Document:

form8k042010ex10-1.htm

    RANGER
GOLD CORP.

    REGULATION
S SUBSCRIPTION AGREEMENT

    AND
INVESTMENT REPRESENTATION

    

    SECTION
1.

    

    

    1.1           Subscription.                      The
undersigned, intending to be legally bound, hereby irrevocably subscribes for
and agrees to purchase ____________ shares (the “Shares”) of the common stock
(the “Common Stock”) of Ranger Gold Corp., a Nevada corporation (the "Company")
in a transaction exempt from the registration requirements of the Securities Act
of 1933, as amended (the “Securities Act”).

    

    1.2           Purchase of
Shares.                                The
undersigned understands and acknowledges that the purchase price to be remitted
to the Company in exchange for the Shares shall be an aggregate of ____________
dollars ($______) or $___ per Share.  The Company shall deliver the
Shares to the undersigned promptly after the acceptance of this Subscription
Agreement by the Company.

    

    1.3           Acceptance or
Rejection.

    

    (a)           The
undersigned understands and agrees that the Company reserves the right to reject
this subscription for the Shares if, in its reasonable judgment, it deems such
action in the best interest of the Company, at any time prior to the Closing,
notwithstanding prior receipt by the undersigned of notice of acceptance of the
undersigned's subscription.

    

    (b)           The
undersigned understands and agrees that its subscription for the Shares is
irrevocable.

    

    (c)           In
the event the sale of the Shares subscribed for by the undersigned is not
consummated by the Company for any reason (in which event this Subscription
Agreement shall be deemed to be rejected), this Subscription Agreement and any
other agreement entered into between the undersigned and the Company relating to
this subscription shall thereafter have no force or effect and the Company shall
promptly return or cause to be returned to the undersigned the purchase price
remitted to the Company by the undersigned, without interest thereon or
deduction therefrom, in exchange for the Shares.

    

    

    SECTION
2.

    

    2.1           Closing.  The
closing (the "Closing") of the purchase and sale of the Shares, shall occur
simultaneously with the acceptance by the Company of the undersigned's
subscription, as evidenced by the Company's execution of this Subscription
Agreement.

    

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    SECTION
3.

    

    3.1           Investor Representations and
Warranties.   The undersigned hereby acknowledges,
represents and warrants to, and agrees with, the Company and its affiliates as
follows:

    

    (a)           Investment
Purposes.  The undersigned is acquiring the Shares for his own
account as principal, not as a nominee or agent, for investment purposes only,
and not with a view to, or for, resale, distribution or fractionalization
thereof in whole or in part and no other person has a direct or indirect
beneficial interest in such Shares or any portion thereof.  Further,
the undersigned does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to the Shares for which the
undersigned is subscribing or any part of the Shares.

    

    (b)           Authority.  The
undersigned has full power and authority to enter into this Agreement, the
execution and delivery of this Agreement has been duly authorized, if
applicable, and this Agreement constitutes a valid and legally binding
obligation of the undersigned.

    

    (c)           No General
Solicitation.  The undersigned is not subscribing for the
Shares as a result of or subsequent to any advertisement, article, notice or
other communication published in any newspaper, magazine or similar media or
broadcast over television or radio, or presented at any seminar or meeting, or
any solicitation of a subscription by person previously not known to the
undersigned in connection with investment securities generally.

    

    (d)           No Obligation to Register
Shares.  The undersigned understands that the Company is under
no obligation to register the Shares under the Securities Act, or to assist the
undersigned in complying with the Securities Act or the securities laws of any
state of the United States or of any foreign jurisdiction.

    

    (e)           Investment
Experience.  The undersigned is (i) experienced in making
investments of the kind described in this Agreement, (ii) able, by reason of the
business and financial experience of its officers (if an entity) and
professional advisors (who are not affiliated with or compensated in any way by
the Company or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this Agreement, and
(iii) able to afford the entire loss of its investment in the
Shares.

    

    (f)           Exemption from
Registration.  The undersigned acknowledges his understanding
that the offering and sale of the Shares is intended to be exempt from
registration under the Securities Act.  In furtherance thereof, in
addition to the other representations and warranties of the undersigned made
herein, the undersigned further represents and warrants to and agrees with the
Company and its affiliates as follows:

    

    (1)           The
undersigned realizes that the basis for the exemption may not be present if,
notwithstanding such representations, the undersigned has in mind merely
acquiring the Shares for a fixed or determinable period in the future, or for a
market rise, or for sale if the market does not rise.  The undersigned
does not have any such intention;

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    

    (2)           The
undersigned has the financial ability to bear the economic risk of his
investment, has adequate means for providing for his current needs and personal
contingencies and has no need for liquidity with respect to his investment in
the Company; and

    

    (3)           The
undersigned has such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of the prospective
investment in the Shares.  The undersigned also represents it has not
been organized for the purpose of acquiring the Shares; and

    

    (4)           The
undersigned has been provided an opportunity for a reasonable period of time
prior to the date hereof to obtain additional information concerning the
offering of the Shares, the Company and all other information to the extent the
Company possesses such information or can acquire it without unreasonable effort
or expense.

    

    (g)           Economic
Considerations.  The undersigned is not relying on the Company,
or its affiliates or agents with respect to economic considerations involved in
this investment.  The undersigned has relied solely on its own
advisors.

    

    (h)           No Other Company
Representations.  No representations or warranties have been
made to the undersigned by the Company, or any officer, employee, agent,
affiliate or subsidiary of the Company, other than the representations of the
Company contained herein, and in subscribing for Shares the undersigned is not
relying upon any representations other than those contained herein.

    

    (i)           Compliance with
Laws.  Any resale of the Shares during the ‘distribution
compliance period’ as defined in Rule 902(f) to Regulation S shall only be made
in compliance with exemptions from registration afforded by Regulation
S.  Further, any such sale of the Shares in any jurisdiction outside
of the United States will be made in compliance with the securities laws of such
jurisdiction.  The Investor will not offer to sell or sell the Shares
in any jurisdiction unless the Investor obtains all required consents, if
any.

    

    (j)           Regulation S
Exemption.  The undersigned understands that the Shares are
being offered and sold to him in reliance on an exemption from the registration
requirements of United States federal and state securities laws under Regulation
S promulgated under the Securities Act and that the Company is relying upon the
truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of the Investor set forth herein in order to
determine the applicability of such exemptions and the suitability of the
Investor to acquire the Shares.  In this regard, the undersigned
represents, warrants and agrees that:

    

    (1)           The
undersigned is not a U.S. Person (as defined below) and is not an affiliate (as
defined in Rule 501(b) under the Securities Act) of the Company and is not
acquiring the Shares for the account or benefit of a U.S. Person.  A
U.S. Person means any one of the following:

    

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (A)

            	
              any
      natural person resident in the United States of
  America;

            

    

     

    (B)           any
partnership or corporation organized or incorporated under the laws of the
United States of America;

    
 

    
      	
               
      

            	
              (C)

            	
              any
      estate of which any executor or administrator is a U.S.
      person;

            

    

     

    
      	
               
      

            	
              (D)

            	
              any
      trust of which any trustee is a U.S.
person;

            

    

     

    (E)           any
agency or branch of a foreign entity located in the United States of
America;

     

    (F)           any
non-discretionary account or similar account (other than an estate or trust)
held by a dealer or other fiduciary for the benefit or account of a U.S.
person;

    
(G)           any
discretionary account or similar account (other than an estate or trust) held by
a dealer or other fiduciary organized, incorporated or (if an individual)
resident in the United States of America; and

    
 

    
      	
               
      

            	
              (H)

            	
              any
      partnership or corporation if:

            

    

    

    (i) organized or incorporated under
the laws of any foreign jurisdiction; and

    

    (ii)           formed
by a U.S. person principally for the purpose of investing in securities not
registered under the Securities Act, unless it is organized or incorporated, and
owned, by accredited investors (as defined in Rule
501(a) under the Securities Act) who are not natural persons, estates or
trusts.

    

    (2)           At
the time of the origination of contact concerning this Agreement and the date of
the execution and delivery of this Agreement, the undersigned was outside of the
United States.

    

    (3)           The
undersigned will not, during the period commencing on the date of issuance of
the Shares and ending on the first anniversary of such date, or such shorter
period as may be permitted by Regulation S or other applicable securities law
(the “Restricted Period”), offer, sell, pledge or otherwise transfer the Shares
in the United States, or to a U.S. Person for the account or for the benefit of
a U.S. Person, or otherwise in a manner that is not in compliance with
Regulation S.

    

    (4)           The
undersigned will, after expiration of the Restricted Period, offer, sell, pledge
or otherwise transfer the Shares only pursuant to registration under the
Securities Act or an available exemption therefrom and, in accordance with all
applicable state and foreign securities laws.

    

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    (5)           The
undersigned was not in the United States, engaged in, and prior to the
expiration of the Restricted Period will not engage in, any short selling of or
any hedging transaction with respect to the Shares, including without
limitation, any put, call or other option transaction, option writing or equity
swap.

    

    (6)           Neither
the undersigned nor or any person acting on his behalf has engaged, nor will
engage, in any directed selling efforts to a U.S. Person with respect to the
Shares and the Investor and any person acting on his behalf have complied and
will comply with the “offering restrictions” requirements of Regulation S under
the Securities Act.

    

    (7)           The
transactions contemplated by this Agreement have not been pre-arranged with a
buyer located in the United States or with a U.S. Person, and are not part of a
plan or scheme to evade the registration requirements of the Securities
Act.

    

    (8)           Neither
the undersigned nor any person acting on his behalf has undertaken or carried
out any activity for the purpose of, or that could reasonably be expected to
have the effect of, conditioning the market in the United States, its
territories or possessions, for any of the Shares.  The undersigned
agrees not to cause any advertisement of the Shares to be published in any
newspaper or periodical or posted in any public place and not to issue any
circular relating to the Shares, except such advertisements that include the
statements required by Regulation S under the Securities Act, and only offshore
and not in the U.S. or its territories, and only in compliance with any local
applicable securities laws.

    

    (9)           Each
certificate representing the Shares shall be endorsed with the following
legends, in addition to any other legend required to be placed thereon by
applicable federal or state securities laws:

    

    (A)           “THE
SECURITIES ARE BEING OFFERED TO INVESTORS WHO ARE NOT U.S. PERSONS (AS DEFINED
IN REGULATION S UNDER THE SECURITIES ACT OF 1933, AS AMENDED (“THE SECURITIES
ACT”)) AND WITHOUT REGISTRATION WITH THE UNITED STATES SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT IN RELIANCE UPON REGULATION S PROMULGATED
UNDER THE SECURITIES ACT.”

    

    (B)           “TRANSFER
OF THESE SECURITIES IS PROHIBITED, EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF
REGULATION S, PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT, OR PURSUANT TO
AVAILABLE EXEMPTION FROM REGISTRATION.  HEDGING TRANSACTIONS MAY NOT
BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.”

    

    (10)           The
undersigned consents to the Company making a notation on its records or giving
instructions to any transfer agent of the Company in order to implement the
restrictions on transfer of the Shares set forth in this Section 2.

    

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    Check
if applicable, otherwise cross out:

    

    (k)           Accredited
Investor.  The undersigned is an “accredited investor” as that
term is defined in Rule 501 of the General Rules and Regulations under the
Securities Act by reason of Rule 501(a)(3).

    

    (l)           Potential Loss of
Investment; Risk Factors.  The undersigned understands that an
investment in the Shares is a speculative investment which involves a high
degree of risk and the potential loss of his entire investment. The
undersigned understands that the following factors, among others, could cause
the loss of any or all of his investment.

    

    (1)           The
Company is a development stage company with no operating history for the
undersigned to evaluate its business.  The Company was incorporated in
the State of Nevada and is only in the very early stages of
development.  Because the Company has no operating history, it is
difficult to evaluate its business and future prospects.  The
undersigned has also considered the uncertainties and difficulties frequently
encountered by companies, such as the Company, in their early stages of
development.  The Company’s revenue and income potential is
non-existent and its business model is still emerging.  If its
business model does not prove to be profitable, the undersigned may lose all of
his investment.

    

    (2)           The
Company currently does not have enough working capital to satisfy its capital
needs.  The Company is dependent upon its management team to fund its
ongoing operations, and cannot be certain that future financing will be
available to it on acceptable terms when it needs it.  The Company can
give no assurances that it will be able to sell any portion of this offering or
that management will continue to fund its ongoing operations.  This,
along with the possibility of other factors and circumstances the Company cannot
predict, may require it to seek additional financing faster than
anticipated.  If the Company is unable to obtain financing to meet its
needs, the undersigned may lose of his investment.

    

    (3)           The
Company’s officers and directors will only devote a limited amount of time to
the Company.  Their divided interests may hinder the Company's ability
to generate revenue.  This could result in missed business
opportunities and worse-than-expected operating results.  The
undersigned may lose his entire investment.

    

    (m)           Investment
Commitment.  The undersigned's overall commitment to
investments which are not readily marketable is not disproportionate to the
undersigned's net worth, and an investment in the Shares will not cause such
overall commitment to become excessive.

    

    (n)           Receipt of
Information.  The undersigned has received all documents,
records, books and other information pertaining to the undersigned’s investment
in the Company that has been requested by the undersigned.

    

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    (o)           Investor
Questionnaire.  The undersigned represents and warrants to the
Company that all information that the undersigned has provided to the Company,
including, without limitation, the information in the Investor Questionnaire
attached hereto or previously provided to the Company (the “Investor
Questionnaire”), is correct and complete as of the date hereof.

    

    (p)           No
Reliance.  Other than as set forth herein, the undersigned is
not relying upon any other information, representation or warranty by the
Company or any officer, director, stockholder, agent or representative of the
Company in determining to invest in the Shares.  The undersigned has
consulted, to the extent deemed appropriate by the undersigned, with the
undersigned’s own advisers as to the financial, tax, legal and related matters
concerning an investment in the Shares and on that basis believes that his or
its investment in the Shares is suitable and appropriate for the
undersigned.

    

    (q)           No Governmental
Review.  The undersigned is aware that no federal or state
agency has (i) made any finding or determination as to the fairness of this
investment, (ii) made any recommendation or endorsement of the Shares or the
Company, or (iii) guaranteed or insured any investment in the Shares or any
investment made by the Company.

    

    (r)           Price of
Shares.  The undersigned understands that the price of the
Shares offered hereby bear no relation to the assets, book value or net worth of
the Company and were determined arbitrarily by the Company.  The
undersigned further understands that there is a substantial risk of further
dilution on his or its investment in the Company.

    

    SECTION
4.

    

    4.1           Company’s Representations
and Warranties.  The Company represents and warrants to the
undersigned as follows:

    

    (a)           
Organization of the
Company.  The Company is a corporation duly organized and
validly existing and in good standing under the laws of the State of
Nevada.

    

    (b)           Authority.   (a)  The
Company has the requisite corporate power and authority to enter into and
perform its obligations under this Agreement and to issue the Shares; (b) the
execution and delivery of this Agreement by the Company and the consummation by
it of the transactions contemplated hereby and thereby have been duly authorized
by all necessary corporate action and no further consent or authorization of the
Company or its Board of Directors or stockholders is required; and (c) this
Agreement has been duly executed and delivered by the Company and constitutes a
valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as
such  enforceability  may be limited by applicable
bankruptcy, insolvency, or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable principles
of general application.

    

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    (c)           Exemption from Registration;
Valid Issuances.  The sale and issuance of the Shares, in
accordance with the terms and on the bases of the representations and warranties
of the undersigned set forth herein, may and shall be properly issued by the
Company to the undersigned pursuant to any applicable federal or state law. When
issued and paid for as herein provided, the Shares shall be duly and validly
issued, fully paid, and nonassessable. Neither the sales of the Shares pursuant
to, nor the Company's performance of its obligations under, this Agreement shall
(a) result in the creation or imposition of any liens, charges, claims or other
encumbrances upon the Shares or any of the assets of the Company, or (b) entitle
the other holders of the Common Stock of the Company to preemptive or other
rights to subscribe to or acquire the Common Stock or other securities of the
Company. The Shares shall not subject the undersigned to personal liability by
reason of the ownership thereof.

    

    (e)           No General Solicitation or
Advertising in Regard to this Transaction. Neither the Company nor any of
its affiliates nor any person acting on its or their behalf (a) has conducted or
will conduct any general solicitation (as that term is used in Rule 502(c) of
Regulation D) or general advertising with respect to any of the Shares, or (b)
made any offers or sales of any security or solicited any offers to buy any
security under any circumstances that would require registration of the Common
Stock under the Securities Act.

    

    SECTION
5.

    

    5.1             Indemnity.  The
undersigned agrees to indemnify and hold harmless the Company, its officers and
directors, employees and its affiliates and their respective successors and
assigns and each other person, if any, who controls any thereof, against any
loss, liability, claim, damage and expense whatsoever (including, but not
limited to, any and all expenses whatsoever reasonably incurred in
investigating, preparing or defending against any litigation commenced or
threatened or any claim whatsoever) arising out of or based upon any false
representation or warranty or breach or failure by the undersigned to comply
with any covenant or agreement made by the undersigned herein or in any other
document furnished by the undersigned to any of the foregoing in connection with
this transaction.

    

    5.2           Modification.  Neither
this Agreement nor any provisions hereof shall be modified, discharged or
terminated except by an instrument in writing signed by the party against whom
any waiver, change, discharge or termination is sought.

    

    5.3           Notices.  Any
notice, demand or other communication which any  party hereto may be
required, or may elect, to give to anyone interested hereunder shall be
sufficiently given if (a) deposited, postage prepaid, in a United States mail
letter box, registered or certified mail, return receipt requested, addressed to
such address as may be given herein, or (b) delivered personally at such
address.

    

    5.4           Counterparts.  This
Agreement may be executed through the use of separate signature pages or in any
number of counterparts and by facsimile, and each of such counterparts shall,
for all purposes, constitute one agreement binding on all parties,
notwithstanding that all parties are not signatories to the same counterpart.
Signatures may  be facsimiles.

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    

    5.5           Binding
Effect.  Except as otherwise provided herein, this Agreement
shall be binding upon and inure to the benefit of the parties and their heirs,
executors, administrators, successors, legal representatives and
assigns.  If the undersigned is more than one person, the obligation
of the undersigned shall be joint and several and the agreements,
representations, warranties and acknowledgments herein contained shall be deemed
to be made by and be binding upon each such person and his heirs, executors,
administrators and successors.

    

    5.6           Entire
Agreement.  This Agreement and the documents referenced herein
contain the entire agreement of the parties and there are no representations,
covenants or other agreements except as stated or referred to herein and
therein.

    

    5.7           Assignability.  This
Agreement is not transferable or assignable by the undersigned.

    

    5.8           Applicable
Law.  This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada, without giving effect to
conflicts of law principles.

    

    5.9           Pronouns.  The
use herein of the masculine pronouns "him" or "his" or similar terms shall be
deemed to include the feminine and neuter genders as well and the use herein of
the singular pronoun shall be deemed to include the plural as well.

    

    5.10           Further
Assurances.  Upon request from time to time, the undersigned
shall execute and deliver all documents, take all rightful oaths and do all
other acts that may be necessary or desirable, in the reasonable opinion of the
Company or its counsel, to effect the subscription for the Shares in accordance
herewith.

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, the undersigned has
executed this Agreement on the   day of
________________, 2010.

    

    Amount of
Investment:

    

    $_____________________

    

    INDIVIDUAL
INVESTOR:

    

    

    ______________________

    Name:

    

    

    PARTNERSHIP,
CORPORATION, TRUST,

    CUSTODIAL
ACCOUNT, OTHER INVESTOR

    

    ______________________________

     (Name
of Entity)

    

    

    By:           __________________

    Name:

    Title:

    Address:

    

    Taxpayer
Identification Number:_____________

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    ACCEPTANCE
OF SUBSCRIPTION

    

    (to be
filed out only
by the Company)

    

    The
Company hereby accepts the above application for subscription for Shares on
behalf of the Company.

    

    Dated:
___________ ___, 2010

    

    

    RANGER GOLD CORP.

    

    

    By:______________________________

    
      	
               
      

            	
              Name:

            

    

    
      	
               
      

            	
              Title:

            

    

    

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    RANGER
GOLD CORP.

    INVESTOR
QUESTIONNAIRE

    

    
      	
              A.

            	
              General Information

               

            	 
      
	 
      	 
      	 
      
	
              1.

            	
              Print
      Full Name of Investor:

            	
              Individual:

            
	 
      	 
      	
              ______________________________

            
	 
      	 
      	
              First,
      Middle, Last

            
	 
      	 
      	 
      
	 
      	 
      	
              Partnership,
      Corporation, Trust, Custodial Account, Other:

            
	 
      	 
      	 
      
	 
      	 
      	
              ____________________________________________________________

            
	 
      	 
      	
              Name
      of Entity

            
	 
      	 
      	 
      
	
              2.

            	
              Address
      for Notices:

            	
              ____________________________________________________________

            
	 
      	 
      	
              ______________________________

            
	 
      	 
      	
              ____________________________________________________________

            
	 
      	 
      	 
      
	
              3.

            	
              Name
      of Primary Contact Person:

              Title:

            	
              ____________________________________________________________

            
	 
      	 
      	 
      
	
              4.

            	
              Telephone
      Number:

            	
              ______________________________

            
	 
      	 
      	 
      
	
              5.

            	
              E-Mail
      Address:

            	
              ____________________________________________________________

            
	 
      	 
      	 
      
	
              6.

            	
              Facsimile
      Number:

              Permanent
      Address:

               

            	
              ____________________________________

            
	
               

              7.

            	
               

              Permanent
      Address:

              (if
      different from Address for Notices above)

               

            	
               

              ____________________________________________________________

            

    

    

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    

    
      	
              8.

            	
              Authorized
      Signatory:

              Title:

            	
              ____________________________________

              ____________________________________

            
	 
      	
              Telephone
      Number:

            	
              ____________________________________

            
	 
      	
              Facsimile
      Number:

               

            	
              ____________________________________

            

    

    

    B.           Accredited Investor
Status

    

    The
Investor represents and warrants that the Investor is an “accredited investor”
within the meaning of Rule 501 of Regulation D under the Securities Act of 1933,
as amended (the “Securities Act”), and has checked the box or boxes below which
are next to the categories under which the Investor qualifies as an accredited
investor:

     

    

    
      	
              FOR
      INDIVIDUALS:

               

            
	
              o

            	
              A
      natural person with individual net worth (or joint net worth with spouse)
      in excess of $1 million. For purposes of this item, “net worth” means the
      excess of total assets at fair market value, including home, home
      furnishings and automobiles (and including property owned by a spouse),
      over total liabilities.

            	 
      
	 
      	 
      	 
      
	
              o

            	
              A
      natural person with individual income (without including any income of the
      Investor’s spouse) in excess of $200,000, or joint income with spouse of
      $300,000, in each of the two most recent years and who reasonably expects
      to reach the same income level in the current year.

            	 
      
	 
      	 
      	 
      

    

    

    
      	
              FOR
      ENTITIES:

            
	 
      	 
      	 
      
	
              o

            	
              A
      bank as defined in Section 3(a)(2) of the Securities Act or any savings
      and loan association or other institution as defined in Section 3(a)(5)(A)
      of the Securities Act, whether acting in its individual or fiduciary
      capacity.

            	 
      
	 
      	 
      	 
      
	
              o

            	
              An
      insurance company as defined in Section 2(13) of the Securities
      Act.

            	 
      
	 
      	 
      	 
      
	
              o

            	
              A
      broker-dealer registered pursuant to Section 15 of the Securities Exchange
      Act of 1934.

            	 
      
	 
      	 
      	 
      
	
              o

            	
              An
      investment company registered under the Investment Company Act of 1940, as
      amended (the “Investment Company Act”). If an Investor has checked this
      box, please contact David Lubin, Esq. at (516) 569-9629 for additional
      information that will be required.

            	 
      
	 
      	 
      	 
      

    

    

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    

    
      	
              o

            	
              A
      business development company as defined in Section 2(a)(48) of the
      Investment Company Act.

            
	 
      	 
      
	
              o

            	
              A
      small business investment company licensed by the Small Business
      Administration under Section 301(c) or (d) of the Small Business
      Investment Act of 1958.

            
	 
      	 
      
	
              o

            	
              A
      private business development company as defined in Section 202(a)(22) of
      the Investment Advisers Act of 1940. If an Investor has checked this box,
      please contact David Lubin, Esq. at (516) 569-9629 for additional
      information that will be required.

            
	 
      	 
      
	
              o

            	
              An
      organization described in Section 501(c)(3) of the Internal Revenue Code,
      a corporation, Massachusetts or similar business trust, or partnership,
      not formed for the specific purpose of acquiring the Shares, with total
      assets in excess of $5 million.

            
	 
      	 
      
	
              o

            	
              A
      trust with total assets in excess of $5 million not formed for the
      specific purpose of acquiring the Shares, whose purchase is directed by a
      person with such knowledge and experience in financial and business
      matters as to be capable of evaluating the merits and risks of an
      investment in the Company and the purchase of the
  Shares.

            
	 
      	 
      
	
              o

            	
              An
      employee benefit plan within the meaning of ERISA if the decision to
      invest in the Shares is made by a plan fiduciary, as defined in Section
      3(21) of ERISA, which is either a bank, savings and loan association,
      insurance company, or registered investment adviser, or if the employee
      benefit plan has total assets in excess of $5 million or, if a
      self-directed plan, with investment decisions made solely by persons that
      are accredited investors.

            
	 
      	 
      
	
              o

            	
              A
      plan established and maintained by a state, its political subdivisions, or
      any agency or instrumentality of a state or its political subdivisions,
      for the benefit of its employees, if the plan has total assets in excess
      of $5 million.

            
	 
      	 
      
	
              o

            	
              An
      entity, including a grantor trust, in which all of the equity owners are
      accredited investors as determined under any of the foregoing paragraphs
      (for this purpose, a beneficiary of a trust is not an equity owner, but
      the grantor of a grantor trust is an equity
  owner).

            

    

    

    

    

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    C.           Confirmation of
Relationship

    

    (For
Directors, Senior Officers and Control Persons and

    Their
Close Personal Friends, Close Business Associates and Relatives)

     

    The
Subscriber represents and warrants to the Company that the Subscriber has read
the following definitions from Multilateral Instrument 45-103 Capital Raising Exemptions
and certifies that the Subscriber has the relationship(s) to the Company or its
directors, senior officers or control persons by virtue of the Subscriber
being:

     

    (initial one or more as
appropriate)

     

    
      	
               
      

            	
              _____

            	
              (a)

            	
              a
      director, senior officer or control person of the Company, or of an
      affiliate of the Company;

            

    

     

    
      	
               
      

            	
              _____

            	
              (b)

            	
              a
      spouse, parent, grandparent, brother, sister or child of a director,
      senior officer or control person of the Company, or of an affiliate of the
      company;

            

    

     

    
      	
               
      

            	
              _____

            	
              (c)

            	
              a
      close personal friend of a director, senior officer or control person of
      the Company, or of an affiliate of the
Company;

            

    

     

    
      	
               
      

            	
              _____

            	
              (d)

            	
              a
      close business associate of a director, senior officer or control person
      of the Company, or of an affiliate of the
  Company;

            

    

     

    
      	
               
      

            	
              _____

            	
              (e)

            	
              a
      person or company that is wholly-owned by any combination of persons or
      companies described in paragraphs (a) to
(d),

            

    

     

    
      	
               
      

            	
              and
      if (b), (c), (d) or (e) is initialed the director, senior officer or
      control person is:

            

    

     

    
      	
               
      

            	
              ________________________________________

            

    

    
      	
               
      

            	
              (Print name of director, senior
      officer or control person)

            

    

     

    The
foregoing representations and warranties are true and accurate as of the date of
this certificate and will be true and accurate as of Closing.  If any
such representations and warranties shall not be true and accurate prior to
Closing, the Subscriber shall give immediate written notice of such fact to the
Company.

     

    For the
purposes hereof, the following definitions are included for
convenience:

     

    
      	
              a.  

            	
              “close
      business associate” means an individual who has had sufficient prior
      business dealings with the director, senior officer or control person to
      be in a position to assess the capabilities and trustworthiness of the
      director, senior officer or control
person.

            

    

     

    A casual
business associate or a person introduced or solicited for the purpose of
purchasing securities is not a close business associate.  An
individual is not a close business associate solely because the individual is a
client or former client.  For example, an individual is not a close
business associate of a registrant or former registrant solely because the
individual is a client or former client of that registrant or former
registrant.

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    The
relationship between the purchaser and the director, senior officer or control
person must be direct.  For example, the exemption is not available
for a close business associate of a close business associate or a director,
senior officer or control person.

     

    
      	
              b.  

            	
              “close
      personal friend” means an individual who has known the director, senior
      officer or control person for a sufficient period of time to be in a
      position to assess the capabilities and trustworthiness of the director,
      senior officer or control person.

            

    

     

    An
individual is not a close personal friend solely because

     

    
      	
              ·  

            	
              the
      individual is a member of the same organization, association or religious
      group, or

            

    

     

    
      	
              ·  

            	
              the
      individual is a client or former
client.

            

    

     

    The
relationship between the purchaser and the director, senior officer or control
person must be direct.  For example, the exemption is not available
for a close personal friend or a close personal friend of the director, senior
officer or control person.

     

    
      	
              c.  

            	
              “company”
      means any corporation, incorporated association, incorporated syndicate or
      other incorporated organization.

            

    

     

    
      	
              d.  

            	
              “person”
      means and individual, partnership, unincorporated association,
      unincorporated syndicate, unincorporated organization, trust, trustee,
      executor, administrator or other legal
  representative.

            

    

     

    
      	
              e.  

            	
              “spouse”
      means, in relation to an individual, another individual to whom that
      individual is married, or another individual of the opposite sex or the
      same sex with whom that individual is living in a conjugal relationship
      outside marriage.

            

    

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    

    

    The
Investor understands that the foregoing information will be relied upon by the
Company for the purpose of determining the eligibility of the Investor to
purchase the Shares. The Investor agrees to notify the Company immediately if
any representation or warranty contained in this Subscription Agreement,
including this Investor Questionnaire, becomes untrue at any time. The Investor
agrees to provide, if requested, any additional information that may reasonably
be required to substantiate the Investor’s status as an accredited investor or
to otherwise determine the eligibility of the Investor to purchase the Shares.
The Investor agrees to indemnify and hold harmless the Company and each officer,
director, shareholder, agent and representative of the Company and their
respective affiliates and successors and assigns from and against any loss,
damage or liability due to or arising out of a breach of any representation,
warranty or agreement of the Investor contained herein.

    

    

    
      	 
      	
              INDIVIDUAL:

            
	 
      	 
      
	 
      	
              ____________________________________

            
	 
      	
              (Signature)

            
	 
      	 
      
	 
      	
              ____________________________________

            
	 
      	
              (Print
      Name)

            
	 
      	 
      
	 
      	
              PARTNERSHIP,
      CORPORATION, TRUST, CUSTODIAL ACCOUNT, OTHER:

            
	 
      	 
      
	 
      	
              ___________________________________

            
	 
      	
              (Name
      of Entity)

            
	 
      	 
      
	 
      	
              By:  ________________________________

            
	 
      	
              (Signature)

            
	 
      	 
      
	 
      	
                     ________________________________

            
	 
      	
              (Print
      Name and Title)

            

    

    

    17exv10w1

Exhibit 10.1

LOAN AND SECURITY AGREEMENT

between

PRIMO WATER CORPORATION

and

WACHOVIA BANK, NATIONAL ASSOCIATION

Dated: June 23, 2005

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	1.
	 	Definitions	 	 	1	 
	 
	 	1.1                                 Defined Terms:	 	 	1	 
	 
	 	1.2                                 Financial Terms	 	 	11	 
	 
	 	 	 	 	 	 
	2.
	 	The Credit Facilities; Letters
of Credit; Interest and Fees	 	 	11	 
	 
	 	2.1                                 The Credit Facilities	 	 	11	 
	 
	 	2.2                                 Collections Account	 	 	12	 
	 
	 	2.3                                 Interest	 	 	12	 
	 
	 	2.4                                 Interest Rate Adjustments	 	 	12	 
	 
	 	2.5                                 Notice and Manner of Borrowing	 	 	12	 
	 
	 	2.6                                 Repayment of Loans	 	 	13	 
	 
	 	2.7                                 Additional Payment Provisions	 	 	14	 
	 
	 	2.8                                 Default Rate	 	 	15	 
	 
	 	2.9                                 Calculation of Interest	 	 	15	 
	 
	 	2.10                                Letters of Credit	 	 	15	 
	 
	 	2.11                                Fees	 	 	16	 
	 
	 	2.12                                Statement of Account	 	 	16	 
	 
	 	2.13                                Termination	 	 	16	 
	 
	 	2.14                                USA Patriot Act Notice	 	 	17	 
	 
	 	2.15                                Financial Management Account Agreement	 	 	17	 
	 
	 	2.16                                Automatic Debit of Checking Account for Loan Payments	 	 	17	 
	 
	 	 	 	 	 	 
	3.
	 	Conditions Precedent to Extensions of Credit	 	 	17	 
	 
	 	3.1                                 Conditions Precedent to Initial Revolver Loan	 	 	17	 
	 
	 	3.2                                 Conditions Precedent to Term Loan	 	 	18	 
	 
	 	3.3                                 Conditions Precedent to Each Revolver Loan	 	 	20	 
	 
	 	3.4                                 Conditions Precedent to Each Term Loan Advance	 	 	20	 
	 
	 	 	 	 	 	 
	4.
	 	Representations and Warranties	 	 	21	 
	 
	 	4.1                                 Valid Existence and Power	 	 	21	 
	 
	 	4.2                                 Authority	 	 	21	 
	 
	 	4.3                                 Financial Condition	 	 	21	 
	 
	 	4.4                                 Litigation	 	 	21	 
	 
	 	4.5                                 Agreements, Etc	 	 	21	 
	 
	 	4.6                                 Authorizations	 	 	22	 
	 
	 	4.7                                 Title	 	 	22	 
	 
	 	4.8                                 Collateral	 	 	22	 
	 
	 	4.9                                 Jurisdiction of Organization; Location	 	 	22	 
	 
	 	4.10                                Taxes	 	 	22	 
	 
	 	4.11                                Labor Law Matters	 	 	22	 
	 
	 	4.12                                Accounts	 	 	22	 
	 
	 	4.13                                Judgment Liens	 	 	23	 
	 
	 	4.14                                Corporate Structure	 	 	23	 
	 
	 	4.15                                Deposit Accounts	 	 	23	 
	 
	 	4.16                                Environmental	 	 	23	 
	 
	 	4.17                                ERISA	 	 	23	 
	 
	 	4.18                                Investment Company Act	 	 	23	 
	 
	 	4.19                                Names	 	 	23	 
	 
	 	4.20                                Insider	 	 	24	 
	 
	 	4.21                                Sanctioned Persons; Sanctioned Countries	 	 	24	 
	 
	 	4.22                                Compliance with Covenants; No Default	 	 	24	 

i

 

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	4.23                                Full Disclosure	 	 	24	 
	 
	 	4.24                                Borrower Information Certificate	 	 	24	 
	 
	 	 	 	 	 	 
	5.
	 	Affirmative Covenants of Borrower	 	 	24	 
	 
	 	5.1                                 Use of Revolver Loan Proceeds	 	 	24	 
	 
	 	5.2                                 Maintenance of Business and Properties	 	 	24	 
	 
	 	5.3                                 Insurance	 	 	24	 
	 
	 	5.4                                 Notice of Default	 	 	25	 
	 
	 	5.5                                 Inspections of Books and Records and Field Examinations	 	 	25	 
	 
	 	5.6                                 Financial Information	 	 	25	 
	 
	 	5.7                                 Maintenance of Existence and Rights	 	 	26	 
	 
	 	5.8                                 Payment of Taxes, Etc	 	 	26	 
	 
	 	5.9                                 Subordination	 	 	26	 
	 
	 	5.10                                Compliance; Hazardous Materials	 	 	26	 
	 
	 	5.11                                Further Assurances	 	 	27	 
	 
	 	5.12                                Covenants Regarding Collateral	 	 	27	 
	 
	 	 	 	 	 	 
	6.
	 	Negative Covenants of Borrower	 	 	27	 
	 
	 	6.1                                 Debt	 	 	27	 
	 
	 	6.2                                 Liens	 	 	28	 
	 
	 	6.3                                 Restricted Payments	 	 	28	 
	 
	 	6.4                                 Loans and Other Investments	 	 	29	 
	 
	 	6.5                                 Change in Business	 	 	29	 
	 
	 	6.6                                 Accounts	 	 	29	 
	 
	 	6.7                                 Transactions with Affiliates	 	 	29	 
	 
	 	6.8                                 No Change in Name, Offices or Jurisdiction of Organization; Removal of Collateral	 	 	30	 
	 
	 	6.9                                 No Sale, Leaseback	 	 	30	 
	 
	 	6.10                                Margin Stock	 	 	30	 
	 
	 	6.11                                Tangible Collateral	 	 	30	 
	 
	 	6.12                                Subsidiaries	 	 	30	 
	 
	 	6.13       Liquidation, Mergers,
Consolidations and Dispositions of Substantial Assets, Name and Good Standing	 	 	30	 
	 
	 	6.14                Change of Fiscal Year or Accounting Methods	 	 	30	 
	 
	 	6.15                Depositary Relationship	 	 	30	 
	 
	 	 	 	 	 	 
	7.
	 	Other Covenants of Borrower	 	 	30	 
	 
	 	7.1                 Minimum EBITDA	 	 	30	 
	 
	 	7.2                 Minimum Gross Revenues	 	 	31	 
	 
	 	7.3                 Leases	 	 	31	 
	 
	 	 	 	 	 	 
	8.
	 	Default	 	 	31	 
	 
	 	8.1                 Events of Default.  Each of the following shall constitute an Event of Default	 	 	31	 
	 
	 	8.2                 Remedies	 	 	33	 
	 
	 	8.3                 Receiver	 	 	33	 
	 
	 	8.4                 Deposits; Insurance	 	 	33	 
	 
	 	 	 	 	 	 
	9.
	 	Security Agreement	 	 	33	 
	 
	 	9.1                 Security Interest	 	 	33	 
	 
	 	9.2                 Financing Statements; Power of Attorney	 	 	34	 
	 
	 	9.3                 Entry	 	 	34	 
	 
	 	9.4                 Other Rights	 	 	35	 
	 
	 	9.5                 Accounts	 	 	35	 
	 
	 	9.6                 Waiver of Marshaling	 	 	35	 
	 
	 	9.7                 Control	 	 	35	 
	 
	 	 	 	 	 	 
	10.
	 	Miscellaneous.	 	 	35	 
	 
	 	10.1                No Waiver, Remedies Cumulative	 	 	35	 

ii

 

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	10.2                Survival of Representations	 	 	35	 
	 
	 	10.3                Indemnity By Borrower; Expenses	 	 	35	 
	 
	 	10.4                Notices	 	 	36	 
	 
	 	10.5                Governing Law	 	 	36	 
	 
	 	10.6                Successors and Assigns	 	 	37	 
	 
	 	10.7                Counterparts; Telecopied Signatures	 	 	37	 
	 
	 	10.8                No Usury	 	 	37	 
	 
	 	10.9                Powers	 	 	37	 
	 
	 	10.10               Approvals; Amendments	 	 	37	 
	 
	 	10.11               Participations and Assignments	 	 	37	 
	 
	 	10.12               Dealings with Multiple Borrowers	 	 	37	 
	 
	 	10.13               Waiver of Certain Defenses	 	 	37	 
	 
	 	10.14               Integration; Final Agreement	 	 	38	 
	 
	 	10.15               LIMITATION ON LIABILITY; WAIVER OF PUNITIVE DAMAGES	 	 	38	 
	 
	 	10.16               BINDING ARBITRATION; PRESERVATION OF REMEDIES	 	 	38	 

EXHIBITS AND SCHEDULES

	 	 	 

	Exhibit A-1

	 	Revolver Note
	Exhibit B

	 	Joinder Agreement
	Exhibit C

	 	Form of Guaranty Agreement
	Exhibit 3.1.2

	 	Borrower Information Certificate
	Exhibit 4

	 	Exceptions to Representations and Warranties
	Exhibit 5.6(a)

	 	Borrowing Base Certificate
	Exhibit 5.6(d)

	 	Compliance and No Default Certificates

iii

 

Loan and Security Agreement

     THIS LOAN AND SECURITY AGREEMENT (the “Agreement”), dated as of June 23, 2005
between PRIMO WATER CORPORATION, a Delaware corporation (“Primo”), and WACHOVIA BANK, NATIONAL
ASSOCIATION, a national banking association (together with its successors and assigns, “Bank”);

WITNESSETH:

     In consideration of the premises and of the mutual covenants herein contained and to induce
Bank to extend credit to Borrower, the parties agree as follows:

     1. Definitions. Capitalized terms that are not otherwise defined herein shall have the
meanings set forth in this Section 1.

          1.1 Defined Terms: 

          “Accession” has the meaning set forth in the Code.

          “Account” has the meaning set forth in the Code, together with any guaranties, letters
of credit, Letter-of-Credit Rights, and other security therefor, including Supporting Obligations.

          “Account Debtor” means a Person who is obligated under any Account, Chattel Paper,
General Intangible or Instrument.

          “Affiliate” of a Person means (a) any Person directly or indirectly owning 25% or more
of the voting stock or equity interests of such named Person or of which the named Person owns 25%
or more of such voting stock or equity interests; (b) any Person controlling, controlled by or
under common control with such named Person; (c) any officer, director or employee of such named
Person or any Affiliate of the named Person; and (d) any family member of the named Person or any
Affiliate of such named Person.

          “Applicable Margin” means (a) as to any Revolver Loan, or portion thereof, that is a
LMIR Loan, 2.50%; and

          (b) as to the Term Loan, or portion thereof that is a LMIR Loan, 1.50% until the Reduction
Date, and, thereafter, 2.50%.

          “Arbitration Rules” has the meaning set forth in Section 10.16.

          “Borrower” means Primo and any Subsidiary who hereafter executes and delivers to Bank
a Joinder Agreement.

          “Borrower Information Certificate” means a certificate submitted by Borrower to Bank
on or before the Closing Date pursuant to Section 3.1 hereto concerning certain factual information
about Borrower, to be substantially in the form of Exhibit 3.1.2 hereto.

          “Borrowing Base” means, on any date of determination thereof, an amount equal to:

               (i) until January 1, 2006, 90% of the total amount of Eligible Accounts, and
after January 1, 2006, 80% of the total amount of Eligible Accounts, plus

 

 

               (ii) until October 1, 2005, 20% of the total amount of Eligible Inventory;
after October 1, 2005, and until January 1, 2006, 30% of the total amount of
Eligible Inventory; and after January 1, 2006, 40% of the total amount of Eligible
Inventory; minus

               (iii) any Reserves;

provided, however, that at no time shall the portion of the Revolver Loan applicable to Inventory
exceed 50% of the aggregate Borrowing Base and of the portion applicable to Inventory, no more than
one-half shall be applicable to Placed Inventory.

          “Borrowing Base Certificate” has the meaning set forth in Section 5.6(a).

          “Bottled Water Product Inventory” means (a) all bottles and other containers that hold
or contain, or are intended for use to hold or contain, Borrower’s bottled water products; (b) all
caps, labels (whether or not affixed to any such bottles or other containers), and minerals
necessary to produce Borrower’s bottled water products; and (c) all drinking water contained in any
such bottles and other containers at any time, in each case whether Controlled Inventory or Placed
Inventory.

          “Business Day” means a weekday on which Bank is open for business in Charlotte, North
Carolina.

          “Chattel Paper” has the meaning set forth in the Code, including Electronic Chattel
Paper and Tangible Chattel Paper, together with any guaranties, letters of credit, Letter-of-Credit
Rights, and other security therefore, including Supporting Obligations.

          “Closing Date” means the date on which all of the conditions precedent in Section 3 of
this Agreement applicable to the Revolver Loan are satisfied and the initial Revolver Loan is made
under this Agreement.

          “Code” means the Uniform Commercial Code (or any successor statute), as adopted and in
force in the Jurisdiction or, when the laws of any other state govern the method or manner of the
perfection or enforcement of any security interest in any of the Collateral, the Uniform Commercial
Code (or any successor statute) of such state. Any term used in this Agreement and in any
financing statement filed in connection herewith which is defined in the Code and not otherwise
defined in this Agreement or in any other Loan Document has the meaning given to the term in the
Code.

          “Collateral” means the following property of Borrower, wherever located and whether
now owned by Borrower or hereafter acquired: (a) all Inventory; (b) all General Intangibles;
(c) all Accounts; (d) all Chattel Paper; (e) all Instruments and Documents and any other instrument
or intangible representing payment for goods or services; (f) all Equipment; (g) all Investment
Property; (h) all Commercial Tort Claims; (i) all Letter-of-Credit Rights; (j) all Deposit Accounts
and funds on deposit therein, including but not limited to any Disbursements Account, Collections
Account or funds otherwise on deposit with or under the control of Bank or its agents or
correspondents; (k) all Fixtures; and (l) all parts, replacements, substitutions, profits,
products, Accessions and cash and non-cash Proceeds and Supporting Obligations of any of the
foregoing (including, but not limited to, insurance proceeds) in any form and wherever located.
Collateral shall include all written or electronically recorded books and records relating to any
such Collateral and other rights relating thereto.

          “Collateral Location” means any location where Collateral is located, as identified
and certified by Borrower from time to time.

          “Collections Account” means any Deposit Account maintained by Borrower at Bank to
which collections, deposits and other payments on or with respect to Collateral may be made
pursuant to the terms hereof, to which only Bank shall have access to withdraw or otherwise direct
the disposition of funds on deposit therein.

2

 

          “Commercial Tort Claim” has the meaning set forth in the Code.

          “Controlled Inventory” means Bottled Water Product Inventory in the possession of
Borrower or a Manufacturer or Distributor.

          “Debt” means all liabilities of a Person as determined under GAAP and all obligations
which such Person has guaranteed or endorsed or is otherwise secondarily or jointly liable for, and
shall include, without limitation (a) all obligations for borrowed money or purchased assets,
(b) obligations secured by assets whether or not any personal liability exists, (c) the capitalized
amount of any capital or finance lease obligations, (d) the unfunded portion of pension or benefit
plans or other similar liabilities, (e) obligations as a general partner, (f) contingent
obligations pursuant to guaranties, endorsements, letters of credit and other secondary
liabilities, (g) obligations for deposits, and (h) obligations under Swap Agreements.

          “Default” has the meaning set forth in the definition of Event of Default.

          “Default Rate” means the Interest Rate (including the Applicable Margin) plus 2
percent per annum.

          “Deposit Account” has the meaning set forth in the Code.

          “Disbursements Account” means any Deposit Account maintained by Borrower with Bank for
the purpose of depositing the proceeds of Loans made pursuant hereto.

          “Distributor” means a Person located within the United States of America with whom
Borrower has contracted for distribution of Bottled Water Product Inventory between Manufacturers
and Retailers.

          “Document” has the meaning set forth in the Code.

          “Electronic Chattel Paper” has the meaning set forth in the Code.

          “Eligible Accounts” means all Accounts in U.S. dollars evidenced by a paper invoice or
electronic equivalent (valued at the face amount of such invoice, less maximum discounts, credits
and allowances which may be taken by Account Debtors on such Accounts, and net of any sales tax,
finance charges or late payment charges included in the invoiced amount) created or acquired by
Borrower arising from the sale of Inventory and/or the provision of certain services in Borrower’s
ordinary course of business (as approved by Bank) in which Bank has a first (and only) priority,
perfected security interest, but excluding, without duplication,

          (a) Accounts outstanding for longer than (i) ninety (90) days from original invoice date or
(ii) sixty (60) days from the original due date, whichever is shorter;

          (b) all Accounts owed by an Account Debtor if more than fifty percent (50%) of the Accounts
owed by such Account Debtor to Borrower are deemed ineligible hereunder pursuant to clause (a);

          (c) Accounts owing from any Affiliate of Borrower;

          (d) Accounts owed by a creditor of Borrower to the extent of the amount of the indebtedness of
Borrower to such creditor;

          (e) Accounts which are in dispute or subject to any counterclaim, contra-account, volume
rebate, cooperative advertising accrual, deposit or offset;

          (f) Accounts owing by any Account Debtor which is not Solvent;

3

 

          (g) Accounts arising from a sale on a bill-and-hold, guaranteed sale, or sale-on-approval
basis or from the delivery of Bottled Water Product Inventory to a Retailer on a consignment or
similar basis prior to the sale thereof by the Retailer to consumer(s);

          (h) Accounts owed by an Account Debtor that (1) is a Sanctioned Person or (2) is located
outside of the United States of America, unless in its sole and absolute discretion Bank agrees to
allow such Account to be an Eligible Account and such Account is supported by a letter of credit or
credit insurance assigned to Bank and which is issued by a financial institution and in an amount
and on terms which are acceptable to Bank in its sole and absolute discretion;

          (i) Accounts owed by the United States of America or other governmental or quasi-governmental
unit, agency or subdivision unless Borrower shall have complied with all applicable federal and
state assignment of claims laws;

          (j) Accounts as to which the goods giving rise to the Account have not been delivered to and
accepted by the Account Debtor or the service giving rise to the Account has not been completely
performed or which do not represent a final sale;

          (k) Accounts evidenced by a note or other Instrument or Chattel Paper or reduced to judgment;

          (l) Accounts for which the total of all Accounts from an Account Debtor (together with the
Affiliates of the Account Debtor) exceed fifty percent (50%) until the first anniversary of the
Closing Date and twenty-five (25%) thereafter of the total Accounts of Borrower (to the extent of
such excess);

          (m) Accounts which, by contract, subrogation, mechanics’ lien laws or otherwise, are subject
to claims by Borrower’s creditors or other third parties or which are owed by Account Debtors as to
whom any creditor of Borrower (including any bonding company) has lien or retainage rights, unless
such lien or retainage rights have been effectively waived in writing by such creditor;

          (n) Accounts owed by an Account Debtor which is located in a jurisdiction where Borrower is
required by such jurisdiction to qualify to transact business or to file reports in order to seek
judicial enforcement of the Account, unless Borrower has so qualified or filed;

          (o) Accounts owed by an Account Debtor who disputes the liability therefor;

          (p) Accounts owed by an Account Debtor that shall be the subject of any proceeding of the type
described in Section 8.1(f) or (g); and

          (q) Aged credits outstanding for longer than the sooner of (i) ninety (90) days from original
invoice date or (ii) sixty (60) days from the original due date.

          No Account shall be an Eligible Account if any representation, warranty or covenant herein
relating thereto shall be untrue, misleading or in default.

          “Eligible Inventory” means all Controlled Inventory and Placed Inventory acquired by
Borrower in the ordinary course of its business as presently conducted consisting of raw materials,
work-in-process and finished goods, valued at the lower of cost or market on a first-in, first-out
basis, but excluding, however, in any event, without limitation of the
foregoing, unless otherwise approved by Bank, any such Inventory which

          (a) is not at all times subject to a duly perfected, first priority (and only) security
interest in favor of Bank (other than any rights of Distributors and Manufacturers in the ordinary
course of business and with respect to the rights of Retailers and others under the Code as to
Placed Inventory);

4

 

          (b) is not in good and saleable condition;

          (c) is on consignment from, or subject to any repurchase agreement with any supplier (other
than with respect to Placed Inventory;

          (d) constitutes returned (other than empty bottles for Borrower’s bottled water products
returned to Borrower or a Distributor or Manufacturer in the ordinary course of business); or
repossessed, damaged, defective, obsolete, or slow-moving goods as determined by Bank;

          (e) does not conform in any material respect to the warranties and representations set forth
in the Loan Documents in respect of Inventory Collateral or Collateral generally;

          (f) is subject to a negotiable document of title (unless issued or endorsed to Bank);

          (g) is subject to any license or other agreement that limits or restricts Borrower’s or Bank’s
right to sell or otherwise dispose of such inventory (unless the licensor and Borrower enter into a
licensor waiver in form and substance satisfactory to Bank);

          (h) is located at a Collateral Location with respect to which, if not owned and controlled by
Borrower, Bank has not received from the Person owning such property or in control thereof a Third
Party Waiver (unless Reserves are imposed with regard thereto as determined by Bank in its sole and
absolute discretion) (other than Placed Inventory in the possession of a Retailer);

          (i) consists of any packaging materials (other than bottles for Borrower’s bottled water
products, caps and labels therefor and minerals for use with such bottled water), supplies or
promotional materials;

          (j) has been returned to, or repossessed by, Borrower (other than empty bottles for Borrower’s
bottled water products returned to Borrower or a Distributor or Manufacturer in the ordinary course
of business); or

          (k) which Bank otherwise in its reasonable discretion deems to not be Eligible Inventory.

          “Environmental Laws” means, collectively the following acts and laws, as amended: the
Comprehensive Environmental Response, Compensation and Liability Act of 1980; the Superfund
Amendments and Reauthorization Act of 1986; the Resource Conservation and Recovery Act; the Toxic
Substances Act; the Clean Water Act; the Clean Air Act; the Oil Pollution and Hazardous Substances
Control Act of 1978; and any other “Superfund” or “Superlien” law or any other federal, state or
local statute, law, ordinance, code, rule, regulation, order or decree relating to, or imposing
liability or standards of conduct concerning, any hazardous, toxic or dangerous waste, substance or
material, as now or at any time hereafter in effect.

          “Equipment” has the meaning set forth in the Code.

          “ERISA” has the meaning set forth in Section 4.17.

          “Event of Default” means any event specified as such in Section 8.1 hereof
(“Events of Default”), provided that there shall have been satisfied any requirement in
connection with such event for the giving of notice or the lapse of time, or both;
“Default” or “default” means any of such events, whether or not any such requirement for
the giving of notice or the lapse of time or the happening of any further condition, event or act
shall have been satisfied.

          “Federal Funds Rate” means, for any period, a fluctuating interest rate per annum
equal, for each day during such period, to the weighted average of the rates on overnight Federal
Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as
published for such day (or, if such day is not a

5

 

Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day that is a Business Day, the average of the
quotations for such day on such transactions received by Bank from three Federal Funds brokers of
recognized standing selected by it.

          “Financial Management Account Agreement” means any Financial Management Account –
Investment/Commercial Loan Access Agreement or similar agreement now or hereafter entered into
between Bank and Borrower.

          “Fiscal Quarter” means any fiscal quarter of the Borrower.

          “Fiscal Year” means any fiscal year of the Borrower.

          “Fixtures” has the meaning set forth in the Code.

          “GAAP” means generally accepted accounting principles as in effect in the Unites
States from time to time.

          “General Intangibles” has the meaning set forth in the Code, and includes, without
limitation, general intangibles of Borrower, whether now owned or hereafter created or acquired by
Borrower, including all choses in action, causes of action, company or other business records,
inventions, blueprints, designs, patents, patent applications, trademarks, trademark applications,
trade names, trade secrets, service marks, goodwill, brand names, copyrights, registrations,
licenses, franchises, customer lists, permits, tax refund claims, computer programs, operational
manuals, internet addresses and domain names, insurance refunds and premium rebates, all claims
under guaranties, security interests or other security held by or granted to Borrower to secure
payment of any of Borrower’s Accounts by an Account Debtor, all rights to indemnification and all
other intangible property of Borrower of every kind and nature (other than Accounts).

          “Guarantor” means any Person hereafter guaranteeing, endorsing or otherwise becoming
liable for the Term Loan. For purposes of this Agreement, no Person shall be considered a
Guarantor unless and until the Term Loan is made.

          “Guaranty Agreement” means any guaranty substantially in the form of Exhibit C
attached hereto and made a part hereof, hereafter executed and delivered by any Guarantor to Bank,
as it may be modified, with respect to the Term Loan.

          “Guaranty Removal Date” means the last day of any Fiscal Quarter as of which
Consolidated EBITDA has been positive for that Fiscal Quarter and for the immediately preceding
three Fiscal Quarters, and during all such Fiscal Quarters no Default has occurred.

          “Instrument” has the meaning set forth in the Code.

          “Interest Rate” has the meaning set forth in Section 2.3 hereof.

          “Inventory” has the meaning set forth in the Code.

          “Investment Property” has the meaning set forth in the Code.

          “Item” means any “item” as defined in Section 4-104 of the Code, and shall also mean
and include checks, drafts, money orders or other media of payment.

          “Joinder Agreement” means a document substantially in the form of Exhibit B hereto,
pursuant to which a Subsidiary agrees to become a party-Borrower to this Agreement.

6

 

          “Jurisdiction” means the State of North Carolina.

          “Letter of Credit” means a letter of credit issued by Bank for the account of Borrower
as provided in Section 2.1.1 and 2.10 hereof.

          “Letter of Credit Obligations” means all obligations of Borrower to Bank, including
but not limited to reimbursement obligations, commissions and fees, incurred by Borrower in
connection with Bank’s issuance, amendment, renewal or extension of Letters of Credit hereunder.

          “Letter-of-Credit Right” has the meaning set forth in the Code.

          “Lien” means any mortgage, deed of trust, deed to secure debt, pledge, statutory lien
or other lien arising by operation of law, security interest, trust arrangement, security deed,
financing lease, collateral assignment or other encumbrance, conditional sale or title retention
agreement, or any other interest in property designed to secure the repayment of Obligations,
whether arising by agreement or under any statute or law or otherwise.

          “LMIR Loan” means a Loan, or portion thereof, during any period in which it bears
interest at a rate based upon the LIBOR Market Index Rate.

          “Loans” means the Revolver Loans and the Term Loan.

          “Loan Documents” means the Loan Documents – Term Loan and Loan Documents – Revolver,
together.

          “Loan Documents — Revolver” means this Agreement, each other Security Agreement, the
Revolver Note, the Notice of Borrowings, the Borrower Information Certificate, Borrowing Base
Certificates, UCC-1 financing statements and all other documents and instruments now or hereafter
evidencing, describing, guaranteeing or securing the Revolver Loan contemplated hereby or delivered
in connection herewith, as they may be modified, amended, extended, renewed or substituted from
time to time, but does not include Swap Agreements.

          “Loan Documents – Term Loan” means this Agreement, each other Security Agreement, the
Term Note, each Guaranty Agreement, the Term Loan Request, UCC-1 Financing Statements and all other
documents and instruments now or hereafter evidencing, describing, guaranteeing or securing the
Term Loan contemplated hereby or delivered in connection herewith, as they may be modified,
amended, extended, renewed or substituted from time to time, but does not include Swap Agreements.

          “Manufacturer” means a Person located within the United States of America with whom
Borrower has contracted for the manufacturer and production of Bottled Water Product Inventory.

          “Material Adverse Effect” means any (i) material adverse effect upon the validity,
performance or enforceability of any of the Loan Documents or any of the transactions contemplated
hereby or thereby, (ii) material adverse effect upon the properties, business, prospects or
condition (financial or otherwise) of Borrower and/or any other Person obligated under any of the
Loan Documents, (iii) material adverse effect upon the ability of Borrower or any other Person to
fulfill any obligation under any of the Loan Documents, or (iv) material adverse effect on the
Collateral.

          “Material Agreement” means an agreement to which Borrower or any Guarantor is a party
(other than the Loan Documents) (i) which is deemed to be a material contract as provided in
Regulation S-K promulgated by the Securities and Exchange Commission under the Securities Act of
1933 or (ii) for which breach, termination, cancellation, nonperformance or failure to renew could
reasonably be expected to have a Material Adverse Effect.

          “Net Proceeds” means, with respect to a disposition of any Collateral, proceeds
(including cash receivable (when received) by way of deferred payment) received by Borrower in cash
from the sale, lease, transfer

7

 

or other disposition of such Collateral, including insurance proceeds and awards of
compensation received with respect to the destruction or condemnation of all or part of such
Collateral, net of: (i) the reasonable and customary costs and expenses of such sale, lease,
transfer or other disposition (including legal fees and sales commissions); (ii) amounts applied to
repayment of Debt for borrowed money (other than the Obligations) secured by a Permitted Lien on
such Collateral disposed of that is senior to Bank’s Liens; and (iii) in connection with any sale
of Collateral, a reasonable reserve (not to exceed 5% of the total purchase price) for post-closing
adjustments to the purchase price, provided that upon the expiration of not more than ninety (90)
days after the sale, any remaining reserve balance is remitted to Bank for application to the
Obligations.

          “Notes” shall mean the Revolver Note and, when and if executed and delivered, the Term
Note and any other promissory note now or hereafter evidencing any Obligations, and all
modifications, extensions and renewals thereof.

          “Notice of Borrowing” with respect to Revolver Loans means the written request for a
Revolver Loan as identified in Section 2.5.2 hereof .

          “OFAC” means the United States Department of the Treasury’s Office of Foreign Assets
Control or any successor thereto.

          “Obligations” means all obligations now or hereafter owed to Bank or any Affiliate of
Bank by Borrower, whether related or unrelated to the Loans, this Agreement or the Loan Documents,
including, without limitation, amounts owed or to be owed under the terms of the Loan Documents, or
arising out of the transactions described therein, including, without limitation, the Loans, any
Debt arising out of or relating to any Deposit Accounts of Borrower at Bank or any Affiliate of
Bank or any cash management services or other products or services, including merchant card and ACH
transfer services, Letter of Credit Obligations for outstanding Letters of Credit, obligations for
banker’s acceptances issued for the account of Borrower or its Subsidiaries, amounts paid by Bank
under Letters of Credit or drafts accepted by Bank for the account of Borrower or its Subsidiaries,
together with all interest accruing thereon, including any interest on pre-petition Debt accruing
after bankruptcy, all existing and future obligations under any Swap Agreements between Bank or any
Affiliate of Bank and Borrower whenever executed (including obligations under Swap Agreements
entered into prior to any transfer or sale of Bank’s interests hereunder if Bank ceases to be a
party hereto), all fees, all costs of collection, attorneys’ fees and expenses of or advances by
Bank which Bank pays or incurs in discharge of obligations of Borrower or to inspect, repossess,
protect, preserve, store or dispose of any Collateral, whether such amounts are now due or
hereafter become due, direct or indirect and whether such amounts due are from time to time reduced
or entirely extinguished and thereafter re-incurred.

          “Permitted Debt” has the meaning set forth in Section 6.1 hereof.

          “Permitted Liens” has the meaning set forth in Section 6.2 hereof.

          “Person” means any natural person, corporation, unincorporated organization, trust,
joint-stock company, joint venture, association, company, limited or general partnership, limited
liability company, any government or any agency or political subdivision of any government, or any
other entity or organization.

          “Placed Inventory” means Bottled Water Product Inventory placed by Borrower with a
Retailer at a location within the United States of America for sale or exchange to consumers in any
situation where a final sale of such Bottled Water Product Inventory to such Retailer has not
occurred such that no Account with respect to such sale has been created.

          “Proceeds” has the meaning set forth in the Code.

          “Projections “ has the meaning set forth in Section 5.6(h) hereof.

8

 

          “Properly Contested” means, in the case of any Debt of Borrower or any Guarantor
(including any taxes) that is not paid as and when due or payable by reason of Borrower’s or such
Guarantor’s bona fide dispute concerning its liability to pay same or concerning the amount
thereof, (i) such Debt is being properly contested in good faith by appropriate proceedings
promptly instituted and diligently conducted; (ii) Borrower or such Guarantor has established
appropriate reserves as shall be required in conformity with GAAP; (iii) the non-payment of such
Debt will not have a Material Adverse Effect and will not result in a forfeiture or sale of any
assets of Borrower or such Guarantor; (iv) no Lien is imposed upon any of Borrower’s or such
Guarantor’s assets with respect to such Debt unless such Lien is at all times junior and
subordinate in priority to the Liens in favor of Bank (except only with respect to property taxes
that have priority as a matter of applicable state law) and enforcement of such Lien is stayed
during the period prior to the final resolution or disposition of such dispute; (v) if the Debt
results from, or is determined by the entry, rendition or issuance against Borrower or such
Guarantor or any of its assets of a judgment, writ, order or decree, enforcement of such judgment,
writ, order or decree is stayed pending a timely appeal or other judicial review; and (vi) if such
contest is abandoned, settled or determined adversely (in whole or in part) to Borrower or such
Guarantor, Borrower or such Guarantor forthwith pays such Debt and all penalties, interest and
other amounts due in connection therewith.

          “Reduction Date” has the same meaning as “Guaranty Removal Date.”

          “Regulated Materials” means any hazardous, toxic or dangerous waste, substance or
material, the generation, handling, storage, disposal, treatment or emission of which is subject to
any Environmental Law.

          “Retailer” means any Person who is a merchant with respect to Borrower’s Bottled Water
Product Inventory.

          “Reserves” means, on any date of determination thereof, an amount equal to the sum of
the following (without duplication): (i) such reserves as may be established from time to time in
good faith by Bank in the exercise of its reasonable commercial judgment to reflect changes in the
salability of any Eligible Inventory in the ordinary course of business of Borrower or such other
factors as may negatively impact the value of any Eligible Inventory, including reserves based on
obsolescence, seasonality, theft or other shrinkage, imbalance, change in composition or mix, or
markdowns; (ii) all amounts of past due rent, fees or other charges owing at such time by Borrower
or any Guarantor to any landlord of any premises where any of the Collateral is located or to any
processor, repairman, mechanic or other Person who is in possession of any Collateral or has
asserted any Lien or claim thereto; (iii) any amounts which Borrower or any Guarantor is obligated
to pay pursuant to the provisions of any of the Loan Documents that Bank elects to pay for the
account of Borrower or such Guarantor in accordance with authority contained in any of the Loan
Documents; (iv) all customer deposits or other prepayments held by Borrower; (v) the aggregate
amount of all liabilities and obligations that are secured by Liens upon any of the Collateral that
are senior in priority to Bank’s Liens if such Liens are not Permitted Liens (provided that the
imposition of a reserve hereunder on account of such Liens shall not be deemed a waiver of the
Event of Default that arises from the existence of such Liens); and (vi) such additional reserves,
in such amounts and with respect to such matters, as Bank in its reasonable discretion may elect to
impose from time to time.

          “Revolver Commitment” means the commitment of Bank, subject to the terms and
conditions herein, to make Revolver Loans and issue Letters of Credit in accordance with the
provisions of Section 2 hereof in an aggregate amount not to exceed $25,000,000.00 at any one time.

          “Revolver Loan” means a loan made by Bank as provided in Section 2.1.1 hereof.

          “Revolver Note” has the meaning set forth in Section 2.1.2 hereof.

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

9

 

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

          “Security Agreement” means this Agreement as it relates to a security interest in the
Collateral, and any other mortgage instrument, security agreement or similar instrument now or
hereafter executed by Borrower or other Person granting Bank a security interest in any Collateral
to secure the Obligations.

          “Senior Officer” means the chairman of the board of directors, the president or the
chief financial officer of, or in-house legal counsel to, Borrower.

          “Solvent” means, as to any Person, that such Person has capital sufficient to carry on
its business and transactions in which it is currently engaged and all business and transactions in
which it is about to engage, is able to pay its debts as they mature, and has assets having a fair
value greater than its liabilities, at fair valuation.

          “Subsidiary” means any corporation, partnership or other entity in which Borrower,
directly or indirectly, owns more than fifty percent (50%) of the stock, capital or income
interests, or other beneficial interests, or which is effectively controlled by such Person.

          “Supporting Obligation” has the meaning set forth in the Code.

          “Swap Agreement” has the meaning for swap agreement as defined in 11 U.S.C. § 101, as
in effect from time to time, or any successor statute, and includes, without limitation, any rate
swap agreement, forward rate agreement, commodity swap, commodity option, interest rate option,
forward foreign exchange agreement, spot foreign exchange agreement, rate cap agreement, rate floor
agreement, rate collar agreement, currency swap agreement, cross-currency rate swap agreement,
currency option and any other similar agreement.

          “Tangible Chattel Paper” has the meaning set forth in the Code.

          “Term” means the period from and including the Closing Date to but not including the
Termination Date.

          “Termination Date” means the earliest of (i) the second anniversary of the Closing
Date, (ii) the date on which Borrower terminates this Agreement and the credit facilities provided
hereunder pursuant to Section 2.13 hereof, and (iii) the date on which Bank terminates its
obligation to make Loans and other extensions of credit to Borrower pursuant to Section 8.2(a)
hereof.

          “Term Loan” means the term loan which may be made, subject to the provisions of this
Agreement, by Bank to Borrower pursuant to Section 2.1.3 of this Agreement.

          “Term Loan Acceptance” has the meaning set forth in Section 2.1.3 hereof.

          “Term Loan Commitment” means the commitment of Bank to make the Term Loan in
accordance with the provisions of Section 2.1.3 of this Agreement.

          “Term Loan Maturity Date” means the second anniversary of the Closing Date.

          “Term Loan Request “ has the meaning set forth in Section 2.1.3 hereof.

          “Term Note” has the meaning set forth in Section 2.1.4 of this Agreement.

10

 

          “Third Party Waiver” means a waiver or subordination of Liens satisfactory to Bank
from any Manufacturers, Distributors, lessors, mortgages, warehouse operators, processors or other
third parties that might have lienholders’ enforcement rights against any Collateral, waiving or
subordinating those rights in favor of Bank and assuring Bank’s access to the Collateral in
exercise of Bank’s rights hereunder.

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

          1.2 Financial Terms. . All financial terms used herein shall have the meanings assigned to
them under GAAP unless another meaning shall be specified.

     2. The Credit Facilities; Letters of Credit; Interest and Fees.

          2.1 The Credit Facilities.

               2.1.1 Revolver Commitment. Bank agrees, on the terms and conditions set forth in this
Agreement, to make Revolver Loans to Borrower and to issue Letters of Credit on behalf of Borrower
from time to time during the Term in amounts such that the aggregate principal amount of Revolver
Loans and the face amount of any Letters of Credit at any one time outstanding will not exceed the
lesser of (i) the Revolver Commitment and (ii) the Borrowing Base. Within the foregoing limit,
Borrower may borrow, prepay and reborrow Revolver Loans at any time during the Term.

               2.1.2 Revolver Note. Borrower shall execute and deliver to Bank, on the Closing Date,
a promissory note in the form of Exhibit A-1 attached hereto and made a part hereof (the “Revolver
Note”), which Revolver Note, in addition to the records of Bank, shall evidence the Revolver Loans
and interest accruing thereon. All outstanding principal amounts and accrued interest under the
Revolver Note shall be due and payable in accordance with the terms of the Revolver Note and this
Agreement.

               2.1.3 Term Loan Commitment. Bank agrees, on the terms and conditions set forth in
this Agreement and upon the written request of Borrower given not later than the first anniversary
of the Closing Date (the “Term Loan Acceptance”), to make a term loan (the “Term Loan”) to Borrower
in the aggregate principal amount of up to $15,000,000.00. The Term Loan shall be funded by Bank,
subject to the terms and conditions of this Agreement, at such times after the Closing Date and
until the Term Loan Maturity Date, as the Borrower may request in writing (“Term Loan Request”) in
accordance with the provisions hereof, provided that the aggregate amount of Term Loan advances
shall not exceed $15,000,000.00, and provided further that, in recognition of the requirement
contained in Section 2.6.2 for the aggregate principal amount, if any, of the Term Loan outstanding
on the first anniversary of the Closing Date to be amortized over the last year of the Term, only
the difference between $15,000,000.00 less the aggregate principal amount of the Term Loan advanced
prior to such first anniversary of the Closing Date may be borrowed during the last year of the
Term. The proceeds of the Term Loan shall be used solely by Borrower for the following purposes:
the acquisition of racking and shelving, trailers, furniture and fixtures, return bins and computer
equipment. Borrower shall not be entitled to obtain Term Loan advances more frequently than twice
per month, and Borrower shall not be entitled to reborrow any amounts repaid with respect to the
Term Loan. Notwithstanding any provision of this Agreement to the contrary, Borrower shall not be
obligated to give the Term Loan Acceptance, make any Term Loan Request or otherwise request or
obtain advances of the Term Loan.

               2.1.4 Term Note. Borrower shall execute and deliver to Bank, prior to any request by
Borrower for an advance of the Term Loan, a promissory note substantially in the form of
Exhibit A-2 attached hereto and made a part hereof (the “Term Note”), which Term Note shall be in
the principal amount of up to $15,000,000.00, and which Term Note, in addition to the records of
Bank, shall evidence the Term Loan and interest accruing thereon. All outstanding principal
amounts and accrued interest under the Term Note shall be due and payable in accordance with the
terms of the Term Note and this Agreement. Amounts advanced under the Term Note and thereafter
repaid may not be reborrowed.

11

 

          2.2 Collections Account.

               2.2.1 Collections Account. All payments on Accounts and other Collateral shall be
forwarded by Borrower to the Collections Account; provided, however, Bank, in its sole discretion,
may require Borrower to establish a lockbox under the control of Bank to which all Account Debtors
shall forward payments on the Accounts. Borrower shall pay all of Bank’s standard fees and charges
in connection with such lockbox arrangement (if any) and Collections Account as such fees and
charges may change from time to time. In the event Bank requires a lockbox arrangement hereunder,
Borrower shall promptly after request from Bank notify Account Debtors on the Accounts to forward
payments on the Accounts to the lockbox; provided, however, that following the occurrence and
during the continuance of an Event of Default, Bank shall have the right to directly contact
Account Debtors at any time to ensure that payments on the Accounts are directed to the lockbox.
All payment items received by Borrower on Accounts and sale of Inventory and other Collateral shall
be held by Borrower in trust for Bank and not commingled with Borrower’s funds and shall be
deposited promptly by Borrower to the Collections Account. All such items shall be the exclusive
property of Bank upon the earlier of the receipt thereof by Bank or by Borrower. Borrower hereby
grants to Bank a security interest in and lien upon all items and balances held in any lockbox, the
Disbursements Account and the Collections Account as Collateral for the Obligations, in addition to
and cumulative with the general security interest in all assets of Borrower (including all Deposit
Accounts) contained in Section 9.1 hereof.

               2.2.2 Power of Attorney. Borrower hereby irrevocably appoints Bank (and any duly
authorized Person designated by Bank) as Borrower’s attorney-in-fact to endorse Borrower’s name on
any checks, drafts, money orders or other media of payment which come into Bank’s possession or
control; this power being coupled with an interest is irrevocable so long as any of the Obligations
remain outstanding. Such endorsement by Bank under power of attorney shall, for all purposes, be
deemed to have been made by Borrower (prior to any subsequent endorsement by Bank) in negotiation
of the item.

               2.2.3 Application of Payments. Payment items received into the Collections Account
shall be applied by Bank on account of the Revolver Loans the day after deposited by Borrower,
subject to chargebacks for uncollected payment items, and if no Event of Default exists and no
Revolver Loans are then outstanding or have been repaid, Bank shall pay over such of the proceeds
of such payments to a Deposit Account maintained by Borrower at Bank and designated in writing by
Borrower. No payment item received by Bank shall constitute payment to Bank until such item is
actually collected by Bank and credited to the Collections Account; provided, however, that Bank
shall have the right to charge back to the Collections Account (or any other account of Borrower
maintained at Bank) an item which is returned for inability to collect, plus accrued interest
during the period of Bank’s provisional credit for such item prior to receiving notice of dishonor.

          2.3 Interest. Borrower agrees to pay interest in respect of all unpaid principal amounts of
the Loans from the respective dates such principal amounts are advanced until paid (whether at
stated maturity, on acceleration or otherwise) at a rate per annum equal to the Applicable Margin
in effect from time to time plus the LMIR in effect from time to time (“Interest Rate”).

          2.4 Interest Rate Adjustments. 

               2.4.1 LMIR Loan. The interest rate shall be adjusted daily as applicable to reflect
LIBOR Market Index Rate then in effect.

          2.5 Notice and Manner of Borrowing. 

               2.5.1 Loans. Borrower shall give Bank irrevocable telephonic notice of each proposed
Revolver Loan and each Term Loan advance not later than 11:00 a.m. (local time in Charlotte, North
Carolina) on the same business day as each proposed Loan, or advance. Each such notice shall
specify (i) the date of such Loan, which shall be a Business Day, (ii) the amount of each Loan and
(iii) in the case of a Term Loan advance, the use the Borrower shall make with the proceeds of such
advance, which shall be one of the uses set forth in Section 2.1.3, together with such other
evidence (e.g., invoices, statements, contracts, purchase orders, etc.)

12

 

satisfactory to Bank
regarding each use. Notices received after 11:00 a.m. (local time in Charlotte, North Carolina)
shall be deemed received on the next Business Day. Bank’s acceptance of such a request shall be
indicated by its making the Loan or advance requested. Such a Loan or advance shall be made
available to Borrower in immediately available funds by deposit into the Disbursement Account.

               2.5.2 Additional Provisions for Requests for Revolver Loans. Bank, in its discretion,
may require from Borrower a signed written request for a Revolver Loan in form of a Notice of
Borrowing satisfactory to Bank, which request shall be irrevocable and shall be delivered to Bank
no later than 11:00 a.m. (local time in Charlotte, North Carolina) on the date determined in
accordance with Section 2.5.1, and shall set forth the calculation of the Borrowing Base and a
reconciliation to the previous request or Borrowing Base Certificate, specify the information
required by Section 2.5.1 for the proposed Revolver Loan and provide such other information as Bank
may require.

                    (a) Subject to subsection 2.5.2(c) below, unless payment is otherwise timely made by Borrower,
the becoming due of any amount required to be paid with respect to any of the Obligations (whether
as principal, accrued interest, fees or other charges owed to Bank or any Affiliate of Bank) shall
be deemed irrevocably to be a request (without the requirement for the submission of a Notice of
Borrowing) for Revolver Loans on the due date of, and in an aggregate amount required to pay, such
Obligations, and Bank may disburse the proceeds of such Revolver Loans by way of direct payment of
the relevant Obligations.

                    (b) Subject to subsection 2.5.2(c) below, the presentation for payment of any check or other
item of payment drawn on the Disbursement Account at a time when there are insufficient funds in
such account to cover such item shall be deemed irrevocably to be a request (without any
requirement for the submission of a Notice of Borrowing) for Revolver Loans on the date of such
presentation in an amount equal to the aggregate amount of the items presented for payment, and
Bank may disburse the proceeds of such Revolver Loans to the Disbursement Account.

                    (c) Bank shall have no obligation to Borrower to honor any deemed request for a Revolver Loan
under Section 2.5.2(a) or Section 2.5.2(b) above after the Termination Date or when the principal
amount of such Revolver Loan, when added to the aggregate outstanding principal amount of all
Revolver Loans and the Letter of Credit Obligations would exceed the lesser of the Revolver
Commitment and the Borrowing Base at such time or when any condition precedent in Section 3.3
hereof is not satisfied, but may do so in its discretion and without regard to the existence of,
and without being deemed to have waived, any Default or Event of Default.

               2.5.3 Excess Outstandings. Notwithstanding the foregoing, Bank may, in its sole and
absolute discretion, make or permit to remain outstanding Revolver Loans which, when added to the
principal amount of all other Revolver Loans and Letter of Credit Obligations, exceed the Revolver
Commitment or the Borrowing Base, and all such amounts shall (i) be part of the Obligations
evidenced by the Revolver Note, (ii) bear interest as provided herein, (iii) be payable upon demand
by Bank, and (iv) be secured by the Collateral and be entitled to all rights and security as
provided under the Loan Documents.

          2.6 Repayment of Loans.

               2.6.1 Repayment of Revolver Loans.

                    (a) The outstanding principal amount of the Revolver Loans shall be repaid as follows: Any
portion of the Revolver Loans shall be paid by Borrower to Bank immediately upon each receipt by
Bank or Borrower of any proceeds of any Accounts or Inventory, to the extent of such proceeds.
Bank may apply all proceeds of Accounts or other Collateral received by Bank and all other payments
in respect of the Obligations to the Revolver Loans whether or not then due or to any other
Obligations then due, in whatever order or manner Bank shall determine. In any event, the
outstanding principal amount of Revolver Loans shall be due and payable on the Termination Date.

13

 

                    (b) Interest accrued on the Revolver Loans shall be due and payable on (i) the first day of
each Fiscal Quarter for the immediately preceding Fiscal Quarter, computed through the last
calendar day of the preceding Fiscal Quarter; and (ii) on the Termination Date.

               2.6.2 Repayment of Term Loan.

                    (a) The principal amount of the Term Loan, if made and if not sooner paid, shall be due and
payable and shall be repaid by Borrower in full on the Term Loan Maturity Date. In addition,
beginning the first day of the first Fiscal Quarter on or after the first anniversary of the
Closing Date and continuing on the first day of each Fiscal Quarter thereafter, Borrower shall make
quarterly payments of the Term Loan, each in an amount equal to one-twentieth (1/20th)
of the principal amount of the Term Loan outstanding on the first anniversary of the Closing Date.

                    (b) Interest accrued on the outstanding principal balance of the Term Loan shall be due and
payable on (i) the first calendar day of each Fiscal Quarter for the immediately preceding Fiscal
Quarter, computed through the last calendar day of the preceding Fiscal Quarter.

               2.6.3 Optional Prepayments of Term Loan. Borrower may, at its option, prepay any
portion of the Term Loan in whole at any time or in part from time to time, in amounts aggregating
not less than $500,000.00 or if less, the principal amount of the Term Loan outstanding, by paying
the principal amount to be prepaid together with interest accrued or unpaid thereon to the date of
prepayment. Borrower shall give written notice (or telephonic notice promptly confirmed in
writing) to Bank of any intended prepayment not less than one (1) Business Day prior to any
prepayment. Such notice, once given, shall be irrevocable. Each prepayment of the Term Loan shall
be applied first to accrued but unpaid interest and the balance to installments of principal in the
inverse order of their maturities.

               2.6.4 Mandatory Prepayment of Term Loan. Borrower shall repay the entire unpaid
principal balance of the Term Loan, if any, and all accrued but unpaid interest thereon, on the
Termination Date. If the Term Loan is made, Borrower shall also be required to prepay the
principal balance of the Term Loan, in inverse order of their maturities, as follows:

                    (a) Borrower shall prepay the Term Loan in connection with dispositions of Equipment by
Borrower subsequent to the first Term Loan advance in an amount equal to the Net Proceeds of such
disposition, except for dispositions of obsolete or worn out Equipment in the ordinary course of
business; provided, however, that the foregoing prepayment requirement shall not apply with respect
to the disposition of Equipment in a single transaction resulting in Net Proceeds of less than
$10,000.

                    (b) Borrower shall prepay the Term Loan in an amount equal to the Net Proceeds of insurance or
condemnation awards paid subsequent to the first Term Loan advance in respect of any Equipment,
except to the extent that such Net Proceeds are applied to purchase replacement Equipment;
provided,
that the foregoing prepayment requirement shall not apply with respect to an insurance or
condemnation award resulting in Net Proceeds of less than $10,000.

                    (c) The terms of this Section 2.6.4 shall be not be deemed to evidence Bank’s consent to any
disposition of any Collateral, if Borrower is otherwise required by the terms of this Agreement to
obtain such prior consent from Bank. Any Net Proceeds due to be turned over to Bank for prepayment
of the Obligations hereunder shall be applied to the Term Loan in Bank’s sole and absolute
discretion.

          2.7 Additional Payment Provisions.

               2.7.1 Payment of Other Obligations. The balance of the Obligations under the Loan
Documents requiring the payment of money shall be repaid by Borrower to Bank as and when provided
in the relevant Loan Documents, or, if no date of payment is otherwise specified in the Loan
Documents, on demand.

14

 

               2.7.2 Authorization to Debit. Bank may debit the Disbursement Account, the
Collections Account and any account subject to Bank’s control (as such term is used in Article 9 of
the Code) and/or make Revolver Loans to Borrower (whether or not in excess of the lesser of the
Revolver Commitment and the Borrowing Base) and apply such amounts to the payment of interest,
fees, expenses and other amounts to which Bank may be entitled from time to time pursuant to the
terms of this Agreement and Bank is hereby irrevocably authorized to do so without the consent of
Borrower.

               2.7.3 Time and Location of Payment. Borrower shall make each payment of principal of
and interest on the Loans and fees hereunder not later than 12:00 noon (local Charlotte, North
Carolina time) on the date when due, without set off, counterclaim or other deduction, in
immediately available funds to Bank at its address referred to in Section 10.4. Whenever any
payment of principal of, or interest on, the Loans or of fees shall be due on a day which is not a
Business Day, the date for payment thereof shall be extended to the next succeeding Business Day.
If the date for any payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.

               2.7.4 Late Charge. If any payments are not timely made, Borrower shall also pay to
Bank a late charge equal to 4% of each payment past due for 15 or more days. This late charge shall
not apply to payments due at maturity or by acceleration of the Loans, unless such late payment is
in an amount not greater than the highest periodic payment due hereunder.

               2.7.5 Excess Over Borrowing Base. To the extent that the aggregate amount of all
Revolver Loans and Letter of Credit Obligations exceeds the Borrowing Base at any time, the amount
of such excess will be paid immediately to Bank.

               2.7.6 Swaps Are Independent. Any prepayment shall not affect Borrower’s obligation to
continue making payments under any Swap Agreement, which shall remain in full force and effect
notwithstanding such prepayment, subject to the terms of such Swap Agreement.

               2.7.7 Capital Requirements. If either (a) the introduction of, or any change in, or
in the interpretation of, any applicable law or (b) compliance with any guideline or request from
any central bank or comparable agency or other governmental authority (whether or not having the
force of law), has or would have the effect of reducing the rate of return on the capital of, or
has affected or would affect the amount of capital required to be maintained by Bank or any
corporation controlling Bank as a consequence of, or with reference to, the Revolver Commitment and
other commitments of this type, below the rate which Bank or such other corporation could have
achieved but for such introduction, change or compliance, then within five (5) Business Days after
written demand by Bank, Borrower shall pay to Bank from time to time as specified by Bank
additional amounts sufficient to compensate Bank or such other corporation for such reduction. A
certificate as to such amounts
submitted to Borrower by Bank shall, in the absence of manifest error, be presumed to be
correct and binding for all purposes.

          2.8 Default Rate. In addition to all other rights contained in the Loan Documents, if an Event
of Default occurs, the principal amount of all outstanding Obligations, other than Obligations
under any Swap Agreements between Borrower and Bank or its affiliates, may, at Bank’s option, bear
interest at the Default Rate. The Default Rate shall apply from acceleration until such
Obligations or any judgment thereon is paid in full.

          2.9 Calculation of Interest. All fees and other charges provided for in this Agreement that
are calculated as a per annum percentage of any amount and all interest shall be calculated daily
and shall be computed on the actual number of days elapsed over a year of 360 days. For purposes
of computing interest and other charges hereunder, all payment items and other forms of payment
received by Bank shall be deemed applied by Bank on account of the Obligations (subject to final
payment of such items) on the first Business Day after Bank receives such items in immediately
available funds in the Collections Account. Each determination by Bank of interest and fees
hereunder shall be presumptive evidence of the correctness of such interest and fees.

          2.10 Letters of Credit.

15

 

               2.10.1 Issuance of Letters of Credit. Bank shall from time to time issue, upon five
(5) Business Days prior written notice, extend or renew letters of credit for the account of
Borrower or its Subsidiaries; provided that (i) the aggregate face amount of Letters of Credit
issued by Bank which are outstanding at any one time shall not exceed $1,000,000.00, (ii) Bank
shall have no obligation to issue any Letter of Credit if, after giving effect thereto, the
principal amount of all Revolver Loans and the Letter of Credit Obligations would exceed the lesser
of the Borrowing Base and the Revolver Commitment, and (iii) all other conditions precedent to the
issuance of each such Letter of Credit as set forth herein are satisfied or waived in writing by
Bank. All payments made by Bank under any such Letters of Credit (whether or not Borrower is the
account party) and all fees, commissions, discounts and other amounts owed or to be owed to Bank in
connection therewith, shall be paid on demand, unless Borrower instructs Bank to make a Revolver
Loan to pay such amount, Bank agrees to do so, and the necessary amount remains available to be
drawn as a Revolver Loan hereunder. All Letter of Credit Obligations shall be secured by the
Collateral. Borrower shall complete and sign such applications and supplemental agreements and
provide such other documentation as Bank may require. The form and substance of all Letters of
Credit, including expiration dates, shall be subject to Bank’s approval, and Bank shall have no
obligation to issue any Letter of Credit which has a maturity date later than the Termination Date.
Bank may charge certain fees or commissions for the issuance, handling, renewal or extension of a
Letter of Credit. Borrower unconditionally guarantees all obligations of any Subsidiary with
respect to Letters of Credit issued by Bank for the account of such Subsidiary. Upon a Default,
Borrower shall, on demand, deliver to Bank good funds equal to 105% of Bank’s maximum liability
under all outstanding Letters of Credit, to be held as cash Collateral for Borrower’s reimbursement
obligations and other Obligations.

               2.10.2 Law Governing Letter of Credit. Any Letter of Credit issued hereunder shall be
governed, as applicable, by the Uniform Customs and Practice for Documentary Credits International
Chamber of Commerce (“ICC”) Publication 500 or any subsequent revision or restatement thereof
adopted by the ICC and in use by Bank or the International Standby Practices, ICC Publication No.
590 or any subsequent revision or restatement thereof adopted by the ICC and in use by Bank, except
to the extent that the terms of such publication would limit or diminish rights granted to Bank
hereunder or in any other Loan Document.

          2.11 Fees.

               2.11.1 Revolver Loan Facility Fee. Borrower shall pay to Bank a non-refundable, fully
earned Revolver Loan facility fee in the amount of $125,000.00, one-half of which shall be payable
on the Closing Date and the other one-half of which shall be payable on or before March 31, 2006.

               2.11.2 Term Loan Facility Fee. If the Term Loan is made, Borrower shall pay to Bank a
non-refundable, fully earned Term Loan facility fee in an amount equal to 0.3% of principal amount
of each advance of the Term Loan, which fee shall be payable concurrently with the submission by
Borrower to Bank of a Term Loan Request for such advance.

               2.11.3 Letter of Credit Fees. Borrower shall pay to Bank, at such times as Bank shall
require, Bank’s standard fees in connection with Letters of Credit, as in effect from time to time,
and with respect to standby Letters of Credit, at the time of issuance of each standby Letter of
Credit, a fee equal to the greater of (a) $500.00 or (b) 2.50% per annum on the face amount of the
Letter of Credit for the period of time the standby Letter of Credit will be outstanding.

          2.12 Statement of Account. If Bank provides Borrower with a statement of account on a periodic
basis, such statement will be presumed complete and accurate and will be definitive and binding on
Borrower, unless objected to with specificity by Borrower in writing within forty-five (45) days
after receipt.

          2.13 Termination. Upon at least thirty (30) days prior written notice to Bank, Borrower may, at
its option, terminate this Agreement and the Revolver Commitment in its entirety but not partially;
provided however, no such termination by Borrower shall be effective until the full, final and
indefeasible payment of the Obligations in cash or immediately available funds and in the case of
any Obligations consisting of contingent obligations, Bank’s receipt of either cash or a direct pay
letter of credit naming Bank as beneficiary and in form and

16

 

substance and from an issuing bank
acceptable to Bank, in each case in an amount not less than 105% of the aggregate amount of all
such contingent obligations. Any notice of termination given by Borrower shall be irrevocable
unless Bank otherwise agrees in writing. Bank may terminate this Agreement and the Revolver
Commitment at any time, without notice, upon or after the occurrence of a Default or Event of
Default.

          2.14 USA Patriot Act Notice. To help fight the funding of terrorism and money laundering
activities, Federal law requires all financial institutions to obtain, verify, and record
information that identifies each Person who opens an account. For purposes of this section,
account shall be understood to include loan accounts.

          2.15 Financial Management Account Agreement. The provisions of this Agreement shall be subject
to the terms, provisions and conditions of any Financial Management Account Agreement, which shall
control the manner in which funds are transferred between the applicable demand deposit account and
the Revolver Loan for credit or debit to the Revolver Loan.

          2.16 Automatic Debit of Checking Account for Loan Payments. Borrower authorizes Bank to debit
demand deposit account number 2000026543086, or any other account with Bank (routing number
053101626) designated in writing by Borrower, for any payments due under the Notes. Borrower
further certifies that Borrower holds legitimate ownership of this account and preauthorizes this
periodic debit as part of its right under said ownership.

     3. Conditions Precedent to Extensions of Credit.

          3.1 Conditions Precedent to Initial Revolver Loan. In addition to any other requirement set
forth in this Agreement, Bank shall not be required to fund any Revolver Loan or make any other
extension of credit hereunder unless and until the following conditions shall have been satisfied,
in the sole opinion of Bank and its counsel:

               3.1.1 Loan Documents — Revolver. Borrower and each other party to any Loan Document -
Revolver, as applicable, shall have executed and delivered this Agreement, the Revolver Note, and
other required Loan Documents — Revolver, all in form and substance satisfactory to Bank.

               3.1.2 Supporting Documents and Other Conditions. Borrower shall cause to be delivered
to Bank the following documents and shall satisfy the following conditions:

                    (a) A copy of the governing instruments of Borrower and each Subsidiary, and good standing
certificates of Borrower and each Subsidiary, certified by the appropriate official of their
respective states of incorporation and each state in which Borrower or such Subsidiary is qualified
to do business;

                    (b) Incumbency certificate and certified resolutions of the board of directors (or other
appropriate governing body) of Borrower and each other Person executing any Loan Documents -
Revolver, signed by the Secretary or another authorized officer of Borrower or such other Person,
authorizing the execution, delivery and performance of the Loan Documents — Revolver;

                    (c) The legal opinion of Borrower’s legal counsel addressed to Bank regarding such matters as
Bank and its counsel may reasonably request;

                    (d) A satisfactory Borrowing Base Certificate duly completed by Borrower, together with all
supporting statements, schedules and reconciliations as required by Bank;

                    (e) UCC-11 searches and other Lien searches showing no existing security interests in or Liens
on the Collateral, unless such liens are Permitted Liens or are otherwise approved by Bank in
writing;

17

 

                    (f) A satisfactory Borrower Information Certificate duly completed by Borrower;

                    (g) Satisfactory evidence of insurance meeting the requirements of Section 5.3;

                    (h) UCC-1 financing statements and, if applicable, certificates of title covering the
Collateral shall duly have been recorded or filed in the manner and places required by law to
establish, preserve, protect and perfect the interests and rights created or intended to be created
by the Security Agreement; and all taxes, fees and other charges in connection with the execution,
delivery and filing of the Security Agreement and the financing statements shall duly have been
paid;

                    (i) Subordinations satisfactory to Bank from all Affiliates as required by Section 5.9;

                    (j) Third Party Waivers as required by Section 5.12 (c);

                    (k) A complete and final payoff letter from any lender whose outstanding Debt is to be
satisfied by remittance of proceeds of the initial Revolver Loan, and, if applicable, such
disbursement letter as shall be required to direct the payment of loan proceeds;

                    (l) All required appraisals shall have been completed to Bank’s satisfaction;

                    (m) All additional opinions, documents, certificates and other assurances that Bank or its
counsel may require;

                    (n) Satisfactory evidence of payment of all fees due and reimbursement of all costs incurred
by Bank, and evidence of payment to other parties of all fees or costs which Borrower is required
under the Loan Documents to pay by the date of the initial Revolver Loan;

                    (o) There shall be no litigation in which Borrower or any Subsidiary is a party defendant,
which may have a Material Adverse Effect;

                    (p) Bank shall have received Borrower’s pro forma, forecasted financial statements and such
other financial reports and information concerning Borrower as Bank shall request, and Bank shall
be satisfied therewith.

          3.2 Conditions Precedent to Term Loan. In addition to any other requirement set forth in this
Agreement, Bank shall not be required to fund the Term Loan unless and until the following
conditions shall have been satisfied, in the sole opinion of Bank and its counsel:

                         3.2.1 Loan Documents – Term Loan. Borrower and each other party to any
Loan Document – Term Loan, as applicable, shall have executed and delivered this
Agreement, the Term Note, and other required Loan Documents —  Term Loan, all in form
and substance satisfactory to Bank. In addition, the identity of the Guarantor(s) must
be satisfactory to Bank; provided, however, no Guarantor shall be required in connection
with the Term Loan if the Guaranty Removal Date shall have then occurred.

                         3.2.2 Supporting Documents and Other Conditions. To the extent not
theretofore satisfied in connection with the Revolver Loan, Borrower shall cause to be
delivered to Bank the following documents and shall satisfy the following conditions:

18

 

                    (a) A copy of the governing instruments of Borrower and each Subsidiary, and good standing
certificates of Borrower and each Subsidiary, certified by the appropriate official of their
respective states of incorporation and each state in which Borrower or such Subsidiary is qualified
to do business;

                    (b) Incumbency certificate and certified resolutions of the board of directors (or other
appropriate governing body) of Borrower and each other Person executing any Loan Documents, signed
by the Secretary or another authorized officer of Borrower or such other Person, authorizing the
execution, delivery and performance of the Loan Documents – Term Loan;

                    (c) The legal opinion of Borrower’s and any Guarantor’s legal counsel addressed to Bank
regarding such matters as Bank and its counsel may reasonably request;

                    (d) UCC-11 searches and other Lien searches showing no existing security interests in or Liens
on the Collateral;

                    (e) A satisfactory Borrower Information Certificate duly completed by Borrower;

                    (f) Satisfactory evidence of insurance meeting the requirements of Section 5.3;

                    (g) UCC-1 financing statements and, if applicable, certificates of title covering the
Collateral shall duly have been recorded or filed in the manner and places required by law to
establish, preserve, protect and perfect the interests and rights created or intended to be created
by the Security Agreement; and all taxes, fees and other charges in connection with the execution,
delivery and filing of the Security Agreement and the financing statements shall duly have been
paid;

                    (h) Subordinations satisfactory to Bank from all Guarantors and Affiliates as required by
Section 5.9;

                    (i) Third Party Waivers as required by Section 5.12 (c);

                    (j) Financial Statements of the Guarantor(s) evidencing a financial condition of the
Guarantor(s) satisfactory to Bank;

                    (k) The evidence (e.g., invoices, statements, contracts, purchase orders, etc.) required
pursuant to Section 2.5.1 with respect to the first advance of the Term Loan;

                    (l) All additional opinions, documents, certificates and other assurances that Bank or its
counsel may require;

                    (m) Satisfactory evidence of payment of all fees due and reimbursement of all costs incurred
by Bank, and evidence of payment to other parties of all fees or costs which Borrower is required
under the Loan Documents to pay by the date of the initial Term Loan advance;

                    (n) There shall be no litigation in which Borrower or any Guarantor or Subsidiary is a party
defendant, which Bank determines may have a Material Adverse Effect;

                    (o) Bank shall have received Borrower’s then updated forecasted financial statements and such
other financial reports and information concerning Borrower as Bank shall request, and Bank shall
be satisfied therewith.

19

 

               3.3 Conditions Precedent to Each Revolver Loan. In addition to any other requirements set
forth in this Agreement, Bank shall not be required to fund any Revolver Loan or issue any Letter
of Credit unless and until the following conditions shall have been satisfied, in the sole opinion
of Bank and its counsel, and each Notice of Borrowing (whether or not a written Notice of Borrowing
is required) shall be deemed to be a representation that all such conditions have been satisfied:

                         3.3.1 Notice of Borrowing. Borrower shall have delivered to Bank a Notice
of Borrowing and such other information as Bank may request.

                         3.3.2 No Default. No Default shall have occurred and be continuing or
could occur upon the making of the Revolver Loan and, if Borrower is required to deliver
a written Notice of Borrowing, Borrower shall have delivered to Bank an officer’s
certificate to such effect, which may be incorporated in the Notice of Borrowing.

                         3.3.3 Correctness of Representations. All representations and warranties
made by Borrower herein or otherwise in writing in connection herewith shall be true and
correct in all material respects with the same effect as though the representations and
warranties had been made on and as of date of the proposed Revolver Loan or Letter of
Credit, and, if Borrower is required to deliver a written Notice of Borrowing, Borrower
shall have delivered to Bank an officer’s certificate to such effect, which may be
incorporated in the Notice of Borrowing.

                         3.3.4 No Adverse Change. There shall have been no change which could have
a Material Adverse Effect on Borrower or any Subsidiary since the date of the most
recent financial statements of such Person delivered to Bank from time to time.

                         3.3.5 Limitations Not Exceeded. The proposed Revolver Loan or Letter of
Credit shall not cause the aggregate outstanding principal balance of the Revolver Loans
plus Letter of Credit Obligations to exceed the lesser of the Revolver Commitment and
the Borrowing Base.

                         3.3.6 Further Assurances. Borrower shall have delivered such further
documentation or assurances as Bank may reasonably require.

               3.4 Conditions Precedent to Each Term Loan Advance. In addition to other requirements set
forth in this Agreement, Bank shall not be required to make any advance of the Term Loan unless and
until the following conditions shall have been satisfied, in the sole opinion of Bank and its
counsel, and each request for a Term Loan advance shall be deemed to be a representation that all
such conditions have been satisfied:

                         3.4.1 Request. Borrower shall have delivered to Bank a Term Loan Request
for Term Loan advance and such other information, as Bank may request.

                         3.4.2 No Default. No Default shall have occurred and be continuing or
could occur upon the making of the Term Loan advance in question.

                         3.4.3 Correctness of Representations. All representations and warranties
made by Borrower and any Guarantor herein or otherwise in writing in connection herewith
shall be true and correct in all material respects with the same effect as though the
representations and warranties had been made on and as of date of the proposed Term Loan
advance.

                         3.4.4 No Adverse Change. There shall have been no change which could have
a Material Adverse Effect on Borrower, any Subsidiary or any Guarantor since the date of
the most recent financial statements of such Person delivered to Bank from time to time.

20

 

                         3.4.5 No Termination. Bank shall (i) have timely received all financial
information from all Guarantors as required under the Loan Documents, and (ii) not have
received notice from any Guarantor or any surety terminating or repudiating such
Person’s guaranty of the Term Loan.

                         3.4.6 Further Assurances. Borrower shall have delivered such further
documentation or assurances as Bank may reasonably require.

     4. Representations and Warranties. Except as may be set forth in Exhibit 4
attached hereto and made a part hereof, in order to induce Bank to enter into this Agreement and to
make the Loans or extend credit as provided for herein, Borrower makes the following
representations and warranties, all of which shall survive the execution and delivery of the Loan
Documents. Unless
otherwise specified, such representations and warranties shall be deemed made as of the date hereof
and as of the date of each request for a Loan or extension of credit hereunder:

          4.1 Valid Existence and Power. Each of Borrower and each Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of the jurisdiction of its
organization and is duly qualified or licensed to transact business in all places where the failure
to be so qualified would have a Material Adverse Effect on it. Each of Borrower and each other
Person which is a party to any Loan Document (other than Bank) has the power to make and perform
the Loan Documents executed by it and all such instruments will constitute the legal, valid and
binding obligations of such Person, enforceable in accordance with their respective terms, subject
only to bankruptcy and similar laws affecting creditors’ rights generally. Borrower is organized
under the laws of the State of Delaware.

          4.2 Authority. The execution, delivery and performance thereof by Borrower and each other
Person (other than Bank) executing any Loan Document have been duly authorized by all necessary
actions of such Person, and do not and will not violate any provision of law or regulation, or any
writ, order or decree of any court or governmental or regulatory authority or agency or any
provision of the governing instruments of such Person, and do not and will not, with the passage of
time or the giving of notice, result in a breach of, or constitute a default or require any consent
under, or result in the creation of any Lien upon any property or assets of such Person pursuant
to, any law, regulation, instrument or agreement to which any such Person is a party or by which
any such Person or its respective properties may be subject, bound or affected.

          4.3 Financial Condition. Other than as disclosed in the audited financial statements of the
Borrower for the Fiscal Year ended December 31, 2004, neither Borrower nor any Subsidiary nor (to
the knowledge of Borrower) any Guarantor has any direct or contingent obligations or liabilities
(including any guarantees or leases) or any material unrealized or anticipated losses from any
commitments of such Person. All such financial statements have been prepared in accordance with
GAAP and fairly present the financial condition of Borrower, Subsidiary or Guarantor, as the case
may be, as of the date thereof. Borrower is not aware of any material adverse fact (other than
facts which are generally available to the public and not particular to Borrower, such as general
economic trends) concerning the conditions or future prospects of Borrower or any Subsidiary or any
Guarantor which has not been fully disclosed to Bank, including any adverse change in the
operations or financial condition of such Person since the date of the most recent financial
statements delivered to Bank. Borrower is Solvent, and after consummation of the transactions set
forth in this Agreement and the other Loan documents, Borrower will be Solvent.

          4.4 Litigation. There are no suits or proceedings pending, or to the knowledge of Borrower
threatened, before any court or by or before any governmental or regulatory authority, commission,
bureau or agency or public regulatory body against or affecting Borrower, any Subsidiary or (to
Borrower’s knowledge) any Guarantor, or their assets, which if adversely determined would have a
Material Adverse Effect on the financial condition or business of Borrower, such Subsidiary or such
Guarantor.

          4.5 Agreements, Etc. Neither Borrower nor any Subsidiary is a party to any agreement or
instrument or subject to any court order, governmental decree or any charter or other corporate
restriction, adversely

21

 

affecting its business, assets, operations or condition (financial or
otherwise), nor is any such Person in default in the performance, observance or fulfillment of any
of the obligations, covenants or conditions contained in any agreement or instrument to which it is
a party, or any law, regulation, decree, order or the like.

          4.6 Authorizations. All authorizations, consents, approvals and licenses required under
applicable law or regulation for the ownership or operation of the property owned or operated by
Borrower or any Subsidiary or for the conduct of any business in which it is engaged have been duly
issued and are in full force and effect, and it is not in default, nor has any event occurred which
with the passage of time or the giving of notice, or both, would constitute a default, under any of
the terms or provisions of any part thereof, or under any order, decree, ruling, regulation,
closing agreement or other decision or instrument of any governmental commission, bureau or other
administrative agency or public regulatory body having jurisdiction over such Person, which default
would have a Material Adverse Effect on such Person. Except as noted herein, no approval, consent
or authorization of, or filing or registration with, any governmental commission, bureau or other
regulatory authority or agency is required with respect to the execution, delivery or performance
of any Loan Document.

          4.7 Title. Each of Borrower and each Subsidiary has good title to all of the assets shown
in its financial statements free and clear of all Liens, except Permitted Liens. Borrower alone
has full ownership rights in all Collateral.

          4.8 Collateral. The security interests granted to Bank herein and pursuant to any other
Security Agreement (a) constitute and, as to subsequently acquired property included in the
Collateral covered by the Security Agreement, will constitute, security interests under the Code
entitled to all of the rights, benefits and priorities provided by the Code and (b) are, and as to
such subsequently acquired Collateral will be, fully perfected, superior and prior to the rights of
all third persons, now existing or hereafter arising, upon Bank taking all such actions as may be
required under the Code in order to perfect such security interests. All of the Collateral is
intended for use solely in Borrower’s business.

          4.9 Jurisdiction of Organization; Location. The jurisdiction in which Borrower is
organized, existing and in good standing, the chief executive office of Borrower where Borrower’s
business records are located, all of Borrower’s other places of business and any other places where
any Collateral is kept, are all correctly and completely indicated on the Borrower Information
Certificate. The Collateral is located and shall at all times be kept and maintained only at
Borrower’s location or locations as described on the Borrower Information Certificate. No such
Collateral is attached or affixed to any real property so as to be classified as a fixture unless
Bank has otherwise agreed in writing.

          4.10 Taxes. Borrower and each Subsidiary have filed all federal and state income and
other tax returns which are required to be filed, and have paid all taxes as shown on said returns
and all taxes, including withholding, FICA and ad valorem taxes, shown on all assessments received
by it to the extent that such taxes have become due. Neither Borrower nor any Subsidiary is
subject to any federal, state or local tax Liens nor has such Person received any notice of
deficiency or other official notice to pay any taxes. Borrower and each Subsidiary have paid all
sales and excise taxes payable by it.

          4.11 Labor Law Matters. No goods or services have been or will be produced by Borrower or
any Subsidiary in violation of any applicable labor laws or regulations or any collective
bargaining agreement or other labor agreements or in violation of any minimum wage, wage-and-hour
or other similar laws or regulations.

          4.12 Accounts. Each Account, Instrument, Chattel Paper and other writing constituting any portion of the
Collateral (a) is genuine and enforceable in accordance with its terms except for such limits
thereon arising from bankruptcy and similar laws relating to creditors’ rights; (b) is not subject
to any deduction or discount (other than as stated in the invoice and disclosed to Bank in
writing), defense, set off, claim or counterclaim of a material nature against Borrower except as
to which Borrower has notified Bank in writing; (c) is not subject to any other circumstances that
would impair the validity, enforceability or amount of such Collateral except as to which Borrower
has notified Bank in writing; (d) arises from a bona fide sale of goods or delivery of services in
the ordinary course and in accordance with the terms and conditions of any applicable purchase
order, contract or

22

 

agreement; (e) is free of all Liens except Permitted Liens; and (f) is for a
liquidated amount maturing as stated in the invoice therefor. Each Account included in any Notice
of Borrowing, Borrowing Base Certificate, report or other document as an Eligible Account meets all
the requirements of an Eligible Account set forth herein.

          4.13 Judgment Liens. Neither Borrower nor any Subsidiary, nor any of their assets, are
subject to any unpaid judgments (whether or not stayed) or any judgment liens in any jurisdiction.

          4.14 Corporate Structure. As of the date hereof, the Borrower Information Certificate
sets forth (i) the correct name of each Subsidiary, its jurisdiction of organization and the
percentage of its equity interests having voting powers owned by each Person, (ii) the name of each
of Borrower’s corporate or joint venture Affiliates and the nature of the affiliation, (iii) the
number, nature and holder of all outstanding equity interests of Borrower and each of its
Subsidiaries and (iv) the number of authorized and issued equity interests (and treasury shares) of
Borrower and each Subsidiary. Borrower has good title to all of the shares it purports to own of
the equity interests of each of its Subsidiaries, free and clear in each case of any Lien other
than Permitted Liens. All such equity interests have been duly issued and are fully paid and
non-assessable. Since the date of the last audited financial statements of Borrower delivered to
Bank, Borrower has not made, or obligated itself to make, any dividends (other than stock
dividends) or other distribution on or with respect to, or any purchase, redemption, retirement or
other acquisition of, any equity interests of Borrower, except as otherwise permitted hereunder.
There are no outstanding options to purchase, or any rights or warrants to subscribe for, or any
commitments or agreements to issue or sell, any equity interests or obligations convertible into
equity interests of Borrower or any of its Subsidiaries. There are no outstanding agreements or
instruments binding upon the holders of any of Borrower’s equity interests relating to the
ownership of its equity interests.

          4.15 Deposit Accounts. Borrower and its Subsidiaries have no Deposit Accounts other than
(a) on the Closing Date, those listed in the Borrower Information Certificate and (b) after the
Closing Date, those otherwise permitted by Section 6.15.

          4.16 Environmental. Except for ordinary and customary amounts of solvents, cleaners and
similar materials used in the ordinary course of Borrower’s business and in strict compliance with
all Environmental Laws, neither Borrower, nor to Borrower’s best knowledge any other previous owner
or operator of any real property currently owned or operated by Borrower, has generated, stored or
disposed of any Regulated Material on any portion of such property, or transferred any Regulated
Material from such property to any other location in violation of any applicable Environmental
Laws. No Regulated Material has been generated, stored or disposed of on any portion of the real
property currently owned or operated by Borrower by any other Person, or is now located on such
property. Borrower is in full compliance with all applicable Environmental Laws and Borrower has
not been notified of any action, suit, proceeding or investigation which calls into question
compliance by Borrower with any Environmental Laws or which seeks to suspend, revoke or terminate
any license, permit or approval necessary for the generation, handling, storage, treatment or
disposal of any Regulated Material.

          4.17 ERISA. As of the date hereof, Borrower has not yet been required to file an annual report pursuant to
Section 104 of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), with
respect to any employee benefit plan or other plan maintained for employees of Borrower or any
Subsidiary and covered by Title IV of ERISA (a “Plan”), and no Termination Event (as hereinafter
defined) with respect to any Plan has occurred and is continuing. For the purposes of this
Agreement, a “Termination Event” shall mean a “reportable event” as defined in Section 4043(b) of
ERISA, or the filing of a notice of intent to terminate under Section 4041 of ERISA. Neither
Borrower nor any Subsidiary has any unfunded liability with respect to any such Plan.

          4.18 Investment Company Act. Neither Borrower nor any Subsidiary is an “investment
company” as defined in the Investment Company Act of 1940, as amended.

          4.19 Names. Borrower currently conducts all business only under its legal name as set
forth above in the introductory section of this Agreement. Except as disclosed on the Borrower
Information Certificate, during the preceding five (5) years Borrower has not (i) been known as or
used any other corporate, fictitious or

23

 

trade name, (ii) been the surviving entity of a merger or
consolidation or (iii) acquired all or substantially all of the assets of any Person.

          4.20 Insider. Borrower is not, and no Person having “control” (as that term is defined in
12 U.S.C. § 375(b)(5) or in regulations promulgated pursuant thereto) of Borrower is, an “executive
officer,” “director,” or “principal shareholder” (as those terms are defined in 12 U.S.C. 375(b)
or in regulations promulgated pursuant thereto) of Bank, of a bank holding company of which Bank is
a subsidiary, or of any subsidiary of a bank holding company of which Bank is a subsidiary.

          4.21 Sanctioned Persons; Sanctioned Countries. None of Borrower, its Subsidiaries or its
Affiliates or any Guarantor (i) is a Sanctioned Person or (ii) does business in a Sanctioned
Country or with a Sanctioned Person in violation of the economic sanctions of the United States
administered by OFAC. The proceeds of any Loan will not be used to fund any operation in, finance
any investments or activities in or make any payments to, a Sanctioned Person or a Sanctioned
Country.

          4.22 Compliance with Covenants; No Default. Borrower is, and upon funding of the initial
Loans on the Closing Date will be, in compliance with all of the covenants hereof. No Default has
occurred, and the execution, delivery and performance of the Loan Documents and the funding of the
initial Loans on the Closing Date will not cause a Default.

          4.23 Full Disclosure. There is no material fact which is known or which reasonably should
be known by Borrower that Borrower has not disclosed to Bank which could reasonably be expected to
have a Material Adverse Effect. No Loan Document, nor any agreement, document, certificate or
statement delivered by Borrower to Bank, contains any untrue statement of a material fact or omits
to state any material fact which is known or which reasonably should be known by Borrower necessary
to keep the other statements from being misleading.

          4.24 Borrower Information Certificate. All representations, warranties and statements
made by Borrower in the Borrower Information Certificate executed and delivered by Borrower to Bank
in connection with the Loan are true and correct as of the date hereof.

     5. Affirmative Covenants of Borrower. Borrower covenants and agrees that from the date
hereof and until payment in full of the Obligations and the formal termination of this Agreement,
Borrower and each Subsidiary:

          5.1 Use of Revolver Loan Proceeds. Shall use the proceeds of Revolver Loans only for
working capital to be used in the operation of Borrower’s business and furnish Bank all evidence
that it may require with respect to such use.

          5.2 Maintenance of Business and Properties. Shall at all times maintain, preserve and
protect all Collateral and all the remainder of its property used or useful in the conduct of its
business, and keep the same in good repair, working order and condition, and from time to time
make, or cause to be made, all material needful and proper repairs, renewals, replacements,
betterments and improvements thereto so that the business carried on in connection therewith may be
conducted properly and in accordance with standards generally accepted in businesses of a similar
type and size at all times, and maintain and keep in full force and effect all licenses and permits
necessary to the proper conduct of its business.

          5.3 Insurance. Shall maintain such liability insurance, workers’ compensation insurance,
business interruption insurance and casualty insurance in amounts as may be required by law, if
applicable, or as are customary and usual for prudent businesses in its industry and any other
insurance that may be reasonably required by Bank and shall insure and keep insured all Collateral
and other properties with insurance companies satisfactory to Bank. All hazard insurance covering
Collateral shall be in amounts acceptable to Bank, shall name and directly insure Bank as secured
party and loss payee under a long-form loss payee clause acceptable to Bank, or its equivalent, and
shall not be terminable except upon 30 days’ written notice to Bank. Borrower shall furnish to
Bank

24

 

copies of all such policies and shall provide evidence of insurance on an annual basis or such
more frequent basis as may be requested by Bank from time to time.

          5.4 Notice of Default. Shall provide to Bank immediate notice of (a) the occurrence of a
Default and what action (if any) Borrower is taking to correct the same, (b) any litigation
involving an amount at issue in excess of $25,000.00 or material changes in existing litigation or
any judgment against it or its assets, (c) any damage or loss to property in excess of $25,000.00,
(d) any notice from taxing authorities as to claimed deficiencies or any tax lien or any notice
relating to alleged ERISA violations, (e) any Reportable Event, as defined in ERISA, (f) any
rejection, return, offset, dispute, loss or other circumstance in an amount greater than $25,000.00
or otherwise having a Material Adverse Effect on any Collateral, (g) the cancellation or
termination of, or any default under, any Material Agreement to which Borrower is a party or by
which any of its properties are bound, or any acceleration of the maturity of any Debt of Borrower;
and (h) any loss or threatened loss of material licenses or permits.

          5.5 Inspections of Books and Records and Field Examinations. Shall permit inspections of
the Collateral and the records of such Person pertaining thereto and verification of the Accounts,
at such times and in such manner as may be required by Bank and shall further permit such
inspections, reviews and field examinations of its other books and records and properties (with
such frequency and at such times as Bank may desire) by Bank as Bank may deem necessary or
desirable from time to time. The cost of such field examinations, reviews, verifications and
inspections, plus Bank’s reasonable out-of-pocket expenses, shall be borne by Borrower; provided,
however, that Borrower shall not be obligated to pay such costs and expenses more than two times
per fiscal year of Borrower unless an Event of Default has occurred and is continuing.

          5.6 Financial Information. Shall maintain books and records in accordance with GAAP and
shall furnish to Bank the following periodic financial information:

               (a) Periodic Borrowing Base Information. Within twenty (20) days of the end of each
month (or more frequently if required by Bank), a completed Borrowing Base Certificate in the form
attached hereto as Exhibit 5.6(a) (a “Borrowing Base Certificate”). Borrower shall attach the
following to each Borrowing Base Certificate, which shall be certified by the chief financial
officer or president of Borrower to be accurate and complete and in compliance with the terms of
the Loan Documents: (i) a report listing all Accounts of Borrower as of the last Business Day of
such month (an “Accounts Receivable Report”) which shall include the amount and age of each Account
on an original invoice date aging basis, the name and mailing address of each Account Debtor, a
detailing of all Accounts which do not constitute Eligible Accounts, and such other information as
Bank may require in order to verify the Eligible Accounts, all in reasonable detail and in form
acceptable to Bank, (ii) a report listing all Inventory and all Eligible Inventory of Borrower as
of the last Business Day of such month, the cost thereof, specifying raw materials,
work-in-process, finished goods and all Inventory which has not been timely sold by Borrower in the
ordinary course of business, and such other information as Bank may require relating thereto, all
in form acceptable to Bank (an “Inventory Report”), and (iii) any other report as Bank may from
time to time require in its sole discretion, each prepared with respect to such periods and with
respect to such information and reporting as Bank may require.

               (b) Interim Statements. Within thirty (30) days after the end of each month, (i) a
consolidated and consolidating balance sheet of Borrower and its Subsidiaries at the end of that
period and a consolidated and consolidating income statement and statement of cash flows for that
period (and for the portion of the Fiscal Year ending with such period), together with all
supporting schedules, setting forth in comparative form the figures for the same period of the
preceding Fiscal Year and (ii) a report reconciling (x) the Accounts and Inventory of Borrower as
set forth on the Accounts Receivable Report and the Inventory Report attached to the Borrowing Base
Certificate to (y) the aggregate Accounts and Inventory set forth in the financial statements
delivered to Bank pursuant hereto (which shall be based upon Borrower’s general ledger and verified
by a physical Inventory count conducted on a frequency acceptable to Bank). The foregoing
statements and report shall be certified by the chief financial officer of Borrower as true and
correct and fairly representing the financial condition of Borrower and its Subsidiaries and that
such statements are prepared in accordance with GAAP, except without footnotes and subject to
normal year-end audit adjustments.

25

 

               (c) Annual Statements. Within ninety (90) days after the end of each Fiscal Year, a
detailed audited financial report of Borrower and its Subsidiaries containing a consolidated and
consolidating balance sheet at the end of that period and a consolidated and consolidating income
statement and statement of cash flows for that period, setting forth in comparative form the
figures for the preceding Fiscal Year, together with all supporting schedules and footnotes, and
containing an unqualified audit opinion of independent certified public accountants acceptable to
Bank that the financial statements were prepared in accordance with GAAP. Borrower shall obtain
such written acknowledgments from Borrower’s independent certified public accountants as Bank may
require permitting Bank to rely on such annual financial statements.

               (d) Compliance and No Default Certificates. Together with each report
required by Subsections (b) and (c), a compliance certificate in the form annexed hereto as Exhibit
5.6(d) and a certificate of its president or chief financial officer certifying that no Default
then exists or if a Default exists, the nature and duration thereof and Borrower’s intention with
respect thereto, and in addition, shall cause Borrower’s independent auditors (if applicable) to
submit to Bank, together with its audit report, a statement that, in the course of such audit, it
discovered no circumstances which it believes would result in a Default or if it discovered any
such circumstances, the nature and duration thereof.

               (e) Auditor’s Management Letters. Promptly upon receipt thereof, copies of each
report submitted to Borrower by independent public accountants in connection with any annual,
interim or special audit made by them of the books of Borrower including, without limitation, each
report submitted to Borrower
concerning its accounting practices and systems and any final comment letter submitted by such
accountants to management in connection with the annual audit of Borrower.

               (f) Statements of Guarantors. Within thirteen (13) months from the previous statement
date on file with Bank, a detailed financial statement of each Guarantor containing a balance sheet
at the end of that period (including all contingent liabilities) and a statement of income for that
period, all in such form as approved by Bank, and within fifteen (15) days after the filing
thereof, personal federal tax returns of each Guarantor.

               (g) Other Information. Such other information reasonably requested by Bank from time
to time concerning the business, properties or financial condition of Borrower, Guarantor and their
respective Subsidiaries.

               (h) Projections. Not later than the thirtieth (30th) day after the commencement of
each Fiscal Year, deliver Projections to Bank for Borrower for such Fiscal Year.
“Projections” means Borrower’s forecasted consolidated and consolidating (i) balance
sheets, (ii) profit and loss statements, (iii) cash flow statements, (iv) capitalization
statements, and (v) Borrowing Base availability calculations, all prepared on a month by month
basis and on a consistent basis with Borrower’s historical financial statements, together with
appropriate supporting details and a statement of underlying assumptions.

          5.7 Maintenance of Existence and Rights. Shall preserve and maintain its corporate
existence, authorities to transact business, rights and franchises, trade names, patents,
trademarks and permits necessary to the conduct of its business.

          5.8 Payment of Taxes, Etc. Shall pay before delinquent all of its debts and taxes, except
and to the extent only that such taxes are being Properly Contested.

          5.9 Subordination. Shall cause all debt and other obligations now or hereafter owed to
any Guarantor or Affiliate to be subordinated in right of payment and security to the Obligations
in accordance with subordination agreements satisfactory to Bank.

          5.10 Compliance; Hazardous Materials. Shall strictly comply with all laws, regulations,
ordinances and other legal requirements, specifically including, without limitation, ERISA, all
securities laws and all laws relating to hazardous materials and the environment. Unless approved
in writing by Bank, neither Borrower

26

 

nor any Subsidiary shall engage in the storage, manufacture,
disposition, processing, handling, use or transportation of any hazardous or toxic materials,
whether or not in compliance with applicable laws and regulations. Borrower shall promptly report
to Bank any notices of any violations of such laws or regulations received from any regulatory or
governmental body, along with Borrower’s proposed corrective action as to such violation.

          5.11 Further Assurances. Shall take such further action and provide to Bank such further
assurances as may be reasonably requested to ensure compliance with the intent of this Agreement
and the other Loan Documents.

          5.12 Covenants Regarding Collateral. Borrower makes the following covenants with Bank regarding the Collateral for itself and each
Subsidiary. Borrower and each Subsidiary:

               (a) will use the Collateral only in the ordinary course of its business and will not permit
the Collateral to be used in violation of any applicable law or policy of insurance;

               (b) as agent for Bank, will defend the Collateral against all claims and demands of all
Persons, except for Permitted Liens;

               (c) will, at Bank’s request, obtain and deliver to Bank such Third Party Waivers as Bank may
require;

               (d) will promptly deliver to Bank all promissory notes, drafts, trade acceptances, chattel
paper, Instruments or documents of title which are Collateral in tangible form, appropriately
endorsed to Bank’s order, and Borrower will not create or permit any Subsidiary to create any
Electronic Chattel Paper without taking all steps deemed necessary by Bank to confer control of the
Electronic Chattel Paper upon Bank in accordance with the Code;

               (e) except for sales of Inventory in the ordinary course of business and the voluntary
termination of Swap Agreements to which Borrower or such Subsidiary is a party, will not sell,
assign, lease, transfer, pledge, hypothecate or otherwise dispose of or encumber any Collateral or
any interest therein;

               (f) shall promptly notify Bank of any future patents, trademarks or copyrights owned by
Borrower or any Subsidiary and any license agreements entered into by Borrower or any Subsidiary
authorizing said Person to use any patents, trademarks or copyrights owned by third parties;

               (g) shall give Bank at least thirty (30) days prior written notice of any new trade or
fictitious name. Borrower’s or any Subsidiary’s use of any trade or fictitious name shall be in
compliance with all laws regarding the use of such names; and

               (h) shall permit Bank, from time to time not more than once during any Fiscal Year of
Borrower, unless an Event of Default has occurred and is continuing, to cause the Collateral to be
appraised by a third-party appraiser satisfactory to Bank, the expenses of which shall be borne by
Borrower.

     6. Negative Covenants of Borrower. Borrower covenants and agrees that from the date
hereof and until payment in full of the Obligations and the formal termination of this Agreement,
Borrower and each Subsidiary:

          6.1 Debt. Shall not create or permit to exist any Debt, including any guaranties or other
contingent obligations, except the following (“Permitted Debt”):

               (a) The Obligations;

               (b) Endorsement of checks for collection in the ordinary course of business;

27

 

               (c) Debt payable to suppliers and other trade creditors in the ordinary course of business on
ordinary and customary trade terms and which is not past due;

               (d) Purchase money Debt not exceeding $250,000.00 in aggregate principal amount at any time
outstanding for Borrower and all Subsidiaries incurred to purchase Equipment, provided that the
amount of such Debt shall not at any time exceed the purchase price of the Equipment purchased;

               (e) Debt of any Subsidiary to Borrower or another Subsidiary;

               (f) Any Debt incurred under any Swap Agreements with Bank (or with any of its Affiliates);

               (g) Capital or finance lease obligations in an aggregate amount not to exceed $10,000,000.00;
and

               (h) Debt subordinated to the Obligations on terms and conditions acceptable to Bank.

          6.2 Liens. Shall not create or permit any Liens on any of its property except the
following (“Permitted Liens”):

               (a) Liens securing the Obligations;

               (b) Liens for taxes, assessments and other governmental charges or levies (excluding any Lien
imposed pursuant to any of the provisions of ERISA or Environmental Laws) not yet due and payable
or which are being Properly Contested;

               (c) The claims of materialmen, mechanics, carriers, warehousemen, processor or landlords
arising out of operation of law so long as the obligations secured thereby are not past due or are
being Properly Contested;

               (d) Liens consisting of deposits or pledges made in the ordinary course of business in
connection with workers’ compensation, unemployment insurance, social security and similar laws;

               (e) Judgment and other similar non-tax Liens arising in connection with court proceedings but
only if and for so long as (a) the execution or enforcement of such Liens is and continues to be
effectively stayed and bonded on appeal, (b) the validity and/or amount of the claims secured
thereby are being Properly Contested and (c) such Liens do not, in the aggregate, materially
detract from the value of the assets of the Person whose assets are subject to such Lien or
materially impair the use thereof in the operation of such Person’s business; and

               (f) Liens securing Permitted Debt incurred solely for the purpose of purchase money financing
or capital or finance lease financing for the acquisition of Equipment, provided that such Lien
does not secure more than the purchase price of, or lease obligation with respect to, such
Equipment and does not encumber property other than the purchased or leased property.

          6.3 Restricted Payments. Shall not pay or declare any dividends (other than stock
dividends) or other distribution or purchase, redeem or otherwise acquire any stock or other equity
interests or pay or acquire any Debt subordinate to the Obligations except the following:

               (a) Any Subsidiary may pay dividends to Borrower or another Subsidiary wholly-owned by
Borrower.

28

 

               (b) If Borrower is an S Corporation, it may distribute to its shareholders during each
calendar year an aggregate amount (including all dividends or other payments) not exceeding the
amount of federal income tax payable by such shareholders in such year with respect to the taxable
income of Borrower, assuming such income is taxed at the rate applicable to the highest bracket of
income (not to exceed 40% unless Bank shall otherwise permit in writing); provided that at
the time of each such distribution, and after giving effect thereto, each of the following
conditions is met: (A) no Default or Event of Default exists, (B) Borrower is Solvent, (C) such
distribution is permitted under applicable law, and (D) Borrower has given Bank at least ten
(10) days prior written notice prior to making such distribution; provided that if the
amount of any such dividends and other payments to a shareholder exceeds the tax liability of said
shareholder, said shareholder shall promptly after the determination of the amount of such excess
make a contribution to capital of Borrower in the amount of such excess.

               (c) Borrower may redeem or repurchase stock from its employees, consultants, directors,
officers and service providers upon the termination of their employment or services to Borrower
pursuant to options or rights granted Borrower pursuant to the terms of any equity incentive
arrangement, equity compensation plan, stock option agreement, restricted stock agreement,
employment agreement, consulting agreement, stock purchase plan, management incentive plan or other
agreement, arrangement or plan approved by the Board of Directors of Borrower and by the Bank in
writing.

          6.4 Loans and Other Investments. Shall not make or permit to exist any advances or loans
to, or guarantee or become contingently liable, directly or indirectly, in connection with the
obligations, leases, stock or dividends of, or own, purchase or make any commitment to purchase any
stock, bonds, notes, debentures or other securities of, or any interest in, or make any capital
contributions to (all of which are sometimes collectively referred to herein as “Investments”) any
Person, except for (a) purchases of direct obligations of the federal government, (b) deposits in
commercial banks, (c) commercial paper of any U.S. corporation having the highest ratings then
given by the Moody’s Investors Services, Inc. or Standard & Poor’s Corporation, (d) existing
investments in Subsidiaries and future advances or loans to, guaranties of the indebtedness of,
investments in and capital contributions to Subsidiaries wholly-owned by Borrower that join this
Agreement as a Borrower or become a Guarantor prior to the date of such advance, loan, guaranty,
investment or capital contribution, (e) endorsement of negotiable instruments for collection in the
ordinary course of business, (f) advances to employees for business travel and other expenses
incurred in the ordinary course of business which do not at any time exceed $50,000.00 in the
aggregate, and (g) any Swap Agreements with Bank (or with any of its Affiliates).

          6.5 Change in Business. Shall not enter into any business which is substantially
different from the business in which it is engaged on the Closing Date.

          6.6 Accounts. (a) Shall not sell or assign any of its Accounts, Chattel Paper or any
promissory notes held by it other than the discount of such notes in the ordinary course of
business for collection; (b) shall not create or accept any Account, Instrument, Chattel Paper or
other obligation of any kind due from or owed by a Sanctioned Person or enter into any lease that
secures the Obligations where the lessee is a Sanctioned Person; and (c) shall notify Bank promptly
in writing of any discount, offset or other deductions not shown on the face of an Account invoice
and any dispute over an Account, and any information relating to an adverse change in any Account
Debtor’s financial condition or ability to pay its obligations or if it learns that any Account
Debtor is a Sectioned Person.

          6.7 Transactions with Affiliates. Shall not directly or indirectly purchase, acquire or
lease any property from, or sell, transfer or lease any property to, pay any management fees to or
otherwise deal with, in the ordinary course of business or otherwise, any Affiliate (other than a
Subsidiary), except that Borrower may purchase or lease equipment (subject to the limitation in
Section 6.1(g)) from an equipment leasing or finance company now or hereafter organized by Billy D.
Prim or of which Billy D. Prim is or becomes a director, officer, stockholder, member or owner;
provided, however, that any acts or transactions prohibited by this Section may be performed or
engaged in after written notice to Bank if upon terms not less favorable to Borrower or such
Subsidiary than if no such relationship existed.

29

 

          6.8 No Change in Name, Offices or Jurisdiction of Organization; Removal of Collateral.
Shall not change its name or the jurisdiction in which Borrower or such Subsidiary is organized or,
unless it shall have given 60 days’ advance written notice thereof to Bank, change the location of
its chief executive office or other office where books or records are kept, or permit any Inventory
or other tangible Collateral to be located at any location other than as specified in the Borrower
Information Certificate.

          6.9 No Sale, Leaseback. Shall not enter into any sale-and-leaseback or similar transaction
exceeding $500,000.00 in the aggregate.

          6.10 Margin Stock. Shall not use any proceeds of the Loan to purchase or carry any margin
stock (within the meaning of Regulation U of the Board of Governors of Federal Reserve System) or
extend credit to others for the purpose of purchasing or carrying any margin stock.

          6.11 Tangible Collateral. Shall not, except as otherwise provided herein, allow any
Inventory or other tangible Collateral to be commingled with, or become an accession to or part of,
any property of any other Person so long as such property is Collateral; nor allow any tangible
Collateral to become a fixture unless Bank shall have given its prior written authorization;
provided, however, that the foregoing shall not restrict any Bottled Water Product Inventory from
being in the possession of a Manufacturer, Distributor or Retailer at any time in the ordinary
course of Borrower’s business.

          6.12 Subsidiaries. Shall not acquire, form or dispose of any Subsidiaries or permit any
Subsidiary to issue capital stock except to its parent; provided, however, that Borrower may,
without the consent of Bank, form a Subsidiary to act as an equipment leasing or finance company.

          6.13 Liquidation, Mergers, Consolidations and Dispositions of Substantial Assets, Name and Good
Standing. Shall not merge, reorganize, consolidate or amalgamate with any Person, liquidate,
wind up its affairs or dissolve itself, acquire by purchase, lease or otherwise any of the assets
of any Person, or sell, transfer, lease or otherwise dispose of any of its property or assets,
except for the sale of Inventory in the ordinary course of business, the disposition of obsolete or
worn out equipment in the ordinary course of business, the disposition of equipment if the proceeds
of such disposition are credited or applied to the purchase price of replacement equipment, and the
voluntary termination of Swap Agreements to which Borrower or such Subsidiary is a party, or sell
or dispose of any equity ownership interests in any Subsidiary, in each case whether in a single
transaction or in a series of related transactions; or change its name or jurisdiction of
organization or conduct business under any new fictitious name; change its Federal Employer
Identification Number; or fail to remain in good standing and qualified to transact business as a
foreign entity in any state or other jurisdiction in which it is required to be qualified to
transact business as a foreign entity and in which the failure to be so qualified could reasonably
be expected to have a Material Adverse Effect.

          6.14 Change of Fiscal Year or Accounting Methods. Shall not change its Fiscal Year or its
accounting methods. Borrower’s Fiscal Year end is December 31 as of the Closing Date.

          6.15 Depositary Relationship. Borrower shall maintain Borrower’s primary depositary
account(s) with Bank.

     7. Other Covenants of Borrower. Borrower covenants and agrees that from the date hereof
and until payment in full of the Obligations and the termination of this Agreement, Borrower and
each Subsidiary shall comply with the following additional covenants:

          7.1 Minimum EBITDA. EBITDA as of the end of each of the following Fiscal Quarters,
determined on a rolling four quarter basis (except the first three of such Fiscal Quarters, which
shall be on a cumulative three month, six month, or nine month, as the case may be, basis), shall
be not less than the amount applicable to such Fiscal Quarter set forth in the table below:

30

 

	 	 	 	 	 
	FISCAL QUARTER	 	AMOUNT
	Q3 – 2005
	 	$	(2,204,400.00	)
	Q4 – 2005
	 	$	(3,691,200.00	)
	Q1 – 2006
	 	$	(3,777,600.00	)
	Q2 – 2006
	 	$	(2,824,800.00	)
	Q3 – 2006
	 	$	626,000.00	 
	Q4 – 2006
	 	$	3,864,800.00	 
	Q1 – 2007
	 	$	6,950,400.00	 
	Q2 – 2007
	 	$	9,624,800.00	 

As used herein, “EBITDA” means for any period the sum of the following, without
duplication: (A) consolidated net income of Borrower and its Subsidiaries in the Fiscal Quarter
(computed without regard to any extraordinary items of gain or loss) plus (B) to the extent
deducted from revenue in computing consolidated net income for such period, the sum of (1) interest
expense, (2) income and franchise taxes, tax expense, and (3) depreciation, amortization and other
non-cash charges (except to the extent that such non-cash charges are reserved for cash charges to
be taken in the future), less interest income and any extraordinary gains.

          7.2 Minimum Gross Revenues. Gross revenues from sales achieved by Borrower as of the end
of each of the following Fiscal Quarters, determined on a rolling four quarter basis (except the
first three of such Fiscal Quarters, which shall be on a cumulative three month, six month, or nine
month, as the case may be, basis), shall be not less than the amounts applicable to such Fiscal
Quarter set forth in the table below:

	 	 	 	 	 
	FISCAL QUARTER	 	AMOUNT
	Q3 – 2005
	 	$	1,418,400.00	 
	Q4 – 2005
	 	$	6,602,400.00	 
	Q1 – 2006
	 	$	16,076,800.00	 
	Q2 – 2006
	 	$	31,307,200.00	 
	Q3 – 2006
	 	$	46,646,400.00	 
	Q4 – 2006
	 	$	60,914,400.00	 
	Q1 – 2007
	 	$	75,018,400.00	 
	Q2 – 2007
	 	$	86,172,000.00	 

          7.3 Leases. Borrower shall not incur, create, or assume any direct or indirect liability
for the payment of rent or otherwise, under any lease or rental arrangement (excluding capitalized
leases) if immediately thereafter the sum of such lease or rental payments made by Borrower during
the first year after the Closing Date is greater than $1,000,000.00 in the aggregate and during the
second year after the date hereof is $2,000,000.00.

     8. Default.

          8.1 Events of Default. Each of the following shall constitute an Event of Default:

               (a) There shall occur any default by Borrower in the payment, when due, of any principal of or
interest on any Note or any fee due hereunder; or there shall occur any default by Borrower in the
payment of any other amounts due hereunder, under any other Loan Document, or under any other
Obligations which continues for 5 days after the same becomes due; or

               (b) There shall occur any default by Borrower in the performance of any agreement, covenant or
obligation contained in Section 5.1, 5.5, 5.6, or Section 6 or Section 7 of this Agreement; or

               (c) There shall occur any default by Borrower or any other party to any Loan Document (other
than Bank) in the performance of any other agreement, covenant or obligation contained in this

31

 

Agreement or such Loan Document not provided for elsewhere in this Section 8 and the breach of such
other agreement, covenant or obligation is not cured to Bank’s satisfaction within 15 days after
any Senior Officer’s receipt of notice of such breach from Bank; provided, however, that such
notice and opportunity to cure shall not apply in the case of any failure to perform, keep or
observe any covenant which is not capable of being cured at all or within such 15-day period or
which is a willful and knowing breach by Borrower or such other party; or

               (d) Any representation or warranty made by Borrower or any other party to any Loan Document
(other than Bank) herein or therein or in any certificate or report furnished in connection
herewith or therewith shall prove to have been untrue or incorrect in any material respect when
made; or

               (e) Any other obligation now or hereafter owed by Borrower or any Subsidiary or any Guarantor
to Bank or any Affiliate of Bank shall be in default and not cured within the grace period, if any,
provided therein; or

               (f) Borrower or any Subsidiary or Guarantor shall fail to make any payment in respect of
outstanding Debt (other than the Obligations) in an aggregate principal amount of $25,000.00 or
more when due after the expiration of any applicable grace period, or any event or condition shall
occur which results in the acceleration of the maturity of such Debt (including, without
limitation, any required mandatory prepayment or “put” of such Debt to any such Person) or enables
(or, with the giving of notice or lapse of time or both, would enable) the holders of such Debt or
a commitment related to such Debt (or any Person acting on such holders’ behalf) to accelerate the
maturity thereof or terminate any such commitment prior to its normal expiration (including,
without limitation, any required mandatory prepayment or “put” of such Debt to such Person); or

               (g) Borrower or any Subsidiary or any Guarantor shall (A) voluntarily dissolve, liquidate or
terminate operations or apply for or consent to the appointment of, or the taking of possession by,
a
receiver, custodian, trustee or liquidator of such Person or of all or of a substantial part
of its assets, (B) admit in writing its inability, or be generally unable, to pay its debts as the
debts become due, (C) make a general assignment for the benefit of its creditors, (D) commence a
voluntary case under the federal Bankruptcy Code (as now or hereafter in effect), (E) file a
petition seeking to take advantage of any other law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, (F) fail to controvert in a
timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an
involuntary case under Bankruptcy Code, or (G) take any corporate action for the purpose of
effecting any of the foregoing; or

               (h) An involuntary petition or complaint shall be filed against Borrower or any Subsidiary or
any Guarantor seeking bankruptcy relief or reorganization or the appointment of a receiver,
custodian, trustee, intervenor or liquidator of Borrower or any Subsidiary or any Guarantor, of all
or substantially all of its assets, and such petition or complaint shall not have been dismissed
within sixty (60) days of the filing thereof; or an order, order for relief, judgment or decree
shall be entered by any court of competent jurisdiction or other competent authority approving or
ordering any of the foregoing actions; or

               (i) A judgment in excess of $50,000.00 shall be rendered against Borrower or any Subsidiary or
Guarantor and shall remain undischarged, undismissed and unstayed for more than ten days (except
judgments validly covered by insurance with a deductible of not more than $50,000.00) or there
shall occur any levy upon, or attachment, garnishment or other seizure of, any portion of the
Collateral or other assets of Borrower, any Subsidiary or any Guarantor in excess of $50,000.00 by
reason of the issuance of any tax levy, judicial attachment or garnishment or levy of execution; or

               (j) Any Guarantor shall attempt to repudiate or revoke any Guaranty Agreement; or

               (k) Loss, theft, damage or destruction of any material portion of the tangible Collateral for
which there is either no insurance coverage or for which, in the reasonable opinion of Bank, there
is insufficient insurance coverage; or

32

 

               (l) There shall occur any change in the condition (financial or otherwise) of Borrower and/or
any Guarantor which, in the reasonable opinion of Bank, could have a Material Adverse Effect; or

               (m) The death (1) of the holder of the majority ownership interests of Borrower, or (2) of any
individual Guarantor, and alternate arrangements reasonably acceptable to the Bank shall not have
been agreed upon within 90 days thereafter; or

               (n) Billy D. Prim shall cease for any reason to be the chief executive officer of Borrower and
a successor CEO reasonably acceptable to the Bank shall not have been employed within 90 days
thereafter.

          8.2 Remedies. If any Default shall occur, Bank may, without notice to Borrower, at its
option, withhold further Loans or other extensions of credit to Borrower. If an Event of Default
shall have occurred and be continuing, Bank may at its option take any or all of the following
actions:

               (a) Bank may declare any or all Obligations (other than Obligations under any Swap Agreements,
between Borrower and Bank or any Affiliate of Bank, which shall be due in accordance with and
governed by the provisions of said Swap Agreements) to be immediately due and payable (if not
earlier demanded), terminate its obligation to make Loans and other extensions of credit to
Borrower, bring suit against Borrower to collect the Obligations, exercise any remedy available to
Bank hereunder or at law and take any action or exercise any remedy provided herein or in any other
Loan Document or under applicable law. No remedy shall be exclusive of other remedies or impair
the right of Bank to exercise any other remedies.

               (b) Without waiving any of its other rights hereunder or under any other Loan Document, Bank
shall have all rights and remedies of a secured party under the Code (and the Uniform Commercial
Code of any other applicable jurisdiction) and such other rights and remedies as may be available
hereunder, under other applicable law or pursuant to contract. If requested by Bank, Borrower will
promptly assemble the Collateral and make it available to Bank at a place to be designated by Bank.
Borrower agrees that any notice by Bank of the sale or disposition of the Collateral or any other
intended action hereunder, whether required by the Code or otherwise, shall constitute reasonable
notice to Borrower if the notice is mailed to Borrower by regular or certified mail, postage
prepaid, at least five days before the action to be taken. Borrower shall be liable for any
deficiencies in the event the proceeds of the disposition of the Collateral do not satisfy the
Obligations in full.

               (c) Bank may demand, collect and sue for all amounts owed pursuant to Accounts, General
Intangibles, Chattel Paper, Instruments, Documents or for proceeds of any Collateral (either in
Borrower’s name or Bank’s name at the latter’s option), with the right to enforce, compromise,
settle or discharge any such amounts.

          8.3 Receiver. In addition to any other remedy available to it, Bank shall have the
absolute right, upon the occurrence of an Event of Default, to seek and obtain the appointment of a
receiver to take possession of and operate and/or dispose of the business and assets of Borrower
and any costs and expenses incurred by Bank in connection with such receivership shall bear
interest at the Default Rate, at Bank’s option, and shall be secured by all Collateral.

          8.4 Deposits; Insurance. After the occurrence of an Event of Default, Borrower authorizes
Bank to collect and apply against the Obligations when due any cash or Deposit Accounts in its
possession, and any refund of insurance premiums or any insurance proceeds payable on account of
the loss or damage to any of the Collateral and irrevocably appoints Bank as its attorney-in-fact
to endorse any check or draft or take other action necessary to obtain such funds.

     9. Security Agreement.

          9.1 Security Interest.

33

 

               (a) As security for the payment and performance of any and all Obligations and the performance
of all obligations and covenants of Borrower to Bank and its Affiliates, whether hereunder and
under the other Loan Documents, Swap Agreements between Bank or any Affiliate of Bank and Borrower
or otherwise, certain or contingent, now existing or hereafter arising, which are now, or may at
any time or times hereafter be owing by Borrower to Bank or any of Bank’s Affiliates, Borrower
hereby grants to Bank (for itself and its Affiliates) a continuing security interest in and general
lien upon and right of set-off against, all right, title and interest of Borrower in and to the
Collateral, whether now owned or hereafter acquired by Borrower.

               (b) Except as herein or by applicable law otherwise expressly provided, Bank shall not be
obligated to exercise any degree of care in connection with any Collateral in its possession, to
take any steps necessary to preserve any rights in any of the Collateral or to preserve any rights
therein against prior parties, and Borrower agrees to take such steps. In any case Bank shall be
deemed to have exercised reasonable care if it shall have taken such steps for the care and
preservation of the Collateral or rights therein as Borrower may have reasonably requested Bank to
take and Bank’s omission to take any action not requested by Borrower shall not be deemed a failure
to exercise reasonable care. No segregation or specific allocation by Bank of specified items of
Collateral against any liability of Borrower shall waive or affect any security interest in or Lien
against other items of Collateral or any of Bank’s options, powers or rights under this Agreement
or otherwise arising.

               (c) Bank may at any time and from time to time after the occurrence of and during the
continuance of an Event of Default, with or without notice to Borrower, (i) transfer into the name
of Bank or the name of Bank’s nominee any of the Collateral, (ii) notify any Account Debtor or
other obligor of any Collateral to make payment thereon direct to Bank of any amounts due or to
become due thereon and (iii) receive and direct the disposition of any proceeds of any Collateral
except pursuant to this Agreement.

               (d) Notwithstanding the foregoing, (i) no Account, Instrument, Chattel Paper or other
obligation or property of any kind due from, owed by or belonging to, a Sanctioned Person or (ii)
any lease in which the lessee is a Sanctioned Person shall be Collateral or shall be credited
toward the payment of the Obligations.

          9.2 Financing Statements; Power of Attorney. Borrower authorizes Bank at Borrower’s
expense to file any financing statements and/or amendments thereto relating to the Collateral
(without Borrower’s signature thereon) which Bank deems appropriate that (a) indicate the
Collateral (i) as “all assets” of Borrower or words of similar effect, if appropriate, regardless
of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of
the Code, or (ii) by specific Collateral category, and (b) provide any other information required
by part 5 of Article 9 of the Code for the sufficiency or filing office acceptance of any financing
statement or amendment. Borrower irrevocably appoints Bank as its attorney-in-fact to execute any
such financing statements and/or control agreements in Borrower’s name and to perform all other
acts, at Borrower’s expense, which Bank deems appropriate to perfect and to continue perfection of
the security interest of Bank. Effective upon the occurrence of and during the continuance of an
Event of Default, Borrower hereby appoints Bank as Borrower’s attorney-in-fact to endorse, present
and collect on behalf of Borrower and in Borrower’s name any draft, checks or other documents
necessary or desirable to collect any amounts which Borrower may be owed. Effective upon the
occurrence of and during the continuance of an Event of Default, Bank is hereby granted a license
or other right to use, without charge, Borrower’s labels, patents, copyrights, rights of use of any
name, trade secrets, trade names, trademarks and advertising matter, or any Property of a similar
nature, as it pertains to the Collateral, in advertising for sale and selling any Collateral, and
Borrower’s rights under all licenses and all franchise agreements shall inure to Bank’s benefit.
The proceeds realized from the sale or other disposition of any Collateral may be applied, first to
the reasonable costs, expenses and attorneys’ fees and expenses incurred by Bank for collection and
for acquisition, completion, protection, removal, storage, sale and delivering of the Collateral;
secondly, to interest due upon any of the Obligations; and thirdly, to the principal amount of the
Obligations and to any other Obligations then outstanding. If any deficiency shall arise, Borrower
and each Guarantor (but only to the extent set forth in such Guaranty Agreement) shall remain
jointly and severally liable to Bank therefor.

          9.3 Entry. Borrower hereby irrevocably consents to any act by Bank or its agents in
entering upon any premises for the purposes of either (i) inspecting the Collateral or (ii) taking
possession of the Collateral

34

 

and Borrower hereby waives its right to assert against Bank or its agents any claim based upon
trespass or any similar cause of action for entering upon any premises where the Collateral may be
located.

          9.4 Other Rights. Borrower authorizes Bank without affecting Borrower’s obligations
hereunder or under any other Loan Document from time to time (i) to take from any party and hold
additional Collateral or guaranties for the payment of the Obligations or any part thereof, and to
exchange, enforce or release such collateral or guaranty of payment of the Obligations or any part
thereof and to release or substitute any endorser or guarantor or any party who has given any
security interest in any collateral as security for the payment of the Obligations or any part
thereof or any party in any way obligated to pay the Obligations or any part thereof; and (ii) upon
the occurrence of any Event of Default to direct the manner of the disposition of the Collateral
and the enforcement of any endorsements, guaranties, letters of credit or other security relating
to the Obligations or any part thereof as Bank in its sole discretion may determine.

          9.5 Accounts. Bank may require a lockbox arrangement hereunder at any time; and Borrower
shall promptly after request from Bank notify Account Debtors on the Accounts to forward payments
on the Accounts to the lockbox. After any Event of Default and during the continuance thereof,
Bank may notify any Account Debtor of Bank’s security interest and may direct such Account Debtor
to make payment directly to Bank for application against the Obligations. Any such payments
received by or on behalf of Borrower at any time, whether before or after default, shall be the
property of Bank, shall be held in trust for Bank and not commingled with any other assets of any
Person (except to the extent they may be commingled with other assets of Borrower in an account
with Bank) and shall be immediately delivered to Bank in the form received. Bank shall have the
right to apply any proceeds of Collateral to such of the Obligations as it may determine.

          9.6 Waiver of Marshaling. Borrower hereby waives any right it may have to require
marshaling of its assets.

          9.7 Control. Borrower will cooperate with Bank in obtaining control of, or control
agreements with respect to, Collateral for which control or a control agreement is required for
perfection of the Bank’s security interest under the Code.

     10. Miscellaneous.

          10.1 No Waiver, Remedies Cumulative. No failure on the part of Bank to exercise, and no
delay in exercising, any right hereunder or under any other Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any right hereunder preclude any other or
further exercise thereof or the exercise of any other right. The remedies herein provided are
cumulative and are in addition to any other remedies provided by law, any Loan Document or
otherwise.

          10.2 Survival of Representations. All representations and warranties made herein shall
survive the making of the Loan hereunder and the delivery of the Note, and shall continue in full
force and effect so long as any Obligations is outstanding, there exists any commitment by Bank to
Borrower, and until this Agreement is formally terminated in writing.

          10.3 Indemnity By Borrower; Expenses. In addition to all other Obligations, Borrower
agrees to defend, protect, indemnify and hold harmless Bank and its Affiliates and all of their
respective officers, directors, employees, attorneys, consultants and agents from and against any
and all losses, damages, liabilities, obligations, penalties, fines, fees, costs and expenses
(including, without limitation, attorneys’ and paralegals’ fees, costs and expenses, and fees,
costs and expenses for investigations and experts) incurred by such indemnitees, whether prior to
or from and after the date hereof, as a result of or arising from or relating to (i) the
negotiation, preparation, execution and/or performance of any of the Loan Documents or of any
document executed in connection with the transactions contemplated thereby and the perfection of
Bank’s Liens in the Collateral, maintenance of the Loan by Bank, and any and all amendments,
modifications, and supplements of any of the Loan Documents or restructuring of the Obligations,
(ii) any suit, investigation, action or proceeding by any Person (other than Borrower), whether
threatened or initiated, asserting a claim for any legal or equitable remedy against any

35

 

Person under any statute, regulation or common law principle, arising from or in connection with
Bank’s furnishing of funds to Borrower under this Agreement, (iii) Bank’s preservation,
administration and enforcement of its rights under the Loan Documents and applicable law, including
reasonable attorneys’ fees if collected by or through an attorney at law and disbursements of
counsel for Bank in connection therewith, whether suit be brought or not and whether incurred at
trial or on appeal, and all costs of repossession, storage, disposition, protection and collection
of Collateral, (iv) periodic field exams, audits and appraisals performed by Bank pursuant to
Section 5.5 hereof;(v) any civil penalty or fine assessed by OFAC against Bank or any Affiliate of
Bank and all reasonable costs and expense (including counsel fees and disbursements) incurred in
connection with defense thereof by Bank or such Affiliate, as a result of the funding of Loans or
the extension of credit, the acceptance of payments due under the Loan Documents or any Swap
Agreement or acceptance of Collateral, and/or (vi) any matter relating to the financing
transactions contemplated by the Loan Documents or by any document executed in connection with the
transactions contemplated thereby, other than for such loss, damage, liability, obligation,
penalty, fee, cost or expense arising from such indemnitee’s gross negligence or willful
misconduct. If Borrower should fail to pay any tax or other amount required by this Agreement to
be paid or which may be reasonably necessary to protect or preserve any Collateral or Borrower’s or
Bank’s interests therein, Bank may make such payment and the amount thereof shall be payable on
demand, may at Bank’s option be debited against any Deposit Account of Borrower at Bank or
converted to a Loan hereunder, shall bear interest at the Default Rate from the date of demand
until paid and shall be deemed to be Obligations entitled to the benefit and security of the Loan
Documents. In addition, Borrower agrees to pay and save Bank harmless against any liability for
payment of any state documentary stamp taxes, intangible taxes or similar taxes (including interest
or penalties, if any) which may now or hereafter be determined to be payable in respect to the
execution, delivery or recording of any Loan Document or the making of any Loan, whether originally
thought to be due or not, and regardless of any mistake of fact or law on the part of Bank or
Borrower with respect to the applicability of such tax. Borrower’s obligation for indemnification
for all of the foregoing losses, damages, liabilities, obligations, penalties, fees, costs and
expenses of Bank shall be part of the Obligations, secured by the Collateral, chargeable against
Borrower’s loan account, and shall survive termination of this Agreement.

          10.4 Notices. Any notice or other communication hereunder or under the Note to any party
hereto or thereto shall be by hand delivery, overnight delivery via nationally recognized overnight
delivery service, facsimile with receipt confirmed, telegram, telex or registered or certified
United States mail with return receipt and unless otherwise provided herein shall be deemed to have
been given or made when delivered, telegraphed, telexed, faxed or, if sent via United States mail,
when receipt signed by the receiver, postage prepaid, addressed to the party at its address
specified below (or at any other address that the party may hereafter specify to the other parties
in writing):

	 	 	 

	 	Bank:

	Wachovia Bank, National Association
	 

	 	101 North Main Street
	 

	 	Winston-Salem, North Carolina 27150
	 

	 	Mail Code: NC 6713
	 

	 	Fax No.
	 

	 	Attn:
	 
	 	 
	 	Borrower:

	Primo Water Corporation
	 

	 	101 N. Cherry Street, Suite 700
	 

	 	Winston-Salem, North Carolina 27101
	 

	 	Fax No.
	 

	 	Attn:

          10.5 Governing Law. This Agreement and the Loan Documents shall be deemed contracts made
under the laws of the State of the Jurisdiction and shall be governed by and construed in
accordance with the laws of said state (excluding its conflict of laws provisions if such
provisions would require application of the laws of another jurisdiction) except insofar as the
laws of another jurisdiction may, by reason of mandatory provisions of law, govern the perfection,
priority and enforcement of security interests in the Collateral.

36

 

          10.6 Successors and Assigns. This Agreement shall be binding upon and shall inure to the
benefit of Borrower and Bank, and their respective successors and assigns; provided, that Borrower
may not assign any of its rights hereunder without the prior written consent of Bank, and any such
assignment made without such consent will be void.

          10.7 Counterparts; Telecopied Signatures. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original and all of which when taken together shall
constitute but one and the same instrument. Any signature delivered by a party by facsimile
transmission shall be deemed to be an original signature hereto.

          10.8 No Usury. Regardless of any other provision of this Agreement, the Note or in any
other Loan Document, if for any reason the effective interest should exceed the maximum lawful
interest, the effective interest shall be deemed reduced to, and shall be, such maximum lawful
interest, and (i) the amount which would be excessive interest shall be deemed applied to the
reduction of the principal balance of the Note and not to the payment of interest, and (ii) if the
loan evidenced by the Note has been or is thereby paid in full, the excess shall be returned to the
party paying same, such application to the principal balance of the Note or the refunding of excess
to be a complete settlement and acquittance thereof.

          10.9 Powers. All powers of attorney granted to Bank are coupled with an interest and are
irrevocable.

          10.10 Approvals; Amendments. If this Agreement calls for the approval or consent of Bank,
such approval or consent may be given or withheld in the discretion of Bank unless otherwise
specified herein. This Agreement and the other Loan Documents may not be modified, altered or
amended, except by an agreement in writing signed by Borrower and Bank and may not be modified in
any manner adverse to a provider under any secured or guarantied Swap Agreement without that
provider’s prior written consent.

          10.11 Participations and Assignments. Bank shall have the right to enter into one or more
participation with other lenders with respect to the Obligations and to assign to one or more
assignees all or a portion of its interest, rights and obligations under the Loan Documents. Upon
prior notice to Borrower of such participation or assignment, Borrower shall thereafter furnish to
such participant or assignee any information furnished by Borrower to Bank pursuant to the terms of
the Loan Documents. Nothing in this Agreement or any other Loan Document shall prohibit Bank from
pledging or assigning this Agreement and Bank’s rights under any of the other Loan Documents,
including collateral therefor, to any Federal Reserve Bank in accordance with applicable law.

          10.12 Dealings with Multiple Borrowers. If more than one Person is named as Borrower
hereunder or becomes a Borrower hereunder pursuant to a Joinder Agreement, all Obligations,
representations, warranties, covenants and indemnities set forth in the Loan Documents to which
such Person is a party shall be joint and several. Bank shall have the right to deal with any
individual of any Borrower with regard to all matters concerning the rights and obligations of Bank
hereunder and pursuant to applicable law with regard to the transactions contemplated under the
Loan Documents. All actions or inactions of the officers, managers, members and/or agents of any
Borrower with regard to the transactions contemplated under the Loan Documents shall be deemed with
full authority and binding upon all Borrowers hereunder. Each Borrower hereby appoints Primo Water
Corporation as its true and lawful attorney-in-fact, with full right and power, for purposes of
exercising all rights of such Person hereunder and under applicable law with regard to the
transactions contemplated under the Loan Documents. The foregoing is a material inducement to the
agreement of Bank to enter into the terms hereof and to consummate the transactions contemplated
hereby.

          10.13 Waiver of Certain Defenses. To the fullest extent permitted by applicable law, upon
the occurrence of any Event of Default, neither Borrower nor anyone claiming by or under Borrower
will claim or seek to take advantage of N.C.G.S. 26-7, et seq. or any other law requiring Bank to
attempt to realize upon any Collateral or collateral of any surety or guarantor, or any
appraisement, evaluation, stay, extension, homestead, redemption or

37

 

exemption laws now or hereafter in force in order to prevent or hinder the enforcement of this
Agreement. Borrower, for itself and all who may at any time claim through or under Borrower,
hereby expressly waives to the fullest extent permitted by law the benefit of all such laws. All
rights of Bank and all obligations of Borrower hereunder shall be absolute and unconditional
irrespective of (i) any change in the time, manner or place of payment of, or any other term of,
all or any of the Obligations, or any other amendment or waiver of or any consent to any departure
from any provision of the Loan Documents, (ii) any exchange, release or non-perfection of any other
collateral given as security for the Obligations, or any release or amendment or waiver of or
consent to departure from any guaranty for all or any of the Obligations, or (iii) any other
circumstance which might otherwise constitute a defense available to, or a discharge of, Borrower
or any third party, other than payment and performance in full of the Obligations.

          10.14 Integration; Final Agreement. This Agreement and the other loan documents represent
the final agreement between the parties and may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements of the parties. There are no unwritten oral
agreements between the parties.

          10.15 LIMITATION ON LIABILITY; WAIVER OF PUNITIVE DAMAGES. EACH OF THE PARTIES HERETO,
INCLUDING BANK BY ACCEPTANCE HEREOF, AGREES THAT IN ANY JUDICIAL, MEDIATION OR ARBITRATION
PROCEEDING OR ANY CLAIM OR CONTROVERSY BETWEEN OR AMONG THEM (A “DISPUTE”) THAT MAY ARISE OUT OF OR
BE IN ANY WAY CONNECTED WITH THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY OTHER AGREEMENT OR DOCUMENT
BETWEEN OR AMONG THEM OR THE OBLIGATIONS EVIDENCED HEREBY OR RELATED HERETO, IN NO EVENT SHALL ANY
PARTY HAVE A REMEDY OF, OR BE LIABLE TO THE OTHER FOR, (1) INDIRECT, SPECIAL OR CONSEQUENTIAL
DAMAGES OR (2) PUNITIVE OR EXEMPLARY DAMAGES. EACH OF THE PARTIES HEREBY EXPRESSLY WAIVES ANY
RIGHT OR CLAIM TO PUNITIVE OR EXEMPLARY DAMAGES THEY MAY HAVE OR WHICH MAY ARISE IN THE FUTURE IN
CONNECTION WITH ANY DISPUTE, WHETHER THE DISPUTE IS RESOLVED BY ARBITRATION, MEDIATION, JUDICIALLY
OR OTHERWISE.

          10.16 BINDING ARBITRATION; PRESERVATION OF REMEDIES.

               (a) Binding Arbitration. Upon demand of any party hereto, whether made before or after
institution of any judicial proceeding, any claim or controversy between parties hereto arising
out of or relating to this Agreement or any other Loan Documents shall be resolved by binding
arbitration conducted under and governed by the Commercial Financial Disputes Arbitration Rules
(the “Arbitration Rules”) of the American Arbitration Association (the “AAA”) and the Federal
Arbitration Act. Disputes may include, without limitation, tort claims, counterclaims, a dispute
as to whether a matter is subject to arbitration, claims brought as class actions, or claims
arising from documents executed in the future. A judgment upon the award may be entered in any
court having jurisdiction. Notwithstanding the foregoing, this arbitration provision does not apply
to disputes under or related to Swap Agreements.

               (b) Special Rules. All arbitration hearings shall be conducted in the city named in
the address of Bank first stated above. A hearing shall begin within 90 days of demand for
arbitration and all hearings shall conclude within 120 days of demand for arbitration. These time
limitations may not be extended unless a party shows cause for extension and then for no more than
a total of 60 days. The expedited procedures set forth in Rule 51 et seq. of the
Arbitration Rules shall be applicable to claims of less than $1,000,000.00. Arbitrators shall be
licensed attorneys selected from the Commercial Financial Dispute Arbitration Panel of the AAA.
The parties do not waive applicable Federal or state substantive law except as provided herein.

               (c) Preservation and Limitation of Remedies. Notwithstanding the preceding binding
arbitration provisions, the parties agree to preserve, without diminution, certain remedies that
any party may exercise before or after an arbitration proceeding is brought. The parties shall
have the right to proceed in any court of proper jurisdiction or by self-help to exercise or
prosecute the following remedies, as applicable: (i) all rights to foreclose against any real or
personal property or other security by exercising a power of sale or under applicable law by
judicial foreclosure including a proceeding to confirm the sale; (ii) all rights of self-help
including peaceful

38

 

occupation of real property and collection of rents, set-off, and peaceful possession of
personal property; (iii) obtaining provisional or ancillary remedies including injunctive relief,
sequestration, garnishment, attachment, appointment of receiver and filing an involuntary
bankruptcy proceeding; and (iv) when applicable, a judgment by confession of judgment. Any claim
or controversy with regard to any party’s entitlement to such remedies is a Dispute.

               (d) Waiver of Jury Trial. THE PARTIES ACKNOWLEDGE THAT BY AGREEING TO BINDING
ARBITRATION THEY HAVE IRREVOCABLY WAIVED ANY RIGHT THEY MAY HAVE TO JURY TRIAL WITH REGARD TO A
DISPUTE.

[Signatures on following page]

39

 

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed under
seal as of the day and year first above written.

	 	 	 	 	 
	 	PRIMO WATER CORPORATION (SEAL)

 	  
	 	By  	/s/ Billy D. Prim
 	 
	 	 	Name:  	Billy D. Prim  	 
	 	 	Its: President 	 	 
	 
	 	Accepted in Winston-Salem, North Carolina:

WACHOVIA BANK, NATIONAL ASSOCIATION (SEAL)

 	  
	 	By  	/s/ Michael L. Rogers
 	 
	 	 	Michael L. Rogers, Senior Vice President

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00172-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00172-of-00352.parquet"}]]