Document:

Exhibit
4.2

 

AGREEMENT

FOR REGISTRATION RIGHTS

 

This Agreement (this “Agreement”) is entered into effective as
of the 15th day of September, 2003 by Magnetek, Inc., a Delaware corporation
(the “Company”), SEI Private Trust Company, a federal thrift savings
bank regulated by the office of Thrift Supervision (the “Trustee”), in
its capacity as successor to Deutsche Bank (the “Previous Trustee”) as
trustee of the trust (the “Trust”) created under the Magnetek, Inc.
FlexCare Plus Retirement Pension Plan (the “Pension Plan”), and the
Company’s Pension Committee (the “Pension Committee”), in its role as
the named investment fiduciary for account and on behalf of the Pension
Plan.  Unless otherwise defined herein,
the capitalized terms used in this Agreement shall have the meaning assigned to
them in the Registration Rights Agreement dated as of June 26, 2002 by and
between the Company and U.S. Trust Company, N.A. (the “Manager”) (the “Rights
Agreement”).

 

RECITALS

 

WHEREAS, under the Rights Agreement, the Manager, in its capacity as
the investment manager of a segregated account held in the Trust, for the
account and on behalf of the Pension Plan, was granted certain registration
rights with respect to Common Stock; and

 

WHEREAS, the Company now desires to contribute to the Trust up to
535,000 shares of Common Stock (the “Supplemental Shares”), and intends
that the Trustee and Pension Committee, on behalf of the Pension Plan and
Trust, be entitled to all the registration rights under the Rights Agreement
with respect to the Supplemental Shares.

 

NOW, THEREFORE, in consideration of the premises, mutual promises, and
all other terms and conditions contained herein, the parties hereto agree as
follows:

 

1.                                       Registrable
Securities.  The 535,000 shares of
Common Stock to be contributed to the Trust on September 15, 2003, and any
Common Stock of the Company issued in respect thereof (in the form of stock
dividend or otherwise) or in exchange or replacement for the Common Stock so
contributed, shall be subject to the Rights Agreement and shall be entitled to
all the registration rights granted hereunder.

 

2.                                       Enforcement
Rights. The rights of the Manager under the Rights Agreement will be
exercisable by the Trustee and the Pension Committee with respect to said
Supplemental Shares; it being acknowledged and agreed that the Trustee has no
duties, fiduciary or otherwise, in respect of (i) the contribution of the
Supplemental Shares or (ii) the determination whether to hold or divest of the
Common Stock held by the Pension Plan, including the Supplemental Shares.

 

1

 

IN
WITNESS WHEREOF, the Company, the Trustee and the Pension
Committee have executed this Agreement as of the date first written above.

 

	
   

  	
  THE COMPANY:

  
	
   

  	
   

  
	
   

  	
  MAGNETEK,
  INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Tina D.
  McKnight

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Vice President, General Counsel and Secretary

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  10900 Wilshire Boulevard, Suite 850

  Los Angeles, CA  90024-6501

  
	
   

  	
   

  
	
   

  	
  THE TRUSTEE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SEI Private Trust Company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  illegible

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  V.P. SEI Private Trust Co.

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  1 Freedom Valley Drive

  	
   

  
	
   

  	
   

  	
  Oaks, PA 19456

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE PENSION COMMITTEE:

  
	
   

  	
   

  
	
   

  	
  MEMBERS

  
	
   

  	
   

  
	
   

  	
  /s/ David P.
  Reiland

  	
   

  
	
   

  	
  Name:

  	
  David P. Reiland

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Marty
  Schwenner

  	
   

  
	
   

  	
  Name:

  	
  Marty Schwenner

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  10900 Wilshire Boulevard, Suite 850

  Los Angeles, CA  90024-6501Exhibit 10.1

 

CREDIT AGREEMENT

 

DATED AS OF AUGUST 15,
2003

 

AMONG

 

 

MAGNETEK, INC.,
MAGNETEK ADS POWER, INC., AND

MAXTEC INTERNATIONAL
CORP.

 

AS BORROWERS,

 

THE LOAN PARTIES
PARTY HERETO,

 

 

BANK ONE, NA,

 

AS LENDER

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I. 
  DEFINITIONS; CONSTRUCTION

  
	
   

  
	
  1.1

  	
  Defined
  Terms

  
	
  1.2

  	
  Other Definitional Provisions; Construction

  
	
   

  	
   

  
	
  ARTICLE II.  THE FACILITY

  
	
   

  
	
  2.1.

  	
  The
  Facility

  
	
  2.1.1.

  	
  Revolving Loans

  
	
  2.1.2.

  	
  Facility
  LCs

  
	
  2.2.

  	
  Payment of the Obligations

  
	
  2.3.

  	
  Minimum Amount of Each Loan

  
	
  2.4.

  	
  Funding Accounts; Controlled Disbursement
  Accounts; C;

  
	
  2.5.

  	
  Reliance Upon Authority; No Liability

  
	
  2.6.

  	
  Conversion and Continuation of Outstanding
  Loans

  
	
  2.7.

  	
  Telephonic Notices

  
	
  2.8.

  	
  Fees

  
	
  2.9.

  	
  Interest
  Rates.

  
	
  2.10.

  	
  Eurodollar Loans Post Default; Default
  Rates

  
	
  2.11.

  	
  Interest Payment Dates; Interest and Fee
  Basis

  
	
  2.12.

  	
  Voluntary Prepayments

  
	
  2.13.

  	
  Mandatory Prepayments

  
	
  2.14.

  	
  Termination of the Facility

  
	
  2.15.

  	
  Method of Payment

  
	
  2.16.

  	
  Collection of Accounts; Lock Box; Cash
  Collateral Account; Application of Payments

  
	
  2.17.

  	
  Indemnity for Returned Payments

  
	
  2.18.

  	
  Noteless Agreement; Evidence of
  Indebtedness

  
	
  2.19.

  	
  Lending Installations

  
	
  2.20.

  	
  Limitation of Interest

  
	
  2.21

  	
  One General Obligation;
  Cross-Collateralized; Joint, Several and Primary Obligations

  
	
   

  	
   

  
	
  ARTICLE III.  YIELD
  PROTECTION; TAXES

  
	
   

  
	
  3.1.

  	
  Yield
  Protection

  
	
  3.2.

  	
  Changes in Capital Adequacy Regulations

  
	
  3.3.

  	
  Availability of Types of Loans

  
	
  3.4.

  	
  Funding Indemnification

  
	
  3.5.

  	
  Taxes

  
	
  3.6.

  	
  Lender Statements; Survival of Indemnity

  
	
   

  	
   

  
	
  ARTICLE IV.  CONDITIONS
  PRECEDENT

  
	
   

  
	
  4.1.

  	
  Effectiveness; Initial Loan Advance

  
	
  4.2.

  	
  Each Credit Extension

  
	
   

  	
   

  
	
  ARTICLE V. 
  REPRESENTATIONS AND WARRANTIES

  
	
   

  
	
  5.1.

  	
  Existence and Standing

  
	
  5.2.

  	
  Authorization and Validity

  
	
  5.3.

  	
  No Conflict; Government Consent

  
	
  5.4.

  	
  Security Interest in Collateral

  
	
  5.5.

  	
  Financial Statements

  
	
  5.6.

  	
  Material Adverse Change

  
	
  5.7.

  	
  Taxes

  
	
  5.8.

  	
  Litigation and Contingent Obligations

  
	
  5.9.

  	
  Subsidiaries

  
	
  5.10.

  	
  ERISA

  
	
  5.11.

  	
  Accuracy of Information

  

 

i

 

	
  5.12.

  	
  Names; Prior Transactions

  
	
  5.13.

  	
  Regulation
  U

  
	
  5.14.

  	
  Material Agreements

  
	
  5.15.

  	
  Compliance With Laws

  
	
  5.16.

  	
  Ownership of Properties

  
	
  5.17.

  	
  Plan Assets; Prohibited Transactions

  
	
  5.18.

  	
  Environmental Matters

  
	
  5.19.

  	
  Investment Company Act

  
	
  5.20.

  	
  Public Utility Holding Company Act

  
	
  5.21.

  	
  Bank
  Accounts

  
	
  5.22.

  	
  Indebtedness

  
	
  5.23.

  	
  Affiliate Transactions

  
	
  5.24.

  	
  Real Property; Leases

  
	
  5.25.

  	
  Intellectual Property Rights

  
	
  5.26.

  	
  Insurance

  
	
  5.27.

  	
  Solvency

  
	
  5.28.

  	
  Subordinated Indebtedness

  
	
  5.29.

  	
  Post-Retirement Benefits

  
	
  5.30.

  	
  Common
  Enterprise

  
	
  5.31.

  	
  Reportable Transactions

  
	
  5.32.

  	
  Labor
  Disputes

  
	
   

  	
   

  
	
  ARTICLE VI.  COVENANTS

  
	
   

  
	
  6.1.

  	
  Financial and Collateral Reporting

  
	
  6.2.

  	
  Use
  of Proceeds

  
	
  6.3.

  	
  Notices

  
	
  6.4.

  	
  Conduct of Business

  
	
  6.5.

  	
  Taxes

  
	
  6.6.

  	
  Payment of Indebtedness and Other
  Liabilities

  
	
  6.7.

  	
  Insurance

  
	
  6.8.

  	
  Compliance
  with Laws

  
	
  6.9.

  	
  Maintenance of Properties

  
	
  6.10.

  	
  Inspection

  
	
  6.11.

  	
  Appraisals

  
	
  6.12.

  	
  Communications with Accountants

  
	
  6.13.

  	
  Collateral Waiver Agreements and Real
  Estate Purchases

  
	
  6.14.

  	
  Deposit Account Control Agreements

  
	
  6.15.

  	
  Additional Collateral; Further Assurances

  
	
  6.16.

  	
  Dividends

  
	
  6.17.

  	
  Indebtedness

  
	
  6.18.

  	
  Capital
  Structure

  
	
  6.19.

  	
  Merger

  
	
  6.20.

  	
  Sale
  of Assets

  
	
  6.21.

  	
  Investments and Acquisitions

  
	
  6.22.

  	
  Liens

  
	
  6.23

  	
  Change of Name or Location; Change of
  Fiscal Year

  
	
  6.24.

  	
  Affiliate Transactions

  
	
  6.25.

  	
  Amendments to Agreements

  
	
  6.26.

  	
  Prepayment of Indebtedness; Subordinated
  Indebtedness

  
	
  6.27.

  	
  Letters
  of Credit

  
	
  6.28.

  	
  Financial Contracts

  
	
  6.29.

  	
  Financial Covenants

  
	
  6.29.1.

  	
  Capital Expenditures

  
	
  6.29.2.

  	
  Minimum Fixed Charge Coverage Ratio

  
	
  6.29.3.

  	
  Minimum
  EBITDA

  
	
  6.29.4.

  	
  Minimum Availability

  
	
  6.30.

  	
  Depository
  Banks

  
	
  6.31.

  	
  Sale
  of Accounts

  

 

ii

 

	
  6.32.

  	
  Required Rate Management Transactions

  
	
  6.33.

  	
  Holding Companies

  
	
  6.34.

  	
  Operating
  Profit

  
	
   

  	
   

  
	
  ARTICLE VII.  DEFAULTS

  
	
   

  
	
  7.1

  	
  Defaults

  
	
  7.2

  	
  Continuing Default

  
	
   

  	
   

  
	
  ARTICLE VIII.  REMEDIES; WAIVERS AND AMENDMENTS

  
	
   

  
	
  8.1.

  	
  Remedies

  
	
  8.2.

  	
  Waivers by Loan Parties

  
	
  8.3.

  	
  Amendments

  
	
  8.4.

  	
  Preservation of Rights

  
	
   

  	
   

  
	
  ARTICLE IX.  GENERAL
  PROVISIONS

  
	
   

  
	
  9.1.

  	
  Survival of Representations

  
	
  9.2.

  	
  Governmental Regulation

  
	
  9.3.

  	
  Headings

  
	
  9.4.

  	
  Entire
  Agreement

  
	
  9.5.

  	
  Several Obligations; Benefits of this
  Agreement

  
	
  9.6.

  	
  Expenses; Indemnification

  
	
  9.7.

  	
  Accounting

  
	
  9.8.

  	
  Severability of Provisions

  
	
  9.9.

  	
  Non-liability of Lender

  
	
   

  	
   

  
	
  ARTICLE X.  BENEFIT OF
  AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

  
	
   

  
	
  10.1.

  	
  Successors and Assigns

  
	
  10.2.

  	
  Participations

  
	
   

  	
   

  
	
  ARTICLE XI.  NOTICES

  
	
   

  
	
  11.1.

  	
  Notices; Effectiveness; Electronic
  Communication

  
	
  11.2.

  	
  Change
  of Address

  
	
   

  	
   

  
	
  ARTICLE XII. 
  COUNTERPARTS

  
	
   

  
	
  ARTICLE XIII.  GUARANTY

  
	
   

  
	
  13.1.

  	
  Guaranty

  
	
  13.2.

  	
  Guaranty of Payment

  
	
  13.3.

  	
  No Discharge or Diminishment of Guaranty

  
	
  13.4.

  	
  Defenses
  Waived

  
	
  13.5.

  	
  Rights of Subrogation

  
	
  13.6.

  	
  Reinstatement; Stay of Acceleration

  
	
  13.7.

  	
  Information

  
	
  13.8.

  	
  Termination

  
	
  13.9.

  	
  Taxes

  
	
  13.10.

  	
  Severability

  
	
  13.11.

  	
  Contribution

  
	
  13.12.

  	
  Lending
  Installations

  
	
  13.13.

  	
  Liability Cumulative

  
	
   

  	
   

  
	
  ARTICLE XIV.  CHOICE OF
  LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

  
	
   

  
	
  14.1.

  	
  CHOICE
  OF LAW

  
	
  14.2.

  	
  CONSENT TO JURISDICTION

  
	
  14.3.

  	
  WAIVER OF JURY TRIAL

  

 

iii

 

ATTACHMENTS

 

PRICING GRID

 

EXHIBITS

 

	
  EXHIBIT A.

  	
   

  	
  FORM OF BORROWING NOTICE

  
	
  EXHIBIT B.

  	
   

  	
  FORM OF CONVERSION/CONTINUATION NOTICE

  
	
  EXHIBIT C.

  	
   

  	
  REVOLVING NOTE

  
	
  EXHIBIT D.

  	
   

  	
  FORM OF OPINION

  
	
  EXHIBIT E.

  	
   

  	
  COMPLIANCE CERTIFICATE

  
	
  EXHIBIT F.

  	
   

  	
  JOINDER AGREEMENT

  
	
  EXHIBIT G.

  	
   

  	
  BORROWING BASE CERTIFICATE

  

 

SCHEDULES

 

	
  SCHEDULE 1

  	
   

  	
  BORROWER
  FACILITIES

  
	
  SCHEDULE 2

  	
   

  	
  FUNDING
  ACCOUNTS; CONTROLLED DISBURSEMENT ACCOUNTS; LOCK BOXES; CASH COLLATERAL
  ACCOUNT

  
	
  SCHEDULE 3

  	
   

  	
  EQUIPMENT
  LEASES

  
	
  SCHEDULE 5.1

  	
   

  	
  FOREIGN
  QUALIFICATIONS

  
	
  SCHEDULE 5.8

  	
   

  	
  LITIGATION
  AND CONTINGENT OBLIGATIONS

  
	
  SCHEDULE 5.9

  	
   

  	
  CAPITALIZATION
  AND SUBSIDIARIES

  
	
  SCHEDULE 5.12

  	
   

  	
  NAMES;
  PRIOR TRANSACTIONS

  
	
  SCHEDULE 5.14

  	
   

  	
  MATERIAL
  AGREEMENTS

  
	
  SCHEDULE 5.16

  	
   

  	
  OWNERSHIP
  OF PROPERTIES

  
	
  SCHEDULE 5.22

  	
   

  	
  INDEBTEDNESS

  
	
  SCHEDULE 5.23

  	
   

  	
  AFFILIATE
  TRANSACTIONS

  
	
  SCHEDULE 5.24

  	
   

  	
  REAL
  PROPERTY; LEASES

  
	
  SCHEDULE 5.25

  	
   

  	
  INTELLECTUAL
  PROPERTY RIGHTS

  
	
  SCHEDULE 5.26

  	
   

  	
  INSURANCE

  
	
  SCHEDULE 5.32

  	
   

  	
  LABOR
  MATTERS

  
	
  SCHEDULE 6.21

  	
   

  	
  OTHER
  INVESTMENTS

  
	
  SCHEDULE 6.22

  	
   

  	
  LIENS

  

 

iv

 

CREDIT AGREEMENT

 

This Credit Agreement (this “Agreement”), dated as of
August 15, 2003, is among MAGNETEK, INC., a Delaware corporation (“MagneTek”),
MAGNETEK ADS POWER, INC., a Delaware corporation and Subsidiary of MagneTek (“ADS”),
and MAXTEC INTERNATIONAL CORP., a Delaware corporation and Subsidiary of
MagneTek (“Maxtec”) as Borrowers, the Loan Parties, and BANK ONE, NA, a
national banking association having its principal office in Chicago, Illinois,
as Lender (the “Lender”).

 

RECITALS

 

WHEREAS, the
Borrowers have requested that the Lender make available to the Borrowers loans
and other extensions of credit in an aggregate amount not to exceed
$19,000,000, which extensions of credit will be used by the Borrowers for the
purposes set forth in Section 6.2;

 

WHEREAS, the
Borrowers and the other Loan Parties have agreed to secure all of their obligations
under the Loan Documents by granting to the Lender a security interest in and
lien upon the Collateral as set forth in the Collateral Documents; and

 

WHEREAS, the
Guarantors have agreed to guarantee all of the Obligations of the Borrowers
under the Loan Documents to the Lender as set forth in the Guaranty;

 

NOW THEREFORE,
in consideration of these premises and the terms and conditions set forth in
this Agreement, and for other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS;
CONSTRUCTION

 

1.1                                 Defined
Terms.  In addition to the other
terms defined in this Agreement, whenever the following capitalized terms
(whether or not underscored) are used, they shall be defined as follows:

 

“Account” shall have the meaning given to such term in the
Security Agreements.

 

“Account Debtor” means any Person obligated on an Account.

 

“Acquisition” means any transaction, or any series of related
transactions, consummated on or after the Closing Date, by which any Loan Party
(a) acquires any going business or all or substantially all of the assets of
any Person or the assets comprising any line of business or business unit or
division of such Person, whether through purchase of assets, merger or
otherwise or (b) directly or indirectly acquires (in one transaction or as the
most recent transaction in a series of transactions) at least a majority (in
number of votes) of the Capital Stock of a Person which has ordinary voting
power for the election of directors or other similar management personnel of a
Person (other than Capital Stock having such power only by reason of the
happening of a contingency) or a majority of the outstanding Capital Stock of a
Person.

 

 

“Affiliate” of any Person means any other Person directly or
indirectly controlling, controlled by or under common control with such
Person.  A Person shall be deemed to
control another Person if the controlling Person owns 10% or more of any class
of the voting Capital Stock of the controlled Person or possesses, directly or
indirectly, the power to direct or cause the direction of the management or
policies of the controlled Person, whether through ownership of Capital Stock,
by contract or otherwise.

 

“Alternate Base Rate” means, for any day, a rate of interest per
annum equal to the higher of (a) the Prime Rate for such day and (b) the sum of
the Federal Funds Effective Rate for such day plus 1/2% per annum.

 

“Applicable LC Fee Rate” means, at any time, the percentage rate
per annum payable in respect of standby Facility LCs as set forth in the Pricing
Schedule.

 

“Applicable Margin” means, with respect to Loans of any Type at
any time, the percentage rate per annum which is applicable at such time with
respect to Loans of such Type as set forth in the Pricing Schedule.

 

“Article” means an article of this Agreement unless another
document is specifically referenced.

 

“Authorized Officer” means any of the Chief Financial Officer or
the Vice President and Controller of a Borrower, acting singly.

 

“Availability” means, at any time, an amount equal to the lesser
of (a) the Commitment and (b) the Borrowing Base, in each case, minus
the Credit Exposure.

 

“Available Commitment” means, at any time, the Commitment then
in effect minus the Credit Exposure at such time.

 

“Available Funds” is defined in Section 2.16.2.

 

“Banking
Services” means each and any of the following bank services provided to any
Loan Party by the Lender or any of its Affiliates: (a) commercial credit cards,
(b) stored value cards and (c) treasury management services (including
controlled disbursement, automated clearinghouse transactions, return items,
overdrafts and interstate depository network services).

 

“Banking
Services Obligations” of the Loan Parties means any and all obligations of
the Loan Parties, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor) in connection with Banking
Services.

 

“Banking Services Reserves” means all Reserves which the Lender
from time to time establishes in its Permitted Discretion for Banking Services
then provided or outstanding.

 

“Bankruptcy Code” means Title 11 of the U.S. Code (11 U.S.C.
§ 101 et
seq.) and any rule or regulation issued thereunder.

 

2

 

“Borrower”
means each of MagneTek, ADS, Maxtec, and their respective successors and
assigns, and “Borrowers” means, collectively, MagneTek, ADS, Maxtec, and
their respective successors and assigns. 
To the extent a term or provision of this Agreement or any of the other
Loan Documents is applicable to a “Borrower”, it is applicable to each and
every Borrower unless the context expressly indicates otherwise.

 

“Borrower
Facility” means, collectively, those facilities described on Schedule 1
which are owned or leased by a Borrowing Base Group Member, other than
ADS.  “Borrower’s Facility” means
each of the foregoing facilities.

 

“Borrower
Representative” shall mean MagneTek in its capacity as the Borrower
Representative pursuant to the provisions of Section 2.5.

 

“Borrowing Base” means, at any time, the sum of:

 

(a)                                  (i)
85% of the Eligible Accounts of each Borrowing Base Group Member, other than
ADS plus
(ii) the lesser of (A) 85% of the Eligible Accounts of ADS or (B)
$1,000,000;

 

plus                         (b)                                 the
least of:

 

(i)                                     the sum of:
(A) 55% of ESI Inventory which at such time is Eligible Inventory; (B) 25% of
Telemotive Inventory which at such time is Eligible Inventory; (C) 25% of
Elevator Inventory which at such time is Eligible Inventory; (D) 20% of PEG Raw
Materials which at such time are Eligible Inventory; (E) 10% of PEG Rectifiers
which at such time are Eligible Inventory; (F) 35% of PEG Finished Goods which
at such time are Eligible Inventory; and (G) the lesser of (1) $350,000
or (2) the sum of (x) 10% of Mondel Canada Inventory which at such time is
Eligible Inventory and (y) 10% of Power Inventory which at such time is
Eligible Inventory;

 

(ii)                                  80% of the Net
Orderly Liquidation Value, as of any date, of the then aggregate amount of
Borrowers’ Eligible Inventory; and

 

(iii)                               $4,000,000;

 

plus                         (c)                                  $1,500,000
(the “Equipment Availability”); provided that the Equipment Availability
described in this subparagraph (c) shall be automatically and permanently
reduced by $75,000.00 per calendar quarter (“Scheduled Equipment
Availability Reduction”) commencing on October 1, 2003 and continuing
on the first day of each calendar quarter thereafter occurring, and such availability
shall be automatically and permanently reduced to zero upon the earliest
to occur of (A) the Facility Termination Date; (B) the date upon which demand
for repayment of the Loans is made by the Lender; and (3) the date upon which
this Agreement terminates pursuant to its provisions including Section 2.14;
and

 

minus                (d)                                 Reserves.

 

3

 

All Inventory will, as of any time, be valued at the lower of
cost or market value, determined on a FIFO basis.  No specified category of Inventory in subparagraph (c) may be
construed to include, and is deemed to exclude, any Inventory specified to be
in another category of Inventory such that all specified categories of
Inventory are at all times mutually exclusive for all purposes of this
Agreement.  The Lender may, in its
Permitted Discretion, reduce the advance rates set forth above or reduce one or
more of the other elements used in computing the Borrowing Base with 15 days advance
written notice of such change given to the Borrower Representative unless a
Default or an Unmatured Default then exists, in which case Lender will give the
Borrower Representative contemporaneous telephone or written notice of such
change.

 

“Borrowing Base Certificate” means a certificate, signed by an
Authorized Officer of the Borrower Representative, in the form of Exhibit G
or another form which is acceptable to the Lender in its sole discretion.

 

“Borrowing Base Group Members” means, collectively, MagneTek,
Maxtec, ADS and Mondel Canada, and “Borrowing Base Group Member” means
each of MagneTek, Maxtec, ADS and Mondel Canada.

 

“Borrowing Date” means a date on which a Loan is made hereunder.

 

“Borrowing Notice” is defined in Section 2.1.1(b).

 

“Business Day” means (a) with respect to any borrowing, payment
or rate selection of Eurodollar Loans, a day (other than a Saturday or Sunday)
on which banks generally are open in Chicago and New York City for the conduct
of substantially all of their commercial lending activities, interbank wire transfers
can be made on the Fedwire system and dealings in U.S. dollars are carried on
in the London interbank market and (b) for all other purposes, a day (other
than a Saturday or Sunday) on which banks generally are open in Chicago for the
conduct of substantially all of their commercial lending activities and
interbank wire transfers can be made on the Fedwire system.

 

“Business Group” means, collectively, ICG, PEG, and TPG.

 

“Business Group Member” means each of ICG, PEG, and TPG.

 

“Capital
Expenditures” means, without duplication, any expenditure or commitment to
expend money for any purchase or other acquisition of any asset which would be
classified as a fixed or capital asset on a balance sheet of the Consolidated
Group prepared in accordance with GAAP.

 

“Capital Stock” means any and all corporate stock, units,
shares, partnership interests, membership interests, equity interests, rights,
securities, or other equivalent evidences of ownership (howsoever designated)
in or issued by any Person.

 

“Capitalized Lease” of a Person means any lease of Property by
such Person as lessee which would be capitalized on a balance sheet of such
Person prepared in accordance with GAAP.

 

4

 

“Capitalized Lease Obligations” of a Person means the aggregate
amount of the obligations of such Person under Capitalized Leases which would
be shown as a liability on a balance sheet of such Person prepared in
accordance with GAAP.

 

“Cash Collateral Account” is defined in Section 2.16.2.

 

“Cash Equivalent Investments” means (a) short-term obligations
of, or fully guaranteed by, the U.S., (b) commercial paper rated A-1 or better
by S&P or P-1 or better by Moody’s, (c) demand deposit accounts maintained
in the ordinary course of business with any domestic office of any commercial
bank organized under the laws of the U.S. or any State thereof that has a
combined capital and surplus and undivided profits of not less than
$500,000,000, and (d) certificates of deposit issued by and time deposits with
any domestic office of any commercial bank organized under the laws of the U.S.
or any State thereof that has a combined capital and surplus and undivided
profits of not less than $500,000,000; provided that, in each case, the same
provides for payment of both principal and interest (and not principal alone or
interest alone) and is not subject to any contingency regarding the payment of
principal or interest.

 

“Change in Control” means any of the following (or any
combination of the following) whether arising from any single transaction or
event or any series of transactions or events (whether as the most recent
transaction in a series of transactions) which, individually or in the
aggregate, results in: (a) the acquisition by any Person or two or more Persons
acting in concert (including a “group” as defined in Section 13(d)(3) of
the Securities Exchange Act of 1934), of beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934) of 25% or more of the outstanding voting
Capital Stock of MagneTek; (b) the election of a director of MagneTek as a
result of which at least a majority of MagneTek’s Board of Directors does not
consist of Continuing Directors; (c) MagneTek’s ceasing to own, free and clear
of all Liens (except for Permitted Liens and Liens in favor of the Lender) or
other adverse claims, 100% of the outstanding voting Capital Stock of ADS
(except as contemplated by Section 6.34), MXT, or Mondel Holding on
a fully diluted basis; (d) MXT’s ceasing to own, free and clear of all Liens
(except for Permitted Liens and Liens in favor of the Lender) or other adverse
claims, 100% of the outstanding voting Capital Stock of Maxtec on a fully
diluted basis; or (e) Mondel Holding’s ceasing to own, free and clear of all
Liens (except in favor of the Lender) or other adverse claims, 100% of the
outstanding voting Capital Stock of Mondel Canada on a fully diluted basis.

 

“Closing Date” means August 15, 2003 or such later date
when the initial Revolving Loans are made hereunder.

 

“Code” means the Internal Revenue Code of 1986 and any rule or
regulation issued thereunder.

 

“Collateral” means any and all Property covered by the
Collateral Documents and any and all other Property of any Loan Party or other
Person, now existing or hereafter acquired, that may at any time be or become
subject to a security interest or Lien in favor of the Lender, to secure the
Secured Obligations.

 

“Collateral
Access Agreement” means any landlord waiver or other agreement, in form and
substance satisfactory to the Lender, between the Lender and any third party
(including any bailee,

 

5

 

consignee, customs broker, or
other similar Person) in possession of any Collateral or any landlord of any
Loan Party for any real Property where any Collateral is located.

 

“Collateral Documents” means, collectively, the Security
Agreements and any other documents granting a Lien upon the Collateral as
security for payment of the Secured Obligations.

 

“Collateral Monitoring Fee” is defined in Section 2.8(d).

 

“Collateral Shortfall Amount” is defined in Section 2.1.2(i).

 

“Commitment” means the obligation of the Lender to make Loans
to, and issue Facility LCs upon the application of, the Borrower Representative
in an aggregate amount not exceeding $19,000,000, as such amount may be
modified from time to time pursuant to the terms hereof.

 

“Compliance Certificate” is defined in Section 6.1(e).

 

“Consolidated Capital Expenditures” means, with reference to any
Test Period, the Capital Expenditures of the Consolidated Group calculated on a
consolidated basis for such period.

 

“Consolidated EBITDA” means, with reference to any Test Period,
Consolidated Net Income plus, to the extent deducted from
revenues in determining Consolidated Net Income, (a) Consolidated Interest
Expense, (b) expense for taxes paid or accrued, (c) depreciation, (d)
amortization, and (e) non-cash or cash pension expense attributable to any Plan
(e.g.,
exclusive of attorneys’ and accountants’ fees and actuarial fees and expenses),
all calculated for the Consolidated Group on a consolidated basis in accordance
with GAAP.  Consolidated EBITDA will (i)
be calculated utilizing a FIFO method of cost accounting for Inventory, (ii)
not include the results from operations of J-Tec for the period of
July 28, 2003 to August 31, 2003; and (iii) not include any (A) gain
or non-cash loss arising from the sale of capital assets, (B) gain arising from
any write-up of assets, (C) gain or non-cash loss arising from the acquisition
of debt securities or Capital Stock of a Consolidated Group member or from
cancellation or forgiveness of indebtedness, (D) gain or income arising from
accretion of any negative goodwill, (E) gain or non-cash loss recognized by a
Consolidated Group member as earnings which relate to any extraordinary
accounting adjustments or non-recurring items of income or non-cash loss or
include any amounts attributable to extraordinary gains or non-cash losses or
extraordinary items of income or non-cash loss or any other non-operating,
non-recurring gain or non-cash loss from time to time occurring; (F) income of
any other Person (other than a wholly-owned Subsidiary) in which a Consolidated
Group member has an ownership interest, except to the extent any such income
has actually been received by such Consolidated Group member in the form of
cash dividends or distributions; (G) undistributed earnings of any Subsidiary
of a Consolidated Group member to the extent that the declaration or payment of
dividends or similar distributions by such Subsidiary is not at the time
permitted by the terms of any contractual obligation or requirement of law
applicable to such Subsidiary; (H) income of any other Person accrued prior to
the date it became a Subsidiary of, or was merged or consolidated into, a
Consolidated Group member or a Subsidiary of a Consolidated Group member; or
(I) in the case of a successor to a Consolidated Group member by consolidation
or merger or as a transferee of its assets, any earnings of such successor
prior to such consolidation, merger or transfer of assets.

 

“Consolidated Fixed Charges” means, with reference to any Test
Period, without duplication, cash Consolidated Interest Expense, plus
scheduled principal payments on Debt For

 

6

 

Borrowed Money
(other than intercompany Indebtedness permitted by clause (e) of Section 6.17)
made during such period (including all Scheduled Equipment Availability
Reductions which occurred during such Test Period), plus Capitalized
Lease payments, plus cash contributions to any Plan,
all calculated for the Consolidated Group on a consolidated basis in accordance
with GAAP.

 

“Consolidated Group” means, collectively, MagneTek, ADS, MXT,
Maxtec, Mondel Holding, and Mondel Canada. 
All other Subsidiaries of MagneTek are excluded from the Consolidated
Group unless expressly made a Loan Party after the Closing Date pursuant to the
terms of this Agreement.

 

“Consolidated Interest Expense” means, with reference to any
Test Period, the interest expense of the Consolidated Group calculated on a
consolidated basis for such period.

 

“Consolidated Net Income” means, with reference to any Test
Period, the net income (or loss) of the Consolidated Group, after the provision
for all taxes, calculated on a consolidated basis for such period.

 

“Contingent Obligation” of a Person means any agreement,
undertaking or arrangement by which such Person assumes, guarantees, endorses,
contingently agrees to purchase or provide funds for the payment of, or
otherwise becomes or is contingently liable upon, the obligation or liability
of any other Person, or agrees to maintain the net worth or working capital or
other financial condition of any other Person, or otherwise assures any
creditor of such other Person against loss, including any comfort letter,
operating agreement, take-or-pay contract or the obligations of any such Person
as general partner of a partnership with respect to the liabilities of the partnership.

 

“Continuing Directors” means those directors on a Person’s Board
of Directors as of the Closing Date (“Current Board”) or those directors
who are recommended or endorsed for election to the Board of Directors of that
Person by a majority of the Current Board or their successors so recommended or
endorsed.

 

“Controlled Disbursement Accounts” means the accounts set forth
on Schedule 2 established at the Lender, which will be structured
and utilized as a non-interest bearing, controlled disbursement account in
accordance with the Lender’s controlled disbursement account policies and
procedures from time to time in effect.

 

“Controlled Group” means all members of a controlled group of
corporations or other business entities and all trades or businesses (whether
or not incorporated) under common control which, together with the Borrowers or
any of their respective Subsidiaries, are treated as a single employer under
Section 414 of the Code.

 

“Conversion/Continuation Notice” is defined in Section 2.6.

 

“Copyrights” shall have the meaning given to such term in the
Security Agreements.

 

“Credit Exposure” means, as at any time, the sum of (a) the
aggregate principal amount of the Loans outstanding at such time, plus
(b) an amount equal to the LC Obligations at such time.

 

“Credit Extension” means the making of a Loan or the issuance of
a Facility LC hereunder.

 

7

 

“Credit Extension Date” means the Borrowing Date for a Loan or
the issuance date for a Facility LC.

 

“Customer List” means a list of a Borrower’s customers,
specifying each customer’s name, mailing address and phone number.

 

“Debt For
Borrowed Money” means (a) indebtedness arising from the lending of
money; (b) Indebtedness, whether or not in any such case arising from the
lending of money, (i) which is represented by notes payable or drafts
accepted that evidence extensions of credit, (ii) which constitutes
obligations evidenced by bonds, debentures, notes or similar instruments, (iii)
whether or not assumed, is secured by Liens on, or payable out of the proceeds
or production from, Property now or hereafter owned or acquired by a Person, or
(iv) upon which interest charges are customarily paid (other than accounts
payable) or that was issued or assumed as full or partial payment for Property
or services; (c) Capitalized Lease Obligations; (d) the maximum available
stated amount of all letters of credit or bankers’ acceptances and, without
duplication, all reimbursement obligations with respect to letters of credit;
(e) indebtedness for the deferred and unpaid purchase price of any Property or
business or any services (other than trade accounts payable incurred in the
ordinary course of business and constituting current liabilities); (f)
Off-Balance Sheet Liabilities of the type set forth in clause (d) of the
definition of Off-Balance Sheet Liabilities; (g) indebtedness under any
guaranty of obligations that would constitute Debt For Borrowed Money under
clauses (a) through (c) hereof, if owed directly by a Person; or (h)
any other obligation for borrowed money which in accordance with GAAP would be
shown as a liability on the consolidated balance sheet of a Person.  “Debt For Borrowed Money” will not include
trade payables or accrued expenses.

 

“Default” means an event described in Section 7.1.

 

“Deposit
Account Control Agreement” means an agreement, in form and substance
satisfactory to the Lender, among any Loan Party, a banking institution holding
such Loan Party’s funds, and the Lender with respect to collection and control
of all deposits and balances held in a deposit account maintained by any Loan
Party with such banking institution.

 

“Designated
Consolidating Basis” means any financial information of the Borrowers and
their Subsidiaries which is required by the terms of this Agreement or any of
the other Loan Documents and which will be presented to the Lender on a
consolidating basis for (a) each Business Group Member, (b) the Business Group
(as consolidated with all Business Group Members), and (c) SPA (as consolidated
with its consolidated Subsidiaries).

 

“Document”
shall have the meaning given to such term in the Security Agreements.

 

“Domestic Subsidiary” means any Subsidiary which is organized
under the laws of the U.S. or any state of the U.S.

 

“EBITDA Covenant” is defined in Section 6.29.3.

 

“Effective
Date” means the date that the conditions precedent set forth in Section 4.1
of Article IV are satisfied.

 

“Elevator
Inventory” means (a) raw material Inventory owned and held by MagneTek at
an ICG Facility that will be converted or fabricated into Elevator Finished
Goods in the ordinary

 

8

 

course of MagneTek’s business
as presently conducted by it exclusive of raw materials which are comprised of
hazardous substances under applicable Environmental Laws and (b) finished goods
(“Elevator Finished Goods”) Inventory manufactured, owned, and held by
MagneTek at an ICG Facility for sale in the ordinary course of MagneTek’s
business as presently conducted by it which is comprised of electrical power
drives for elevators, including complete systems or repair, replacement or
add-on units thereof.

 

“Eligible
Accounts” means, at any time, the Accounts of a Borrowing Base Group Member
which the Lender determines in its Permitted Discretion are eligible as the
basis for Credit Extensions hereunder. 
Without limiting the Lender’s discretion provided herein, Eligible
Accounts shall not include any Account:

 

(a)                                  which
is not subject to a first priority perfected security interest in favor of the
Lender;

 

(b)                                 which
is subject to any Lien other than (i) a Lien in favor of the Lender and (ii) a
Permitted Lien which does not have priority over the Lien in favor of the
Lender;

 

(c)                                  with
respect to which more than 90 days have elapsed since the date of the original
invoice therefor;

 

(d)                                 which
is owing by an Account Debtor for which more than 50% of the Accounts owing
from such Account Debtor and its Affiliates are ineligible hereunder;

 

(e)                                  which
is owing by an Account Debtor to the extent the aggregate amount of Accounts
owing from such Account Debtor and its Affiliates to the Borrowing Base Group
Members exceeds 20% of the aggregate Eligible Accounts of the Borrowing Base
Group Members;

 

(f)                                    with
respect to which any covenant, representation, or warranty contained in this
Agreement or in a Security Agreement has been breached or is not true;

 

(g)                                 which
(i) does not arise from the sale of goods or performance of services in the
ordinary course of business, (ii) is not evidenced by an invoice or other
documentation satisfactory to the Lender which has been sent to the Account
Debtor, (iii) represents a progress billing, (iv) is contingent upon a
Borrowing Base Group Member’s completion of any further performance, or (v) represents
a sale on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval,
consignment, cash-on-delivery or any other repurchase or return basis;

 

(h)                                 for
which the goods giving rise to such Account have not been shipped to the
Account Debtor or for which the services giving rise to such Account have not
been performed by the applicable Borrower;

 

(i)                                     with
respect to which any check or other instrument of payment has been returned
uncollected for any reason;

 

(j)                                     which
is owed by an Account Debtor which has (i) applied for, suffered, or consented
to the appointment of any receiver, custodian, trustee, or liquidator of its
assets,

 

9

 

(ii) has had
possession of all or a material part of its property taken by any receiver,
custodian, trustee or liquidator, (iii) filed, or had filed against it, any
request or petition for liquidation, reorganization, arrangement, adjustment of
debts, adjudication as bankrupt, winding-up, or voluntary or involuntary case
under any state or federal bankruptcy laws, (iv) has admitted in writing its
inability, or is generally unable to, pay its debts as they become due, (v)
become insolvent, or (vi) ceased operation of its business;

 

(k)                                  which
is owed by any Account Debtor which has sold all or a substantially all of its
assets;

 

(l)                                     which
is owed by an Account Debtor which (i) does not maintain its chief executive
office in the U.S. or Canada (other than the Province of Quebec) or (ii) is not
organized under applicable law of the U.S., any state of the U.S., Canada, or
any province of Canada (other than the Province of Quebec) unless, in either
case, such Account is backed by a Letter of Credit acceptable to the Lender
which is in the possession of the Lender and in which the Lender as first
priority security interest;

 

(m)                               which
is owed in any currency other than U.S. dollars;

 

(n)                                 which
is owed by (i) the government (or any department, agency, public corporation,
or instrumentality thereof) of any country other than the U.S. unless such
Account is backed by a Letter of Credit acceptable to the Lender which is in
the possession of the Lender and in which the Lender as first priority security
interest, (ii) the government of the U.S., or any department, agency, public
corporation, or instrumentality thereof, unless the Federal Assignment of
Claims Act of 1940, as amended (31 U.S.C. § 3727 et seq. and 41 U.S.C.
§ 15 et
seq.), and any other steps necessary to perfect the Lien of the
Lender in such Account and obtain directly the payment thereof have been
complied with to the Lender’s satisfaction, or (iii) any State of the U.S. (or
other political subdivision thereof) unless any assignment of claims (or
comparable law) law and any other steps necessary to perfect the Lien of the
Lender in such Account and obtain directly the payment thereof have been
complied with to the Lender’s satisfaction;

 

(o)                                 which
is owed by any Affiliate, employee, or director of any Loan Party;

 

(p)                                 which,
for any Account Debtor, exceeds a credit limit determined by the Lender, to the
extent of such excess;

 

(q)                                 which
is owed by an Account Debtor or any Affiliate of such Account Debtor to which
any Loan Party is indebted, but only to the extent of such indebtedness;

 

(r)                                    which
is subject to any counterclaim, deduction, defense, setoff or dispute but only
to the extent of any such counterclaim, deduction, defense, setoff or dispute;

 

(s)                                  which
is evidenced by any promissory note, chattel paper, or instrument or with
respect to which the terms or conditions prohibit or restrict assignment or
collection rights;

 

(t)                                    which
is owed by an Account Debtor located in any jurisdiction which requires filing
of a “Notice of Business Activities Report” or other similar report in order to

 

10

 

permit the
affected Borrowers to seek judicial enforcement in such jurisdiction of payment
of such Account, unless such Borrowers has filed such report or qualified to do
business in such jurisdiction;

 

(u)                                 with
respect to which a Borrowing Base Group Member has made any agreement with the
Account Debtor for any reduction thereof, other than discounts and adjustments
given in the ordinary course of business;

 

(v)                                 which
(i) consists (or to the extent consisting) of deposits, (ii) consists (or to
the extent consisting) of vendor warranty claims, (iii) consists (or to the
extent consisting) of finance charges, service charges, or interest on
delinquent accounts, (iv) is proceeds of consigned Inventory, or (vi) are debit
memoranda;

 

(w)                               with
respect to which an invoice for the agreed-on purchase price has been issued to
the Account Debtor five or more Business Days after the services covered
thereby have been rendered or the goods covered thereby have been (or were
originally) delivered to the account debtor or its designee; or

 

(x)                                   which
the Lender determines may not be paid by reason of the Account Debtor’s
inability to pay or which the Lender otherwise determines is unacceptable for
any reason whatsoever.

 

In the event that an Account
which was previously an Eligible Account ceases to be an Eligible Account
hereunder, the Borrowers Representative shall notify the Lender thereof (i)
within five (5) Business Days of the date a Borrowing Base Group Member has
obtained knowledge thereof if any such Account is in excess of $250,000 in the
aggregate and (ii) on and at the time of submission to the Lender of the next
Borrowing Base Certificate in all other cases.

 

“Eligible
Inventory” means, at any time, the Inventory owned by a Borrowing Base
Group Member (other than ADS) and held at a Borrower’s Facility which the
Lender determines in its Permitted Discretion is eligible as the basis for
Credit Extensions hereunder.  Without
limiting the Lender’s discretion provided herein, Eligible Inventory shall not
include any Inventory:

 

(a)                                  which
is not subject to a first priority perfected Lien in favor of the Lender;

 

(b)                                 which
is subject to any Lien other than (i) a Lien in favor of the Lender and (ii) a
Permitted Lien which does not have priority over the Lien in favor of the
Lender;

 

(c)                                  which
is, in the Lender’s opinion, slow moving, obsolete, unmerchantable, defective,
unfit for sale, not salable at prices approximating at least the cost of such
Inventory in the ordinary course of business or unacceptable due to age, type,
category and/or quantity;

 

(d)                                 with
respect to which any covenant, representation, or warranty contained in this
Agreement or a Security Agreement has been breached or is not true;

 

(e)                                  which
does not conform to all standards imposed by any governmental authority;

 

11

 

(f)                                    which
constitutes work-in-process, packaging and shipping material, manufacturing
supplies, display items, bill-and-hold goods, returned or repossessed goods,
defective goods, goods held on consignment, or goods which are not of a type
held for sale in the ordinary course of business;

 

(g)                                 which
is not located in the U.S. (exclusive of the Mondel Canada Facility) or is in
transit with a common carrier from vendors and suppliers;

 

(h)                                 which
is located in any location leased by a Borrowing Base Group Member (other than
ADS) unless (i) the lessor has delivered to the Lender a Collateral Access
Agreement or (ii) a Reserve for rent, charges, and other amounts due or to
become due with respect to such facility has been established by the Lender in
its Permitted Discretion;

 

(i)                                     which
is located in any third party warehouse or is in the possession of a bailee and
is not evidenced by a Document, unless (i) such warehouseman or bailee has delivered
to the Lender a Collateral Access Agreement and such other documentation as the
Lender may require or (ii) an appropriate Reserve has been established by the
Lender in its Permitted Discretion;

 

(j)                                     which
is the subject of a consignment by a Borrowing Base Group Member (other than
ADS) as consignor;

 

(k)                                  which
is perishable;

 

(l)                                     which
(i) contains or bears any Intellectual Property Rights licensed to a Loan Party
unless the Lender is satisfied that it may sell or otherwise dispose of such
Inventory without (A) infringing the rights of such licensor, (B) violating any
contract with such licensor, or (C) incurring any liability with respect to
payment of royalties other than royalties incurred pursuant to sale of such
Inventory under the current licensing agreement or (ii) is subject to any
contractual arrangement or any law, rule or regulation that could, in any
instance in the Lender’s Permitted Discretion, limit or impair the ability of
the Lender to promptly exercise any of its rights with respect thereto;

 

(m)                               which
is not reflected in a current perpetual Inventory report of the Borrowing Base
Group Members, other than ADS (unless such Inventory is reflected in a report
to the Lender as “in transit” Inventory);

 

(n)                                 which
is custom made for a particular customer of a Borrowing Base Group Member
(other than ADS) for which such Borrower’s customer did not issue a purchase
order to such Borrower; or

 

(o)                                 which
the Lender otherwise determines is unacceptable for any reason whatsoever.

 

In the event that Inventory
which was previously Eligible Inventory ceases to be Eligible Inventory
hereunder, the Borrower Representative shall notify the Lender thereof (i)
within five (5) Business Days of the date a Borrowing Base Group Member (other
than ADS) has obtained knowledge thereof if any such Inventory has a value
(based on the lower of cost, determined on a first-in, first-

 

12

 

out basis, or market) in excess
of $500,000 in the aggregate and (ii) on and at the time of submission to the
Lender of the next Borrowing Base Certificate in all other cases.

 

“Environmental Laws” means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating
to (a) the protection of the environment, (b) the effect of the environment on
human health, (c) emissions, discharges or releases of pollutants,
contaminants, hazardous substances or wastes into surface water, ground water
or land, or (d) the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants, hazardous
substances or wastes or the clean-up or other remediation thereof.

 

“Equipment” has the meaning specified in the Security
Agreements.

 

“Equipment Availability” is defined in subparagraph (c) of the
definition of Borrowing Base.

 

“Equipment Leases” means the leases attached as Schedule 3,
whether or not a Borrower is the primary obligor or a guarantor thereunder.

 

“ERISA” means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any rule or regulation issued
thereunder.

 

“ESI Inventory” means (a) raw material Inventory owned and held
by MagneTek at an ICG Facility that will be converted or fabricated into ESI
Finished Goods in the ordinary course of MagneTek’s business as presently
conducted by it exclusive of raw materials which are comprised of hazardous
substances under applicable Environmental Laws and (b) finished goods (“ESI
Finished Goods”) Inventory manufactured, owned, and held by MagneTek at an
ICG Facility for sale in the ordinary course of MagneTek’s business as
presently conducted by it which is comprised of electrical control panels and
power drives for the overhead crane and material handling industry, including
complete systems or repair, replacement or add-on units thereof.

 

“Eurodollar Loan” means a Loan which, except as otherwise
provided in Section 2.10, bears interest at the applicable
Eurodollar Rate.

 

“Eurodollar Base Rate” means, with respect to a Eurodollar Loan
for the relevant Interest Period, the applicable British Bankers’ Association
LIBOR rate for deposits in U.S. dollars as reported by any generally recognized
financial information service as of 11:00 a.m. (London time) two Business Days
prior to the first day of such Interest Period, and having a maturity equal to
such Interest Period, provided that, if no such British Bankers’
Association LIBOR rate is available to the Lender, the applicable Eurodollar
Base Rate for the relevant Interest Period shall instead be the rate determined
by the Lender to be the rate at which the Lender or one of its Affiliate banks
offers to place deposits in U.S. dollars with first-class banks in the
interbank market at approximately 11:00 a.m. (London time) two Business Days
prior to the first day of such Interest Period, in the approximate amount of
the Lender’s relevant Eurodollar Loan and having a maturity equal to such
Interest Period.

 

“Eurodollar Loan” means a Loan which, except as otherwise
provided in Section 2.10, bears interest at the applicable
Eurodollar Rate.

 

13

 

“Eurodollar Rate” means, with respect to a Eurodollar Loan for
the relevant Interest Period, the sum of (a) the quotient of (i) the Eurodollar
Base Rate applicable to such Interest Period, divided by (ii) one minus
the Reserve Requirement (expressed as a decimal) applicable to such Interest
Period, plus
(b) the Applicable Margin.

 

“Excluded Foreign Stock” means, as of the Closing Date, the
Capital Stock of any Foreign Subsidiary of MagneTek or Mondel Holding.

 

“Excluded Taxes” means, in the case of the Lender or its
applicable Lending Installation, taxes imposed on its overall revenue or net
income, and franchise taxes imposed on it, by (a) the jurisdiction under the
laws of which the Lender is incorporated or organized or any political
subdivision thereof or (b) the jurisdiction in which the Lender’s principal
executive office or the Lender’s applicable Lending Installation is located or
any political subdivision thereof.

 

“Exhibit” refers to an exhibit to this Agreement, unless another
document is specifically referenced.

 

“Existing LCs” means the outstanding Letters of Credit issued
prior to the Closing Date under the Prior Agreement.

 

“Facility” means the credit facility described in Section 2.1
hereof to be provided to the Borrowers on the terms and conditions set forth in
this Agreement.

 

“Facility LC” is defined in Section 2.1.2(a).

 

“Facility LC Application” is defined in Section 2.1.2(b).

 

“Facility LC Collateral Account” is defined in Section 2.1.2(h).

 

“Facility Termination Date” means July 15, 2006 or any
earlier date on which the  Commitment is
reduced to zero or otherwise terminated pursuant to the terms hereof.

 

“Federal Funds Effective Rate” means, for any day, an interest
rate per annum equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published for such day (or, if such day
is not a Business Day, for the immediately preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations at approximately
11:00 a.m. (Chicago time) on such day on such transactions received by the
Lender from three Federal funds brokers of recognized standing selected by the
Lender in its sole discretion.

 

“FIFO” means a first in-first-out method of cost accounting for
Inventory in accordance GAAP.

 

“Financial Contract” of a Person means (a) any exchange-traded
or over-the-counter futures, forward, swap or option contract or other
financial instrument with similar characteristics, or (b) any Rate Management
Transaction.

 

14

 

“Fiscal
Month” means any of the monthly accounting periods of the Consolidated
Group.

 

“Fiscal
Quarter” means any of the quarterly accounting periods of the Consolidated
Group, ending on the Sunday closest to September 30th, December 31st,
March 31st, and June 30th of each year.

 

“Fiscal Year” means any of the annual accounting periods of the
Consolidated Group ending on the Sunday closest to June 30 of each year.

 

“Fixed Charge Coverage Ratio” means, the ratio, determined for
any Test Period, of (a) Consolidated EBITDA for such Test Period minus
(i) the unfinanced portion of Consolidated Capital Expenditures (for purposes
of this clause (a) “unfinanced” will not include funds borrowed from the Lender
as a Loan), (ii) expense for income taxes paid in cash, and (iii) dividends or
distributions paid in cash for such Test Period (exclusive of dividends or
distributions from a Subsidiary to a Borrower) to (b) Consolidated Fixed
Charges for such Test Period, all calculated for the Consolidated Group on a
consolidated basis.

 

“Fixtures” has the meaning specified in the Security Agreements.

 

“Floating Rate” means, for any day, a rate per annum equal to
(a) the Alternate Base Rate for such day plus (b) the Applicable Margin, in
each case changing when and as the Alternate Base Rate changes.

 

“Floating Rate Loan” means a Loan which, except as otherwise
provided in Section 2.10, bears interest at the Floating Rate.

 

“Foreign Subsidiary” means any Subsidiary which is not a
Domestic Subsidiary.

 

“Funding Account” is defined in Section 2.4.

 

“GAAP” means generally accepted accounting principles as in
effect from time to time, applied in a manner consistent with that used in
preparing the financial statements referred to in Section 5.5.

 

“Guaranteed Obligations” is defined in Section 13.1.

 

“Guarantor” each Loan Party and any other Person who becomes a
Loan Party pursuant to a Joinder Agreement and their successors and assigns.

 

 “Guaranty” means Article XIII
of this Agreement and each separate guaranty, in form and substance
satisfactory to the Lender, delivered by each Guarantor that is a Foreign
Subsidiary.

 

 “Highest Lawful Rate”
shall mean, on any day, the maximum non-usurious rate of interest permitted for
that day by applicable federal or State law stated as a rate per annum.

 

“ICG” means MagneTek’s Industrial Power Controls business unit
which is comprised of the operations of MagneTek, Maxtec, and Mondel Canada at
the ICG Facilities.

 

“ICG Facility” means a Borrower Facility designated as an ICG
Facility on Schedule 1.

 

15

 

“Inactive
Companies” means Magnetek Leasing Corporation, a Delaware corporation,
Magnetek National Electric Coil, Inc., a Delaware Corporation, and their
respective successors and assigns.

 

“Indebtedness”
of a Person means such Person’s: (a) Debt For Borrowed Money, (b) obligations
of such Person to purchase securities or other Property arising out of or in
connection with the sale of the same or substantially similar securities or
Property or any other Off-Balance Sheet Liabilities, (c) Contingent Obligations
for which the underlying transaction constitutes Indebtedness under this
definition, (d) Net Mark-to-Market Exposure under all Rate Management
Transactions, (e) obligations of such Person under any Sale and Leaseback
Transaction, and (f) obligations under any liquidated earn-out.

 

“Intellectual
Property Rights” means, with respect to any Person, all of such Person’s
Patents, Copyrights, Trademarks, and Licenses, all other rights under any of
the foregoing, all extensions, renewals, reissues, divisions, continuations and
continuations-in-part of any of the foregoing, and all rights to sue for past,
present, and future infringement of any of the foregoing.

 

“Interest Period” means, with respect to a Eurodollar Loan, a
period of one, two, or three months commencing on a Business Day selected by
the Borrower Representative pursuant to this Agreement.  Such Interest Period shall end on the day
which corresponds numerically to such date one, two, or three months
thereafter, provided,
however, that if there is no such numerically corresponding day in
such next, second, or third succeeding month, such Interest Period shall end on
the last Business Day of such next, second, or third succeeding month.  If an Interest Period would otherwise end on
a day which is not a Business Day, such Interest Period shall end on the next
succeeding Business Day, provided, further, that if said next
succeeding Business Day falls in a new calendar month, such Interest Period
shall end on the immediately preceding Business Day.

 

“Inventory” has the meaning specified in the Security
Agreements.

 

“Investment” of a Person means any (a) loan, advance, extension
of credit (other than accounts receivable arising in the ordinary course of
business on terms customary in the trade) or contribution of capital by such
Person, (b) stocks, bonds, mutual funds, partnership interests, notes,
debentures, securities or other Capital Stock owned by such Person, (c) any
deposit accounts and certificate of deposit owned by such Person, and (d)
structured notes, derivative financial instruments and other similar
instruments or contracts owned by  such
Person.

 

“J-Tec” means J-Tec, Inc., an Ohio corporation.

 

“Joinder Agreement” is defined in Section 6.15(a).

 

“LC Fee” is defined in Section 2.8(b).

 

“LC Obligations” means, at any time, the sum, without
duplication, of (a) the aggregate undrawn stated amount under all Facility LCs
outstanding at such time, after giving effect to reinstatements of the face
amount effected, pursuant to the terms of the Facility LCs, prior to such time plus
(b) the aggregate unpaid amount at such time of all Reimbursement Obligations.

 

“LC Payment Date” is defined in Section 2.1.2(c).

 

16

 

“Lending Installation” means the office, branch, subsidiary or
Affiliate of the Lender listed on the signature pages hereof or on a
Schedule or otherwise selected by the Lender pursuant to Section 2.19.

 

“Letter of Credit” of a Person means a letter of credit or
similar instrument which is issued upon the application of such Person or upon
which such Person is an account party or for which such Person is in any way
liable.

 

“Lien” means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, adverse claim, encumbrance or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including the interest of a vendor or lessor
under any conditional sale, Capitalized Lease or other title retention
agreement).

 

“Licenses” shall have the meaning given to such term in the
Security Agreements.

 

“Loans” means the loans made pursuant to Article II
(or any conversion or continuation thereof).

 

“Loan Documents” means this Agreement, the Note, the Facility LC
Applications, the Collateral Documents, the Guaranty, and all other agreements,
instruments, documents and certificates identified in Section 4.1
executed and delivered to, or in favor of, the Lender and including all other
pledges, powers of attorney, consents, assignments, contracts, notices, letter
of credit agreements and all other written matter whether heretofore, now or
hereafter executed by or on behalf of any Loan Party, or any employee of any
Loan Party, and delivered to the Lender or its Affiliates in connection with
the Agreement, the Banking Services, the Rate Management Obligations or the
transactions contemplated hereby and thereby. 
Any reference in the Agreement or any other Loan Document to a Loan
Document shall include all appendices, exhibits or schedules thereto, and all
amendments, restatements, supplements or other modifications thereto, and shall
refer to the Agreement or such Loan Document as the same may be in effect at
any and all times such reference becomes operative.

 

“Loan Parties” means MagneTek, ADS, MXT, Maxtec, Mondel Holding,
Mondel Canada, the Inactive Companies and any other Person who becomes a party
to this Agreement pursuant to a Joinder Agreement.

 

“Lock Box” is defined in Section 2.16.1.

 

“MagneTek Pension Plan” means the Magnetek FlexCare Plus Retirement
Pension Plan.

 

“Material Adverse Effect” means a material adverse effect on (a)
the business, Property, condition (financial or otherwise), results of
operations, or prospects of the Consolidated Group taken as a whole, (b) the
ability of any Loan Party to perform its obligations under the Loan Documents
to which it is a party, (c) the Collateral, or the Lender’s Liens on the
Collateral or the priority of such Liens, or (d) the validity or enforceability
of any of the Loan Documents or the rights or remedies of the Lender
thereunder.

 

17

 

“Material Indebtedness” means Debt For Borrowed Money (exclusive
of the Credit Exposure) in an outstanding principal amount of $500,000 or more
in the aggregate (or the equivalent thereof in any currency other than U.S.
dollars).

 

“Material Indebtedness Agreement” means any agreement under
which any Material Indebtedness was created or is governed or which provides
for the incurrence of Indebtedness in an amount which would constitute Material
Indebtedness (whether or not an amount of Indebtedness constituting Material
Indebtedness is outstanding thereunder).

 

“Modify” and “Modification” are
defined in Section 2.1.2(a).

 

“Mondel Holding” means Magnetek Mondel
Holding, Inc., a Delaware corporation, its successors and assigns.

 

“Mondel Canada” means Mondel ULC, an unlimited liability corporation
organized under the laws of Nova Scotia, Canada, its successor and
assigns.

 

“Mondel Canada Facility” means a
Borrower Facility designated as the Mondel Canada Facility on Schedule 1.

 

“Mondel Canada Inventory” means (a) raw material Inventory owned
and held by Mondel Canada at the Mondel Canada Facility that will be converted
or fabricated into Mondel Finished Goods in the ordinary course of Mondel
Canada’s business as presently conducted by it exclusive of raw materials which
are comprised of hazardous substances under applicable Environmental Laws and
(b) finished goods (“Mondel Finished Goods”) Inventory manufactured,
owned, and held by Mondel Canada at the Mondel Canada Facility for sale in the
ordinary course of Mondel Canada’s business as presently conducted by it which
is comprised of brakes and brake-type systems for the overhead crane and
material handling industry, including complete systems or repair, replacement
or add-on units thereof.

 

“Moody’s” means Moody’s Investors Service, Inc., its successors
and assigns

 

“MXT” means MXT Holdings, Inc., an Illinois corporation, its
successors and assigns.

 

“Multiemployer Plan” means a Plan maintained pursuant to a
collective bargaining agreement or any other arrangement to which a Loan Party
or any member of the Controlled Group is a party to which more than one
employer is obligated to make contributions.

 

“Net Cash Proceeds” means, if in connection with (a) an asset
disposition, cash proceeds net of (i) commissions and other reasonable and
customary transaction costs, fees and expenses properly attributable to such
transaction and payable by such Loan Party in connection therewith which are on
an arms-length basis in the ordinary course of business, (ii) transfer taxes,
(iii) amounts payable to holders of senior Liens on such asset (to the extent
such Liens constitute Permitted Liens hereunder), if any, and (iv) an
appropriate reserve for income taxes in accordance with GAAP established in
connection therewith, (b) the issuance or incurrence of Debt For Borrowed
Money, cash proceeds net of attorneys’ fees, investment banking fees,
accountants’ fees, underwriting discounts and commissions and other customary
fees and expenses actually incurred in connection therewith and fees associated
with retiring any refinanced Debt For Borrowed Money, or (c) an equity
issuance, cash proceeds net of underwriting discounts and commissions and other

 

18

 

reasonable
costs, attorneys’ fees, accountants’ fees and other reasonable and customary
transaction costs, fees and expenses properly attributable to such transaction
which are on an arms-length basis in the ordinary course of business.

 

“Net Mark-to-Market Exposure” of a Person means, as of any date
of determination, the excess (if any) of all unrealized losses over all
unrealized profits of such Person arising from Rate Management
Transactions.  As used in this
definition, “unrealized losses” means the fair market value of the cost to such
Person of replacing such Rate Management Transaction as of the date of
determination (assuming the Rate Management Transaction were to be terminated
as of that date), and “unrealized profits” means the fair market value of the
gain to such Person of replacing such Rate Management Transaction as of the
date of determination (assuming such Rate Management Transaction were to be
terminated as of that date).

 

“Net
Orderly Liquidation Value” means, as of any date, with respect to Inventory
of any Person, the orderly liquidation value thereof as determined in a manner
acceptable to the Lender by an appraiser acceptable to the Lender, net of all
costs of liquidation thereof, pursuant to then current appraisal.

 

“Note” means the Revolving Note.

 

“Obligations” means all unpaid principal of and accrued and
unpaid interest on present and future Loans, all LC Obligations, all Banking
Services Obligations, all Rate Management Obligations owing to the Lender or
its Affiliates, all indebtedness under all Equipment Leases, all accrued and
unpaid fees and all expenses, reimbursements, indemnities and other obligations
of the Loan Parties to the Lender or its Affiliates or any indemnified party
arising under the Loan Documents, including the Existing LCs, whether or not
evidenced by any note or other instrument, or any other document, whether
arising from an extension of credit, opening of a letter of credit, credit
card, acceptance (including a bankers’ acceptance), lease, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including those
acquired by assignment from others, and any participation by the Lender or any
Affiliate of the Lender in a Borrower’s or any other Loan Party’s debts owing
to others), absolute or contingent, related or unrelated, due or to become due,
primary or secondary, whether arising out of overdrafts on checking, deposit or
other accounts or electronic funds transfers (whether through automatic
clearing houses or otherwise) or out of the Lender’s or any of the Lender’s
Affiliate’s non-receipt of, or inability to collect, funds or otherwise not
being made whole in connection with wire transfers or depository transfer
checks or other similar arrangements, and including all principal, interest,
charges, expenses, fees, attorneys’ fees, filing fees and any other sums
chargeable to a Borrower or any other Loan Party under any of the Loan
Documents.

 

“Off-Balance Sheet Liability” of a Person means (a) any
repurchase obligation or liability of such Person with respect to accounts or
notes receivable sold by such Person, (b) any indebtedness, liability or
obligation under any Sale and Leaseback Transaction which is not a Capitalized
Lease, (c) any indebtedness, liability or obligation under any so-called
“synthetic lease” transaction entered into by such Person, or (d) any
indebtedness, liability or obligation arising with respect to any other
transaction which is the functional equivalent of or takes the place of
borrowing but which does not constitute a liability on the balance sheets of
such Person, but excluding from this clause (d) Operating Leases.

 

19

 

“Operating Lease” of a Person means any lease of Property (other
than a Capitalized Lease) by such Person as lessee which has an original term
(including any required renewals and any renewals effective at the option of
the lessor) of one year or more.

 

“Operating Lease Obligations” means, as at any date of
determination, the amount obtained by aggregating the present values,
determined in the case of each particular Operating Lease by applying a
discount rate (which discount rate shall equal the discount rate which would be
applied under GAAP if such Operating Lease were a Capitalized Lease) from the
date on which each fixed lease payment is due under such Operating Lease to
such date of determination, of all fixed lease payments due under all Operating
Leases of the Borrowers and its Subsidiaries.

 

“Operating Profit” means, for any Test Period, the total
(without duplication), in Dollars (all as determined in accordance with GAAP
consistently applied) of each Business Group Member’s earnings before interest,
income taxes, and general and administrative overhead expenses of MagneTek for
the applicable Test Period.  “Operating
Profit” of TPG will not include the results from operations of J-Tec for the
period of July 28, 2003 to August 31, 2003.

 

“Operating Profit Covenant” is defined in Section 6.34.

 

“Other Taxes” is defined in Section 3.5(b).

 

 “Participants” is
defined in Section 10.2(a).

 

“Patents” shall have the meaning given to such term in the
Security Agreements.

 

“Payment Date” means (a) with respect to interest payments due
on any Floating Rate Loan, the first day of each calendar month and the
Facility Termination Date, (b) with respect to interest payments due on any
Eurodollar Loan, (i) the last day of the applicable Interest Period and (ii)
the Facility Termination Date, (c) with respect to the Collateral Monitoring
Fee or the Unused Commitment Fee, the first day of each calendar month and the
Facility Termination Date, and (d) with respect to the LC Fee: (i) for any
commercial Facility LCs, a one-time payment on the date of issuance of the commercial
Facility LC and (ii) for any standby Facility LCs, in advance on the first day
of each calendar month and the Facility Termination Date.

 

“PBGC” means the Pension Benefit Guaranty Corporation, or any
successor thereto.

 

“PEG” means MagneTek’s Power Electronic Group business unit
which is comprised of the operations of MagneTek at the PEG Facilities.

 

“PEG Facility” means a Borrower Facility designated as a PEG
Facility on Schedule 1.

 

“PEG Finished Goods” means finished goods Inventory
manufactured, owned, and held by MagneTek at a PEG Facility for sale in the
ordinary course of MagneTek’s business as presently conducted by each of them
which is comprised of AC/DC power supply and AC/DC power converters servicing
the data storage, telecommunications, semi-conductor, medical, and industrial
markets, including complete systems or repair, replacement or add-on units
thereof.

 

“PEG Raw Materials” means raw material Inventory owned and held
by MagneTek or Mondel Canada at a PEG Facility that will be converted or
fabricated into PEG Finished Goods in

 

20

 

the ordinary
course of MagneTek’s and Mondel Canada’s business as presently conducted by
each of them exclusive of (a) PEG Rectifiers and (b) raw materials which are
comprised of hazardous substances under applicable Environmental Laws.

 

“PEG Rectifiers” means raw material Inventory owned and held by
MagneTek at a PEG Facility that will be converted or fabricated into PEG
Finished Goods in the ordinary course of MagneTek’s and Mondel Canada’s
business as presently conducted by each of them which is comprised solely of
rectifiers.

 

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

 

“Permitted Liens” is defined in Section 6.22.

 

“Permitted Obligations” means all obligations permitted under Section 6.17.

 

“Person” means any natural person, corporation, firm, joint
venture, partnership, limited liability company, association, enterprise, trust
or other entity or organization, or any government or political subdivision or
any agency, department or instrumentality thereof.

 

“Plan” means an employee pension benefit plan which is covered
by Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code as to which a Loan Party or any member of the
Controlled Group may have any liability.

 

“Power Inventory” means (a) raw material Inventory owned and
held by MagneTek at an ICG Facility that will be converted or fabricated into
Power Finished Goods in the ordinary course of MagneTek’s business as presently
conducted by it exclusive of raw materials which are comprised of hazardous
substances under applicable Environmental Laws and (b) finished goods (“Power
Finished Goods”) Inventory manufactured, owned, and held by MagneTek at an
ICG Facility for sale in the ordinary course of MagneTek’s business as
presently conducted by it which is comprised of power supply units for
alternative energy sources and fuel cells, including complete systems or
repair, replacement or add-on units thereof.

 

“Prepayment Fee” is defined in Section 2.14(b).

 

“Presentments” is defined in Section 2.4.

 

“Pricing Schedule” means the Schedule attached hereto identified
as such.

 

“Prior Agreement” is defined in Section 4.1(j).

 

“Prime Rate” means a rate per annum equal to the prime rate of
interest announced from time to time by the Lender or its parent (which is not
necessarily the lowest rate charged to any customer), changing when and as said
prime rate changes.

 

21

 

“Problem Financing Statements” means the following financing
statements:

 

	
  Secured Party

  	
   

  	
  Filing
  Office

  	
   

  	
  Filing #

  	
   

  	
  Filing
  Date

  
	
  ASARCO,
  Incorporated

  	
   

  	
  Tennessee
  Secretary of State

  	
   

  	
  940369087

  	
   

  	
  11-09-94

  
	
  ASARCO,
  Incorporated

  	
   

  	
  Davidson
  County, Tennessee

  	
   

  	
  E0061503

  	
   

  	
  06-22-99

  
	
  ASARCO,
  Incorporated

  	
   

  	
  Mississippi
  Secretary of State

  	
   

  	
  844846

  	
   

  	
  11-10-94

  
	
  ASARCO,
  Incorporated

  	
   

  	
  Copiah
  County, Mississippi

  	
   

  	
  52718

  	
   

  	
  06-14-99

  
	
  Mississippi
  Business Finance Corporation

  	
   

  	
  Delaware
  Secretary of State

  	
   

  	
  22219016

  	
   

  	
  08-27-02

  
	
  Toshiba
  American Information Systems, Inc.

  	
   

  	
  Delaware
  Secretary of State

  	
   

  	
  22223620

  	
   

  	
  08-28-02

  

 

“Projections” is defined in Section 6.1(d).

 

“Property” of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets
owned, leased or operated by such Person.

 

“Rate Management Obligations” of a Person means any and all
obligations of such Person, whether absolute or contingent and howsoever and
whensoever created, arising, evidenced or acquired (including all renewals,
extensions and modifications thereof and substitutions therefor), under (a) any
and all Rate Management Transactions, and (b) any and all cancellations, buy
backs, reversals, terminations or assignments of any Rate Management
Transactions.

 

“Rate Management Transaction” means any transaction (including
an agreement with respect thereto) now existing or hereafter entered by any
Loan Party which is a rate swap, basis swap, forward rate transaction,
commodity swap, commodity option, equity or equity index swap, equity or equity
index option, bond option, interest rate option, foreign exchange transaction,
cap transaction, floor transaction, collar transaction, forward transaction,
currency swap transaction, cross-currency rate swap transaction, currency
option or any other similar transaction (including any option with respect to
any of these transactions) or any combination thereof, whether linked to one or
more interest rates, foreign currencies, commodity prices, equity prices or
other financial measures.

 

“Regulation D” means Regulation D of the Board of Governors of
the Federal Reserve System or other regulation or official interpretation of
said Board of Governors relating to reserve requirements applicable to member
banks of the Federal Reserve System.

 

“Regulation U” means Regulation U of the Board of Governors of
the Federal Reserve System or other regulation or official interpretation of
said Board of Governors relating to the extension of credit by banks for the
purpose of purchasing or carrying margin stocks applicable to member banks of
the Federal Reserve System.

 

“Reimbursement Obligations” means, at any time, the aggregate of
all obligations of the Borrowers then outstanding under Section 2.1.2
to reimburse the Lender for amounts paid by the Lender in respect of any one or
more drawings under Facility LCs.

 

“Remittances” is defined in Section 2.16.1.

 

“Reportable Event” means a reportable event as defined in
Section 4043 of ERISA and the regulations issued under such section, with
respect to a Plan, excluding, however, such events as to which the PBGC has by
regulation waived the requirement of Section 4043(a) of ERISA that it be

 

22

 

notified
within thirty days of the occurrence of such event, provided however, that a
failure to meet the minimum funding standard of Section 412 of the Code
and of Section 302 of ERISA shall be a Reportable Event regardless of the
issuance of any such waiver of the notice requirement.

 

“Reports” is defined in Section 9.6(a)(i).

 

“Reserves”
means any and all reserves which the Lender deems necessary, in its Permitted
Discretion, to maintain (including reserves for cost testing, aged credits,
accrued and unpaid interest on the Secured Obligations, Banking Services
Reserves, reserves for rent at locations leased by any Loan Party and for
warehousemen’s and bailee’s charges, reserves for dilution of Accounts, reserves
for Inventory shrinkage, reserves for customs charges and shipping charges
related to any Inventory in transit, reserves for Rate Management Transactions,
reserves for contingent liabilities of any Loan Party, reserves for uninsured
losses of any Loan Party and reserves for taxes, fees, assessments, and other
governmental charges) with respect to the Collateral or any Loan Party.

 

 “Revolving Loans” means
the revolving loans extended by the Lender to the Borrowers pursuant to Section 2.1.1.

 

“Revolving Note” is defined in Section 2.18(d).

 

“Reserve Requirement” means, with respect to an Interest Period,
the maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on Eurocurrency
liabilities.

 

“S&P” means Standard and Poor’s Ratings Services, a division
of The McGraw Hill Companies, Inc., its successors and assigns.

 

“Sale and Leaseback Transaction” means any sale or other
transfer of Property by any Person with the intent to lease such Property as
lessee.

 

“Schedule” refers to a specific schedule to this Agreement,
unless another document is specifically referenced.

 

“Scheduled Equipment Availability Reduction” is defined in
subparagraph (c) of the definition of Borrowing Base.

 

“Section” means a numbered section of this Agreement,
unless another document is specifically referenced.

 

“Secured Obligations” means, collectively, (i) the Obligations;
(ii) all Banking Services Obligations; (iii) all Rate Management Obligations owing
to the Lender or its Affiliates; and (iv) all indebtedness under all Equipment
Leases.

 

“Security Agreement” means each Pledge and Security Agreement,
dated as of the date hereof, between each Loan Parties and the Lender, and any
other pledge or security agreement entered into, after the Closing Date by any
other Loan Party (as required by this Agreement or any other Loan Document), or
any other Person, as the same may be amended, restated or otherwise modified
from time to time.

 

23

 

“Single Employer Plan” means a Plan maintained by a Loan Party
or any member of the Controlled Group for employees of the Loan Parties or any
member of the Controlled Group.

 

“SPA” means Magnetek S.p.A., a corporation organized and
existing under the laws of Italy and a subsidiary of MagneTek, its successors
and assigns.

 

“SPA Indebtedness” means all existing or future Debt For
Borrowed Money owed by a Loan Party to SPA.

 

“Stated Rate” is defined in Section 2.20.

 

“Subordinated Indebtedness” of a Person means any Indebtedness
of such Person the payment of which is subordinated to payment of the Secured
Obligations to the written satisfaction of the Lender.

 

“Subsidiary” of a Person means, any corporation, partnership,
limited liability company, association, joint venture or similar business
organization more than 50% of the outstanding Capital Stock having ordinary
voting power of which shall at the time be owned or controlled by such
Person.  Unless otherwise expressly
provided, all references herein to a “Subsidiary” shall mean a Subsidiary of a
Borrower.

 

“Substantial Portion” means Property which represents more than
10% of the consolidated assets of the Consolidated Group or property which is
responsible for more than 10% of the consolidated net sales or of the
consolidated net income of the Consolidated Group, in each case, as would be
shown in the consolidated financial statements of the Consolidated Group as at
the beginning of the twelve-month period ending with the month in which such
determination is made (or if financial statements have not been delivered
hereunder for that month which begins the twelve-month period, then the
financial statements delivered hereunder for the quarter ending immediately
prior to that month).

 

“Supporting Letter of Credit” is defined in Section 2.1.2(i).

 

“Taxes”
means any and all present or future taxes, duties, levies, imposts, deductions,
charges or withholdings, and any and all liabilities with respect to the
foregoing, but excluding Excluded Taxes and Other Taxes.

 

“Telemotive Inventory” finished goods Inventory manufactured,
owned, and held by MagneTek or Maxtec at an ICG Facility for sale in the
ordinary course of MagneTek’s or Maxtec’s business as presently conducted by it
which is comprised of radio frequency power systems for the overhead crane and
material handling industry.

 

“Test Period” means, for any determination of the Fixed Charge
Coverage Ratio, the EBITDA Covenant, or the Operating Profit Covenant the
period of four consecutive Fiscal Quarters of the Consolidated Group ended on
each Fiscal Quarter ending during the term of this Agreement (i.e.,
a rolling four Fiscal Quarter  period); provided
that,
with respect to determining the Fixed Charge Coverage Ratio at the end of each
of the Fiscal Quarters of the Consolidated Group beginning on
September 29, 2003 and ending on December 28, 2003 and beginning on
December 29, 2003 and ending on March 28, 2004, “Test Period” means,
respectively, the period of one Fiscal Quarter beginning on September 29,
2003 and ending on December 28, 2003 and the period of two

 

24

 

Fiscal
Quarters beginning on September 29, 2003 and ending on March 28,
2004;
provided,  further that, with respect to determining
the EBITDA Covenant at the end of the Fiscal Quarter of the Consolidated Group
ending on September 28, 2003 and the EBITDA Covenant and the Operating
Profit Covenant at the end of each of the Fiscal Quarters of the Consolidated
Group ending on December 28, 2003 and on March 28, 2004, “Test
Period” means, respectively, the period of one Fiscal Quarter beginning on
June 30, 2003 and ending on September 29, 2003, the period of two
Fiscal Quarters beginning on June 30, 2003 and ending on December 28,
2003, and the period of three Fiscal Quarters beginning on June 30, 2003
and ending March 28, 2004.

 

“TPG” means MagneTek’s Telco Power Group business unit which is
comprised of the operations of ADS at the TPG Facilities.

 

“TPG Facility” means a Borrower Facility designated as a TPG
Facility on Schedule 1.

 

“Trademarks” shall have the meaning given to such term in the
Security Agreement.

 

“Type” means, with respect to any Loan, its nature as a Floating
Rate Loan or a Eurodollar Loan.

 

“UCC” means the Uniform Commercial Code as in effect from time
to time in the State of Ohio or any other state the laws of which are required
to be applied in connection with the issue of perfection of security interests.

 

“Unfunded Liabilities” means the amount (if any) by which the
present value of all vested and unvested accrued benefits under all Single
Employer Plans exceeds the fair market value of all such Plan assets allocable
to such benefits, all determined under Financial Accounting Statement 87 as of
the end of the most recent Fiscal Year end or any date otherwise required to be
determined under applicable law.

 

“Unliquidated Secured Obligations” means, at any time, any
Secured Obligations (or portion thereof) that is contingent in nature or
unliquidated at such time, including any Secured Obligation that is: (i) an
obligation to reimburse a bank for drawings not yet made under a Letter of
Credit issued by it; (ii) any other obligation (including any guarantee) that
is contingent in nature at such time; or (iii) an obligation to provide
collateral to secure any of the foregoing types of obligations.

 

“Unmatured Default” means an event which but for the lapse of
time or the giving of notice, or both, would constitute a Default.

 

“Unused Commitment Fee” is defined in Section 2.8(a).

 

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

 

“Wholly-Owned Subsidiary” of a Person means, any Subsidiary all
of the outstanding Capital Stock of which shall at the time be owned or
controlled, directly or indirectly, by such Person or one or more Wholly-Owned
Subsidiaries of such Person, or by such Person and one or more Wholly-Owned
Subsidiaries of such Person.

 

25

 

1.2                                 Other Definitional Provisions;
Construction. Unless otherwise specified,

 

(a)                                  All terms defined in this
Agreement, whether or not defined in this Section 1, have the defined
meanings provided in this Agreement when used in this Agreement, in any other
of the Loan Documents, or any other certificate, instrument or other document
made or delivered pursuant to this Agreement or any other Loan Document, unless
otherwise defined therein.

 

(b)                                 References to the Uniform
Commercial Code, or UCC, mean as enacted in the particular jurisdiction(s)
encompassed by the reference.

 

(c)                                  The
definition of any agreement, document or instrument includes all schedules,
attachments and exhibits thereto and all renewals, extensions, supplements,
modifications, restatements and amendments thereof but only to the extent such
renewals, extensions, supplements, modifications, restatements or amendments
thereof are not prohibited by the terms of any Loan Document.  All references to statutes include (i) all
regulations promulgated thereunder, (ii) any amendments of such statutes or
regulations promulgated thereunder, and (iii) any successor statutes and
regulations, including any comparable provision of the applicable statute,
ordinance, code, regulation or other law as amended or superseded after the
date of this Agreement.

 

(d)                                 “Hereunder,”
“herein,” “hereto,” “this Agreement” and words of similar import refer to this
entire document; “including” is used by way of illustration and not by way of
limitation, unless the context clearly indicates the contrary; the singular
includes the plural and conversely; and any action required to be taken by a
Person is to be taken promptly, unless the context clearly indicates the
contrary.

 

(e)                                  All of
the uncapitalized terms contained in the Loan Documents which are now or
hereafter defined under the UCC will, unless defined in the Loan Documents or
the context indicates otherwise, have the meanings now or hereafter provided
for in the UCC.

 

(f)                                    The term “good faith” means
honesty in fact in the conduct or transaction concerned.

 

(g)                                 All
Exhibits and Schedules attached to this Agreement are incorporated into, made
and form an integral part of, this Agreement for all purposes.

 

(h)                                 The
existence of references to a Borrower’s Subsidiaries throughout this Agreement
is for a matter of convenience only. 
Any references to Subsidiaries of a Borrower set forth herein shall not
in any way be construed as consent by the Lender to the establishment,
maintenance or acquisition of any Subsidiary.

 

(i)                                     Whenever
the sense of this Agreement or any of the other Loan Documents so require, the
masculine or feminine gender will be substituted for, or be deemed to include,
the neuter, the feminine gender will be substituted for the masculine, or the
masculine will be deemed to include the feminine, and the neuter gender will be
substituted for, or be deemed to include, the masculine or, as applicable,
feminine gender.

 

26

 

ARTICLE II

 

THE FACILITY

 

2.1.                              The Facility. 
The Lender agrees, on the terms and conditions set forth in this
Agreement, to (a) make Revolving Loans to the Borrowers as set forth below and
(b) issue Facility LCs upon the request of the Borrower Representative, provided
that, after giving effect to the making of each such Revolving Loan
and the issuance of each such Facility LC, the Credit Exposure shall not exceed
the Commitment.  The Facility shall be
composed of Revolving Loans and Facility LCs as set forth below:

 

2.1.1.                     Revolving Loans.

 

(a)                                  Amount. From
and including the Effective Date and prior to the Facility Termination Date, the
Lender agrees, on the terms and conditions set forth in this Agreement, to make
revolving loans to the Borrowers and issue Facility LCs as set forth in Section 2.1.2
below on the request of the Borrower Representative.  If any advance of a Revolving Loan or issuance of a Facility LC
would exceed Availability, the Lender will refuse to make or may otherwise
restrict the making of Revolving Loans or the issuance of Facility LCs as the
Lender determines until such excess has been eliminated. The Revolving Loans
may consist of Floating Rate Loans or Eurodollar Loans, or a combination
thereof, selected by the Borrower Representative in accordance with Sections
2.1.1(b) and 2.6.  Subject to
the terms of this Agreement, the Borrowers may borrow, repay and reborrow
Revolving Loans at any time prior to the Facility Termination Date.  The Commitment to extend credit under this Section 2.1.1(a)
shall expire on the Facility Termination Date.

 

(b)                                 Borrowing
Procedures.  The Borrower
Representative shall (i) select the Type of Loan and, in the case of each
Eurodollar Loan, the Interest Period applicable thereto, from time to time and
(ii) give the Lender irrevocable notice (a “Borrowing Notice”) not later
than 11:00 a.m. (Chicago, Illinois time) on each Borrowing Date of each
Floating Rate Loan and three Business Days before the Borrowing Date for each
Eurodollar Loan, specifying (in the form of Exhibit A for Eurodollar
Loans): (1) the Borrowing Date, which shall be a Business Day, of such Loan,
(2) the aggregate amount of such Loan, (3) the Type of Loan selected; provided
that, if the Borrower Representative fails to specify the Type of Loan
requested, such request shall be deemed a request for a Floating Rate Loan; and
(4) the duration of the Interest Period if the Type of Loan requested is a
Eurodollar Loan; provided that, if the Borrower Representative fails to select the
duration of the Interest Period for the requested Eurodollar Loan, the
Borrowers shall be deemed to have requested that such Eurodollar Loan be made with
an Interest Period of one month.

 

2.1.2.                     Facility
LCs.

 

(a)                                  Issuance.  The 
Lender  issued  the Existing LCs and the Lender hereby
agrees, on the terms and conditions set forth in this Agreement, to issue
standby and commercial Letters of Credit (each, including each “Existing LC”,
a “Facility LC”) and to renew, extend, increase, decrease or otherwise
modify each Facility LC (“Modify,” and each such action a “Modification”),
from time to time from and including the Effective Date and prior to the Facility
Termination Date upon the request and for the account of the Borrower

 

27

 

Representative;
provided
that, the maximum face amount of the Facility LC to be issued or
Modified, does not exceed the lesser of (i) an amount equal to $10,000,000 minus
the sum of (1) the aggregate undrawn amount of all outstanding Facility LCs at
such time plus, without duplication, (2) the aggregate unpaid
Reimbursement Obligations with respect to all Facility LCs outstanding at such
time and (ii) Availability.  No Facility
LC shall have an expiry date later than the earlier of (x) the thirtieth (30th)
Business Day prior to the Facility Termination Date and (y) one year after its
issuance; provided
that any Letter of Credit with a one-year tenor may provide for the renewal
thereof for additional one-year periods (which shall in no event extend beyond
the date referred to in clause (x) above).

 

(b)                                 Notice.  Subject to Section 2.1.2(a), the
Borrower Representative shall give the Lender notice prior to 11:00 a.m.
(Chicago, Illinois time) at least three Business Days prior to the proposed
date of issuance or Modification of each Facility LC, specifying the
beneficiary, the proposed date of issuance (or Modification) and the expiry date
of such Facility LC, and describing the proposed terms of such Facility LC and
the nature of the transactions proposed to be supported thereby.  The issuance or Modification by the Lender
of any Facility LC shall, in addition to the conditions precedent set forth in Article IV
(the satisfaction of which the Lender shall have no duty to ascertain), be
subject to the conditions precedent that such Facility LC shall be satisfactory
to the Lender and that the Borrowers shall have executed and delivered such application
agreement and/or such other instruments and agreements relating to such
Facility LC as the Lender shall have reasonably requested (each, a “Facility
LC Application”).  In the event of
any conflict between the terms of this Agreement and the terms of any Facility
LC Application, the terms of this Agreement shall control.

 

(c)                                  Administration.  Upon receipt from the beneficiary of any
Facility LC of any demand for payment under such Facility LC, the Lender shall
notify the Borrower Representative as to the amount to be paid by the Lender as
a result of such demand and the proposed payment date (the “LC Payment Date”).  The responsibility of the Lender to the
Borrowers shall be only to determine that the documents (including each demand
for payment) delivered under each Facility LC in connection with such
presentment shall be in conformity in all material respects with such Facility
LC.

 

(d)                                 Reimbursement
by the Borrowers.  The Borrowers
shall be irrevocably and unconditionally obligated to reimburse the Lender on
or before the applicable LC Payment Date for any amounts to be paid by the
Lender upon any drawing under any Facility LC, without presentment, demand,
protest or other formalities of any kind; provided that, neither the Borrowers nor
the Lender shall hereby be precluded from asserting any claim for direct (but
not consequential) damages suffered by a Borrower or the Lender to the extent,
but only to the extent, caused by (i) the willful misconduct or gross
negligence of the Lender in determining whether a request presented under any
Facility LC issued by it complied with the terms of such Facility LC or (ii)
the Lender’s failure to pay under any Facility LC issued by it after the
presentation to it of a request strictly complying with the terms and
conditions of such Facility LC.  All
such amounts paid by the Lender and remaining unpaid by the Borrowers shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to (x) the rate applicable to Floating Rate Loans for such day if such
day falls on or before the applicable LC Payment Date and (y) the sum of 2% plus
the rate applicable to Floating Rate Loans for such day if such day falls after
such LC Payment Date.  Subject to the
terms and conditions of this Agreement (including  the submission of a Borrowing

 

28

 

Notice in
compliance with Section 2.1.1(b) and the satisfaction of the
applicable conditions precedent set forth in Article IV), the
Borrower Representative may request a Floating Rate Loan hereunder for the
purpose of satisfying any Reimbursement Obligation.

 

(e)                                  Obligations
Absolute.  The Borrower’s
obligations under this Section 2.1.2 shall be absolute and
unconditional under any and all circumstances and irrespective of any setoff,
counterclaim or defense to payment which any Borrower may have or have had
against the Lender or any beneficiary of a Facility LC.  The Borrowers further agree with the Lender
that the Lender shall not be responsible for, and the Borrower’s Reimbursement
Obligation in respect of any Facility LC shall not be affected by, among other
things, the validity or genuineness of documents or of any endorsements
thereon, even if such documents should in fact prove to be in any or all
respects invalid, fraudulent or forged, or any dispute between or among any
Borrower, any of any Borrower’s Affiliates, the beneficiary of any Facility LC
or any financing institution or other party to whom any Facility LC may be
transferred or any claims or defenses whatsoever of any Borrower or of any of
its Affiliates against the beneficiary of any Facility LC or any such
transferee.  The Lender shall not be
liable for any error, omission, interruption or delay in transmission, dispatch
or delivery of any message or advice, however transmitted, in connection with
any Facility LC.  The Borrowers agree
that any action taken or omitted by the Lender under or in connection with each
Facility LC and the related drafts and documents, if done without gross
negligence or willful misconduct, shall be binding upon the Borrowers and shall
not put the Lender under any liability to any Borrower.  Nothing in this Section 2.1.2(e)
is intended to limit the right of the Borrowers to make a claim against the
Lender for damages as contemplated by the proviso to the first sentence of Section 2.1.2(d).

 

(f)                                    Actions
of the Lender.  The Lender shall be
entitled to rely, and shall be fully protected in relying, upon any Facility
LC, draft, writing, resolution, notice, consent, certificate, affidavit,
letter, cablegram, email, telegram, telecopy, telex or teletype message,
statement, order or other document believed by it to be genuine and correct and
to have been signed, sent or made by the proper Person or Persons, and upon
advice and statements of legal counsel, independent accountants and other
experts selected by the Lender.

 

(g)                                 Indemnification.  The Borrowers hereby agree to indemnify and
hold harmless the Lender and its directors, officers, agents and employees from
and against any and all claims and damages, losses, liabilities, costs or
expenses which the Lender may incur (or which may be claimed against the Lender
by any Person whatsoever) by reason of or in connection with the issuance,
execution and delivery or transfer of or payment or failure to pay under any
Facility LC or any actual or proposed use of any Facility LC, including any
claims, damages, losses, liabilities, costs or expenses which the Lender may
incur by reason of, in connection with or on account of the Lender issuing any
Facility LC which specifies that the term “Beneficiary” included therein
includes any successor by operation of law of the named Beneficiary, but which
Facility LC does not require that any drawing by any such successor Beneficiary
be accompanied by a copy of a legal document, satisfactory to the Lender,
evidencing the appointment of such successor Beneficiary; provided that, the Borrowers
shall not be required to indemnify the Lender for any claims, damages, losses,
liabilities, costs or expenses to the extent, but only to the extent, caused by
(x) the willful misconduct or gross negligence of the Lender in determining
whether a request presented under any Facility LC complied with the terms of
such Facility LC, (y) the Lender’s failure to pay under any Facility LC after
the presentation to it of a request strictly complying with

 

29

 

the terms and
conditions of such Facility LC or (z) the breach by the Lender of its
responsibilities under Section 2.1.2(c). Nothing in this Section 2.1.2(g)
is intended to limit the obligations of the Borrowers under any other provision
of this Agreement.

 

(h)                                 Facility
LC Collateral Account.  The
Borrowers agree that it will, upon the request of the Lender and until the final
expiration date of any Facility LC and thereafter as long as any amount is
payable to the Lender in respect of any Facility LC, maintain a special
collateral account pursuant to arrangements satisfactory to the Lender (the “Facility
LC Collateral Account”) at the Lender’s office at the address specified
pursuant to Article XI, in the name of the Borrowers but under the
sole dominion and control of the Lender and in which the Borrowers shall have
no interest other than as set forth in Section 8.1.  Nothing in this Section 2.1.2(h)
shall either obligate the Lender to require the Borrowers to deposit any funds
in the Facility LC Collateral Account or limit the right of the Lender to
release any funds held in the Facility LC Collateral Account in each case other
than as required by Section 8.1. 
The Borrowers hereby pledge, assign and grant to the Lender a security
interest in all of the Borrower’s right, title and interest in and to all funds
which may from time to time be on deposit in the Facility LC Collateral Account
to secure the prompt and complete payment and performance of the Secured
Obligations.  The Lender will invest any
funds on deposit from time to time in the Facility LC Collateral Account in
certificates of deposit of the Lender having a maturity not exceeding thirty
days.

 

(i)                                     Termination
of the Facility.  If,
notwithstanding the provisions of this Section 2.1.2, any Facility
LC is outstanding upon the earlier of (x) the termination of this Agreement and
(y) the Facility Termination Date, then upon such termination the Borrowers
shall deposit with the Lender, with respect to all LC Obligations, as the
Lender in its discretion shall specify, either (i) a standby letter of credit
(a “Supporting Letter of Credit”), in form and substance satisfactory to
the Lender, issued by an issuer satisfactory to the Lender, in a stated amount,
in immediately available funds (which funds shall be held in the Facility LC
Collateral Account), equal to 105% of the difference of (x) the amount of LC
Obligations at such time, less (y) the amount on deposit in the Facility LC
Collateral Account at such time which is free and clear of all rights and
claims of third parties and has not been applied against the Obligations (such
difference, the “Collateral Shortfall Amount”), under which Supporting
Letter of Credit the Lender is entitled to draw amounts necessary to reimburse
the Lender for payments to be made by the Lender under any such Facility LC and
any fees and expenses associated with such 
Facility LC, or (ii) cash in an amount equal to 105% of the Collateral
Shortfall Amount.  Such Supporting
Letter of Credit or deposit of cash shall be held by the Lender, as security
for, and to provide for the payment of, the aggregate undrawn amount of such
Facility LC remaining outstanding.

 

2.2.                              Payment of the Obligations. The
Borrowers shall repay the outstanding principal balance of the Loans, together
with all other Obligations, including all accrued and unpaid interest thereon,
on the Facility Termination Date.

 

2.3.                              Minimum Amount of Each Loan.  Each Eurodollar Loan shall be in the minimum
amount of $500,000 and in multiples of $100,000 if in excess thereof.  Floating Rate Loans may be in any amount.  After giving effect to any Loan,
continuation, or conversion of any Eurodollar Loan, there may not be more than
four (4) different Interest Periods in effect hereunder.

 

2.4.                              Funding Accounts; Controlled
Disbursement Accounts.  All
disbursements of

 

30

 

Revolving Loans will initially
be made into the disbursement funding accounts set forth on Schedule 2
maintained at the (collectively, the “Funding Account”) structured and
utilized for that purpose in accordance with the Lender’s policies and
procedures as Floating Rate Loans.  With
respect to advances requested by the Borrower Representative in the Borrowing
Notice to cover Presentments in the Controlled Disbursement Accounts, the
Borrowers hereby irrevocably authorize the Lender, without any further written
or oral request of a Borrower, to transfer funds automatically from the Funding
Account to the Controlled Disbursement Accounts in amounts necessary for the
payment of checks and other items drawn on the Controlled Disbursement Accounts
as such checks and other items (“Presentments”) are presented to the
Lender for payment.  If any Presentments
in the Controlled Disbursement Accounts are paid by the Lender in excess of
funds available in the Funding Account for any reason, including the failure of
the Borrowers to determine the correct amount of Presentments in its Borrowing
Notice, the amounts so paid by the Lender will be deemed to be an advance of
the Revolving Loans as a Floating Rate Loan for all purposes of this Agreement
and are hereby ratified and approved by the Borrowers; however, under no
circumstances will the Lender have any obligation to pay any Presentments in
the Controlled Disbursement Accounts in excess of funds available in the
Funding Account.  Notwithstanding
anything to the contrary in this Section 2.4, the Lender may, at
any time hereafter on telephone or written notice to the Borrower
Representative, elect to discontinue the automatic sweeping of funds from the
Funding Account to the Controlled Disbursement Accounts, but the Lender instead
may disburse proceeds of the Revolving Loans made by the Lender by crediting
only the Funding Account.  Furthermore,
the Lender reserves the right to discontinue providing controlled disbursement
accounts to its customers, including the Borrowers.  In addition to advances of Revolving Loans made pursuant to the
Lender’s controlled disbursement account system, the Lender will, from time to
time prior to the Facility Termination Date and subject to the other terms and
conditions of this Agreement, advance Revolving Loans via wire transfer of
funds on the written request of the Borrower Representative therefor in
compliance with the Lender’s wire transfer policies and procedures.  Each request submitted by the Borrower
Representative for a new advance of a Revolving Loan via wire transfer of funds
must be in accordance with Section 2.1.1(b) and the Lender’s wire
transfer policies and procedures.

 

2.5.                              Reliance Upon Authority; No
Liability; Borrower Representative. 
The Lender is entitled to rely conclusively on any individual’s request
for Loans hereunder, so long as the proceeds thereof are to be transferred to
the Funding Account.  The Lender shall
have no duty to verify the identity of any individual representing himself or
herself as a person authorized by a Borrower to make such requests on its
behalf.  The Lender shall not incur any
liability to the Borrowers as a result of acting upon any notice referred to in
Section 2.1 which the Lender reasonably believes to have been given
by an officer or other person duly authorized by a Borrower to request Loans on
its behalf or for otherwise acting under this Agreement.  The crediting of Loans to the Funding
Account shall conclusively establish the obligation of the Borrowers to repay
such Loans as provided herein. Each Borrower hereby irrevocably designates
MagneTek as its representative and agent (“Borrower Representative”) on
its behalf for the purposes of issuing Borrowing Notices, giving instructions
with respect to the disbursement of the proceeds of the Loans, selecting
interest rate options, requesting Facility LCs, giving and receiving all other
notices and consents hereunder or under any of the other Loan Documents and
taking all other actions (including in respect of compliance with covenants) on
behalf of any Borrower or Borrowers under the Loan Documents.  The Borrower Representative hereby accepts
such appointment.  The Lender may regard
any notice or other communication pursuant to any Loan Document from the
Borrower Representative as a notice or communication from all Borrowers, and
may give any notice or communication required or permitted to be given to any
Borrower or Borrowers hereunder to the

 

31

 

Borrower Representative on
behalf of such Borrower or Borrowers. 
Each Borrower agrees that each notice, election, representation and
warranty, covenant, agreement and undertaking made on its behalf by the
Borrower Representative shall be deemed for all purposes to have been made by
such Borrower and shall be binding upon and enforceable against such Borrower
to the same extent as if the same had been made directly by such Borrower.

 

2.6.                              Conversion and Continuation of
Outstanding Loans.  Floating
Rate Loans shall continue as Floating Rate Loans unless and until such Floating
Rate Loans are converted into Eurodollar Loans pursuant to this Section 2.6
or are repaid in accordance with this Agreement.  Each Eurodollar Loan shall continue as a Eurodollar Loan until
the end of the then applicable Interest Period therefor, at which time such
Eurodollar Loan shall be automatically converted into a Floating Rate Loan
unless (x) such Eurodollar Loan is or was repaid in accordance with this
Agreement or (y) the Borrower Representative shall have given the Lender a
Conversion/Continuation Notice (as defined below) requesting that, at the end
of such Interest Period, such Eurodollar Loan continue as a Eurodollar Loan for
the same or another Interest Period. 
Subject to the terms of Section 2.3, the Borrower
Representative may elect from time to time to convert all or any part of a
Floating Rate Loan into a Eurodollar Loan. 
The Borrower Representative shall give the Lender irrevocable notice in
the form of Exhibit B (a “Conversion/Continuation Notice”) of
each conversion of a Floating Rate Loan into a Eurodollar Loan or continuation
of a Eurodollar Loan not later than 11:00 a.m. (Chicago, Illinois time) at
least three Business Days prior to the date of the requested conversion or
continuation, specifying (i) the requested date, which shall be a Business Day,
of such conversion or continuation, (ii) the aggregate amount and Type of the
Loan which is to be converted or continued, and (iii) the amount of such Loan
which is to be converted into or continued as a Eurodollar Loan and the
duration of the Interest Period applicable thereto.

 

2.7.                              Telephonic Notices.  The Borrowers hereby authorize the Lender to extend, convert or
continue Loans, effect selections of Types of Loans and to transfer funds based
on telephonic notices made by any person or persons the Lender in good faith
believes to be acting on behalf of the Borrowers, it being understood that the
foregoing authorization is specifically intended to allow Borrowing Notices and
Conversion/Continuation Notices to be given telephonically.  The Borrowers agree to deliver promptly to
the Lender a written confirmation, if such confirmation is requested by the
Lender, of each telephonic notice signed by an Authorized Officer. If the
written confirmation differs in any material respect from the action taken by
the Lender, the records of the Lender shall govern absent manifest error.

 

2.8.                              Fees.

 

(a)                                  Unused Commitment
Fee.  The Borrowers agree to pay to
the Lender an unused commitment fee at a per annum rate equal to 0.50% on the
average daily Available Commitment, payable on each Payment Date hereafter and
on the Facility Termination Date (the “Unused Commitment Fee”).

 

(b)                                 LC Fees.  The Borrowers shall pay to the Lender (i)
(collectively, the “LC Fee”): (A) with respect to each standby Facility
LC, a fee at a per annum rate equal to the Applicable LC Fee Rate on the
average daily undrawn stated amount under each Facility LC, such fee to be
payable in arrears on each Payment Date and (B) with respect to each commercial
Facility LC a fee at a rate per annum equal to 1% of the initial stated amount
(or, with respect to a Modification of any such commercial Facility LC which
increases the

 

32

 

stated amount thereof, such increase in the stated amount), such fee to
be paid upon the issuance of such commercial Facility LC and (ii) documentary
and processing charges in connection with the issuance or Modification of and
draws under Facility LCs in accordance with the Lender’s standard
schedule for such charges as in effect from time to time.  The LC Fee will be calculated on the basis
of the actual number of days elapsed in a 360-day year.  If any Facility LC is cancelled for any
reason before the stated expiry date thereof, any LC Fee paid in advance will
not be refunded and will be retained by the Lender solely for its account.

 

(c)                                  Closing Fee.  The Borrowers will pay to the Lender a
non-refundable, fully-earned closing fee in the total amount of $225,000 on the
Closing Date.

 

(d)                                 Collateral
Monitoring Fee.  The Borrowers shall
pay to the Lender for its account a collateral monitoring fee of $1,000 per
month, payable in advance on each Payment Date hereafter and on the Facility
Termination Date (the “Collateral Monitoring Fee”).  The Collateral Monitoring Fee shall be fully
earned and non-refundable for any reason upon payment thereof.

 

2.9.                              Interest
Rates.  Each Floating Rate Loan
shall bear interest on the outstanding principal amount thereof, for each day
from and including the date such Loan is made or is automatically converted
from a Eurodollar Loan into a Floating Rate Loan pursuant to Section 2.6,
to but excluding the date it is paid or is converted into a Eurodollar Loan
pursuant to Section 2.6 hereof, at a rate per annum equal to the
Floating Rate for such day.  Changes in
the rate of interest on that portion of any Loan maintained as a Floating Rate
Loan will take effect simultaneously with each change in the Alternate Base
Rate.  Each Eurodollar Loan shall bear
interest on the outstanding principal amount thereof from and including the
first day of the Interest Period applicable thereto to (but not including) the
last day of such Interest Period at the interest rate determined by the Lender
as applicable to such Eurodollar Loan based upon the Borrower’s selections
under Sections 2.1.1 and 2.6 and otherwise in accordance with the
terms hereof.  No Interest Period may
end after the Facility Termination Date. 
If at any time Loans are outstanding with respect to which the Borrower
Representative has not delivered a notice to the Lender specifying the basis
for determining the interest rate applicable thereto, those Loans shall bear
interest at the Floating Rate.

 

2.10.                        Eurodollar Loans Post Default;
Default Rates.  Notwithstanding
anything to the contrary contained hereunder, during the continuance of a
Default or Unmatured Default the Lender may, at its option, by notice to the
Borrower Representative, declare that no Loan may be made as, converted into or
continued as a Eurodollar Loan.  During
the continuance of a Default the Lender may, at its option, by notice to the
Borrower Representative, declare that  (i) each Eurodollar Loan shall bear
interest for the remainder of the applicable Interest Period at the rate
otherwise applicable to such Interest Period plus 2% per annum,
(ii) each Floating Rate Loan shall bear interest at a rate per annum equal to
the Floating Rate in effect from time to time plus 2% per annum and
(iii) the LC Fee shall be increased by 2% per annum, provided that, during the
continuance of a Default under subsection (f) or (g) of Section 7.1,
the interest rates set forth in clauses (i) and (ii) above and the increase in
the LC Fee set forth in clause (iii) above shall be applicable to all Credit
Extensions without any election or action the part of the Lender.

 

2.11.                        Interest Payment Dates; Interest and
Fee Basis.  Interest accrued on
each Floating Rate Loan shall be payable on each Payment Date, commencing with
the first such date to occur after the date hereof and at maturity.  Interest accrued on each Eurodollar Loan
shall be payable on

 

33

 

the last day
of its applicable Interest Period, on any date on which the Eurodollar Loan is
prepaid, whether by acceleration or otherwise, and at maturity.  Interest accrued on each Eurodollar Loan
having an Interest Period longer than three months shall also be payable on the
last day of each three-month interval during such Interest Period.  Interest on all Loans, unused commitment
fees and LC Fees shall be calculated for actual days elapsed on the basis of a
360-day year.  Interest shall be payable
for the day a Loan is made but not for the day of any payment on the amount
paid if payment is received prior to noon (local time) at the place of
payment.  If any payment of principal of
or interest on a Loan shall become due on a day which is not a Business Day,
such payment shall be made on the next succeeding Business Day and, in the case
of a principal payment, such extension of time shall be included in computing
interest in connection with such payment.

 

2.12.                        Voluntary Prepayments.  The Borrowers may also from time to time
prepay, subject to the payment of any funding indemnification amounts required
by Section 3.4 but without penalty or premium, all outstanding
Eurodollar Loans, or, in a minimum aggregate amount of $500,000 or any integral
multiple of $100,000 in excess thereof, any portion of the outstanding
Eurodollar Loans upon three Business Days’ prior notice to the Lender.

 

2.13.                        Mandatory Prepayments.

 

(a)                                  Borrowing
Base Compliance.  The
Borrowers shall immediately repay the Revolving Loans or Reimbursement
Obligations if, at any time, the Credit Exposure exceeds the lesser of (i) the
Commitment and (ii) the Borrowing Base, to the extent required to eliminate
such excess.  If any such excess remains
after repayment in full of all outstanding Revolving Loans and Reimbursement
Obligations, the Borrowers shall provide cash collateral or a Supporting Letter
of Credit for the LC Obligations in the manner set forth in Section 2.1.2(i)
to the extent required to eliminate such excess.

 

(b)                                 Sale of
Assets.  Immediately upon
receipt by any Loan Party of the Net Cash Proceeds of any asset disposition
(other than sales of Inventory in the ordinary course of business; however,
a sale in the ordinary course of business will not include a transfer in total
or partial satisfaction of indebtedness), the Borrowers shall
prepay the Obligations in an amount equal to all such Net Cash Proceeds.  Any such prepayment shall be applied first,
to pay the principal of the Revolving Loans with the then Equipment
Availability being reduced dollar-for-dollar by the amount of any Availability
attributed to the Equipment included in such asset disposition and second,
to cash collateralize outstanding Facility LCs; provided further, subject to
the Lender’s rights and remedies exercisable upon the occurrence of a Default
or an Unmatured Default, if there are no Revolving Loans outstanding, and no
Default or Unmatured Default exists, the Net Cash Proceeds will not be required
to cash collateralize outstanding Facility LCs.

 

(c)                                  Issuance
of Debt or Equity.  If MagneTek
issues Capital Stock or any Loan Party issues any Debt For Borrowed Money
(other than the type set forth in clauses (c), (d), (e), (f) or (g) of the
definition of Debt For Borrowed Money) or if any Loan Party receives any
dividend or distribution from a Person other than a Loan Party, no later than
the Business Day following the date of receipt of any Net Cash Proceeds of such
issuance or receipt of such dividend, distribution, loan or advance, the
Borrowers shall prepay the Obligations in an amount equal to all such Net Cash
Proceeds or such dividends, distributions, loans or advances.  Any such prepayment shall be applied first,
to pay the

 

34

 

principal of the Revolving Loans,
and second, to cash collateralize outstanding Facility LCs in no more
than the Reimbursement Obligations related thereto; provided further, subject
to the Lender’s rights and remedies exercisable upon the occurrence of a
Default or an Unmatured Default, if there are no Revolving Loans outstanding,
and no Default or Unmatured Default exists, the Net Cash Proceeds will not be
required to cash collateralize outstanding Facility LCs.

 

(d)                                 Insurance/Condemnation
Proceeds. Any insurance or condemnation proceeds to be applied
to the Obligations in accordance with Section 6.7(c) shall be
applied as follows: (i) insurance proceeds from casualties or losses to cash or
Inventory shall be applied, first, to the Revolving Loans and second,
to cash collateralize outstanding Facility LCs in no more than the
Reimbursement Obligations related thereto; and (ii) insurance or condemnation
proceeds from casualties or losses to Equipment, Fixtures and real Property
shall be applied first, to pay the principal of the Revolving Loans with
the then Equipment Availability being reduced dollar-for-dollar by the amount
of any Availability, if any, attributed to the Equipment affected by such
casualty or loss, and second, to cash collateralize outstanding Facility
LCs in no more than the Reimbursement Obligations related thereto.  The Commitment (other than Equipment
Availability) shall not be permanently reduced by the amount of any such
prepayments.  If the precise amount of
insurance or condemnation proceeds allocable to Inventory as compared to
Equipment, Fixtures and real Property is not otherwise determined, the
allocation and application of those proceeds shall be determined by the Lender,
in its Permitted Discretion.

 

(e)                                  Tax Refund.  On the date of receipt thereof by any Loan
Party of a Tax Refund, an amount equal to 100% of the Tax Refund shall be paid
to the Lender and applied first, to pay the principal of the Revolving
Loans, and second, to cash collateralize outstanding Facility LCs.  “Tax Refund” means any refund of any
taxes, fees or interest which (i) are paid to MagneTek by any Governmental
Authority and are attributable to losses, deductions, credits, or payments of,
or by, any Loan Party or (ii) are paid directly to any Loan Party by any
Governmental Authority.

 

(f)                                    General.  Without in any way limiting the foregoing,
immediately upon receipt by any Loan Party of proceeds of any sale of any
Collateral, the Borrowers shall cause such Loan Party to deliver such proceeds
to the Lender, or deposit such proceeds in a deposit account subject to a
Deposit Account Control Agreement.  All
of such proceeds shall be applied as set forth above or otherwise as provided
in Section 2.16.  Nothing in
this Section 2.13 shall be construed to constitute the Lender’s
consent to any transaction that is not permitted by other provisions of this
Agreement or the other Loan Documents.

 

2.14.                        Termination of the Facility.

 

(a)                                  Without
limiting Section 2.2 or Section 8.1, (a) the Commitment
shall expire on the Facility Termination Date and (b) the Credit Exposure and
all other unpaid Obligations shall be paid in full by the Borrowers on the
Facility Termination Date.

 

(b)                                 The
Borrowers may terminate this Agreement upon at least 10 Business Days’ prior
written notice thereof from the Borrowing Representative to the Lender, upon
(i) the payment in full of all outstanding Loans, together with accrued and
unpaid interest thereon, (ii) the cancellation and return of all outstanding
Facility LCs (or alternatively, with

 

35

 

respect to each such Facility LC,
the furnishing to the Lender of a cash deposit or Supporting Letter of Credit
as required by Section 2.1.2(i)), (iii) the payment in full of the
early termination fee set forth in the following sentence (the “Prepayment
Fee”), (iv) the payment in full of all reimbursable expenses and other
Obligations together with accrued and unpaid interest thereon, and (v) the
payment in full of any amount due under Section 3.4.  Subject to Section 2.20, if this
Agreement is terminated at any time prior to the Facility Termination Date,
other than by virtue of a refinancing by the Lender, or by a group of lenders
agented by the Lender, whether pursuant to this Section 2.14 or
pursuant to Section 8.1, the Borrowers shall pay to the Lender an
early termination fee determined in accordance with the following table:

 

	
  Period during which

  early termination occurs

  	
   

  	
  Prepayment
  Fee

  	
   

  
	
  On or prior to the first anniversary of the
  Closing Date

  	
   

  	
  $

  	
  500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  After the first anniversary of the Closing
  Date but on or prior to the second anniversary of the Closing Date

  	
   

  	
  $

  	
  300,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  After the second anniversary of the Closing
  Date but on or prior to the third anniversary of the Closing Date

  	
   

  	
  $

  	
  100,000

  	
   

  

 

2.15.                        Method of Payment.

 

(a)                                  All
payments of the Obligations hereunder shall be made, without setoff, deduction,
or counterclaim, in immediately available funds to the Lender at its address
specified pursuant to Article XI, or at any other Lending
Installation of the Lender specified in writing by the Lender to the Borrower
Representative, by noon (Chicago, Illinois time) on the date when due. Any
payment received by the Lender after such time shall be deemed to have been
received on the following Business Day and any applicable interest or fee shall
continue to accrue.

 

(b)                                 At the
election of the Lender, all payments of principal, interest, reimbursement
obligations in connection with Facility LCs, fees, premiums, reimbursable
expenses (including all reimbursement for fees and expenses pursuant to Section 9.6),
and other sums payable under the Loan Documents, may be paid from the proceeds
of Loans made hereunder whether made following a request by the Borrower
Representative pursuant to Section 2.1 or a deemed request as
provided in this Section 2.15 or may be deducted from the Funding
Account or any other deposit account of any Borrower maintained with the
Lender.  The Borrowers hereby
irrevocably authorize (i) the Lender to make a Floating Rate Loan for the
purpose of paying each payment of principal, interest and fees as it becomes
due hereunder or any other amount due under the Loan Documents and agrees that
all such amounts charged shall constitute Loans and that all such Loans shall
be deemed to have been requested pursuant to Section 2.1 and (ii)
the Lender to charge the Funding Account or any other deposit account of a Loan
Party maintained with the Lender for each payment of 

 

36

 

principal, interest and fees as it becomes due hereunder or
any other amount due under the Loan Documents.

 

2.16.                        Collection of Accounts; Lock Box; Cash
Collateral Account; Application of Payments.

 

2.16.1. 
Lock Box.  The Borrowers
have established and will continue to 
maintain through the Lender the post office boxes at the U.S. Post
Office bearing the addresses set forth in Schedule 2 or such other
address or addresses as the Lender may notify the Borrowers from time to time
(collectively, the “Lock Box”). 
The Borrowers will notify all of their customers and account debtors to
forward all checks, drafts, money orders, and other items, cash and other
remittances of every kind due the Borrowers (“Remittances”) to the Lock
Box (such notices to be in such form and substance as the Lender may require
from time to time).  The Lender will
have sole access to the Lock Box at all times, and the Borrowers will take all
action necessary to grant the Lender such sole access.  At no time will the Borrowers remove any
item from Lock Box without the Lender’s prior written consent, and the
Borrowers will not notify any customer or account debtor to pay any Remittance
to any other place or address without the Lender’s prior written consent.  If a Borrower should neglect or refuse to
notify any customer or account debtor to pay any Remittance to the Lock Box,
the Lender will be entitled to make such notification.

 

2.16.2. 
Cash Collateral Account. Upon retrieval of Remittances and other
proceeds of Accounts and other Collateral from the Lock Box, the Lender will
deposit the same in a non-interest bearing account in the Lender’s name as set
forth on Schedule 2 at the Lender “Cash Collateral Account”.  Any Remittance or other proceeds of Accounts
or other Collateral received by the Borrowers shall be deemed held by the
Borrowers in trust and as fiduciary for the Lender, and the Borrowers
immediately shall deliver the same, in its original form, to the Lender by
overnight delivery for deposit into the Lock Box or shall immediately deposit
the same into the Cash Collateral Account. 
Pending such deposit, the Borrowers will not commingle any such
Remittance or other proceeds of Accounts or other Collateral with any of the
Borrowers’ other funds or property, but the Borrowers will hold it separate and
apart therefrom in trust for the Lender until delivery is made to the Lender by
overnight delivery carrier as described above. 
All deposits to the Cash Collateral Account and the Lock Box will be the
Lender’s property and will be subject only to the signing authority designated
from time to time by the Lender, and the Borrowers shall have no interest
therein or control over such deposits or funds.  The Lender will have sole access to the Cash Collateral Account,
and the Borrowers shall have no access thereto.  The Lender shall have, and the Borrowers hereby grants to the
Lender, a Lien on all funds held in the Funding Account, the Controlled Disbursement
Accounts, and the Cash Collateral Account as security for the Obligations.  None of the Funding Account, the Controlled
Disbursement Accounts, or the Cash Collateral Account will be subject to any
deduction, set-off, banker’s lien or any other right in favor or any Person
other than the Lender.  Deposits to the
Cash Collateral Account will be applied to the Obligations (including to cash
collateralize outstanding Facility LCs) in such order and method of application
as may be elected by the Lender in its discretion exercised in good faith; however, unless
so directed by the Borrower Representative, or unless a Default is in
existence, the Lender shall not apply funds in the Cash Collateral Account to
any Eurodollar Loan, except (a) on the expiration date of the Interest Period
applicable to any such Eurodollar Loan or (b) in the event, and only to the
extent, that there are no outstanding Floating Rate Loans and, in any event,
the Borrowers

 

37

 

shall pay the Eurodollar breakage losses in accordance with Section 3.4.  Any funds in the Cash Collateral Account
remaining after the applications set forth in the preceding sentence (“Available
Funds”) will be deposited into the Borrowers’ Funding Account with the
Lender; however, if a Default is in existence, all
Available Funds may, at the Lender’s option, be retained in the Cash Collateral
Account as continuing security for the Obligations.  If any Remittance deposited in the Cash Collateral Account is
dishonored or returned unpaid for any reason, the Lender, in its discretion,
may charge the amount of such dishonored or returned Remittance directly
against the Borrowers and any account maintained by the Borrowers with the
Lender and such amount shall be deemed part of the Obligations.  The Lender shall not be liable for any loss
or damage resulting from any error, omission, failure or negligence on the part
of the Lender with respect to the operation of the Funding Account, the
Controlled Disbursement Accounts, the Cash Collateral Account, the Lock Box, or
the services to be provided by the Lender under this Agreement, except to the
extent, but only to the extent, of any direct (as opposed to any consequential,
special or lost profit) damages suffered by the Borrowers from the Lender’s
gross negligence or willful misconduct. 
Until a payment is received by the Lender for the Lender’s account in
finally collected funds, all risks associated with such payment will be borne
solely by the Borrowers.  The Lender
shall have the continuing and exclusive right to apply and reverse and reapply
any and all such proceeds and payments to any portion of the Secured
Obligations at any time on and after the occurrence of a Default or an
Unmatured Default.

 

2.16.3. 
Crediting of Remittances. 
All Remittances and other proceeds of Accounts and other Collateral
deposited into the Cash Collateral Account shall be credited against the then
Credit Exposure and Eligible Accounts on the Business Day immediately following
the Business Day on which such deposit is made into the Cash Collateral Account
(conditional upon final collection and the Lender’s funds availability
policies); provided, however, to the extent that such funds
applied by the Lender are not available funds under the Lender’s funds
availability policies on the date of deposit into the Cash Collateral Account,
then such funds will constitute a negative collected balance and will bear
interest at the Floating Rate until such funds become available under the
Lender’s funds availability polices. 
From time to time, the Lender may adopt such regulations and procedures
as it may deem reasonable and appropriate with respect to the operation of the
Cash Collateral Account and the Lock Box and the services to be provided by the
Lender under this Agreement.

 

2.16.4. 
Cost of Collection.  All
(a) reasonable costs of collection of the Borrowers’ Accounts, including
attorneys’ fees and other out-of-pocket expenses, (b) of the Lender’s
administrative and recordkeeping costs, and (c) of the Lender’s service charges
and costs related to the establishment and maintenance of the Lock Box, the
Funding Account, the Controlled Disbursement Accounts, and the Cash Collateral
Account shall be the sole responsibility of the Borrowers, whether the same are
incurred by the Lender or the Borrowers, and the Lender, at its discretion, may
charge the same against the Borrowers and any account maintained by the
Borrowers with the Lender and the same shall be deemed part of the Obligations.

 

2.17.                        Indemnity for Returned Payments.  If after receipt of any payment which is
applied to the payment of all or any part of the Obligations, the Lender is for
any reason compelled to surrender such payment or proceeds to any Person
because such payment or application of proceeds is invalidated, declared fraudulent,
set aside, determined to be void or voidable as a preference, impermissible
setoff, or a diversion of trust funds, or for any other reason, then the
Obligations or

 

38

 

part thereof
intended to be satisfied shall be revived and continued and this Agreement
shall continue in full force as if such payment or proceeds had not been
received by the Lender, and the Borrowers shall be liable to pay to the Lender,
and the Borrowers hereby indemnify the Lender and hold the Lender harmless for
the amount of such payment or proceeds surrendered.  The provisions of this Section 2.17 shall be and
remain effective notwithstanding any contrary action which may have been taken
by the Lender in reliance upon such payment or application of proceeds, and any
such contrary action so taken shall be without prejudice to the Lender’s rights
under this Agreement and shall be deemed to have been conditioned upon such
payment or application of proceeds having become final and irrevocable.  The provisions of this Section 2.17
shall survive the termination of this Agreement.

 

2.18.                        Noteless Agreement; Evidence of
Indebtedness.

 

(a)                                  The Lender shall
maintain in accordance with its usual practice an account or accounts
evidencing the Obligations of the Borrowers to the Lender resulting from each
Loan made from time to time, including the amounts of principal and interest
payable and paid to the Lender from time to time hereunder.

 

(b)                                 The Lender shall also
maintain accounts in which it will record (a) the amount of each Loan extended
hereunder, the Type thereof and the Interest Period with respect thereto, (b)
the amount of any principal or interest due and payable or to become due and
payable from the Borrowers to the Lender hereunder, (c) the original stated
amount of each Facility LC and the amount of LC Obligations outstanding at any
time, and (d) the amount of any sum received by the Lender hereunder from the
Borrowers.

 

(c)                                  The entries
maintained in the accounts maintained pursuant to paragraphs (i) and (ii) above
shall be prima
facie evidence of the existence and amounts of the Obligations
therein recorded; provided however, that the failure of the Lender to maintain
such accounts or any error therein shall not in any manner affect the
obligation of the Borrowers to repay the Obligations in accordance with their
terms.

 

(d)                                 The Lender may request
that its Revolving Loans be evidenced by a promissory note in substantially the
form of Exhibit C (a “Revolving Note”).  In such event, the Borrowers shall prepare, execute and deliver
to the Lender such Note payable to the order of the Lender.  Thereafter, the Revolving Loans evidenced by
such Revolving Note and interest thereon shall at all times be represented by
one or more promissory notes payable to the order of the payee named therein,
except to the extent that the Lender subsequently returns any such Note for
cancellation and requests that such Revolving Loans once again be evidenced as
described in paragraphs (a) and (b) above.

 

2.19.                        Lending
Installations.  The Lender may
book its Loans and the Facility LCs at any Lending Installation selected by the
Lender and may change its Lending Installation from time to time.  All terms of this Agreement shall apply to
any such Lending Installation and the Loans, Facility LCs, and the Note issued
hereunder shall be deemed held by the Lender for the benefit of any such
Lending Installation.  The Lender may,
by written notice to the Borrower Representative in accordance with Article XI,
designate replacement or additional Lending Installations through which Loans
will be made by it or Facility LCs will be issued by it and for whose account
Loan payments or payments with respect to Facility LCs are to be made.

 

39

 

2.20.                        Limitation
of Interest. The Borrowers and the Lender intend to strictly comply
with all applicable laws, including applicable usury laws.  Accordingly, the provisions of this Section 2.20
shall govern and control over every other provision of this Agreement or any
other Loan Document which conflicts or is inconsistent with this Section 2.20,
even if such provision declares that it controls.  As used in this Section 2.20, the term “interest”
includes the aggregate of all charges, fees, benefits or other compensation
which constitute interest under applicable law, provided that, to the
maximum extent permitted by applicable law, (a) any non-principal payment shall
be characterized as an expense or as compensation for something other than the
use, forbearance or detention of money and not as interest, and (b) all
interest at any time contracted for, reserved, charged or received shall be
amortized, prorated, allocated and spread, in equal parts during the full term
of the Obligations.  In no event shall
the Borrowers or any other Person be obligated to pay, or the Lender have any
right or privilege to reserve, receive or retain, (a) any interest in excess of
the maximum amount of non-usurious interest permitted under the applicable laws
(if any) of the U.S. or of any other applicable state, or (b) total interest in
excess of the amount which the Lender could lawfully have contracted for,
reserved, received, retained or charged had the interest been calculated for
the full term of the Obligations at the Highest Lawful Rate.  On each day, if any, that the interest rate
(the “Stated Rate”) called for under this Agreement or any other Loan
Document exceeds the Highest Lawful Rate, the rate at which interest shall
accrue shall automatically be fixed by operation of this sentence at the
Highest Lawful Rate for that day, and shall remain fixed at the Highest Lawful
Rate for each day thereafter until the total amount of interest accrued equals
the total amount of interest which would have accrued if there were no such
ceiling rate as is imposed by this sentence. 
Thereafter, interest shall accrue at the Stated Rate unless and until
the Stated Rate again exceeds the Highest Lawful Rate when the provisions of
the immediately preceding sentence shall again automatically operate to limit
the interest accrual rate.  The daily
interest rates to be used in calculating interest at the Highest Lawful Rate
shall be determined by dividing the applicable Highest Lawful Rate per annum by
the number of days in the calendar year for which such calculation is being
made.  None of the terms and provisions
contained in this Agreement or in any other Loan Document which directly or
indirectly relate to interest shall ever be construed without reference to this
Section 2.20, or be construed to create a contract to pay for the
use, forbearance or detention of money at an interest rate in excess of the
Highest Lawful Rate.  If the term of any
Obligation is shortened by reason of acceleration of maturity as a result of
any Default or by any other cause, or by reason of any required or permitted
prepayment, and if for that (or any other) reason the Lender at any time,
including the stated maturity, is owed or receives (and/or has received)
interest in excess of interest calculated at the Highest Lawful Rate, then and
in any such event all of any such excess interest shall be canceled
automatically as of the date of such acceleration, prepayment or other event
which produces the excess, and, if such excess interest has been paid to the
Lender, it shall be credited pro tanto against the then-outstanding
principal balance of the Borrower’s obligations to the Lender, effective as of
the date or dates when the event occurs which causes it to be excess interest,
until such excess is exhausted or all of such principal has been fully paid and
satisfied, whichever occurs first, and any remaining balance of such excess
shall be promptly refunded to its payor.

 

2.21.                        One General Obligation;
Cross-Collateralized; Joint, Several and Primary Obligations.  All advances of credit by the Lender to, or
for the benefit of, a Borrower under this Agreement and under any other Loan
Document constitute one loan, and all of the Obligations constitute one
obligation.  The Loans and all other
advances or extensions of credit to, or for the benefit of, Borrowers under
this Agreement or the other Loan Documents are made on the security of all of
the Collateral.  The Obligations of
Borrowers under this Agreement and the other Loan

 

40

 

Documents are joint, several
and primary.  No Borrower will be or be
deemed to be an accommodation party with respect to any of the Loan
Documents.  The limits on outstanding advances
against the Borrowing Base are not intended and shall not be deemed to limit in
any way the Lender’s security interest in, or other Liens on, the Accounts,
Inventory, Equipment, General Intangibles, or any other Collateral.

 

ARTICLE III

 

YIELD PROTECTION;
TAXES  

 

3.1.                              Yield
Protection.  If, on or after the
Closing Date, the adoption of any law or any governmental or quasi-governmental
rule, regulation, policy, guideline or directive (whether or not having the
force of law), or any change in the interpretation or administration thereof by
any governmental or quasi-governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by the Lender or its applicable Lending Installation with any request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency:

 

(a)                                  subjects the Lender
or any Lending Installation of the Lender to any Taxes, or changes the basis of
taxation of payments (other than with respect to Excluded Taxes) to the Lender
in respect of its Eurodollar Loans or Facility LCs, or

 

(b)                                 imposes or increases
or deems applicable any reserve, assessment, insurance charge, special deposit
or similar requirement against assets of, deposits with or for the account of,
or credit extended by, the Lender or any applicable Lending Installation of the
Lender (other than reserves and assessments taken into account in determining
the interest rate applicable to Eurodollar Loans), or

 

(c)                                  imposes any other
condition the result of which is to increase the cost to the Lender or any
applicable Lending Installation of the Lender of making, funding or maintaining
its Eurodollar Loans, of issuing Facility LCs, or reduces any amount receivable
by the Lender or any applicable Lending Installation of the Lender in
connection with its Eurodollar Loans or Facility LCs, or requires the Lender or
any applicable Lending Installation of the Lender to make any payment
calculated by reference to the amount of Eurodollar Loans or Facility LCs
therein held or interest or LC Fees received by it, by an amount deemed
material by the Lender,

 

and the result
of any of the foregoing is to increase the cost to the Lender or applicable
Lending Installation of the Lender, as the case may be, of making or
maintaining its Eurodollar Loans or Commitment or of issuing Facility LCs or to
reduce the return received by the Lender or applicable Lending Installation of
the Lender, in connection with such Eurodollar Loans, Commitment, or Facility
LCs therein, then, within fifteen days of demand by the Lender, the Borrowers
shall pay the Lender such additional amount or amounts as will compensate the
Lender for such increased cost or reduction in amount received.

 

3.2.                              Changes in Capital Adequacy
Regulations.  If the Lender
determines the amount of capital required or expected to be maintained by it,
any Lending Installation of the Lender, or any

 

41

 

corporation
controlling the Lender is increased as a result of a Change, then, within
fifteen days of demand by the Lender, the Borrowers shall pay the Lender the
amount necessary to compensate for any shortfall in the rate of return on the
portion of such increased capital which the Lender determines is attributable
to this Agreement, the Credit Exposure or the Commitment to make Loans and
issue Facility LCs, as the case may be, hereunder (after taking into account
the Lender’s policies as to capital adequacy). 
“Change” means (i) any change after the date of this Agreement in
the Risk-Based Capital Guidelines (as defined below) or (ii) any adoption of or
change in any other law, governmental or quasi-governmental rule, regulation,
policy, guideline, interpretation, or directive (whether or not having the
force of law) after the date of this Agreement which affects the amount of
capital required or expected to be maintained by the Lender or any Lending
Installation or any corporation controlling the Lender.  “Risk-Based Capital Guidelines” means
(i) the risk-based capital guidelines in effect in the U.S. on the date of this
Agreement, including transition rules, and (ii) the corresponding capital
regulations promulgated by regulatory authorities outside the U.S. implementing
the July 1988 report of the Basle Committee on Banking Regulation and
Supervisory Practices Entitled “International Convergence of Capital
Measurements and Capital Standards,” including transition rules, and any
amendments to such regulations adopted prior to the date of this Agreement.

 

3.3.                              Availability of Types of Loans.  If the Lender determines that (a)
maintenance of the Eurodollar Loans (or any portion thereof) at a suitable
Lending Installation would violate any applicable law, rule, regulation, or
directive, whether or not having the force of law or (b)(i) deposits of a type
and maturity appropriate to match fund Eurodollar Loans are not available or
(ii) the interest rate applicable to Eurodollar Loans does not accurately
reflect the cost of making or maintaining Eurodollar Loans, then the Lender
shall suspend the availability of Eurodollar Loans and require any affected
Eurodollar Loans to be repaid or converted to Floating Rate Loans, subject to
the payment of any funding indemnification amounts required by Section 3.4.

 

3.4.                              Funding Indemnification.  If any payment of a Eurodollar Loan
occurs on a date which is not the last day of the applicable Interest Period,
whether because of acceleration, prepayment or otherwise, or a Eurodollar Loan
is not made on the date specified by the Borrower Representative for any reason
other than default by the Lender, the Borrowers will indemnify the Lender for
any loss or cost incurred by it resulting therefrom, including any loss or cost
in liquidating or employing deposits acquired to fund or maintain such
Eurodollar Loan.

 

3.5.                              Taxes.

 

(a)                                  All payments by the
Borrowers to or for the account of the Lender hereunder or under the Note or
Facility LC Application shall be made free and clear of and without deduction
for any and all Taxes.  If the Borrowers
shall be required by law to deduct any Taxes (other than Excluded Taxes) from
or in respect of any sum payable hereunder to the Lender, (a) the sum payable
shall be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section 3.5)
the Lender receives an amount equal to the sum it would have received had no
such deductions been made, (b) the Borrowers shall make such deductions, (c)
the Borrowers shall pay the full amount deducted to the relevant authority in
accordance with applicable law, and (d) the Borrowers shall furnish to the
Lender the original copy of a receipt evidencing payment thereof within thirty
days after such payment is made.

 

42

 

(b)                                 In addition, the
Borrowers hereby agrees to pay any present or future stamp or documentary taxes
and any other excise or property taxes, charges or similar levies which arise
from any payment made hereunder or under the Note or Facility LC Application or
from the execution or delivery of, or otherwise with respect to, this Agreement
or the Note or Facility LC Application (“Other Taxes”).

 

(c)                                  The Borrowers hereby
agrees to indemnify the Lender for the full amount of Taxes or Other Taxes
(including any Taxes or Other Taxes imposed on amounts payable under this Section 3.5)
paid by the Lender as a result of the Commitment, any Loans made by it
hereunder, any Facility LC issued hereunder or otherwise in connection with its
participation in this Agreement and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto.  Payments due under this indemnification
shall be made within thirty days of the date the Lender makes demand therefor
pursuant to Section 3.6.

 

3.6.                              Lender Statements; Survival of
Indemnity. To the extent reasonably possible, the Lender shall
designate an alternate Lending Installation with respect to its Eurodollar
Loans to reduce any liability of the Borrowers to the Lender under Sections
3.1, 3.2 and 3.5 or to avoid the unavailability of Eurodollar
Loans under Section 3.3, so long as such designation is not, in the
judgment of the Lender, disadvantageous to the Lender.  The Lender shall deliver its written
statement to the Borrower Representative as to the amount due, if any, under Section 3.1,
3.2, 3.4 or 3.5. 
Such written statement shall set forth in reasonable detail the
calculations upon which such Lender determined such amount and shall be final,
conclusive and binding on the Borrowers in the absence of manifest error.  Determination of amounts payable under such
Sections in connection with a Eurodollar Loan shall be calculated as though the
Lender funded the Eurodollar Loan through the purchase of a deposit of the type
and maturity corresponding to the deposit used as a reference in determining
the Eurodollar Rate applicable to such Loan, whether in fact that is the case
or not.  Unless otherwise provided
herein, the amount specified in the written statement of the Lender (showing
the calculation of such amount in reasonable detail) shall be payable on demand
after receipt by the Borrower Representative of such written statement.  The obligations of the Borrowers under Sections
3.1, 3.2, 3.4 and 3.5 shall survive payment of the
Obligations and termination of this Agreement.

 

ARTICLE IV

 

CONDITIONS PRECEDENT

 

4.1.                              Effectiveness; Initial Loan Advance.
This Agreement will not become effective unless the Loan Parties have satisfied
each of the following conditions in a manner satisfactory to the Lender.

 

(a)                                  This Agreement or
counterparts hereof shall have been duly executed by each  Loan Party, the Lender; and the Lender shall
have received duly executed copies of the Loan Documents and such other
documents, instruments, agreements and legal opinions as the Lender shall reasonably
request in connection with the transactions contemplated by this Agreement and
the other Loan Documents, each in form and substance reasonably satisfactory to
the Lender.

 

43

 

(b)                                 Each Loan Party shall
have delivered copies of its articles or certificate of incorporation or
organization, together with all amendments, and a certificate of good standing,
each certified by the appropriate governmental officer in its jurisdiction of
incorporation or organization.

 

(c)                                  Each Loan Party shall
have delivered copies, certified by its Secretary or Assistant Secretary, of
its by-laws or operating, management or partnership agreement and of its Board
of Directors’ resolutions or the resolutions of its members and of resolutions
or actions of any other body authorizing the execution of the Loan Documents to
which such Loan Party is a party.

 

(d)                                 Each Loan Party shall
have delivered an incumbency certificate, executed by its Secretary or
Assistant Secretary, which shall identify by name and title and bear the
signatures of the Authorized Officers and any other officers such Loan Party
authorized to sign the Loan Documents to which such Loan Party is a party, upon
which certificate the Lender shall be entitled to rely until informed of any
change in writing by such Loan Party.

 

(e)                                  The Borrowers and the
Loan Parties shall have delivered a certificate, signed by the chief financial
officer of the Borrowers and each other Loan Party, on the initial Credit
Extension Date (i) stating that no Default or Unmatured Default has occurred
and is continuing, (ii) stating that the representations and warranties
contained in Article V are true and correct as of such Credit
Extension Date, (iii) specifying the deposit account at the Lender which shall
be used as the Funding Account, and (iv) certifying any other factual matters
as may be reasonably requested by the Lender.

 

(f)                                    The Loan Parties
shall have delivered a written opinion of the Loan Parties’ counsel, addressed
to the Lender in substantially the form of Exhibit D.

 

(g)                                 The Borrowers shall
have delivered the Note requested by the Lender pursuant to Section 2.18
payable to the order of the Lender.

 

(h)                                 The Borrowers shall
have delivered money transfer authorizations as the Lender may have reasonably
requested.

 

(i)                                     Each Loan Party
shall have delivered duly executed copies of this Agreement and the other Loan
Documents to which it is a party.

 

(j)                                     The Lender
shall have received a fully executed original of a pay-off letter reasonably
satisfactory to the Lender confirming that all of the Loan Parties’ obligations
under that certain Credit Agreement dated June 17, 2002 between the Loan
Parties, Bank One, NA, as agent and the lenders party thereto (as amended, the
“Prior Agreement”) will be repaid in full from the proceeds the initial
Credit Extension, all Liens upon any of the property of the Loan Parties
constituting Collateral will be terminated immediately upon such payment.

 

(k)                                  The Lender
shall have received all Lien and other searches that the Lender deems
necessary, the Loan Parties shall have delivered UCC termination statements or
amendments to existing UCC financing statements with respect to any filings
against the 

 

44

 

Collateral as may be requested by
the Lender and shall have authorized the filing of such termination statements
or amendments, the Lender shall have been authorized to file any UCC financing
statements that the Lender deems necessary to perfect its Liens in the
Collateral and Liens creating a first priority security interest in the
Collateral  in favor of the Lender shall
have been perfected.

 

(l)                                     The
Borrowers shall have delivered a Borrowing Base Certificate which calculates
the Borrowing Base as of the Closing Date.

 

(m)                               The
Borrowers shall have delivered to the Lender the unaudited financial statements
of the Consolidated Group on a consolidated basis and the Designated
Consolidating Basis with respect thereto for the period ending on June 29,
2003.

 

(n)                                 The Lender
shall have completed its business due diligence and the Loan Parties’ corporate
structure, capital structure, material accounts and governing documents shall
be acceptable to the Lender.  In
addition, the terms and conditions of all Indebtedness of each Loan Party shall
be acceptable to the Lender.

 

(o)                                 All legal
(including tax implications) and regulatory matters, including compliance with
applicable requirements of Regulations U, T and X of the Board of Governors of
the Federal Reserve System, shall be satisfactory to the Lender.

 

(p)                                 The Loan
Parties shall have delivered (i) Collateral audits, satisfactory to the Lender,
and (ii) appraisals, prepared by an independent appraiser engaged directly by
the Lender, of Eligible Inventory and Equipment, which audits and appraisals
shall be satisfactory to the Lender.

 

(q)                                 The Loan
Parties shall have delivered any requested environmental review reports from
firm(s) satisfactory to the Lender, which review reports shall be acceptable to
the Lender. Any environmental hazards or liabilities identified in any such
environmental review reports shall indicate the Loan Parties’ plans with
respect thereto.

 

(r)                                    The
Borrowers shall have delivered evidence of insurance coverage in form, scope,
and substance reasonably satisfactory to the Lender and otherwise in compliance
with the terms of Section 6.7.

 

(s)                                  The
Borrowers shall have delivered each Collateral Access Agreement required to be
provided pursuant to Section 6.13.

 

(t)                                    The
Borrowers shall have delivered each Deposit Account Control Agreement required
to be provided pursuant to Section 6.14.

 

(u)                                 The
Borrowers shall have delivered a properly completed Facility LC Application if
the initial Credit Extension will include the issuance of a Facility LC.

 

(v)                                 After giving
effect to all Credit Extensions to be made on the Effective Date and payment of
all fees and expenses due hereunder, and with all of the Loan Parties’
Indebtedness current, the Borrower’s Availability shall not be less than
$2,250,000.

 

45

 

(w)                               The
Borrowers shall have paid all of the fees and expenses owing to the Lender
pursuant to Section 2.8, and Section 9.6(a).

 

(x)                                   The
Borrowers shall have delivered to the Lender its most recent statement of the Unfunded
Liabilities of each Single Employer Plan, certified as correct by an actuary
enrolled under ERISA.

 

(y)                                 The Lender
shall have received confirmation, satisfactory to it, of completion of real
estate term financing by SPA and the status of certain loans by SPA to MagneTek
of at least $9,000,000 on terms acceptable to the Lender.

 

(z)                                   The
Effective Date shall occur on or before August 15, 2003.

 

(aa)                            The Loan
Parties shall have delivered such other documents as the Lender or its counsel
may have reasonably requested.

 

4.2.                              Each Credit Extension. Except as otherwise
expressly provided herein, the Lender shall not be required to make any Credit
Extension if on the applicable Credit Extension Date:

 

(a)                                  The Borrower
Representative has not delivered a duly completed Borrowing Notice in
compliance with the terms of this Agreement;

 

(b)                                 There exists any
Default or Unmatured Default or any Default or Unmatured Default shall result
from any such Credit Extension and the Lender shall have determined not to make
any Credit Extension as a result of such Default or Unmatured Default;

 

(c)                                  Any representation or
warranty (other than a representation or warranty that is stated to relate
solely to an earlier date) contained in Article V is untrue or
incorrect as of such Credit Extension Date except to the extent any such
representation or warranty is stated to relate solely to an earlier date, and
the Lender shall have determined not to make any Credit Extension as a result
of the fact that such representation or warranty is untrue or incorrect;

 

(d)                                 After giving effect to
any Credit Extension, Availability would be less than zero;

 

(e)                                  No law or regulation
prohibits, and no order, judgment or decree of any arbitrator or governmental
authority enjoins or restrains the Lender, from making such requested Credit
Extension;

 

(f)                                    Unless, on or
before October 15, 2003, the Borrowers shall have delivered to the Lender
a true and complete Customer List;

 

(g)                                 Unless, on or before
October 15, 2003, the Borrowers cause the Problem Financing Statements to
be terminated; or

 

(h)                                 Unless, on or before
October 15, 2003, the Borrowers deliver to the Lender the original stock
certificates required to be pledged under the Loan Documents together with the
stock powers related thereto, that were not delivered on or before the Closing
Date, or replacement certificates if the originals have been lost or destroyed.

 

46

 

Each Borrowing Notice or request for issuance of Facility LC with
respect to each such Credit Extension shall constitute a representation and
warranty by the Borrowers that the conditions contained in Sections 4.2(a)
and (b) have been satisfied.  The
Lender may require a duly completed Compliance Certificate as a condition to
making a Credit Extension.

 

ARTICLE V

 

REPRESENTATIONS AND
WARRANTIES

 

Each Loan Party represents and warrants to the Lender as follows:

 

5.1.                              Existence and Standing.  Each Loan Party is a corporation or, in the
case of Mondel Canada, an unlimited liability company, duly and properly
incorporated or organized, as the case may be, validly existing and (to the
extent such concept applies to such entity) in good standing under the laws of
its jurisdiction of incorporation or organization, has all requisite authority to
conduct its business in each jurisdiction in which its business is conducted,
and is and shall remain qualified to do business as a foreign corporation or,
in the case of Mondel Canada, an unlimited liability company, in the case of  under the laws of the jurisdictions listed
on Schedule 5.1 and under the laws of each other jurisdiction in
which the failure to be so qualified and in good standing would have a Material
Adverse Effect.

 

5.2.                              Authorization and Validity. Each Loan
Party has the corporate power and authority (or as it relates to Mondel Canada,
unlimited limited company power and authority) and legal right to execute and
deliver the Loan Documents to which it is a party and to perform its
obligations thereunder.  The execution
and delivery by each Loan Party of the Loan Documents to which it is a party
and the performance of its obligations thereunder have been duly authorized by
proper proceedings, and the Loan Documents to which such Loan Party is a party
constitute legal, valid and binding obligations of such Loan Party enforceable
against such Loan Party in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors’ rights generally.

 

5.3.                              No Conflict; Government Consent.  Neither the execution and delivery by any
Loan Party of the Loan Documents to which it is a party, nor the consummation
of the transactions therein contemplated, nor compliance with the provisions
thereof will violate (i) any law, rule, regulation, order, writ, judgment,
injunction, decree or award binding on such Loan Party or (ii) any Loan Party’s
articles or certificate of incorporation, partnership agreement, certificate of
partnership, articles or certificate of organization, by-laws, or operating or
other management agreement, as the case may be, or (iii) the provisions of any
indenture, instrument or agreement to which any Loan Party is a party or is
subject, or by which it, or its Property, is bound, or conflict with or
constitute a default thereunder, or result in, or require, the creation or
imposition of any Lien in, of or on the Property of such Loan Party pursuant to
the terms of any such indenture, instrument or agreement.  No order, consent, adjudication, approval,
license, authorization, or validation of, or filing, recording or registration
with, or exemption by, or other action in respect of any governmental or public
body or authority, or any subdivision thereof, which has not been obtained by a
Loan Party, is required to be obtained by any Loan Party in connection with the
execution and delivery of the Loan Documents, the borrowings under this
Agreement, the payment and performance by the Loan Parties of the Obligations
or the legality, validity, binding effect or enforceability of any of the Loan
Documents.

 

47

 

5.4.                              Security Interest in Collateral.  The provisions of this Agreement and the
other Loan Documents create legal and valid Liens on all the Collateral in
favor of the Lender, and such Liens constitute perfected and continuing Liens
on the Collateral, securing the Obligations, enforceable against the applicable
Loan Party and all third parties, and having priority over all other Liens on
the Collateral except in the case of (a) Permitted Liens, to the extent any
such Permitted Liens would have priority over the Liens in favor of the Lender
pursuant to any applicable law and (b) Liens perfected only by possession
(including possession of any certificate of title) to the extent the Lender has
not obtained or does not maintain possession of such Collateral.

 

5.5                                 Financial Statements.

 

(a)                                  The
audited consolidated and consolidating financial statements of the Borrowers
and its Subsidiaries for the period ending on June 30, 2002 heretofore
delivered to the Lender were prepared in accordance with GAAP (as in effect on
the date such statements were prepared) and fairly present the consolidated
financial condition and operations of the Borrowers and its Subsidiaries at
such date and the consolidated results of their operations for the period then
ended.  The unaudited consolidated
financial statements of the Borrowers and its Subsidiaries for the  fiscal periods ended on or before
June 29, 2003 heretofore delivered by the Borrowers to the Lender were
prepared in accordance with GAAP (as in effect on the date such statements were
prepared except for the presentation of footnotes and for applicable normal
year-end audit adjustments) and fairly present the consolidated financial condition
and operations of the Borrowers and its Subsidiaries at such date and the
consolidated results of their operations for the period then ended.

 

(b)                                 The Projections
received by the Lender on August 1, 2003 represent the Borrowers’ good
faith estimate of the future financial performance of the Consolidated Group
for the period set forth therein.

 

5.6.                              Material Adverse Change.  As of the Closing Date, since June 29,
2003 there has been no change in the business, Property, prospects, condition
(financial or otherwise) or results of operations of the Loan Parties which
could reasonably be expected to have a Material Adverse Effect.

 

5.7.                              Taxes.  The Loan Parties have filed all U.S. federal
tax returns and all other tax returns which are required to be filed and have
paid all taxes due pursuant to said returns or pursuant to any assessment
received by any Loan Party, except such taxes, if any, as are being contested
in good faith and as to which adequate reserves have been provided in
accordance with GAAP and as to which no Lien exists.  The U.S. income tax returns of the Loan Parties have been audited
by the Internal Revenue Service through the Fiscal Year ended June 29,
1997.  No tax liens have been filed and
no claims are being asserted with respect to any such taxes.  The charges, accruals and reserves on the
books of the Loan Parties in respect of any taxes or other governmental charges
are adequate.  There are not in effect
any waivers of applicable statutes of limitations for federal, foreign, state
or local taxes for any period.  No Loan
Party is a party to any tax-sharing agreement or arrangement.

 

5.8.                              Litigation and Contingent
Obligations.  Except as set
forth on Schedule 5.8, there is no litigation, arbitration,
governmental investigation, proceeding or inquiry pending or, to the knowledge
of any of their officers, threatened against or affecting any Loan Party which
could reasonably be expected to have a Material Adverse Effect or which seeks
to prevent, enjoin or delay

 

48

 

the making of
any Credit Extensions.  Other than any
liability incident to any litigation, arbitration or proceeding which (i) could
not reasonably be expected to have a Material Adverse Effect or (ii) is set
forth on Schedule 5.8, no Loan Party has any material contingent
obligations not provided for or disclosed in the financial statements referred
to in Section 5.5.

 

5.9.                              Capitalization and Subsidiaries.  Schedule 5.9 sets forth (a) a
correct and complete list of the name and relationship to the Borrowers of each
and every Subsidiary of a Loan Party and each and every Person for which a Loan
Party has any ownership interest, (b) the location of the chief executive
office of the Borrowers and each of its Subsidiaries and each other location
where any of them have maintained their chief executive office in the past five
years, (c) a true and complete listing of each class of each of the Loan
Parties’ authorized Capital Stock and, with respect to all Loan Parties other
than MagneTek, is owned beneficially and of record by the Persons identified on
Schedule 5.9, and (d) the type of entity of each of the Loan
Parties.  With respect to each Loan
Party, Schedule 5.9 also sets forth the employer or taxpayer
identification number of each Loan Party and the organizational identification
number issued by each Loan Party’s jurisdiction of organization or a statement
that no such number has been issued. 
All of the issued and outstanding Capital Stock owned by any Loan Party
has been duly authorized and issued and is fully paid and non-assessable.

 

5.10.                        ERISA.  The
Unfunded Liabilities of the MagneTek Pension Plan do not in the aggregate
exceed $51,356,000.  With respect to the
MagneTek Pension Plan, (a) effective June 29, 2003, participants shall accrue
no future benefits thereunder; (b) on or before September 15, 2003,
MagneTek shall make a stock contribution of $2,250,000 thereto; and (c) as of
the Closing Date, provided the contribution described in (b) above is made, no
annual contribution is projected to be made to the MagneTek Pension Plan for
its Fiscal Years ending the Sunday ending the closest to June 30, 2004;
June 30, 2005; June 30, 2006; and June 30, 2007.  Neither any Loan Party nor any Controlled
Group member is currently sponsoring, maintaining or contributing (or becoming
obligated to sponsor, maintain, or contribute) to any Multiemployer Plan.  Each Plan complies in all material respects
with all applicable requirements of law and regulations.  No Reportable Event or “prohibited transaction”
(as defined under ERISA) has occurred with respect to any Plan.  Neither any Loan Party nor any other member
of the Controlled Group has withdrawn from any Plan or initiated steps to do
so, and no steps have been taken to reorganize or terminate any Plan.  Each Plan that is intended to meet the
requirements of qualified pension benefit plans under Sections 401(a) and
501(a) of the Code has received a current favorable determination letter to
that effect under the Code.  The Loan
Parties and each Controlled Group has satisfied the minimum funding standards
under ERISA with respect to its respective Plans.

 

5.11.                        Accuracy
of Information.  No information,
exhibit or report furnished by any Loan Party to the Lender in connection with
the negotiation of, or compliance with, the Loan Documents contained any
material misstatement of fact or omitted to state a material fact or any fact
necessary to make the statements contained therein not misleading.

 

5.12.                        Names;
Prior Transactions.  Except as
set forth on Schedule 5.12, the Loan Parties have not, during the
past five years, been known by or used any other corporate or fictitious name,
or been a party to any merger or consolidation, or been a party to any
Acquisition.

 

5.13.                        Regulation
U.  No Loan Party is engaged,
nor will it engage, principally or as one of its important activities, in the
business of extending credit for the purpose of “purchasing” or “carrying” any
“margin stock” as such terms are defined in Regulation U of the Federal Reserve

 

49

 

Board as now
and from time to time hereafter in effect (such securities being referred to
herein as “Margin Stock”).  No
Loan Party owns any Margin Stock, and none of the proceeds of the Loans or
other extensions of credit under this Agreement will be used, directly or
indirectly, for the purpose of purchasing or carrying any Margin Stock, for the
purpose of reducing or retiring any Indebtedness that was originally incurred
to purchase or carry any Margin Stock or for any other purpose that might cause
any of the Loans or other extensions of credit under this Agreement to be
considered a “purpose credit” within the meaning of Regulations T, U or X of
the Federal Reserve Board.  No Loan
Party will take or permit to be taken any action that might cause any Loan
Document to violate any regulation of the Federal Reserve Board.

 

5.14.                        Material
Agreements.  Schedule 5.14
hereto sets forth as of the Closing Date all material agreements and contracts
to which any Loan Party is a party or is bound as of the date hereof.  No Loan Party is subject to any charter or
other corporate restriction which could reasonably be expected to have a
Material Adverse Effect.  No Loan Party
is in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in (i) any material agreement to
which it is a party or (ii) any agreement or instrument evidencing or governing
any material Indebtedness.

 

5.15.                        Compliance
With Laws.  The Loan Parties have
complied with all applicable statutes, rules, regulations, orders and
restrictions of any domestic or foreign government or any instrumentality or
agency thereof having jurisdiction over the conduct of their respective
businesses or the ownership of their respective Property except for any failure
to comply with any of the foregoing which could not reasonably be expected to
have a Material Adverse Effect.

 

5.16.                        Ownership
of Properties.  Except as set
forth on Schedule 5.16, on the date of this Agreement, the Loan
Parties will have good title, free of all Liens other than those permitted by Section 6.22,
to all of the Property and assets reflected in the Loan Parties’ most recent
consolidated financial statements provided to the Lender as owned by the Loan
Parties.  None of the equipment included
in the appraisal which the Lender has made eligible for purposes of the Credit
Exposure is the subject of any Lien or capitalized lease of any Person.

 

5.17.                        Plan Assets; Prohibited Transactions.  No Borrower is an entity deemed to hold
“plan assets” within the meaning of 29 C.F.R. § 2510.3-101 of an employee
benefit plan (as defined in Section 3(3) of ERISA) which is subject to
Title I of ERISA or any plan (within the meaning of Section 4975 of the
Code), and neither the execution of this Agreement nor the making of Credit
Extensions hereunder gives rise to a prohibited transaction within the meaning
of Section 406 of ERISA or Section 4975 of the Code.  Each Loan Party, determined exclusive of
MagneTek, is an “operating company” as defined in 29 C.F.R 2510-101(c).

 

5.18.                        Environmental
Matters.  In the ordinary course
of its business, the officers of each Loan Party consider the effect of
Environmental Laws on the business of such Loan Party, in the course of which
they identify and evaluate potential risks and liabilities accruing to such
Loan Party due to Environmental Laws. 
On the basis of this consideration, the Loan Parties have concluded that
Environmental Laws cannot reasonably be expected to have a Material Adverse
Effect.  No Loan Party has received any
notice to the effect that its operations are not in material compliance with
any of the requirements of applicable Environmental Laws or are the subject of
any federal or state investigation evaluating whether any remedial action is
needed to respond to a release of any toxic or hazardous waste or substance
into the environment.

 

50

 

5.19.                        Investment
Company Act.  No Loan Party is
an “investment company” or a company “controlled” by an “investment company”,
within the meaning of the Investment Company Act of 1940, as amended.

 

5.20.                        Public Utility Holding Company Act.  No Loan Party is a “holding company” or a
“subsidiary company” of a “holding company”, or an “Affiliate” of a “holding
company” or of a “subsidiary company” of a “holding company”, within the
meaning of the Public Utility Holding Company Act of 1935, as amended.

 

5.21.                        Bank Accounts.  As of the Closing Date, Schedule 5.21
to the Security Agreement contains a complete and accurate list of all bank
accounts maintained by each Loan Party with any bank or other financial
institution.

 

5.22.                        Indebtedness.  As of the Closing Date and after giving
effect to the Credit Extensions to be made on the Closing Date (if any), the
Loan Parties have no Indebtedness, except for (a) the Obligations, (b) any
Indebtedness described on Schedule 5.22, and (c) Permitted
Obligations.

 

5.23.                        Affiliate Transactions. 
Except as set forth on Schedule 5.23, as of the Closing Date,
there are no existing or proposed agreements, arrangements, understandings, or
transactions between any Loan Party and any of the officers, members, managers,
directors, stockholders, parents, other interest holders, employees, or
Affiliates (other than Subsidiaries) of any Loan Party or any members of their
respective immediate families, any of which matters would be required to be
disclosed in a proxy statement of MagneTek, other than matters which are
disclosed in its 2002 proxy statement.  For the Fiscal
Year of the Borrowers ending in June, 2004 and each Fiscal Year ending
thereafter, the Borrowers will allocate corporate and other overhead
expenses of MagneTek to SPA.  The amount
allocated to SPA (“Allocated Overhead Amount”) will be at least $1,000,000
per Fiscal Quarter.  SPA will begin
paying the quarterly Allocated Overhead Amount on October 1, 2003 and will
continue paying the quarterly Allocated Overhead Amount on the first day of
each calendar quarter thereafter occurring. 
All of the Capital Stock of J-Tec was sold, and the proceeds of such
sale were received by MagneTek, on or before the Closing Date.

 

5.24.                        Real Property; Leases. 
As of the Closing Date, Schedule 5.24 sets forth a correct
and complete list of all real Property owned by each Loan Party, all leases and
subleases of real Property by each Loan Party as lessee or sublessee, and all
leases and subleases of real Property by each Loan Party as lessor or
sublessor.  Each of such leases and subleases
is valid and enforceable in accordance with its terms and is in full force and
effect, and no default by any party to any such lease or sublease exists.  Each Loan Party has good and indefeasible
title in fee simple to the real Property identified on Schedule 5.24
as owned by such Loan Party, or valid leasehold interests in all real Property
designated therein as “leased” by such Loan Party.

 

5.25.                        Intellectual Property Rights. 
As of the Closing Date: (a) Schedule 5.25 sets forth a
correct and complete list of all Intellectual Property Rights of each Loan
Party; (b) none of the Intellectual Property Rights listed in Schedule 5.25
is subject to any licensing agreement or similar arrangement except as set
forth in Schedule 5.25; (c) the Intellectual Property Rights
described in Schedule 5.25 constitute all of the property of such
type necessary to the current and anticipated future conduct of the Loan
Parties’ business; (d) to the best of each Loan Party’s knowledge, no slogan or
other advertising device, product, process, method, substance, part, or other
material now employed, or now contemplated to be employed, by any Loan Party
infringes in any material respect upon any rights held by any other Person; and
(e) no claim or litigation regarding any of the

 

51

 

foregoing is
pending or threatened, and no patent, invention, device, application, principle
or any statute, law, rule, regulation, standard, or code is pending or, to the
knowledge of any Loan Party, proposed, which, in either case, could reasonably
be expected to have a Material Adverse Effect. 
To any Borrower’s knowledge, after due inquiry, no key employee of a
Borrower is subject to any agreement in favor of anyone other than a Borrower
which restricts or limits that individual’s right to engage in the type of
business activity conducted by such Borrower in any manner which could
materially impair the ability of such individual to carry out his or her duties
with such Borrower or to use any property or confidential information or which
grants to any Person, other than a Borrower, any rights to inventions or other
ideas susceptible to legal protection developed or conceived by any such key
employee of a Borrower.

 

5.26.                        Insurance. Schedule 5.26 lists
all insurance policies of any nature maintained, as of the Closing Date, by
each Loan Party, as well as a summary of the terms of each such policy.

 

5.27.                        Solvency.

 

(a)                                  Immediately
after the consummation of the transactions to occur on the date hereof and
immediately following the making of each Credit Extension, if any, made on the
date hereof and after giving effect to the application of the proceeds of such
Credit Extensions, (a) the fair value of the assets of each Loan Party, at a
fair valuation, will exceed the debts and liabilities, subordinated, contingent
or otherwise, of each Loan Party; (b) the present fair saleable value of the
Property of each Loan Party will be greater than the amount that will be
required to pay the probable liability of each Loan Party on its debts and
other liabilities, subordinated, contingent or otherwise, as such debts and
other liabilities become absolute and matured; (c) each Loan Party will be able
to pay its debts and liabilities, subordinated, contingent or otherwise, as
such debts and liabilities become absolute and matured; and (d) each Loan Party
will not have unreasonably small capital with which to conduct the businesses
in which it is engaged as such businesses are now conducted and are proposed to
be conducted after the date hereof.

 

(b)                                 No
Borrower intends to, or will permit any of its Subsidiaries to, and does not
believe that it or any of its Subsidiaries will, incur debts beyond its ability
to pay such debts as they mature, taking into account the timing of and amounts
of cash to be received by it or any such Subsidiary and the timing of the
amounts of cash to be payable on or in respect of its Indebtedness or the
Indebtedness of any such Subsidiary.

 

5.28.                        Subordinated Indebtedness.  The Obligations constitute senior
indebtedness which is entitled to the benefits of the subordination provisions
of all outstanding Subordinated Indebtedness.

 

5.29.                        Post-Retirement
Benefits.  The present value of
the expected cost of post-retirement medical and insurance benefits payable by
each Loan Party to its employees and former employees, as estimated by such
Loan Party in accordance with procedures and assumptions deemed reasonable by
the Lender, does not exceed $100,000.

 

5.30                           Common
Enterprise.  The successful
operation and condition of each of  the
Loan Parties is dependent on the continued successful performance of the
functions of the group of the Loan Parties as a whole and the successful
operation of each of the Loan Parties is dependent on the successful
performance and operation of each other Loan Party.  Each Loan Party expects to derive benefit (and its board of
directors or other governing body has determined that it may reasonably be

 

52

 

expected to
derive benefit), directly and indirectly, from (i) successful operations of
each of the other Loan Parties and (ii) the credit extended by the Lender to
the Borrowers hereunder, both in their separate capacities and as members of
the group of companies.  Each Loan Party
has determined that execution, delivery, and performance of this Agreement and
any other Loan Documents to be executed by such Loan Party is within its
purpose, will be of direct and indirect benefit to such Loan Party, and is in
its best interest.  Each Loan Party
states to the Lender that the Loan Parties desire to utilize their borrowing
potential on a consolidated basis, to the extent(s) possible as if they were
merged into a single corporate entity and, consistent with realizing such
potential, to make available to the Lender commensurate with the amount and
nature of their aggregate borrowings, and the Loan Parties have requested and
bargained for the structure and terms of and security for the advances
contemplated by this Agreement.

 

5.31.                        Reportable Transaction.  No Loan Party intends to treat the Loans and
related transactions as being a “reportable transaction” (within the meaning of
Treasury Regulation Section 1.6011-4). 
In the event any Loan Party determines to take any action inconsistent
with such intention, it will promptly notify the Lender thereof.

 

5.32.                        Labor Disputes. 
Except as set forth on Schedule 5.32, as of the Closing
Date, (a) there is no collective bargaining agreement or other labor contract
covering employees of any Borrower or any of its Subsidiaries, (b) no such collective
bargaining agreement or other labor contract is scheduled to expire during the
term of this Agreement, (c) no union or other labor organization is seeking to
organize, or to be recognized as, a collective bargaining unit of employees of
any Borrower or any of its Subsidiaries or for any similar purpose, and
(d) there is no pending or (to the best of each Borrower’s knowledge)
threatened, strike, work stoppage, material unfair labor practice claim, or
other material labor dispute against or affecting any Borrower or its
Subsidiaries or their employees.

 

ARTICLE VI

 

COVENANTS

 

Each Loan
Party executing this Agreement jointly and severally agrees as to all Loan
Parties that from and after the date hereof and until the Facility Termination
Date:

 

6.1.                              Financial and Collateral Reporting.  Each Loan Party will maintain, for itself
and each Subsidiary, a system of accounting established and administered in
accordance with GAAP, and will furnish to the Lender:

 

(a)                                  (i) within 90 days
after the close of each Fiscal Year of the Borrowers and their  Subsidiaries, audited financial statements
of the Borrowers and their Subsidiaries as of the end of such Fiscal Year, on a
consolidated basis and prepared in accordance with GAAP, certified, without
qualification or exception, by a firm of independent certified public
accountants acceptable to the Lender (“Auditors”), including balance
sheets as of the end of such Fiscal Year, related profit and loss and
reconciliation of surplus statements, and a statement of cash flows,
accompanied by (A) any management letter prepared by such Auditors and (B) for
Fiscal Years ending in and after June, 2004, a certificate of such Auditors
that, in the course of their examination necessary for their certification of
the foregoing, they have obtained no knowledge of any Default or Unmatured
Default, or if, in

 

53

 

the opinion of such Auditors, any Default or
Unmatured Default shall exist, stating the nature and status thereof and (ii) within
90 days after the close of each Fiscal Year of the Borrowers and their  Subsidiaries ending in and after June, 2004,
financial statements of the Borrowers and their Subsidiaries as of the end of
each such Fiscal Year, on a Designated Consolidating Basis with respect thereto
and prepared in accordance with GAAP, including balance sheets as of the end of
such Fiscal Year, related profit and loss and reconciliation of surplus
statements, and a statement of cash flows, accompanied by the report of such Auditors
with respect to such consolidating statements satisfactory to the Lender;

 

(b)                                 within 45 days after
the close of the first three quarterly periods of each Fiscal Year of the
Borrowers and their Subsidiaries, (i) unaudited balance sheets as at the close
of each such Fiscal Quarter on a consolidated basis and the Designated
Consolidating Basis with respect thereto and (ii) profit and loss and
reconciliation of surplus statements and a statement of cash flows, each on a
consolidated basis and the Designated Consolidating Basis with respect thereto,
for such Fiscal Quarter and the period from the beginning of the applicable
Fiscal Year to the end of such Fiscal Quarter, all certified by its chief
financial officer and prepared in accordance with GAAP (except for exclusion of
footnotes and subject to normal year-end audit adjustments);

 

(c)                                  within 30 days after
the close of each Fiscal Month of the Borrowers and their Subsidiaries, (i)
unaudited balance sheets as at the close of each such Fiscal Month on a consolidated
basis and the Designated Consolidating Basis with respect thereto and (ii)
profit and loss and reconciliation of surplus statements and a statement of
cash flows, each on a consolidated basis and the Designated Consolidating Basis
with respect thereto, for such Fiscal Month and the period from the beginning
of the applicable Fiscal Year to the end of such Fiscal Month, all certified by
its chief financial officer and prepared in accordance with GAAP (except for
exclusion of footnotes and subject to normal year-end audit adjustments);

 

(d)                                 as soon as available,
but in any event not more than 90 days prior to the end of each Fiscal Year of
the Consolidated Group, but not less than 30 days prior to the end of such
Fiscal Year, a copy of the plan and forecast (including a projected balance
sheet, income statement and funds flow statement) of the Consolidated Group for
each month of such Fiscal Year (the “Projections”) on a consolidated
basis and the Designated Consolidating Basis with respect thereto in form
reasonably satisfactory to the Lender;

 

(e)                                  together with each of
the financial statements required under Sections 6.1(a), (b) and (c),
a compliance certificate in substantially the form of Exhibit E (a “Compliance
Certificate”) signed by the chief financial officer of the Borrower
Representative showing the calculations necessary to determine compliance with
this Agreement and stating that no Default or Unmatured Default exists, or if
any Default or Unmatured Default exists, stating the nature and status thereof.

 

(f)                                    not less frequently
than weekly, and more frequently if the Lender shall require or the Borrower
Representative shall so elect, the Borrower Representative shall deliver to the
Lender:  (i) a Borrowing Base Certificate
by no later than Tuesday of each week (which is based on values as of the
immediately preceding Friday), (ii) reports of the Borrowers’ sales, credits to
sales or credit memoranda applicable to sales, collections and non-cash charges
(from whatever source, including sales and noncash journals or other

 

54

 

credits to Accounts) for the applicable
period, and acceptable supporting documentation thereto (including, a report
indicating the dollar value of the Borrowers’ Eligible Accounts, and all other
information deemed necessary by the Lender to determine levels of that which is
and is not Eligible Accounts), and (iii) reporting the value of the Borrowers’
Inventory as of the immediately preceding month;

 

(g)                                 as soon as available
but in any event within 15 days of the end of each calendar month and at such
other times as may be requested by the Lender, as of the period then ended:

 

(i)                                     a detailed
aged trial balance of the Borrowers’ Accounts (1) specifying the name, address,
and balance due for each Account Debtor and (2) reconciled to the Borrowing
Base Certificate delivered as of such date prepared in a manner reasonably
acceptable to the Lender;

 

(ii)                                  a
schedule detailing the Borrowers’ Inventory, in form satisfactory to the Lender,
(1) by location (including any Inventory located with a third party under any
consignment, bailee arrangement, or warehouse agreement), product type, volume
on hand, which Inventory shall be valued at the lower of cost (determined on a
first-in, first-out basis) or market and adjusted for Reserves as the Lender
has previously indicated to the Borrower Representative are deemed by the
Lender to be appropriate, (2) including a report of any variances or other
results of Inventory counts performed by the Borrowers since the last Inventory
schedule (including information regarding sales or other reductions,
additions, returns, credits issued by a Borrower and complaints and claims made
against a Borrower), and (3) reconciled to the Borrowing Base Certificate
delivered as of such date;

 

(iii)                               a
worksheet of calculations prepared by the Borrower Representative to determine
Eligible Accounts and Eligible Inventory, such worksheets detailing the
Accounts and Inventory excluded from Eligible Accounts and Eligible Inventory
and the reason for such exclusion; and

 

(iv)                              a
reconciliation of the Borrower’s Accounts and Inventory between the amounts
shown in the Borrower’s books and financial statements and the reports
delivered pursuant to clauses (i) and (ii) above;

 

(h)                                 as soon as available
but in any event within 15 days of the end of each calendar month and at such
other times as may be requested by the Lender, as of the month then ended, a
schedule and aging of the Borrower’s accounts payable;

 

(i)                                     promptly
upon the Lender’s request:

 

(i)                                     copies of
invoices in connection with the invoices issued by the Borrowers in connection
with any Accounts, credit memos, shipping and delivery documents, and other
information related thereto;

 

(ii)                                  copies of
purchase orders, invoices, and shipping and delivery documents in connection
with any Inventory or Equipment purchased by any Loan Party; and

 

55

 

(iii)                               a
schedule detailing the balance of all intercompany accounts of the Loan
Parties;

 

(j)                                     on the first
Business Day of the month of March and September, a certificate of good
standing for each Loan Party from the appropriate governmental officer in its
jurisdiction of incorporation, formation, or organization;

 

(k)                                  as soon as possible
and in any event within 15 days of filing thereof, copies of all tax returns
filed by any Loan Party with the U.S. Internal Revenue Service;

 

(l)                                     as soon as
possible and in any event within 90 days after the close of the Fiscal Year of
the Borrowers, a statement of the Unfunded Liabilities and the required annual
contribution of each Single Employer Plan, certified as correct by an actuary
enrolled under ERISA;

 

(m)                               as soon as possible and
in any event within ten days after any Borrower knows that any Reportable Event
has occurred with respect to any Plan, a statement, signed by the chief
financial officer of the Borrower Representative, describing said Reportable
Event and the action which the Borrowers propose to take with respect thereto;

 

(n)                                 as soon as possible
and in any event within 15 days of filing therewith with the PBGC, the U.S.
Internal Revenue Service or any other governmental entity, a copy of each
annual report or other filing with respect to any Plan;

 

(o)                                 as soon as possible
and in any event within ten days after receipt by any Loan Party, a copy of (i)
any notice or claim to the effect that any Loan Party is or may be liable to
any Person as a result of the release by any Loan Party, or any other Person of
any toxic or hazardous waste or substance into the environment, and (ii) any
notice alleging any violation of any federal, state or local environmental,
health or safety law or regulation by the any Loan Party;

 

(p)                                 within 30 days after
each March 31 and September 30, an updated Customer List, certified
as true and correct by an Authorized Officer of the Borrower Representative;

 

(q)                                 promptly upon the
filing thereof and in any event within 10 days after filing therewith, copies
of all registration statements and other reports on Form 8-K which any Loan
Party files with the Securities and Exchange Commission;

 

(r)                                    promptly upon
incurrence thereof until the applicable Problem Financing Statement shall be
terminated in accordance with applicable law, notice of the amount of all
payables to any of the secured parties, or their assignees, listed on the
Problem Financing Statements; and

 

(s)                                  such other
information (including non-financial information) as the Lender may from time
to time reasonably request.

 

56

 

6.2.                              Use
of Proceeds.

 

(a)                                  The Borrowers will
use the proceeds of the Credit Extensions (i) to repay the outstanding
indebtedness, liabilities and obligations under the Prior Agreement, and (ii)
for general corporate purposes (not otherwise prohibited by this Agreement).

 

(b)                                 No Borrower will, nor
will it permit any Loan Party to, use any of the proceeds of the Credit
Extensions to (i) purchase or carry any Margin Stock in violation of Regulation
U, (ii) repay or refinance any Indebtedness of any Person incurred to buy or
carry any Margin Stock, (iii) acquire any security in any transaction that is
subject to Section 13 or Section 14 of the Securities Exchange Act of
1934 (and the regulations promulgated thereunder), or (iv) make any Acquisition.

 

6.3.                              Notices.  Each Loan Party will give prompt notice in
writing to the Lender of:

 

(a)                                        the occurrence
of any Default or Unmatured Default;

 

(b)                                       any other
development, financial or otherwise, which could reasonably be expected to have
a Material Adverse Effect;

 

(c)                                        the assertion
by the holder of any Capital Stock of any Loan Party or the holder of any
Indebtedness of any Loan Party in excess of $500,000 that any default exists
with respect thereto or that any Loan Party is not in compliance therewith;

 

(d)                                       receipt of any
written notice that any Loan Party is subject to any investigation by any
governmental entity with respect to any potential or alleged violation of any
applicable Environmental Law or of imposition of any Lien against any Property of
any Loan Party for any liability with respect to damages arising from, or costs
resulting from, any violation of any Environmental Laws;

 

(e)                                  receipt of any notice
of litigation commenced or threatened against any Loan Party that (i) seeks
damages in excess of $250,000, (ii) seeks injunctive relief that may be
material to the business of a Loan Party, (iii) is asserted or instituted
against any Plan, its fiduciaries or its assets, (iv) alleges criminal
misconduct by any Loan Party, (v) alleges the violation of any law regarding,
or seeks remedies in connection with, any Environmental Laws; or (vi) involves
any product recall;

 

(f)                                    any Lien (other
than Permitted Liens) or claim made or asserted against any of the Collateral;

 

(g)                                       its decision to
change, (i) such Loan Party’s name or type of entity, (ii) such Loan Party’s
articles or certificate of incorporation, partnership agreement, certificate of
partnership, articles or certificate of organization, by-laws, or operating or
other management agreement, and (iii) the location where any Collateral is held
or maintained; provided that, in no event shall the Lender receive notice
of such change less than thirty days prior thereto;

 

(h)                                       commencement of
any proceedings contesting any tax, fee, assessment, or other governmental
charge in excess of $100,000;

 

57

 

(i)                                           the opening
of any new deposit account by any Loan Party with any bank or other financial
institution;

 

(j)                                     any loss, damage,
or destruction to the Collateral in the amount of $500,000 or more, whether or
not covered by insurance;

 

(k)                                  any and all default
notices received under or with respect to any leased location or public
warehouse where Collateral is located (which shall be delivered within two
Business Days after receipt thereof);

 

(l)                                     all material
amendments to real estate leases, together with a copy of each such amendment;

 

(m)                               immediately after
becoming aware of any pending or threatened strike, work stoppage, unfair labor
practice claim, or other labor dispute affecting any Borrower or any of its
Subsidiaries in a manner;

 

(n)                                 upon request by the
Lender, evidence of payment of monthly lease or rental payments as to each
leased or rented location for which a Collateral Access Agreement has not been
obtained (which shall be delivered within three Business Days after payment
thereof);

 

(o)                                 the fact that such
Loan Party has entered into a Rate Management Transaction or an amendment to a
Rate Management Transaction, together with copies of all agreements evidencing
such Rate Management Transactions or amendments thereto (which shall be
delivered within two Business Days); and

 

(p)                                 any other matter as
the Lender may reasonably request.

 

6.4.                              Conduct of Business.  Each Loan Party will:

 

(a)                                  carry
on and conduct its business in substantially the same manner and in
substantially the same fields of enterprise as it is presently conducted;

 

(b)                                 do all things
necessary to remain duly incorporated or organized, validly existing and (to
the extent such concept applies to such entity) in good standing as a domestic
corporation, partnership or limited liability company in its jurisdiction of
incorporation or organization, as the case may be, and maintain all requisite
authority to conduct its business in each jurisdiction in which its business is
conducted;

 

(c)                                  keep adequate books
and records with respect to its business activities in which proper entries,
reflecting all financial transactions, are made in accordance with GAAP and on
a basis consistent with the Financial Statements delivered to the Lender
pursuant to Section 4.1(m);

 

(d)                                 at all times maintain,
preserve and protect all of its assets and properties used or useful in the
conduct of its business, and keep the same in good repair, working order and
condition in all material respects (taking into consideration ordinary wear and
tear) and from

 

58

 

time to time make, or cause to be made, all necessary or appropriate
repairs, replacements and improvements thereto consistent with industry
practices; and

 

(e)                                  transact business
only in such corporate and trade names as are set forth in Schedule 5.12.

 

6.5.                              Taxes.  Each Loan Party will timely file complete
and correct U.S. federal and applicable foreign, state and local tax returns
required by law and pay when due all taxes, assessments and governmental
charges and levies upon it or its income, profits, Property or Collateral
except those which are being contested in good faith by appropriate proceedings
so long as (a) adequate reserves have been set aside in accordance with GAAP
with respect to such taxes, (b) the continuation of any such contest does not
result in any part of the Collateral or any other property of a Loan Party
being made the subject of (i) any proceeding in foreclosure, (ii) any levy or
execution (which shall not have been stayed or dismissed), (iii) any
forfeiture, seizure or other loss, or (iv) any Lien other than a Permitted
Lien, and (c) such Loan Party shall promptly pay or discharge such contested
taxes, if any, and shall deliver to the Lender evidence reasonably acceptable
to the Lender of such compliance, payment or discharge, if such contest is
terminated or discontinued adversely to such Loan Party or the conditions set
forth in this proviso are no longer met. 
No Loan Party will file or consent to the filing of any consolidated
income tax return with any Person other than the Borrowers and their
Subsidiaries.

 

6.6.                              Payment of Indebtedness and Other
Liabilities.  Each Loan Party
will pay or discharge when due (a) all Material Indebtedness permitted by Section 6.17
owed by such Loan Party and (b) all other indebtedness due to materialmen,
mechanics, carriers, warehousemen, and landlords (“Other Liabilities”)
except that the Loan Parties may in good faith contest, by appropriate
proceedings diligently pursued, any such Other Liabilities; provided that:
(i) adequate reserves have been set aside for such contested Other Liabilities
in accordance with GAAP, (ii) such contested Other Liabilities do not exceed
$250,000 in the aggregate as of any date, (iii) no Lien, other than a Permitted
Lien, shall be imposed or exist with respect to any contested Other
Liabilities, (iv) none of the Collateral becomes subject to any forfeiture,
seizure or other loss as a result of the contest of such Other Liabilities, and
(v) such Loan Party shall promptly pay or discharge such contested Other
Liabilities, if any, and shall deliver to the Lender evidence reasonably
acceptable to the Lender of such compliance, payment or discharge, if such
contest is terminated or discontinued adversely to such Loan Party or the
conditions set forth in this proviso are no longer met.

 

6.7.                              Insurance.

 

(a)                                  Each Loan
Party shall at all times maintain, with financially sound and reputable
carriers having a Financial Strength rating of at least A+ by A.M. Best
Company, insurance against: (i) loss or damage by fire and loss in transit;
(ii) theft, burglary, pilferage, larceny, embezzlement, and other criminal
activities; (iii) business interruption; (iv) general liability and (v) and
such other hazards, as is customary in the business of such Loan Party.  All such insurance shall be in amounts,
cover such assets and be under policies acceptable to the Lender in its
Permitted Discretion.  In the event any
Collateral is located in any area that has been designated by the Federal
Emergency Management Agency as a “Special Flood Hazard Area”, the applicable
Loan Party shall purchase and maintain flood insurance on such Collateral
(including any personal Property which is located on any real Property leased
by such Loan Party within a “Special Flood Hazard Area”).  The amount of all insurance required by this
Section shall at a minimum comply with applicable law, including

 

59

 

the Flood Disaster Protection Act of 1973, as
amended.  All premiums on such insurance
shall be paid when due by the applicable Loan Party, and copies of the policies
delivered to the Lender.  If any Loan
Party fails to obtain any insurance as required by this Section, the Lender may
obtain such insurance at the Borrowers’ expense.  By purchasing such insurance, the Lender shall not be deemed to
have waived any Default or Unmatured Default arising from any Loan Party’s
failure to maintain such insurance or pay any premiums therefor.   No Loan Party will use or permit any
Property to be used in violation of applicable law or in any manner which might
render inapplicable any insurance coverage.

 

(b)                                 All
insurance policies required under Section 6.7(a) shall name the
Lender (for the benefit of the Lender and its Affiliates) as an additional
insured or as loss payee, as applicable, and shall provide that, or contain
loss payable clauses or mortgagee clauses, in form and substance satisfactory
to the Lender, which provide that:

 

(iv)                              all
proceeds thereunder with respect to any Collateral shall be payable to the
Lender;

 

(v)                                 no such
insurance shall be affected by any act or neglect of the insured or owner of
the Property described in such policy; and

 

(vi)                              such
policy and loss payable clauses may be canceled, amended, or terminated only
upon at least thirty days prior written notice given to the Lender.

 

(c)                                  Notwithstanding
the foregoing, any insurance or condemnation proceeds received by the Loan
Parties shall be immediately forwarded to the Lender and the Lender may, at its
option, apply any such proceeds to the reduction of the Obligations in
accordance with Section 2.13(d), provided that in the case of
insurance proceeds pertaining to any Loan Party other than a Borrower, such
insurance proceeds shall be applied to the Loans owing by the Borrowers.  The Lender may permit or require any Loan
Party to use such money, or any part thereof, to replace, repair, restore or
rebuild the Collateral in a diligent and expeditious manner with materials and
workmanship of substantially the same quality as existed before the loss,
damage or destruction. Notwithstanding the foregoing, if the casualty giving
rise to such insurance proceeds could not reasonably be expected to have a
Material Adverse Effect and such insurance proceeds do not exceed $500,000 in
the aggregate, upon the applicable Loan Party’s request, the Lender shall
permit such Loan Party to replace, restore, repair or rebuild the property; provided
that, if such Loan Party has not completed or entered into binding
agreements to complete such replacement, restoration, repair or rebuilding
within 30 days of such casualty, the Lender may apply such insurance proceeds
to the Obligations in accordance with Section 2.13.  All insurance proceeds that are to be made
available to a Borrower to replace, repair, restore or rebuild the Collateral
shall be applied by the Lender to reduce the outstanding principal balance of
the Revolving Loans (which application shall not result in a permanent
reduction of the Commitment) and upon such application, the Lender shall
establish a Reserve against the Borrowing Base in an amount equal to the amount
of such proceeds so applied.  All
insurance proceeds made available to any Loan Party that is not a Borrower to
replace, repair, restore or rebuild Collateral shall be deposited in a cash
collateral account.  In either case,
thereafter, such funds shall be made available to the applicable Loan Party to
provide funds to replace, repair, restore or rebuild the Collateral as follows:

 

60

 

(i)                                     The
Borrower Representative shall request a Revolving Loan or the applicable Loan
Party shall request a release from the cash collateral account be made in the
amount needed;

 

(ii)                                  so
long as the conditions set forth in Section 4.2 have been met, the
Lender shall make such Revolving Loan or Lender shall release funds from the
cash collateral account; and

 

(iii)                               in
the case of insurance proceeds applied against the Revolving Loan, the Reserve
established with respect to such insurance proceeds shall be reduced by the
amount of such Revolving Loan.

 

6.8.                              Compliance
with Laws.  Each Loan
Party will comply with all laws, rules, regulations, orders, writs, judgments,
injunctions, decrees or awards to which it may be subject including all
Environmental Laws.

 

6.9.                              Maintenance of Properties and
Intellectual Property Rights. 
Each Loan Party will do all things necessary to (i) maintain, preserve,
protect and keep its Property in good repair, working order and condition, and
make all necessary and proper repairs, renewals and replacements so that its
business carried on in connection therewith may be properly conducted at all
times and (ii) obtain and maintain in effect at all times all material
franchises, governmental authorizations, Intellectual Property Rights, licenses
and permits, which are necessary for it to own its Property or conduct its
business as conducted on the Closing Date.

 

6.10.                        Inspection.  Each Loan Party will permit the Lender, by
its employees, representatives and agents, from time to time upon two Business
Days’ prior notice as frequently as the Lender reasonably determines to be
appropriate, to (a) inspect any of the Property, the Collateral, and the books
and financial records of such Loan Party, (b) examine, audit and make extracts
or copies of the books of accounts and other financial records of such Loan
Party, (c) have access to its properties, facilities, the Collateral and its
advisors, officers, directors and employees to discuss the affairs, finances
and accounts of such Loan Party, and (d) review, evaluate and make test
verifications and counts of the Accounts, Inventory and other Collateral of
such Loan Party.  If a Default or an
Unmatured Default has occurred and is continuing, each Loan Party shall provide
such access to the Lender at all times and without advance notice.  Furthermore, so long as any Default has
occurred and is continuing, each Loan Party shall provide the Lender with
access to its suppliers.  Each Loan
Party shall promptly make available to the Lender and its counsel originals or
copies of all books and records that the Lender may reasonably request.

 

6.11.                        Appraisals.  Whenever a Default or Unmatured Default
exists (and at such other times not more frequently than once per calendar
year) as the Lender requests, the Lender may, at the sole expense of the
Borrowers, obtain appraisals or updates thereof of the Borrowers’ Inventory
from an appraiser, and prepared on a basis, satisfactory to the Lender, such
appraisals and updates to include, without limitation, information required by
applicable law and regulations and by the internal policies of the Lender.  The appraisers performing the appraisal and
the methods of appraisal used by the appraisers doing the appraisal are subject
to the Lender’s approval in its discretion exercised in good faith.  From and after the date the Lender receives
and approves the most recent appraisal undertaken pursuant to this Section 6.11,
the Net Orderly Liquidation Value of the Borrowers’ Inventory will, for
purposes of determining the Borrowing Base, equal the Net Orderly Liquidation
Value of then Eligible Inventory established by the most recent appraisal.  The

 

61

 

Lender will
provide the Borrower Representative a copy of the most recent appraisal
promptly on the receipt of it by the Lender.

 

6.12.                        Communications with Accountants.  Each Loan Party executing this Agreement authorizes
the Lender to communicate directly with its independent certified public
accountants and authorizes and shall instruct those accountants and advisors to
communicate to the Lender information relating to any Loan Party with respect
to the business, results of operations and financial condition of any Loan
Party.

 

6.13.                        Collateral Access Agreements and
Real Estate Purchases.  Each Loan Party shall use commercially
reasonable efforts to obtain a Collateral Access Agreement, from the lessor of
each leased property, mortgagee of owned property or bailee with respect to any
warehouse, processor or converter facility or other location where Collateral
is stored or located, which agreement or letter shall provide access rights,
contain a waiver or subordination of all Liens or claims that the landlord,
mortgagee or bailee may assert against the Collateral at that location, and
shall otherwise be satisfactory in form and substance to the Lender. With
respect to such locations or warehouse space leased or owned as of the Closing
Date and thereafter, if Lender has not received a Collateral Access Agreement
as of the Effective Date (or, if later, as of the date such location is
acquired or leased), Borrower’s Eligible Inventory or Equipment at that
location shall, in the Lender’s discretion, be excluded from the Borrowing Base
or be subject to such Reserves as may be established by the Lender.  After the Closing Date, no real property or
warehouse space shall be leased by any Loan Party and no Inventory shall be shipped
to a processor or converter under arrangements established after the Closing
Date without the prior written consent of the Lender (which consent, in the
Lender’s discretion, may be conditioned upon the exclusion from the Borrowing
Base of Eligible Inventory at that location or the establishment of Reserves
acceptable to the Lender) or, unless and until a satisfactory Collateral Access
Agreement shall first have been obtained with respect to such location.  Each Loan Party shall timely and fully pay and
perform its obligations under all leases and other agreements with respect to
each leased location or third party warehouse where any Collateral is or may be
located.  To the extent permitted
hereunder, if any Loan Party proposes to acquire a fee ownership interest in
real Property after the Closing Date, it shall first provide to the Lender a
mortgage or deed of trust granting Lender a first priority Lien on such real
Property, together with environmental audits, mortgage title insurance
commitment, real property survey, local counsel opinion(s), and, if required by
the Lender, supplemental casualty insurance and flood insurance, and such other
documents, instruments or agreements reasonably requested by Lender, in each
case, in form and substance reasonably satisfactory to the Lender.

 

6.14.                        Deposit Account Control Agreements.  The Loan Parties will provide to the Lender
upon the Lender’s request, a Deposit Account Control Agreement duly executed on
behalf of each financial institution holding a deposit account of a Loan Party
as set forth in the Security Agreements.

 

6.15.                        Additional Collateral; Further
Assurances.

 

(a)                                  Subject to applicable law, each Loan
Party shall, unless the Lender otherwise consents, (i) cause each of its
Subsidiaries existing on the Closing Date (excluding any Foreign Subsidiary
existing on the Closing Date other than Mondel Canada) to become or remain a
Loan Party and a Guarantor and (ii) cause each of its Subsidiaries (excluding
any Foreign Subsidiary formed after the Closing Date with the Lender’s prior
consent) formed or acquired after the Closing Date in accordance with the terms
of this Agreement to (1)

 

62

 

become a party to this Agreement by executing the Joinder
Agreement set forth as Exhibit F hereto (the “Joinder Agreement”),
and (2) guarantee payment and performance of the Guaranteed Obligations
pursuant to the Guaranty; provided that no Subsidiary party to a
Joinder Agreement shall be a Borrower under this Agreement unless the Lender
has designated such Subsidiary to be a Borrower.

 

(b)                                 Upon the
request of the Lender, each Loan Party shall (i) grant Liens to the Lender,
pursuant to such documents as the Lender may reasonably deem necessary and
deliver such property, documents, and instruments as the Lender may request to
perfect the Liens of the Lender in any Property of such Loan Party which
constitutes Collateral, including any parcel of real Property located in the
U.S. owned by any Loan Party, and (ii) in connection with the foregoing
requirements, or either of them, deliver to the Lender all items of the type
required by Section 4.1 (as applicable).  Upon execution and delivery of such Loan Documents and other
instruments, certificates, and agreements, each such Person shall automatically
become a Guarantor hereunder and thereupon shall have all of the rights,
benefits, duties, and obligations in such capacity under the Loan Documents.

 

(c)                                  Each Loan
Party will cause (i) 100% of the issued and outstanding Capital Stock of each
of its Domestic Subsidiaries and (ii) 65% (or such greater percentage that, due
to a change in an applicable law after the date hereof, (1) could not
reasonably be expected to cause the undistributed earnings of such Foreign
Subsidiary as determined for U.S. federal income tax purposes to be treated as
a deemed dividend to such Foreign Subsidiary’s U.S. parent and (2) could not
reasonably be expected to cause any material adverse tax consequences) of the
issued and outstanding Capital Stock entitled to vote (within the meaning of
Treas. Reg. Section 1.956-2(c)(2)) (exclusive of any Excluded
Foreign Stock) and 100% of the issued and outstanding Capital Stock not
entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)
in each Foreign Subsidiary directly owned by any Loan Party (exclusive of any Excluded
Foreign Stock) or any Domestic Subsidiary to be subject at all times to a
first priority, perfected Lien in favor of the Lender pursuant to the terms and
conditions of the Loan Documents or other security documents as the Lender
shall reasonably request.

 

(d)                                 Without
limiting the foregoing, each Loan Party shall, and shall cause each of its
Subsidiaries which is required to become a Loan Party pursuant to the terms of
this Agreement to, execute and deliver, or cause to be executed and delivered,
to the Lender such documents and agreements, and shall take or cause to be
taken such actions as the Lender may, from time to time, reasonably request to
carry out the terms and conditions of this Agreement and the other Loan
Documents.

 

6.16.                        Dividends.

 

(a)                                  No Loan Party will
declare or pay any dividends or make any distributions on its Capital Stock
(other than dividends or distributions payable in its own common stock) or
redeem, repurchase or otherwise acquire or retire any of its Capital Stock at
any time outstanding, except that any Subsidiary may declare and pay dividends
or make distributions to a Borrower.

 

(b)                                 No Loan Party shall
directly or indirectly enter into or become bound by any agreement, instrument,
indenture or other obligation (other than this Agreement and the

 

63

 

other Loan Documents) that could directly or indirectly restrict,
prohibit or require the consent of any Person with respect to the payment of
dividends or distributions or the making or repayment of intercompany loans by
a Loan Party to a Loan Party.

 

6.17.                        Indebtedness.  No Loan Party will create, incur or suffer
to exist any Indebtedness, except:

 

(a)                                  the Obligations;

 

(b)                                 Indebtedness existing
on the date hereof and described in Schedule 5.22, including the
SPA Indebtedness;

 

(c)                                  purchase money
Indebtedness or Capitalized Lease Obligations incurred in connection with the
purchase of any Equipment; provided that, (i) such Indebtedness is
not secured by any of the Collateral other than the property so acquired and
any identifiable proceeds, (ii) any Liens relating to such Indebtedness do not
extend to or cover any property of a Loan Party other than the property so acquired
and any identifiable proceeds therefrom, (iii) the principal amount of such
Capitalized Lease Obligations or purchase money Indebtedness will not, at the
time of the incurrence thereof, exceed the value of the property so acquired,
and (iv) the aggregate of all such purchase money Indebtedness and Capitalized
Lease Obligations incurred in any Fiscal Year shall not exceed the amount
permitted during such period for capital expenditures pursuant to Section 6.29.1;

 

(d)                                 Indebtedness which
represents an extension, refinancing, or renewal of any of the Indebtedness
described in clauses (b) and (c) of this Section 6.17;
provided that,
(i) the principal amount or interest rate of such Indebtedness is not
increased, (ii) any Liens securing such Indebtedness are not extended to any
additional Property of any Loan Party, (iii) no Loan Party that is not
originally obligated with respect to repayment of such Indebtedness is required
to become obligated with respect thereto, (iv) such extension, refinancing or
renewal does not result in a shortening of the average weighted maturity of the
Indebtedness so extended, refinanced, renewed, (v) the terms of any such
extension, refinancing, or renewal are not less favorable to the obligor
thereunder than the original terms of such Indebtedness, and (vi) if the
Indebtedness that is refinanced, renewed, or extended was subordinated in right
of payment to the Obligations, then the terms and conditions of the
refinancing, renewal, or extension Indebtedness must include subordination
terms and conditions that are at least as favorable to the Lender as those that
were applicable to the refinanced, renewed, or extended Indebtedness;

 

(e)                                  Indebtedness owing by
any Borrowing Base Group Member to any other Loan Party with respect to intercompany
loans, provided,
further, that:

 

(i)                                     Each Borrowing
Base Group Member shall record all intercompany transactions on its books and
records in a manner reasonably satisfactory to the Lender;

 

(ii)                                  at the time any such
intercompany loan or advance is made by the Loan Party and after giving effect
thereto, such Loan Party shall be Solvent; and

 

(iii)                               no Default or Unmatured
Default then exists.

 

64

 

(f)                                    Contingent
Obligations (i) by indorsement of instruments for deposit or collection in the
ordinary course of business, (ii) consisting of the Reimbursements Obligations,
and (iii) consisting of the Guaranty and guarantees of Indebtedness incurred
for the benefit of any Borrowing Base Group Member if the primary obligation is
expressly permitted elsewhere in this Section 6.17;

 

(g)                                 Indebtedness arising
under Rate Management Transactions related to the Loans as required by Section 6.32;

 

(h)                                 unsecured Indebtedness
incurred after the Closing Date from SPA; and

 

(i)                                     unsecured
Subordinated Indebtedness incurred to comply with the requirements of
Section 6.29.4 with respect to an Availability Condition.

 

6.18.                        Capital
Structure.  (a) If all or any
part of a Loan Party’s Capital Stock has been pledged to the Lender, that Loan
Party shall not issue additional Capital Stock, and (b) no Loan Party will (i)
make any change in its capital structure or (ii) engage in any business other
than the businesses currently engaged in by it or businesses reasonably related
thereto.

 

6.19.                        Merger.  No Loan Party will merge or consolidate with
or into any other Person, except that, with the prior consent of the Lender,
(a) any Subsidiary of a Borrower may merge into a Borrower or a Wholly-Owned
Subsidiary of a Borrower which is a Domestic Subsidiary and a Loan Party and
(b) any Loan Party (other than a Borrower) may merge with any other Loan Party
so long as the surviving Loan Party is a Domestic Subsidiary.

 

6.20.                        Sale of
Assets.  No Loan Party will
lease, sell or otherwise dispose of its Property (including any Capital Stock
owned by it) to any other Person, except:

 

(a)                                  sales of Inventory in
the ordinary course of business; however, a sale in the ordinary course of
business will not include a transfer in total or partial satisfaction of
indebtedness; and

 

(b)                                 the sale or other
disposition of Equipment that is obsolete or no longer useful in such Loan
Party’s business and having a net book value not exceeding $250,000 in the
aggregate in any Fiscal Year.

 

The Net Cash Proceeds of any sale or disposition permitted pursuant to
this Section shall be delivered to the Lender as required by Section 2.13
and applied to the Obligations as set forth therein.

 

6.21.                        Investments and Acquisitions.  No Loan Party will (a) make or suffer to
exist any Investments (including loans and advances to, and other Investments
in, Subsidiaries), or commitments therefor, (b) create any Subsidiary, (c)
become or remain a partner in any partnership or joint venture, or (d) make any
Acquisition, except:

 

(a)                                  Cash Equivalent
Investments, subject to control agreements in favor of the Lender or otherwise
subject to a perfected security interest in favor of the Lender, so long as
after making such Cash Equivalent Investment, no Loans are then outstanding;

 

65

 

(b)                                 Investments in
Subsidiaries existing as of the Closing Date;

 

(c)                                  other Investments
described in Schedule 6.21;

 

(d)                                 Investments consisting
of loans or advances made to employees of such Loan Party on an arms-length
basis in the ordinary course of business consistent with past practices for
travel and entertainment expenses, and similar purposes up to a maximum of
$25,000 to any employee and up to a maximum of $150,000 in the aggregate at any
one time outstanding, except for loans for relocation purposes which may be
made up to $200,000 at any time outstanding in the aggregate; and

 

(e)                                  subject to Sections
4.2(a) and 4.4 of the Security Agreements, Investments comprised of
notes payable, or stock or other securities issued by Account Debtors to such
Loan Party pursuant to negotiated agreements with respect to settlement of such
Account Debtor’s Accounts in the ordinary course of business, consistent with
past practices.

 

6.22.                        Liens.

 

(e)                                  No Loan Party will create, incur, or
suffer to exist any Lien in, of, or on the Property of such Loan Party, except
the following (collectively, “Permitted Liens”):

 

(i)                                     Liens for
taxes, fees, assessments, or other governmental charges or levies on the
Property of such Loan Party if such Liens (A) shall not at the time be
delinquent or (B)(1) do not secure amounts in excess of $50,000 in the
aggregate as of any date, (2) are being contested in accordance with Section 6.5
and with respect to which the other terms of Section 6.5 are then
being complied with by such Loan Party, and (3) do not prevent the
Lender from having a perfected first priority security interest in, or as
applicable, mortgage Lien on, the Collateral or with respect to future advances
made hereunder;

 

(ii)                                  Liens imposed
by law, such as carrier’s, warehousemen’s, and mechanic’s Liens and other
similar Liens arising in the ordinary course of business which (A) secure
payment of indebtedness not more than ten days past due or (B) (1) are being
contested in good faith in accordance with Section 6.6 and with
respect to which the other terms of Section 6.6 are then being
complied with by such Loan Party, (2) do not secure indebtedness in excess of
$250,000 in the aggregate as of any date, and (3) do not prevent the
Lender from having a perfected first priority security interest in, or as
applicable, mortgage Lien on, the Collateral or with respect to future advances
made hereunder;

 

(iii)                               statutory
Liens in favor of landlords of real Property leased by such Loan Party for each
Borrower Facility for which there is not in effect a Collateral Access
Agreement; provided
that (A) such Loan Party is current with respect to payment of all
rent and other amounts due to such landlord under any lease of such real
Property and (B) do not secure indebtedness in excess of any aggregate Reserves
therefor as of any date;

 

66

 

(iv)                              Liens
arising out of pledges or deposits under worker’s compensation laws,
unemployment insurance, old age pensions, or other social security or
retirement benefits, or similar legislation or to secure the performance of
bids, tenders, or contracts (other than for the repayment of indebtedness) or
to secure indemnity, performance, or other similar bonds for the performance of
bids, tenders, or contracts (other than for the repayment of indebtedness) or
to secure statutory obligations (other than Liens arising under ERISA or
Environmental Laws) or surety or appeal bonds, or to secure indemnity,
performance, or other similar bonds up to a maximum aggregate amount not to
exceed, as of any date, $250,000;

 

(v)                                 utility
easements, building restrictions, and such other encumbrances or charges
against real Property as are of a nature generally existing with respect to
properties of a similar character and which do not in any material way affect
the marketability of such real Property or interfere with the use thereof in
the business of such Loan Party;

 

(vi)                              Liens
existing on the Closing Date and described in Schedule 6.22 provided
that such Liens shall secure only that Indebtedness which they secure on the
Closing Date subject to extension, refinancing, or renewal of that Indebtedness
as permitted pursuant to Section 6.17(d); provided that, the Liens
evidenced thereby are not increased to cover any additional Property not
originally covered thereby;

 

(vii)                           Liens
resulting from any extension, refinancing, or renewal of the related
Indebtedness as permitted pursuant to Section 6.17(d); provided
that, the Liens evidenced thereby are not increased to cover any
additional Property not originally covered thereby;

 

(viii)                        Liens
securing purchase money Indebtedness or Capital Lease Obligations of such Loan
Party permitted pursuant to Section 6.17(c); provided that, such Liens
attach only to the Property which was purchased with the proceeds of such
purchase money Indebtedness or Capital Lease Obligations; and

 

(ix)                                Liens in
favor of the Lender granted pursuant to any Loan Document.

 

(f)                                    Notwithstanding
the foregoing, none of the Liens permitted pursuant to this Section 6.22,
other than (1) clauses (i) and (viii) above, may at any time
attach to any Accounts of any Loan Party and (2) clauses (i)
through (iii) above, may at any time attach to any Inventory of any Loan
Party.

 

(g)                                 Other than
as provided in the Loan Documents or in connection with the creation or
incurrence of any Indebtedness under Section 6.17(c), no Loan Party
will enter into or become subject to any negative pledge or other restriction
the right of such Loan Party to grant Liens to the Lender on any of its
Property; provided
that, any such negative pledge or other restriction entered into in
connection with the creation of Indebtedness under Section 6.17(c)
shall be limited to the Property securing such purchase money Indebtedness.

 

6.23.                        Change of Corporate Name or Location;
Change of Fiscal Year.  No Loan
Party shall (a) change its name as it appears in official filings in the state
of its incorporation or organization, (b) change its chief executive office,
principal place of business, mailing address, corporate offices or warehouses
or locations at which Collateral is held or stored, or the location of its
records

 

67

 

concerning the Collateral as set forth in the Security Agreement, (c)
change the type of entity that it is, (d) change its organization
identification number, if any, issued by its state of incorporation or other
organization, or (e) change its state of incorporation or organization, in each
case, without at least thirty days prior written notice to the Lender and the
Lender shall have either (1) determined that such event or occurrence will not
adversely affect the validity, perfection or priority of the Lender’s security
interest in the Collateral, or (2) after the Lender’s written acknowledgment
that any reasonable action requested by the Lender in connection therewith,
including to continue the perfection of any Liens in favor of the Lender in any
Collateral, has been completed or taken, and, provided that, any new
location shall be in the continental U.S.. No Loan Party shall change its
Fiscal Year.

 

6.24.                        Affiliate
Transactions.  No Loan
Party will (a) enter into any transaction (including the purchase or sale of
any Property or service) with any Affiliate or (b) make any payment or transfer
(including any payment or transfer with respect to any fees or expenses for
management services) to, any Affiliate except (i) in the ordinary course of
business and pursuant to the reasonable requirements of such Loan Party’s
business and upon fair and reasonable terms no less favorable to such Loan
Party than such Loan Party would obtain in a comparable arms-length transaction
and (ii) MagneTek may pay management fees pursuant to that certain Executive
Management Agreement dated as of July 1, 1994 between MagneTek and The
Spectrum Group, Inc. as in effect on the Closing Date, and any increases to the
amounts set forth therein and any bonuses payable thereunder, in each case as
may be approved by of the Board of Directors of MagneTek, so long as such
increases and bonuses are solely for executive compensation; provided
that no Loan Party will extend credit to, or have Indebtedness owing from, its
Affiliates or pay in whole or in part any Indebtedness of any Affiliate except
as permitted by Section 6.17(e) and Section 6.26(a).

 

6.25.                        Amendments
to Agreements.  No Loan Party
will, nor will any Loan Party permit its Subsidiary to, amend or terminate its
articles of incorporation, charter, certificate of formation, by-laws, operating,
management or partnership agreement or other organizational document.

 

6.26.                        Prepayment of Indebtedness;
Subordinated Indebtedness. 

 

(a)                                  No Loan Party shall,
directly or indirectly, voluntarily purchase, redeem, defease or prepay any
principal of, premium, if any, interest or other amount payable in respect of
any Debt For Borrowed Money prior to its scheduled maturity, other than (i) the
Obligations; (ii) Indebtedness secured by a Permitted Lien if the asset
securing such Indebtedness has been sold or otherwise disposed of in accordance
with Section 6.20; (iii) Indebtedness permitted by Section 6.17(d)
upon any refinancing thereof in accordance therewith; and (iv) Indebtedness
permitted by Section 6.17(e).

 

(b)                                 No Loan Party shall
make any amendment or modification to the indenture, note or other agreement
evidencing or governing any Subordinated Indebtedness, or directly or
indirectly voluntarily prepay, defease or in substance defease, purchase,
redeem, retire or otherwise acquire, any Subordinated Indebtedness.

 

(c)                                  No Loan Party shall
make any payments of interest, fees or principal on the SPA Indebtedness.

 

6.27.                        Letters
of Credit.  No Loan Party will
apply for or become liable upon or in respect of any Letter of Credit other
than Facility LCs.

 

68

 

6.28.                        Financial
Contracts.  No Loan Party shall
enter into or remain liable upon any Financial Contract except for Rate
Management Transactions required by Section 6.32.

 

6.29.                        Financial
Covenants.

 

6.29.1.  Capital
Expenditures.  No Loan Party
shall expend, or be committed to expend, for Capital Expenditures in the
aggregate for the Consolidated Group, in excess of (a) $1,750,000 for the
Fiscal Year ending in June, 2004, (b) $2,500,000 for the Fiscal Year ending in
June, 2005, or (c) $3,000,000 for the Fiscal Year ending in June, 2006.

 

6.29.2.  Minimum
Fixed Charge Coverage Ratio. 
The Borrowers will not permit the Fixed Charge Coverage Ratio for any
Test Period ending on the dates set forth below to be less than the ratio set
forth below opposite such Test Period ending on such date:

 

	
  Test Period

  	
   

  	
  Minimum
  Fixed Charge Coverage Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Fiscal Quarter beginning September 29, 2003 and ending on
  December 28, 2003

  	
   

  	
  1.250:1.0  

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Two Fiscal
  Quarters beginning September 29, 2003 and ending on March 28, 2004

  	
   

  	
  1.250:1.0  

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Four
  Consecutive Fiscal Quarters ending June 27, 2004

  	
   

  	
  1.250:1.0  

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Four
  Consecutive Fiscal Quarters ending September 26, 2004

  	
   

  	
  1.250:1.0  

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Four
  Consecutive Fiscal Quarters ending December 26, 2004

  	
   

  	
  1.250:1.0  

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Four
  Consecutive Fiscal Quarters ending March 27, 2005

  	
   

  	
  1.250:1.0  

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Four
  Consecutive Fiscal Quarters ending June 26, 2005 and each Four
  Consecutive Fiscal Quarters thereafter

  	
   

  	
  1.300:1.0

  	
   

  

 

6.29.3.  Minimum EBITDA.  The Borrowers shall not permit Consolidated
EBITDA (“EBITDA Covenant”) to be less than the amounts set opposite the
Test Periods set forth below (or, as applicable, in the case of negative
amounts, the Borrowers will not permit Consolidated EBITDA to be more negative
than the negative amounts set opposite the Test Periods ending on the following
dates):

 

69

 

	
  Test Period

  	
   

  	
  Minimum
  EBITDA

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Fiscal
  Quarter beginning June 30, 2003 and ending on September 28, 2003

  	
   

  	
  $

  	
  (750,000

  	
  )

  
	
   

  	
   

  	
   

  	
   

  
	
  Two Fiscal
  Quarters beginning June 30, 2003 and ending on December 28, 2003

  	
   

  	
  $

  	
  150,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Three Fiscal
  Quarters beginning June 30, 2003 and ending on March 28, 2004

  	
   

  	
  $

  	
  1,100,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Four
  Consecutive Fiscal Quarters ending June 27, 2004

  	
   

  	
  $

  	
  2,750,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Four
  Consecutive Fiscal Quarters ending September 26, 2004

  	
   

  	
  $

  	
  3,400,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Four
  Consecutive Fiscal Quarters ending December 26, 2004

  	
   

  	
  $

  	
  4,125,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Four
  Consecutive Fiscal Quarters ending March 27, 2005

  	
   

  	
  $

  	
  4,800,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Four
  Consecutive Fiscal Quarters ending June 26, 2005 and each Four
  Consecutive Fiscal Quarters thereafter

  	
   

  	
  $

  	
  5,500,000

  	
   

  

 

6.29.4.  Minimum
Availability.  The Borrowers
shall maintain, at all times and under all circumstances, Availability of not
less than $500,000 in the aggregate; provided  that if Availability is less
than $1,000,000 in the aggregate for two consecutive Business Days (“Availability
Condition”), then, within 30 days after each Availability Condition, the
Borrowers will incur additional unsecured Subordinated Indebtedness, unsecured
Debt For Borrowed Money from SPA, or cause equity to be contributed to MagneTek
in cash in an aggregate amount at least equal to $1,000,000 with respect to the
occurrence of each such Availability Condition.

 

6.30.                        Depository
Banks.  Each Loan Party shall
maintain the Lender as such Loan Party’s principal depository bank, including
for the maintenance of operating, administrative, cash management, collection
activity, and other deposit accounts for the conduct of its business.

 

6.31.                        Sale
of Accounts. No Loan Party will, nor will any Loan Party permit its
Subsidiary to, sell or otherwise dispose of any notes receivable or accounts
receivable, with or without recourse.

 

70

 

6.32.                        Required Rate Management
Transactions.  Within 60 days of
the initial Loans, the Borrowers will enter into one or more transactions of
the type described in the definition of “Rate Management Transactions” with the
Lender in its reasonable discretion, providing for a fixed rate of interest on
a notional amount of at least $3,000,000 and an average weighted maturity of at
least 3 years.

 

6.33.                        Holding Companies; Inactive Companies.  None of MXT, Mondel Holding or the Inactive
Companies shall engage in any trade or business, or own any assets (other than
the Capital Stock of its Subsidiaries) or incur any Indebtedness (other than
the Secured Obligations).

 

6.34.                        Operating
Profit.  The Borrowers shall not
permit Operating Profit for any Business Group Member (“Operating Profit
Covenant”) to be less than the amounts set opposite the Test Periods set
forth below (or, as applicable, in the case of negative amounts, the Borrowers
will not permit Operating Profit for any Business Group Member to be more
negative than the negative amounts set opposite the Test Periods ending on the
following dates):

 

(a)                                  ICG:

 

	
  Test Period

  	
   

  	
  Minimum
  Operating Profit of ICG

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Two Fiscal
  Quarters beginning June 30, 2003 and ending on December 28, 2003

  	
   

  	
  $

  	
  2,800,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Three Fiscal
  Quarters beginning June 30, 2003 and ending on March 28, 2004

  	
   

  	
  $

  	
  4,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Four
  Consecutive Fiscal Quarters ending June 27, 2004 and each Four
  Consecutive Fiscal Quarters ending thereafter

  	
   

  	
  $

  	
  7,000,000

  	
   

  

 

(b)                                 PEG:

 

	
  Test Period

  	
   

  	
  Minimum
  Operating Profit of PEG

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Two Fiscal
  Quarters beginning June 30, 2003 and ending on December 28, 2003

  	
   

  	
  $

  	
  (350,000

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Three Fiscal
  Quarters beginning June 30, 2003 and ending on March 28, 2004

  	
   

  	
  $

  	
  25,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Four
  Consecutive Fiscal Quarters ending June 27, 2004 and each Four
  Consecutive Fiscal Quarters ending thereafter

  	
   

  	
  $

  	
  400,000

  	
   

  

 

71

 

(c)                                  TPG:

 

	
  Test Period

  	
   

  	
  Minimum
  Operating Profit of TPG

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Two Fiscal Quarters
  beginning June 30, 2003 and ending on December 28, 2003

  	
   

  	
  $

  	
  (2,000,000

  	
  )

  
	
   

  	
   

  	
   

  	
   

  
	
  Three Fiscal
  Quarters beginning June 30, 2003 and ending on March 28, 2004

  	
   

  	
  $

  	
  (1,900,000

  	
  )

  
	
   

  	
   

  	
   

  	
   

  
	
  Four
  Consecutive Fiscal Quarters ending June 27, 2004

  	
   

  	
  $

  	
  (1,700,000

  	
  )

  
	
   

  	
   

  	
   

  	
   

  
	
  Each Four
  Consecutive Fiscal Quarters ending after June 27, 2004

  	
   

  	
  $

  	
  (1,250,000

  	
  )

  

 

ARTICLE VII

 

DEFAULTS

 

7.1                                 Defaults.  The occurrence of any one or more of the
following events or conditions, whether or not caused by or within the control
of a Loan Party, shall constitute a “Default” hereunder:

 

(a)                                  any representation or
warranty made or deemed made by or on behalf of any Loan Party to the Lender
under or in connection with this Agreement, any other Loan Document, any Credit
Extension, or any certificate or information delivered in connection with any
of the foregoing shall be materially false on the date as of which made;

 

(b)                                 nonpayment, when due
(whether upon demand or otherwise), of any principal, interest, fee,
Reimbursement Obligation or any other Obligation owing under any of the Loan
Document;

 

(c)                                  the breach by any
Loan Party of any of the terms or provisions of Section 6.2, 6.3(a),
6.10, 6.16 through 6.23 or 6.25 through 6.34;

 

(d)                                 (i) the breach by any
Loan Party (other than a breach which constitutes a Default under another
subsection of this Section 7.1) of any of the terms or
provisions of (i) Sections 6.1(f) or 6.7(a) (insofar as
maintenance of applicable insurance coverage is concerned) which is not
remedied within five (5) days after the earlier of such breach or written
notice from the Lender; (ii) Section 6.1 (other than Section 6.1(f)),
6.3 (other than Section 6.3(a)), 6.4 through 6.15
(other than Sections 6.7(a) or 6.10), or 6.24 of this

 

72

 

Agreement which is not remedied within ten
(10) days after the earlier of such breach or written notice from the Lender;
or (iii) any other Section of this Agreement which is not remedied within
twenty (20) days after the earlier of such breach or written notice from the
Lender;

 

(e)                                  failure of any Loan
Party to pay when due any Material Indebtedness or a default, breach or other
event occurs under any term, provision or condition contained in any Material
Indebtedness Agreement of any Loan Party, the effect of which default, event or
condition is to cause, or to permit the holder(s) of such Material Indebtedness
or the lender(s) under any Material Indebtedness Agreement to cause, such
Material Indebtedness to become due prior to its stated maturity or any
commitment to lend under any Material Indebtedness Agreement to be terminated
prior to its stated expiration date; any Material Indebtedness of any Loan
Party shall be declared to be due and payable or required to be prepaid or
repurchased (other than by a regularly scheduled payment) prior to the stated
maturity thereof; or any Loan Party shall not pay, or admit in writing its
inability to pay, its debts generally as they become due;

 

(f)                                    any Loan Party
shall (i) have an order for relief entered with respect to it under the
Bankruptcy Code as now or hereafter in effect, (ii) make an assignment for the
benefit of creditors, (iii) apply for, seek, consent to, or acquiesce in, the
appointment of a receiver, custodian, trustee, examiner, liquidator or similar
official for it or any Substantial Portion of its Property, (iv) institute any
proceeding seeking an order for relief under the Bankruptcy Code as now or
hereafter in effect or seeking to adjudicate it a bankrupt or insolvent, or
seeking dissolution, winding up, liquidation, reorganization, arrangement,
adjustment or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors or fail to file
an answer or other pleading denying the material allegations of any such
proceeding filed against it, (v) take any corporate or partnership action to
authorize or effect any of the foregoing actions set forth in this subsection (f),
(vi) fail to contest in good faith any appointment or proceeding described in subsection (g)
below, or (vii) voluntarily dissolve or cease to exist or any final and
nonappealable order or judgment shall be entered against a Loan Party decreeing
its involuntary dissolution;

 

(g)                                 a receiver, trustee,
examiner, liquidator or similar official shall be appointed for any Loan Party
or any Substantial Portion of its Property, or a proceeding described in subsection (f)(iv)
of Section 7.1 shall be instituted against any Loan Party and such
appointment continues undischarged or such proceeding continues undismissed or
unstayed for a period of sixty consecutive days;

 

(h)                                 any court, government
or governmental agency shall condemn, seize or otherwise appropriate, or take
custody or control of, all or any portion of the Property of any Loan Party
which, when taken together with all other Property of any Loan Party so
condemned, seized, appropriated, or taken custody or control of, during the
twelve-month period ending with the month in which any such action occurs,
constitutes a Substantial Portion;

 

(i)                                     any loss, theft,
damage or destruction of any item or items of Collateral or other property of
any Loan Party occurs which could reasonably be expected to cause a Material
Adverse Effect and is not adequately covered by insurance;

 

73

 

(j)                                     any Loan Party
shall fail within thirty days to pay, bond or otherwise discharge one or more
(i) judgments or orders for the payment of money in excess of $250,000 (or the
equivalent thereof in currencies other than U.S. Dollars) in the aggregate, or
(ii) nonmonetary judgments or orders which, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect, which judgments
or orders, in any such case, are not stayed on appeal or otherwise being
appropriately contested in good faith by proper proceedings diligently pursued
or result any Lien;

 

(k)                                  any Change in Control
shall occur;

 

(l)                                     (i) the Unfunded
Liabilities of the MagneTek Pension Plan shall exceed in the aggregate
$51,356,000 as of any Fiscal Year end or any date otherwise required to be
determined under applicable law, (ii) any Reportable Event that can be expected
to result in a Material Adverse Effect shall occur in connection with any Plan,
(iii) a cash contribution is required to be made to the MagneTek Pension Plan,
(iv) a contribution failure occurs with respect to any Plan sufficient to give
rise to a Lien under Section 302(f) of ERISA, (v) a Loan Party or the PBGC
takes any action to terminate a Plan, or (vi) liability is imposed on any Loan
Party or any Control Group Member pursuant to Section  4069 of ERISA;

 

(m)                               any Loan Party shall (i)
be the subject of any proceeding or investigation pertaining to the release by
the any Loan Party or any other Person of any toxic or hazardous waste or
substance into the environment, or (ii) violate any Environmental Law, which,
in the case of an event described in clause (i) or clause (ii), could
reasonably be expected to have a Material Adverse Effect;

 

(n)                                 the occurrence of any “default”,
as defined in any Loan Document (other than this Agreement) or the breach of
any of the terms or provisions of any Loan Document (other than this
Agreement), which default or breach continues beyond any period of grace
therein provided;

 

(o)                                 the Guaranty shall
fail to remain in full force or effect or any action shall be taken to
discontinue or to assert the invalidity or unenforceability of the Guaranty, or
any Guarantor shall fail to comply with any of the terms or provisions of the
Guaranty to which it is a party, or any Guarantor shall deny that it has any
further liability under the Guaranty to which it is a party, or shall give
notice to such effect;

 

(p)                                 any Collateral
Document shall for any reason fail to create a valid and perfected first
priority security interest in any Collateral purported to be covered thereby,
except as permitted by the terms of any Collateral Document, or any Collateral
Document shall fail to remain in full force or effect or any action shall be
taken to discontinue or to assert the invalidity or unenforceability of any
Collateral Document, or any Loan Party shall fail to comply with any of the
terms or provisions of any Collateral Document;

 

(q)                                 (other than a breach
which constitutes a Default under Section 7.1(p)), any material
provision of any Loan Document for any reason ceases to be valid, binding and
enforceable in accordance with its terms (or any Loan Party shall challenge the
enforceability of any Loan Document or shall assert in writing, or engage in
any action or

 

74

 

inaction based on any such assertion, that
any provision of any of the Loan Documents has ceased to be or otherwise is not
valid, binding and enforceable in accordance with its terms);

 

(r)                                    (other than a
breach which constitutes a Default under Section 7.1(a)), the
representations and warranties set forth in Section 5.17 shall at
any time not be true and correct;

 

(s)                                  nonpayment by a
Borrower or any of its Subsidiary of any Rate Management Obligation when due or
the breach by a Borrower or any of its Subsidiary of any term, provision or
condition contained in any Rate Management Transaction or any transaction of
the type described in the definition of “Rate Management Transactions,” whether
or not the Lender or Affiliate of the Lender is a party thereto; or

 

(t)                                    any Loan Party is
criminally indicted or convicted under any law that may reasonably be expected
to lead to a forfeiture of any Property of such Loan Party having a fair market
value in excess of $100,000.

 

7.2                                 Continuing Default.  Each Default will be deemed continuing until it is waived in
writing by, or cured to the written satisfaction of, the Lender.

 

ARTICLE VIII

 

REMEDIES;
WAIVERS AND AMENDMENTS

 

8.1.                              Remedies.

 

(h)                                 If any Default occurs, the Lender
may in its discretion (i) reduce the Commitment, (ii) terminate or suspend the
obligations of the Lender to make Loans hereunder and the obligation and power
of the LC Issuer to issue Facility LCs, (iii) declare all or any portion of the
Obligations to be due and payable, whereupon such Obligations shall become
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which the Borrowers hereby expressly waive, (iv) upon notice
to the Borrower Representative and in addition to the continuing right to
demand payment of all amounts payable under this Agreement, the Lender may
either (1) make demand on the Borrowers to pay, and the Borrowers will,
forthwith upon such demand and without any further notice or act, pay to the
Lender an amount, in immediately available funds (which funds shall be held in
the Facility LC Collateral Account), equal to 105% of the Collateral Shortfall
Amount or (2) deliver a Supporting Letter of Credit as required by Section 2.1.2(i),
whichever the Lender may specify in its sole discretion, (v) increase the rate
of interest applicable to the Loans and the LC Fees as set forth in this
Agreement and (vi) exercise any rights and remedies provided to the Lender
under the Loan Documents or at law or equity, including all remedies provided
under the UCC.

 

(i)                                     If any
Default described in subsections (f) or (g) of Section 7.1
occurs with respect to any Loan Party, the obligations of the Lender to make
Loans hereunder and the obligation and power of the LC Issuer to issue Facility
LCs shall automatically terminate and all Obligations shall immediately become
due and payable without any election or action the part of the Lender and the
Loan Parties will be and become thereby

 

75

 

unconditionally obligated, without
any further notice, act or demand, to pay to the Lender an amount equal to 105%
of the Collateral Shortfall Amount, which funds shall be deposited in the
Facility LC Collateral Account.

 

(j)                                     If, within
thirty days after acceleration of the maturity of the Obligations or
termination of the obligations of the Lender to make Loans and the obligation
and power of the LC Issuer to issue Facility LCs hereunder as a result of any
Default (other than any Default as described in subsections (f) or (g)
of Section 7.1 with respect to the Borrower) and before any
judgment or decree for the payment of the Obligations due shall have been
obtained or entered, the Lender (in its 
sole discretion) shall so direct, the Lender shall, by notice to the
Borrower Representative, rescind and annul such acceleration and/or
termination.

 

(k)                                  If at any
time while any Default is continuing, the Lender determines that the Collateral
Shortfall Amount at such time is greater than zero, the Lender may make demand
on the Borrowers to pay, and the Borrowers will, forthwith upon such demand and
without any further notice or act, pay to the Lender an amount equal to 105% of
the Collateral Shortfall Amount, which funds shall be deposited in the Facility
LC Collateral Account. The Borrowers hereby pledge, assign, and grant to the
Lender a security interest in all of the Borrowers’ right, title, and interest
(individually and collectively) in and to all funds which may from time to time
be on deposit in the Facility LC Collateral Account to secure the prompt and
complete payment and performance of the Obligations.

 

(l)                                     The Lender
may at any time or from time to time after funds are deposited in the Facility
LC Collateral Account, apply such funds to the payment of the Obligations and
any other amounts as shall from time to time have become due and payable by the
Borrowers to the Lender under the Loan Documents.

 

(m)                               At any
time while any Default is continuing, neither any Borrower nor any Person
claiming on behalf of or through a Borrower shall have any right to withdraw
any of the funds held in the Facility LC Collateral Account.  After all of the Secured Obligations have
been indefeasibly paid in full and the Commitment has been terminated, any
funds remaining in the Facility LC Collateral Account shall be returned by the
Lender to the Borrowers or paid to whomever may be legally entitled thereto at
such time.

 

(n)                                 In
addition to, and without limitation of, any rights of the Lender under
applicable law, if any Loan Party becomes insolvent, however evidenced, or any
Default occurs, any and all deposits (including all account balances, whether
provisional or final and whether or not collected or available) and any other
Indebtedness at any time held or owing by the Lender or any Affiliate of the
Lender to or for the credit or account of any Borrower may be offset and
applied toward the payment of the Secured Obligations owing to such Lender,
whether or not the Secured Obligations, or any part thereof, shall then be due.

 

8.2.                              Waivers by Loan Parties.  Except as otherwise provided for in this Agreement or by
applicable law, each Loan Party waives: (a) presentment, demand and protest and
notice of presentment, dishonor, notice of intent to accelerate, notice of
acceleration, protest, default, nonpayment, maturity, release, compromise,
settlement, extension or renewal of any or all commercial paper, accounts,
contract rights, documents, instruments, chattel paper and guaranties at any
time held by the Lender on which any Loan Party may in any way be liable, and
hereby ratifies

 

76

 

and confirms whatever the
Lender may do in this regard, (b) all rights to notice and a hearing prior to
the Lender’s taking possession or control of, or to the Lender’s replevy,
attachment or levy upon, the Collateral or any bond or security that might be
required by any court prior to allowing the Lender to exercise any of its
remedies, and (c) the benefit of all valuation, appraisal, marshaling and
exemption laws.

 

8.3.                              Amendments.  No amendment, waiver or modification of any
provision of this Agreement or any other Loan Document, and no consent with
respect to any departure by any Loan Party therefrom, shall be effective unless
the same shall be in writing and signed by the Lender and the Loan Parties and
then any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.

 

8.4.                              Preservation of Rights.  No delay or omission of the Lender to
exercise any right under the Loan Documents shall impair such right or be
construed to be a waiver of any Default or an acquiescence therein, and the
making of a Credit Extension notwithstanding the existence of a Default or the
inability of the Borrowers to satisfy the conditions precedent to such Credit
Extension shall not constitute any waiver or acquiescence.  Any single or partial exercise of any such
right shall not preclude other or further exercise thereof or the exercise of
any other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Loan Documents whatsoever shall be valid unless
in writing signed by the Lender as required pursuant to Section 8.3,
and then only to the extent in such writing specifically set forth.  All remedies contained in the Loan Documents
or by law afforded shall be cumulative and all shall be available to the Lender
until the Obligations have been paid in full.

 

ARTICLE IX

 

GENERAL PROVISIONS

 

9.1.                              Survival of Representations.  All representations and warranties of the
Loan Parties contained in this Agreement and the other Loan Documents shall
survive the execution and delivery of the Loan Documents and the making of the
Credit Extensions herein contemplated.

 

9.2.                              Governmental Regulation.  Anything contained in this Agreement to the
contrary notwithstanding, the Lender shall not be obligated to extend credit to
any Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.

 

9.3.                              Headings.  Section headings in the Loan Documents
are for convenience of reference only, and shall not govern the interpretation
of any of the provisions of the Loan Documents.

 

9.4.                              Entire
Agreement.  The Loan Documents
embody the entire agreement and understanding among the Loan Parties and the
Lender and supersede all prior agreements and understandings among the Loan
Parties and the Lender relating to the subject matter thereof.

 

9.5.                              Several Obligations; Benefits of
this Agreement.  This Agreement
shall not be construed so as to confer any right or benefit upon any Person
other than the parties to this Agreement and their respective successors and
assigns.

 

77

 

9.6.                              Expenses; Indemnification.

 

(a)                                  The Borrowers shall
reimburse the Lender for any costs, internal charges and out-of-pocket expenses
(including attorneys’ fees and time charges of attorneys for the Lender, which
attorneys may be employees of the Lender) paid or incurred by the Lender n
connection with the preparation, negotiation, execution, delivery, distribution
(including via the internet or through a service such as Intralinks), review,
amendment, modification, and administration of the Loan Documents.  The Borrowers also agree to reimburse the
Lender for any costs, internal charges and out-of-pocket expenses (including
attorneys’ fees and time charges of attorneys for the Lender, which attorneys
may be employees of the Lender) paid or incurred by the Lender in connection with
the collection and enforcement of the Loan Documents.  Expenses being reimbursed by the Borrowers under this
Section include, without limitation, costs and expenses incurred in
connection with:

 

(i)                                     appraisals of all
or any portion of the Collateral, each parcel of real Property or interest in
real Property described in any Collateral Document, which appraisals shall be
in conformity with the applicable requirements of any law or any governmental
rule, regulation, policy, guideline or directive (whether or not having the
force of law), or any interpretation thereof, including the provisions of Title
XI of the Financial Institutions Reform, Recovery and Enforcement Act of 1989,
as amended, reformed or otherwise modified from time to time, and any rules promulgated
to implement such provisions (including travel, lodging, meals and other out of
pocket expenses for inspections of the Collateral and the Borrower’s operations
by the Lender) plus the Lender’s then customary charge for field
examinations and audits and the preparation of certain audit reports (the “Reports”)
(such charge is currently $850 per day (or portion thereof) for each Person
retained or employed by the Lender with respect to each field examination or
audit);

 

(ii)                                  any amendment,
modification, supplement, consent, waiver or other documents prepared with
respect to any Loan Document and the transactions contemplated thereby;

 

(iii)                               lien and title searches
and title insurance;

 

(iv)                              taxes, fees and other
charges for recording the Mortgages, filing financing statements and
continuations, and other actions to perfect, protect, and continue the Lender’s
Liens (including costs and expenses paid or incurred by the Lender in
connection with the consummation of the Agreement);

 

(v)                                 sums paid or incurred
to take any action required of any Loan Party under the Loan Documents that
such Loan Party fails to pay or take;

 

(vi)                              any litigation, contest,
dispute, proceeding or action (whether instituted by the Lender, any Loan Party
or any other Person and whether as to party, witness or otherwise) in any way
relating to the Collateral, the Loan Documents or the transactions contemplated
thereby; and

 

78

 

(vii)                           costs and expenses of
forwarding loan proceeds, collecting checks and other items of payment, and
establishing and maintaining the Funding Account and lock boxes, and costs and
expenses of preserving and protecting the Collateral.

 

The foregoing shall not be construed to limit
any other provisions of the Loan Documents regarding costs and expenses to be
paid by the Borrowers.  All of the
foregoing costs and expenses may be charged to the Borrower’s Loan Account as
Revolving Loans or to another deposit account, all as described in Section 2.15(b).

 

The Borrowers
hereby further agree to indemnify the Lender, its Affiliates, and each of their
directors, officers and employees against all losses, claims, damages,
penalties, judgments, liabilities and expenses (including all expenses of
litigation or preparation therefor whether or not the Lender or any Affiliate
is a party thereto) which any of them may pay or incur arising out of or
relating to this Agreement, the other Loan Documents, the transactions
contemplated hereby or the direct or indirect application or proposed
application of the proceeds of any Credit Extension hereunder except to the
extent that they are determined in a final non-appealable judgment by a court
of competent jurisdiction to have resulted from the gross negligence or willful
misconduct of the party seeking indemnification.   The obligations of the Borrowers under this Section 9.6
shall survive the termination of this Agreement.

 

9.7.                              Accounting.  Except as provided to the contrary herein,
all accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with GAAP in a manner
consistent with that used in preparing the financial statements referred to in Section 5.5,
except that any calculation or determination which is to be made on a
consolidated basis shall be made for the Consolidated Group.  If at any time any change in GAAP would
affect the computation of any financial ratio or requirement set forth in any
Loan Document, and the Borrower Representative, the Lender and the Loan Parties
shall negotiate in good faith to amend such ratio or requirement to preserve
the original intent thereof in light of such change in GAAP, provided
that, until so amended, such ratio or requirement shall continue to
be computed in accordance with GAAP prior to such change therein and the
Borrower Representative shall provide to the Lender reconciliation statements
showing the difference in such calculation, together with the delivery of
monthly, quarterly and annual financial statements required hereunder.

 

9.8.                              Severability of Provisions.  Any provision in any Loan Document that is
held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as
to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of all Loan Documents are declared to be severable.

 

9.9.                              Non-liability of Lender.  The relationship between any Loan Party on
the one hand and the Lender on the other hand shall be solely that of debtor
and creditor.  The Lender shall not have
any fiduciary responsibilities to any Loan Party.  The Lender does not undertake any responsibility to any Loan
Party to review or inform such Loan Party of any matter in connection with any
phase of any Loan Party’s business or operations.  The Loan Parties agree that the Lender shall have no liability to
any Loan Party (whether sounding in tort, contract or otherwise) for losses
suffered by any Loan Party in connection with, arising out of, or in any way
related to, the transactions contemplated and the relationship established by
the Loan Documents, or any act, omission or event occurring in connection
therewith, unless it is determined in a final non-appealable judgment by a
court of competent jurisdiction that such losses resulted from the gross

 

79

 

negligence or
willful misconduct of the party from which recovery is sought.  The Lender shall not have any liability with
respect to, and each Loan Party hereby waives, releases and agrees not to sue
for, any special, indirect, consequential or punitive damages suffered by any
Loan Party in connection with, arising out of, or in any way related to the
Loan Documents or the transactions contemplated thereby.

 

ARTICLE X

 

BENEFIT
OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

 

10.1.                        Successors
and Assigns.  The terms and
provisions of the Loan Documents shall be binding upon and inure to the benefit
of the Loan Parties and the Lender and their respective successors and assigns
permitted hereby, except that the Loan Parties shall not have the right to
assign its rights or obligations under the Loan Documents without the prior written
consent of the Lender.  The Lender shall
have the right to assign this Agreement and the other Loan Documents to any
Person at any time without the consent of any of the Loan Parties.  The Lender may from time to time provide any
information the Lender may have about any Loan Party, the Collateral or about
any matter relating to this Agreement or the other Loan Documents to any
assignee or prospective assignee of the Lender or to Bank One Corporation or
any of its Affiliates or their successors.

 

10.2.                        Participations.

 

(a)                                  The
Lender, in the ordinary course of its commercial banking business and in
accordance with applicable law, may at any time sell to one or more banks or
other entities (“Participants”) participating interests in the
Commitment, the Credit Exposure, the Collateral or other security provided to
the Lender, or any other interests of the Lender under this Agreement or the
other Loan Documents.

 

(b)                                 The
Loan Parties acknowledge that Participants have or will have certain rights
under their respective participation agreements with the Lender that may,
subject to the terms of the participation agreements, require the Lender to
obtain the consent (collectively, “Participant Consents”) of some or all
of the Participants before the Lender takes or refrains from taking certain
actions (other than as expressly required by the Loan Documents) or grants
certain waivers, consents or approvals in respect of the Commitment, the Credit
Exposure, the Loan Documents or the Collateral.  None of the Participants, however, will have Participant Consent
rights which are greater than those rights and remedies the Lender has under
the Loan Documents.  In addition, from
time to time, the Lender may request instructions from the Participants in
respect of the actions, waivers, consents or approvals which by the terms of
any of the Loan Documents the Lender is permitted or required to take or to
grant or to not take or grant (“Participant Instructions”).  If the Participant Consents are, pursuant to
the terms of the respective participation agreements, required or Participant
Instructions are requested, the Lender will (i) be absolutely empowered to take
or refrain from taking any action (other than as expressly required by the Loan
Documents) or withhold any waiver, consent or approval and (ii) not be under
any liability whatsoever to any Person, including any Loan Party and any
Participant, from taking or refraining from taking any action or withholding
any waiver, consent or approval under any of the Loan Documents until it has
received the requisite Participant Consents or, as applicable, the Participant
Instructions.

 

80

 

(c)                                  The
Loan Parties authorize the Lender to disclose to any Participant or prospective
Participant any information the Lender may have about any Loan Party, the
Collateral or about any matter relating to this Agreement or the other Loan
Documents; provided,
however, the Lender will cause each Participant or prospective
participant to enter into an agreement to hold any confidential information
which it may receive from the Lender with respect to any Loan Party in
connection with this Agreement in confidence on customary terms and conditions
except for disclosure (i) to such Participant’s Affiliates, (ii) to legal
counsel, accountants, and other professional advisors to such Participant,
(iii) to regulatory officials, (iv) to any Person as requested pursuant to or
as required by law, regulation, or legal process, (v) to any Person in
connection with any legal proceeding to which such Participant is a party, (vi)
to such Participant’s direct or indirect contractual counterparties in swap
agreements or to legal counsel, accountants and other professional advisors to
such counterparties, and (vii) to rating agencies if requested or required by
such agencies in connection with a rating relating to the Credit Extensions
hereunder;

 

(d)                                 Nothing
in the Loan Documents will prohibit the Lender from pledging or assigning its
interests in the Loans to any Federal Reserve the Lender in accordance with
applicable law.

 

(e)                                  Each
Loan Party agrees that each Participant shall be deemed to have the right of
setoff provided in Section 8.1(g) in respect of its participating
interest in amounts owing under the Loan Documents to the same extent as if the
amount of its participating interest were owing directly to it as a Lender
under the Loan Documents, provided that, the Lender shall retain the
right of setoff provided in Section 8.1(g) with respect to the
amount of participating interests sold to each Participant.

 

ARTICLE XI

 

NOTICES

 

11.1.                        Notices; Effectiveness; Electronic Communication

 

(a)                                  Notices
Generally.  Except in the case of
notices and other communications expressly permitted to be given by telephone
(and except as provided in paragraph (b) below), all notices and other
communications provided for herein shall be in writing and shall be delivered
by hand or overnight courier service, mailed by certified or registered mail or
sent by telecopier as follows:

 

(i)                                     if
to any Loan Party, at its address or telecopier number set forth on the
signature page hereof; and

 

(ii)                                  if
to the Lender, at its address or telecopier number set forth on the signature
page hereof.

 

Notices sent by hand or overnight courier service, or mailed by
certified or registered mail, shall be deemed to have been given when received;
notices sent by telecopier shall be deemed to have been given when sent (except
that, if not given during normal business hours for the recipient, shall be
deemed to have been given at the opening of business on the next Business Day
for the recipient).  Notices delivered
through electronic communications

 

81

 

to the extent
provided in paragraph (b) below, shall be effective as provided in said
paragraph (b).

 

(b)                                 Electronic
Communications.  The Lender or any
Loan Party may, in its respective discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it or as it otherwise determines, provided that such
determination or approval may be limited to particular notices or
communications. Notwithstanding the foregoing, in every instance, the Borrower
Representative shall be required to provide paper copies of the Compliance
Certificates required by Section 6.1(e) to the Lender.

 

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

 

11.2.                        Change
of Address, Etc.  Any
party hereto may change its address or telecopier number for notices and other
communications hereunder by notice to the other parties hereto.

 

ARTICLE XII

 

COUNTERPARTS

 

This Agreement
may be executed in any number of counterparts, all of which taken together
shall constitute one agreement, and any of the parties hereto may execute this
Agreement by signing any such counterpart. 
This Agreement shall be effective when it has been executed by the Loan
Parties and the Lender and each party has notified the Lender by facsimile
transmission or telephone that it has taken such action.

 

ARTICLE XIII

 

GUARANTY

 

13.1.                        Guaranty. Each
Guarantor (other than the Foreign Subsidiaries; each to be referred to in this Article XIII
as a Guarantor and collectively as the Guarantors) hereby agrees that it is
jointly and severally liable for, and, as primary obligor and not merely as
surety, absolutely and unconditionally guarantees to the Lender the prompt
payment when due, whether at stated maturity, upon acceleration or otherwise,
and at all times thereafter, of the Secured Obligations and all costs and
expenses including all court costs and attorneys’ and paralegals’ fees
(including allocated costs

 

82

 

of in-house
counsel and paralegals) and expenses paid or incurred by the Lender in
endeavoring to collect all or any part of the Secured Obligations from, or in
prosecuting any action against, any Borrower, any Guarantor or any other
guarantor of all or any part of the Secured Obligations (such costs and
expenses, together with the Secured Obligations, collectively the “Guaranteed
Obligations”). Each Guarantor further agrees that the Guaranteed
Obligations may be extended or renewed in whole or in part without notice to or
further assent from it, and that it remains bound upon its guarantee
notwithstanding any such extension or renewal.

 

13.2.                        Guaranty of Payment.  This Guaranty is a guaranty of payment and
not of collection. Each Guarantor waives any right to require the Lender to sue
any Borrower, any Guarantor, any other guarantor, or any other person obligated
for all or any part of the Guaranteed Obligations, or otherwise to enforce its
payment against any collateral securing all or any part of the Guaranteed
Obligations.

 

13.3.                        No Discharge or Diminishment of
Guaranty.

 

(o)                                 Except as otherwise provided for
herein and to the extent provided for herein, the obligations of each Guarantor
hereunder are unconditional and absolute and not subject to any reduction,
limitation, impairment or termination for any reason (other than the
indefeasible payment in full in cash of the Guaranteed Obligations), including:

 

(i)                                     any claim
of waiver, release, extension, renewal, settlement, surrender, alteration, or
compromise of any of the Guaranteed Obligations, by operation of law or
otherwise;

 

(ii)                                  any change
in the corporate existence, structure or ownership of any Borrower or any other
guarantor of or other person liable for any of the Guaranteed Obligations;

 

(iii)                               any
insolvency, bankruptcy, reorganization or other similar proceeding affecting
any Borrower, any Guarantor, or any other guarantor of or other person liable
for any of the Guaranteed Obligations, or their assets or any resulting release
or discharge of any obligation of any Borrower, any Guarantor, or any other
guarantor of or other person liable for any of the Guaranteed Obligations; or

 

(iv)                              the
existence of any claim, setoff or other rights which any Guarantor may have at
any time against any Borrower, any Guarantor, any other guarantor of the
Guaranteed Obligations, the Lender, or any other person, whether in connection
herewith or in any unrelated transactions.

 

(p)                                 The
obligations of each Guarantor hereunder are not subject to any defense or
setoff, counterclaim, recoupment, or termination whatsoever by reason of the
invalidity, illegality, or unenforceability of any of the Guaranteed
Obligations or otherwise, or any provision of applicable law or regulation
purporting to prohibit payment by any Borrower, any Guarantor or any other guarantor
of or other person liable for any of the Guaranteed Obligations, of the
Guaranteed Obligations or any part thereof.

 

(q)                                 Further,
the obligations of any Guarantor hereunder are not discharged or impaired or
otherwise affected by:

 

83

 

(i)                                     the
failure of the Lender to assert any claim or demand or to enforce any remedy
with respect to all or any part of the Guaranteed Obligations;

 

(ii)                                  any waiver
or modification of or supplement to any provision of any agreement relating to
the Guaranteed Obligations;

 

(iii)                               any
release, non-perfection, or invalidity of any indirect or direct security for
the obligations of the Borrowers (or any one or more of them) for all or any
part of the Guaranteed Obligations or any obligations of any other guarantor of
or other person liable for any of the Guaranteed Obligations;

 

(iv)                              any action
or failure to act by the Lender with respect to any collateral securing any
part of the Guaranteed Obligations; or

 

(v)                                 any
default, failure or delay, willful or otherwise, in the payment or performance
of any of the Guaranteed Obligations, or any other circumstance, act, omission
or delay that might in any manner or to any extent vary the risk of such
Guarantor or that would otherwise operate as a discharge of any Guarantor as a
matter of law or equity (other than the indefeasible payment in full in cash of
the Guaranteed Obligations).

 

13.4.                        Defenses Waived.  To the fullest extent permitted by applicable law, each Guarantor
hereby waives any defense based on or arising out of any defense of any
Borrower or any Guarantor or the unenforceability of all or any part of the
Guaranteed Obligations from any cause, or the cessation from any cause of the
liability of any Borrower or any Guarantor, other than the indefeasible payment
in full in cash of the Guaranteed Obligations. Without limiting the generality
of the foregoing, each Guarantor irrevocably waives acceptance hereof,
presentment, demand, protest and, to the fullest extent permitted by law, any
notice not provided for herein, as well as any requirement that at any time any
action be taken by any person against any Borrower, any Guarantor, any other
guarantor of any of the Guaranteed Obligations, or any other person.  The Lender may, at its election, foreclose
on any Collateral held by it by one or more judicial or nonjudicial sales,
accept an assignment of any such Collateral in lieu of foreclosure or otherwise
act or fail to act with respect to any collateral securing all or a part of the
Guaranteed Obligations, compromise or adjust any part of the Guaranteed
Obligations, make any other accommodation with any Borrower, any Guarantor, any
other guarantor or any other person liable on any part of the Guaranteed
Obligations or exercise any other right or remedy available to it against any
Borrower, any Guarantor, any other guarantor or any other person liable on any
of the Guaranteed Obligations, without affecting or impairing in any way the
liability of such Guarantor under this Guaranty except to the extent the
Guaranteed Obligations have been fully and indefeasibly paid in cash.  To the fullest extent permitted by
applicable law, each Guarantor waives any defense arising out of any such
election even though that election may operate, pursuant to applicable law, to
impair or extinguish any right of reimbursement or subrogation or other right
or remedy of any Guarantor against any Borrower, any other guarantor or any
other person liable on any of the Guaranteed Obligations, as the case may be, or
any security.

 

13.5.                        Rights
of Subrogation.  No Guarantor
will assert any right, claim or cause of action, including a claim of
subrogation, contribution or indemnification that it has against any Borrower,
any Guarantor, any person liable on the Guaranteed Obligations, or any
collateral, until the Loan Parties and the Guarantors have fully performed all
their obligations to the Lender.

 

84

 

13.6.                        Reinstatement; Stay of Acceleration.  If at any time any payment of any portion of
the Guaranteed Obligations is rescinded or must otherwise be restored or
returned upon the insolvency, bankruptcy, or reorganization of any Borrower or
otherwise, each Guarantor’s obligations under this Guaranty with respect to
that payment shall be reinstated at such time as though the payment had not
been made and whether or not the Lender are in possession of this
Guaranty.  If acceleration of the time
for payment of any of the Guaranteed Obligations is stayed upon the insolvency,
bankruptcy or reorganization of any Borrower, all such amounts otherwise
subject to acceleration under the terms of any agreement relating to the
Guaranteed Obligations shall nonetheless be payable by the Guarantors forthwith
on demand by the Lender.

 

13.7.                        Information. 
Each Guarantor assumes all responsibility for being and keeping itself
informed of the Borrower’s financial condition and assets, and of all other
circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations
and the nature, scope and extent of the risks that each Guarantor assumes and
incurs under this Guaranty, and agrees that the Lender shall not have any duty
to advise any Guarantor of information known to it regarding those
circumstances or risks.

 

13.8.                        Termination. 
The Lender may continue to make loans or extend credit to the Borrowers
based on this Guaranty until five days after it receives written notice of
termination from any Guarantor. 
Notwithstanding receipt of any such notice, each Guarantor will continue
to be liable to the Lender for any Guaranteed Obligations created, assumed or
committed to prior to the fifth day after receipt of the notice, and all
subsequent renewals, extensions, modifications and amendments with respect to,
or substitutions for, all or any part of that Guaranteed Obligations.

 

13.9.                        Taxes.  All
payments of the Guaranteed Obligations will be made by each Guarantor free and
clear of and without deduction for or on account of any and all present or
future taxes, levies, imposts, duties, charges, deductions or withholdings of
whatever nature imposed by any governmental authority with respect to such
payments, and any and all liabilities with respect to the foregoing, but
excluding franchise taxes and taxes imposed on overall net income of the Lender
by the U.S. or the jurisdiction in which the Lender’s applicable Lending
Installation is located (collectively, “Taxes”).  If any Guarantor is required by law to
deduct any Taxes from or in respect of any sum payable to the Lender under this
Guaranty, (a) the sum payable must be increased as necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this provision) the Lender receive an amount equal to the
sum it would have received had no such deductions been made, (b) the Guarantors
must then make such deductions, and must pay the full amount deducted to the
relevant authority in accordance with applicable law, and (c) the Guarantors
must furnish to the Lender within forty-five days after their due date
certified copies of all official receipts evidencing payment thereof.

 

13.10.                  Severability.  The provisions of this Guaranty are
severable, and in any action or proceeding involving any state corporate law,
or any state, federal or foreign bankruptcy, insolvency, reorganization or
other law affecting the rights of creditors generally, if the obligations of
any Guarantor under this Guaranty would otherwise be held or determined to be
avoidable, invalid or unenforceable on account of the amount of such
Guarantor’s liability under this Guaranty, then, notwithstanding any other
provision of this Guaranty to the contrary, the amount of such liability shall,
without any further action by the Guarantors or the Lender, be automatically
limited and reduced to the highest amount that is valid and enforceable as
determined in such action or proceeding (such highest amount determined
hereunder being the relevant Guarantor’s “Maximum

 

85

 

Liability”.  This Section with respect to the
Maximum Liability of each Guarantor is intended solely to preserve the rights
of the Lender to the maximum extent not subject to avoidance under applicable
law, and no Guarantor nor any other person or entity shall have any right or
claim under this Section with respect to such Maximum Liability, except to
the extent necessary so that the obligations of any Guarantor hereunder shall
not be rendered voidable under applicable law. Each Guarantor agrees that the
Guaranteed Obligations may at any time and from time to time exceed the Maximum
Liability of each Guarantor without impairing this Guaranty or affecting the
rights and remedies of the Lender hereunder, provided that, nothing in
this sentence shall be construed to increase any Guarantor’s obligations
hereunder beyond its Maximum Liability.

 

13.11.                  Contribution. 
In the event any Guarantor (a “Paying Guarantor”) shall make any
payment or payments under this Guaranty or shall suffer any loss as a result of
any realization upon any collateral granted by it to secure its obligations
under this Guaranty, each other Guarantor (each a “Non-Paying Guarantor”)
shall contribute to such Paying Guarantor an amount equal to such Non-Paying
Guarantor’s “Pro Rata Share” of such payment or payments made, or losses
suffered, by such Paying Guarantor.  For
purposes of this Article XIII, each Non-Paying Guarantor’s “Pro
Rata Share” with respect to any such payment or loss by a Paying Guarantor
shall be determined as of the date on which such payment or loss was made by
reference to the ratio of (i) such Non-Paying Guarantor’s Maximum Liability as
of such date (without giving effect to any right to receive, or obligation to
make, any contribution hereunder) or, if such Non-Paying Guarantor’s Maximum Liability
has not been determined, the aggregate amount of all monies received by such
Non-Paying Guarantor from a Borrower after the date hereof (whether by loan,
capital infusion or by other means) to (ii) the aggregate Maximum Liability of
all Guarantors hereunder (including such Paying Guarantor) as of such date
(without giving effect to any right to receive, or obligation to make, any
contribution hereunder), or to the extent that a Maximum Liability has not been
determined for any Guarantor, the aggregate amount of all monies received by
such Guarantors from a Borrower after the date hereof (whether by loan, capital
infusion or by other means).  Nothing in
this provision shall affect any Guarantor’s several liability for the entire
amount of the Guaranteed Obligations (up to such Guarantor’s Maximum
Liability).  Each of the Guarantors
covenants and agrees that its right to receive any contribution under this
Guaranty from a Non-Paying Guarantor shall be subordinate and junior in right
of payment to the payment in full in cash of the Guaranteed Obligations.  This provision is for the benefit of both
the Lender and the Guarantors and may be enforced by any one, or more, or all
of them in accordance with the terms hereof.

 

13.12.                  Lending Installations.  The Guaranteed Obligations may be booked at
any Lending Installation.  All terms of
this Guaranty apply to and may be enforced by or on behalf of any Lending
Installation.

 

13.13.                  Liability Cumulative.  The liability of each Loan Party as a
Guarantor under this Article XIII is in addition to and shall be
cumulative with all liabilities of each Loan Party to the Lender under this
Agreement and the other Loan Documents to which such Loan Party is a party or
in respect of any obligations of liabilities of the other Loan Parties, without
any limitation as to amount, unless the instrument or agreement evidencing or
creating such other liability specifically provides to the contrary.

 

86

 

ARTICLE XIV

 

CHOICE OF LAW; CONSENT TO
JURISDICTION; WAIVER OF JURY TRIAL

 

14.1.                     CHOICE
OF LAW. THE LOAN DOCUMENTS (OTHER
THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (BUT OTHERWISE WITHOUT REGARD TO
THE CONFLICT OF LAWS PROVISIONS) OF THE STATE OF OHIO, BUT GIVING EFFECT TO
FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.

 

14.2.                     CONSENT TO JURISDICTION.  EACH LOAN PARTY HEREBY IRREVOCABLY SUBMITS
TO THE NON-EXCLUSIVE JURISDICTION OF ANY U.S. FEDERAL OR ILLINOIS STATE COURT
SITTING IN CINCINNATI, OHIO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO ANY LOAN DOCUMENTS AND EACH LOAN PARTY HEREBY IRREVOCABLY AGREES
THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT
MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT
FORUM.  NOTHING HEREIN SHALL LIMIT THE
RIGHT OF THE LENDER TO BRING PROCEEDINGS AGAINST ANY LOAN PARTY IN THE COURTS
OF ANY OTHER JURISDICTION.  ANY JUDICIAL
PROCEEDING BY ANY LOAN PARTY AGAINST THE LENDER INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTION
WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CINCINNATI, OHIO.

 

14.3.                     WAIVER OF JURY TRIAL.  EACH LOAN PARTY AND THE LENDER HEREBY WAIVE
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT
OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP
ESTABLISHED THEREUNDER.

 

[Signature
Pages Follow]

 

87

 

IN WITNESS WHEREOF, the Loan Parties and the Lender have executed this
Agreement as of the date first above written.

 

	
   

  	
  BORROWERS:

  
	
   

  	
   

  
	
   

  	
  MAGNETEK,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ David P. Reiland

  	
   

  
	
   

  	
   

  	
  David P.
  Reiland, Executive Vice President

  and Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  MAGNETEK ADS
  POWER, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ David P. Reiland

  	
   

  
	
   

  	
   

  	
  David P.
  Reiland, President

  
	
   

  	
   

  
	
   

  	
  MAXTEC
  INTERNATIONAL CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ David P. Reiland

  	
   

  
	
   

  	
   

  	
  David P.
  Reiland, President

  
	
   

  	
   

  
	
   

  	
  LOAN PARTIES (OTHER THAN

  BORROWERS):

  
	
   

  	
   

  
	
   

  	
  MXT
  HOLDINGS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ David P. Reiland

  	
   

  
	
   

  	
   

  	
  David P.
  Reiland, President

  
	
   

  	
   

  
	
   

  	
  MONDEL ULC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ John P. Colling, Jr.

  	
   

  
	
   

  	
   

  	
  John P.
  Colling, Jr., Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  MAGNETEK
  MONDEL HOLDING, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ David P. Reiland

  	
   

  
	
   

  	
   

  	
  David P.
  Reiland, President

  

 

88

 

	
   

  	
  MAGNETEK
  LEASING CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ David P. Reiland

  	
   

  
	
   

  	
   

  	
  David P.
  Reiland, President

  
	
   

  	
   

  
	
   

  	
  MAGNETEK
  NATIONAL ELECTRIC COIL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ David P. Reiland

  	
   

  
	
   

  	
   

  	
  David P.
  Reiland, President

  
	
   

  	
   

  
	
   

  	
  NOTICE ADDRESS FOR ALL LOAN

  PARTIES:

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  MagneTek,
  Inc.

  
	
   

  	
   

  	
  10900
  Wilshire Blvd., Suite 850

  
	
   

  	
   

  	
  Los Angeles,
  California 90024

  
	
   

  	
  Attention:

  	
  David P.
  Reiland

  
	
   

  	
  Telephone:

  	
  (310)
  689-1613

  
	
   

  	
  Facsimile:

  	
  (310)
  208-1322

  
	
   

  	
   

  
	
   

  	
  THE LENDER:

  
	
   

  	
   

  
	
   

  	
  BANK ONE, NA

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ David L. Carey

  	
   

  
	
   

  	
   

  	
  David L.
  Carey, Director

  
	
   

  	
   

  
	
   

  	
  NOTICE ADDRESS FOR LENDER:

  
	
   

  	
   

  
	
   

  	
  Address:
  8044 Montgomery Road, 3rd Floor

  
	
   

  	
  Mail Code
  OH3-4103

  
	
   

  	
  Cincinnati,
  Ohio 45236

  
	
   

  	
  Attention:
  Mr. Jeffrey W. Swartz

  
	
   

  	
   

  
	
   

  	
   

  	
  Telephone:

  	
  (513)
  985-5732

  
	
   

  	
   

  	
  Facsimile:

  	
  (513)
  985-5030

  
									

 

89

 

PRICING
SCHEDULE

 

	
   

  	
   

  	
   

  	
   

  	
  Applicable Margin

  	
   

  	
  Applicable

  LC Fee Rate

  	
   

  
	
  PRICING

  LEVEL

  	
   

  	
  Fixed Charge

  Coverage Ratio

  (Fiscal year end)

  	
   

  	
  Revolver

  Eurodollar

  Margin

  	
   

  	
  Revolver

  ABR

  Margin

  	
   

  	
  LC Fee

  	
   

  
	
  I

  	
   

  	
  < 1.150 to 1.0

  	
   

  	
  3.50

  	
  %

  	
  1.25

  	
  %

  	
  3.250

  	
  %

  
	
  II

  	
   

  	
  <
  1.350 to 1.0 but

  > 1.150 to 1.0

  	
   

  	
  3.25

  	
  %

  	
  1.0

  	
  %

  	
  3.0

  	
  %

  
	
  III

  	
   

  	
  <
  1.500 to 1.0 but

  > 1.350 to 1.0

  	
   

  	
  3.00

  	
  %

  	
  0.75

  	
  %

  	
  2.75

  	
  %

  
	
  IV

  	
   

  	
  > 1.500 to 1.0

  	
   

  	
  2.75

  	
  %

  	
  0.50

  	
  %

  	
  2.50

  	
  %

  

 

“Financials” means the annual
financial statements of the Consolidated Group delivered pursuant to Section 6.1
of the Credit Agreement.

 

For purposes of determining the Applicable
Margin and the Applicable LC Fee Rate, the Fixed Charge Coverage Ratio will,
after the Closing Date, be determined as of the end of each Fiscal Year
occurring during the term of this Agreement (each such date being a “Determination
Date”).  The first Determination
Date after the Closing Date is June 27, 2004.  On the Lender’s receipt of the Borrowers’ Financials, the
Applicable Margin and the Applicable LC Fee Rate will be subject to adjustment
in accordance with the table set forth in this Pricing Schedule based on
the then Fixed Charge Coverage Ratio so long as no Default or Unmatured Default
is existing as of applicable Determination Date or as of the effective date of
adjustment.  The foregoing adjustment,
if applicable, to the Applicable Margin and the Applicable LC Fee Rate will
become effective for Eurodollar Loans made, the unpaid principal balance of
Floating Rate Loans outstanding, and LC Fees due with respect to Facility LCs
issued or renewed on and after the first day of the first calendar month
following delivery to the Lender of the Financials until the next succeeding
effective date of adjustment pursuant to this Pricing Schedule.  Each of the Financials must be delivered to
the Lender in compliance with Section 6.1.  If the Borrowers, however, have not timely
delivered its Financials, then, at the Lender’s option, commencing on the date
upon which such Financials should have been delivered in accordance with Section 6.1
and continuing until such Financials are actually delivered in accordance with Section 6.1,
it shall be assumed for purposes of determining the Applicable Margin and the
Applicable LC Fee Rate that the Fixed Charge Coverage Ratio was less than 1.150
to 1.0 and pricing Level I will be applicable on the then applicable
Determination Date.  As of the Closing
Date, pricing Level II will be in effect.

 

 

EXHIBIT A

BORROWING NOTICE

 

Date:
                                         ,
20     

 

To:                              Bank One, NA

 

This Borrowing Notice is furnished pursuant to Section 2.1.1(b)(i)
of that certain Credit Agreement dated as of August 15, 2003 (as amended,
modified, renewed or extended from time to time, the “Agreement”) among  MagneTek, Inc., Magnetek ADS Power, Inc.,
and Maxtec International Corp. (the “Borrowers”), the other Loan Parties, and
Bank One, NA (the “Lender”).  Unless
otherwise defined herein, capitalized terms used in this Borrowing Notice have
the meanings ascribed thereto in the Agreement.

 

The Borrowers hereby notify the Lender of their request of an advance
of the Revolving Loans pursuant to Section 2.1.1 of the
Agreement.  The Borrowers hereby request
that:

 

[FOR FLOATING RATE LOANS:]

 

(1)                                  A
Revolving Loan in the total amount of
$                   
(the “Advance”), which Advance shall be made by transferring the amount
of the Advance to the Funding Account of the Borrowers at the Lender as
contemplated by the Agreement;

 

(2)                                  The
Advance is to be made as a Floating Rate Loan; and

 

(3)                                  The Borrowing Date
for the requested Advance is
                       ,
          [INSERT] (must be a
Business Day).

 

[FOR
EURODOLLAR LOANS:]

 

(1)                                  Borrowing Date of
Eurodollar Loan (must be a Business Day and given three days prior to the
Borrowing
Date):                            

 

(2)                                  Aggregate Amount of
the Eurodollar Loan:
$                                                     
(minimum of $500,000 and increments of $100,000)

 

(3)                                  Duration of Interest
Period:

 

One Month
                            

 

Two Months
                            

 

Three Months
                            

 

(4)                                  There are no more
than 4 Interest Periods outstanding after giving effect to the Interest Period
selected by this Borrowing Notice.

 

 

The Borrowers hereby represent that, as of the date of this Borrowing
Notice:

 

(a)                                  There exists no
Default or Unmatured Default and no Default or Unmatured Default shall result
from this Credit Extension.

 

(b)                                 The representations
and warranties contained in Article V of the Agreement are true and
correct, except to the extent any such representation or warranty is stated to
relate solely to an earlier date.

 

(c)                                  the person signing
this Borrowing Notice is duly authorized to execute and deliver it to the Lender
on behalf of the Borrowers;

 

(d)                                 this Credit Extension
is made in accordance with the Agreement; and

 

(e)                                  this Credit Extension
is not revocable by the Borrowers.

 

	
   

  	
  MAGNETEK,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
							

 

 

EXHIBIT B

CONVERSION/CONTINUATION
NOTICE

 

Date:
                                         ,
20     

 

To:                              Bank One, NA

 

This Conversion/Continuation Notice is furnished pursuant to Section 2.6
of that certain Credit Agreement dated as of August 15, 2003 (as amended,
modified, renewed or extended from time to time, the “Agreement”) among
MagneTek, Inc., Magnetek ADS Power, Inc., and Maxtec International Corp. (the
“Borrowers”), the other Loan Parties and Bank One, NA, (the “Lender”).  Unless otherwise defined herein, capitalized
terms used in this Borrowing Notice have the meanings ascribed thereto in the
Agreement.

 

The Borrowers hereby notify the Lender of its request to [SELECT ONE]:

 

(1)                                  convert the Floating
Rate Loan in the amount of
$             into
a Eurodollar Loan with an Interest Period duration
of:             
month(s) (1, 2, or 3 months)

 

(2)                                  continue the
Eurodollar Loan described below:

 

(a)     Date of Continuation (must be a Business Day and
given three days prior to the requested conversion/continuation Date):
                              

 

(b)    Aggregate Amount of the Eurodollar Loan:
$                                               
(minimum of $500,000 and increments of $100,000)

 

(c)     The duration of the Interest Period applicable
thereto:                   
month(s) (1, 2, or 3 months)

 

(d)    There are no more than 4 Interest Periods
outstanding after giving effect to the Interest Period selected by
Conversion/Continuation Notice.

 

The Borrowers hereby represent that, as of the date of this
Conversion/Continuation Notice:

 

(a)                                  There exists no
Default or Unmatured Default and no Default or Unmatured Default shall result
from this Credit Extension;

 

(b)                                 The representations
and warranties contained in Article V of the Agreement are true and
correct, except to the extent any such representation or warranty is stated to
relate solely to an earlier date;

 

(c)                                  this
Conversion/Continuation Notice is made in accordance with the Agreement;

 

(d)                                 this
Conversion/Continuation Notice is not revocable by the Borrowers; and

 

 

(e)                                  the
person signing this Conversion/Continuation Notice is duly authorized to
execute and deliver it to the Lender on behalf of the Borrowers.

 

 

	
   

  	
  MAGNETEK,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
							

 

 

EXHIBIT C

REVOLVING NOTE

 

 

EXHIBIT D

FORM OF OPINIONS

 

 

EXHIBIT E

 

COMPLIANCE
CERTIFICATE

 

 

To:                              Bank One, NA

 

This Compliance Certificate is furnished pursuant to that certain
Credit Agreement dated as of August 15, 2003 (as amended, modified,
renewed or extended from time to time, the “Agreement”) among  MagneTek, Inc., Magnetek ADS Power, Inc.,
and Maxtec International Corp. (the “Borrowers”), the other Loan Parties, and
Bank One, NA.  Unless otherwise defined
herein, capitalized terms used in this Compliance Certificate have the meanings
ascribed thereto in the Agreement.

 

THE UNDERSIGNED HEREBY CERTIFIES THAT:

 

1.               I am the duly elected
                         
of MagneTek, Inc.;

 

2.  I
have reviewed the terms of the Agreement and I have made, or have caused to be
made under my supervision, a detailed review of the transactions and conditions
of the Borrowers and their Subsidiaries during the accounting period covered by
the attached financial statements;

 

3.         The examinations described in paragraph 2 did
not disclose, and I have no knowledge of, the existence of any condition or
event which constitutes a Default or Unmatured Default during or at the end of
the accounting period covered by the attached financial statements or as of the
date of this Certificate, except as set forth below;

 

4.         I hereby certify that no Loan Party has
changed (i) its name, (ii) its chief executive office, (iii) principal place of
business, (iv) the type of entity it is or (v) its state of incorporation or
organization without having given the Lender the notice required by Section 6.23;

 

5. Schedule I attached hereto sets forth financial data and
computations evidencing the Borrower’s compliance with certain covenants of the
Agreement, all of which data and computations are true, complete and correct;

 

6.         Schedule II hereto sets forth the
determination of the interest rates to be paid for Credit Extensions and the
commitment fee rates commencing on the fifth day following the delivery hereof;
and

 

7.         Schedule III attached hereto sets
forth the various reports and deliveries which are required at this time under
the Credit Agreement and the other Loan Documents and the status of compliance.

 

Described below are the exceptions, if any, to paragraph 3 by listing,
in detail, the nature of the condition or event, the period during which it has
existed and the action which the Borrowers have taken, are taking, or propose
to take with respect to each such condition or event:

 

 

 

 

 

 

The foregoing certifications, together with the computations set forth
in Schedule I and Schedule II hereto and the financial statements
delivered with this Certificate in support hereof, are made and delivered this
     day of
            ,
      .

 

 

	
   

  	
  MAGNETEK,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
							

 

 

SCHEDULE I TO
COMPLIANCE CERTIFICATE

 

Compliance as of            ,
       with

Provisions of     and
       of

the Agreement

 

 

SCHEDULE II TO
COMPLIANCE CERTIFICATE

 

Borrower’s Applicable Margin Calculation

 

 

SCHEDULE III TO
COMPLIANCE CERTIFICATE

 

Reports and Deliveries Currently Due

 

 

EXHIBIT F

 

JOINDER AGREEMENT

 

THIS JOINDER
AGREEMENT (this “Agreement”), dated as of
                 ,
       , 200  , is entered into
between                                                                    ,
a
                              
(the “New Subsidiary”) and BANK ONE, NA (the “Lender”) under that certain
Credit Agreement, dated as of August 15, 2003 among MagneTek, Inc.,
Magnetek ADS Power, Inc., and Maxtec International Corp. (the “Borrowers”), the
Loan Parties party thereto, and the Lender (as the same may be amended,
modified, extended or restated from time to time, the “Credit Agreement”).  All capitalized terms used herein and not
otherwise defined shall have the meanings set forth in the Credit Agreement.

 

The New
Subsidiary and the Lender hereby agree as follows:

 

1.                                       The
New Subsidiary hereby acknowledges, agrees and confirms that, by its execution
of this Agreement, the New Subsidiary will be deemed to be a Loan Party under
the Credit Agreement and a “Guarantor” for all purposes of the Credit Agreement
and shall have all of the obligations of a Loan Party and a Guarantor
thereunder as if it had executed the Credit Agreement.  The New Subsidiary hereby ratifies, as of
the date hereof, and agrees to be bound by, all of the terms, provisions and
conditions contained in the Credit Agreement, including  (a) all of the representations and
warranties of the Loan Parties set forth in Article V of the Credit
Agreement, and (b) all of the covenants set forth in Article VI of the
Credit Agreement, and (c) all of the guaranty obligations set forth in
Article XIII of the Credit Agreement. 
Without limiting the generality of the foregoing terms of this paragraph
1, the New Subsidiary, subject to the limitations set forth in Section 13.10
of the Credit Agreement, hereby guarantees, jointly and severally with the
other Guarantors, to the Lender, as provided in Article XIII of the Credit
Agreement, the prompt payment and performance of the Guaranteed Obligations in
full when due (whether at stated maturity, as a mandatory prepayment, by
acceleration or otherwise) strictly in accordance with the terms thereof and
agrees that if any of the Guaranteed Obligations are not paid or performed in
full when due (whether at stated maturity, as a mandatory prepayment, by
acceleration or otherwise), the New Subsidiary will, jointly and severally
together with the other Guarantors, promptly pay and perform the same, without
any demand or notice whatsoever, and that in the case of any extension of time
of payment or renewal of any of the Guaranteed Obligations, the same will be
promptly paid in full when due (whether at extended maturity, as a mandatory
prepayment, by acceleration or otherwise) in accordance with the terms of such
extension or renewal. The New Subsidiary has delivered to the Lender an
executed Guaranty.

 

2.                                       If
required, the New Subsidiary is, simultaneously with the execution of this
Agreement, executing and delivering such Collateral Documents (and such other
documents and instruments) as requested by the Lender in accordance with the
Credit Agreement.

 

3.                                       The
address of the New Subsidiary for purposes of Article XIII of the Credit
Agreement is as follows:

 

	
   

  
	
   

  
	
   

  
	
   

  
	
   

  

 

 

 

4.                                       The
New Subsidiary hereby waives acceptance by the Lender of the guaranty by the
New Subsidiary upon the execution of this Agreement by the New Subsidiary.

 

5.                                       This
Agreement may be executed in any number of counterparts, each of which when so
executed and delivered shall be an original, but all of which shall constitute
one and the same instrument.

 

6.                                       THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS.

 

IN WITNESS
WHEREOF, the New Subsidiary has caused this Agreement to be duly executed by
its authorized officer, and the Lender has caused the same to be accepted by
its authorized officer, as of the day and year first above written.

 

	
   

  	
  [NEW
  SUBSIDIARY]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Acknowledged
  and accepted:

  
	
   

  	
   

  
	
   

  	
  BANK ONE, NA

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
							

 

 

EXHIBIT G

 

BORROWING BASE
CERTIFICATE

 

 

SCHEDULE 5.8

 

LITIGATION AND
CONTINGENT OBLIGATIONS

 

 

SCHEDULE 5.9

 

CAPITALIZATION AND
SUBSIDIARIES

 

 

SCHEDULE 5.12

 

NAMES; PRIOR
TRANSACTIONS

 

 

SCHEDULE 5.14

 

MATERIAL AGREEMENTS

 

 

SCHEDULE 5.16

 

OWNERSHIP OF
PROPERTIES

 

 

SCHEDULE 5.22

 

INDEBTEDNESS

 

 

SCHEDULE 5.23

 

AFFILIATE
TRANSACTIONS

 

 

SCHEDULE 5.24

 

REAL PROPERTY; LEASES

 

 

SCHEDULE 5.25

 

INTELLECTUAL PROPERTY
RIGHTS

 

 

SCHEDULE 5.26

 

INSURANCE

 

 

SCHEDULE 5.32

 

LABOR MATTERS

 

 

SCHEDULE 6.21

 

OTHER INVESTMENTS

 

 

	
  Investment

  In

  	
   

  	
  Jurisdiction
  of

  Organization

  	
   

  	
  Owned

  By

  	
   

  	
  Amount of

  Investment

  	
   

  	
  Percent

  Ownership

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

SCHEDULE 6.22

 

LIENS

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