

As used herein, “Creditand Security Agreement” means the Credit and Security Agreement dated as of July 20,2004, among Borrower, the Lenders, as defined therein, and KeyBank NationalAssociation, as lead arranger, sole book runner and administrative agent forthe Lenders (“Agent”), as the same may from time to time be amended, restatedor otherwise modified.  Each capitalizedterm used herein that is defined in the Credit and Security Agreement and nototherwise defined herein shall have the meaning ascribed to it in the Creditand Security Agreement.

 

Borrower also promises topay interest on the unpaid principal amount of the Term Loan from time to timeoutstanding, from the date of the Term Loan until the payment in full thereof,at the rates per annum that shall be determined in accordance with theprovisions of Section 2.4(c) of the Credit and Security Agreement.  Such interest shall be payable on each dateprovided for in such Section 2.4(c); provided, however, that interest onany principal portion that is not paid when due shall be payable on demand.

 

The portions of theprincipal sum hereof from time to time representing Base Rate Loans andEurodollar Loans, and payments of principal of either thereof, shall be shownon the records of Lender by such method as Lender may generally employ;provided, however, that failure to make any such entry shall in no way detractfrom the obligations of Borrower under this Note.

 

If this Note shall not bepaid at maturity, whether such maturity occurs by reason of lapse of time or byoperation of any provision for acceleration of maturity contained in the Creditand Security Agreement, the principal hereof and the unpaid interest thereonshall bear interest, until paid, at a rate per annum equal to the DefaultRate.  All payments of principal of andinterest on this Note shall be made in immediately available funds.

 

This Note is one of theTerm Notes referred to in the Credit and Security Agreement.  Reference is made to the Credit and SecurityAgreement for a description of the right of the undersigned to anticipatepayments hereof, the right of the holder hereof to declare this Note due priorto its stated maturity, and other terms and conditions upon which this Note isissued.

 

C-1

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Borrower herebydesignates all Indebtedness and other obligations now or hereafter incurred orotherwise outstanding under this Note, the Credit and Security Agreement andthe other Loan Documents, as defined in the Credit and Security Agreement, tobe “Senior Indebtedness” as defined in the Note Agreement.

 

Except as expresslyprovided in the Credit and Security Agreement, Borrower expressly waivespresentment, demand, protest and notice of any kind.  This Note shall be governed by and construed in accordance withthe laws of the State of Ohio, without regard to conflicts of laws provisions.

 

JURY TRIAL WAIVER.  BORROWER, TO THE EXTENT PERMITTED BY LAW,HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWER, AGENT AND THELENDERS, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, ORINCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THISNOTE OR ANY OTHER NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED ORDELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.

 
|   | EPIQ SYSTEMS, INC. |
|--------|--------------------|
|   |               |
|   | By:                |   |
|   | Name:              |   |
|   | Title:             |   |
|        |                    |  |  |  |

 

C-2

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