Document:

ex10-1.htm

    Exhibit
10.1

     

     

    [EXECUTION]

    

    

     

    

    

    LOAN
AND SECURITY AGREEMENT

     

    by
and among

     

    AMERICAN
BILTRITE INC.

    IDEAL
TAPE CO., INC.

    K&M
ASSOCIATES L.P.,

    as
US Borrowers

     

    and

     

    AMERICAN
BILTRITE (CANADA) LTD.,

    as
Canadian Borrower

     

    and

     

    OCEAN
STATE JEWELRY, INC.

    MAJESTIC
JEWELRY, INC.

    425
DEXTER ASSOCIATES, L.P.,

    AMERICAN
BILTRITE FAR EAST, INC.,

    as
US Guarantors

     

    

     

    THE
LENDERS AND ISSUING BANK FROM TIME TO TIME PARTY HERETO

     

    

     

    WACHOVIA
BANK, NATIONAL ASSOCIATION

    as
Agent

     

    Dated:
as of June 30, 2009

     

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    TABLE OF
CONTENTS

     

    
      	
              SECTION
      1.

            	
              DEFINITIONS

            	
              1

            
	 
      	 
      	 
      
	
              SECTION
      2.

            	
              CREDIT
      FACILITIES

            	
              34

            
	
              2.1

            	
              Loans.

            	
              34

            
	
              2.2

            	
              Letters
      of Credit.

            	
              35

            
	
              2.3

            	
              Term
      Loan.

            	
              40

            
	
              2.4

            	
              Commitments

            	
              40

            
	 
      	 
      	 
      
	
              SECTION
      3.

            	
              INTEREST
      AND FEES

            	
              40

            
	 
      	 
      	 
      
	
              3.1

            	
              Interest.

            	
              40

            
	
              3.2

            	
              Fees.

            	
              43

            
	
              3.3

            	
              Changes
      in Laws and Increased Costs of Loans.

            	
              43

            
	 
      	 
      	 
      
	
              SECTION
      4.

            	
              CONDITIONS
      PRECEDENT

            	
              45

            
	 
      	 
      	 
      
	
              4.1

            	
              Conditions
      Precedent to Initial Loans and Letters of Credit.

            	
              45

            
	
              4.2

            	
              Conditions
      Precedent to All Loans and Letters of Credit

            	
              48

            
	 
      	 
      	 
      
	
              SECTION
      5.

            	
              GRANT
      AND PERFECTION OF SECURITY INTEREST

            	
              48

            
	 
      	 
      	 
      
	
              5.1

            	
              Grant
      of Security Interest

            	
              48

            
	
              5.2

            	
              Perfection
      of Security Interests.

            	
              50

            
	
              5.3

            	
              Special
      Provisions Relating to Collateral.

            	
              53

            
	 
      	 
      	 
      
	
              SECTION
      6.

            	
              COLLECTION
      AND ADMINISTRATION

            	
              54

            
	 
      	 
      	 
      
	
              6.1

            	
              Borrowers’
      Loan Accounts

            	
              54

            
	
              6.2

            	
              Statements

            	
              54

            
	
              6.3

            	
              Collection
      of Accounts.

            	
              54

            
	
              6.4

            	
              Payments.

            	
              55

            
	
              6.5

            	
              Taxes.

            	
              58

            
	
              6.6

            	
              Authorization
      to Make Loans.

            	
              62

            
	
              6.7

            	
              Use
      of Proceeds.

            	
              62

            
	
              6.8

            	
              Appointment
      of Administrative Borrower as Agent for Requesting Loans and Receipts of
      Loans and Statements.

            	
              62

            
	
              6.9

            	
              Pro
      Rata Treatment

            	
              63

            
	
              6.10

            	
              Sharing
      of Payments, Etc.

            	
              63

            
	
              6.11

            	
              Settlement
      Procedures.

            	
              64

            
	
              6.12

            	
              Obligations
      Several; Independent Nature of Lenders’ Rights

            	
              68

            
	
              6.13

            	
              Bank
      Products

            	
              68

            
	 
      	 
      	 
      
	
              SECTION
      7.

            	
              COLLATERAL
      REPORTING AND COVENANTS

            	
              69

            
	 
      	 
      	 
      
	
              7.1

            	
              Collateral
      Reporting.

            	
              69

            

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    

    
      	
              7.2

            	
              Accounts
      Covenants.

            	
              70

            
	
              7.3

            	
              Inventory
      Covenants

            	
              71

            
	
              7.4

            	
              Equipment
      and Real Property Covenants

            	
              71

            
	
              7.5

            	
              Power
      of Attorney

            	
              72

            
	
              7.6

            	
              Right
      to Cure

            	
              73

            
	
              7.7

            	
              Access
      to Premises

            	
              73

            
	
              7.8

            	
              Bills
      of Lading and Other Documents of Title.

            	
              73

            
	 
      	 
      	 
      
	
              SECTION
      8.

            	
              REPRESENTATIONS
      AND WARRANTIES

            	
              74

            
	 
      	 
      	 
      
	
              8.1

            	
              Existence,
      Power and Authority

            	
              74

            
	
              8.2

            	
              Name;
      Jurisdiction of Organization; Chief Executive Office; Collateral
      Locations.

            	
              74

            
	
              8.3

            	
              Financial
      Statements; No Material Adverse Change

            	
              75

            
	
              8.4

            	
              Priority
      of Liens; Title to Properties

            	
              75

            
	
              8.5

            	
              Tax
      Returns

            	
              76

            
	
              8.6

            	
              Litigation

            	
              76

            
	
              8.7

            	
              Compliance
      with Other Agreements and Applicable Laws.

            	
              76

            
	
              8.8

            	
              Environmental
      Compliance.

            	
              77

            
	
              8.9

            	
              Employee
      Benefits.

            	
              77

            
	
              8.10

            	
              Bank
      Accounts

            	
              78

            
	
              8.11

            	
              Intellectual
      Property

            	
              79

            
	
              8.12

            	
              Subsidiaries;
      Affiliates; Capitalization; Solvency.

            	
              79

            
	
              8.13

            	
              Labor
      Disputes.

            	
              80

            
	
              8.14

            	
              Restrictions
      on Subsidiaries

            	
              80

            
	
              8.15

            	
              Material
      Contracts

            	
              80

            
	
              8.16

            	
              Payable
      Practices

            	
              80

            
	
              8.17

            	
              Accuracy
      and Completeness of Information

            	
              80

            
	
              8.18

            	
              Survival
      of Warranties; Cumulative

            	
              81

            
	 
      	 
      	 
      
	
              SECTION
      9.

            	
              AFFIRMATIVE
      AND NEGATIVE COVENANTS

            	
              81

            
	 
      	 
      	 
      
	
              9.1

            	
              Maintenance
      of Existence.

            	
              81

            
	
              9.2

            	
              New
      Collateral Locations

            	
              81

            
	
              9.3

            	
              Compliance
      with Laws, Regulations, Etc.

            	
              82

            
	
              9.4

            	
              Payment
      of Taxes and Claims

            	
              83

            
	
              9.5

            	
              Insurance

            	
              83

            
	
              9.6

            	
              Financial
      Statements and Other Information.

            	
              84

            
	
              9.7

            	
              Sale
      of Assets, Consolidation, Merger, Amalgamation, Dissolution,
      Etc.

            	
              86

            
	
              9.8

            	
              Encumbrances

            	
              88

            
	
              9.9

            	
              Indebtedness

            	
              90

            
	
              9.10

            	
              Loans,
      Investments, Etc.

            	
              92

            
	
              9.11

            	
              Dividends
      and Redemptions

            	
              94

            
	
              9.12

            	
              Transactions
      with Affiliates

            	
              95

            
	
              9.13

            	
              Compliance
      with ERISA.

            	
              96

            
	
              9.14

            	
              End
      of Fiscal Years; Fiscal Quarters

            	
              97

            
	
              9.15

            	
              Change
      in Business

            	
              97

            
	
              9.16

            	
              Limitation
      of Restrictions Affecting Subsidiaries

            	
              97

            

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    

    
      	
              9.17

            	
              Financial
      Covenants.

            	
              97

            
	
              9.18

            	
              License
      Agreements.

            	
              100

            
	
              9.19

            	
              Foreign
      Assets Control Regulations, Etc.

            	
              101

            
	
              9.20

            	
              Costs
      and Expenses

            	
              102

            
	
              9.21

            	
              Applications
      under Insolvency Statutes

            	
              102

            
	
              9.22

            	
              After
      Acquired Real Property

            	
              102

            
	
              9.23

            	
              Further
      Assurances

            	
              103

            
	 
      	 
      	 
      
	
              SECTION
      10.

            	
              EVENTS
      OF DEFAULT AND REMEDIES

            	
              103

            
	 
      	 
      	 
      
	
              10.1

            	
              Events
      of Default

            	
              103

            
	
              10.2

            	
              Remedies.

            	
              106

            
	 
      	 
      	 
      
	
              SECTION
      11.

            	
              JURY
      TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW

            	
              109

            
	 
      	 
      	 
      
	
              11.1

            	
              Governing
      Law; Choice of Forum; Service of Process; Jury Trial
    Waiver.

            	
              109

            
	
              11.2

            	
              Waiver
      of Notices

            	
              111

            
	
              11.3

            	
              Amendments
      and Waivers.

            	
              111

            
	
              11.4

            	
              Waiver
      of Counterclaims

            	
              113

            
	
              11.5

            	
              Indemnification

            	
              113

            
	 
      	 
      	 
      
	
              SECTION
      12.

            	
              THE
      AGENT

            	
              114

            
	 
      	 
      	 
      
	
              12.1

            	
              Appointment,
      Powers and Immunities.

            	
              114

            
	
              12.2

            	
              Reliance
      by Agent

            	
              115

            
	
              12.3

            	
              Events
      of Default.

            	
              116

            
	
              12.4

            	
              Wachovia
      in its Individual Capacity

            	
              116

            
	
              12.5

            	
              Indemnification

            	
              116

            
	
              12.6

            	
              Non-Reliance
      on Agent and Other Lenders

            	
              117

            
	
              12.7

            	
              Failure
      to Act

            	
              117

            
	
              12.8

            	
              Additional
      Loans

            	
              117

            
	
              12.9

            	
              Concerning
      the Collateral and the Related Financing Agreements

            	
              118

            
	
              12.10

            	
              Field
      Audit, Examination Reports and other Information; Disclaimer by
      Lenders.

            	
              118

            
	
              12.11

            	
              Collateral
      Matters.

            	
              118

            
	
              12.12

            	
              Agency
      for Perfection

            	
              120

            
	
              12.13

            	
              Successor
      Agent

            	
              120

            
	
              12.14

            	
              Other
      Agent Designations.

            	
              121

            
	 
      	 
      	 
      
	
              SECTION
      13.

            	
              TERM
      OF AGREEMENT; MISCELLANEOUS

            	
              121

            
	 
      	 
      	 
      
	
              13.1

            	
              Term.

            	
              121

            
	
              13.2

            	
              Interpretative
      Provisions.

            	
              122

            
	
              13.3

            	
              Notices.

            	
              125

            
	
              13.4

            	
              Partial
      Invalidity

            	
              125

            
	
              13.5

            	
              Confidentiality.

            	
              126

            
	
              13.6

            	
              Successors

            	
              127

            
	
              13.7

            	
              Assignments;
      Participations.

            	
              127

            
	
              13.8

            	
              Entire
      Agreement

            	
              129

            
	
              13.9

            	
              USA
      Patriot Act

            	
              129

            
	
              13.10

            	
              Counterparts,
      Etc.

            	
              129

            

    

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    

    INDEX

    TO

    EXHIBITS
AND SCHEDULES

     

    

     

    
      	
              Exhibit
      A

            	
              Form
      of Assignment and Acceptance

            
	 	 
	
              Exhibit
      B

            	
              Information
      Certificate

            
	 	 
	
              Exhibit
      C

            	
              Form
      of Compliance Certificate

            
	 	 
	
              Exhibit
      D

            	
              Form
      of Borrowing Base Certificate

            
	 	 
	
              Schedule
      1.74

            	
              Existing
      Lenders

            
	 	 
	
              Schedule
      1.75

            	
              Existing
      Letters of Credit

            

    

    

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    LOAN AND SECURITY
AGREEMENT

     

    This
Loan and Security Agreement, dated as of June 30, 2009 (this “Agreement”), is
entered into by and among American Biltrite Inc., a Delaware corporation
(“Parent”), Ideal Tape Co., Inc., a Delaware corporation (“Ideal Tape”), K&M
Associates L.P., a Rhode Island limited partnership (“K&M”; together with
Parent and Ideal Tape, each individually a “US Borrower” and collectively, “US
Borrowers” as hereinafter further defined), American Biltrite (Canada) Ltd., a
Canadian corporation (“Canadian Borrower”; together with US Borrowers, each
individually a “Borrower” and collectively, “Borrowers” as hereinafter further
defined), 425 Dexter Associates, L.P., a Rhode Island limited partnership
(“Dexter”), Ocean State Jewelry, Inc., a Rhode Island corporation (“Ocean
State”), Majestic Jewelry, Inc., a Delaware corporation (“Majestic”), American
Biltrite Far East, Inc., a Delaware corporation (“Far East”; together with
Dexter, Ocean State and Majestic, each individually a “US Guarantor” and
collectively, “US Guarantors” as hereinafter further defined), the parties
hereto from time to time as lenders, whether by execution of this Agreement or
an Assignment and Acceptance (each individually, a “Lender” and collectively,
“Lenders” as hereinafter further defined), Wachovia Bank, National Association,
a national banking association, in its capacity as US Issuing Bank, and Wachovia
Bank, National Association, a national banking association, in its capacity as
agent for Issuing Bank, Lenders and the other Secured Parties (in such capacity,
“Agent” as hereinafter further defined).

     

    W I T N E
S S E T H:

     

    WHEREAS,
Borrowers have requested that Agent, Issuing Bank and Lenders enter into
financing arrangements with Borrowers pursuant to which Lenders may make loans
and provide other financial accommodations to Borrowers; and

     

    WHEREAS,
Issuing Bank and each Lender is willing to agree (severally and not jointly) to
make such loans and provide such financial accommodations to Borrowers on a pro
rata basis according to its Commitment (as defined below) on the terms and
conditions set forth herein and Agent is willing to act as agent for Lenders on
the terms and conditions set forth herein and the other Financing
Agreements;

     

    NOW,
THEREFORE, in consideration of the mutual conditions and agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

     

    
      	
              SECTION
      1.

            	
              DEFINITIONS

            

    

     

    For
purposes of this Agreement, the following terms shall have the respective
meanings given to them below:

     

    1.1           “Accounts”
shall mean, as to each Borrower and Guarantor, all present and future rights of
such Borrower and Guarantor to payment of a monetary obligation, whether or not
earned by performance, which is not evidenced by chattel paper or an instrument,
(a) for property that has been or is to be sold, leased, licensed, assigned, or
otherwise disposed of, (b) for services rendered or to be rendered, (c) for a
secondary obligation incurred or to be incurred, or (d) arising out of the use
of a credit or charge card or information contained on or for use with the
card.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    1.2           “Adjusted
Eurodollar Rate” shall mean, with respect to each Interest Period for any
Eurodollar Rate Loan comprising part of the same borrowing (including
conversions, extensions and renewals), the rate per annum determined by dividing
(a) the London Interbank Offered Rate for such Interest Period by (b) a
percentage equal to: (i) one (1) minus (ii) the
Reserve Percentage.  For purposes hereof, “Reserve Percentage” shall
mean for any day, that percentage, (expressed as a decimal) which is in effect
from time to time under Regulation D of the Board of Governors of the Federal
Reserve System (or any successor), as such regulation may be amended from time
to time or any successor regulation, as the maximum reserve requirement
(including, without limitation, any basic, supplemental, emergency, special, or
marginal reserves) applicable with respect to Eurocurrency liabilities as that
term is defined in Regulation D (or against any other category of liabilities
that includes deposits by reference to which the interest rate of Eurodollar
Loans is determined), whether or not any Lender has any Eurocurrency liabilities
subject to such reserve requirement at that time.  Eurodollar Loans
shall be deemed to constitute Eurocurrency liabilities and as such shall be
deemed subject to reserve requirements without benefits of credits for
proration, exceptions or offsets that may be available from time to time to a
Lender.  The Adjusted Eurodollar Rate shall be adjusted automatically
on and as of the effective date of any change in the Reserve
Percentage.

     

    1.3           “Administrative
Borrower” shall mean American Biltrite Inc., in its capacity as Administrative
Borrower on behalf of itself and the other Borrowers pursuant to Section 6.8
hereof and its successors and assigns in such capacity.

     

    1.4           “Affiliate”
shall mean, with respect to a specified Person, any other Person which directly
or indirectly, through one or more intermediaries, controls or is controlled by
or is under common control with such Person, and without limiting the generality
of the foregoing, includes (a) any Person which beneficially owns or holds ten
(10%) percent or more of any class of Voting Stock of such Person or other
equity interests in such Person, (b) any Person of which such Person
beneficially owns or holds ten (10%) percent or more of any class of Voting
Stock or in which such Person beneficially owns or holds ten (10%) percent or
more of the equity interests and (c) any director or executive officer of such
Person.  For the purposes of this definition, the term “control”
(including with correlative meanings, the terms “controlled by” and “under
common control with”), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of Voting
Stock, by agreement or otherwise.

     

    1.5           “Agent”
shall mean Wachovia Bank, National Association, in its capacity as agent on
behalf of Secured Parties pursuant to the terms hereof, and any replacement or
successor agent hereunder.

     

    1.6           “Agent
Payment Account” shall mean the US Payment Account and the Canadian Payment
Account, as applicable.

     

    1.7           “Applicable
Margin” shall mean (a) as to the Interest Rate for Revolving Loans which are
Base Rate Loans, two (2%) percent, (b) as to the Interest Rate for Revolving
Loans which are Eurodollar Rate Loans, four (4%) percent, (c) as to the Interest
Rate for the Term Loan which are Base Rate Loans, three (3%) percent, and (d) as
to the Interest Rate for the Term Loan which are Eurodollar Rate Loans, five
(5%) percent.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    1.8           “Assignment
and Acceptance” shall mean an Assignment and Acceptance substantially in the
form of Exhibit A attached hereto (with blanks appropriately completed)
delivered to Agent in connection with an assignment of a Lender’s interest
hereunder in accordance with the provisions of Section 13.7 hereof.

     

    1.9           “Bank
Product Provider” shall mean any Lender, Affiliate of Lender or other financial
institution (in each case as to any such Lender, Affiliate or other financial
institution to the extent approved by Agent) that provides any Bank Products to
Borrowers or Guarantors.

     

    1.10           “Bank
Products” shall mean any one or more of the following types or services or
facilities provided to a Borrower by a Bank Product Provider: (a) credit cards
or stored value cards, (b) cash management or related services, including (i)
the automated clearinghouse transfer of funds for the account of a Borrower
pursuant to agreement or overdraft for any accounts of Borrowers maintained at
Agent or any Bank Product Provider that are subject to the control of Agent
pursuant to any Deposit Account Control Agreement to which Agent or such Bank
Product Provider is a party, as applicable, and (ii) controlled disbursement
services and (c) Hedge Agreements if and to the extent permitted
hereunder.  Any of the foregoing shall only be included in the
definition of  the term “Bank Products” to the extent that the Bank
Product Provider has been approved by Agent.

     

    1.11           “Base
Rate” shall mean the highest of (a) the rate from time to time publicly
announced by Wachovia Bank, National Association, or its successors, as its
prime rate, subject to each increase or decrease in such prime rate effective as
of the day any such change occurs, whether or not such announced rate is the
best rate available at such bank or (b) the Federal Funds Effective Rate from
time to time plus one-half (.50%)
percent.  The term “Federal Funds Effective Rate” shall mean, 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 Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not published for any day that is a Business Day, the
average of the quotations for such day on such transactions received by Agent
from three Federal Funds brokers of recognized standing selected by
it.

     

    1.12           “Base
Rate Loans” shall mean US Base Rate Loans and Canadian Base Rate
Loans.

     

    1.13           “Belgian
Tape Division” shall mean the Belgian division of Parent, which division sells
Inventory to account debtors only located in Belgium and other European
countries.

     

    1.14           “Belgian
Tape Division Accounts” shall mean any Accounts of Parent now or hereafter
owned, which Accounts arise solely in connection with the Belgian Tape
Division.

     

    1.15           “Belgian
Tape Division Factored Accounts” shall mean all Belgian Tape Division Accounts
sold or assigned by Parent to Faunus pursuant to and in accordance with the
Faunus ABI Factoring Agreement as in effect on the date hereof, subject to the
Faunus Intercreditor Agreement.  All Belgian Tape Division Accounts
that are not sold or assigned by Parent to Faunus or that, after sale or
assignment, are reassigned to Parent, shall not constitute Belgian Tape Division
Factored Accounts.

     

    1.16           “Blocked
Accounts” shall have the meaning set forth in Section 6.3 hereof.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    1.17           “Borrowers”
shall mean collectively, US Borrowers and Canadian Borrower; sometimes referred
to herein individually as a “Borrower”.

     

    1.18           “Borrowing
Base Certificate” shall mean a certificate substantially in the form of Exhibit
D hereto, as such form may from time to time be modified by Agent in a manner
consistent with the terms of this Agreement, which is duly completed (including
all schedules thereto) and executed by the vice-president-finance, chief
financial officer, treasurer, assistant treasurer, controller or other financial
or senior officer of Administrative Borrower and delivered to
Agent.

     

    1.19           “Business
Day” shall mean any day other than a Saturday, Sunday, or other day on which
commercial banks are authorized or required to close under the laws of the State
of New York or the State of North Carolina, Province of Ontario or Canada (or,
in the case of the CDOR Rate, in Toronto, Ontario) and a day on which Agent is
open for the transaction of business; except, that, if a
determination of a Business Day shall relate to any Eurodollar Rate Loans, the
term Business Day shall also exclude any day on which banks are closed for
dealings in dollar deposits in the London interbank market or other applicable
Eurodollar Rate market.

     

    1.20           “Canadian
Base Rate” shall mean, at any time, the annual rate of interest equal to the
greater of (a) the annual rate from time to time publicly announced by Canadian
Reference Bank as its prime rate in effect for determining interest rates on
Canadian Dollar denominated commercial loans in Canada or (b) the annual rate of
interest equal to the sum of the 30-day CDOR Rate at such time plus one (1%) percent
per annum.

     

    1.21           “Canadian
Base Rate Loans” shall mean any Canadian Dollar Loans or portion thereof on
which interest is payable based on the Canadian Base Rate in accordance with the
terms hereof.

     

    1.22           “Canadian
Borrower” shall mean American Biltrite (Canada) Ltd., a Canadian corporation,
and its successors and assigns.

     

    1.23           “Canadian
Borrowing Base” shall mean, at any time the amount equal to: (a) the lesser of:
(i) the Canadian Revolving Loan Limit and (ii) an amount equal to the sum of (A)
eight-five (85%) percent of the Eligible Accounts of Canadian Borrower plus (B) the lesser
of (1) the sum of (x) forty two (42%) percent multiplied by the Value of
Eligible Inventory of Canadian Borrower consisting of raw materials and (y)
fifty (50%) percent multiplied by the Value of Eligible Inventory of Canadian
Borrower consisting of finished goods, (2) eight-five (85%) percent of the Net
Recovery Percentage of such Eligible Inventory multiplied by the Value of
Eligible Inventory of Canadian Borrower or (3) Inventory Loan Limit for the
Canadian Borrower, minus (b) Reserves
attributable to the Canadian Borrower.

     

    For
purposes only of applying the Inventory Loan Limit for the Canadian Borrower,
Agent may treat the then undrawn amounts of outstanding Letters of Credit for
the purpose of purchasing Eligible Inventory as Revolving Loans to the extent
Agent is in effect basing the issuance of the Letter of Credit Obligations on
the Value of the Eligible Inventory being purchased with such Letters of
Credit.  In determining the actual amounts of such Letter of Credit
Obligations to be so treated for purposes of the sublimit, the outstanding
Revolving Loans and Reserves shall be attributed first to any components of the
lending formulas set forth above that are not subject to such sublimit, before
being attributed to the components of the lending formulas subject to such
sublimit.  The amounts of Eligible Inventory of Canadian Borrower
shall, at Agent’s option, be determined based on the lesser of the amount of
Inventory set forth in the general ledger of Canadian Borrower or the perpetual
inventory record maintained by Canadian Borrower

     

    
      
         

      

      
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    1.24           “Canadian
Collateral” shall mean all personal and real property and fixtures, and
interests in property and fixtures, of any Canadian Loan Party, whether now
owned or hereafter acquired or existing, and wherever located.

     

    1.25           “Canadian
Cash Equivalents” shall mean any of the following (a) any evidence of
Indebtedness issued, guaranteed or insured by the government of Canada or any
province, and having terms to maturity of not more than one hundred eighty (180)
days from the date of acquisition, (b) certificates of deposit having maturities
of not more than one year issued or guaranteed by any Canadian chartered bank
and rated A (or the then equivalent grade) or better by Dominion Bond Rating
Service Limited, (c) Canadian Dollar denominated bankers acceptances of any
Canadian chartered bank and rated A (or the then equivalent grade) or better by
Dominion Bond Rating Service Limited having terms to maturity of not more than
one hundred eighty (180) days, (d) commercial paper having terms to maturity of
not more than one hundred eighty (180) days from the date of acquisition issued
by, or guaranteed by, any company which is rated at least A-2 (or any equivalent
rating) by S&P and P-2 (or any equivalent rating) by Moody’s, (e) repurchase
agreements and reverse repurchase agreements relating to marketable direct
obligations issued or unconditionally guaranteed by the Government of Canada or
any province or issued by any governmental agency thereof maturing within one
hundred eighty (180) days or less, and (f) investments in money market funds
substantially all the assets of which are comprised of securities of the types
described in clauses (a) through (e) above.

     

    1.26           “Canadian
Commitment” shall mean, at any time, as to each Lender, the principal amount set
forth below such Lender’s signature on the signatures pages hereto designated as
the Canadian Commitment or on Schedule 1 to the Assignment and Acceptance
Agreement pursuant to which such Lender became a Lender hereunder in accordance
with the provisions of Section 13.7 hereof, as the same may be adjusted from
time to time in accordance with the terms hereof; sometimes being collectively
referred to herein as “Canadian Commitments”.

     

    1.27           “Canadian
Credit Facility” shall mean the Loans and Letters of Credit provided to or for
the benefit of Canadian Borrower pursuant to Sections 2.1, 2.2 and
2.3hereof.

     

    1.28           “Canadian
Dollar Loans” shall mean any Loans or portion thereof which are denominated in
Canadian Dollars and on which interest is payable based on the Canadian Base
Rate in accordance with the terms hereof.

     

    1.29           “Canadian
Dollars” and “C$” shall each mean the lawful currency of Canada.

     

    1.30           “Canadian
Excess Availability” shall mean the amount, as determined by Agent, calculated
at any date, equal to: (a) the lesser of:  (i) the Canadian Borrowing
Base and (ii) the Canadian Revolving Loan Limit, minus (b) the sum
of:  (i) the amount of all then outstanding and unpaid Canadian
Obligations (but not including for this purpose any Term Loan or outstanding
Canadian Letter of Credit Obligations), plus (ii) the amount
of all Reserves then established in respect of Canadian Letter of Credit
Obligations, plus (iii) the
aggregate amount of all then outstanding and unpaid trade payables and other
obligations of Canadian Borrower which are outstanding more than sixty (60) days
past due as of the end of the immediately preceding month or

     

    
      
         

      

      
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    at
Agent’s option, as of a more recent date based on such reports as Agent may from
time to time specify (other than trade payables or other obligations being
contested or disputed by Canadian Borrower in good faith), plus (iv) without
duplication, the amount of checks issued by Canadian Borrower to pay trade
payables and other obligations which are more than sixty (60) days past due as
of the end of the immediately preceding month or at Agent’s option, as of a more
recent date based on such reports as Agent may from time to time specify (other
than trade payables or other obligations being contested or disputed by Canadian
Borrower in good faith), but not yet sent.

     

    1.31           “Canadian
Guarantors” shall mean, collectively, any Person that at any time after the date
hereof becomes party to a guarantee in favor of Agent or any Lender in respect
of or otherwise liable on or with respect to the Canadian Obligations (but not
the US Obligations) or who is the owner of any property which is security for
the Canadian Obligations (other than Canadian Borrower); each sometimes being
referred to herein individually as a “Canadian Guarantor”.

     

    1.32           “Canadian
Issuing Bank” shall mean such financial institution that is approved by Agent
that shall issue a Letter of Credit for the account of a Canadian Borrower and
has agreed in a manner satisfactory to Agent to be subject to the terms hereof
as Canadian Issuing Bank.

     

    1.33           “Canadian
Lender” shall mean, at any time, each Lender having a Canadian Commitment or a
Revolving Loan (or Canadian Letter of Credit Obligation) made to Canadian
Borrower owing to it at such time; sometimes being referred to herein
collectively as “Canadian Lenders”.

     

    1.34           “Canadian
Letter of Credit Limit” shall mean $3,000,000.

     

    1.35           “Canadian
Letter of Credit Obligations” shall mean at any time, the sum of (a) the
aggregate undrawn amount of all Letters of Credit issued for the account of
Canadian Borrower outstanding at such time, plus (b) without
duplication, the aggregate amount of all drawings under Letters of Credit issued
for the account of Canadian Borrower for which the Canadian Issuing Bank has not
at such time been reimbursed, plus (c) without
duplication, the aggregate amount of all payments made by Canadian Lender to the
Canadian Issuing Bank with respect to such Canadian Lender’s participation in
Letters of Credit issued for the account of Canadian Borrower as provided in
Section 2.2 for which Canadian Borrower have not at such time reimbursed the
Canadian Lenders, whether by way of a Revolving Loan or otherwise.

     

    1.36           “Canadian
Loan Parties” shall mean Canadian Borrower and Canadian Guarantors; each
sometimes being referred to individually as a “Canadian Loan
Party”.

     

    1.37           “Canadian
Obligations” shall mean (a) any and all Loans, Letter of Credit Obligations and
all other obligations, liabilities and indebtedness of every kind, nature and
description owing by Canadian Loan Parties to Agent, any Canadian Lender or any
Canadian Issuing Bank arising under this Agreement or any of the other Financing
Agreements, including principal, interest, charges, fees, costs and expenses,
however evidenced, whether as principal, surety, endorser, guarantor or
otherwise, arising under this Agreement or any of the other Financing Agreements
or on account of any Letter of Credit and all other Canadian Letter of Credit
Obligations, whether now existing or hereafter arising, whether arising before,
during or after the initial term or any renewal term of this Agreement or after
the commencement of any case or proceeding with respect to any Canadian
Loan

     

    
      
         

      

      
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    Party
under the United States Bankruptcy Code, the Bankruptcy and Insolvency Act
(Canada), the Companies’ Creditors Arrangement Act (Canada) or any similar
statute in any jurisdiction (including the payment of interest and other amounts
which would accrue and become due but for the commencement of such case or
proceeding, whether or not such amounts are allowed or allowable in whole or in
part in such case), whether direct or indirect, absolute or contingent, joint or
several, due or not due, primary or secondary, liquidated or unliquidated, or
secured or unsecured and (b) for purposes only of Section 5.1 hereof and subject
to the priority in right of payment set forth in Section 6.4 hereof, all
obligations, liabilities and indebtedness of every kind, nature and description
owing by any Canadian Loan Party to Agent or any Bank Product Provider arising
under or pursuant to any Bank Products, whether now existing or hereafter
arising; provided, that, (i) as to any
such obligations, liabilities and indebtedness arising under or pursuant to a
Hedge Agreement, the same shall only be included within the Canadian Obligations
if upon Agent’s request, Agent shall have entered into an agreement, in form and
substance reasonably satisfactory to Agent, with the Bank Product Provider that
is a counterparty to such Hedge Agreement, as acknowledged and agreed to by
Canadian Borrower, providing for the delivery to Agent by such counterparty of
information with respect to the amount of such obligations and providing for the
other rights of Agent and such Bank Product Provider in connection with such
arrangements, (ii) any Bank Product Provider, other than Wachovia and its
Affiliates, shall have delivered written notice to Agent that (A) such Bank
Product Provider has entered into a transaction to provide Bank Products to such
Canadian Borrower and (B) the obligations arising pursuant to such Bank Products
provided to such Canadian Borrower constitute Canadian Obligations entitled to
the benefits of the security interest of Agent granted hereunder, and Agent
shall have accepted such notice in writing and (iii) in no event shall any Bank
Product Provider acting in such capacity to whom such obligations, liabilities
or indebtedness are owing be deemed a Lender for purposes hereof to the extent
of and as to such obligations, liabilities or indebtedness except that each
reference to the term “Lender” in Sections 12.1, 12.2, 12.3(b), 12.6, 12.7,
12.9, 12.12 and 13.6 hereof shall be deemed to include such Bank Product
Provider and in no event shall the approval of any such person in its capacity
as Bank Product Provider be required in connection with the release or
termination of any security interest or lien of Agent.

     

    1.38           “Canadian
Payment Account” shall mean account no. 1258 246 with respect to Canadian
Dollars and account no. 4635 886 with respect to US Dollars Wachovia of Canada
at Canadian Reference Bank or such other account of Agent or Wachovia Canada as
Agent may from time to time designate to Administrative Borrower as the Canadian
Payment Account.

     

    1.39           “Canadian
Pension Plan” shall mean any plan, program or arrangement that is a pension plan
for the purposes of any applicable pension benefits legislation or any tax laws
of Canada or a Province thereof, whether or not registered under any such laws,
which is maintained or contributed to by, or to which there is or may be an
obligation to contribute by, any Borrower or Guarantor in respect of any
Person’s employment in Canada with such Borrower or Guarantor.

     

    1.40           “Canadian
Reference Bank” shall mean Bank of Montreal, or such other bank listed in
Schedule I of the Bank Act (Canada) as Agent may from time to time
designate.

     

    1.41           “Canadian
Revolving Loan Maximum Amount” shall mean $12,000,000.

     

    
      
         

      

      
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    1.42           “Capital
Expenditures” shall mean, as applied to any Person for any period, the aggregate
of all cash expenditures (including that portion, if any, paid in cash
attributable to any lease of any property, whether real, personal or mixed, by
that Person as lessee which is accounted for as a capital lease on the balance
sheet of such Person prepared in accordance with GAAP, incurred during that
period), made by that Person during such period in respect of the purchase,
construction or other acquisition of fixed or capital assets, determined in
accordance with GAAP.

     

    1.43           “Capital
Leases” shall mean, as applied to any Person, any lease of (or any agreement
conveying the right to use) any property (whether real, personal or mixed) by
such Person as lessee which in accordance with GAAP, is required to be reflected
as a liability on the balance sheet of such Person.

     

    1.44           “Capital
Stock” shall mean, with respect to any Person, any and all shares, interests,
participations or other equivalents (however designated) of such Person’s
capital stock or partnership, limited liability company or other equity
interests at any time outstanding, and any and all rights, warrants or options
exchangeable for or convertible into such capital stock or other interests (but
excluding any debt security that is exchangeable for or convertible into such
capital stock).

     

    1.45           “CDOR
Rate” shall mean, on any day, the annual rate of interest which is the rate
equal to the average rate for 30 day Canadian Dollar bankers’ acceptances issued
on such day for a term equal or comparable for the purpose of calculating the
interest rate applicable as such rate appears on the “Reuters Screen CDOR Page”
(as defined in the International Swaps and Derivatives Association, Inc. 2000,
definitions, as modified and amended from time to time) rounded to the nearest
1/100th of 1% (with 0.005% being rounded up), as of 10:00 a.m. on such day, or
if such day is not a Business Day, then on the immediately preceding Business
Day; provided,
that, if such
rate does not appear on the Reuters Screen CDOR Page as contemplated, then the
CDOR Rate on any day shall be the average of the rates applicable to 30 day
Canadian Dollar bankers’ acceptances quoted by the Schedule I Canadian chartered
banks as of 10:00 a.m. on such day, or if such day is not a Business Day, then
on the immediately preceding Business Day.

     

    1.46           “Change
of Control” shall mean (a) the transfer (in one transaction or a series of
transactions) of all or substantially all of the assets of any Borrower or
Guarantor to any Person or group (as such term is used in Section 13(d)(3) of
the Exchange Act), other than as permitted in Section 9.7 hereof; (b) the
liquidation or dissolution of any Borrower or Guarantor or the adoption of a
plan by the stockholders of any Borrower or Guarantor relating to the
dissolution or liquidation of such Borrower or Guarantor, other than as
permitted in Section 9.7 hereof; (c) the acquisition by any Person or group (as
such term is used in Section 13(d)(3) of the Exchange Act), except for one or
more Permitted Holders, of beneficial ownership, directly or indirectly, of a
majority of the voting power of the total outstanding Voting Stock of any
Borrower or Guarantor or the Board of Directors of any Borrower or Guarantor;
(d) directors who are appointed by the Permitted Holders cease to constitute a
majority of the Board of Directors of Parent; (e) the failure of the Permitted
Holders to own directly or indirectly fifty-one (51%) percent of the voting
power of the total outstanding Voting Stock of Parent; or (f) the failure of
Parent to own directly or indirectly (i) one hundred (100%) percent of the
voting power of the total outstanding Voting Stock of any Borrower (other than
K&M) or Guarantor or (ii) eighty-seven (87%) percent of the voting power of
the total partnership interests of K&M.

     

    
      
         

      

      
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    1.47           “Code”
shall mean the Internal Revenue Code of 1986, as the same now exists or may from
time to time hereafter be amended, modified, recodified or supplemented,
together with all rules, regulations and interpretations thereunder or related
thereto.

     

    1.48           “Collateral”
shall have the meaning set forth in Section 5 hereof.

     

    1.49           “Collateral
Access Agreement” shall mean an agreement in writing, in form and substance
satisfactory to Agent, from any lessor of premises to any Borrower or Guarantor,
or any other person to whom any Collateral is consigned or who has custody,
control or possession of any such Collateral or is otherwise the owner or
operator of any premises on which any of such Collateral is located, in favor of
Agent with respect to the Collateral at such premises or otherwise in the
custody, control or possession of such lessor, consignee or other
person.

     

    1.50           “Commitment”
shall mean, at any time, as to any Lender, the aggregate of such Lender’s US
Commitment and Canadian Commitment; sometimes being collectively referred to
herein as “Commitments”; provided, that, the US Dollar
Equivalent of the aggregate Commitments of all Lenders shall not exceed
US$30,000,000 (it being understood that the Canadian Commitments are a sublimit
of the US Commitments of all Lenders).

     

    1.51           “Congoleum”
shall mean Congoleum Corporation, a Delaware corporation.

     

    1.52           “Consolidated
Net Income” shall mean, with respect to any Person, for any period, the
aggregate of the net income (loss) of such Person and its Subsidiaries, on a
consolidated basis, for such period, as determined in accordance with GAAP;
provided, that, (a) the net
income of any Person that is not a majority-owned Subsidiary or that is
accounted for by the equity method of accounting shall be included only to the
extent of the amount of dividends or distributions paid or payable to such
Person or a majority-owned Subsidiary of such Person; (b) the effect of any
change in accounting principles adopted by (or applicable to) such Person or its
Subsidiaries after the date hereof (including any cumulative effects resulting
from changes in purchase accounting principles) shall be excluded; and (c) the
net income (if positive) of any majority-owned Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by such
majority-owned Subsidiary to such Person or to any other majority-owned
Subsidiary of such Person is not at the time permitted by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to such majority-owned Subsidiary
shall be excluded.  For the purposes of calculating Consolidated Net
Income, Congoleum shall not constitute a Subsidiary of Parent.

     

    1.53           “Credit
Facility” shall mean, collectively, the US Credit Facility and the Canadian
Credit Facility.

     

    1.54           “Default”
shall mean an act, condition or event which with notice or passage of time or
both would constitute an Event of Default.

     

    1.55           “Defaulting
Lender” shall have the meaning set forth in Section 6.11 hereof.

     

    1.56           “Deposit
Account Control Agreement” shall mean an agreement in writing, in form and
substance satisfactory to Agent, by and among Agent, the Borrower or Guarantor
with a deposit account at any bank and the bank at which such deposit account is
at any time maintained which provides that such bank will comply with
instructions originated by Agent directing disposition of the funds in the
deposit account without further consent by such Borrower or Guarantor and has
such other terms and conditions as Agent may require.

     

    
      
         

      

      
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    1.57           “EBITDA”
shall mean, as to any Person, with respect to any period, an amount equal to the
Consolidated Net Income of such Person and its Subsidiaries for such period,
plus the
following to the extent deducted in the computation of Consolidated Net Income
of such Person for such period: (a) depreciation, amortization and deferred
compensation, (b) Interest Expense, (c) the Provision for Taxes, (d)
non-recurring transaction fees, charges and expenses, and (e) other non-cash
and/or extraordinary, one-time or non-recurring cash charges.

     

    1.58           “Eligible
Accounts” shall mean Accounts created by a Borrower which are and continue to be
acceptable to Agent based on the criteria set forth below as determined by
Agent.  In general, Accounts shall be Eligible Accounts
if:

     

    (a)           such
Accounts arise from the actual and bona fide sale and delivery of goods by such
Borrower or rendition of services by such Borrower in the ordinary course of its
business which transactions are completed in accordance with the terms and
provisions contained in any documents related thereto;

     

    (b)           such
Accounts are not unpaid more than sixty (60) days after the original due date
for them or ninety (90) days after the date of the original invoice for
them;

     

    (c)           such
Accounts comply with the terms and conditions contained in Section 7.2(b) of
this Agreement;

     

    (d)           such
Accounts do not arise from sales on consignment, guaranteed sale, sale and
return, sale on approval, or other terms under which payment by the account
debtor may be conditional or contingent;

     

    (e)           an
office of the account debtor with respect to such Accounts is located in the
United States of America or Canada or, at Agent’s option, if the chief executive
office and principal place of business of the account debtor with respect to
such Accounts is located other than in the United States of America or Canada,
then if either:  (i) the account debtor has delivered to such Borrower
an irrevocable letter of credit issued or confirmed by a bank satisfactory to
Agent and payable only in the United States of America and in U.S. dollars,
sufficient to cover such Account, in form and substance satisfactory to Agent
and if required by Agent, the original of such letter of credit has been
delivered to Agent or Agent’s agent and the issuer thereof, and such Borrower
has complied with the terms of Section 5.2(f) hereof with respect to the
assignment of the proceeds of such letter of credit to Agent or naming Agent as
transferee beneficiary thereunder, as Agent may specify, or (ii) such Account is
subject to credit insurance payable to Agent issued by an insurer and on terms
and in an amount acceptable to Agent, or (iii) such Account is otherwise
acceptable in all respects to Agent (subject to such lending formula with
respect thereto as Agent may determine);

     

    (f)           such
Accounts do not consist of progress billings (such that the obligation of the
account debtors with respect to such Accounts is conditioned upon such
Borrower’s satisfactory completion of any further performance under the
agreement giving rise thereto), bill and hold invoices or retainage invoices,
except as to bill and hold invoices, if Agent shall have received an agreement
in writing from the account debtor, in form and substance satisfactory to Agent,
confirming the unconditional obligation of the account debtor to take the goods
related thereto and pay such invoice;

     

    
      
         

      

      
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    (g)           the
account debtor with respect to such Accounts has not asserted a counterclaim,
defense or dispute and is not owed or does not claim to be owed any amounts that
may give rise to any right of setoff or recoupment against such Accounts (but
the portion of the Accounts of such account debtor in excess of the amount at
any time and from time to time owed by such Borrower to such account debtor or
claimed owed by such account debtor may be deemed Eligible
Accounts);

     

    (h)           such
Accounts are subject to the first priority, valid and perfected security
interest of Agent and any goods giving rise thereto are not, and were not at the
time of the sale thereof, subject to any liens except those permitted in this
Agreement that are subject to an intercreditor agreement in form and substance
satisfactory to Agent between the holder of such security interest or lien and
Agent;

     

    (i)           neither
the account debtor nor any officer or employee of the account debtor with
respect to such Accounts is an officer, employee, agent or other Affiliate of
any Borrower or Guarantor;

     

    (j)           (i)
the account debtors with respect to such Accounts are not any foreign
government, or (ii) the account debtors with respect to such Accounts are not
the United States of America, Canada, any State, Province, political
subdivision, department, agency or instrumentality thereof, unless, (A) if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Agent’s
request, the Federal Assignment of Claims Act of 1940, as amended or any similar
State or local law, if applicable, has been complied with in a manner
satisfactory to Agent or (B) if the account debtor is Her Majesty in right of
Canada or any Provincial or local Governmental Authority, or any Ministry
thereof, such Borrower has assigned its rights to payment of such Account to
Agent pursuant to, and in accordance with the Financial Administration Act,
R.S.C. 185, C.F.-11, as amended, or any similar applicable provincial or local
law regulation or requirement if applicable, has been complied with in a manner
satisfactory to Agent; except, that, notwithstanding
the provisions of subsection (j)(ii)(A) and (B) above, Accounts owing by the
United States of America, Canada, any State, Province, political subdivision,
department, agency or instrumentality thereof may be considered Eligible
Accounts up to an aggregate amount of $1,000,000 at any given time; provided, that, such Accounts
are otherwise Eligible Accounts hereunder;

     

    (k)           there
are no proceedings or actions which are threatened or pending against the
account debtors with respect to such Accounts which might result in any material
adverse change in any such account debtor’s financial condition (including,
without limitation, any bankruptcy, dissolution, liquidation, reorganization or
similar proceeding);

     

    (l)           the
aggregate amount of such Accounts owing by a single account debtor (other than
Kohl’s Illinois, Inc. and Wal-Mart Stores, Inc.) do not constitute more than
fifteen (15%) percent of the aggregate amount of all otherwise Eligible Accounts
and such Accounts owing by each of Kohl’s Illinois, Inc. and Wal-Mart Stores,
Inc. do not, in each case, constitute more than thirty (30%) percent of the
aggregate amount of all otherwise Eligible Accounts (but the portion of the
Accounts not in excess of the applicable percentages may be deemed Eligible
Accounts);

     

    
      
         

      

      
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    (m)           such
Accounts are not owed by an account debtor who has Accounts unpaid more than
sixty (60) days after the original due date for them or more than ninety (90)
days after the date of the original invoice for them which constitute more than
fifty (50%) percent of the total Accounts of such account debtor;

     

    (n)           there
are no facts, events or occurrences which would impair the validity,
enforceability or collectibility of such Accounts or reduce the amount payable
or delay payment thereunder;

     

    (o)           the
account debtor is not located in a state requiring the filing of a Notice of
Business Activities Report or similar report in order to permit such Borrower to
seek judicial enforcement in such State of payment of such Account, unless such
Borrower has qualified to do business in such state or has filed a Notice of
Business Activities Report or equivalent report for the then current year or
such failure to file and inability to seek judicial enforcement is capable of
being remedied without any material delay or material cost;

     

    (p)           such
Accounts are owed by account debtors whose total indebtedness to such Borrower
does not exceed the credit limit with respect to such account debtors as
determined by such Borrower from time to time, to the extent such credit limit
as to any account debtor is established consistent with the current practices of
such Borrower as of the date hereof and such credit limit is acceptable to Agent
(but the portion of the Accounts not in excess of such credit limit may be
deemed Eligible Accounts); and

     

    (q)           such
Accounts are owed by account debtors deemed creditworthy at all times by Agent
in its reasonable discretion.

     

    The
criteria for Eligible Accounts set forth above may only be changed and any new
criteria for Eligible Accounts may only be established by Agent in good faith
based on either: (i) an event, condition or other circumstance arising after the
date hereof, or (ii) an event, condition or other circumstance existing on the
date hereof to the extent Agent has no written notice thereof from a Borrower
prior to the date hereof, in either case under clause (i) or (ii) which
adversely affects or could reasonably be expected to adversely affect the
Accounts in the good faith determination of Agent.  Any Accounts that
are not Eligible Accounts shall nevertheless be part of the
Collateral.

     

    1.59           “Eligible
In-Transit Inventory” shall mean Eligible Inventory owned by K&M that
otherwise satisfies the criteria for Eligible Inventory set forth herein but is
located outside of the United States of America and which is in transit to
either the premises of a Freight Forwarder in the United States of America or
the premises of K&M in the United States of America, which are either owned
and controlled by K&M or leased by K&M (but only if Agent has received a
Collateral Access Agreement duly authorized, executed and delivered by such
Freight Forwarder or the owner and lessor of such leased premises, as the case
may be); provided, that,

     

    (a)           Agent
has a first priority perfected security interest in and lien upon such Inventory
and all documents of title with respect thereto,

     

    
      
         

      

      
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    (b)           such
Inventory either (i) is the subject of a negotiable bill of lading (A) that is
consigned to Agent (either directly or by means of endorsements), (B) that was
issued by the carrier respecting such Inventory that is subject to such bill of
lading, and (C) that is in the possession of Agent or the Freight Forwarder
handling the importing, shipping and delivery of such Inventory, in all cases,
acting on Agent’s behalf subject to a Collateral Access Agreement duly
authorized, executed and delivered by such Freight Forwarder; or (ii) is the
subject of a cargo receipt and such cargo receipt was issued by a consolidator
respecting such Inventory and is either (A) consigned to Agent (either directly
or by means of endorsements) or (B) is in the possession of Agent or the Freight
Forwarder handling the importing, shipping and delivery of such Inventory, in
all cases, acting on Agent’s behalf subject to a Collateral Access Agreement
duly authorized, executed and delivered by such Freight Forwarder,

     

    (c)           K&M
has title to such Inventory, and Agent shall have received such evidence thereof
as it may from time to time require,

     

    (d)           Agent
shall have received a Collateral Access Agreement, duly authorized, executed and
delivered by the Freight Forwarder located in the United States of America
handling the importing, shipping and delivery of such Inventory,

     

    (e)           such
Inventory is insured against types of loss, damage, hazards, and risks, and in
amounts, satisfactory to Agent in its reasonable discretion, and Agent shall
have received a copy of the certificate of marine cargo insurance in connection
therewith in which it has been named as an additional insured and loss payee in
a manner reasonably acceptable to Agent,

     

    (f)           Agent
shall have received (i) a certificate duly executed and delivered by an officer
of K&M (or Administrative Borrower on behalf of K&M) certifying to Agent
that, to the best of the knowledge of K&M (or Administrative Borrower on
behalf of K&M), such Inventory meets all of K&M’s representations and
warranties contained herein concerning Eligible Inventory and that the shipment
as evidenced by the documents conforms to the related order documents, and (ii)
upon Agent’s request, a copy of the invoice, packing slip and manifest with
respect thereto,

     

    (g)           such
Inventory is not subject to a Letter of Credit, and

     

    (h)           such
Inventory shall not have been in transit for more than forty-five (45)
days.

     

    1.60           “Eligible
Inventory” shall mean, as to each Borrower, Inventory of such Borrower
consisting of finished goods held for resale in the ordinary course of the
business of such Borrower and raw materials for such finished goods, that in
each case satisfy the criteria set forth below as determined by
Agent.  In general, Eligible Inventory shall not
include:  (a) work-in-process; (b) components which are not part of
finished goods; (c) spare parts for equipment; (d) packaging and shipping
materials; (e) supplies used or consumed in such Borrower’s business; (f)
Inventory at premises other than those owned or leased and controlled by any
Borrower, except any Inventory which would otherwise be deemed Eligible
Inventory that is not located at premises owned and operated by Borrower may
nevertheless be considered Eligible Inventory: (i) as to locations which are
leased by Borrowers, if Agent shall have received a Collateral Access Agreement
executed by the Person in possession of such Inventory and/or the owner or
operator of such premises that Agent

     

    
      
         

      

      
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    has
accepted in writing and (ii) if such Inventory meets the criteria set forth in
the definitions of Eligible In-Transit Inventory and Eligible L/C Inventory; (g)
Inventory subject to a security interest or lien in favor of any Person other
than Agent except those permitted in this Agreement that are subject to an
intercreditor agreement in form and substance satisfactory to Agent between the
holder of such security interest or lien and Agent; (h) bill and hold goods; (i)
unserviceable, obsolete or slow moving Inventory; (j) Inventory that is not
subject to the first priority, valid and perfected security interest of Agent;
(k) returned, damaged and/or defective Inventory; (l) Inventory purchased or
sold on consignment and (m) Inventory located outside the United States of
America or Canada.  The criteria for Eligible Inventory set forth
above may only be changed and any new criteria for Eligible Inventory may only
be established by Agent in good faith based on either: (i) an event, condition
or other circumstance arising after the date hereof, or (ii) an event, condition
or other circumstance existing on the date hereof to the extent Agent has no
written notice thereof from a Borrower prior to the date hereof, in either case
under clause (i) or (ii) which adversely affects or could reasonably be expected
to adversely affect the Inventory in the good faith determination of
Agent.  Any Inventory that is not Eligible Inventory shall
nevertheless be part of the Collateral.

     

    1.61           “Eligible
L/C Inventory” shall mean Eligible Inventory that otherwise satisfies the
criteria for Eligible In-Transit Inventory and which has been purchased with and
is subject to a Letter of Credit.

     

    1.62           “Eligible
Transferee” shall mean (a) any Lender; (b) the parent company of any Lender
and/or any Affiliate of such Lender which is at least fifty (50%) percent owned
by such Lender or its parent company; (c) any person (whether a corporation,
partnership, trust or otherwise) that is engaged in the business of making,
purchasing, holding or otherwise investing in bank loans and similar extensions
of credit in the ordinary course of its business and is administered or managed
by a Lender or with respect to any Lender that is a fund which invests in bank
loans and similar extensions of credit, any other fund that invests in bank
loans and similar extensions of credit and is managed by the same investment
advisor as such Lender or by an Affiliate of such investment advisor, and in
each case is approved by Agent; and (d) any other commercial bank, financial
institution or “accredited investor” (as defined in Regulation D under the
Securities Act of 1933) approved by Agent and, so long as there does not exist
an Event of Default, approved by Administrative Borrower, on behalf of
Borrowers; provided, that, (i) neither any
Borrower nor any Guarantor or any Affiliate of any Borrower or Guarantor shall
qualify as an Eligible Transferee, and (ii) no Person to whom any Indebtedness
which is in any way subordinated in right of payment to any other Indebtedness
of any Borrower or Guarantor shall qualify as an Eligible Transferee, except as
Agent may otherwise specifically agree.

     

    1.63        “Environmental
Laws” shall mean all foreign, Federal, State, Provincial and local laws
(including common law), legislation, rules, codes, licenses, permits (including
any conditions imposed therein), authorizations, judicial or administrative
decisions, injunctions or agreements between any Borrower or Guarantor and any
Governmental Authority, (a) relating to pollution and the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, ground water, drinking water, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource), or
to human health or safety, (b) relating to the exposure to, or the use, storage,
recycling, treatment, generation, manufacture, processing, distribution,
transportation, handling, labeling, production, release or disposal, or
threatened release, of Hazardous Materials, or (c) relating to all laws with
regard to recordkeeping, notification, disclosure and reporting

     

    
      
         

      

      
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    requirements
respecting Hazardous Materials.  The term “Environmental Laws”
includes (i) the Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Federal Superfund Amendments and Reauthorization Act,
the Federal Water Pollution Control Act of 1972, the Federal Clean Water Act,
the Federal Clean Air Act, the Federal Resource Conservation and Recovery Act of
1976 (including the Hazardous and Solid Waste Amendments thereto), the Federal
Solid Waste Disposal and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water
Act of 1974, the Canadian Environmental Assessment Act, the Canadian
Environmental Protection Act, Transportation of Dangerous Goods Act, 1992, the
Fisheries Act, the Migratory Birds Protection Act, 1994, the Species at Risk
Act, the Hazardous Production Act, the Canada Shipping Act and the Canada
Wildlife Act, the Environmental Assessment Act (Ontario) and the Environmental
Protection Act (Ontario), (ii) applicable state counterparts to such laws and
(iii) any common law or equitable doctrine that may impose liability or
obligations for injuries or damages due to, or threatened as a result of, the
presence of or exposure to any Hazardous Materials.

     

    1.64           “Equipment”
shall mean, as to each Borrower and Guarantor, all of such Borrower’s and
Guarantor’s now owned and hereafter acquired equipment, wherever located,
including machinery, data processing and computer equipment (whether owned or
licensed and including embedded software), vehicles, tools, furniture, fixtures,
all attachments, accessions and property now or hereafter affixed thereto or
used in connection therewith, and substitutions and replacements thereof,
wherever located.

     

    1.65           “ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as amended,
together with all rules, regulations and interpretations thereunder or related
thereto.

     

    1.66           “ERISA
Affiliate” shall mean any person required to be aggregated with any Borrower,
any Guarantor or any of its or their respective Subsidiaries under Sections
414(b), 414(c), 414(m) or 414(o) of the Code.

     

    1.67           “ERISA
Event” shall mean (a) any “reportable event”, as defined in Section 4043(c) of
ERISA or the regulations issued thereunder, with respect to a Pension Plan,
other than events as to which the requirement of notice has been waived in
regulations by the Pension Benefit Guaranty Corporation; (b) the adoption of any
amendment to a Pension Plan that would require the provision of security
pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA; (c) a
complete or partial withdrawal by any Borrower, Guarantor or any ERISA Affiliate
from a Multiemployer Plan or a cessation of operations which is treated as such
a withdrawal or notification that a Multiemployer Plan is in reorganization; (d)
the filing of a notice of intent to terminate, the treatment of a Pension Plan
amendment as a termination under Section 4041 or 4041A of ERISA, or the
commencement of proceedings by the Pension Benefit Guaranty Corporation to
terminate a Pension Plan; (e) an event or condition which might reasonably be
expected to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Plan; (f) the imposition
of any liability under Title IV of ERISA, other than the Pension Benefit
Guaranty Corporation premiums due but not delinquent under Section 4007 of
ERISA, upon any Borrower, Guarantor or any ERISA Affiliate in excess of $100,000
and (g) any other event or condition with respect to a Plan including any
Pension Plan subject to Title IV of ERISA maintained, or contributed to, by any
ERISA Affiliate that could reasonably be expected to result in liability of any
Borrower in excess of $100,000.

     

    
      
         

      

      
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    1.68           “Eurodollar
Rate Loans” shall mean any Loans or portion thereof on which interest is payable
based on the Adjusted Eurodollar Rate in accordance with the terms
hereof.

     

    1.69           “Event
of Default” shall mean the occurrence or existence of any event or condition
described in Section 10.1 hereof.

     

    1.70           “Exchange
Act” shall mean the Securities Exchange Act of 1934, together with all rules,
regulations and interpretations thereunder or related thereto.

     

    1.71           “Exchange
Rate” shall mean the prevailing spot rate of exchange of such bank as Agent may
reasonably select for the purpose of conversion of one currency to another, at
or around 11:00 a.m. New York City time, on the date on which any such
conversion of currency is to be made under this Agreement.

     

    1.72           “Excluded
Accounts” shall mean (a) deposit accounts that are specifically and exclusively
used for payroll, payroll taxes and other employee wage and benefit payments to
or for the benefit of any Borrower’s or any Guarantor’s salaried employees and
(b) petty cash accounts to the extent the balances therein do not exceed at any
one time $25,000 in the aggregate.

     

    1.73           “Excluded
Property” shall mean:

     

    (a)           any
rights or interests in any contract, lease, sublease, permit, license, charter
or license agreement covering personal property, as such, if under the terms of
such contract, lease, sublease, permit, license, charter or license agreement,
or applicable law with respect thereto, the valid grant of a security interest
or lien therein to Agent is prohibited and such prohibition has not been or is
not waived or the consent of the other party to such contract, lease, permit,
license, charter or license agreement has not been or is not otherwise obtained
or under applicable law such prohibition cannot be waived; provided, that, the
foregoing exclusion shall in no way be construed (i) to apply if any such
prohibition is unenforceable under Sections 9-406, 9-407 or 9-408 of the UCC or
other applicable law or (ii) so as to limit, impair or otherwise affect Agent’s
unconditional continuing security interests in and liens upon any rights or
interests of any Borrower in or to monies due or to become due under any such
contract, lease, permit, license, charter or license agreement (including any
Receivables);

     

    (b)           equity
interests of any Subsidiary organized under the laws of a jurisdiction outside
the United States of America, its territories or its possessions that is a
“controlled foreign corporation” (as such term is defined in Section 957(a) of
the Code or a successor provision thereof) in excess of sixty five (65%) percent
of all of the issued and outstanding shares of Equity Interests of such
Subsidiary entitled to vote (within the meaning of Treasury Regulation Section
1.956-2);

     

    (c)           any
Excluded Account; and

     

    (d)           applications
for any trademarks that have been filed with the U.S. Patent and Trademark
Office on the basis of an “intent-to-use” with respect to such marks, unless and
until a statement of use or amendment to allege use is filed and accepted by the
U.S. Patent and Trademark Office or any other filing is made or circumstances
otherwise change so that the interests of a Borrower in such marks is no longer
on an “intent-to-use” basis, at which time such marks shall automatically and
without further action by the parties be subject to the security interests and
liens granted by a Borrower to Agent hereunder.

     

    
      
         

      

      
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    1.74           “Existing
Lenders” shall mean the lenders to Borrowers listed on Schedule 1.74 hereto and
their respective predecessors, successors and assigns.

     

    1.75           “Existing
Letters of Credit” shall mean, collectively, the letters of credit issued for
the account of a Borrower or Guarantor or for which such Borrower or Guarantor
is otherwise liable listed on Schedule 1.75 hereto, as the same now exist
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.

     

    1.76           “Far
East Factored Accounts” shall mean all Accounts of Far East sold or assigned by
Far East to Faunus pursuant to and in accordance with the Faunus Far East
Factoring Agreement as in effect on the date hereof, subject to the Faunus
Intercreditor Agreement.  All Far East Accounts that are not sold or
assigned by Far East to Faunus or that, after sale or assignment, are reassigned
to Far East, shall not constitute Far East Factored Accounts.

     

    1.77           “Faunus”
shall mean Faunus Group International, Inc., a Delaware corporation, together
with its successors and assigns.

     

    1.78           “Faunus
ABI Factoring Agreement” shall mean the Debt Purchase Agreement, dated June 30,
2009, by and between Parent and Faunus, as the same now exists and may hereafter
be amended, modified, supplemented, extended, renewed, restated or
replaced.

     

    1.79           “Faunus
Factored Accounts” shall mean the Belgian Tape Division Factored Accounts and
the Far East Factored Accounts to the extent that such Belgian Tape Division
Factored Accounts and the Far East Factored Accounts are subject to the Faunus
Factoring Documents.  All Belgian Tape Division Factored Accounts or
Far East Factored Accounts that are not sold or assigned by Parent to Faunus or
by Far East to Faunus, as the case may be, or that, after sale or assignment,
are reassigned to Parent or Far East, as the case may be, shall not constitute
Belgian Tape Division Factored Accounts or Far East Factored Accounts,
respectively, but, for the purposes of this Agreement, shall nonetheless
constitute Accounts and Receivables hereunder.

     

    1.80           “Faunus
Factoring Documents” shall mean the Faunus ABI Factoring Agreement, the Faunus
Far East Factoring Agreement, the Faunus Far East Guaranty, and all other
agreements, documents and instruments executed and/or delivered in connection
therewith, including the FGI Documents (as defined in the Faunus Intercreditor
Agreement), together with all exhibits and schedules to each of the foregoing,
as all of the same now exist and may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.

     

    1.81           “Faunus
Far East Factoring Agreement” shall mean the Receivables Finance Agreement,
dated June 30, 2009, by and between Far East and Faunus, as the same now exists
and may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.

     

    1.82           “Faunus
Far East Guaranty” shall mean the Guaranty, dated as of the date hereof, by
Parent in favor of Faunus with respect to the obligations of Far East to Faunus
under the Faunus Far East Documents, as the same now exists and may hereafter be
amended, modified, supplemented, extended, renewed, restated or
replaced.

     

    1.83           “Faunus
Intercreditor Agreement” shall mean the Intercreditor and Lien Subordination
Agreement, dated as of the date hereof, by and between Agent and Faunus, as the
same now exists and may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.

     

    
      
         

      

      
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    1.84           “Fee
Letter” shall mean the letter agreement, dated of even date herewith, by and
among Borrowers, Guarantors and Agent, setting forth certain fees payable by
Borrowers to Agent for the benefit of itself and Lenders, as the same now exists
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.

     

    1.85           “Financing
Agreements” shall mean, collectively, this Agreement and all notes, guarantees,
security agreements, hypothecs, deposit account control agreements, investment
property control agreements, intercreditor agreements and all other agreements,
documents and instruments now or at any time hereafter executed and/or delivered
by any Borrower or Obligor in connection with this Agreement; provided, that, in no event
shall the term Financing Agreements be deemed to include any Hedge
Agreement.

     

    1.86           “Fixed
Charges” for any period shall mean the sum of, without duplication, (a) all
Interest Expense paid in cash during the applicable period, plus (b) all
regularly scheduled (as determined at the beginning of the respective period)
principal payments of Indebtedness for borrowed money (including, without
limitation, the cumulative Term Loan amortization for such period) and
Indebtedness with respect to Capital Leases (and without duplicating amounts in
clause (a) of this definition, the interest component with respect to
Indebtedness under Capital Leases), plus (c) cash taxes
paid for such period, minus cash tax
refunds received for such period, plus (d) cash
management fees paid during such period to the extent not already deducted in
the calculation of EBITDA for such period, plus (e) dividends or
other distributions.  The foregoing shall not be construed to include
principal payments on Indebtedness arising pursuant to revolving loans and
advances.

     

    1.87           “Fixed
Charge Coverage Ratio” shall mean, with respect to Borrowers and their
Subsidiaries, on a consolidated basis, for any applicable period, the ratio of
(a) the sum
of EBITDA, minus
unfinanced Capital Expenditures, to (b) Fixed
Charges.

     

    1.88           “Foreign
Lender” shall mean any Lender that is organized under the laws of a jurisdiction
other than that in which a Borrower is resident for tax purposes.  For
purposes of this definition, the United States of America, each State thereof
and the District of Columbia shall be deemed to constitute a single
jurisdiction.

     

    1.89           “Freight
Forwarders” shall mean such person or persons as may be selected by K&M who
are reasonably acceptable to Agent to handle the receipt of Inventory within the
United States of America and/or to clear Inventory through U.S. Customs or other
foreign export control authorities or otherwise perform port of entry services
to process Inventory imported by K&M from outside the United States of
America (such persons sometimes being referred to herein individually as a
“Freight Forwarder”); provided, that, as to each such person, (a) Agent shall
have received a Collateral Access Agreement by such person in favor of Agent (in
form and substance reasonably satisfactory to Agent) duly authorized, executed
and delivered by such person, (b) such agreement shall be in full force and
effect and (c) such person shall be in compliance in all material respects with
the terms thereof.

     

    1.90           “Funding
Bank” shall have the meaning given to such term in Section 3.3
hereof.

     

    
      
         

      

      
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    1.91           “GAAP”
shall mean generally accepted accounting principles in the United States of
America as in effect from time to time as set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Board which are applicable to the circumstances
as of the date of determination consistently applied; except, that, for purposes of
Section 9.17 hereof, (a) GAAP shall be determined on the basis of such
principles in effect on the date hereof and consistent with those used in the
preparation of the most recent audited financial statements delivered to Agent
prior to the date hereof and (b) all financial covenants shall be calculated
without giving effect to any election under Statement of Financial Account
Standards 159 or any similar accounting principle.

     

    1.92           “Global
Excess Availability” shall mean the amount, as determined by Agent, calculated
at any date, equal to: (a) the lesser of: (i) the aggregate of the US Borrowing
Base and the Canadian Borrowing Base and (ii) $30,000,000, minus (b) the sum of:
(i) the amount of all then outstanding and unpaid Obligations (but not including
for this purpose the Term Loan and Obligations arising pursuant to any
guarantees in favor of Agent and Lenders of the Obligations of the other
Borrowers or any outstanding Letter of Credit Obligations), plus (ii) the amount
of all Reserves then established in respect of Letter of Credit Obligations,
plus (iii) the
aggregate amount of all then outstanding and unpaid trade payables and other
obligations of Borrowers which are outstanding more than sixty (60) days past
due as of the end of the immediately preceding month or at Agent’s option, as of
a more recent date based on such reports as Agent may from time to time specify
(other than trade payables or other obligations being contested or disputed by
Borrowers in good faith), plus (iv) without
duplication, the amount of checks issued by Borrowers to pay trade payables and
other obligations which are more than sixty (60) days past due as of the end of
the immediately preceding month or at Agent’s option, as of a more recent date
based on such reports as Agent may from time to time specify (other than trade
payables or other obligations being contested or disputed by Borrowers in good
faith), but not yet sent.

     

    1.93           “Guarantors”
shall mean, collectively, the US Guarantors and the Canadian Guarantors; each
sometimes being referred to herein individually as a “Guarantor”

     

    1.94           “Governmental
Authority” shall mean any nation or government, any state, province, or other
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to
government.

     

    1.95           “Hazardous
Materials” shall mean any hazardous, toxic or dangerous substances, materials
and wastes, including hydrocarbons (including naturally occurring or man-made
petroleum and hydrocarbons), flammable explosives, asbestos, urea formaldehyde
insulation, radioactive materials, biological substances, polychlorinated
biphenyls, pesticides, herbicides and any other kind and/or type of pollutants
or contaminants (including materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances,
materials, or wastes and including any other substances, materials or wastes
that are or become regulated under any Environmental Law (including any that are
or become classified as hazardous or toxic under any Environmental
Law).

     

    
      
         

      

      
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    1.96           “Hedge
Agreement” shall mean an agreement between any Borrower or Guarantor and Agent
or any Bank Product Provider that is a swap agreement as such term is defined in
11 U.S.C. Section 101, and including any rate swap agreement, basis swap,
forward rate agreement, commodity swap, 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, any other similar agreement (including any
option to enter into any of the foregoing or a master agreement for any the
foregoing together with all supplements thereto) for the purpose of protecting
against or managing exposure to fluctuations in interest or exchange rates,
currency valuations or commodity prices; sometimes being collectively referred
to herein as “Hedge Agreements”.

     

    1.97           “Ideal
Borrowing Group” shall mean, collectively, Parent and its subsidiary, Ideal Tape
Co., Inc., a Delaware corporation

     

    1.98           “Indebtedness”
shall mean, with respect to any Person, any liability, whether or not
contingent, (a) in respect of borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof) or evidenced by bonds, notes, debentures or similar instruments; (b)
representing the balance deferred and unpaid of the purchase price of any
property or services (except any such balance that constitutes an account
payable to a trade creditor (whether or not an Affiliate) created, incurred,
assumed or guaranteed by such Person in the ordinary course of business of such
Person in connection with obtaining goods, materials or services that is not
overdue by more than sixty (60) days, unless the trade payable is being
contested in good faith) and payable in accordance with customary trade
practices); (c) all obligations as lessee under leases which have been, or
should be, in accordance with GAAP recorded as Capital Leases; (d) any
contractual obligation, contingent or otherwise, of such Person to pay or be
liable for the payment of any indebtedness described in this definition of
another Person, including, without limitation, any such indebtedness, directly
or indirectly guaranteed, or any agreement to purchase, repurchase, or otherwise
acquire such indebtedness, obligation or liability or any security therefor, or
to provide funds for the payment or discharge thereof, or to maintain solvency,
assets, level of income, or other financial condition; (e) all obligations with
respect to redeemable stock and redemption or repurchase obligations under any
Capital Stock or other equity securities issued by such Person; (f) all
reimbursement obligations and other liabilities of such Person with respect to
surety bonds (whether bid, performance or otherwise), letters of credit,
banker’s acceptances, drafts or similar documents or instruments issued for such
Person’s account; (g) all indebtedness of such Person in respect of indebtedness
of another Person for borrowed money or indebtedness of another Person otherwise
described in this definition which is secured by any consensual lien, security
interest, collateral assignment, conditional sale, mortgage, deed of trust, or
other encumbrance on any asset of such Person, whether or not such obligations,
liabilities or indebtedness are assumed by or are a personal liability of such
Person, all as of such time; (h) all obligations, liabilities and indebtedness
of such Person (marked to market) arising under swap agreements, cap agreements
and collar agreements and other agreements or arrangements designed to protect
such person against fluctuations in interest rates or currency or commodity
values; (i) all obligations owed by such Person under License Agreements with
respect to non-refundable, advance or minimum guarantee royalty payments; (j)
indebtedness of any partnership or joint venture in which such Person is a
general partner or a joint venturer to the extent such Person is liable therefor
as a result of such Person’s ownership interest in such entity, except to the
extent that the terms of such indebtedness expressly provide that such Person is
not liable therefor or such Person has no liability therefor as a matter of law
and (k) the principal and interest portions of all rental obligations of such
Person under any synthetic lease or similar off-balance sheet financing where
such transaction is considered to be borrowed money for tax purposes but is
classified as an operating lease in accordance with GAAP.

     

    
      
         

      

      
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    1.99           “Information
Certificate” shall mean the Information Certificate of Borrowers and Guarantors
constituting Exhibit B hereto containing material information with respect to
Borrowers and Guarantors, their respective businesses and assets, provided by or
on behalf of Borrowers and Guarantors to Agent in connection with the
preparation of this Agreement and the other Financing Agreements and the
financing arrangements provided for herein.

     

    1.100           “Intellectual
Property” shall mean, as to each Borrower and Guarantor, such Borrower’s and
Guarantor’s now owned and hereafter arising or acquired:  patents,
patent rights, patent applications, copyrights, works which are the subject
matter of copyrights, copyright applications, copyright registrations,
trademarks, servicemarks, trade names, trade styles, trademark and service mark
applications, and licenses and rights to use any of the foregoing and all
applications, registrations and recordings relating to any of the foregoing as
may be filed in the United States Copyright Office, the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof, any political subdivision thereof or in any other country or
jurisdiction, together with all rights and privileges arising under applicable
law with respect to any Borrower’s or Guarantor’s use of any of the foregoing;
all extensions, renewals, reissues, divisions, continuations, and
continuations-in-part of any of the foregoing; all rights to sue for past,
present and future infringement of any of the foregoing; inventions, trade
secrets, formulae, processes, compounds, drawings, designs, blueprints, surveys,
reports, manuals, and operating standards; goodwill (including any goodwill
associated with any trademark or servicemark, or the license of any trademark or
servicemark); customer and other lists in whatever form maintained; trade secret
rights, copyright rights, rights in works of authorship, domain names and domain
name registration; software and contract rights relating to computer software
programs, in whatever form created or maintained.

     

    1.101           “Interest
Expense” shall mean, for any period, as to any Person, as determined in
accordance with GAAP, the total interest expense of such Person, whether paid or
accrued during such period but without duplication (including the interest
component of Capital Leases for such period), including, without limitation,
discounts in connection with the sale of any Accounts that are sold for purposes
other than collection.

     

    1.102          “Interest
Period” shall mean for any Eurodollar Rate Loan, a period of approximately one
(1), two (2), or three (3) months duration as Borrowers (or Administrative
Borrower on behalf of Borrowers) may elect, the exact duration to be determined
in accordance with the customary practice in the applicable Eurodollar Rate
market; provided, that, such Borrower
(or Administrative Borrower on behalf of such Borrower) may not elect an
Interest Period which will end after the last day of the then-current term of
this Agreement.

     

    1.103           “Interest
Rate” shall mean,

     

    (a)           Subject
to clause (b) of this definition below:

     

    
      
         

      

      
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    (i)           as
to US Base Rate Loans, a rate equal to the US Base Rate plus the Applicable
Margin for Base Rate Loans,

     

    (ii)           as
to Canadian Base Rate Loans, a rate equal to the Canadian Base Rate plus the Applicable
Margin for Base Rate Loans,

     

    (iii)           as
to Eurodollar Rate Loans, a rate equal to the Adjusted Eurodollar Rate plus the Applicable
Margin for Eurodollar Rate Loans (in each case, based on the London Interbank
Offered Rate applicable for the Interest Period selected by Borrowers (or
Administrative Borrower on behalf of Borrowers) as in effect two (2) Business
Days prior to the commencement of the Interest Period, whether such rate is
higher or lower than any rate previously quoted to Borrowers (or Administrative
Borrower on behalf of Borrowers)).

     

    (b)           Notwithstanding
anything to the contrary contained in clause (a) of this definition, the
Applicable Margin otherwise used to calculate the Interest Rate for Base Rate
Loans and Eurodollar Rate Loans shall be the percentage set forth in the
definition of the term Applicable Margin for each category of Loans that is then
applicable plus
two (2%) percent per annum, at Agent’s option, (i) for the period (A) on and
after the date of termination or non-renewal hereof until such time as all
Obligations are finally paid and satisfied in full in immediately available
funds (or in the case of contingent Obligations, Agent shall have received cash
collateral or a letter of credit, at its option, all in accordance with Section
13.1 below), or (B) from and after the date of the occurrence of any Event of
Default, and for so long as such Event of Default is continuing and (ii) on the
Revolving Loans to any Borrower at any time outstanding in excess of the
Borrowing Base or any other limitation with respect thereto provided for herein
(whether or not such excess(es) arise or are made with or without Agent’s or any
Lender’s knowledge or consent and whether made before or after an Event of
Default).

     

    1.104           “Inventory”
shall mean, as to each Borrower and Guarantor, all of such Borrower’s and
Guarantor’s now owned and hereafter existing or acquired goods, wherever
located, which (a) are leased by such Borrower or Guarantor as lessor; (b) are
held by such Borrower for sale or lease or to be furnished under a contract of
service; (c) are furnished by such Borrower or Guarantor under a contract of
service; or (d) consist of raw materials, work in process, finished goods or
materials used or consumed in its business.

     

    1.105           “Inventory
Loan Limit” shall mean (a) in the case of the Ideal Borrowing Group, at any
time, the amount equal to $5,000,000, (b) in the case of K&M, at any time,
the amount equal to $4,500,000, and (c) in the case of Canadian Borrower, at any
time, the amount equal to the US Dollar Equivalent of $6,000,000.

     

    1.106           “Investment
Property Control Agreement” shall mean an agreement in writing, in form and
substance satisfactory to Agent, by and among Agent, any Borrower or Guarantor
(as the case may be) and any securities intermediary, commodity intermediary or
other person who has custody, control or possession of any investment property
of such Borrower or Guarantor acknowledging that such securities intermediary,
commodity intermediary or other person has custody, control or possession of
such investment property on behalf of Agent, that it will comply with
entitlement orders originated by Agent with respect to such investment property,
or other instructions of Agent, and has such other terms and conditions as Agent
may require.

     

    
      
         

      

      
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    1.107          “Issuing
Bank” shall mean Canadian Issuing Bank or US Issuing Bank, as the case may
be.

     

    1.108           “Lenders”
shall mean the financial institutions who are signatories hereto as Lenders and
other persons made a party to this Agreement as a Lender in accordance with
Section 13.7 hereof, and their respective successors and assigns; each sometimes
being referred to herein individually as a “Lender”.

     

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

     

    1.110           “Letter
of Credit Limit” shall mean $6,000,000.

     

    1.111           “Letter
of Credit Obligations” shall mean, at any time, the sum of (a) the aggregate
undrawn amount of all Letters of Credit outstanding at such time, plus (b) the
aggregate amount of all drawings under Letters of Credit for which Issuing Bank
has not at such time been reimbursed, plus (c) without
duplication, the aggregate amount of all payments made by each Lender to Issuing
Bank with respect to such Lender’s participation in Letters of Credit as
provided in Section 2.2 for which Borrowers have not at such time reimbursed the
Lenders, whether by way of a Revolving Loan or otherwise.

     

    1.112            “Letters
of Credit” shall mean all letters of credit denominated in US Dollars or
Canadian Dollars (whether documentary or stand-by and whether for the purchase
of inventory, equipment or otherwise) issued by an Issuing Bank for the account
of any Borrower pursuant to this Agreement, and all amendments, renewals,
extensions or replacements thereof and including, but not limited to, the
Existing Letters of Credit.

     

    1.113          “License
Agreements” shall have the meaning set forth in Section 8.11
hereof.

     

    1.114          “Loans”
shall mean, collectively, the Revolving Loans and the Term Loan.

     

    1.115          “London
Interbank Offered Rate” shall mean, with respect to any Eurodollar Loan for the
Interest Period applicable thereto, the rate of interest per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) appearing on Telerate Page
3750 (or any successor page) as the London interbank offered rate for deposits
in U.S. Dollars at approximately 11:00 a.m. (London time) two (2) Business Days
prior to the first day of such Interest Period for a term comparable to such
Interest Period; provided, that, if more than one rate is specified on Telerate
Page 3750, the applicable rate shall be the arithmetic mean of all such
rates.  If, for any reason, such rate is not available, the term
“London Interbank Offered Rate” shall mean, with respect to any Eurodollar Loan
for the Interest Period applicable thereto, the rate of interest per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters
Screen LIBO Page as the London interbank offered rate for deposits in Dollars at
approximately 11:00 A.M. (London time) two (2)  Business Days prior to
the first day of such Interest Period for a term comparable to such Interest
Period; provided, however, if more than one rate is specified on Reuters Screen
LIBO Page, the applicable rate shall be the arithmetic mean of all such
rates.

     

    
      
         

      

      
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    1.116           “Material
Adverse Effect” shall mean a material adverse effect, taken as a whole, on (a)
the financial condition, business, performance or operations of Borrowers; (b)
the legality, validity or enforceability of this Agreement or any of the other
Financing Agreements; (c) the legality, validity, enforceability, perfection or
priority of the security interests and liens of Agent upon the Collateral; (d)
the Collateral or its value; (e) the ability of any Borrower to repay the
Obligations or of any Borrower to perform its obligations under this Agreement
or any of the other Financing Agreements as and when to be performed; or (f) the
ability of Agent or any Lender to enforce the Obligations or realize upon the
Collateral or otherwise with respect to the rights and remedies of Agent and
Lenders under this Agreement or any of the other Financing
Agreements.

     

    1.117          “Material
Contract” shall mean (a) any contract or other agreement (other than the
Financing Agreements), written or oral, of any Borrower or Guarantor involving
monetary liability of or to any Person in an amount in excess of $500,000 in any
fiscal year and (b) any other contract or other agreement (other than the
Financing Agreements), whether written or oral, to which any Borrower or
Guarantor is a party as to which the breach, nonperformance, cancellation or
failure to renew by any party thereto would have a Material Adverse
Effect.

     

    1.118           “Maturity
Date” shall have the meaning set forth in Section 13.1 hereof.

     

    1.119           “Maximum
Credit” shall mean the amount of $38,000,000.

     

    1.120           “Mortgages”
shall mean, individually and collectively, each of the following (as the same
now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced):  (a) the Mortgage, Assignment of
Leases and Rents, Security Agreement and Fixture Filing, dated of even date
herewith, by Ideal Tape in favor of Agent with respect to the Real Property
and related assets of Ideal Tape located in Lowell, Massachusetts, (b) the
Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing,
dated of even date herewith, by Parent in favor of Agent with respect to
the Real Property and related assets of Parent located in Moorestown, New
Jersey, (c) the Open-End Mortgage, Assignment of Leases and Rents, Security
Agreement and Fixture Filing, dated of even date herewith, by Dexter in
favor of Agent with respect to the Real Property and related assets of Dexter
located in Providence, Rhode Island and (d) the Moveable Hypothec,
dated of even date herewith, by Canadian Borrower in favor of Agent
with respect to the Real Property and related assets of Canadian Borrower
located in Sherbrooke, Québec, Canada.

     

    1.121           “Multiemployer
Plan” shall mean a “multi-employer plan” as defined in Section 4001(a)(3) of
ERISA which is or was at any time during the current year or the immediately
preceding six (6) years contributed to by any Borrower, Guarantor or any ERISA
Affiliate or with respect to which any Borrower, Guarantor or any ERISA
Affiliate may incur any liability.

     

    1.122           “Net
Recovery Percentage” shall mean the fraction, expressed as a percentage, (a) the
numerator of which is the amount equal to the amount of the recovery in respect
of the Inventory at such time on a “net orderly liquidation value” basis as set
forth in the most recent acceptable appraisal of Inventory received by Agent in
accordance with Section 7.3, net of operating expenses, liquidation expenses and
commissions, and (b) the denominator of which is the applicable original cost of
the aggregate amount of the Inventory subject to such appraisal.

     

    
      
         

      

      
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    1.123          “Obligations”
shall mean, collectively, the US Obligations and the Canadian
Obligations.

     

    1.124          “Obligor”
shall mean any guarantor, endorser, acceptor, surety or other person liable on
or with respect to the Obligations or who is the owner of any property which is
security for the Obligations (including, without limitation, Guarantors), other
than Borrowers.

     

    1.125          “Other
Taxes” shall have the meaning given to such term in Section 6.5
hereof.

     

    1.126          “Parent”
shall mean American Biltrite Inc., a Delaware corporation, and its successors
and assigns.

     

    1.127          “Participant”
shall mean any financial institution that acquires and holds a participation in
the interest of any Lender in any of the Loans and Letters of Credit in
conformity with the provisions of Section 13.7 of this Agreement governing
participations.

     

    1.128          “Pension
Plan” shall mean a pension plan (as defined in Section 3(2) of ERISA) subject to
Title IV of ERISA which any Borrower or Guarantor sponsors, maintains, or to
which any Borrower, Guarantor or ERISA Affiliate makes, is making, or is
obligated to make contributions, other than a Multiemployer Plan.

     

    1.129          “Permitted
Holders” shall mean, with respect to each Borrower and Guarantor, the persons
set forth on Schedule 8.12 to the Information Certificate.

     

    1.130          “Person”
or “person” shall mean any individual, sole proprietorship, partnership,
corporation (including any corporation which elects subchapter S status under
the Code), limited liability company, limited liability partnership, business
trust, unincorporated association, joint stock corporation, trust, joint venture
or other entity or any government or any agency or instrumentality or political
subdivision thereof.

     

    1.131          “Plan”
shall mean an employee benefit plan (as defined in Section 3(3) of ERISA) which
any Borrower or Guarantor sponsors, maintains, or to which it makes, is making,
or is obligated to make contributions, or in the case of a Multiemployer Plan
has made contributions at any time during the immediately preceding six (6) plan
years or with respect to which any Borrower or Guarantor may incur
liability.

     

    1.132          “PPSA”
shall mean the Personal Property Security Act (Ontario), the Civil Code of
Québec or any other applicable  Canadian Federal or Provincial statute
pertaining to the granting, perfecting, priority or ranking of security
interests, liens, hypothecs on personal property, and any successor statutes,
together with any regulations thereunder, in each case as in effect from time to
time.  References to sections of the PPSA shall be construed to also
refer to any successor sections.

     

    
      
         

      

      
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    1.133          “Priority
Payables” shall mean, as to any Borrower or Guarantor at any time, (a) the full
amount of the liabilities of such Borrower or Guarantor at such time which (i)
have a trust imposed to provide for payment or a security interest, pledge,
lien, hypothec or charge ranking or capable of ranking senior to or pari passu
with security interests, liens, hypothecs or charges securing the Obligations
under Federal, Provincial, State, county, district, municipal, or local law in
Canada or (ii) have a right imposed to provide for payment ranking or capable of
ranking senior to or pari passu with the Obligations under local or national
law, regulation or directive, including, but not limited to, claims for
unremitted and/or accelerated rents, taxes, wages, withholding taxes, VAT and
other amounts payable to an insolvency administrator, employee withholdings or
deductions, severance pay, termination pay and vacation pay, workers’
compensation obligations, government royalties or pension fund obligations in
each case to the extent such trust, or security interest, lien or charge has
been or may be imposed and (b) the amount equal to the percentage applicable to
Inventory in the calculation of the Borrowing Base multiplied by the aggregate
Value of the Eligible Inventory which Agent, in good faith, considers is or may
be subject to retention of title by a supplier or a right of a supplier to
recover possession thereof, where such supplier’s right has priority over the
security interests, liens or charges securing the Obligations, including,
without limitation, Eligible Inventory subject to a right of a supplier to
repossess goods pursuant to Section 81.1 of the Bankruptcy and Insolvency Act
(Canada) or any applicable laws granting revendication or similar rights to
unpaid suppliers or any similar laws of Canada or any other applicable
jurisdiction (provided, that, to the extent such Inventory has been identified
and has been excluded from Eligible Inventory, the amount owing to the supplier
shall not be considered a Priority Payable).

     

    1.134          “Pro
Rata Share” shall mean as to any Lender, the fraction (expressed as a
percentage) the numerator of which is such Lender’s Commitment and the
denominator of which is the aggregate amount of all of the Commitments of
Lenders, as adjusted from time to time in accordance with the provisions of
Section 13.7 hereof; provided, that, if the
Commitments have been terminated, the numerator shall be the unpaid amount of
such Lender’s Loans and its interest in the Letters of Credit and the
denominator shall be the aggregate amount of all unpaid Loans and Letters of
Credit.

     

    1.135          “Provision
for Taxes” shall mean an amount equal to all taxes imposed on or measured by net
income, whether Federal, State, Provincial, county or local, and whether foreign
or domestic, that are paid or payable by any Person in respect of any period in
accordance with GAAP.

     

    1.136          “Real
Property” shall mean all now owned and hereafter acquired real property of each
Borrower and Guarantor, including leasehold interests, together with all
buildings, structures, and other improvements located thereon and all licenses,
easements and appurtenances relating thereto, wherever located.

     

    1.137          “Receivables”
shall mean all of the following now owned or hereafter arising or acquired
property of each Borrower and Guarantor: (a) all Accounts, other than the Faunus
Factored Accounts; (b) all interest, fees, late charges, penalties, collection
fees and other amounts due or to become due or otherwise payable in connection
with any Account; (c) all payment intangibles of such Borrower or Guarantor
(including, without limitation, any amounts payable to such Borrower or
Guarantor under the Faunus Factoring Documents in respect of the Faunus Factored
Accounts or otherwise, or under any other factoring agreement); (d) letters of
credit, indemnities, guarantees, security or other deposits and proceeds thereof
issued payable to any Borrower or Guarantor or

     

    
      
         

      

      
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    otherwise
in favor of or delivered to any Borrower or Guarantor in connection with any
Account; or (e) all other accounts, contract rights, chattel paper, instruments,
notes, general intangibles and other forms of obligations owing to any Borrower
or Guarantor, whether from the sale and lease of goods or other property,
licensing of any property (including Intellectual Property or other general
intangibles), rendition of services or from loans or advances by any Borrower or
Guarantor or to or for the benefit of any third person (including loans or
advances to any Affiliates or Subsidiaries of any Borrower or Guarantor) or
otherwise associated with any Accounts, Inventory or general intangibles of any
Borrower or Guarantor (including, without limitation, choses in action, causes
of action, tax refunds, tax refund claims, any funds which may become payable to
any Borrower or Guarantor in connection with the termination of any Plan or
other employee benefit plan and any other amounts payable to any Borrower or
Guarantor from any Plan or other employee benefit plan, rights and claims
against carriers and shippers, rights to indemnification, business interruption
insurance and proceeds thereof, casualty or any similar types of insurance and
any proceeds thereof and proceeds of insurance covering the lives of employees
on which any Borrower or Guarantor is a beneficiary).

     

    1.138          “Records”
shall mean, as to each Borrower and Guarantor, all of such Borrower’s and
Guarantor’s present and future books of account of every kind or nature,
purchase and sale agreements, invoices, ledger cards, bills of lading and other
shipping evidence, statements, correspondence, memoranda, credit files and other
data relating to the Collateral or any account debtor, together with the tapes,
disks, diskettes and other data and software storage media and devices, file
cabinets or containers in or on which the foregoing are stored (including any
rights of any Borrower or Guarantor with respect to the foregoing maintained
with or by any other person).

     

    1.139          “Register”
shall have the meaning set forth in Section 13.7 hereof.

     

    1.140          “Required
Lenders” shall mean, at any time, those Lenders whose Pro Rata Shares aggregate
fifty-one (51%) percent or more of the aggregate of the Commitments of all
Lenders, or if the Commitments shall have been terminated, Lenders to whom at
least  fifty-one (51%) percent of the then outstanding Obligations are
owing.

     

    1.141           “Reserves”
shall mean as of any date of determination, such amounts as Agent may from time
to time establish and revise in good faith reducing the amount of Loans and
Letters of Credit that would otherwise be available to any Borrower under the
lending formula(s) provided for herein: (a) to reflect events, conditions,
contingencies or risks which, as determined by Agent in good faith, adversely
affect, or would have a reasonable likelihood of adversely affecting, either (i)
the Collateral or any other property which is security for the Obligations or
its value or (ii) the assets, business or prospects of any Borrower or Obligor
or (iii) the security interests and other rights of Agent or any Lender in the
Collateral (including the enforceability, perfection and priority thereof) or
(b) to reflect Agent’s good faith belief that any collateral report or financial
information furnished by or on behalf of any Borrower or Obligor to Agent is or
may have been incomplete, inaccurate or misleading in any material respect or
(c) to reflect the amounts of Priority Payables or (d) to reflect outstanding
Letter of Credit Obligations as provided in Section 2.2 hereof or (e) in respect
of any state of facts which Agent determines in good faith constitutes a Default
or an Event of Default.  Without limiting the generality of the
foregoing, Reserves may, at Agent’s option, be established to reflect, as may be
reasonably determined by Agent: (i) dilution with respect to the Accounts (based
on the ratio of the aggregate amount of non-cash reductions in Accounts for any
period to the

     

    
      
         

      

      
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    aggregate
dollar amount of the sales of such Borrower for such period) as calculated by
Agent for any period is or is reasonably anticipated to be greater than five
(5%) percent; (ii) to reflect that the orderly liquidation value of the
Equipment or fair market value of any of the Real Property as set forth in the
most recent acceptable appraisals received by Agent with respect thereto has
declined so that the then outstanding principal amount of the Term Loan is
greater than such percentage with respect to such appraised values as Agent used
in establishing the original principal amount of the Term Loan multiplied by
such appraised values; (iii) returns, discounts, claims, credits and allowances
of any nature that are not paid pursuant to the reduction of Accounts; (iv)
sales, excise or similar taxes included in the amount of any Accounts reported
to Agent; (v) a change in the turnover, age or mix of the categories of
Inventory that adversely affects the aggregate value of all Inventory; (vi)
amounts due or to become due to owners and lessors of premises where any
Collateral is located, other than for those locations where Agent has received a
Collateral Access Agreement that Agent has accepted in writing; (vii) amounts
due or to become due to owners and licensors of trademarks and other
Intellectual Property used by any Borrower and (viii) obligations, liabilities
or indebtedness (contingent or otherwise) of Borrowers or Guarantors to Agent or
any Bank Product Provider arising under or in connection with any Bank Products
or as such Affiliate or Person may otherwise require in connection therewith to
the extent that such obligations, liabilities or indebtedness constitute
Obligations as such term is defined herein or otherwise receive the benefit of
the security interest of Agent in any Collateral.  The amount of any
Reserve established by Agent shall have a reasonable relationship to the event,
condition or other matter which is the basis for such reserve as determined by
Agent in good faith.

     

    1.142           “Revolving
Borrowers” shall mean, collectively, the US Revolving Borrowers and the Canadian
Borrower; each sometimes being referred to herein individually as a “Revolving
Borrower”.

     

    1.143           “Revolving
Loans” shall mean the loans now or hereafter made by or on behalf of any Lender
or by Agent for the account of any Lender on a revolving basis pursuant to the
Credit Facility (involving advances, repayments and readvances) as set forth in
Section 2.1 hereof.

     

    1.144           “Secured
Parties” shall mean, collectively, (a) Agent, (b) Issuing Banks, (c) Lenders and
(d) Bank Product Providers (to the extent approved by Agent).

     

    1.145           “Solvent”
shall mean, at any time with respect to any Person, that at such time such
Person (a) is able to pay its debts as they mature and has (and has a reasonable
basis to believe it will continue to have) sufficient capital (and not
unreasonably small capital) to carry on its business consistent with its
practices as of the date hereof, and (b) the assets and properties of such
Person at a fair valuation (and including as assets for this purpose at a fair
valuation all rights of subrogation, contribution or indemnification arising
pursuant to any guarantees given by such Person) are greater than the
Indebtedness of such Person, and including subordinated and contingent
liabilities computed at the amount which, such person has a reasonable basis to
believe, represents an amount which can reasonably be expected to become an
actual or matured liability (and including as to contingent liabilities arising
pursuant to any guarantee the face amount of such liability as reduced to
reflect the probability of it becoming a matured liability).

     

    1.146           “Special
Agent Advances” shall have the meaning set forth in Section 12.11
hereof.

     

    
      
         

      

      
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    1.147           “Subsidiary”
or “subsidiary” shall mean, with respect to any Person, any corporation, limited
liability company, limited liability partnership or other limited or general
partnership, trust, association or other business entity of which an aggregate
of at least a majority of the outstanding Capital Stock or other interests
entitled to vote in the election of the board of directors of such corporation
(irrespective of whether, at the time, Capital Stock of any other class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency), managers, trustees or other controlling
persons, or an equivalent controlling interest therein, of such Person is, at
the time, directly or indirectly, owned by such Person and/or one or more
subsidiaries of such Person.

     

    1.148           “Term
Loan” shall mean the term loan made by or on behalf of Lenders to the Ideal
Borrowing Group as provided for in Section 2.3 hereof.

     

    1.149           “UCC”
shall mean the Uniform Commercial Code as in effect in the State of New York and
any successor statute, as in effect from time to time (except, that, terms used
herein which are not otherwise defined herein and defined in the Uniform
Commercial Code as in effect in the State of New York on the date hereof shall
continue to have the same meaning notwithstanding any replacement or amendment
of such statute except as Agent may otherwise determine).

     

    1.150           “US
Base Rate” shall mean the higher of (a) the rate from time to time publicly
announced by Wachovia Bank, National Association, or its successors, as its
prime rate, whether or not such announced rate is the best rate available at
such bank or (b) the Federal Funds Effective Rate from time to time plus one-half of one
(0.50%) percent.  The term “Federal Funds Effective Rate” shall mean,
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 Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not published for any day that is a Business Day, the
average of the quotations for such day on such transactions received by Agent
from three Federal Funds brokers of recognized standing selected by
it.

     

    1.151           “US
Base Rate Loans” shall mean any Loans or portion thereof denominated in US
Dollars and on which interest is payable based on the US Base Rate in accordance
with the terms hereof.

     

    1.152           “US
Borrowers” shall mean, collectively, the following (together with their
respective successors and assigns):  (a) Parent, (b) Ideal Tape Co.,
Inc., a Delaware corporation, (c) K&M Associates L.P., a Rhode Island
limited partnership, and (d) any other Person that at any time after the date
hereof becomes party to this Agreement as a US Borrower; each sometimes being
referred to herein individually as a “US Borrower”.

     

    1.153           “US
Borrowing Base” shall mean, at any time, as to each US Revolving Borrower, the
amount equal to (a) the lesser of: (i) the US Revolving Loan Borrowing Limit and
(ii) an amount equal to the sum of (A) eight-five (85%) percent of the Eligible
Accounts of such US Revolving Borrower plus (B) (I) in the
case of K&M Associates L.P., the lesser of (1)(x) for the calendar months of
September, October and November of each year, fifty (50%) percent multiplied by
the Value of Eligible Inventory of such US Revolving Borrower consisting of
finished goods, or

     

    
      
         

      

      
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    (y)
for all calendar months other than September, October and November, forty four
(44%) percent multiplied by the Value of Eligible Inventory of such US Revolving
Borrower consisting of finished goods, (2) eight-five (85%) percent of the Net
Recovery Percentage of such Eligible Inventory multiplied by the Value of
Eligible Inventory of such US Revolving Borrower or (3) the Inventory Loan Limit
of such US Revolving Borrower, or (II) in the case of the Ideal Borrowing Group,
the lesser of (1) the sum of (x) thirty six (36%) percent multiplied by the
Value of Eligible Inventory of such US Revolving Borrower consisting of raw
materials and (y) fifty (50%) percent multiplied by the Value of Eligible
Inventory of such US Revolving Borrower consisting of finished goods, (2)
eight-five (85%) percent of the Net Recovery Percentage of such Eligible
Inventory multiplied by the Value of Eligible Inventory of such US Revolving
Borrower or (3) the Inventory Loan Limit of such US Revolving Borrower, minus (b) Reserves
attributable to such US Revolving Borrower.

     

    For
purposes only of applying the Inventory Loan Limit, Agent may treat the then
undrawn amounts of outstanding Letters of Credit for the purpose of purchasing
Eligible Inventory as Revolving Loans to the extent Agent is in effect basing
the issuance of the Letter of Credit Obligations on the Value of the Eligible
Inventory being purchased with such Letters of Credit.  In determining
the actual amounts of such Letter of Credit Obligations to be so treated for
purposes of the sublimit, the outstanding Revolving Loans and Reserves shall be
attributed first to any components of the lending formulas set forth above that
are not subject to such sublimit, before being attributed to the components of
the lending formulas subject to such sublimit.  The amounts of
Eligible Inventory of such US Revolving Borrower shall, at Agent’s option, be
determined based on the lesser of the amount of Inventory set forth in the
general ledger of such US Revolving Borrower or the perpetual inventory record
maintained by such US Revolving Borrower.

     

    1.154           “US
Cash Equivalents” shall mean, at any time, (a) any evidence of Indebtedness with
a maturity date of ninety (90) days or less issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof; provided, that, the full faith
and credit of the United States of America is pledged in support thereof; (b)
certificates of deposit or bankers’ acceptances with a maturity of ninety (90)
days or less of any financial institution that is a member of the Federal
Reserve System having combined capital and surplus and undivided profits of not
less than $1,000,000,000; (c) commercial paper (including variable rate demand
notes) with a maturity of ninety (90) days or less issued by a corporation
(except an Affiliate of any Borrower or Guarantor) organized under the laws of
any State of the United States of America or the District of Columbia and rated
at least A-1 by Standard & Poor’s Ratings Service, a division of The
McGraw-Hill Companies, Inc. or at least P-1 by Moody’s Investors Service, Inc.;
(d) repurchase obligations with a term of not more than thirty (30) days for
underlying securities of the types described in clause (a) above entered into
with any financial institution having combined capital and surplus and undivided
profits of not less than $1,000,000,000; (e) repurchase agreements and reverse
repurchase agreements relating to marketable direct obligations issued or
unconditionally guaranteed by the United States of America or issued by any
governmental agency thereof and backed by the full faith and credit of the
United States of America, in each case maturing within ninety (90) days or less
from the date of acquisition; provided, that, the terms of
such agreements comply with the guidelines set forth in the Federal Financial
Agreements of Depository Institutions with Securities Dealers and Others, as
adopted by the Comptroller of the Currency on October 31, 1985; and (f)
investments in money market funds and mutual funds which invest substantially
all of their assets in securities of the types described in clauses (a) through
(e) above.

     

    
      
         

      

      
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    1.155           “US
Collateral” shall mean all personal and real property and fixtures, and
interests in property and fixtures, of any US Loan Party, whether now owned or
hereafter acquired or existing, and wherever located.

     

    1.156           “US
Commitment” shall mean, at any time, as to each Lender, the principal amount set
forth below such Lender’s signature on the signatures pages hereto designated as
the US Commitment or on Schedule 1 to the Assignment and Acceptance Agreement
pursuant to which such Lender became a Lender hereunder in accordance with the
provisions of Section 13.7 hereof, as the same may be adjusted from time to time
in accordance with the terms hereof; sometimes being collectively referred to
herein as “US Commitments”.

     

    1.157)          “US
Credit Facility” shall mean the Loans and Letters of Credit provided to or for
the benefit of any US Borrower or a Guarantor pursuant to Sections 2.1, 2.2 and
2.3 hereof.

     

    1.158           “US
Dollar Equivalent” shall mean at any time (a) as to any amount denominated in US
Dollars, the amount thereof at such time, and (b) as to any amount denominated
in any other currency, the equivalent amount in US Dollars calculated by Agent
in good faith at such time using the exchange rate in effect on the Business Day
of determination.

     

    1.159           “US
Dollars”, “US$” and “$” shall each mean lawful currency of the United States of
America.

     

    1.160           “US
Excess Availability” shall mean, as to each US Revolving Borrower, the amount,
as determined by Agent, calculated at any date, equal to: (a) the lesser of: (i)
the US Borrowing Base for such US Revolving Borrower and (ii) the US Revolving
Loan Borrowing Limit for such US Revolving Borrower, minus (b) the sum of:
(i) the amount of all then outstanding and unpaid US Obligations of such US
Revolving Borrower (but not including for this purpose any Term Loan, US
Obligations arising pursuant to any guarantees in favor of Agent and US Lenders
of the US Obligations of the other US Borrowers or any outstanding US Letter of
Credit Obligations), plus (ii) the amount
of all Reserves then established in respect of US Letter of Credit Obligations,
plus (iii) the
aggregate amount of all then outstanding and unpaid trade payables and other
obligations of such US Revolving Borrower which are outstanding more than sixty
(60) days past due as of the end of the immediately preceding month or at
Agent’s option, as of a more recent date based on such reports as Agent may from
time to time specify (other than trade payables or other obligations being
contested or disputed by such US Revolving Borrower in good faith), plus (iv) without
duplication, the amount of checks issued by US Borrowers to pay trade payables
and other obligations which are more than sixty (60) days past due as of the end
of the immediately preceding month or at Agent’s option, as of a more recent
date based on such reports as Agent may from time to time specify (other than
trade payables or other obligations being contested or disputed by such US
Revolving Borrower in good faith), but not yet sent..

     

    1.161           “US
Guarantors” shall mean, collectively, the following (together with their
respective successors and assigns):  (a) 425 Dexter Associates, L.P.,
a Rhode Island limited partnership, (b) Ocean State Jewelry, Inc., a Rhode
Island corporation, (c) Majestic Jewelry, Inc., a Delaware corporation, (d)
American Biltrite Far East, Inc., a Delaware corporation, and (e) any other
Person that at any time after the date hereof becomes party to a guarantee in
favor of Agent or any Lender or otherwise liable on or with respect to the US
Obligations or who is the owner of any property which is security for the US
Obligations (other than Borrowers); each sometimes being referred to herein
individually as a “US Guarantor”.

     

    
      
         

      

      
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    1.162           “US
Issuing Bank” shall mean Wachovia Bank, National Association or any US Lender
that is approved by Agent that shall issue a Letter of Credit for the account of
a US Borrower and have agreed in a manner satisfactory to Agent to be subject to
the terms hereof as a US Issuing Bank.

     

    1.163           “US
Lender” shall mean, at any time, each Lender having a US Commitment or a Loan
made to any US Borrower owing to it at such time; sometimes being referred to
herein collectively as “US Lenders”.

     

    1.164           “US
Letter of Credit Limit” shall mean $6,000,000, minus the amount of
all outstanding Canadian Letter of Credit Obligations.

     

    1.165           “US
Letter of Credit Obligations” shall mean, at any time, the sum of (a) the
aggregate undrawn amount of all Letters of Credit issued for the account of a US
Revolving Borrower outstanding at such time, plus (b) the
aggregate amount of all drawings under Letters of Credit for a US Revolving
Borrower for which Issuing Bank has not at such time been reimbursed, plus (c) without
duplication, the aggregate amount of all payments made by each Lender to the US
Issuing Bank with respect to such Lender’s participation in Letters of Credit
issued for the account of a US Revolving Borrower as provided in Section 2.2 for
which US Revolving Borrowers have not at such time reimbursed the Lenders,
whether by way of a Revolving Loan or otherwise.

     

    1.166           “US
Loan Parties” shall mean Guarantors and Borrowers other than the Canadian Loan
Parties; each sometimes being referred to individually as a “US Loan
Party”.

     

    1.167           “US
Obligations” shall mean (a) any and all Loans, Letter of Credit Obligations and
all other obligations, liabilities and indebtedness of every kind, nature and
description owing by any or all of US Borrowers to Agent or any Lender or any
Issuing Bank, including principal, interest, charges, fees, costs and expenses,
however evidenced, whether as principal, surety, endorser, guarantor or
otherwise, arising under this Agreement or any of the other Financing Agreements
or on account of any Letter of Credit and all other Letter of Credit
Obligations, whether now existing or hereafter arising, whether arising before,
during or after the initial or any renewal term of this Agreement or after the
commencement of any case with respect to such US Borrower under the United
States Bankruptcy Code, the Bankruptcy and Insolvency Act (Canada), the
Companies’ Creditors Arrangement Act (Canada) or any similar statute (including
the payment of interest and other amounts which would accrue and become due but
for the commencement of such case, whether or not such amounts are allowed or
allowable in whole or in part in such case), whether direct or indirect,
absolute or contingent, joint or several, due or not due, primary or secondary,
liquidated or unliquidated, or secured or unsecured and (b) for purposes only of
Section 5.1 hereof and subject to the priority in right of payment set forth in
Section 6.4 hereof, all obligations, liabilities and indebtedness of every kind,
nature and description owing by any or all of US Borrowers or Guarantors to
Agent or any Bank Product Provider arising under or pursuant to any Bank
Products, whether now existing or hereafter arising; provided, that, (i) as to any
such obligations, liabilities and indebtedness arising under or pursuant to a
Hedge Agreement, the same shall only be included within the US Obligations if
upon Agent’s request, Agent shall have entered into an agreement, in form and
substance satisfactory to Agent, with the Bank Product Provider that is a
counterparty to such Hedge Agreement, as acknowledged and agreed to by Borrowers
and Guarantors, providing for the delivery to Agent by such counterparty of
information with respect to

     

    
      
         

      

      
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    the
amount of such obligations and providing for the other rights of Agent and such
Bank Product Provider in connection with such arrangements, (ii) any Bank
Product Provider, other than Wachovia and its Affiliates, shall have delivered
written notice to Agent that (A) such Bank Product Provider has entered into a
transaction to provide Bank Products to a Borrower and Guarantor and (B) the
obligations arising pursuant to such Bank Products provided to US Borrowers and
Guarantors constitute Obligations entitled to the benefits of the security
interest of Agent granted hereunder, and Agent shall have accepted such notice
in writing and (iii) in no event shall any Bank Product Provider acting in such
capacity to whom such obligations, liabilities or indebtedness are owing be
deemed a Lender for purposes hereof to the extent of and as to such obligations,
liabilities or indebtedness except that each reference to the term “Lender” in
Sections 12.1, 12.2, 12.3(b), 12.6, 12.7, 12.9, 12.12 and 13.6 hereof shall be
deemed to include such Bank Product Provider and in no event shall the approval
of any such person in its capacity as Bank Product Provider be required in
connection with the release or termination of any security interest or lien of
Agent.

     

    1.168           “US
Payment Account” shall mean account no. 5000000030279 of Agent at Wachovia Bank,
National Association, or such other account of Agent as Agent may from time to
time designate to Administrative Borrower as the US Payment Account for purposes
of this Agreement and the other Financing Agreements.

     

    1.169           “US
Reference Bank” shall mean Wachovia Bank, National Association, or such other
bank as Agent may from time to time designate.

     

    1.170           “US
Revolving Borrowers” shall mean, collectively, the following (together with
their respective successors and assigns): (a) the Ideal Borrowing Group (as
defined below), and (b) K&M Associates L.P., a Rhode Island limited
partnership, and (c) any other Person that at any time after the date hereof
becomes a US Revolver Borrower; each sometimes being referred to herein
individually as a “US Revolving Borrower”.

     

    1.171           “US
Revolving Loan Borrowing Limit” shall mean, as to each US Revolving Borrower at
any time, the amount equal to the US Revolving Loan Maximum Amount minus (a) the then
outstanding principal amount of the Revolving Loans and Letters of Credit
provided to the other US Revolving Borrowers and (b) the US Dollar Equivalent of
Revolving Loans and Letters of Credit Obligations outstanding to the Canadian
Borrower.

     

    1.172           “US
Revolving Loan Maximum Amount” shall mean $30,000,000.

     

    1.173           “Value”
shall mean, the US Dollar Equivalent as determined by Agent in good faith, with
respect to Inventory, the lower of (a) cost computed on a first-in first-out
basis in accordance with GAAP or (b) market value; provided, that, for purposes of
the calculation of the Borrowing Base, (i) the Value of the Inventory shall not
include:  (A) the portion of the value of Inventory equal to the
profit earned by any Affiliate on the sale thereof to any Borrower or (B)
write-ups or write-downs in value with respect to currency exchange rates and
(ii) notwithstanding anything to the contrary contained herein, the cost of the
Inventory shall be computed in the same manner and consistent with the most
recent appraisal of the Inventory received and accepted by Agent prior to the
date hereof, if any.

     

    
      
         

      

      
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    1.174           “VAT”
shall mean Value Added Tax imposed in Canada or any other jurisdiction and any
equivalent tax applicable in any jurisdiction (including goods and services tax,
harmonized sales tax and Québec sales tax).

     

    1.175           “Voting
Stock” shall mean with respect to any Person, (a) one (1) or more classes of
Capital Stock of such Person having general voting powers to elect at least a
majority of the board of directors, managers or trustees of such Person,
irrespective of whether at the time Capital Stock of any other class or classes
have or might have voting power by reason of the happening of any contingency,
and (b) any Capital Stock of such Person convertible or exchangeable without
restriction at the option of the holder thereof into Capital Stock of such
Person described in clause (a) of this definition.

     

    1.176           “Wachovia”
shall mean Wachovia Bank, National Association, a Nevada corporation, in its
individual capacity, and its successors and assigns.

     

    1.177           “Wachovia
Canada” shall mean Wachovia Capital Finance Corporation (Canada), and its
successors and assigns.

     

    
      	
              SECTION
      2.

            	
              CREDIT
      FACILITIES

            

    

     

    2.1           Loans.

     

    (a)           Subject
to and upon the terms and conditions contained herein, (i) each US Lender
severally (and not jointly) agrees to make its Pro Rata Share of Revolving Loans
in US Dollars (which Revolving Loans shall be repayable in US Dollars) to each
US Revolving Borrower from time to time in amounts requested by such US
Revolving Borrower (or Administrative Borrower on behalf of such US Revolving
Borrower) up to the aggregate amount outstanding for all US Lenders at any time
equal to the lesser of: (A) the US Borrowing Base of such US Revolving Borrower
or (B) the amount equal to (1) US Revolving Loan Maximum Amount minus (2) the sum of
(x) the US Dollar Equivalent of the aggregate amount of Revolving Loans
outstanding to the Canadian Borrower at such time, (y) the US Dollar Equivalent
of the Canadian Letter of Credit Obligations at such time and (z) the aggregate
amount of Revolving Loans and Letters of Credit outstanding in favor of all
other US Borrowers at such time, (ii) each Canadian Lender severally (and not
jointly) agrees to make its Pro Rata Share of Revolving Loans in Canadian
Dollars to Canadian Borrower (which Revolving Loans shall be repayable in the
currency in which such Revolving Loan was made) from time to time in amounts
requested by a Canadian Borrower (or Administrative Borrower on behalf of any
Canadian Borrower) up to the aggregate amount thereof outstanding for all
Canadian Lenders at any time equal to the lesser of: (A) the US Dollar
Equivalent of the Canadian Borrowing Base at such time or (B) an amount equal to
the US Dollar Equivalent of the Canadian Revolving Loan Maximum Amount minus the sum of (1)
the aggregate amount of Revolving Loans outstanding to the Canadian Borrower at
such time and (2) the Canadian Letter of Credit Obligations at such
time.  All Loans made by US Lenders to US Borrowers shall be US Dollar
Loans and all Loans made by Canadian Lenders to Canadian Borrower shall be
Canadian Dollar Loans or US Dollar Loans.

     

    
      
         

      

      
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    (b)           Except
with the consent of Agent and all Lenders, or as otherwise provided herein, (i)
the US Dollar Equivalent of the aggregate principal amount of the Revolving
Loans and the Letter of Credit Obligations outstanding at any time shall not
exceed US Revolving Loan Maximum Amount, (ii) the US Dollar Equivalent of the
aggregate principal amount of the Revolving Loans and Letters of Credit
Obligations of any US Revolving Borrowers outstanding at any time shall not
exceed the lesser of (A) the US Borrowing Base of such US Revolving Borrower or
(B) the US Revolving Loan Borrowing Limit of such US Revolving Borrower, (iii)
the US Dollar Equivalent of the aggregate principal amount of the Revolving
Loans and Letter of Credit Obligations of Canadian Borrower outstanding at any
time shall not exceed the lesser of (A) the Canadian Borrowing Base or (B) the
US Dollar Equivalent of the Canadian Revolving Loan Maximum Amount, (iv) the
aggregate principal amount of Revolving Loans outstanding to any Borrower based
on the Eligible Inventory of such Borrower shall not exceed the Inventory Loan
Limit of such Borrower and (v) the aggregate
principal amount of Revolving Loans to K&M outstanding at any time against
Eligible In-Transit Inventory shall not exceed $1,000,000.

     

    (c)           In
the event that (i) the US Dollar Equivalent of the aggregate principal amount of
the Loans and the Letter of Credit Obligations outstanding at any time exceeds
the US Revolving Loan Maximum Amount, or (ii) the US Dollar Equivalent of the
aggregate principal amount of the Revolving Loans and Letters of Credit
Obligations of any US Revolving Borrowers outstanding at any time exceeds the
lesser of (A) the US Borrowing Base of such US Revolving Borrower or (B) the US
Revolving Loan Borrowing Limit of such US Revolving Borrower, or (iii) the US
Dollar Equivalent of the aggregate principal amount of the Revolving Loans and
Letter of Credit Obligations of Canadian Borrower outstanding at any time
exceeds the lesser of (A) the Canadian Borrowing Base or (B) the US Dollar
Equivalent of the Canadian Revolving Loan Maximum Amount, (iv) the aggregate
principal amount of Revolving Loans outstanding to any Borrower based on the
Eligible Inventory of such Borrower exceeds the Inventory Loan Limit of such
Borrower, or (v) the aggregate principal amount of the Revolving Loans to
K&M outstanding at any time against Eligible In-Transit Inventory exceeds
$1,000,000, such event shall not limit, waive or otherwise affect any rights of
Agent or Lenders in such circumstances or on any future occasions and Borrowers
shall, upon demand by Agent, which may be made at any time or from time to time,
immediately repay to Agent the entire amount of any such excess(es) for which
payment is demanded.

     

    2.2           Letters of
Credit.

     

    (a)           Subject
to and upon the terms and conditions contained herein and in the Letter of
Credit Documents, (i) at the request of a US Revolving Borrower (or
Administrative Borrower on behalf of such US Revolving Borrower), Agent agrees
to cause US Issuing Bank to issue, and US Issuing Bank agrees to issue, for the
account of such US Revolving Borrower one or more Letters of Credit, for the
ratable risk of each US Lender according to its Pro Rata Share, containing terms
and conditions acceptable to Agent and Issuing Bank and (ii) at the request of
Canadian Borrower (or Administrative Borrower on behalf of Canadian Borrower),
Wachovia Canada agrees to cause Canadian Issuing Bank to issue for the account
of Canadian Borrower one or more Letters of Credit denominated in US Dollars or
Canadian Dollars, for the ratable risk of each Canadian Lender according to its
Pro Rata Share, containing terms and conditions acceptable to Agent and Canadian
Issuing Bank.

     

    
      
         

      

      
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    (b)           The
Borrower requesting such Letter of Credit (or Administrative Borrower on behalf
of such Borrower) shall give Agent and Issuing Bank three (3) Business Days’
prior written notice of such Borrower’s request for the issuance of a Letter of
Credit.  Such notice shall be irrevocable and shall specify the
original face amount of the Letter of Credit requested, the effective date
(which date shall be a Business Day and in no event shall be a date less than
ten (10) days prior to the end of the then current term of this Agreement) of
issuance of such requested Letter of Credit, whether such Letter of Credit may
be drawn in a single or in partial draws, the date on which such requested
Letter of Credit is to expire (which date shall be a Business Day and shall not
be more than one year from the date of issuance), the purpose for which such
Letter of Credit is to be issued, and the beneficiary of the requested Letter of
Credit.  The Borrower requesting the Letter of Credit (or
Administrative Borrower on behalf of such Borrower) shall attach to such notice
the proposed terms of the Letter of Credit.  The renewal or extension
of any Letter of Credit shall, for purposes hereof, be treated in all respects
the same as the issuance of a new Letter of Credit hereunder.

     

    (c)           In
addition to being subject to the satisfaction of the applicable conditions
precedent contained in Section 4 hereof and the other terms and conditions
contained herein, no Letter of Credit shall be available unless each of the
following conditions precedent have been satisfied in a manner satisfactory to
Agent:  (i) the Borrower requesting such Letter of Credit (or
Administrative Borrower on behalf of such Borrower) shall have delivered to
Issuing Bank at such times and in such manner as Issuing Bank may require, an
application, in form and substance satisfactory to Issuing Bank and Agent, for
the issuance of the Letter of Credit and such other Letter of Credit Documents
as may be required pursuant to the terms thereof, and the form and terms of the
proposed Letter of Credit shall be satisfactory to Agent and Issuing Bank, (ii)
as of the date of issuance, no order of any court, arbitrator or other
Governmental Authority shall purport by its terms to enjoin or restrain money
center banks generally from issuing letters of credit of the type and in the
amount of the proposed Letter of Credit, and no law, rule or regulation
applicable to money center banks generally and no request or directive (whether
or not having the force of law) from any Governmental Authority with
jurisdiction over money center banks generally shall prohibit, or request that
Issuing Bank refrain from, the issuance of letters of credit generally or the
issuance of such Letter of Credit, (iii) after giving effect to the issuance of
such Letter of Credit, the Letter of Credit Obligations shall not exceed the
Letter of Credit Limit, and (iv) the Excess Availability, prior to giving effect
to any Reserves with respect to such Letter of Credit, on the date of the
proposed issuance of any Letter of Credit shall be equal to or greater than: (A)
if the proposed Letter of Credit is for the purpose of purchasing Eligible L/C
Inventory and if the conditions contained in the definition of Eligible L/C
Inventory are satisfied, the sum of (1) the percentage equal to one hundred
(100%) percent minus the then
applicable percentage with respect to Eligible Inventory set forth in the
definition of the term Canadian Borrowing Base or US Borrowing Base, as
applicable, multiplied by the Value of such Eligible Inventory, plus (2) freight,
taxes, duty and other amounts which Agent estimates must be paid in connection
with such Inventory upon arrival and for delivery to one of such Borrower’s
locations for Eligible Inventory within the United States of America or Canada
and (B) if the proposed Letter of Credit is for any other purpose or if the
conditions contained in the definition of Eligible L/C Inventory are not
satisfied, an amount equal to one hundred (100%) percent of the Letter of Credit
Obligations with respect thereto.  Effective on the issuance of each
Letter of Credit, a Reserve shall be established in the applicable amount set
forth in Section 2.2(c)(iv)(A) or Section 2.2(c)(iv)(B).

     

    
      
         

      

      
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    (d)           In
addition to being subject to the satisfaction of the applicable conditions
precedent contained in Section 4 hereof and the other terms and conditions
contained herein, no Letter of Credit shall be available to Canadian Borrower
unless each of the following conditions precedent have been satisfied in a
manner satisfactory to Agent:  (i) Canadian Borrower (or
Administrative Borrower on behalf of Canadian Borrower) shall have delivered to
Canadian Issuing Bank at such times and in such manner as Canadian Issuing Bank
may require, an application, in form and substance satisfactory to Canadian
Issuing Bank and Agent, for the issuance of the Letter of Credit and such other
Letter of Credit Documents as may be reasonably required pursuant to the terms
thereof, and the form and terms of the proposed Letter of Credit shall be
satisfactory to Agent and Canadian Issuing Bank, (ii) as of the date of
issuance, no order of any court, arbitrator or other Governmental Authority
shall purport by its terms to enjoin or restrain money center banks generally
from issuing letters of credit of the type and in the amount of the proposed
Letter of Credit, and no law, rule or regulation applicable to money center
banks generally and no request or directive (whether or not having the force of
law) from any Governmental Authority with jurisdiction over money center banks
generally shall prohibit, or request that Canadian Issuing Bank refrain from,
the issuance of letters of credit generally or the issuance of such Letter of
Credit, (iii) after giving effect to the issuance of such Letter of Credit, the
Canadian Letter of Credit Obligations shall not exceed the Canadian Letter of
Credit Limit, and (iv) in the case of a Letter of Credit issued for the account
of a Canadian Borrower, the Canadian Excess Availability, on the date of the
proposed issuance of any Letter of Credit shall be equal to or greater than an
amount equal to one hundred (100%) percent of the Letter of Credit Obligations
with respect thereto.

     

    (e)           Except
with the consent of Agent and all Lenders, (i) the amount of all outstanding US
Letter of Credit Obligations shall not at any time exceed the US Letter of
Credit Limit and (ii) the amount of all outstanding Canadian Letter of Credit
Obligations shall not at any time exceed the Canadian Letter of Credit
Limit.

     

    (f)           Each
US Revolving Borrower shall reimburse immediately US Issuing Bank for any draw
under any Letter of Credit issued for the account of such US Revolving Borrower
and pay US Issuing Bank the amount of all other charges and fees payable to US
Issuing Bank in connection with any Letter of Credit issued for the account of
such US Revolving Borrower immediately when due, irrespective of any claim,
setoff, defense or other right which such US Revolving Borrower may have at any
time against Issuing Bank or any other Person.  Each drawing under any
Letter of Credit issued for the account of a US Revolving Borrower or other
amount payable in connection therewith when due shall constitute a request by
such US Revolving Borrower to Agent for a US Base Rate Loan in the amount of
such drawing or other amount then due, and shall be made by Agent on behalf of
US Lenders as a Revolving Loan (or Special Agent Advance, as the case may
be).  Each drawing under any Letter of Credit issued for the account
of a Canadian Borrower or other amount payable in connection therewith when due
shall constitute a request by such Canadian Borrower to Agent for a Canadian
Dollar Loan in the amount of such drawing or other amount then due, and shall be
made by Canadian Lenders as Revolving Loans according to their respective Pro
Rata Shares.  The date of such Loan shall be the date of the drawing
or as to other amounts, the due date therefor.  Any payments made by
or on behalf of Agent or any US Lender to Issuing Bank and/or related parties in
connection with any Letter of Credit shall constitute additional Revolving Loans
to such US Revolving Borrower pursuant to this Section 2 (or Special Agent
Advances as the case may be).

     

    
      
         

      

      
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    (g)           Canadian
Borrower shall reimburse immediately Canadian Issuing Bank for any draw under
any Letter of Credit issued for the account of Canadian Borrower and pay
Canadian Issuing Bank the amount of all other charges and fees payable to
Canadian Issuing Bank in connection with any Letter of Credit issued for the
account of Canadian Borrower immediately when due, irrespective of any claim,
setoff, defense or other right which Canadian Borrower may have at any time
against Canadian Issuing Bank or any other Person.  Each drawing under
any Letter of Credit issued for the account of Canadian Borrower or other amount
payable in connection therewith when due shall constitute a request by Canadian
Borrower to Agent for a Canadian Dollar Loan in the amount of such drawing or
other amount then due, and shall be made by Canadian Lenders as Revolving Loans
according to their respective Pro Rata Shares.  The date of such Loan
shall be the date of the drawing or as to other amounts, the due date
therefor.  Any payments made by or on behalf of Agent or any Canadian
Lender to Canadian Issuing Bank and/or related parties in connection with any
Letter of Credit shall constitute additional Revolving Loans to Canadian
Borrower pursuant to this Section 2 (or Special Agent Advances as the case may
be).

     

    (h)           Borrowers
and Guarantors shall indemnify and hold Agent and Lenders harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
which Agent or any Lender may suffer or incur in connection with any Letter of
Credit and any documents, drafts or acceptances relating thereto, including any
losses, claims, damages, liabilities, costs and expenses due to any action taken
by Issuing Bank or correspondent with respect to any Letter of Credit, except
for such losses, claims, damages, liabilities, costs or expenses that are a
direct result of the gross negligence or willful misconduct of Agent or any
Lender as determined pursuant to a final non-appealable order of a court of
competent jurisdiction.  Each Borrower and Guarantor assumes all risks
with respect to the acts or omissions of the drawer under or beneficiary of any
Letter of Credit and for such purposes the drawer or beneficiary shall be deemed
such Borrower’s agent.  Each Borrower and Guarantor assumes all risks
for, and agrees to pay, all foreign, Federal, State and local taxes, duties and
levies relating to any goods subject to any Letter of Credit or any documents,
drafts or acceptances thereunder.  Each Borrower and Guarantor hereby
releases and holds Agent and Lenders harmless from and against any acts,
waivers, errors, delays or omissions with respect to or relating to any Letter
of Credit, except for the gross negligence or willful misconduct of Agent or any
Lender as determined pursuant to a final, non-appealable order of a court of
competent jurisdiction.  The provisions of this Section 2.2(f) shall
survive the payment of Obligations and the termination of this
Agreement.

     

    (i)           In
connection with Inventory purchased pursuant to any Letter of Credit, Borrowers
and Guarantors shall, at Agent’s request, instruct all suppliers, carriers,
forwarders, customs brokers, warehouses or others receiving or holding cash,
checks, Inventory, documents or instruments in which Agent holds a security
interest that upon Agent’s request, such items are to be delivered to Agent
and/or subject to Agent’s order, and if they shall come into such Borrower’s or
Guarantor’s possession, to deliver them, upon Agent’s request, to Agent in their
original form.  Except as otherwise provided herein, Agent shall not
exercise such right to request such items so long as no Default or Event of
Default shall exist or have occurred and be continuing.  Except as
Agent may otherwise specify, Borrowers shall designate Issuing Bank as the
consignee on all bills of lading and other negotiable and non-negotiable
documents.

     

    
      
         

      

      
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    (j)           Each
Borrower and Guarantor hereby irrevocably authorizes and directs Issuing Bank to
name such Borrower or Guarantor as the account party therein and to deliver to
Agent all instruments, documents and other writings and property received by
Issuing Bank pursuant to the Letter of Credit and to accept and rely upon
Agent’s instructions and agreements with respect to all matters arising in
connection with the Letter of Credit or the Letter of Credit Documents with
respect thereto.  Nothing contained herein shall be deemed or
construed to grant any Borrower or Guarantor any right or authority to pledge
the credit of Agent or any Lender in any manner.  Agent and Lenders
shall have no liability of any kind with respect to any Letter of Credit
provided by Issuing Bank unless Agent has duly executed and delivered to Issuing
Bank the application or a guarantee or indemnification in writing with respect
to such Letter of Credit.  Borrowers and Guarantors shall be bound by
any reasonable interpretation made in good faith by Agent, or Issuing Bank under
or in connection with any Letter of Credit or any documents, drafts or
acceptances thereunder, notwithstanding that such interpretation may be
inconsistent with any instructions of any Borrower or Guarantor.

     

    (k)           Immediately
upon the issuance or amendment of any Letter of Credit issued for the account of
a US Revolving Borrower, each US Lender shall be deemed to have irrevocably and
unconditionally purchased and received, without recourse or warranty, an
undivided interest and participation to the extent of such US Lender’s Pro Rata
Share of the liability with respect to such Letter of Credit and the obligations
of Borrowers with respect thereto (including all Letter of Credit Obligations
with respect thereto).  Each US Lender shall absolutely,
unconditionally and irrevocably assume, as primary obligor and not as surety,
and be obligated to pay to US Issuing Bank therefor and discharge when due, its
Pro Rata Share of all of such obligations arising under such Letter of
Credit.  Without limiting the scope and nature of each US Lender’s
participation in any such Letter of Credit, to the extent that US Issuing Bank
has not been reimbursed or otherwise paid as reasonably required hereunder with
respect to any such Letter of Credit or under any such Letter of Credit, each
such US Lender shall pay to US Issuing Bank its Pro Rata Share of such
unreimbursed drawing or other amounts then due to US Issuing Bank in connection
therewith.

     

    (l)           Immediately
upon the issuance or amendment of any Letter of Credit issued for the account of
Canadian Borrower, each Canadian Lender shall be deemed to have irrevocably and
unconditionally purchased and received, without recourse or warranty, an
undivided interest and participation to the extent of such Canadian Lender’s Pro
Rata Share in the liability with respect to such Letter of Credit and the
obligations of Canadian Borrower with respect thereto (including all Letter of
Credit Obligations with respect thereto).  Each Canadian Lender shall
absolutely, unconditionally and irrevocably assume, as primary obligor and not
as surety, and be obligated to pay to Canadian Issuing Bank therefor and
discharge when due, its Pro Rata Share of all of such obligations arising under
such Letter of Credit.  Without limiting the scope and nature of each
Canadian Lender’s participation in any such Letter of Credit, to the extent that
Canadian Issuing Bank or other issuer has not been reimbursed or otherwise paid
as required hereunder or under any such Letter of Credit, each Canadian Lender
shall pay to Canadian Issuing Bank its Pro Rata Share of such unreimbursed
drawing or other amounts then due to Canadian Issuing Bank in connection
therewith.

     

    
      
         

      

      
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    (m)           The
obligations of US Revolving Borrowers to pay each Letter of Credit Obligation,
the obligations of Canadian Borrower to pay each Canadian Letter of Credit
Obligation, the obligations of Canadian Lenders to make payments to Agent for
the account of Canadian Letter of Credit Issuer with respect to Letters of
Credit issued for the account of Canadian Borrower and the obligations of US
Lenders to make payments to Agent for the account of US Issuing Bank with
respect to Letters of Credit shall be absolute, unconditional and irrevocable
and shall be performed strictly in accordance with the terms of this Agreement
under any and all circumstances, whatsoever, notwithstanding the occurrence or
continuance of any Default, Event of Default, the failure to satisfy any other
condition set forth in Section 4 or any other event or
circumstance.  If such amount is not made available by a Lender when
due, Agent shall be entitled to recover such amount on demand from such Lender
with interest thereon, for each day from the date such amount was due until the
date such amount is paid to Agent at the interest rate then payable by any
Borrower in respect of Loans that are US Base Rate Loans (in the case of a
Lender that is a US Lender) or Canadian Dollar Loans (in the case of a Lender
that is a Canadian Lender).  Any such reimbursement shall not relieve
or otherwise impair the obligation of Borrowers to reimburse US Issuing Bank or
Canadian Issuing Bank, as applicable, under any Letter of Credit or make any
other payment in connection therewith.

     

    (n)           Any
rights, remedies, duties or obligations granted or undertaken by any Borrower to
Issuing Bank in any application for any Letter of Credit, or any other agreement
in favor of Issuing Bank relating to any Letter of Credit, shall be deemed to
have been granted or undertaken by such Borrower to Agent.  Any duties
or obligations undertaken by Agent to Issuing Bank in any application for any
Letter of Credit, or any other agreement by Agent in favor of Issuing Bank
relating to any Letter of Credit, shall be deemed to have been undertaken by
Borrowers to Agent and to apply in all respects to Borrowers.

     

    2.3           Term
Loan.

     

    (a)           Subject
to and upon the terms and conditions contained herein, each US Lender severally
(and not jointly) agrees to make a Term Loan to the Ideal Borrowing Group in an
amount equal to its Pro Rata Share of the aggregate original principal amount of
$8,000,000.

     

    (b)           The
Term Loan is (i) evidenced by a Term Promissory Note in such original principal
amount duly executed and delivered by the Ideal Borrowing Group to Agent
concurrently herewith; (ii) to be repaid, together with interest and other
amounts, in accordance with this Agreement, such Term Promissory Note, and the
other Financing Agreements; and (iii) secured by all of the
Collateral.  The principal amount of the Term Loan shall be repaid in
seventy-two (72) consecutive monthly installments (or earlier as provided
herein) payable on the first day of each month commencing August 1, 2009, of
which the first seventy-one (71) installments shall each be in the amount of
$111,111 and the last installment shall be in the amount of the entire unpaid
balance of the Term Loan.

     

    2.4           Commitments.  The
aggregate amount of each Lender’s Pro Rata Share of the Loans and Letter of
Credit Obligations shall not exceed the amount of such Lender’s Commitment, as
the same may from time to time be amended in accordance with the provisions
hereof.

     

    
      	
              SECTION
      3.

            	
              INTEREST AND
      FEES

            

    

     

    3.1           Interest.

     

    
      
         

      

      
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    (a)           US
Borrowers shall pay to Agent, for the benefit of Lenders, interest on the
outstanding principal amount of the US Dollar Loans at the Interest
Rate.  Canadian Borrower shall pay to Agent, for the benefit of
Canadian Lenders, interest on the outstanding principal amount of the Canadian
Dollar Loans at the Interest Rate.  All interest accruing hereunder on
and after the date of any Event of Default or termination hereof shall be
payable on demand.

     

    (b)           Each
Borrower (or Administrative Borrower on behalf of such Borrower) may from time
to time request Eurodollar Rate Loans or may request that US Base Rate Loans be
converted to Eurodollar Rate Loans or that any existing Eurodollar Rate Loans
continue for an additional Interest Period.  Such request from a
Borrower (or Administrative Borrower on behalf of such Borrower) shall specify
the amount of the Eurodollar Rate Loans or the amount of the US Base Rate Loans
to be converted to Eurodollar Rate Loans or the amount of the Eurodollar Rate
Loans to be continued (subject to the limits set forth below) and the Interest
Period to be applicable to such Eurodollar Rate Loans.  Subject to the
terms and conditions contained herein, three (3) Business Days after receipt by
Agent of such a request from a Borrower (or Administrative Borrower on behalf of
such Borrower), such Eurodollar Rate Loans shall be made or US Base Rate Loans
shall be converted to Eurodollar Rate Loans or such Eurodollar Rate Loans shall
continue, as the case may be; provided, that, (i) no Event of
Default shall exist or have occurred and be continuing, (ii) no party hereto
shall have sent any notice of termination of this Agreement, (iii) such Borrower
(or Administrative Borrower on behalf of such Borrower) shall have complied with
such customary procedures as are established by Agent and specified by Agent to
Administrative Borrower from time to time for requests by Borrowers for
Eurodollar Rate Loans, (iv) no more than six (6) Interest Periods may be in
effect at any one time, (v) the aggregate amount of the Eurodollar Rate Loans
must be in an amount not less than $2,000,000 or an integral multiple of
$250,000 in excess thereof, and (vi) Agent and each Lender shall have determined
that the Interest Period or Adjusted Eurodollar Rate is available to Agent and
such Lender and can be readily determined as of the date of the request for such
Eurodollar Rate Loan by such Borrower.  Any request by or on behalf of
a Borrower for Eurodollar Rate Loans or to convert US Base Rate Loans to
Eurodollar Rate Loans or to continue any existing Eurodollar Rate Loans shall be
irrevocable.  Notwithstanding anything to the contrary contained
herein, Agent and Lenders shall not be required to purchase United States Dollar
deposits in the London interbank market or other applicable Eurodollar Rate
market to fund any Eurodollar Rate Loans, but the provisions hereof shall be
deemed to apply as if Agent and Lenders had purchased such deposits to fund the
Eurodollar Rate Loans.

     

    (c)           Any
Eurodollar Rate Loans shall automatically convert to US Base Rate Loans upon the
last day of the applicable Interest Period, unless Agent has received and
approved a request to continue such Eurodollar Rate Loan at least three (3)
Business Days prior to such last day in accordance with the terms
hereof.  Any Eurodollar Rate Loans shall, at Agent’s option, upon
notice by Agent to Administrative Borrower, be subsequently converted to Base
Rate Loans in the event that this Agreement shall terminate or not be
renewed.  Borrowers shall pay to Agent, for the benefit of Lenders,
upon demand by Agent (or Agent may, at its option, charge any loan account of
any Borrower) any amounts required to compensate any Lender or Participant for
any loss (including loss of anticipated profits), cost or expense incurred by
such person, as a result of the conversion of Eurodollar Rate Loans to Base Rate
Loans pursuant to any of the foregoing.

     

    
      
         

      

      
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    (d)           Interest
shall be payable by Borrowers to Agent, for the account of Lenders, monthly in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of (i) in the case of US Base Rate Loans and Eurodollar
Rate Loans a three hundred sixty (360) day year, (ii) in the case of Canadian
Base Rate Loans, on the basis of a three hundred and sixty-five (365) day year
or three hundred and sixty-six (366) day year, in each case based on actual days
elapsed.  The interest rate on non-contingent Obligations (other than
Eurodollar Rate Loans) shall increase or decrease by an amount equal to each
increase or decrease in the US Base Rate or Canadian Base Rate, as applicable,
effective on the day of any change in such Base Rate.  In no event
shall charges constituting interest payable by Borrowers to Agent and Lenders
exceed the maximum amount or the rate permitted under any applicable law or
regulation, and if any such part or provision of this Agreement is in
contravention of any such law or regulation, such part or provision shall be
deemed amended to conform thereto.

     

    (e)           For
purposes of disclosure under the Interest Act (Canada), where interest is
calculated pursuant thereto at a rate based upon a year of 360, 365 or 366 days,
as the case may be (the “First Rate”), the rate or percentage of interest on a
yearly basis is equivalent to such First Rate multiplied by the actual number of
days in the year divided by 360, 365 or 366, as the case may be.

     

    (f)           If
any provision of this Agreement or any of the other Financing Agreements would
obligate a Canadian Borrower or Canadian Guarantor to make any payment of
interest or other amount payable to the Agent or a Lender in an amount or
calculated at a rate which would be prohibited by law or would result in a
receipt by the Agent or such Lender of interest at a criminal rate (as construed
under the Criminal Code (Canada)), then notwithstanding that provision, that
amount or rate shall be deemed to have been adjusted with retroactive effect to
the maximum amount or rate of interest, as the case may be, as would not be so
prohibited by law or result in a receipt by the Agent or such Lender of interest
at a criminal rate, the adjustment to be effected, to the extent necessary, as
follows:

     

    (i)           first,
by reducing the amount or rate of interest required to be paid to the Agent or
applicable Lender under this Section 3.1; and

     

    (ii)           thereafter,
by reducing any fees, commissions, premiums and other amounts required to be
paid to the Agent or the applicable Lender which would constitute interest for
purposes of the Criminal Code (Canada).

     

    (iii)           Notwithstanding
this Section 3.1(f), and after giving effect to all adjustments contemplated
hereby, if the Agent or any Lender shall have received an amount in excess of
the maximum permitted by the Criminal Code (Canada), then the Canadian Borrower
or Canadian Guarantor, as applicable, shall be entitled, by notice in writing to
the Agent or the affected Lender, as the case may be, to obtain reimbursement
from the Agent or such Lender, as the case may be, in an amount equal to the
excess, and pending reimbursement, the amount of the excess shall be deemed to
be an amount payable by the Agent or such Lender, as the case may be, to the
Canadian Borrower.

     

    
      
         

      

      
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    (iv)           Any
amount or rate of interest referred to in this Section 3.1(f) shall be
determined in accordance with generally accepted actuarial practices and
principles as an effective annual rate of interest over the term that any
Obligation remains outstanding on the assumption that any charges, fees or
expenses that fall within the meaning of “interest” (as defined in the Criminal
Code (Canada)) shall, if they relate to a specific period of time, be pro-rated
over that period of time and otherwise be pro-rated over the period from the
date of the incurrence of the Obligation to its relevant maturity date and, in
the event of a dispute, a certificate of a Fellow of the Canadian Institute of
Actuaries appointed by the Agent shall be conclusive for the purposes of that
determination.

     

    3.2           Fees.

     

    (a)           Borrowers
shall pay to Agent, for the account of Lenders, monthly an unused line fee at a
rate equal to five-eighths of one (0.625%) percent per annum calculated upon the
amount by which the US Revolving Loan Maximum Amount exceeds the average daily
principal balance of the outstanding Revolving Loans and Letters of Credit
during the immediately preceding month (or part thereof) while this Agreement is
in effect and for so long thereafter as any of the Obligations are outstanding,
which fee shall be payable on the first day of each month in
arrears.

     

    (b)           In
the case of letters of credit, Borrowers shall pay to Agent, for the account of
Lenders, a fee at a rate equal to four (4%) percent per annum on the average
daily maximum amount available to be drawn under all of such Letters of Credit
for the immediately preceding month (or part thereof), payable in arrears as of
the first day of each succeeding month, computed for each day from the date of
issuance to the date of expiration; except, that, Borrowers shall
pay, at Agent’s option, without notice, such fee at a rate two (2%) percent
greater than the otherwise applicable rate on such average daily maximum amount
for:  (i) the period from and after the date of termination or
non-renewal hereof until Lenders have received full and final payment of all
Obligations (notwithstanding entry of a judgment against any Borrower or
Guarantor) and (ii) the period from and after the date of the occurrence of an
Event of Default for so long as such Event of Default is continuing as
determined by Agent.  Such letter of credit fees shall be calculated
on the basis of a three hundred sixty five (365) or three hundred sixty six
(366), as applicable, day year as to Letters of Credit denominated in Canadian
Dollars and a three hundred sixty (360) day year as to Letters of Credit
denominated in US Dollars, and in each case, actual days elapsed and the
obligation of Borrowers to pay such fee as set forth in this Section 3.2(b)
shall survive the termination of this Agreement or non-renewal of this
Agreement.  In addition to the letter of credit fees provided above,
Borrowers shall pay to Issuing Bank for its own account (without sharing with
Lenders) the letter of credit fronting fee of one-eighth (0.125%) percent per
annum and the other customary charges from time to time of Issuing Bank with
respect to the issuance, amendment, transfer, administration, cancellation and
conversion of, and drawings under, such Letters of Credit.

     

    (c)           Borrowers
shall pay to Agent the other fees and amounts set forth in the Fee Letter in the
amounts and at the times specified therein.  To the extent payment in
full of the applicable fee is received by Agent from Borrowers on or about the
date hereof, Agent shall pay to each Lender its share of such fees in accordance
with the terms of the arrangements of Agent with such Lender.

     

    3.3           Changes in Laws and
Increased Costs of Loans.

     

    (a)           If
after the date hereof, either (i) any change in, or in the interpretation of,
any law or regulation is introduced, including, without limitation, with respect
to reserve requirements, applicable to any Lender or any banking or financial
institution from whom any Lender borrows funds or obtains credit (a “Funding
Bank”), or (ii) a Funding Bank, any Lender or Issuing Bank complies with any
future guideline or request from any central bank or other Governmental
Authority or (iii) a Funding Bank, Issuing Bank or any Lender determines that
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any Governmental Authority, central

     

    
      
         

      

      
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    bank
or comparable agency charged with the interpretation or administration thereof
has or would have the effect described below, or a Funding Bank, any Lender or
Issuing Bank complies with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, and in the case of any event set forth in this clause (iii),
such adoption, change or compliance has or would have the direct or indirect
effect of reducing the rate of return on any Lender’s or Issuing Bank’s capital
as a consequence of its obligations hereunder to a level below that which such
Lender or Issuing Bank could have achieved but for such adoption, change or
compliance (taking into consideration the Funding Bank’s or Lender’s or Issuing
Bank’s policies with respect to capital adequacy) by an amount deemed by such
Lender or Issuing Bank to be material, and the result of any of the foregoing
events described in clauses (i), (ii) or (iii) is or results in an increase in
the cost to any Lender or Issuing Bank of funding or maintaining the Loans, the
Letters of Credit or its Commitment, then Borrowers and Guarantors shall from
time to time upon demand by Agent pay to Agent additional amounts sufficient to
indemnify such Lender or Issuing Bank against such increased cost on an
after-tax basis (after taking into account applicable deductions and credits in
respect of the amount indemnified).  A certificate as to the amount of
such increased cost shall be submitted to Administrative Borrower by Agent or
the applicable Lender and shall be conclusive, absent manifest
error.

     

    (b)           If
prior to the first day of any Interest Period, (i) Agent shall have determined
in good faith (which determination shall be conclusive and binding upon
Borrowers and Guarantors) that, by reason of circumstances affecting the
relevant market, adequate and reasonable means do not exist for ascertaining the
Adjusted Eurodollar Rate such Interest Period, (ii) Agent has received notice
from the Required Lenders that the Adjusted Eurodollar Rate determined or to be
determined for such Interest Period will not adequately and fairly reflect the
cost to Lenders of making or maintaining Eurodollar Rate Loans during such
Interest Period, or (iii) Dollar deposits in the principal amounts of the
Eurodollar Rate Loans to which such Interest Period is to be applicable are not
generally available in the London interbank market, Agent shall give telecopy or
telephonic notice thereof to Administrative Borrower as soon as practicable
thereafter, and will also give prompt written notice to Administrative Borrower
when such conditions no longer exist.  If such notice is given (A) any
Eurodollar Rate Loans requested to be made on the first day of such Interest
Period shall be made as US Base Rate Loans, (B) any Loans that were to have been
converted on the first day of such Interest Period to or continued as Eurodollar
Rate Loans shall be converted to or continued as US Base Rate Loans and (C) each
outstanding Eurodollar Rate Loan shall be converted, on the last day of the
then-current Interest Period thereof, to Base Rate Loans.  Until such
notice has been withdrawn by Agent, no further Eurodollar Rate Loans shall be
made or continued as such, nor shall any Borrower (or Administrative Borrower on
behalf of any Borrower) have the right to convert US Base Rate Loans to
Eurodollar Rate Loans.

     

    (c)           Notwithstanding
any other provision herein, if the adoption of or any change in any law, treaty,
rule or regulation or final, non-appealable determination of an arbitrator or a
court or other Governmental Authority or in the interpretation or application
thereof occurring after the date hereof shall make it unlawful for Agent or any
Lender to make or maintain Eurodollar Rate Loans as contemplated by this
Agreement, (i) Agent or such Lender shall promptly give written notice of such
circumstances to Administrative Borrower (which notice shall be withdrawn
whenever such circumstances no longer exist), (ii) the commitment of such Lender
hereunder to make Eurodollar Rate Loans, continue Eurodollar Rate Loans as such
and convert US Base Rate Loans to Eurodollar Rate Loans shall forthwith be
canceled and, until such time as it shall no longer

     

    
      
         

      

      
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    be
unlawful for such Lender to make or maintain Eurodollar Rate Loans, such Lender
shall then have a commitment only to make a Base Rate Loan when a Eurodollar
Rate Loan is requested and (iii) such Lender’s Loans then outstanding as
Eurodollar Rate Loans, if any, shall be converted automatically to US Base Rate
Loans on the respective last days of the then current Interest Periods with
respect to such Loans or within such earlier period as required by
law.  If any such conversion of a Eurodollar Rate Loan occurs on a day
which is not the last day of the then current Interest Period with respect
thereto, Borrowers and Guarantors shall pay to such Lender such amounts, if any,
as may be required pursuant to Section 3.3(d) below.

     

    (d)           Borrowers
and Guarantors shall indemnify Agent and each Lender and to hold Agent and each
Lender harmless from any loss or expense which Agent or such Lender may sustain
or incur as a consequence of (i) default by Borrower in making a borrowing of,
conversion into or extension of Eurodollar Rate Loans after such Borrower (or
Administrative Borrower on behalf of such Borrower) has given a notice
requesting the same in accordance with the provisions of this Loan Agreement,
(ii) default by any Borrower in making any prepayment of a Eurodollar Rate Loan
after such Borrower has given a notice thereof in accordance with the provisions
of this Agreement, and (iii) the making of a prepayment of Eurodollar Rate Loans
on a day which is not the last day of an Interest Period with respect
thereto.  With respect to Eurodollar Rate Loans, such indemnification
may include an amount equal to the excess, if any, of (A) the amount of interest
which would have accrued on the amount so prepaid, or not so borrowed, converted
or extended, for the period from the date of such prepayment or of such failure
to borrow, convert or extend to the last day of the applicable Interest Period
(or, in the case of a failure to borrow, convert or extend, the Interest Period
that would have commenced on the date of such failure) in each case at the
applicable rate of interest for such Eurodollar Rate Loans provided for herein
over (B) the amount of interest (as determined by such Agent or such Lender)
which would have accrued to Agent or such Lender on such amount by placing such
amount on deposit for a comparable period with leading banks in the interbank
Eurodollar market.  This covenant shall survive the termination or
non-renewal of this Agreement and the payment of the Obligations.

     

    
      	
              SECTION
      4.

            	
              CONDITIONS
      PRECEDENT

            

    

     

    4.1           Conditions Precedent to
Initial Loans and Letters of Credit.

     

      The
obligation of Lenders to make the initial Loans or of Issuing Bank to provide
for the initial Letters of Credit hereunder is subject to the satisfaction of,
or waiver of, immediately prior to or concurrently with the making of such Loan
or the issuance of such Letter of Credit of each of the following conditions
precedent:

     

    (a)           Agent
shall have received, in form and substance satisfactory to Agent, all releases,
terminations and such other documents as Agent may request to evidence and
effectuate the termination by the Existing Lenders of their respective financing
arrangements with Borrowers and Guarantors and release of any security interest
in and to any assets and properties of each Borrower and Guarantor that is not a
lien indicated on Schedule 8.4 to the Information Certificate and the other
liens permitted under Section 9.8 hereof, duly authorized, executed and
delivered by it or each of them, including, but not limited to, (i) UCC
termination statements for all UCC financing statements previously filed by it
or any of them or their predecessors, as secured party and with respect to any
such interests that is not a liens indicated on Schedule 8.4 to the
Information

     

    
      
         

      

      
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    Certificate
and the other liens permitted under Section 9.8 hereof, filed against any
Borrower or Guarantor, as debtor; (ii) PPSA terminations or discharges for all
PPSA financing statements previously filed with respect to any such interests
that is not a lien indicated on Schedule 8.4 to the Information Certificate and
the other liens permitted under Section 9.8 hereof, filed against any Borrower
or Guarantor, as debtor; and (iii) satisfactions and discharges of any
mortgages, deeds of trust or deeds to secure debt by any Borrower or Guarantor
that is not a liens indicated on Schedule 8.4 to the Information Certificate and
the other liens permitted under Section 9.8 hereof, in form acceptable for
recording with the appropriate Governmental Authority;

     

    (b)           all
requisite corporate action and proceedings in connection with this Agreement and
the other Financing Agreements shall be satisfactory in form and substance to
Agent, and Agent shall have received all information and copies of all
documents, including records of requisite corporate action and proceedings which
Agent may have requested in connection therewith, such documents where requested
by Agent or its counsel to be certified by appropriate corporate officers or
Governmental Authority (and including a copy of the certificate of
incorporation, articles of association, certificate of formation, limited
liability agreement, limited partnership agreement or other organizational
documents of each Borrower and Guarantor certified by the Secretary of State (or
equivalent Governmental Authority) which shall set forth the same complete
corporate, limited liability or partnership name of such Borrower or Guarantor
as is set forth herein and such document as shall set forth the organizational
identification number of each Borrower or Guarantor, if one is issued in its
jurisdiction of incorporation);

     

    (c)           no
material adverse change shall have occurred in the assets or business of
Borrowers since the date of Agent’s latest field examination (not including for
this purpose the field review referred to in clause (d) below) and no change or
event shall have occurred which would materially impair the ability of any
Borrower or Guarantor to perform its obligations hereunder or under any of the
other Financing Agreements to which it is a party or of Agent or any Lender to
enforce the Obligations or realize upon the Collateral;

     

    (d)           Agent
shall have completed a field review of the Records and such other information
with respect to the Collateral as Agent may require to determine the amount of
Loans available to Borrowers (including, without limitation, current perpetual
Inventory records and/or roll-forwards of Accounts through the date of closing
and test counts of the Inventory in a manner satisfactory to Agent, together
with such supporting documentation as may be necessary or appropriate, and other
documents and information that will enable Agent to accurately identify and
verify the Collateral), the results of which in each case shall be satisfactory
to Agent, not more than three (3) Business Days prior to the date hereof or such
earlier date as Agent may agree;

     

    (e)           Agent
shall have received, in form and substance satisfactory to Agent, all consents,
waivers, acknowledgments and other agreements from third persons which Agent may
deem necessary in order to permit, protect and perfect its security interests in
and liens upon the Collateral or to effectuate the provisions or purposes of
this Agreement and the other Financing Agreements;

     

    (f)           the
Global Excess Availability as determined by Agent, as of the date hereof, shall
be not less than $7,000,000 after giving effect to the initial Loans made or to
be made and Letters of Credit issued or to be issued in connection with the
initial transactions hereunder;

     

    
      
         

      

      
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    (g)           Agent
shall have received, in form and substance satisfactory to Agent, Deposit
Account Control Agreements by and among Agent, each Borrower and Guarantor, as
the case may be and each bank where such Borrower (or Guarantor) maintains its
principal concentration account(s) and related lockboxes (if any), in each case,
duly authorized, executed and delivered by such bank and Borrower or Guarantor,
as the case may be (or Agent shall be the bank’s customer with respect to such
deposit account as Agent may specify);

     

    (h)           Agent
shall have received evidence, in form and substance satisfactory to Agent, that
Agent has a valid perfected first priority security interest or hypothec in all
of the Collateral, other than the Faunus Factored Accounts, which Faunus
Factored Accounts shall be subject to Agent’s valid and perfected second
priority security interest therein;

     

    (i)           Agent
shall have received and reviewed lien search results for the jurisdiction of
organization of each Borrower and Guarantor, and judgment and tax search results
for the jurisdiction of organization and the jurisdiction of the chief executive
office of each Borrower and Guarantor, which search results shall be in form and
substance satisfactory to Agent;

     

    (j)           Agent
shall have received a Borrowing Base Certificate setting forth the Borrowing
Base as at the date set forth therein, which shall be completed in a manner
reasonably satisfactory to Agent and duly authorized, executed and delivered by
Borrowers;

     

    (k)           Agent
shall have received originals of the shares of the stock certificates
representing all of the issued and outstanding shares of the Capital Stock of
each Borrower and Guarantor (other than Parent) and owned by any Borrower or
Guarantor, in each case together with stock powers duly executed in blank with
respect thereto;

     

    (l)           Agent
shall have received evidence of insurance and loss payee endorsements required
hereunder and under the other Financing Agreements, in form and substance
satisfactory to Agent, and certificates of insurance policies and/or
endorsements naming Agent as loss payee;

     

    (m)           Agent
shall have received, in form and substance satisfactory to Agent, the opinion
letter(s) of counsel(s) to Borrowers with respect to Financing Agreements and
the security interests, hypothecs and liens of Agent with respect to the
Collateral and such other matters as Agent may request;

     

    (n)           Agent
shall have received environmental audits of the Real Property to be subject to
the Mortgages conducted by an independent environmental engineering firm
acceptable to Agent, and in form, scope and methodology satisfactory to Agent,
the results of which shall be satisfactory to Agent;

     

    (o)           Agent
shall have received, in form and substance satisfactory to Agent, a valid and
effective title insurance policy issued by a company and agent acceptable to
Agent: (i) insuring the priority, amount and sufficiency of the Mortgages, (ii)
insuring against matters that would be disclosed by surveys and (iii) containing
any legally available endorsements, assurances or affirmative coverage requested
by Agent for protection of its interests;

     

    
      
         

      

      
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    (p)           the
other Financing Agreements and all instruments and documents hereunder and
thereunder shall have been duly executed and delivered to Agent, in form and
substance satisfactory to Agent; and

     

    (q)           Agent
shall have received (i) true, complete and correct copies of each of the Faunus
Factoring Documents, all of which shall be in form and substance reasonably
satisfactory to Agent, and (ii) the Faunus Intercreditor Agreement, in form and
substance reasonably satisfactory to Agent, duly authorized, executed and
delivered by Faunus.

     

    4.2           Conditions Precedent to All
Loans and Letters of Credit.  The
obligation of Lenders to make the Loans, including the initial Loans, or of
Issuing Bank to issue any Letter of Credit, including the initial Letters of
Credit, is subject to the satisfaction of, or waiver of, immediately prior to or
concurrently with the making of each such Loan or the issuance of such Letter of
Credit of each of the following conditions precedent:

     

    (a)           all
representations and warranties contained herein and in the other Financing
Agreements shall be true and correct in all material respects on and as of the
date of such Loan or issuance of such Letter of Credit with the same effect as
though such representations and warranties had been made on and as of the date
of the making of each such Loan or providing each such Letter of Credit and
after giving effect thereto, except to the extent that such representations and
warranties expressly relate solely to an earlier date (in which case such
representations and warranties shall have been true and accurate on and as of
such earlier date);

     

    (b)           no
law, regulation, order, judgment or decree of any Governmental Authority shall
exist, and no action, suit, investigation, litigation or proceeding shall be
pending or threatened in any court or before any arbitrator or Governmental
Authority, which (i) purports to enjoin, prohibit, restrain or otherwise affect
(A) the making of the Loans or providing the Letters of Credit, or (B) the
consummation of the transactions contemplated pursuant to the terms hereof or
the other Financing Agreements or (ii) has or has a reasonable likelihood of
having a Material Adverse Effect; and

     

    (c)           no
Default or Event of Default shall exist or have occurred and be continuing on
and as of the date of the making of such Loan or providing each such Letter of
Credit and after giving effect thereto.

     

    
      	
              SECTION
      5.

            	
              GRANT AND PERFECTION
      OF SECURITY INTEREST

            

    

     

    5.1           Grant of Security
Interest.  To secure payment and performance of all
Obligations, each US Loan Party hereby grants to Agent, for itself and the
benefit of Secured Parties, and to secure the payment and performance of all
Canadian Obligations, each Canadian Loan Party hereby grants to Agent, for
itself and the benefit of Secured Parties, a continuing security interest in, a
lien upon, and a right of set off against, and hereby collaterally assigns to
Agent, for itself and the benefit of Secured Parties, all right, title and
interest in and to the following personal and real property and fixtures, and
interests in property and fixtures, of each Borrower and Guarantor, whether now
owned or hereafter acquired or existing, and wherever located (together with all
other collateral security for the Obligations at any time granted to or held or
acquired by Agent or any Lender, collectively, the “Collateral”):

     

    
      
         

      

      
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    (a)           all
Accounts;

     

    (b)           all
general intangibles, including, without limitation, all Intellectual
Property;

     

    (c)           all
goods, including, without limitation, Inventory and Equipment;

     

    (d)           all
Real Property and fixtures;

     

    (e)           all
chattel paper, including, without limitation, all tangible and electronic
chattel paper;

     

    (f)           all
instruments, including, without limitation, all promissory notes;

     

    (g)           all
documents;

     

    (h)           all
deposit accounts;

     

    (i)           all
letters of credit, banker’s acceptances and similar instruments and including
all letter-of-credit rights;

     

    (j)           all
supporting obligations and all present and future liens, security interests,
rights, remedies, title and interest in, to and in respect of any of the
Collateral, including (i) rights and remedies under or relating to guaranties,
contracts of suretyship, letters of credit and credit and other insurance
related to the Collateral, (ii) rights of stoppage in transit, replevin,
repossession, reclamation and other rights and remedies of an unpaid vendor,
lienor or secured party, (iii) goods, documents, contracts or instruments with
respect to, or otherwise representing or evidencing any of the Collateral,
including returned, repossessed and reclaimed goods, and (iv) deposits by and
property of account debtors or other persons securing the obligations of account
debtors;

     

    (k)           all
(i) investment property (including securities, whether certificated or
uncertificated, securities accounts, security entitlements, commodity contracts
or commodity accounts) and (ii) monies, credit balances, deposits and other
property of any Borrower or Guarantor now or hereafter held or received by or in
transit to Agent, any Lender or its Affiliates or at any other depository or
other institution from or for the account of any Borrower or Guarantor, whether
for safekeeping, pledge, custody, transmission, collection or
otherwise;

     

    (l)           all
commercial tort claims, including, without limitation, those identified in the
Information Certificate;

     

    (m)           to
the extent not otherwise described above, all Receivables;

     

    (n)           all
Records; and

     

    
      
         

      

      
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    (o)           all
products and proceeds of the foregoing, in any form, including insurance
proceeds and all claims against third parties for loss or damage to or
destruction of or other involuntary conversion of any kind or nature of any or
all of the other Collateral.

     

    Notwithstanding
anything to the contrary contained in Section 5.1 above, the grant of security
interest hereunder and the term “Collateral” shall not include the Excluded
Property.

     

    5.2           Perfection of Security
Interests.

     

    (a)           Each
Borrower and Guarantor irrevocably and unconditionally authorizes Agent (or its
agent) to file at any time and from time to time such financing statements with
respect to the Collateral naming Agent or its designee as the secured party and
such Borrower or Guarantor as debtor, as Agent may require, and including any
other information with respect to such Borrower or Guarantor or otherwise
required by part 5 of Article 9 of the UCC or under the PPSA of such
jurisdiction as Agent may determine, together with any amendment and
continuations with respect thereto, which authorization shall apply to all
financing statements filed on, prior to or after the date
hereof.  Each Borrower and Guarantor hereby ratifies and approves all
financing statements naming Agent or its designee as secured party and such
Borrower or Guarantor, as the case may be, as debtor with respect to the
Collateral (and any amendments with respect to such financing statements) filed
by or on behalf of Agent prior to the date hereof and ratifies and confirms the
authorization of Agent to file such financing statements (and amendments, if
any).  Each Borrower and Guarantor hereby authorizes Agent to adopt on
behalf of such Borrower and Guarantor any symbol required for authenticating any
electronic filing and any financing statements filed by the Agent may describe
the Collateral covered thereby by any description that the Agent determines,
including, without limitation, descriptions as “all assets of the Debtor now
owned or hereafter acquired” or using words of similar import.  In the
event that the description of the collateral in any financing statement naming
Agent or its designee as the secured party and any Borrower or Guarantor as
debtor includes assets and properties of such Borrower or Guarantor that do not
at any time constitute Collateral, whether hereunder, under any of the other
Financing Agreements or otherwise, the filing of such financing statement shall
nonetheless be deemed authorized by such Borrower or Guarantor to the extent of
the Collateral included in such description and it shall not render the
financing statement ineffective as to any of the Collateral or otherwise affect
the financing statement as it applies to any of the Collateral.  In no
event shall any Borrower or Guarantor at any time file, or permit or cause to be
filed, any correction statement or termination statement with respect to any
financing statement (or amendment or continuation with respect thereto) naming
Agent or its designee as secured party and such Borrower or Guarantor as
debtor.

     

    (b)           Each
Borrower and Guarantor does not have any chattel paper (whether tangible or
electronic) or instruments as of the date hereof, except as set forth in the
Information Certificate.  In the event that any Borrower or Guarantor
shall be entitled to or shall receive any chattel paper or instrument after the
date hereof, Borrowers and Guarantors shall promptly notify Agent thereof in
writing.  Promptly upon the receipt thereof by or on behalf of any
Borrower or Guarantor (including by any agent or representative), such Borrower
or Guarantor shall deliver, or cause to be delivered to Agent, all tangible
chattel paper and instruments that such Borrower or Guarantor has or may at any
time acquire, accompanied by such instruments of transfer or assignment duly
executed in blank as Agent may from time to time specify, in each case except as
Agent may otherwise agree.  At Agent’s option, each Borrower and
Guarantor shall, or Agent may at

     

    
      
         

      

      
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    any
time on behalf of any Borrower or Guarantor, cause the original of any such
instrument or chattel paper to be conspicuously marked in a form and manner
acceptable to Agent with the following legend referring to chattel paper or
instruments as applicable: “This [chattel paper][instrument] is subject to the security
interest of Wachovia Bank, National Association and any sale, transfer,
assignment or encumbrance of this [chattel paper][instrument] violates the rights of such
secured party”.

     

    (c)           In
the event that any Borrower or Guarantor shall at any time hold or acquire an
interest in any electronic chattel paper or any “transferable record” (as such
term is defined in Section 201 of the Federal Electronic Signatures in Global
and National Commerce Act or in Section 16 of the Uniform Electronic
Transactions Act as in effect in any relevant jurisdiction), such Borrower or
Guarantor shall promptly notify Agent thereof in writing.  Promptly
upon Agent’s request, such Borrower or Guarantor shall take, or cause to be
taken, such actions as Agent may request to give Agent control of such
electronic chattel paper under Section 9-105 of the UCC and control of such
transferable record under Section 201 of the Federal Electronic Signatures in
Global and National Commerce Act or, as the case may be, Section 16 of the
Uniform Electronic Transactions Act, as in effect in such
jurisdiction.

     

    (d)           Each
Borrower and Guarantor does not have any deposit accounts as of the date hereof,
except as set forth in the Information Certificate.  Borrowers and
Guarantors shall not, directly or indirectly, after the date hereof open,
establish or maintain any deposit account unless each of the following
conditions is satisfied:  (i) Agent shall have received not less than
five (5) Business Days prior written notice of the intention of any Borrower or
Guarantor to open or establish such account which notice shall specify in
reasonable detail and specificity acceptable to Agent the name of the account,
the owner of the account, the name and address of the bank at which such account
is to be opened or established, the individual at such bank with whom such
Borrower or Guarantor is dealing and the purpose of the account, (ii) the bank
where such account is opened or maintained shall be acceptable to Agent, and
(iii) on or before the opening of such deposit account, such Borrower or
Guarantor shall as Agent may specify either (A) deliver to Agent a Deposit
Account Control Agreement with respect to such deposit account duly authorized,
executed and delivered by such Borrower or Guarantor and the bank at which such
deposit account is opened and maintained or (B) arrange for Agent to become the
customer of the bank with respect to the deposit account on terms and conditions
acceptable to Agent.  The terms of this subsection (d) shall not apply
to Excluded Accounts.

     

    (e)           No
Borrower or Guarantor owns or holds, directly or indirectly, beneficially or as
record owner or both, any investment property, as of the date hereof, or have
any investment account, securities account, commodity account or other similar
account with any bank or other financial institution or other securities
intermediary or commodity intermediary as of the date hereof, in each case
except as set forth in the Information Certificate.

     

    (i)           In
the event that any Borrower or Guarantor shall be entitled to or shall at any
time after the date hereof hold or acquire any certificated securities in
respect of investment property that constitutes Collateral, such Borrower or
Guarantor shall promptly endorse, assign and deliver the same to Agent,
accompanied by such instruments of transfer or assignment duly executed in blank
as Agent may from time to time specify.  If any securities, now or
hereafter acquired by any Borrower or Guarantor are uncertificated and are
issued to such Borrower or Guarantor or its nominee directly by Issuing Bank,
such Borrower or Guarantor shall immediately notify Agent thereof and shall as
Agent may specify, either (A) cause Issuing Bank to agree to comply with
instructions from Agent as to such securities, without further consent of any
Borrower or Guarantor or such nominee, or (B) arrange for Agent to become the
registered owner of the securities.

     

    
      
         

      

      
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    (ii)           Borrowers
and Guarantors shall not, directly or indirectly, after the date hereof open,
establish or maintain any investment account, securities account, commodity
account or any other similar account (other than a deposit account) with any
securities intermediary or commodity intermediary unless each of the following
conditions is satisfied: (A) Agent shall have received not less than five (5)
Business Days prior written notice of the intention of such Borrower or
Guarantor to open or establish such account which notice shall specify in
reasonable detail and specificity acceptable to Agent the name of the account,
the owner of the account, the name and address of the securities intermediary or
commodity intermediary at which such account is to be opened or established, the
individual at such intermediary with whom such Borrower or Guarantor is dealing
and the purpose of the account, (B) the securities intermediary or commodity
intermediary (as the case may be) where such account is opened or maintained
shall be acceptable to Agent, and (C) on or before the opening of such
investment account, securities account or other similar account with a
securities intermediary or commodity intermediary, such Borrower or Guarantor
shall as Agent may specify either (1) execute and deliver, and cause to be
executed and delivered to Agent, an Investment Property Control Agreement with
respect thereto duly authorized, executed and delivered by such Borrower or
Guarantor and such securities intermediary or commodity intermediary or (2)
arrange for Agent to become the entitlement holder with respect to such
investment property on terms and conditions acceptable to Agent.

     

    (f)           Borrowers
and Guarantors are not the beneficiary or otherwise entitled to any right to
payment under any letter of credit, banker’s acceptance or similar instrument as
of the date hereof, except as set forth in the Information
Certificate.  In the event that any Borrower or Guarantor shall be
entitled to or shall receive any right to payment under any letter of credit,
banker’s acceptance or any similar instrument, whether as beneficiary thereof or
otherwise after the date hereof, such Borrower or Guarantor shall promptly
notify Agent thereof in writing.  Such Borrower or Guarantor shall
promptly, as Agent may specify, either (i) deliver, or cause to be delivered to
Agent, with respect to any such letter of credit, banker’s acceptance or similar
instrument, the written agreement of Issuing Bank and any other nominated person
obligated to make any payment in respect thereof (including any confirming or
negotiating bank), in form and substance satisfactory to Agent, consenting to
the assignment of the proceeds of the letter of credit to Agent by such Borrower
or Guarantor and agreeing to make all payments thereon directly to Agent or as
Agent may otherwise direct or (ii) cause Agent to become, at Borrowers’ expense,
the transferee beneficiary of the letter of credit, banker’s acceptance or
similar instrument (as the case may be).

     

    (g)           Borrowers
and Guarantors do not have any commercial tort claims as of the date hereof,
except as set forth in the Information Certificate.  In the event that
any Borrower or Guarantor shall at any time after the date hereof have any
commercial tort claims, such Borrower or Guarantor shall promptly notify Agent
thereof in writing, which notice shall (i) set forth in reasonable detail the
basis for and nature of such commercial tort claim and (ii) include the express
grant by such Borrower or Guarantor to Agent of a security interest in such
commercial tort claim (and the proceeds thereof).  In the event that
such notice does not include such grant of a security interest, the sending
thereof by such Borrower or Guarantor to Agent shall be deemed to constitute
such grant to Agent. Upon the sending of such notice, any commercial tort claim
described therein shall constitute part of the Collateral and shall be deemed
included therein.  Without limiting the authorization of Agent
provided in Section 5.2(a) hereof or otherwise arising by the execution by such
Borrower or Guarantor of this Agreement or any of the other Financing
Agreements, Agent is hereby irrevocably authorized from time to time and at any
time to file such financing statements naming Agent or its designee as secured
party and such Borrower or Guarantor as debtor, or any amendments to any
financing statements, covering any such commercial tort claim as Collateral. In
addition, each Borrower and Guarantor shall promptly upon Agent’s request,
execute and deliver, or cause to be executed and delivered, to Agent such other
agreements, documents and instruments as Agent may require in connection with
such commercial tort claim.

     

    
      
         

      

      
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    (h)           Borrowers
and Guarantors do not have any goods, documents of title or other Collateral in
the custody, control or possession of a third party as of the date hereof,
except as set forth in the Information Certificate and except for goods located
in the United States or Canada in transit to a location of a Borrower or
Guarantor permitted herein in the ordinary course of business of such Borrower
or Guarantor in the possession of the carrier transporting such
goods.  In the event that any goods, documents of title or other
Collateral are at any time after the date hereof in the custody, control or
possession of any other person not referred to in the Information Certificate or
such carriers, Borrowers and Guarantors shall promptly notify Agent thereof in
writing.  Promptly upon Agent’s request, Borrowers and Guarantors
shall deliver to Agent a Collateral Access Agreement duly authorized, executed
and delivered by such person and the Borrower or Guarantor that is the owner of
such Collateral.

     

    (i)           Borrowers
and Guarantors shall take any other actions reasonably requested by Agent from
time to time to cause the attachment, perfection and first priority of, and the
ability of Agent to enforce, the security interest of Agent in any and all of
the Collateral, including, without limitation, (i) executing, delivering and,
where appropriate, filing financing statements and amendments relating thereto
under the UCC, the PPSA or other applicable law, to the extent, if any, that any
Borrower’s or Guarantor’s signature thereon is required therefor, (ii) causing
Agent’s name to be noted as secured party on any certificate of title for a
titled good if such notation is a condition to attachment, perfection or
priority of, or ability of Agent to enforce, the security interest of Agent in
such Collateral, (iii) complying with any provision of any statute, regulation
or treaty of the United States or Canada as to any Collateral if compliance with
such provision is a condition to attachment, perfection or priority of, or
ability of Agent to enforce, the security interest of Agent in such Collateral,
(iv) obtaining the consents and approvals of any Governmental Authority or third
party, including, without limitation, any consent of any licensor, lessor or
other person obligated on Collateral, and taking all actions required by any
earlier versions of the UCC or the PPSA or by other law, as applicable in any
relevant jurisdiction.

     

    5.3           Special Provisions Relating
to Collateral.

     

    (a)           The
grant of a security interest in the Collateral of each Canadian Loan Party in
favor of Agent under the laws of Canada and the Provinces thereof is further
evidenced by other Financing Agreements and subject to the terms of the other
Financing Agreements.

     

    (b)           Notwithstanding
anything to the contrary contained in this Agreement or the other Financing
Agreements to the contrary, (i) Canadian Borrower and Canadian Guarantors
(whether as guarantor or otherwise) shall not be liable in respect of any US
Obligations except as otherwise agreed by Agent and such Canadian Loan Party,
(ii) no security interest granted by any Canadian Borrower or Canadian Loan
Party under any of the Financing Agreements shall secure any US Obligations,
(iii) all amounts received by Agent or any Lender on account of the Canadian
Obligations by any Canadian Borrower or Canadian Guarantor shall be applied or
credited solely to the Canadian Obligations, and (iv) the liability or
obligation of any Canadian Loan Party with respect to the Obligations shall not
exceed that portion of the Total Obligations which is attributable only to the
Canadian Borrower, the Canadian Obligations, their Collateral, the Canadian
Dollar Loans, the Canadian Commitments or the Canadian Letter of Credit
Obligations (as the case may be) or such other greater amount as may be agreed
to in writing by Agent and the Canadian Borrower.

     

    
      
         

      

      
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              SECTION
      6.

            	
              COLLECTION AND
      ADMINISTRATION

            

    

     

    6.1           Borrowers’ Loan
Accounts.  Agent
shall maintain one or more loan account(s) on its books in which shall be
recorded (a) all Loans, Letters of Credit and other Obligations and the
Collateral, (b) all payments made by or on behalf of any Borrower or Guarantor
and (c) all other appropriate debits and credits as provided in this Agreement,
including fees, charges, costs, expenses and interest.  All entries in
the loan account(s) shall be made in accordance with Agent’s customary practices
as in effect from time to time.

     

    6.2           Statements.  Agent
shall render to Administrative Borrower each month a statement setting forth the
balance in Borrowers’ loan account(s) maintained by Agent for Borrowers pursuant
to the provisions of this Agreement, including principal, interest, fees, costs
and expenses.  Each such statement shall be subject to subsequent
adjustment by Agent but shall, absent manifest errors or omissions, be
considered correct and deemed accepted by Borrowers and Guarantors and
conclusively binding upon Borrowers and Guarantors as an account stated except
to the extent that Agent receives a written notice from Administrative Borrower
of any specific exceptions of Administrative Borrower thereto within thirty (30)
days after the date such statement has been received by Administrative
Borrower.  Until such time as Agent shall have rendered to
Administrative Borrower a written statement as provided above, the balance in
any Borrower’s loan account(s) shall be presumptive evidence of the amounts due
and owing to Agent and Lenders by Borrowers and Guarantors.

     

    6.3           Collection of
Accounts.

     

    (a)           Borrowers
shall establish and maintain, at their expense, blocked accounts or lockboxes
and related blocked accounts (in either case, “Blocked Accounts”), as Agent may
specify, with such banks as are acceptable to Agent into which Borrowers shall
promptly deposit and direct their respective account debtors to directly remit
all payments on Receivables and all payments constituting proceeds of Inventory
or other Collateral in the identical form in which such payments are made,
whether by cash, check or other manner.  Borrowers shall deliver, or
cause to be delivered to Agent a Deposit Account Control Agreement duly
authorized, executed and delivered by each bank where a Blocked Account is
maintained as provided in Section 5.2 hereof or at any time and from time to
time Agent may become the bank’s customer with respect to any of the Blocked
Accounts and promptly upon Agent’s request, Borrowers shall execute and deliver
such agreements and documents as Agent may require in connection
therewith.  Each Borrower and Guarantor agrees that all payments made
to such Blocked Accounts or other funds received and collected by Agent or any
Lender, whether in respect of the Receivables, as proceeds of Inventory or other
Collateral or otherwise shall be treated as payments to Agent and Lenders in
respect of the Obligations and therefore shall constitute the property of Agent
and Lenders to the extent of the then outstanding Obligations; except, that, no Deposit
Account Control Agreement shall be required with respect to any Excluded
Account.

     

    
      
         

      

      
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    (b)           For
purposes of calculating the amount of the Loans available to each Borrower, such
payments will be applied (conditional upon final collection) to the Obligations
on the Business Day of receipt by Agent of immediately available funds in the
Agent Payment Account provided such payments and notice thereof are received in
accordance with Agent’s usual and customary practices as in effect from time to
time and within sufficient time to credit such Borrower’s loan account on such
day, and if not, then on the next Business Day.  For the purposes of
calculating interest on the Obligations, such payments or other funds received
will be applied (conditional upon final collection) to the Obligations one (1)
Business Day following the date of receipt of immediately available funds by
Agent in the Agent Payment Account provided such payments or other funds and
notice thereof are received in accordance with Agent’s usual and customary
practices as in effect from time to time and within sufficient time to credit
such Borrower’s loan account on such day, and if not, then on the next Business
Day.  In the event that at any time or from time to time there are no
Revolving Loans outstanding, Agent shall be entitled to an administrative fee in
an amount calculated based on the Interest Rate for Base Rate Loans (on a per
annum basis) multiplied by the amount of the funds received in the Blocked
Account for such day as calculated by Agent in accordance with its customary
practice. The economic benefit of the timing in the application of payments (and
the administrative charge with respect thereto, if applicable) shall be for the
sole benefit of Agent.

     

    (c)           Each
Borrower and Guarantor and their respective shareholders, directors, employees,
agents and Subsidiaries or other Affiliates shall, acting as trustee for Agent,
receive, as the property of Agent, any monies, checks, notes, drafts or any
other payment relating to and/or proceeds of Accounts or other Collateral which
come into their possession or under their control and immediately upon receipt
thereof, shall deposit or cause the same to be deposited in the Blocked
Accounts, or remit the same or cause the same to be remitted, in kind, to
Agent.  In no event shall the same be commingled with any Borrower’s
or Guarantor’s own funds.  Borrowers agree to reimburse Agent on
demand for any amounts owed or paid to any bank or other financial institution
at which a Blocked Account or any other deposit account or investment account is
established or any other bank, financial institution or other person involved in
the transfer of funds to or from the Blocked Accounts arising out of Agent’s
payments to or indemnification of such bank, financial institution or other
person.  The obligations of Borrowers to reimburse Agent for such
amounts pursuant to this Section 6.3 shall survive the termination of this
Agreement.

     

    6.4           Payments.

     

    (a)           All
Obligations of US Borrowers and Guarantors shall be payable to the US Payment
Account and all Obligations of Canadian Borrower shall be payable to the
Canadian Payment Account.  Agent shall apply payments received or
collected from any US Borrower or US Guarantor or for the account of any US
Borrower or US Guarantor (including the monetary proceeds of collections or of
realization upon any US Collateral) as follows: first, to pay any
fees, indemnities or expense reimbursements then due to Agent from any US
Borrower or US Guarantor; second, to pay any
fees, indemnities, or expense reimbursements then due to Lenders from any US
Borrower or US Guarantor; third, to pay
interest due in respect of any US Obligations (and including any Special Agent
Advances); fourth, to pay
principal in respect of Special Agent Advances; fifth, to pay
principal in respect of all US Loans and to pay or prepay US Obligations then
due arising under or pursuant to any Hedge Agreements of a US Borrower or US
Guarantor with a Bank Product Provider (up to the amount of any then effective
US Reserve established in respect of such US

     

    
      
         

      

      
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    Obligations),
on a pro rata basis; sixth, to pay or
prepay any other US Obligations whether or not then due, in such order and
manner as Agent determines or to be held as cash collateral in connection with
any Letter of Credit Obligations or other contingent US Obligations (but not
including for this purpose any Obligations arising under or pursuant to any Bank
Products) on a pro rata basis; and seventh, to pay any
of the Canadian Obligations.  Notwithstanding anything to the contrary
contained in this Agreement, (i) unless so directed by Administrative Borrower,
on behalf of Borrowers, or unless an Event of Default shall exist or have
occurred and be continuing, Agent shall not apply any payments which it receives
to any Eurodollar Rate Loans, except (A) on the expiration date of the Interest
Period applicable to any such Eurodollar Rate Loans or (B) in the event that
there are no outstanding US Base Rate Loans and (ii) to the extent any US
Borrower uses any proceeds of the US Loans or Letters of Credit to acquire
rights in or the use of any US Collateral or to repay any Indebtedness used to
acquire rights in or the use of any US Collateral, payments in respect of the
Obligations shall be deemed applied first to the Obligations arising from US
Loans and Letter of Credit Obligations that were not used for such purposes, and
second, to the US Obligations arising from US Loans and Letter of Credit
Obligations the proceeds of which were used to acquire rights in or the use of
any US Collateral in the chronological order in which such US Borrower acquired
such rights in or the use of such US Collateral.

     

    (b)           Agent
shall apply payments received or collected from Canadian Borrower or any
Guarantor of the Canadian Obligations (including any payments made by US
Borrowers and Guarantors pursuant to the Canadian Guarantee) or for the account
of Canadian Borrower or any Canadian Guarantor of the Canadian Obligations
(including the monetary proceeds of collections or of realization upon any
Canadian Collateral) as follows: first, to pay any
fees, indemnities or expense reimbursements then due to Agent from Canadian
Borrower; second, to pay any
fees, indemnities, or expense reimbursements then due to Canadian Lenders from
Canadian Borrower; third, to pay
interest due in respect of any Canadian Obligations (and including any Special
Agent Advances); fourth, to pay
principal in respect of Canadian Special Agent Advances; fifth, to pay
principal then due in respect of the Canadian Obligations; sixth, to pay or
prepay Canadian Loans and Canadian Obligations arising under or pursuant to any
Hedge Agreements of Canadian Borrower with a Bank Product Provider (up to the
amount of any then effective Reserve established in respect of such Canadian
Obligations), on a pro rata basis; seventh, to pay or
prepay any other Canadian Obligations whether or not then due, in such order and
manner as Agent determines or to be held as cash collateral in connection with
any Letter of Credit Obligations or other contingent Canadian Obligations on a
pro rata basis.  Notwithstanding anything to the contrary contained in
this Agreement, (i) unless so directed by Administrative Borrower, on behalf of
Borrowers, or unless a Default or an Event of Default shall exist or have
occurred and be continuing, Agent shall not apply any payments which it receives
to any Canadian Obligations, except (A) on the expiration date of the Interest
Period applicable to any such Canadian Obligations or (B) in the event that
there are no outstanding Canadian Obligations and (ii) to the extent any
Borrower uses any proceeds of the Loans to acquire rights in or the use of any
Canadian Collateral or to repay any Indebtedness used to acquire rights in or
the use of any Canadian Collateral, payments in respect of the Canadian
Obligations shall be deemed applied first to the Canadian Obligations arising
from the Loans or Letters of Credit that were not used for such purposes and
second, to the Canadian Obligations arising from Loans and Letters of Credit the
proceeds of which were used to acquire rights in or the use of any Canadian
Collateral in the chronological order in which Canadian Borrower acquired such
rights in or the use of such Canadian Collateral.

     

    
      
         

      

      
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    (c)           Notwithstanding
anything to the contrary set forth in any of the Financing Agreements, (i) all
payments by or on behalf of Canadian Borrower and Canadian Guarantors shall be
applied only to the Canadian Obligations, (ii) all payments by or on behalf of a
US Borrower or Guarantor shall be applied to US Obligations then due until paid
in full, (iii) all payments in respect of the Canadian Obligations shall be
applied to Canadian Obligations denominated in the same currency as the payments
received; provided, that, with respect to
this clause (iii), (A) payments and collections received in any currency other
than the currency in which any outstanding Obligations are denominated will be
accepted and/or applied at the discretion of the applicable Agent, (B) in the
event that any Agent elects to accept and apply such amounts when there are no
Obligations (other than Letter of Credit Obligations or other contingent
Obligations) then outstanding in the same currency, such Agent may, at its
option (but is not obligated to), convert such currency received to the currency
in which the Obligations are denominated at the Exchange Rate on such date and
(C) in such event, Borrowers shall pay the costs of such conversion (or such
Agent may, at its option, charge such costs to the loan account of any Borrower
maintained by such Agent) and (iv) to the extent any Borrower or Guarantor,
directly or indirectly, uses any proceeds of the applicable Loans or Letter of
Credit Obligations to acquire rights in or the use of any Collateral or to repay
any Indebtedness used to acquire rights in or the use of any Collateral,
payments in respect of the Obligations shall be deemed applied first to the
Obligations arising from Loans and Letter of Credit Obligations that were not
used for such purposes and second to the Obligations arising from Loans and
Letter of Credit Obligations the proceeds of which were used to acquire rights
in or the use of any Collateral in the chronological order in which such
Borrower acquired such rights in or the use of such Collateral.

     

    (d)           Notwithstanding
anything to the contrary contained in this Agreement, unless so directed by
Administrative Borrower, or unless a Default or an Event of Default shall exist
or have occurred and be continuing, Agent shall not apply any payments which it
receives to any Eurodollar Rate Loans, except (i) on the expiration date of the
Interest Period applicable to any such Eurodollar Rate Loans or (ii) in the
event that there are no outstanding US Base Rate Loans provided, however, that Agent
will attempt to honor any written request received from Administrative Borrower
to hold such payment until the expiration of the applicable Interest Period, it
being understood and agreed that Agent shall have no liability for any failure
to do so.  To the extent Agent or any Lender receives any payments or
collections in respect of the Obligations in a currency other than US Dollars,
or in respect of the Canadian Obligations, in a currency other than Canadian
Dollars, each of Agent and Wachovia Canada may, at its option (but is not
obligated to), convert such other currency to US Dollars (and, as to the
Canadian Obligations, Canadian Dollars) at the Exchange Rate on such date and in
such market as Agent or Wachovia Canada may select.  US Borrowers
shall pay the costs of such conversion (or Agent may, at its option, charge such
costs to the loan account of any US Borrower maintained by
Agent).  Payments and collections received in any currency other than
the currency in which any outstanding Obligations are denominated will be
accepted and/or applied at the discretion of Agent and Wachovia
Canada.  Any and all payments by or on account of the Obligations
shall be made without setoff, counterclaim or deduction.

     

    
      
         

      

      
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    (e)           For
purposes of this Section 6.4, “Paid in full” and “payment in full” and
“prepayment in full” means payment of all amounts owing under the Financing
Agreements according to the terms thereof, including loan fees, service fees,
professional fees, interest (and specially including interest accrued after the
commencement of any case under the U.S. bankruptcy code or any similar domestic
or foreign similar statute), default interest, interest on interest, and expense
reimbursements, whether or not the same would be or is allowed or disallowed in
whole or in part in any case under the United States Bankruptcy Code, the
Bankruptcy and Insolvency Act (Canada), the Companies’ Creditors Arrangement Act
(Canada) or any similar statute in any jurisdiction, but excluding (A) interest
to the extent paid in excess of amounts based on the pre-default rates (but not
any other interest) and (B) fees paid in respect of the waiver of an Event of
Default, in each case as to amounts under clauses (A) and (B) above only to the
extent that such amounts are disallowed in any case under the United States
Bankruptcy Code, the Bankruptcy and Insolvency Act (Canada), the Companies’
Creditors Arrangement Act (Canada) or any similar statute in any
jurisdiction.

     

    (f)           At
Agent’s option, all principal, interest, fees, costs, expenses and other charges
provided for in this Agreement or the other Financing Agreements may be charged
directly to the loan account(s) of Borrowers maintained by Agent with respect to
each Borrower’s respective Obligations.  If after receipt of any
payment of, or proceeds of Collateral applied to the payment of, any of the
Obligations, Agent, any Lender or Issuing Bank is required to surrender or
return such payment or proceeds to any Person for any reason, then the
Obligations intended to be satisfied by such payment or proceeds shall be
reinstated and continue and this Agreement shall continue in full force and
effect as if such payment or proceeds had not been received by Agent or such
Lender.  Borrowers and Guarantors shall be liable to pay to Agent, and
do hereby indemnify and hold Agent and Lenders harmless for the amount of any
payments or proceeds surrendered or returned.  This Section 6.4(b)
shall remain effective notwithstanding any contrary action which may be taken by
Agent or any Lender in reliance upon such payment or proceeds.  This
Section 6.4 shall survive the payment of the Obligations and the termination of
this Agreement.

     

    6.5           Taxes.

     

    (a)           Any
and all payments by or on account of any of the Obligations shall be made free
and clear of and without deduction or withholding for or on account of, any
setoff, counterclaim, defense, duties, taxes, levies, imposts, fees, deductions,
charges, withholdings, liabilities, restrictions or conditions of any kind,
excluding (i) in the case of each Lender, Issuing Bank and Agent (A) taxes
measured by its net income, and franchise taxes imposed on it, by the
jurisdiction (or any political subdivision thereof) under the laws of which such
Lender, Issuing Bank or Agent (as the case may be) is organized and (B) any
United States or Canadian withholding taxes payable with respect to payments
under the Financing Agreements under laws (including any statute, treaty or
regulation) in effect on the date hereof (or, in the case of an Eligible
Transferee, the date of the Assignment and Acceptance) applicable to such
Lender, Issuing Bank or Agent, as the case may be, but not excluding any United
States or Canadian withholding taxes payable as a result of any change in such
laws occurring after the date hereof (or the date of such Assignment and
Acceptance) and (ii) in the case of each Lender, Issuing Bank or Agent taxes
measured by its net income, and franchise taxes imposed on it as a result of a
present or former business carried on by such Lender in the jurisdiction of the
Governmental Authority imposing such tax (all such non-excluded taxes, levies,
imposts, fees, deductions, charges, withholdings and liabilities being
hereinafter referred to as “Taxes”).

     

    
      
         

      

      
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    (b)           If
any Taxes shall be required by law to be deducted from or in respect of any sum
payable in respect of the Obligations to any Lender, Issuing Bank or Agent (i)
the sum payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 6.5), such Lender, Issuing Bank or Agent (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the relevant Borrower or Guarantor shall make such
deductions, (iii) the relevant Borrower or Guarantor shall pay the full amount
deducted to the relevant taxing authority or other authority in accordance with
applicable law and (iv) the relevant Borrower or Guarantor shall deliver to
Agent evidence of such payment.

     

    (c)           In
addition, each Borrower and Guarantor agrees to pay any present or future stamp
or documentary taxes or any other excise or property taxes, charges or similar
levies of the United States or Canada or any political subdivision thereof or
any applicable foreign jurisdiction, and all liabilities with respect thereto,
in each case arising from any payment made hereunder or under any of the other
Financing Agreements or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement or any of the other Financing
Agreements (collectively, “Other Taxes”).

     

    (d)           Borrowers
and Guarantors shall indemnify and hold harmless Agent, Issuing Bank and Lenders
for the full amount of Taxes or Other Taxes paid by Agent, any Issuing Bank or
any Lender (including any Taxes or Other Taxes imposed by any jurisdiction on
amounts payable under this Section, but not including Other Taxes that arise as
a result of Agent’s, any Issuing Bank’s or any Lender’s activities with the
applicable taxing jurisdiction, if any, and not as a result of this Agreement)
and any liability (including penalties, interest and expenses (including
reasonable attorney’s fees and expenses) other than those resulting solely from
a failure by Agent, any Issuing Bank or any Lender to pay any Taxes or Other
Taxes which it is required to pay and for which it received an indemnity
payment) arising therefrom or with respect thereto, whether or not such Taxes or
Other Taxes were correctly or legally asserted by the relevant Governmental
Authority; provided, that, Borrowers and
Guarantors shall not be required to indemnify Agent, any Issuing Bank or any
Lender with respect to any Taxes or Other Taxes which are attributable to such
Agent’s, Issuing Bank’s or Lender’s failure to comply with the provisions of
Section 6.5(g), (h), (j) or (k) hereof.  Payment under this
indemnification shall be made within ten (10) days after the date Agent, any
Issuing Bank or any Lender makes written demand therefor on Administrative
Borrower.  If Borrowers reasonably believe that such Taxes or Other
Taxes were not correctly or legally asserted, Agent, such Issuing Bank or such
Lender shall, upon Administrative Borrower’s request and at Borrowers’ expense,
provide such documents to Administrative Borrower in form and substance
reasonably satisfactory to Agent, as Administrative Borrower may reasonably
request, to enable Borrowers to contest such Taxes or Other Taxes pursuant to
appropriate proceedings then available to Borrowers (so long as providing such
documents shall not, in the good faith determination of Agent, have a reasonable
likelihood of resulting in any liability of Agent, any Issuing Bank or any
Lender).

     

    (e)           Within
thirty (30) days after the date of any payment by any Borrower or Guarantor of
Taxes or Other Taxes, such Borrower or Guarantor shall furnish to Agent the
original or a certified copy of a receipt evidencing payment thereof, or other
evidence of payment reasonably satisfactory to Agent.

     

    
      
         

      

      
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    (f)           If
any Borrower or Guarantor otherwise would be required to pay additional amounts
to Agent, an Issuing Bank or a Lender pursuant to Section 6.5(b) hereof, then
upon Administrative Borrower’s written request such Lender shall use reasonable
efforts at Borrowers’ expense (consistent with legal and regulatory
restrictions) to take such action, including changing the jurisdiction of its
lending office, so as to eliminate or reduce any such additional payment by such
Borrower or Guarantor which may thereafter accrue.

     

    (g)           In
the event a US Lender shall assign the Obligations and its rights hereunder to
an assignee which is organized under the laws of a jurisdiction outside the
United States of America on or prior to the effective date of any such
assignment, such assignee of a Lender shall provide Administrative Borrower with
an IRS Form W-8BEN or Form W-8ECI or other applicable form, certificate or
document prescribed by the Internal Revenue Service certifying as to such
assignee’s being entitled to full exemption from United States of America
withholding tax with respect to all payments to be made by the US Loan Parties
to such assignee hereunder and under any of the other Financing Agreements
(unless such assignee of a Lender is unable to do so by reason of a change in
law, including, without limitation, any statute, treaty, ruling, determination
or regulation occurring subsequent to the effective date of such
assignment).  In the event that a Canadian Lender shall assign the
Obligations and its rights hereunder to an assignee, on or prior to the
effective date of any such assignment, such assignee shall provide
Administrative Borrower with a document (on a form prescribed by the relevant
Governmental Authority, if any) certifying that any amount payable to such
assignee pursuant to this Agreement is, as of the date of such assignment, not
subject to Canadian withholding tax.

     

    (h)           Notwithstanding
anything to the contrary contained in this Section 6.5, unless Administrative
Borrower has received forms or other documents indicating that payments by the
US Loan Parties to a US Lender or US Issuing Bank, which US Lender or US Issuing
Bank is also a Foreign Lender, hereunder or under any of the other Financing
Agreements are not subject to United States of America withholding or backup
withholding tax, US Borrowers shall, (i) withhold taxes from such payments at
the applicable statutory rate, or at a rate reduced by an applicable tax treaty,
and (ii) pay such assignee such payment net of any taxes so withheld (and not be
required to pay any additional amounts pursuant to this Section 6.5, except with
respect to Taxes and in accordance with Section 6.5(b) or (d)
hereof).  Such US Lender or US Issuing Bank, which US Lender or US
Issuing Bank is also a Foreign Lender, will be required to use reasonable
efforts (including reasonable efforts to change its lending office) to avoid or
to minimize any amounts which might otherwise be payable by any Borrower or
Guarantor pursuant to this Section 6.5; provided, that, such efforts
shall not cause the imposition on such assignee of any additional costs or legal
or regulatory burdens deemed by such assignee in good faith to be
material.

     

    (i)           If
Agent, any Issuing Bank or any Lender receives a permanent tax benefit in
respect of any Taxes or Other Taxes for which Agent, such Issuing Bank or such
Lender has received an indemnification payment or additional amounts from any
Borrower or Guarantor hereunder, so long as no Event of Default shall exist or
have occurred and be continuing, Agent, such Issuing Bank or such Lender (as the
case may be) shall credit to the loan account of Borrowers the amount of such
tax benefit.

     

    
      
         

      

      
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    (j)           Each
Person that is a US Lender or US Issuing Bank, which US Lender or US Issuing
Bank is also a Foreign Lender, as of the date of this Agreement and each Person
that becomes a US Lender or US Issuing Bank, which US Lender or US Issuing Bank
is also a Foreign Lender, after the date of this Agreement (i) agrees to furnish
to Agent and Administrative Borrower prior to the time that Agent or such
Borrower is required to make any payment of principal, interest or fees
hereunder, duplicate executed originals of any of the following, as applicable
(but only if such Foreign Lender is legally entitled to do so):  (A)
duly completed copies of Internal Revenue Service Form W-8BEN claiming exemption
from, or a reduction to, withholding tax under an income tax treaty, or any
successor form, (B) duly completed copies of Internal Revenue Service Form
W-8ECI claiming exemption from withholding because the income is effectively
connection with a U.S. trade or business or any successor form, (C) in the case
of a Foreign Lender claiming the benefits of the exemption for portfolio
interest under Sections 871(h) or 881(c) of the Code, (1) a certificate of the
Lender to the effect that such Lender is not a “bank” within the meaning of
Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of a Borrower
within the meaning of Section 881(c)(3)(B) of the Code or a “controlled foreign
corporation” described and Section 881(c)(3)(C) of the Code and (2) duly
completed copies of Internal Revenue Service Form W-8BEN claiming exemption from
withholding under the portfolio interest exemption or any successor form, or (D)
any other applicable form, certificate or document prescribed by applicable law
as a basis for claiming exemption from or a reduction in United States
withholding tax duly completed together with such supplementary documentation as
may be prescribed by applicable law to permit a Borrower to determine the
withholding or deduction required to be made, and (ii) agrees to comply with all
applicable U.S. laws and regulations with regard to such withholding tax
exemption.  Each Person that is a Canadian Lender or a Canadian
Issuing Bank as of the date of this Agreement and each Person that becomes a
Canadian Lender or a Canadian Issuing Bank after the date of this Agreement
agrees to furnish to Agent and Administrative Borrower prior to the time that
Agent or Borrowers is required to make any payment of principal, interest or
fees hereunder, a document (on a form prescribed by the relevant Governmental
Authority, if any) certifying that any such amount is, as of the date of such
document, not subject to Canadian withholding tax and further agrees to comply
with all applicable Canadian laws and regulations with regard to such
withholding tax exemption.

     

    (k)           Each
US Lender or US Issuing Bank (other than any such US Lender or US Issuing Bank
that is entitled to a presumption under applicable Treasury Regulations that it
is a domestic corporation for U.S. federal income tax purposes) shall deliver to
Agent (or, in the case of an assignee of a US Lender which (i) is an Affiliate
of such US Lender or an Approved Fund of such US Lender and (ii) does not
deliver an Assignment and Acceptance to Agent pursuant to Section 13.7(a) hereof
for recordation pursuant to Section 13.7(b) hereof, to the assigning US Lender
only) and Administrative Borrower two properly completed and duly executed
copies of U.S. Internal Revenue Service Form W-9 certifying that such US Lender
is exempt from U.S. backup withholding tax.  Such forms shall be
delivered by each such US Lender on or before the date it becomes a party to
this Agreement and thereafter within twenty (20) days after receipt of a written
request therefor from Agent.  Notwithstanding any other provision of
this Section 6.5(l), a US Lender or US Issuing Bank described in this Section
6.5(l) shall not be required to deliver any form pursuant to this Section 6.5(l)
that such US Lender or US Issuing Bank is not legally able to
deliver.

     

    
      
         

      

      
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    6.6           Authorization to Make
Loans.  Agent
and Lenders are authorized to make the Loans and provide the Letters of Credit
based upon telephonic or other instructions received from anyone purporting to
be an officer of Administrative Borrower or any Borrower or other authorized
person or, at the discretion of Agent, if such Loans are necessary to satisfy
any Obligations.  All requests for Loans or Letters of Credit
hereunder shall specify the date on which the requested advance is to be made or
Letters of Credit established (which day shall be a Business Day) and the amount
of the requested Loan.  Requests received after 11:00 a.m. New York
City time on any day shall be deemed to have been made as of the opening of
business on the immediately following Business Day.  All Loans and
Letters of Credit under this Agreement shall be conclusively presumed to have
been made to, and at the request of and for the benefit of, any Borrower or
Guarantor when deposited to the credit of any Borrower or Guarantor or otherwise
disbursed or established in accordance with the instructions of any Borrower or
Guarantor or in accordance with the terms and conditions of this
Agreement.

     

    6.7           Use of Proceeds.  Borrowers shall use the
initial proceeds of the Loans and Letters of Credit hereunder only for: (a) payments to each of the persons listed in the
disbursement direction letter furnished by Borrowers to Agent on or about the
date hereof and (b) costs, expenses and fees in connection with the
preparation, negotiation, execution and delivery of this Agreement and the other
Financing Agreements.  All other Loans made or Letters of Credit
provided to or for the benefit of any Borrower pursuant to the provisions hereof
shall be used by such Borrower only for general operating, working capital and
other proper corporate or limited partnership purposes of such Borrower not
otherwise prohibited by the terms hereof.  None of the proceeds will
be used, directly or indirectly, for the purpose of purchasing or carrying any
margin security or for the purposes of reducing or retiring any indebtedness
which was originally incurred to purchase or carry any margin security or for
any other purpose which might cause any of the Loans to be considered a “purpose
credit” within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System, as amended.

     

    6.8           Appointment of
Administrative Borrower as Agent for Requesting Loans and Receipts of Loans and
Statements.

     

    (a)           Each
Borrower hereby irrevocably appoints and constitutes Administrative Borrower as
its agent and attorney-in-fact to request and receive Loans and Letters of
Credit pursuant to this Agreement and the other Financing Agreements from Agent
or any Lender in the name or on behalf of such Borrower.  Agent and
Lenders may disburse the Loans to such bank account of Administrative Borrower
or a Borrower or otherwise make such Loans to a Borrower and provide such
Letters of Credit to a Borrower as Administrative Borrower may designate or
direct, without notice to any other Borrower or
Guarantor.  Notwithstanding anything to the contrary contained herein,
Agent may at any time and from time to time require that Loans to or for the
account of any Borrower be disbursed directly to an operating account of such
Borrower.

     

    (b)           Administrative
Borrower hereby accepts the appointment by Borrowers to act as the agent and
attorney-in-fact of Borrowers pursuant to this Section 6.8. Administrative
Borrower shall ensure that the disbursement of any Loans to each Borrower
requested by or paid to or for the account of Parent, or the issuance of any
Letter of Credit for a Borrower hereunder, shall be paid to or for the account
of such Borrower.

     

    
      
         

      

      
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    (c)           Each
Borrower and other Guarantor hereby irrevocably appoints and constitutes
Administrative Borrower as its agent to receive statements on account and all
other notices from Agent and Lenders with respect to the Obligations or
otherwise under or in connection with this Agreement and the other Financing
Agreements.

     

    (d)           Any
notice, election, representation, warranty, agreement or undertaking by or on
behalf of any other Borrower or any Guarantor by Administrative Borrower shall
be deemed for all purposes to have been made by such Borrower or Guarantor, as
the case may be, and shall be binding upon and enforceable against such Borrower
or Guarantor to the same extent as if made directly by such Borrower or
Guarantor.

     

    (e)           No
purported termination of the appointment of Administrative Borrower as agent as
aforesaid shall be effective, except after ten (10) days’ prior written notice
to Agent.

     

    6.9           Pro Rata
Treatment.  Except to the extent otherwise provided in this
Agreement or as otherwise agreed by Lenders:  (a) the making and conversion of Loans to the US
Borrowers shall be made among the US Lenders based on their respective Pro Rata
Shares as to the Loans made to the US Borrowers, (b) the making and conversion of Loans to the
Canadian Borrower shall be made among the Canadian Lenders based on their
respective Pro Rata Shares as to the Loans made to the Canadian Borrower and
(c) each payment on account of any
Obligations or Canadian Obligations, as the case may be, to or for the account
of one or more Lenders in respect of any Obligations or Canadian Obligations, as
the case may be, due on a particular day shall be allocated among the Lenders
entitled to such payments based on their respective Pro Rata Shares and shall be
distributed accordingly.

     

    6.10           Sharing of Payments,
Etc.

     

    (a)           Each
Borrower and Guarantor agrees that, in addition to (and without limitation of)
any right of setoff, banker’s lien or counterclaim Agent or any Lender may
otherwise have, each Lender shall be entitled, at its option (but subject, as
among Agent and Lenders, to the provisions of Section 12.3(b) hereof), to offset
balances held by it for the account of such Borrower or Guarantor at any of its
offices, in dollars or in any other currency, against any principal of or
interest on any Loans owed to such Lender or any other amount payable to such
Lender hereunder, that is not paid when due (regardless of whether such balances
are then due to such Borrower or Guarantor), in which case it shall promptly
notify Administrative Borrower and Agent thereof; provided, that, such Lender’s
failure to give such notice shall not affect the validity thereof.

     

    (b)           If
any Lender (including Agent) shall obtain from any Borrower or Guarantor payment
of any principal of or interest on any Loan owing to it or payment of any other
amount under this Agreement or any of the other Financing Agreements through the
exercise of any right of setoff, banker’s lien or counterclaim or similar right
or otherwise (other than from Agent as provided herein), and, as a result of
such payment, such Lender shall have received more than its Pro Rata Share of
the principal of the Loans or more than its share of such other amounts then due
hereunder or thereunder by any Borrower or Guarantor to such Lender than the
percentage thereof received by any other Lender, it shall promptly pay to Agent,
for the benefit of Lenders, the amount of such excess and simultaneously
purchase from such other Lenders a participation in the Loans or such other
amounts, respectively, owing to such other Lenders (or such interest due
thereon, as the case

     

    
      
         

      

      
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    may
be) in such amounts, and make such other adjustments from time to time as shall
be equitable, to the end that all Lenders shall share the benefit of such excess
payment (net of any expenses that may be incurred by such Lender in obtaining or
preserving such excess payment) in accordance with their respective Pro Rata
Shares or as otherwise agreed by Lenders.  To such end all Lenders
shall make appropriate adjustments among themselves (by the resale of
participation sold or otherwise) if such payment is rescinded or must otherwise
be restored.

     

    (c)           Each
Borrower and Guarantor agrees that any Lender purchasing a participation (or
direct interest) as provided in this Section may exercise, in a manner
consistent with this Section, all rights of setoff, banker’s lien, counterclaim
or similar rights with respect to such participation as fully as if such Lender
were a direct holder of Loans or other amounts (as the case may be) owing to
such Lender in the amount of such participation.

     

    (d)           Nothing
contained herein shall require any Lender to exercise any right of setoff,
banker’s lien, counterclaims or similar rights or shall affect the right of any
Lender to exercise, and retain the benefits of exercising, any such right with
respect to any other Indebtedness or obligation of any Borrower or
Guarantor.  If, under any applicable bankruptcy, insolvency or other
similar law, any Lender receives a secured claim in lieu of a setoff to which
this Section applies, such Lender shall, to the extent practicable, assign such
rights to Agent for the benefit of Lenders and, in any event, exercise its
rights in respect of such secured claim in a manner consistent with the rights
of Lenders entitled under this Section to share in the benefits of any recovery
on such secured claim.

     

    6.11           Settlement
Procedures.

     

    (a)           In
order to administer the Credit Facility in an efficient manner and to minimize
the transfer of funds between Agent and Lenders, Agent may, at its option,
subject to the terms of this Section, make available, on behalf of Lenders, the
full amount of the Revolving Loans requested or charged to any Borrower’s loan
account(s) or otherwise to be advanced by Lenders pursuant to the terms hereof,
without requirement of prior notice to Lenders of the proposed Revolving
Loans.

     

    (b)           With
respect to all Revolving Loans made by Agent on behalf of Lenders, the amount of
each Lender’s Pro Rata Share of the outstanding Revolving Loans shall be
computed weekly, and shall be adjusted upward or downward on the basis of the
amount of the outstanding Revolving Loans as of 5:00 p.m. New York City time on
the Business Day immediately preceding the date of each settlement computation;
provided, that, Agent retains
the absolute right at any time or from time to time to make the above described
adjustments at intervals more frequent than weekly, but in no event more than
twice in any week.  Agent shall deliver to each of the Lenders after
the end of each week, or at such period or periods as Agent shall determine, a
summary statement of the amount of outstanding Revolving Loans for such period
(such week or other period or periods being hereinafter referred to as a
“Settlement Period”).  If the summary statement is sent by Agent and
received by a Lender prior to 12:00 p.m. New York City time, then such Lender
shall make the settlement transfer described in this Section by no later than
3:00 p.m. New York City time on the same Business Day and if received by a
Lender after 12:00 p.m. New York City time, then such Lender shall make the
settlement transfer by not later than 3:00 p.m. New York City time on the next
Business Day following the date of receipt.  If, as of the end of any
Settlement Period, the

     

    
      
         

      

      
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    amount
of a Lender’s Pro Rata Share of the outstanding Revolving Loans is more than
such Lender’s Pro Rata Share of the outstanding Revolving Loans as of the end of
the previous Settlement Period, then such Lender shall forthwith (but in no
event later than the time set forth in the preceding sentence) transfer to Agent
by wire transfer in immediately available funds the amount of the
increase.  Alternatively, if the amount of a Lender’s Pro Rata Share
of the outstanding Revolving Loans in any Settlement Period is less than the
amount of such Lender’s Pro Rata Share of the outstanding Revolving Loans for
the previous Settlement Period, Agent shall forthwith transfer to such Lender by
wire transfer in immediately available funds the amount of the
decrease.  The obligation of each of the Lenders to transfer such
funds and effect such settlement shall be irrevocable and unconditional and
without recourse to or warranty by Agent and may occur at any time a Default or
Event of Default exists or has occurred and whether or not the conditions set
forth in Section 4.2 are satisfied (except if there is an Event of Default under
Section 10.1(g) and 10.1(h), in which case the funds shall be in respect of each
Lender’s participation).  Agent and each Lender agrees to mark its
books and records at the end of each Settlement Period to show at all times the
dollar amount of its Pro Rata Share of the outstanding Revolving Loans and
Letters of Credit.  Each Lender shall only be entitled to receive
interest on its Pro Rata Share of the Revolving Loans to the extent such
Revolving Loans have been funded by such Lender.  Because the Agent on
behalf of Lenders may be advancing and/or may be repaid Revolving Loans prior to
the time when Lenders will actually advance and/or be repaid such Revolving
Loans, interest with respect to Revolving Loans shall be allocated by Agent in
accordance with the amount of Revolving Loans actually advanced by and repaid to
each Lender and the Agent and shall accrue from and including the date such
Revolving Loans are so advanced to but excluding the date such Revolving Loans
are either repaid by Borrowers or actually settled with the applicable Lender as
described in this Section.

     

    (c)           To
the extent that Agent has made any such amounts available and the settlement
described above shall not yet have occurred, upon repayment of any Revolving
Loans by a Borrower, Agent may apply such amounts repaid directly to any amounts
made available by Agent pursuant to this Section.  In lieu of
settlements, Agent may, at its option, at any time require each Lender to
provide Agent with immediately available funds representing its Pro Rata Share
of each Revolving Loan, prior to Agent’s disbursement of such Revolving Loan to
a Borrower.  In such event, Agent shall notify each Lender promptly
after Agent’s receipt of the request for the Revolving Loans from a Borrower (or
Administrative Borrower on behalf of such Borrower) or any deemed request
hereunder and each Lender shall provide its Pro Rata Share of such requested
Loan to the account specified by Agent in immediately available funds not later
than 2:00 p.m. New York City time on the requested funding date, so that all
such Revolving Loans shall be made by the Lenders simultaneously and
proportionately to their Pro Rata Shares.  No Lender shall be
responsible for any default by any other Lender in the other Lender’s obligation
to make a Loan requested hereunder nor shall the Commitment of any Lender be
increased or decreased as a result of the default by any other Lender in the
other Lender’s obligation to make a Loan hereunder.

     

    (d)           Upon
the making of any Revolving Loan by Agent as provided herein, without further
action by any party hereto, each Lender shall be deemed to have irrevocably and
unconditionally purchased and received from Agent, without recourse or warranty,
an undivided interest and participation to the extent of such Lender’s Pro Rata
Share in such Loan.  To the extent that there is no settlement in
accordance with the terms hereof, Agent may at any time require the Lenders to
fund their participations.  From and after the date, if any, on which
any Lender has funded its participation in any such Revolving Loan, Agent shall
promptly distribute to such Lender, such Lender’s Pro Rata Share of all payments
of principal and interest received by Agent in respect of such Revolving
Loan.

     

    
      
         

      

      
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    (e)           As
to any Revolving Loan funded by Agent on behalf of a Lender whether pursuant to
Sections 6.11(a), 6.11(b) or 6.11(c) above, Agent may assume that each Lender
will make available to Agent such Lender’s Pro Rata Share of the Revolving Loan
requested or otherwise made on such day in the case of Revolving Loans funded
pursuant to Section 6.11(c) above or otherwise on the applicable settlement
date.  If Agent makes amounts available to a Borrower and such
corresponding amounts are not in fact made available to Agent by such Lender,
Agent shall be entitled to recover such corresponding amount on demand from such
Lender together with interest thereon for each day from the date such payment
was due until the date such amount is paid to Agent at the Federal Funds Rate
for each day during such period (as published by the Federal Reserve Bank of New
York or at Agent’s option based on the arithmetic mean determined by Agent of
the rates for the last transaction in overnight Federal funds arranged prior to
9:00 a.m. New York City time on that day by each of the three leading brokers of
Federal funds transactions in New York selected by Agent) and if such amounts
are not paid within three (3) days of Agent’s demand, at the highest Interest
Rate provided for in Section 3.1 hereof applicable to Base Rate Revolving
Loans.  During the period in which such Lender has not paid such
corresponding amount to Agent, notwithstanding anything to the contrary
contained in this Agreement or any of the other Financing Agreements, the amount
so advanced by Agent to or for the benefit of any Borrower shall, for all
purposes hereof, be a Loan made by Agent for its own account.

     

    (f)           Upon
any failure by a Lender to pay Agent pursuant to the settlement described in
Section 6.11(b) above or to pay Agent pursuant to Section 6.11(c), 6.11(d) or
Section 6.11(e), Agent shall promptly thereafter notify Administrative Borrower
of such failure and Borrowers shall pay such corresponding amount to Agent for
its own account within five (5) Business Days of Administrative Borrower’s
receipt of such notice.  The term “Defaulting Lender” shall mean (i)
any Lender that has failed to fund any portion of the Revolving Loans or
participations in Letter of Credit Obligations required to be funded by it
hereunder within one (1) Business Day of the date required to be funded by it
hereunder, or has otherwise failed to pay over to Agent or any other Lender any
other amount required to be paid by it hereunder within one (1) Business Day of
the date when due, (ii) any Lender that has notified Agent, any Lender, Issuing
Bank, or any Borrower or Guarantor in writing that it will not or does not
intend to comply with any of its funding obligations under this Agreement or has
made a public statement to the effect that it will not or does not intend to
comply with its funding obligations under this Agreement or under other
agreements in which it has agreed to make Revolving Loans or provide other
financial accommodations, or (iii) any Lender that becomes or is insolvent or
has a parent company that has become or is insolvent or becomes the subject of a
bankruptcy or insolvency proceeding, or has a receiver, conservator, trustee or
custodian appointed for it, or has taken any action in furtherance of, or
indicating its consent to, approval of or acquiescence in any such proceeding or
appointment and has not obtained all required orders, approvals or consents of
any court or other Governmental Authority to continue to fulfill its obligations
hereunder, in form and substance satisfactory to Agent.

     

    (g)           Agent
shall not be obligated to transfer to a Defaulting Lender any payments received
by Agent for the Defaulting Lender’s benefit, nor shall a Defaulting Lender be
entitled to the sharing of any payments hereunder (including any principal,
interest or fees, whether in respect of Revolving Loans, the Term Loan,
participation interests or otherwise).  For purposes of voting or
consenting to matters with respect to this Agreement and the other Financing
Agreements and determining Pro Rata Shares, such Defaulting Lender shall be
deemed not to be a “Lender” and such Lender’s Commitment shall be deemed to be
zero (0).  So long as there is a Defaulting Lender, the

     

    
      
         

      

      
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    maximum
amount of the Revolving Loans and Letters of Credit shall not exceed the
aggregate amount of the Commitments for Revolving Loans of the Lenders that are
not Defaulting Lenders plus the Pro Rata
Share of the Defaulting Lender (determined immediately prior to its being a
Defaulting Lender) of the Revolving Loans and Letters of Credit outstanding as
of the date that the Defaulting Lender has become a Defaulting
Lender.  At any time that there is a Defaulting Lender, payments
received for application to the Obligations payable to Lenders in accordance
with the terms of this Agreement shall be distributed to Lenders based on their
Pro Rata Shares calculated after giving effect to the reduction of the
Defaulting Lender’s Commitment to zero as provided herein or at Agent’s option,
Agent may instead receive and retain such amounts that would be otherwise
attributable to the Pro Rata Share of a Defaulting Lender (which for such
purpose shall be such Pro Rata Share as in effect immediately prior to its being
a Defaulting Lender).  To the extent that Agent elects to receive and
retain such amounts, Agent may hold such amounts (which shall not accrue
interest) and, in its reasonable discretion, relend such amounts to a
Borrower.  To the extent that Agent exercises its option to relend
such amounts, such amounts shall be treated as Revolving Loans for the account
of Agent in addition to the Revolving Loans that are made by the Lenders other
than a Defaulting Lender based on their respective Pro Rata Shares as calculated
after giving effect to the reduction of such Defaulting Lender’s Commitment to
zero (0) as provided herein but shall be repaid in the same order of priority as
the principal amount of the Revolving Loans on a pro rata basis for purposes of
Section 6.4 hereof.  Agent shall determine whether any Revolving Loans
requested shall be made from relending such amounts or from Revolving Loans from
the Lenders (other than a Defaulting Lender) and any allocation of requested
Revolving Loans between them.  The rights of a Defaulting Lender shall
be limited as provided herein until such time as the Defaulting Lender has made
all payments to Agent of the amounts that it had failed to pay causing it to
become a Defaulting Lender and such Lender is otherwise in compliance with the
terms of this Agreement (including making any payments as it would have been
required to make as a Lender during the period that it was a Defaulting Lender
other than in respect of the principal amount of Revolving Loans, which payments
as to the principal amount of Revolving Loans shall be made based on the
outstanding balance thereof on the date of the cure by Defaulting Lender or at
such other time thereafter as Agent may specify) or has otherwise provided
evidence in form and substance satisfactory to Agent that such Defaulting Lender
will be able to fund its Pro Rata Share (as in effect immediately prior to its
being a Defaulting Lender) in accordance with the terms hereof.  Upon
the cure by Defaulting Lender of the event that is the basis for it to be a
Defaulting Lender by making such payment or payments and such Lender otherwise
being in compliance with the terms hereof, such Lender shall cease to be a
Defaulting Lender and shall only be entitled to payment of interest accrued
during the period that such Lender was a Defaulting Lender to the extent
previously received and retained by Agent from or for the account of Borrowers
on the funds constituting Loans funded by such Lender prior to the date of it
being a Defaulting Lender (and not previously paid to such Lender) and shall
otherwise, on and after such cure, make Revolving Loans and settle in respect of
the Revolving Loans and other Obligations in accordance with the terms
hereof.  The existence of a Defaulting Lender and the operation of
this Section shall not be construed to increase or otherwise affect the
Commitment of any Lender, or relieve or excuse the performance by any Borrower
or Guarantor of its duties and obligations hereunder (including, but not limited
to, the obligation of such Borrower or Guarantor to make any payments hereunder,
whether in respect of Revolving Loans or the Term Loan by a Defaulting Lender or
otherwise).

     

    
      
         

      

      
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    (h)           Notwithstanding
anything to the contrary contained in this Agreement, in the event that there is
a Defaulting Lender, if there are any Letters of Credit outstanding, within one
(1) Business Day after the written request of Issuing Bank, Borrowers shall pay
to Agent an amount equal to the Pro Rata Share of the Defaulting Lender
(calculated as in effect immediately prior to such Lender becoming a Defaulting
Lender) of the Letter of Credit Obligations then outstanding to be held by Agent
on terms and conditions satisfactory to Agent and Issuing Bank as cash
collateral for the Obligations and for so long as there is a Defaulting Lender,
Issuing Bank shall not be required to issue any Letter of Credit, or increase or
extend or otherwise amend any Letter of Credit, unless upon the request of
Issuing Bank, Agent has cash collateral from Borrowers in an amount equal to the
Pro Rata Share of the Defaulting Lender (calculated as in effect immediately
prior to such Lender becoming a Defaulting Lender) of the Letter of Credit
Obligations outstanding after giving effect to any such requested Letter of
Credit (or increase, extension or other amendment) to be held by Agent on its
behalf on terms and conditions satisfactory to Agent and Issuing Bank or there
are other arrangements reasonably satisfactory to Issuing Bank with respect to
the participation in Letters of Credit by such Defaulting
Lender.  Such cash collateral shall be applied first to the Letter of
Credit Obligations before application to any other Obligations, notwithstanding
anything to the contrary contained in Section 6.4 hereof.

     

    (i)           Nothing
in this Section or elsewhere in this Agreement or the other Financing Agreements
shall be deemed to require Agent to advance funds on behalf of any Lender or to
relieve any Lender from its obligation to fulfill its Commitment hereunder or to
prejudice any rights that any Borrower may have to commence any legal action
against a Lender as a result of any default by such Lender hereunder in
fulfilling its Commitment.

     

    6.12           Obligations Several;
Independent Nature of Lenders’ Rights.  The
obligation of each Lender hereunder is several, and no Lender shall be
responsible for the obligation or commitment of any other Lender
hereunder.  Nothing contained in this Agreement or any of the other
Financing Agreements and no action taken by the Lenders pursuant hereto or
thereto shall be deemed to constitute the Lenders to be a partnership, an
association, a joint venture or any other kind of entity.  The amounts
payable at any time hereunder to each Lender shall be a separate and independent
debt, and subject to Section 12.3 hereof, each Lender shall be entitled to
protect and enforce its rights arising out of this Agreement and it shall not be
necessary for any other Lender to be joined as an additional party in any
proceeding for such purpose.

     

    6.13           Bank Products.  Borrowers
and Guarantors, or any of their Subsidiaries, may (but no such Person is
required to) request that the Bank Product Providers provide or arrange for such
Person to obtain Bank Products from Bank Product Providers, and each Bank
Product Provider may, in its sole discretion, provide or arrange for such Person
to obtain the requested Bank Products.  Borrowers and Guarantors or
any of their Subsidiaries that obtains Bank Products shall indemnify and hold
Agent, each Lender and their respective Affiliates harmless from any and all
obligations now or hereafter owing to any other Person by any Bank Product
Provider in connection with any Bank Products other than for gross negligence or
willful misconduct on the part of any such indemnified Person.  This
Section 6.13 shall survive the payment of the Obligations and the termination of
this Agreement.  Borrower and its Subsidiaries acknowledge and agree
that the obtaining of Bank Products from Bank Product Providers (a) is in the sole discretion of such Bank Product
Provider, and (b) is subject to all rules
and regulations of such Bank Product Provider.

     

    
      
         

      

      
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              SECTION
      7.

            	
              COLLATERAL REPORTING
      AND COVENANTS

            

    

     

    7.1           Collateral
Reporting.

     

    (a)           Borrowers
shall provide Agent with the following documents in a form satisfactory to Agent
in each case setting out the information for the US Borrowers and Canadian
Borrower on a separate basis:

     

    (i)           on
a regular basis as requested by Agent, schedules of sales made (other than with
respect to the Faunus Factored Accounts), credits issued and cash
received;

     

    (ii)           as
soon as possible after the end of each week (but in any event within three (3)
Business Days after the end thereof), on a weekly basis or more frequently as
Agent may request, a Borrowing Base Certificate with respect to each of the
Ideal Borrowing Group, K&M and Canadian Borrower, setting forth the
calculation of the Borrowing Base with respect to each such Borrower as of the
last Business Day of the immediately preceding period, duly completed and
executed by the chief executive officer, chief financial officer, vice president
of finance, controller or other financial or senior officer of each such
Borrower, together with all schedules (including schedules of sales made,
credits issues and cash received) required pursuant to the terms of each
Borrowing Base Certificate duly completed;

     

    (iii)           as
soon as possible after the end of each month (but in any event within thirty
(30) days after the end thereof), on a monthly basis or more frequently as Agent
may request, (A) a perpetual Inventory report, (B) an Inventory report (1) for
Inventory being stored at the premises of third parties and (2) for Inventory
transferred by the Ideal Borrowing Group to the Belgian Tape Division, (C) an
Inventory report, by licensor, for Inventory that is subject to a license
agreement with such licensor, (D) agings of accounts receivable (together with a
reconciliation to the previous month’s aging and general ledger), (E) a schedule
of Belgian Tape Division Factored Accounts, (F) agings of accounts payable (and
including information indicating the amounts owing to owners and lessors of
leased premises, warehouses and other third parties from time to time in
possession of any Collateral), and (G) a certificate in form and substance
reasonably satisfactory to Agent identifying the Eligible In-Transit Inventory
and Eligible L/C Inventory as of the close of business of the immediately
preceding period, duly completed and executed by the chief executive officer,
chief financial officer, vice president of finance, controller or other
financial or senior officer of K&M (or Administrative Borrower on behalf of
K&M);

     

    (iv)           upon
Agent’s request, (A) copies of customer statements, purchase orders, sales
invoices, credit memos, remittance advices and reports, and copies of deposit
slips and bank statements, (B) copies of shipping and delivery documents, and
(C) copies of purchase orders, invoices and shipping and delivery documents for
Inventory and Equipment acquired by any Borrower or Guarantor, including copies
of all packing slips, invoices and bills of lading with respect to all Eligible
In-Transit Inventory and Eligible L/C Inventory; and

     

    (v)           such
other reports as to the Collateral (including, without limitation, a schedule of
Far East Factored Accounts) as Agent shall request from time to
time.

     

    
      
         

      

      
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    (b)           If
any Borrower’s or Guarantor’s records or reports of the Collateral are prepared
or maintained by an accounting service, contractor, shipper or other agent, such
Borrower and Guarantor hereby irrevocably authorizes such service, contractor,
shipper or agent to deliver such records, reports, and related documents to
Agent and to follow Agent’s instructions with respect to further services at any
time that an Event of Default exists or has occurred and is
continuing.

     

    (c)           All
of the documents, reports and schedules provided by or on behalf of any Borrower
or Guarantor to Agent hereunder for Receivables payable in any currency other
than US Dollars and Inventory located outside the United States of America shall
set forth the US Dollar Equivalent for the amount of the Receivables and Value
of the Equipment included in any such documents, reports or
schedules.  For purposes hereof, Agent may, at its option, provide to
Administrative Borrower, at least five (5) days prior to the date any such
documents, reports or schedules are required to be provided by Borrowers or
Guarantors to Agent hereunder, the exchange rates required to set forth the US
Dollar Equivalent in such documents, reports and schedules and in the event
Agent does not do so, Borrowers shall use such rates of exchange with respect to
the applicable currencies as Borrowers and Guarantors use for such purpose in
the ordinary course of business consistent with current practices as of the date
hereof and shall identify such rates of exchange in any such documents, reports
and schedules.

     

    7.2           Accounts
Covenants.

     

    (a)           Borrowers
shall notify Agent promptly of: (i) any material delay in any Borrower’s
performance of any of its material obligations to any account debtor or the
assertion of any material claims, offsets, defenses or counterclaims by any
account debtor, or any material disputes with account debtors, or any
settlement, adjustment or compromise thereof, (ii) all material adverse
information known to any Borrower or Guarantor relating to the financial
condition of any account debtor, and (iii) any event or circumstance which, in
each case, to the best of any Borrower’s or Guarantor’s knowledge, would cause
Agent to consider any then existing Accounts as no longer constituting Eligible
Accounts.  No credit, discount, allowance or extension or agreement
for any of the foregoing shall be granted to any account debtor without Agent’s
consent, except (A) in the ordinary course of a Borrower’s or Guarantor’s
business in accordance with practices and policies previously disclosed in
writing to Agent, (B) with respect to the Faunus Factored Accounts and (C) as
set forth in the schedules delivered to Agent pursuant to Section 7.1(a)
above.  So long as no Event of Default exists or has occurred and is
continuing, Borrowers and Guarantors shall settle, adjust or compromise any
claim, offset, counterclaim or dispute with any account debtor.  At
any time that an Event of Default exists or has occurred and is continuing,
Agent shall, at its option, have the exclusive right to settle, adjust or
compromise any claim, offset, counterclaim or dispute with account debtors or
grant any credits, discounts or allowances, except with respect to the Faunus
Factored Accounts.

     

    (b)           With
respect to each Account:  (i) the amounts shown on any invoice
delivered to Agent or schedule thereof delivered to Agent shall be true and
complete, (ii) except with respect to the Faunus Factored Accounts, no payments
shall be made thereon except payments immediately delivered to Agent pursuant to
the terms of this Agreement, (iii) no credit, discount, allowance or extension
or agreement for any of the foregoing shall be granted to any account debtor
except as reported to Agent in accordance with this Agreement and except for
credits, discounts,

     

    
      
         

      

      
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    allowances
or extensions made or given in the ordinary course of each Borrower’s business
in accordance with practices and policies previously disclosed to Agent, (iv)
there shall be no setoffs, deductions, contras, defenses, counterclaims or
disputes existing or asserted with respect thereto except as reported to Agent
in accordance with the terms of this Agreement, (v) none of the transactions
giving rise thereto will violate any applicable foreign, Federal, State or local
laws or regulations, all documentation relating thereto will be legally
sufficient under such laws and regulations and all such documentation will be
legally enforceable in accordance with its terms.

     

    (c)           Agent
shall have the right at any time or times, in Agent’s name or in the name of a
nominee of Agent, to verify the validity, amount or any other matter relating to
any Receivables or other Collateral, by mail, telephone, facsimile transmission
or otherwise.

     

    7.3           Inventory
Covenants.  With
respect to the Inventory: (a) each
Borrower and Guarantor shall at all times maintain inventory records reasonably
satisfactory to Agent, keeping correct and accurate records itemizing and
describing the kind, type, quality and quantity of Inventory, such Borrower’s or
Guarantor’s cost therefor and daily withdrawals therefrom and additions thereto;
(b) Borrowers and Guarantors shall conduct
a physical count of the Inventory at least once each year but at any time or
times as Agent may request on or after an Event of Default, and promptly
following such physical inventory shall supply Agent with a report in the form
and with such specificity as may be satisfactory to Agent concerning such
physical count; (c) Borrowers and
Guarantors shall not remove any Inventory from the locations set forth or
permitted herein, without the prior written consent of Agent, except for sales
of Inventory in the ordinary course of its business and except to move Inventory
directly from one location set forth or permitted herein to another such
location and except for Inventory shipped from the manufacturer thereof to such
Borrower or Guarantor which is in transit to the locations set forth or
permitted herein; (d) upon Agent’s request,
Borrowers shall, at their expense, no more than two (2) times in any twelve (12)
month period, but at any time or times as Agent may request on or after an Event
of Default, deliver or cause to be delivered to Agent written appraisals as to
the Inventory in form, scope and methodology acceptable to Agent and by an
appraiser acceptable to Agent, addressed to Agent and Lenders and upon which
Agent and Lenders are expressly permitted to rely; (e) Borrowers and Guarantors shall produce, use,
store and maintain the Inventory with all reasonable care and caution and in
accordance with applicable standards of any insurance and in conformity with
applicable laws (including the requirements of the Federal Fair Labor Standards
Act of 1938, as amended and all rules, regulations and orders related thereto);
(f) none of the Inventory or other
Collateral constitutes farm products or the proceeds thereof; (g) each Borrower and Guarantor assumes all
responsibility and liability arising from or relating to the production, use,
sale or other disposition of the Inventory; (h) Borrowers and Guarantors shall not sell
Inventory to any customer on approval, or any other basis which entitles the
customer to return or may obligate any Borrower or Guarantor to repurchase such
Inventory; (i) Borrowers and Guarantors
shall keep the Inventory in good and marketable condition; and (j) Borrowers and Guarantors shall not, without
prior written notice to Agent or the specific identification of such Inventory
in a report with respect thereto provided by Administrative Borrower to Agent
pursuant to Section 7.1(a) hereof, acquire or accept any Inventory on
consignment or approval.

     

    
      
         

      

      
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    7.4           Equipment and Real Property
Covenants.  With respect to the Equipment and Real
Property:  (a) upon Agent’s
request, Borrowers and Guarantors shall, at their expense, no more than one (1)
time in any twelve (12) month period, but at any time or times as Agent may
request on or after an Event of Default, deliver or cause to be delivered to
Agent written appraisals as to the Equipment and/or the Real Property in form,
scope and methodology acceptable to Agent and by an appraiser acceptable to
Agent, addressed to Agent and upon which Agent is expressly permitted to rely;
(b) Borrowers and Guarantors shall keep the
Equipment in good order, repair, running and marketable condition (ordinary wear
and tear excepted); (c) Borrowers and
Guarantors shall use the Equipment and Real Property with all reasonable care
and caution and in accordance with applicable standards of any insurance and in
conformity with all applicable laws; (d)
the Equipment is and shall be used in the business of Borrowers and Guarantors
and not for personal, family, household or farming use; (e) Borrowers and Guarantors shall not remove any
Equipment from the locations set forth or permitted herein, except to the extent
necessary to have any Equipment repaired or maintained in the ordinary course of
its business or to move Equipment directly from one location set forth or
permitted herein to another such location and except for the movement of motor
vehicles used by or for the benefit of such Borrower or Guarantor in the
ordinary course of business; (f) the
Equipment is now and shall remain personal property and Borrowers and Guarantors
shall not permit any of the Equipment to be or become a part of or affixed to
real property; and (g) each Borrower and
Guarantor assumes all responsibility and liability arising from the use of the
Equipment and Real Property.

     

    7.5           Power of
Attorney.  Each
Borrower and Guarantor hereby irrevocably designates and appoints Agent (and all
persons designated by Agent) as such Borrower’s and Guarantor’s true and lawful
attorney-in-fact, and authorizes Agent, in such Borrower’s, Guarantor’s or
Agent’s name, to: (a) at any time an Event
of Default exists or has occurred and is continuing (i) demand payment on Receivables or other
Collateral, (ii) enforce payment of
Receivables by legal proceedings or otherwise, (iii) exercise all of such Borrower’s or
Guarantor’s rights and remedies to collect any Receivable or other Collateral,
(iv) sell or assign any Receivable upon
such terms, for such amount and at such time or times as the Agent deems
advisable, (v) settle, adjust, compromise,
extend or renew an Account, (vi) discharge
and release any Receivable, (vii) prepare,
file and sign such Borrower’s or Guarantor’s name on any proof of claim in
bankruptcy or other similar document against an account debtor or other obligor
in respect of any Receivables or other Collateral, (viii) notify the post office authorities to
change the address for delivery of remittances from account debtors or other
obligors in respect of Receivables or other proceeds of Collateral to an address
designated by Agent, and open and dispose of all mail addressed to such Borrower
or Guarantor and handle and store all mail relating to the Collateral; and (ix) do all acts and things which are necessary,
in Agent’s determination, to fulfill such Borrower’s or Guarantor’s obligations
under this Agreement and the other Financing Agreements and (b) at any time to (i) take control in any manner of any item of
payment in respect of Receivables or constituting Collateral or otherwise
received in or for deposit in the Blocked Accounts or otherwise received by
Agent or any Lender, (ii) have access to
any lockbox or postal box into which remittances from account debtors or other
obligors in respect of Receivables or other proceeds of Collateral are sent or
received, (iii) endorse such Borrower’s or
Guarantor’s name upon any items of payment in respect of Receivables or
constituting Collateral or otherwise received by Agent and any Lender and
deposit the same in Agent’s account for application to the Obligations, (iv) endorse such Borrower’s or Guarantor’s name
upon any chattel paper, document, instrument, invoice, or similar document or
agreement relating to any Receivable or any goods pertaining thereto or any
other Collateral, including any warehouse or other receipts, or
bills

     

    
      
         

      

      
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    of
lading and other negotiable or non-negotiable documents, (v) clear Inventory the purchase of which was
financed with a Letter of Credit through U.S. Customs or foreign export control
authorities in such Borrower’s or Guarantor’s name, Agent’s name or the name of
Agent’s designee, and to sign and deliver to customs officials powers of
attorney in such Borrower’s or Guarantor’s name for such purpose, and to
complete in such Borrower’s or Guarantor’s or Agent’s name, any order, sale or
transaction, obtain the necessary documents in connection therewith and collect
the proceeds thereof, and (vi) sign such
Borrower’s or Guarantor’s name on any verification of Receivables and notices
thereof to account debtors or any secondary obligors or other obligors in
respect thereof.  Each Borrower and Guarantor hereby releases Agent
and Lenders and their respective officers, employees and designees from any
liabilities arising from any act or acts under this power of attorney and in
furtherance thereof, whether of omission or commission, except as a result of
Agent’s or any Lender’s own gross negligence or willful misconduct as determined
pursuant to a final non-appealable order of a court of competent
jurisdiction.

     

    7.6           Right to Cure.  Agent
may, at its option, upon notice to Administrative Borrower, (a) cure any default by any Borrower or Guarantor
under any material agreement with a third party that affects the Collateral, its
value or the ability of Agent to collect, sell or otherwise dispose of the
Collateral or the rights and remedies of Agent or any Lender therein or the
ability of any Borrower or Guarantor to perform its obligations hereunder or
under any of the other Financing Agreements, (b) pay or bond on appeal any judgment entered
against any Borrower or Guarantor, (c)
discharge taxes, liens, security interests or other encumbrances at any time
levied on or existing with respect to the Collateral and (d) pay any amount, incur any expense or perform
any act which, in Agent’s judgment, is necessary or appropriate to preserve,
protect, insure or maintain the Collateral and the rights of Agent and Lenders
with respect thereto.  Agent may add any amounts so expended to the
Obligations and charge any Borrower’s account therefor, such amounts to be
repayable by Borrowers on demand.  Agent and Lenders shall be under no
obligation to effect such cure, payment or bonding and shall not, by doing so,
be deemed to have assumed any obligation or liability of any Borrower or
Guarantor.  Any payment made or other action taken by Agent or any
Lender under this Section shall be without prejudice to any right to assert an
Event of Default hereunder and to proceed accordingly.

     

    7.7           Access to
Premises.  From
time to time as requested by Agent, at the cost and expense of Borrowers,
(a) Agent or its designee shall have
complete access to all of each Borrower’s and Guarantor’s premises during normal
business hours and after reasonable notice to Administrative Borrower, or at any
time and without notice to Administrative Borrower if an Event of Default exists
or has occurred and is continuing, for the purposes of inspecting, verifying and
auditing the Collateral and all of each Borrower’s and Guarantor’s books and
records, including the Records, and (b)
each Borrower and Guarantor shall promptly furnish to Agent such copies of such
books and records or extracts therefrom as Agent may request, and Agent or any
Lender or Agent’s designee may use during normal business hours such of any
Borrower’s and Guarantor’s personnel, equipment, supplies and premises as may be
reasonably necessary for the foregoing and if an Event of Default exists or has
occurred and is continuing for the collection of Receivables and realization of
other Collateral.

     

    7.8           Bills of Lading and Other
Documents of Title.

     

    
      
         

      

      
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    (a)           On
and after the date hereof, K&M shall cause all bills of lading or other
documents of title relating to goods purchased by K&M which are outside the
United States of America and in transit to the premises of K&M or the
premises of a Freight Forwarder in the United States of America (i) to be issued
in a form so as to constitute negotiable documents as such term is defined in
the UCC and (ii) other than those relating to goods being purchased pursuant to
a Letter of Credit, to be issued either to the order of Agent or such other
person as the Agent may from time to time designate for such purpose as
consignee or Borrower as consignee, as Agent may specify.

     

    (b)           There
shall be no more than three (3) originals of any bills of lading and other
documents of title relating to goods being purchased by K&M which are
outside the United States of America and in transit to the premises of K&M
or the premises of a Freight Forwarder in the United States of
America.  As to any such bills of lading or other documents of title,
unless and until Agent shall direct otherwise, (i) two (2) originals of each of
such bill of lading or other document of title shall be delivered to such
Freight Forwarder as K&M may specify and that is party to a Collateral
Access Agreement and (ii) one (1) original of each such bill of lading or other
document of title shall be delivered to Agent.  To the extent that the
terms of this Section have not been satisfied as to any Inventory, such
Inventory shall not constitute Eligible Inventory, except as Agent may otherwise
agree.

     

    
      	
              SECTION
      8.

            	
              REPRESENTATIONS AND
      WARRANTIES

            

    

     

    Each
Borrower and Guarantor hereby represents and warrants to Agent, Lenders and
Issuing Bank the following (which shall survive the execution and delivery of
this Agreement), the truth and accuracy of which are a continuing condition of
the making of Loans and providing Letters of Credit to Borrowers:

     

    8.1           Existence, Power and
Authority.  Each
Borrower and Guarantor is a corporation or limited partnership duly organized
and in good standing under the laws of its jurisdiction of organization and is
duly qualified as a foreign corporation, as applicable, or extra provincial
corporation and in good standing in all states or other jurisdictions where the
nature and extent of the business transacted by it or the ownership of assets
makes such qualification necessary, except for those jurisdictions in which the
failure to so qualify would not have a Material Adverse Effect.  The
execution, delivery and performance of this Agreement, the other Financing
Agreements and the transactions contemplated hereunder and thereunder (a) are all within each Borrower’s and Guarantor’s
corporate or limited partnership powers, (b) have been duly authorized, (c) are not in contravention of law or the terms of
any Borrower’s or Guarantor’s certificate of incorporation, articles of
association, certificate of formation, limited liability agreement, limited
partnership agreement or other organizational documentation, or any indenture,
agreement or undertaking to which any Borrower or Guarantor is a party or by
which any Borrower or Guarantor or its property are bound and (d) will not result in the creation or imposition
of, or require or give rise to any obligation to grant, any lien, security
interest, charge or other encumbrance upon any property of any Borrower or
Guarantor, except pursuant to this Agreement and the other Financing
Agreements.  This Agreement and the other Financing Agreements to
which any Borrower or Guarantor is a party constitute legal, valid and binding
obligations of such Borrower and Guarantor enforceable in accordance with their
respective terms.

     

    8.2           Name; Jurisdiction of
Organization; Chief Executive Office; Collateral Locations.

     

    
      
         

      

      
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    (a)           The
exact legal name of each Borrower and Guarantor is as set forth on the signature
page of this Agreement and in the Information Certificate.  No
Borrower or Guarantor has, during the five years prior to the date of this
Agreement, been known by or used any other corporate or fictitious name or been
a party to any merger or consolidation, or acquired all or substantially all of
the assets of any Person, or acquired any of its property or assets out of the
ordinary course of business, except as set forth in the Information
Certificate.

     

    (b)           Each
Borrower and Guarantor is an organization of the type and organized in the
jurisdiction set forth in the Information Certificate.  The
Information Certificate accurately sets forth the organizational identification
number of each Borrower and Guarantor or accurately states that such Borrower or
Guarantor has none and accurately sets forth the federal employer identification
number and business identification number of each Borrower and
Guarantor.

     

    (c)           The
chief executive office and mailing address of each Borrower and Guarantor and
each Borrower’s and Guarantor’s Records concerning Accounts are located only at
the address identified as such in Schedule 8.2 to the Information Certificate
and its only other places of business and the only other locations of
Collateral, if any, are the addresses set forth in Schedule 8.2 to the
Information Certificate, subject to the rights of any Borrower or Guarantor to
establish new locations in accordance with Section 9.2 below.  The
Information Certificate correctly identifies any of such locations which are not
owned by a Borrower or Guarantor and sets forth the owners and/or operators
thereof.

     

    8.3           Financial Statements; No
Material Adverse Change.  All
financial statements relating to any Borrower or Guarantor which have been or
may hereafter be delivered by any Borrower or Guarantor to Agent and Lenders
have been prepared in accordance with GAAP (except as to any interim financial
statements, to the extent such statements are subject to normal year-end
adjustments and do not include any notes) and fairly present in all material
respects the financial condition and the results of operation of such Borrower
and Guarantor as at the dates and for the periods set forth
therein.  Except as disclosed in any interim financial statements
furnished by Borrowers and Guarantors to Agent prior to the date of this
Agreement, there has been no act, condition or event which has had or is
reasonably likely to have a Material Adverse Effect since the date of the most
recent audited financial statements of any Borrower or Guarantor furnished by
any Borrower or Guarantor to Agent prior to the date of this
Agreement.  The projections dated June 11, 2009 for the fiscal years
ending 2009 through 2011 that have been delivered to Agent or any projections
hereafter delivered to Agent have been prepared in light of the past operations
of the businesses of Borrowers and Guarantors and are based upon estimates and
assumptions stated therein, all of which Borrowers and Guarantors have
determined to be reasonable and fair in light of the then current conditions and
current facts and reflect the good faith and reasonable estimates of Borrowers
and Guarantors of the future financial performance of Parent and its
Subsidiaries and of the other information projected therein for the periods set
forth therein.

     

    8.4           Priority of Liens; Title to
Properties.  The
security interests, liens and hypothecs granted to Agent under this Agreement
and the other Financing Agreements constitute valid and perfected first priority
liens and security interests in and upon the Collateral subject only to the
liens indicated on Schedule 8.4 to the Information Certificate and the other
liens permitted under Section 9.8 hereof.  Each Borrower and Guarantor
has good and marketable fee simple title to or valid leasehold interests in all
of its Real Property and good, valid and merchantable title to all of its other
properties and assets subject to no liens, mortgages, pledges, security
interests, encumbrances or charges of any kind, except those granted to Agent
and such others as are specifically listed on Schedule 8.4 to the Information
Certificate or permitted under Section 9.8 hereof.

     

    
      
         

      

      
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    8.5           Tax Returns.  Each
Borrower and Guarantor has filed, or caused to be filed, in a timely manner all
federal and other material tax returns, reports and declarations which are
required to be filed by it.  All information in such tax returns,
reports and declarations is complete and accurate in all material
respects.  Each Borrower and Guarantor has paid all federal and other
material taxes due and payable or claimed due and payable in any assessment
received by it, except taxes the validity of which are being contested in good
faith by appropriate proceedings diligently pursued and available to such
Borrower or Guarantor and with respect to which adequate reserves have been set
aside on its books.  Adequate provision has been made for the payment
of all accrued and unpaid Federal, State, county, local, foreign and other taxes
whether or not yet due and payable and whether or not disputed.

     

    8.6           Litigation.  Except
as set forth on Schedule 8.6 to the Information Certificate, (a) there is no
investigation by any Governmental Authority pending, or to the best of any
Borrower’s or Guarantor’s knowledge threatened, against or affecting any
Borrower or Guarantor, its or their assets or business and (b) there is no action,
suit, proceeding or claim by any Person pending, or to the best of any
Borrower’s or Guarantor’s knowledge threatened, against any Borrower or
Guarantor or its or their assets or goodwill, or against or affecting any
transactions contemplated by this Agreement, in each case, which if adversely
determined against such Borrower or Guarantor has or could reasonably be
expected to have a Material Adverse Effect.

     

    8.7           Compliance with Other
Agreements and Applicable Laws.

     

    (a)           Borrowers
and Guarantors are not in default in any respect under, or in violation in any
respect of the terms of, any Material Contract and Borrowers and Guarantors are
in compliance with the requirements of all applicable laws, rules, regulations
and orders of any Governmental Authority relating to their respective
businesses, including, without limitation, those set forth in or promulgated
pursuant to the Occupational Safety and Health Act of 1970, as amended, the Fair
Labor Standards Act of 1938, as amended, ERISA, the Code, as amended, and the
rules and regulations thereunder, and all Environmental Laws, in each case,
where the failure to comply has or could reasonably be expected to have a
Material Adverse Effect.

     

    (b)           Borrowers
and Guarantors have obtained all material permits, licenses, approvals,
consents, certificates, orders or authorizations of any Governmental Authority
required for the lawful conduct of its business (the “Permits”); except, that, as to Permits
required under Environmental Laws, such Permits have been obtained in accordance
with Section 8.8(d) hereof and except where the failure to have such Permit has
or could reasonably be expected to have a Material Adverse
Effect.  Except as set forth on Schedule 8.7 to the Information
Certificate, all of the Permits are valid and subsisting and in full force and
effect.  There are no actions, claims or proceedings pending or to the
best of any Borrower’s or Guarantor’s knowledge, threatened that seek the
revocation, cancellation, suspension or modification of any of the Permits where
any such action has or could reasonably be expected to have a Material Adverse
Effect.

     

    
      
         

      

      
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    8.8           Environmental
Compliance.

     

    (a)           Except
as set forth on Schedule 8.8 to the Information Certificate, Borrowers,
Guarantors and any Subsidiary of any Borrower or Guarantor have not generated,
used, stored, treated, transported, manufactured, handled, produced or disposed
of any Hazardous Materials, on or off its premises (whether or not owned by it)
in any manner which at any time violates in any material respect any applicable
Environmental Law or Permit, and the operations of Borrowers, Guarantors and any
Subsidiary of any Borrower or Guarantor complies in all material respects with
all Environmental Laws and all Permits, in each case above, where any such
violation or failure has or could reasonably be expected to have a Material
Adverse Effect.

     

    (b)           Except
as set forth on Schedule 8.8 to the Information Certificate, there has been no
investigation by any Governmental Authority or any proceeding, complaint, order,
directive, claim, citation or notice by any Governmental Authority or any other
person nor is any pending or to the best of any Borrower’s or Guarantor’s
knowledge threatened, with respect to any non compliance with or violation of
the requirements of any Environmental Law by any Borrower or Guarantor and any
Subsidiary of any Borrower or Guarantor or the release, spill or discharge,
threatened or actual, of any Hazardous Material or the generation, use, storage,
treatment, transportation, manufacture, handling, production or disposal of any
Hazardous Materials or any other environmental, health or safety matter, which
has or could reasonably be expected to have a Material Adverse
Effect.

     

    (c)           Except
as set forth on Schedule 8.8 to the Information Certificate, Borrowers,
Guarantors and their Subsidiaries have no material liability (contingent or
otherwise) in connection with a release, spill or discharge, threatened or
actual, of any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials, which has or could reasonably be expected to have a Material Adverse
Effect.

     

    (d)           Except
as set forth on Schedule 8.8 to the Information Certificate, Borrowers,
Guarantors and their Subsidiaries have all Permits required to be obtained or
filed in connection with the operations of Borrowers and Guarantors under any
Environmental Law and all of such licenses, certificates, approvals or similar
authorizations and other Permits are valid and in full force and effect, in each
case above, where the failure to have any of the same has or could reasonably be
expected to have a Material Adverse Effect.

     

    8.9           Employee
Benefits.

     

    (a)           Except
as could not reasonably be expected to have a Material Adverse
Effect:  (i) each Plan is in compliance in all material respects with
the applicable provisions of ERISA, the Code and other Federal or State law;
(ii) each Plan which is intended to qualify under Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue Service and
to the best of any Borrower’s or Guarantor’s knowledge, nothing has occurred
which would reasonably be expected to cause the loss of such qualification; and
(iii) each Borrower and its ERISA Affiliates have made all required
contributions to any Plan subject to Section 412 of the Code, and no application
for a funding waiver or an extension of any amortization period pursuant to
Section 412 of the Code has been made with respect to any Plan.

     

    
      
         

      

      
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    (b)           Except
as could not reasonably be expected to have a Material Adverse
Effect:  (i) there are no pending, or to the best of any Borrower’s or
Guarantor’s knowledge, threatened claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Plan; and (ii) there has been no
prohibited transaction or violation of the fiduciary responsibility rules with
respect to any Plan.

     

    (c)           Except
as could not reasonably be expected to have a Material Adverse
Effect:  (i) no ERISA Event has occurred or is reasonably expected to
occur; (ii) based on the latest valuation of each Pension Plan and on the
actuarial methods and assumptions employed for such valuation (determined in
accordance with the assumptions used for funding such Pension Plan pursuant to
Section 412 of the Code), the aggregate current value of accumulated benefit
liabilities of such Pension Plan under Section 4001(a)(16) of ERISA does not
exceed the aggregate current value of the assets of such Pension Plan; (iii)
each Borrower and Guarantor, and their ERISA Affiliates, have not incurred and
do not reasonably expect to incur, any liability under Title IV of ERISA with
respect to any Plan (other than premiums due and not delinquent under Section
4007 of ERISA); (iv) each Borrower and Guarantor, and their ERISA Affiliates,
have not incurred and do not reasonably expect to incur, any liability (and no
event has occurred which, with the giving of notice under Section 4219 of ERISA,
would result in such liability) under Section 4201 or 4243 of ERISA with respect
to a Multiemployer Plan; and (v) each Borrower and Guarantor, and their ERISA
Affiliates, have not engaged in a transaction that would be subject to Section
4069 or 4212(c) of ERISA.

     

    (d)           With
respect to any Canadian Pension Plan, to the best of the knowledge of each
Borrower and Guarantor, except as could not reasonably be expected to have a
Material Adverse Effect, (i) the Canadian Pension Plans are duly registered
under all applicable Federal and Provincial pension benefits legislation, (ii)
all statutory obligations of any Borrower or Guarantor required to be performed
in connection with the Canadian Pension Plans or the funding agreements therefor
have been performed in a timely fashion and there are no outstanding disputes
concerning the assets held pursuant to any such funding agreement, (iii) all
contributions or premiums required to be made by any Borrower or Guarantor to
the Canadian Pension Plans have been made in a timely fashion in accordance with
the terms of the Canadian Pension Plans and applicable laws and regulations,
(iv) all employee contributions to the Canadian Pension Plans required to be
made by way of authorized payroll deduction have been properly withheld by any
Borrower or Guarantor and fully paid into the Canadian Pension Plans in a timely
fashion, (v) all reports and disclosures relating to the Canadian Pension Plans
required by any applicable laws or regulations have been filed or distributed in
a timely fashion, (vi) no amount is owing by any of the Canadian Pension Plans
under the Income Tax Act (Canada) or any provincial taxation statute, (vii) the
Canadian Pension Plans are funded to the extent required by applicable law both
on an ongoing basis and on a solvency basis (using actuarial assumptions and
methods which are consistent with the valuations last filed with the applicable
governmental authorities and which are consistent with generally accepted
actuarial principles), and (viii) none of the Canadian Pension Plans is the
subject of an investigation, proceeding, action or claim and there exists no
state of facts which after notice or lapse of time or both could reasonably be
expected to give rise to any such proceeding, action or claim.

     

    8.10           Bank Accounts.  All of
the deposit accounts, investment accounts or other accounts in the name of or
used by any Borrower or Guarantor maintained at any bank or other financial
institution are set forth on Schedule 8.10 to the Information Certificate,
subject to the right of each Borrower and Guarantor to establish new accounts in
accordance with Section 5.2 hereof.

     

    
      
         

      

      
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    8.11           Intellectual
Property. Each Borrower and
Guarantor owns or licenses or otherwise has the right to use all Intellectual
Property necessary for the operation of its business as presently conducted or
proposed to be conducted.  As of the date hereof, Borrowers and
Guarantors do not have any Intellectual Property registered, or subject to
pending applications, in the United States Patent and Trademark Office or any
similar office or agency in the United States, any State thereof, any political
subdivision thereof or in any other country, other than those described in
Schedule 8.11 to the Information Certificate and has not granted any licenses
with respect thereto other than as set forth in Schedule 8.11 to the Information
Certificate.  To the best of any Borrower’s and Guarantor’s knowledge,
no event has occurred which permits or would permit after notice or passage of
time or both, the revocation, suspension or termination of such
rights.  To the best of any Borrower’s and Guarantor’s knowledge, no
slogan or other advertising device, product, process, method, substance or other
Intellectual Property or goods bearing or using any Intellectual Property
presently contemplated to be sold by or employed by any Borrower or Guarantor
infringes any patent, trademark, servicemark, trade name, copyright, license or
other Intellectual Property owned by any other Person presently and no claim or
litigation is pending or threatened against or affecting any Borrower or
Guarantor contesting its right to sell or use any such Intellectual
Property.  Schedule 8.11 to the Information Certificate sets forth all
of the agreements or other arrangements of each Borrower and Guarantor pursuant
to which such Borrower or Guarantor has a license or other right to use any
trademarks, logos, designs, representations or other Intellectual Property owned
by another person as in effect on the date hereof and the dates of the
expiration of such agreements or other arrangements of such Borrower or
Guarantor as in effect on the date hereof (collectively, together with such
agreements or other arrangements as may be entered into by any Borrower or
Guarantor after the date hereof, collectively, the “License Agreements” and
individually, a “License Agreement”).  No trademark, servicemark,
copyright or other Intellectual Property at any time used by any Borrower or
Guarantor which is owned by another person, or owned by such Borrower or
Guarantor subject to any security interest, lien, collateral assignment, pledge
or other encumbrance in favor of any person other than Agent, is affixed to any
Eligible Inventory, except (a) to the
extent permitted under the term of the license agreements listed on Schedule
8.11 to the Information Certificate and (b)
to the extent the sale of Inventory to which such Intellectual Property is
affixed is permitted to be sold by such Borrower or Guarantor under applicable
law (including the United States Copyright Act of 1976).

     

    8.12           Subsidiaries; Affiliates;
Capitalization; Solvency.

     

    (a)           Each
Borrower and Guarantor does not have any direct or indirect Subsidiaries or
Affiliates and is not engaged in any joint venture or partnership except as set
forth in Schedule 8.12 to the Information Certificate.

     

    (b)           Each
Borrower and Guarantor is the record and beneficial owner of all of the issued
and outstanding shares of Capital Stock of each of the Subsidiaries listed on
Schedule 8.12 to the Information Certificate as being owned by such Borrower or
Guarantor and there are no proxies, irrevocable or otherwise, with respect to
such shares and no equity securities of any of the Subsidiaries are or may
become required to be issued by reason of any options, warrants, rights to
subscribe to, calls or commitments of any kind or nature and there are no
contracts, commitments, understandings or arrangements by which any Subsidiary
is or may become bound to issue additional shares of it Capital Stock or
securities convertible into or exchangeable for such shares.

     

    
      
         

      

      
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    (c)           The
issued and outstanding shares of Capital Stock of each Borrower and Guarantor
are directly and beneficially owned and held by the persons indicated in the
Information Certificate, and in each case all of such shares have been duly
authorized and are fully paid and non-assessable, free and clear of all claims,
liens, pledges and encumbrances of any kind, except as disclosed in writing to
Agent prior to the date hereof.

     

    (d)           Each
Borrower and Guarantor is Solvent and will continue to be Solvent after the
creation of the Obligations, the security interests of Agent and the other
transaction contemplated hereunder.

     

    8.13           Labor
Disputes.

     

    (a)           Set
forth on Schedule 8.13 to the Information Certificate is a list (including dates
of termination) of all collective bargaining or similar agreements between or
applicable to each Borrower and Guarantor and any union, labor organization or
other bargaining agent in respect of the employees of any Borrower or Guarantor
on the date hereof.

     

    (b)           Except
as could not reasonably be expected to have a Material Adverse Effect, there is
(i) no unfair labor practice complaint pending against any Borrower or Guarantor
or, to the best of any Borrower’s or Guarantor’s knowledge, threatened against
it, before the National Labor Relations Board, and no grievance or significant
arbitration proceeding arising out of or under any collective bargaining
agreement is pending on the date hereof against any Borrower or Guarantor or, to
best of any Borrower’s or Guarantor’s knowledge, threatened against it, and (ii)
no strike, labor dispute, slowdown or stoppage is pending against any Borrower
or Guarantor or, to the best of any Borrower’s or Guarantor’s knowledge,
threatened against any Borrower or Guarantor.

     

    8.14           Restrictions on
Subsidiaries.  Except
for restrictions contained in this Agreement or in any other agreement with
respect to Indebtedness of any Borrower or Guarantor permitted hereunder as in
effect on the date hereof, there are no contractual or consensual restrictions
on any Borrower or Guarantor or any of its Subsidiaries which prohibit or
otherwise restrict (a) the transfer of cash
or other assets (i) between any Borrower or
Guarantor and any of its or their Subsidiaries or (ii) between any Subsidiaries of any Borrower or
Guarantor or (b) the ability of any
Borrower or Guarantor or any of its or their Subsidiaries to incur Indebtedness
or grant security interests to Agent or any Lender in the
Collateral.

     

    8.15           Material
Contracts.  Schedule
8.15 to the Information Certificate sets forth all Material Contracts to which
any Borrower or Guarantor is a party or is bound as of the date
hereof.  Borrowers and Guarantors have delivered true, correct and
complete copies of such Material Contracts to Agent on or before the date
hereof.  Borrowers and Guarantors are not in breach or in default in
any material respect of or under any Material Contract and have not received any
notice of the intention of any other party thereto to terminate any Material
Contract.

     

    8.16           Payable
Practices.  Each
Borrower and Guarantor have not made any material change in the historical
accounts payable practices from those in effect immediately prior to the date
hereof.

     

    8.17           Accuracy and Completeness of
Information.  All
information furnished by or on behalf of any Borrower or Guarantor in writing to
Agent or any Lender in connection with this Agreement or any of the other
Financing Agreements or any transaction contemplated hereby or thereby,
including all information on the Information Certificate is true and correct in
all material respects on the date as of which such information is dated or
certified and does not omit any material fact necessary in order to make such
information not misleading.  No event or circumstance has occurred
which has had or could reasonably be expected to have a Material Adverse Affect,
which has not been fully and accurately disclosed to Agent in writing prior to
the date hereof.

     

    
      
         

      

      
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    8.18           Survival of Warranties;
Cumulative.  All
representations and warranties contained in this Agreement or any of the other
Financing Agreements shall survive the execution and delivery of this Agreement
and shall be deemed to have been made again to Agent and Lenders on the date of
each additional borrowing or other credit accommodation hereunder and shall be
conclusively presumed to have been relied on by Agent and Lenders regardless of
any investigation made or information possessed by Agent or any
Lender.  The representations and warranties set forth herein shall be
cumulative and in addition to any other representations or warranties which any
Borrower or Guarantor shall now or hereafter give, or cause to be given, to
Agent or any Lender.

     

    
      	
              SECTION
      9. 

            	
              AFFIRMATIVE AND
      NEGATIVE COVENANTS

            

    

     

    9.1           Maintenance of
Existence.

     

    (a)           Each
Borrower and Guarantor shall at all times preserve, renew and keep in full force
and effect its corporate or limited liability company or limited partnership
existence and rights and franchises with respect thereto and maintain in full
force and effect all licenses, trademarks, trade names, approvals,
authorizations, leases, contracts and Permits necessary to carry on the business
as presently or proposed to be conducted, except as to any Guarantor other than
Parent as permitted in Section 9.7 hereto and except where the failure to so
maintain could not reasonably be expected to have a Material Adverse
Effect.

     

    (b)           No
Borrower or Guarantor shall change its name unless each of the following
conditions is satisfied: (i) Agent shall have received not less than ten (10)
days prior written notice from Administrative Borrower of such proposed change
in its corporate name, which notice shall accurately set forth the new name; and
(ii) Agent shall have received a copy of the amendment to the certificate of
incorporation, articles of association, certificate of formation, limited
liability agreement, limited partnership agreement or other organizational
documents of such Borrower or Guarantor providing for the name change certified
by the Secretary of State of the jurisdiction of incorporation or organization
of such Borrower or Guarantor as soon as it is available.

     

    (c)           No
Borrower or Guarantor shall change its chief executive office or its mailing
address or organizational identification number (or if it does not have one,
shall not acquire one) unless Agent shall have received not less than ten (10)
days’ prior written notice from Administrative Borrower of such proposed change,
which notice shall set forth such information with respect thereto as Agent may
require and Agent shall have received such agreements as Agent may reasonably
require in connection therewith.  No Borrower or Guarantor shall
change its type of organization, jurisdiction of organization or other legal
structure.

     

    9.2           New Collateral
Locations.  Each
Borrower and Guarantor may only open any new location within the continental
United States provided such Borrower or Guarantor (a) gives Agent ten (10) days prior written notice
of the intended opening of any such new location and (b) executes and delivers, or causes to be executed
and delivered, to Agent such agreements, documents, and instruments as Agent may
deem reasonably necessary or desirable to protect its interests in the
Collateral at such location.

     

    
      
         

      

      
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    9.3           Compliance with Laws,
Regulations, Etc.

     

    (a)           Each
Borrower and Guarantor shall, and shall cause any Subsidiary to, at all times,
comply in all material respects with all laws, rules, regulations, licenses,
approvals, orders and other Permits applicable to it and duly observe all
requirements of any foreign, Federal, State, Provincial or local Governmental
Authority, except where the failure to so comply has or could reasonably be
expected to have a Material Adverse Effect.

     

    (b)           Borrowers
and Guarantors shall give written notice to Agent immediately upon any
Borrower’s or Guarantor’s receipt of any notice of, or any Borrower’s or
Guarantor’s otherwise obtaining knowledge of, (i) the occurrence of any event
involving the release, spill or discharge, threatened or actual, of a material
amount of any Hazardous Material that has or could reasonably be expected to
have a Material Adverse Effect or (ii) any investigation, proceeding, complaint,
order, directive, claims, citation or written notice with respect to any of the
following that has or could reasonably be expected to have a Material Adverse
Effect: (A) any non-compliance with or violation of any Environmental Law by any
Borrower or Guarantor or (B) the release, spill or discharge, threatened or
actual, of any Hazardous Material other than in the ordinary course of business
and other than as permitted under any applicable Environmental
Law.  When such notice is required, copies of all environmental
surveys, audits, assessments, feasibility studies and results of remedial
investigations shall be promptly furnished, or caused to be furnished, by such
Borrower or Guarantor to Agent.  Each Borrower and Guarantor shall
take prompt action to respond to any non-compliance with any of the
Environmental Laws that has or could reasonably be expected to have a Material
Adverse Effect and shall report to Agent on any such response.

     

    (c)           Without
limiting the generality of the foregoing, whenever Agent reasonably determines
that there is non-compliance that has or could reasonably be expected to have a
Material Adverse Effect or any condition which requires any action by or on
behalf of any Borrower or Guarantor in order to avoid any non-compliance that
has or could reasonably be expected to have a Material Adverse Effect with any
Environmental Law, Borrowers shall, at Agent’s request and Borrowers’
expense:  (i) cause an independent environmental engineer reasonably
acceptable to Agent to conduct such tests or other appropriate review of the
site where non-compliance or alleged non compliance with such Environmental Laws
has occurred as to such non-compliance and prepare and deliver to Agent a report
as to such non-compliance setting forth the results of such tests or review, a
proposed plan for responding to any environmental problems described therein,
and an estimate of the costs thereof and (ii) provide to Agent a supplemental
report of such engineer whenever the scope of such non-compliance, or such
Borrower’s or Guarantor’s response thereto or the estimated costs thereof, shall
change in any material respect.

     

    (d)           Each
Borrower and Guarantor shall indemnify and hold harmless Agent and Lenders and
their respective directors, officers, employees, agents, invitees,
representatives, successors and assigns, from and against any and all losses,
claims, damages, liabilities, costs, and expenses (including reasonable
attorneys’ fees and expenses) directly or indirectly arising out of or
attributable to the use, generation, manufacture, reproduction, storage,
release, spill, discharge, disposal or presence of a Hazardous Material,
including the costs of any required or necessary repair, cleanup or other
remedial work with respect to any property of any Borrower or Guarantor and the
preparation and implementation of any closure, remedial or other required
plans.  All representations, warranties, covenants and
indemnifications in this Section 9.3 shall survive the payment of the
Obligations and the termination of this Agreement.

     

    
      
         

      

      
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    9.4           Payment of Taxes and
Claims.  Each
Borrower and Guarantor shall, and shall cause any Subsidiary to, duly pay and
discharge all federal and other material taxes, assessments, contributions and
governmental charges upon or against it or its properties or assets, except for
taxes the validity of which are being contested in good faith by appropriate
proceedings diligently pursued and available to such Borrower, Guarantor or
Subsidiary, as the case may be, and with respect to which adequate reserves have
been set aside on its books.  Subject to Section 6.5 hereof, each
Borrower and Guarantor shall be liable for any Taxes or Other Taxes imposed on
Agent or any Lender as a result of the financing arrangements provided for
herein and each Borrower and Guarantor agrees to indemnify and hold Agent
harmless with respect to the foregoing, and to repay to Agent, for the benefit
of Lenders, on demand the amount thereof, and until paid by such Borrower or
Guarantor such amount shall be added and deemed part of the Loans; provided,
that, nothing contained herein shall be construed to require any Borrower or
Guarantor to pay any income or franchise taxes attributable to the income of
Lenders from any amounts charged or paid hereunder to Lenders.  The
foregoing indemnity shall survive the payment of the Obligations and the
termination of this Agreement to the extent required by GAAP.

     

    9.5           Insurance.  Each
Borrower and Guarantor shall, and shall cause any Subsidiary to, at all times,
maintain with financially sound and reputable insurers insurance with respect to
the Collateral against loss or damage and all other insurance of the kinds and
in the amounts customarily insured against or carried by corporations of
established reputation engaged in the same or similar businesses and similarly
situated.  Said policies of insurance shall be reasonably satisfactory
to Agent as to form, amount and insurer.  Borrowers and Guarantors
shall furnish certificates, policies or endorsements to Agent as Agent shall
reasonably require as proof of such insurance, and, if any Borrower or Guarantor
fails to do so, Agent is authorized, but not required, to obtain such insurance
at the expense of Borrowers.  Except as Agent may otherwise agree (it
being acknowledged that the insurance certificates delivered to Agent on the
date hereof are in form and substance satisfactory to Agent), all policies shall
provide for at least thirty (30) days prior written notice to Agent of any
cancellation or reduction of coverage and that Agent may act as attorney for
each Borrower and Guarantor in obtaining, and at any time an Event of Default
exists or has occurred and is continuing, adjusting, settling, amending and
canceling such insurance.  Borrowers and Guarantors shall cause Agent
to be named as a loss payee and an additional insured (but without any liability
for any premiums) under such insurance policies and Borrowers and Guarantors
shall obtain non-contributory lender’s loss payable endorsements to all
insurance policies in form and substance satisfactory to Agent.  Such
lender’s loss payable endorsements shall specify that the proceeds of such
insurance shall be payable to Agent as its interests may appear and further
specify that Agent and Lenders shall be paid regardless of any act or omission
by any Borrower, Guarantor or any of its or their Affiliates. Without limiting
any other rights of Agent or Lenders, any insurance proceeds received by Agent
at any time may be applied to payment of the Obligations, whether or not then
due, in any order and in such manner as Agent may determine.  Upon
application of such proceeds to the Revolving Loans, Revolving Loans may be
available subject and pursuant to the terms hereof to be used for the costs of
repair or replacement of the Collateral lost or damages resulting in the payment
of such insurance proceeds.

     

    
      
         

      

      
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    9.6           Financial Statements and
Other Information.

     

    (a)           Each
Borrower and Guarantor shall, and shall cause any Subsidiary to, keep proper
books and records in which true and complete entries shall be made of all
dealings or transactions of or in relation to the Collateral and the business of
such Borrower, Guarantor and its Subsidiaries in accordance with
GAAP.  Borrowers and Guarantors shall promptly furnish to Agent and
Lenders all such financial and other information as Agent shall reasonably
request relating to the Collateral and the assets, business and operations of
Borrowers and Guarantors, and Borrower shall notify the auditors and accountants
of Borrowers and Guarantors that Agent is authorized to obtain such information
directly from them.  Without limiting the foregoing, Borrowers shall
furnish or cause to be furnished to Agent, the following:

     

    (i)           within
thirty (30) days after the end of each fiscal month, monthly unaudited
consolidated financial statements, and unaudited consolidating financial
statements (including in each case balance sheets, statements of income and
loss, statements of cash flow, and statements of shareholders’ equity), all in
reasonable detail, fairly presenting in all material respects the financial
position and the results of the operations of Parent and its Subsidiaries as of
the end of and through such fiscal month, certified to be correct by the chief
financial officer of Parent, subject to normal year-end adjustments and
accompanied by a compliance certificate substantially in the form of Exhibit C
hereto, along with a schedule in a form reasonably satisfactory to Agent of the
calculations used in determining, as of the end of such month, whether Borrowers
and Guarantors were in compliance with the covenants set forth in Section 9.17
of this Agreement for such month, and

     

    (ii)           within
one hundred twenty (120) days after the end of each fiscal year, audited
consolidated financial statements and unaudited consolidating financial
statements of Parent and its Subsidiaries (including in each case balance
sheets, statements of income and loss, statements of cash flow, and statements
of shareholders’ equity), and the accompanying notes thereto, all in reasonable
detail, fairly presenting in all material respects the financial position and
the results of the operations of Parent and its Subsidiaries as of the end of
and for such fiscal year, together with the unqualified opinion of independent
certified public accountants with respect to the audited consolidated financial
statements, which accountants shall be an independent accounting firm selected
by Administrative Borrower and acceptable to Agent, that such audited
consolidated financial statements have been prepared in accordance with GAAP,
and present fairly in all material respects the results of operations and
financial condition of Parent and its Subsidiaries as of the end of and for the
fiscal year then ended, and

     

    (iii)           at
such time as available, but in no event later than ten (10) days after the end
of each fiscal year (commencing with the fiscal year of Borrowers ending
December 31, 2009), projected consolidated and consolidating financial
statements (including in each case, forecasted balance sheets and statements of
income and loss, statements of cash flow, and statements of shareholders’
equity) of Parent and its Subsidiaries for the next fiscal year, all in
reasonable detail, and in a format consistent with the projections delivered by
Borrowers to Agent prior to the date hereof, together with such supporting
information as Agent may reasonably request.  Such projected financial
statements shall be prepared on a monthly basis for the next succeeding year.
Such projections shall represent the reasonable best estimate by Borrowers and
Guarantors of the future financial performance of Parent and its Subsidiaries
for the periods set forth therein and shall have

     

    
      
         

      

      
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    been
prepared on the basis of the assumptions set forth therein which Borrowers and
Guarantors believe are fair and reasonable as of the date of preparation in
light of current and reasonably foreseeable business conditions (it being
understood that actual results may differ from those set forth in such projected
financial statements).  Each year Borrowers shall provide to Agent a
semi-annual update with respect to such projections or at any time a Default or
Event of Default exists or has occurred and is continuing, more frequently as
Agent may require.

     

    (b)           Borrowers
and Guarantors (or Administrative Borrower on behalf of any Borrower or
Guarantor) shall promptly notify Agent in writing of the details of (i) any
loss, damage, investigation, action, suit, proceeding or claim relating to
Collateral having a value of more than $250,000 in the aggregate at any give
time or which if adversely determined could reasonably be expected to result in
a Material Adverse Effect, (ii) any Material Contract being terminated or
amended or any new Material Contract entered into (in which event Borrowers and
Guarantors (or Administrative Borrower on behalf of any Borrower or Guarantor)
shall provide Agent with a copy of such Material Contract), (iii) any order,
judgment or decree in excess of $250,000 shall have been entered against any
Borrower or Guarantor or any of its or their properties or assets, (iv) any
notification of a material violation of laws or regulations received by any
Borrower or Guarantor, (v) any ERISA Event that has or could reasonably be
expected to have a Material Adverse Effect, and (vi) the occurrence of any
Default or Event of Default.

     

    (c)           Borrowers
and Guarantors shall promptly after the sending or filing thereof furnish or
cause to be furnished to Agent copies of all reports which any Borrower or
Guarantor sends to its stockholders generally and copies of all reports and
registration statements which any Borrower or Guarantor files with the
Securities and Exchange Commission, any national securities exchange or the
National Association of Securities Dealers, Inc.

     

    (d)           Borrowers
and Guarantors shall furnish or cause to be furnished to Agent such budgets,
forecasts, projections and other information respecting the Collateral and the
business of Borrowers and Guarantors, as Agent may, from time to time,
reasonably request.  Agent is hereby authorized to deliver a copy of
any financial statement or any other information relating to the business of
Borrowers and Guarantors to any court or other Governmental Authority or to any
Lender or Participant or prospective Lender or Participant or any Affiliate of
any Lender or Participant.  Each Borrower and Guarantor hereby
irrevocably authorizes and directs all accountants or auditors to deliver to
Agent, at Borrowers’ expense, copies of the financial statements of any Borrower
and Guarantor and any reports or management letters prepared by such accountants
or auditors on behalf of any Borrower or Guarantor and to disclose to Agent and
Lenders such information as they may have regarding the business of any Borrower
and Guarantor with copies to Administrative Borrower.  Any documents,
schedules, invoices or other papers delivered to Agent or any Lender may be
destroyed or otherwise disposed of by Agent or such Lender one (1) year after
the same are delivered to Agent or such Lender, except as otherwise designated
by Administrative Borrower to Agent or such Lender in writing.

     

    
      
         

      

      
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    9.7           Sale of Assets,
Consolidation, Merger, Amalgamation, Dissolution, Etc.  Each
Borrower and Guarantor shall not, and shall not permit any Subsidiary (other
than Congoleum) to, directly or indirectly,

     

    (a)           merge
into or with or consolidate with any other Person or permit any other Person to
merge into or with or consolidate or amalgamate with it except that (i) any
wholly-owned Subsidiary of Parent (other than any Borrower) may merge with and
into or consolidate or amalgamate with any other wholly-owned Subsidiary of
Parent (other than any Borrower) and (ii) any Borrower and Guarantor may merge
with and into or consolidate or amalgamate with any other Borrower
or  Guarantor, so long as in the case of a merger with and into or
consolidation or amalgamation of Borrower and Guarantor, that Borrower is the
surviving entity; provided, that, each of the
following conditions is satisfied as determined by Agent in good
faith:  (A) Agent shall have received not less than ten (10) Business
Days’ prior written notice of the intention of such Subsidiaries to so merge,
consolidate or amalgamate, which notice shall set forth in reasonable detail
satisfactory to Agent, the persons that are merging, consolidating or
amalgamating, which person will be the surviving entity, the locations of the
assets of the persons that are merging, consolidating or amalgamating, and the
material agreements and documents relating to such merger, consolidation or
amalgamation, (B) Agent shall have received such other information with respect
to such merger or consolidation as Agent may reasonably request, (C) as of the
effective date of the merger, consolidation or amalgamation and after giving
effect thereto, no Default or Event of Default shall exist or have occurred, (D)
Agent shall have received, true, correct and complete copies of all agreements,
documents and instruments relating to such merger, consolidation or
amalgamation, including, but not limited to, the certificate or certificates of
merger to be filed with each appropriate Secretary of State (with a copy as
filed promptly after such filing), (E) the surviving corporation shall expressly
confirm, ratify and assume the Obligations and the Financing Agreements to which
it is a party in writing, in form and substance satisfactory to Agent, and
Borrowers and Guarantors shall execute and deliver such other agreements,
documents and instruments as Agent may request in connection
therewith;

     

    (b)           sell,
issue, assign, lease, license, transfer, abandon or otherwise dispose of any
Capital Stock or Indebtedness to any other Person or any of its assets to any
other Person, except for:

     

    (i)           sales
of Inventory in the ordinary course of business or the transfer of Inventory in
the ordinary course of business by the Ideal Borrowing Group to the Belgian Tape
Division,

     

    (ii)           the
sale or other disposition of Equipment (including worn-out or obsolete Equipment
or Equipment no longer used or useful in the business of any Borrower or
Guarantor) so long as such sales or other dispositions do not involve Equipment
having an aggregate fair market value in excess of $200,000 for all such
Equipment disposed of in any fiscal year of Borrowers or as Agent may otherwise
agree,

     

    (iii)           the
issuance and sale by any Borrower or Guarantor of Capital Stock of such Borrower
or Guarantor after the date hereof; provided, that, (A) Agent shall
have received not less than ten (10) Business Days’ prior written notice of such
issuance and sale by such Borrower or Guarantor, which notice shall specify the
parties to whom such shares are to be sold, the terms of such sale, the total
amount which it is anticipated will be realized from the issuance and sale of
such

     

    
      
         

      

      
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    stock
and the net cash proceeds which it is anticipated will be received by such
Borrower or Guarantor from such sale, (B) such Borrower or Guarantor shall not
be required to pay any cash dividends or repurchase or redeem such Capital Stock
or make any other payments in respect thereof, except as otherwise permitted in
Section 9.11 hereof, (C) the terms of such Capital Stock, and the terms and
conditions of the purchase and sale thereof, shall not include any terms that
include any limitation on the right of any Borrower to request or receive Loans
or Letters of Credit or the right of any Borrower and Guarantor to amend or
modify any of the terms and conditions of this Agreement or any of the other
Financing Agreements or otherwise in any way relate to or affect the
arrangements of Borrowers and Guarantors with Agent and Lenders or are more
restrictive or burdensome to any Borrower or Guarantor than the terms of any
Capital Stock in effect on the date hereof, (D) except as Agent may otherwise
agree in writing, all of the proceeds of the sale and issuance of such Capital
Stock shall be paid to Agent for application to the Obligations in such order
and manner as Agent may determine or at Agent’s option, to be held as cash
collateral for the Obligations and (E) as of the date of such issuance and sale
and after giving effect thereto, no Default or Event of Default shall exist or
have occurred,

     

    (iv)           the
issuance of Capital Stock of any Borrower or Guarantor consisting of common
stock pursuant to an employee stock option or grant or similar equity plan or
401(k) plans of such Borrower or Guarantor for the benefit of its employees,
directors and consultants; provided, that, in no event
shall such Borrower or Guarantor be required to issue, or shall such Borrower or
Guarantor issue, Capital Stock pursuant to such stock plans or 401(k) plans
which would result in a Change of Control or other Event of
Default,

     

    (v)           sales
and assignments by Parent and Far East of the Faunus Factored Accounts to
Faunus, subject to the terms of the Faunus Intercreditor Agreement,
and

     

    (vi)           transfers
of assets of any Borrower or Guarantor to any Borrower or Guarantor;
or

     

    (c)           wind
up, liquidate or dissolve except that any Guarantor (other than Parent) may wind
up, liquidate and dissolve; provided, that, each of the
following conditions is satisfied, (i) the winding up, liquidation and
dissolution of such Guarantor shall not violate any law or any order or decree
of any court or other Governmental Authority in any material respect and shall
not conflict with or result in the breach of, or constitute a default under, any
indenture, mortgage, deed of trust, or any other agreement or instrument to
which any Borrower or Guarantor is a party or may be bound, (ii) such winding
up, liquidation or dissolution shall be done in accordance with the requirements
of all applicable laws and regulations, (iii) effective upon such winding up,
liquidation or dissolution, all of the assets and properties of such Guarantor
shall be duly and validly transferred and assigned to a Borrower, free and clear
of any liens, restrictions or encumbrances other than the security interest and
liens of Agent (and Agent shall have received such evidence thereof as Agent may
require) and Agent shall have received such deeds, assignments or other
agreements as Agent may request to evidence and confirm the transfer of such
assets to of such Guarantor to a Borrower, (iv) Agent shall have received all
documents and agreements that any Borrower or Guarantor has filed with any
Governmental Authority or as are otherwise required to effectuate such winding
up, liquidation or dissolution, (v) no Borrower or Guarantor shall assume any
Indebtedness, obligations or liabilities as a result of such winding up,
liquidation or dissolution, or otherwise become liable in respect of any
obligations or liabilities of the entity that is winding up, liquidating or
dissolving, unless such Indebtedness is otherwise expressly permitted hereunder,
(vi) Agent shall have received not less than ten (10) Business Days prior
written notice of the intention of such Guarantor to wind up, liquidate or
dissolve, and (vii) as of the date of such winding up, liquidation or
dissolution and after giving effect thereto, no Default or Event of Default
shall exist or have occurred.

     

    
      
         

      

      
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    9.8           Encumbrances.  Each
Borrower and Guarantor shall not, and shall not permit any Subsidiary to,
create, incur, assume or suffer to exist any security interest, mortgage,
pledge, lien, statutory deemed trust, charge, hypothec or other encumbrance of
any nature whatsoever on any of its assets or properties, including the
Collateral, or file or permit the filing of, or permit to remain in effect, any
financing statement or other similar notice of any security interest or lien
with respect to any such assets or properties, except:

     

    (a)           the
security interests, liens and hypothecs of Agent for itself and the benefit of
Secured Parties;

     

    (b)           liens
securing the payment of taxes, assessments or other governmental charges or
levies either not yet overdue or the validity of which are being contested in
good faith by appropriate proceedings diligently pursued and available to such
Borrower, or Guarantor or Subsidiary, as the case may be, which proceedings (or
orders entered in connection with such proceedings) have the effect of
preventing the forfeiture or sale of the property subject to any such Lien and
with respect to which adequate reserves have been set aside on its books in
accordance with GAAP;

     

    (c)           non-consensual
statutory liens (other than liens arising under ERISA or securing the payment of
taxes) arising in the ordinary course of such Borrower’s, Guarantor’s or
Subsidiary’s business that do not secure Indebtedness for borrowed money, such
as carriers’, warehousemen’s, materialmen’s, landlords’, workmen’s suppliers’,
repairmen’s and mechanics’ liens, to the extent: (i) such liens do not in the
aggregate materially detract from the value of the property of Borrowers and
Guarantors taken as a whole and do not materially impair the use thereof in the
operation of Borrowers and Guarantors taken as a whole, and (ii) such liens
secure liabilities which are (A) not overdue or (B) are fully insured and being
defended at the sole cost and expense and at the sole risk of the insurer or (C)
being contested in good faith by appropriate proceedings diligently pursued and
available to such Borrower, Guarantor or such Subsidiary, in each case prior to
the commencement of foreclosure or other similar proceedings, which proceedings
(or orders entered in connection with such proceeding) have the effect of
preventing the forfeiture or sale of the property subject to any such lien and
with respect to which adequate reserves have been set aside on its books in
accordance with GAAP;

     

    (d)           reservations
in the original grant of a Real Property or letters patent from the Crown as
well as, zoning restrictions, easements, licenses, covenants and other
restrictions affecting the use of Real Property which do not interfere in any
material respect with the use of such Real Property or ordinary conduct of the
business of such Borrower, Guarantor or such Subsidiary as presently conducted
thereon or materially impair the value of the Real Property which may be subject
thereto;

     

    (e)           purchase
money security interests in Equipment (including Capital Leases) and purchase
money mortgages on Real Property to secure Indebtedness permitted under Section
9.9(b) hereof;

     

    (f)           pledges
and deposits of cash by any Borrower or Guarantor after the date hereof in the
ordinary course of business in connection with workers’ compensation,
unemployment insurance and other types of social security benefits;

     

    
      
         

      

      
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    (g)           pledges
and deposits of cash or letters of credit by any Borrower or Guarantor after the
date hereof to secure the performance of tenders, bids, leases, trade contracts
(other than for the repayment of Indebtedness), statutory obligations, surety,
stay, customs and appeal bonds, and liability for premiums to insurance
carriers, in each case in the ordinary course of business of such Borrower or
Guarantor as of the date hereof; provided, that, in connection
with any performance bonds issued by a surety or other person, the issuer of
such bond shall have waived in writing any rights in or to, or other interest
in, any of the Collateral in an agreement, in form and substance satisfactory to
Agent;

     

    (h)           liens
arising from (i) operating leases and the precautionary UCC or PPSA, as
applicable, financing statement filings in respect thereof and (ii) equipment or
other materials which are not owned by any Borrower or Guarantor located on the
premises of such Borrower or Guarantor (but not in connection with, or as part
of, the financing thereof) from time to time in the ordinary course of business
and consistent with current practices of such Borrower or Guarantor and the
precautionary UCC or PPSA, as applicable, financing statement filings in respect
thereof;

     

    (i)           judgments
and other similar liens arising in connection with court proceedings that do not
constitute an Event of Default; provided, that, (i) such liens
are being contested in good faith and by appropriate proceedings diligently
pursued, (ii) adequate reserves or other appropriate provision, if any, as are
required by GAAP have been made therefor, (iii) a stay of enforcement of any
such liens is in effect and (iv) Agent may establish a Reserve with respect
thereto;

     

    (j)           statutory
or common law liens or rights of setoff of depository banks with respect to
funds of any Borrower, Guarantor or Subsidiary at such banks to secure fees and
charges in connection with returned items or the standard fees and charges of
such banks in connection with the deposit accounts maintained by such Borrower,
Guarantor or Subsidiary at such banks (but not any other Indebtedness or
obligations);

     

    (k)           leases
or subleases of Real Property granted by any Borrower or Guarantor in the
ordinary course of business and consistent with past practice to any Person so
long as any such leases or subleases are subordinate in all respects to the
security interests and liens granted to Agent and Secured Parties and do not
interfere in any material respect with the ordinary conduct of the business of
such Borrower or Guarantor or materially impair the value or marketability of
the Real Property subject thereto;

     

    (l)           liens
arising out of conditional sale, title retention, consignment or similar
arrangements for the sale of goods entered into by any Borrower or Guarantor in
the ordinary course of business in accordance with the past practices of such
Borrower or Guarantor;

     

    (m)           liens
securing Indebtedness permitted under Section 9.9;

     

    
      
         

      

      
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    (n)           the
security interests and liens pursuant to and in accordance with the terms of the
Faunus Factoring Documents as in effect on the date hereof and subject to the
terms of the Faunus Intercreditor Agreement as in effect on the date hereof to
secure the Indebtedness permitted under Section 9.9(k) hereof; provided, that, the Faunus
Intercreditor Agreement shall remain in full force and effect and enforceable in
accordance with its terms; and

     

    (o)           the
security interests and liens set forth on Schedule 8.4 to the Information
Certificate.

     

    9.9           Indebtedness  Each
Borrower and Guarantor shall not, and shall not permit any Subsidiary to, incur,
create, assume, become or be liable in any manner with respect to, or permit to
exist, any Indebtedness, or guarantee, assume, endorse, or otherwise become
responsible for (directly or indirectly), the Indebtedness, performance,
obligations or dividends of any other Person, except:

     

    (a)           the
Obligations;

     

    (b)           purchase
money Indebtedness (including Capital Leases) arising after the date hereof to
the extent secured by purchase money security interests in Equipment (including
Capital Leases) and purchase money mortgages on Real Property not to exceed
$250,000 in the aggregate at any time outstanding so long as such security
interests and mortgages do not apply to any property of such Borrower, Guarantor
or Subsidiary other than the Equipment or Real Property so acquired, and the
Indebtedness secured thereby does not exceed the cost of the Equipment or Real
Property so acquired, as the case may be;

     

    (c)           guarantees
by any Borrower or Guarantor of the Obligations of the other Borrowers or
Guarantors in favor of Agent for the benefit of Lenders and the other Secured
Parties;

     

    (d)           the
Indebtedness of any Borrower or Guarantor to any other Borrower or Guarantor
arising after the date hereof pursuant to loans by any Borrower or Guarantor
permitted under Section 9.10(g) hereof;

     

    (e)           unsecured
Indebtedness and contingent obligations of any Borrower or Guarantor arising
after the date hereof to any third person (but not to any other Borrower or
Guarantor); provided, that, each of the
following conditions is satisfied as determined by Agent: (i) such Indebtedness
and contingent obligations shall be on terms and conditions acceptable to Agent
and shall be subject and subordinate in right of payment to the right of Agent
and Lenders to receive the prior indefeasible payment and satisfaction in full
payment of all of the Obligations pursuant to the terms of an intercreditor
agreement between Agent and such third party, in form and substance satisfactory
to Agent, (ii) Agent shall have received not less than ten (10) days prior
written notice of the intention of such Borrower or Guarantor to incur such
Indebtedness or contingent obligations, which notice shall set forth in
reasonable detail satisfactory to Agent the amount of such Indebtedness or
contingent obligations, the person or persons to whom such Indebtedness or
contingent obligations will be owed, the interest rate, the schedule of
repayments and maturity date with respect thereto and such other information as
Agent may request with respect thereto, (iii) Agent shall have received true,
correct and complete copies of all agreements, documents and instruments
evidencing or otherwise related to such Indebtedness or contingent obligations,
(iv)

     

    
      
         

      

      
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    except
as Agent may otherwise agree in writing, all of the proceeds of the loans or
other accommodations giving rise to such Indebtedness and/or contingent
obligations shall be paid to Agent for application to the Obligations in such
order and manner as Agent may determine or at Agent’s option, to be held as cash
collateral for the Obligations, (v) in no event shall the aggregate principal
amount of such Indebtedness and contingent obligations incurred during the term
of this Agreement exceed $2,000,000, (vi) as of the date of incurring such
Indebtedness or contingent obligations and after giving effect thereto, no
Default or Event of Default shall exist or have occurred, (vii) such Borrower
and Guarantor shall not, directly or indirectly, (A) amend, modify, alter or
change the terms of such Indebtedness or contingent obligations, or any
agreement, document or instrument related thereto; except, that, such Borrower
or Guarantor may, after prior written notice to Agent, amend, modify, alter or
change the terms thereof so as to extend the maturity thereof, or defer the
timing of any payments in respect thereof, or to forgive or cancel any portion
of such Indebtedness or contingent obligations (other than pursuant to payments
thereof), or to reduce the interest rate or any fees in connection therewith, or
(B) redeem, retire, defease, purchase or otherwise acquire such Indebtedness or
contingent obligations (except pursuant to regularly scheduled payments
permitted herein), or set aside or otherwise deposit or invest any sums for such
purpose, and (viii) Borrowers and Guarantors shall furnish to Agent all notices
or demands in connection with such Indebtedness or contingent obligations either
received by any Borrower or Guarantor or on its behalf promptly after the
receipt thereof, or sent by any Borrower or Guarantor or on its behalf
concurrently with the sending thereof, as the case may be;

     

    (f)           contingent
Indebtedness of any Borrower or Guarantor arising pursuant to a performance, bid
or surety bond in the ordinary course of business; provided, that: (i) such
Indebtedness shall be on terms and conditions acceptable to Agent and shall be
subject and subordinate in right of payment to the right of Agent and Lenders to
receive the prior indefeasible payment and satisfaction in full payment of all
of the Obligations pursuant to the terms of an intercreditor agreement between
Agent and such third party, in form and substance satisfactory to Agent, (ii)
Agent shall have received not less than ten (10) days prior written notice of
the intention of such Borrower or Guarantor to incur such Indebtedness, which
notice shall set forth in reasonable detail satisfactory to Agent the amount of
such Indebtedness, the person or persons to whom such Indebtedness will be owed,
the interest rate, the schedule of repayments and maturity date with respect
thereto and such other information as Agent may request with respect thereto,
(iii) Agent shall have received true, correct and complete copies of all
agreements, documents and instruments evidencing or otherwise related to such
Indebtedness, (iv) in no event shall the aggregate principal amount of such
Indebtedness exceed $50,000 at any time outstanding, (v) as of the date of
incurring such Indebtedness and after giving effect thereto, no Default or Event
of Default shall exist or have occurred, (vi) such Borrower and Guarantor shall
not, directly or indirectly, (A) amend, modify, alter or change the terms of
such Indebtedness, or any agreement, document or instrument related thereto;
except, that, such Borrower
or Guarantor may, after prior written notice to Agent, amend, modify, alter or
change the terms thereof so as to extend the maturity thereof, or defer the
timing of any payments in respect thereof, or to forgive or cancel any portion
of such Indebtedness (other than pursuant to payments thereof), or to reduce the
interest rate or any fees in connection therewith, or (B) redeem, retire,
defease, purchase or otherwise acquire such Indebtedness (except pursuant to
regularly scheduled payments permitted herein), or set aside or otherwise
deposit or invest any sums for such purpose, and (vii) Borrowers and Guarantors
shall furnish to Agent all notices or demands in connection with such
Indebtedness either received by any Borrower or Guarantor or on its behalf
promptly after the receipt thereof, or sent by any Borrower or Guarantor or on
its behalf concurrently with the sending thereof, as the case may
be;

     

    
      
         

      

      
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    (g)           Indebtedness
of a Borrower or Guarantor arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient funds it
the ordinary course of business; provided, that, (i) such
Indebtedness is extinguished within five (5) Business Days of incurrence and
(ii) the aggregate amount of such Indebtedness outstanding at any time shall not
exceed $5,000;

     

    (h)           Indebtedness
of a Borrower or Guarantor arising in connection with the endorsement of
instruments for deposit in the ordinary course of business;

     

    (i)           contingent
Indebtedness, obligations or liabilities arising pursuant to guarantees in
respect of Indebtedness otherwise permitted under this Section 9.9 or other
liabilities not prohibited by the terms hereof;

     

    (j)           the
Indebtedness set forth on Schedule 9.9 to the Information Certificate; provided, that, (i) Borrowers
and Guarantors may only make regularly scheduled payments of principal and
interest in respect of such Indebtedness in accordance with the terms of the
agreement or instrument evidencing or giving rise to such Indebtedness as in
effect on the date hereof, (ii) Borrowers and Guarantors shall not, directly or
indirectly, (A) amend, modify, alter or change the terms of such Indebtedness or
any agreement, document or instrument related thereto as in effect on the date
hereof except, that, Borrowers and Guarantors may, after prior written notice to
Agent, amend, modify, alter or change the terms thereof so as to extend the
maturity thereof, or defer the timing of any payments in respect thereof, or to
forgive or cancel any portion of such Indebtedness (other than pursuant to
payments thereof), or to reduce the interest rate or any fees in connection
therewith, or (B) redeem, retire, defease, purchase or otherwise acquire such
Indebtedness, or set aside or otherwise deposit or invest any sums for such
purpose, and (iii) Borrowers and Guarantors shall furnish to Agent all notices
or demands in connection with such Indebtedness either received by any Borrower
or Guarantor or on its behalf, promptly after the receipt thereof, or sent by
any Borrower or Guarantor or on its behalf, concurrently with the sending
thereof, as the case may be;

     

    (k)           Indebtedness
of Parent and Far East arising under the Faunus Factoring Documents as in effect
on the date hereof (to the extent deemed to constitute Indebtedness); provided, that, the maximum
amount of such Indebtedness shall not exceed the Maximum FGI Debt (as defined in
the Faunus Intercreditor Agreement as in effect on the date hereof), and such
Indebtedness shall not include any guaranty by Faunus of any amount due or to
become due from Parent or Far East to any third party Person; and

     

    (l)           Indebtedness
of any Borrower or Guarantor entered into in the ordinary course of business
pursuant to a Hedge Agreement; provided, that, (i) such
arrangements are with a Bank Product Provider, (ii) such arrangements are not
for speculative purposes, and (iii) such Indebtedness shall be unsecured, except
to the extent such Indebtedness constitutes part of the Obligations arising
under or pursuant to Hedge Agreements with a Bank Product Provider that are
secured under the terms hereof.

     

    9.10           Loans, Investments,
Etc.  Each Borrower and Guarantor shall not, and shall not
permit any Subsidiary to, directly or indirectly, make any loans or advance
money or property to any person, or invest in (by capital contribution, dividend
or otherwise) or purchase or repurchase the Capital Stock or Indebtedness or all
or a substantial part of the assets or property of any person, or form or
acquire any Subsidiaries, or agree to do any of the foregoing,
except:

     

    
      
         

      

      
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    (a)           the
endorsement of instruments for collection or deposit in the ordinary course of
business;

     

    (b)           investments
in cash or Cash Equivalents; provided, that, (i) no Loans
are then outstanding and (ii) the terms and conditions of Section 5.2 hereof
shall have been satisfied with respect to the deposit account, investment
account or other account in which such cash or Cash Equivalents are
held;

     

    (c)           the
equity investments of each Borrower and Guarantor as of the date hereof in its
Subsidiaries and by any Subsidiary in any other Subsidiary or in a Borrower;
provided, that, no Borrower or
Guarantor shall have any further obligations or liabilities to make any capital
contributions or other additional investments or other payments to or in or for
the benefit of any of such Subsidiaries;

     

    (d)           loans
and advances by any Borrower or Guarantor to employees of such Borrower or
Guarantor not to exceed the principal amount of $100,000 in the aggregate at any
time outstanding for: (i) reasonable and necessary work-related travel or other
ordinary business expenses to be incurred by such employee in connection with
their work for such Borrower or Guarantor, (ii) reasonable and necessary
relocation expenses of such employees (including home mortgage financing for
relocated employees), and (iii) loans to employees in an aggregate amount not to
exceed $25,000 in the aggregate at any time;

     

    (e)           stock
or obligations issued to any Borrower or Guarantor by any Person (or the
representative of such Person) in respect of Indebtedness of such Person owing
to such Borrower or Guarantor in connection with the insolvency, bankruptcy,
receivership or reorganization of such Person or a composition or readjustment
of the debts of such Person; provided, that, the original of
any such stock or instrument evidencing such obligations shall be promptly
delivered to Agent, upon Agent’s request, together with such stock power,
assignment or endorsement by such Borrower or Guarantor as Agent may
request;

     

    (f)           obligations
of account debtors to any Borrower or Guarantor arising from Accounts which are
past due evidenced by a promissory note made by such account debtor payable to
such Borrower or Guarantor; provided, that, promptly upon
the receipt of the original of any such promissory note by such Borrower or
Guarantor, such promissory note shall be endorsed to the order of Agent by such
Borrower or Guarantor and promptly delivered to Agent as so
endorsed;

     

    (g)           loans
by a Borrower or Guarantor to another Borrower or Guarantor after the date
hereof; provided, that,

     

    (i)           as
to all of such loans, (A) within thirty (30) days after the end of each fiscal
month, Borrowers shall provide to Agent a report in form and substance
satisfactory to Agent of the outstanding amount of such loans as of the last day
of the immediately preceding month and indicating any loans made and payments
received during the immediately preceding month, (B) the Indebtedness arising
pursuant to any such loan shall not be evidenced by a promissory note or other
instrument, unless the single original of such note or other instrument is
promptly delivered to Agent upon its request to hold as part of the Collateral,
with such endorsement and/or assignment by the payee of such note or other
instrument as Agent may require, (C) as of the date of any such loan and after
giving effect thereto, the Borrower or Guarantor making such loan shall be
Solvent, and (D) as of the date of any such loan and after giving effect
thereto, no Default or Event of Default shall exist or have occurred and be
continuing,

     

    
      
         

      

      
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    (ii)           as
to loans by a Guarantor to a Borrower, (A) the Indebtedness arising pursuant to
such loan shall be subject to, and subordinate in right of payment to, the right
of Agent and Lenders to receive the prior final payment and satisfaction in full
of all of the Obligations on terms and conditions acceptable to Agent, (B)
promptly upon Agent’s request, Agent shall have received a subordination
agreement, in form and substance satisfactory to Agent, providing for the terms
of the subordination in right of payment of such Indebtedness of such Borrower
to the prior final payment and satisfaction in full of all of the Obligations,
duly authorized, executed and delivered by such Guarantor and such Borrower, and
(C) such Borrower shall not, directly or indirectly make, or be required to
make, any payments in respect of such Indebtedness prior to the end of the then
current term of this Agreement;

     

    (iii)           as
to loans by a Borrower to a Guarantor or another Borrower, as of the date of any
such loan and after giving effect thereto, (A) with respect to any such loans,
the Global Excess Availability shall be not less than $2,000,000 and (B) the
aggregate principal amount of all Loans by Borrowers to any Guarantor shall not
exceed, at any one time outstanding, $50,000 and to all Guarantors shall not
exceed, at any one time outstanding, $100,000; and

     

    (h)           the
loans and advances set forth on Schedule 9.10 to the Information Certificate;
provided, that, as to such
loans and advances, Borrowers and Guarantors shall not, directly or indirectly,
amend, modify, alter or change the terms of such loans and advances or any
agreement, document or instrument related thereto and Borrowers and Guarantors
shall furnish to Agent all notices or demands in connection with such loans and
advances either received by any Borrower or Guarantor or on its behalf, promptly
after the receipt thereof, or sent by any Borrower or Guarantor or on its
behalf, concurrently with the sending thereof, as the case may be.

     

    9.11           Dividends and
Redemptions.  Each
Borrower and Guarantor shall not, directly or indirectly, declare or pay any
dividends on account of any shares of class of any Capital Stock of such
Borrower or Guarantor now or hereafter outstanding, or set aside or otherwise
deposit or invest any sums for such purpose, or redeem, retire, defease,
purchase or otherwise acquire any shares of any class of Capital Stock (or set
aside or otherwise deposit or invest any sums for such purpose) for any
consideration or apply or set apart any sum, or make any other distribution (by
reduction of capital or otherwise) in respect of any such shares or agree to do
any of the foregoing; except, that:

     

    (a)           any
Borrower or Guarantor may declare and pay such dividends or redeem, retire,
defease, purchase or otherwise acquire any shares of any class of Capital Stock
for consideration in the form of shares of common stock (so long as after giving
effect thereto no Change of Control or other Default or Event of Default shall
exist or occur);

     

    (b)           Borrowers
and Guarantors may pay dividends to the extent permitted in Section 9.12
below;

     

    
      
         

      

      
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    (c)           any
Subsidiary of a Borrower or Guarantor may pay dividends to a
Borrower;

     

    (d)           Borrowers
and Guarantors may repurchase Capital Stock consisting of common stock held by
employees pursuant to any employee stock ownership plan thereof upon the
termination, retirement or death of any such employee in accordance with the
provisions of such plan; provided, that, as to any such
repurchase, each of the following conditions is satisfied: (i) as of the date of
the payment for such repurchase and after giving effect thereto, no Default or
Event of Default shall exist or have occurred and be continuing, (ii) such
repurchase shall be paid with funds legally available therefor, (iii) such
repurchase shall not violate any law or regulation or the terms of any
indenture, agreement or undertaking to which such Borrower or Guarantor is a
party or by which such Borrower or Guarantor or its or their property are bound,
and (iv) the aggregate amount of all payments for such repurchases in any
calendar year shall not exceed $100,000.

     

    9.12           Transactions with
Affiliates.  Each
Borrower and Guarantor shall not, directly or indirectly:

     

    (a)           purchase,
acquire or lease any property from, or sell, transfer or lease any property to,
any officer, director or other Affiliate of such Borrower or Guarantor, except
in the ordinary course of and pursuant to the reasonable requirements of such
Borrower’s or Guarantor’s business (as the case may be) and upon fair and
reasonable terms no less favorable to such Borrower or Guarantor than such
Borrower or Guarantor would obtain in a comparable arm’s length transaction with
an unaffiliated person; provided, that, in connection
with the sale of Inventory in the ordinary course as permitted hereunder by a
Borrower or Guarantor to the Belgian Tape Division and by a Borrower or
Guarantor to any Affiliate that is not organized under the laws of the United
States or Canada (individually, a “Foreign Affiliate”; collectively, “Foreign
Affiliates”), (i) the maximum amount due and owing from the Belgian Tape
Division to Borrowers and Guarantors (which, as of the date hereof, is
approximately $9,265,000), increased by the value of transfers of Inventory to
the Belgian Tape Division by Borrowers and Guarantors at standard manufacturing
cost, and reduced by transfers of cash from the Belgian Tape Division to
Borrowers and Guarantors, shall not exceed $10,000,000 at any given time, and
(ii) the amount due and owing from Far East to Borrowers and Guarantors (which,
as of the date hereof, is approximately $2,000), increased by the value of
transfers of Inventory to Far East by Borrowers and Guarantors at standard
manufacturing cost, and reduced by transfers of cash from Far East to Borrowers
and Guarantors, shall not exceed $500,000] at any given time;

     

    (b)           so
long as a Borrower or Guarantor is treated as a flow-through entity for tax
purposes, such Borrower or Guarantor may distribute to the Parent, to the extent
actually payable by Parent to the applicable taxing authority, with respect to
each taxable year an aggregate amount equal to the product of (i) the maximum
combined federal and state income tax rate applicable to corporations doing
business in the state to which Parent allocates at least ten (10%) percent of
its taxable income and which has the highest such rate (or the state in which
Parent or Holdings allocates more income than any other state, if it does not
allocate at least ten (10%) percent of its taxable income to any state)
multiplied by (ii) the excess of the taxable income of Parent for such taxable
year over the taxable losses of the Parent for all prior taxable years that have
not previously been used to reduce taxable income pursuant to this clause (b);
or

     

    
      
         

      

      
        95

        
          

        

      

      
         

      

    

    (c)           make
any payments (whether by dividend, loan or otherwise) of management, consulting
or other fees for management or similar services, or of any Indebtedness owing
to any officer, employee, shareholder, director or any other Affiliate of such
Borrower or Guarantor, except (i) reasonable compensation to officers, employees
and directors for services rendered to such Borrower or Guarantor in the
ordinary course of business, and (ii) payments by any such Borrower or Guarantor
to Parent for actual and necessary reasonable out-of-pocket legal and
accounting, insurance, marketing, payroll and similar types of services paid for
by Parent on behalf of such Borrower or Guarantor, in the ordinary course of
their respective businesses or as the same may be directly attributable to such
Borrower or Guarantor and for the payment of taxes by or on behalf of
Parent.

     

    9.13           Compliance with
ERISA.

     

    (a)           Except
as could not reasonably be expected to have a Material Adverse Effect, each
Borrower and Guarantor shall, and shall cause each of its ERISA Affiliates,
to:  (i) maintain each Plan in compliance in all material respects
with the applicable provisions of ERISA, the Code and other Federal and State
law; (ii) cause each Plan which is qualified under Section 401(a) of the Code to
maintain such qualification; (iii) not terminate any of such Plans so as to
incur any material liability to the Pension Benefit Guaranty Corporation; (iv)
not allow or suffer to exist any prohibited transaction involving any of such
Plans or any trust created thereunder which would subject such Borrower,
Guarantor or such ERISA Affiliate to a material tax or penalty or other
liability on prohibited transactions imposed under Section 4975 of the Code or
ERISA; (v) make all required contributions to any Plan which it is obligated to
pay under Section 302 of ERISA, Section 412 of the Code or the terms of such
Plan; (vi) not allow or suffer to exist any accumulated funding deficiency,
whether or not waived, with respect to any such Plan; or (vii) allow or suffer
to exist any occurrence of a reportable event or any other event or condition
which presents a material risk of termination by the Pension Benefit Guaranty
Corporation of any such Plan that is a single employer plan, which termination
could result in any material liability to the Pension Benefit Guaranty
Corporation.

     

    (b)           Each
Borrower and Guarantor shall (i) cause the Canadian Pension Plans to be
administered in accordance with the requirements of the applicable pension plan
texts, funding agreements, the Income Tax Act (Canada) and applicable provincial
pension benefits legislation, (ii) deliver to Agent an undertaking of the
funding agent for such Canadian Pension Plan stating that the funding agent will
notify Agent within seven (7) days of the failure of any Borrower or US
Guarantor to make any required contribution to each Canadian Pension Plan, (iii)
not accept payment of any amount from any Canadian Pension Plan (other than
amounts on account of expenses reasonably incurred in connection with the
operations of such Canadian Pension Plan) without the prior written consent of
Agent, (iv) not terminate, or cause to be terminated, any Canadian Pension Plan,
if such plan would have a solvency deficiency on termination, (v) shall promptly
provide Agent with any documentation relating to the Canadian Pension Plans as
Agent may reasonably request, and (vi) shall notify Agent within thirty (30)
days of (A) a material increase in the liabilities of any Canadian Pension Plan,
(B) the establishment of a new registered pension plan or (C) the commencement
of payments of contributions to any Canadian Pension Plan to which any Borrower
or Guarantor had not previously been paying or contributing.

     

    
      
         

      

      
        96

        
          

        

      

      
         

      

    

    9.14           End of Fiscal Years; Fiscal
Quarters.  Each
Borrower and Guarantor shall, for financial reporting purposes, cause its, and
each of its Subsidiaries (a) fiscal years
to end on the Saturday closest to the 31st day of December of each year, and
(b) fiscal quarters to end on the last day
of the thirteenth (13th) week following the end of the immediately preceding
fiscal quarter; provided, that, the end of the fourth fiscal quarter shall be on
the last day of the fourteenth (14th) week following the end of the third fiscal
quarter whenever necessary to have the fourth fiscal quarter end on the Saturday
closest to December 31 of each year.

     

    9.15           Change in
Business.  Each Borrower and Guarantor shall not engage in any
business other than the business of such Borrower or Guarantor on the date
hereof and any business reasonably related, ancillary or complimentary to the
business in which such Borrower or Guarantor is engaged on the date
hereof.

     

    9.16           Limitation of Restrictions
Affecting Subsidiaries.  Each Borrower and
Guarantor shall not, directly, or indirectly, create or otherwise cause or
suffer to exist any encumbrance or restriction which prohibits or limits the
ability of any Subsidiary of such Borrower or Guarantor to (a) pay dividends or make other distributions or
pay any Indebtedness owed to such Borrower or Guarantor or any Subsidiary of
such Borrower or Guarantor; (b) make loans
or advances to such Borrower or Guarantor or any Subsidiary of such Borrower or
Guarantor, (c) transfer any of its
properties or assets to such Borrower or Guarantor or any Subsidiary of such
Borrower or Guarantor; or (d) create,
incur, assume or suffer to exist any lien upon any of its property, assets or
revenues, whether now owned or hereafter acquired, other than encumbrances and
restrictions arising under (i) applicable
law, (ii) this Agreement, (iii) customary provisions restricting subletting
or assignment of any lease governing a leasehold interest of such Borrower or
Guarantor or any Subsidiary of such Borrower or Guarantor, (iv) customary restrictions on dispositions of
real property interests found in reciprocal easement agreements of such Borrower
or Guarantor or any Subsidiary of such Borrower or Guarantor, (v) any agreement relating to permitted
Indebtedness incurred by a Subsidiary of such Borrower or Guarantor prior to the
date on which such Subsidiary was acquired by such Borrower or such Guarantor
and outstanding on such acquisition date, and (vi) the extension or continuation of contractual
obligations in existence on the date hereof; provided, that, any such
encumbrances or restrictions contained in such extension or continuation are no
less favorable to Agent and Lenders than those encumbrances and restrictions
under or pursuant to the contractual obligations so extended or
continued.

     

    9.17           Financial
Covenants.

     

    (a)           Fixed Charge Coverage
Ratio.  As of the end of each month, commencing August, 31,
2009, Borrowers and Guarantors shall maintain, on a consolidated basis, a Fixed
Charge Coverage Ratio of not less than the ratio set forth below for each
respective period as set forth below:

     

    
      
         

      

      
        97

        
          

        

      

      
         

      

    

    

    
      
        	
                Period

              	
                Ratio

              
	 	 
	
                for
      the two (2) month period ending August 31, 2009

              	
                0.8:1.0

              
	 	 
	
                for
      the three (3) month period ending September 30, 2009

              	
                0.8:1.0

              
	 	 
	
                for
      the four (4) month period ending October 31, 2009

              	
                1.0:1.0

              
	 	 
	
                for
      the five (5) month period ending November 30, 2009

              	
                1.0:1.0

              
	 	 
	
                for
      the six (6) month period ending December 31, 2009

              	
                1.0:1.0

              
	 	 
	
                for
      the seven (7) month period ending January 31, 2009

              	
                1.0:1.0

              
	 	 
	
                for
      the eight (8) consecutive month period ending February 28,
      2010

              	
                1.0:1.0

              
	 	 
	
                for
      the nine (9) consecutive month period ending March 31,
2010

              	
                1.0:1.0

              
	 	 
	
                for
      the ten (10) consecutive month period ending April 30,
2010

              	
                1.0:1.0

              
	 	 
	
                for
      the eleven (11) consecutive month period ending May 31,
    2010

              	
                1.0:1.0

              
	 	 
	
                for
      the twelve (12) consecutive month period ending June 30, 2010 and as of
      the end of each month thereafter (calculated on a trailing twelve (12)
      consecutive month basis)

              	
                1.0:1.0

              

      

    

    

    (b)           Minimum
EBITDA.  As of the end of each month, commencing August 31,
2009, Borrowers and Guarantors shall maintain, on a consolidated basis, EBITDA
of not less than the amount set forth below for each respective period as set
forth below:

     

    
      
        	
                Period

              	
                Minimum
      EBITDA

              
	 	 
	
                for
      the two (2) month period ending August 31, 2009

              	
                $1,114,000

              
	 	 
	
                for
      the three (3) month period ending September 30, 2009

              	
                $1,690,000

              
	 	 
	
                for
      the four (4) month period ending October 31, 2009

              	
                $2,646,000

              
	 	 
	
                for
      the five (5) month period ending November 30, 2009

              	
                $3,330,000

              
	 	 
	
                for
      the six (6) month period ending December 31, 2009

              	
                $3,514,000

              

      

    

    
      
         

      

      
        98

        
          

        

      

      
         

      

    

    

    
      
        	
                Period

              	
                Minimum
      EBITDA

              
	 	 
	
                for
      the seven (7) month period ending January 31, 2009

              	
                $3,400,000

              
	 	 
	
                for
      the eight (8) consecutive month period ending February 28,
      2010

              	
                $3,688,000

              
	 	 
	
                for
      the nine (9) consecutive month period ending March 31,
2010

              	
                $4,203,000

              
	 	 
	
                for
      the ten (10) consecutive month period ending April 30,
2010

              	
                $4,497,000

              
	 	 
	
                for
      the eleven (11) consecutive month period ending May 31,
    2010

              	
                $5,023,000

              
	 	 
	
                for
      the twelve (12) consecutive month period ending June 30,
    2010

              	
                $5,410,000

              
	 	 
	
                for
      the twelve (12) consecutive month period ending July 31,
    2010

              	
                $5,462,000

              
	 	 
	
                for
      the twelve (12) consecutive month period ending August 31,
      2010

              	
                $5,475,000

              
	 	 
	
                for
      the twelve (12) consecutive month period ending September 30,
      2010

              	
                $5,566,000

              
	 	 
	
                for
      the twelve (12) consecutive month period ending October 31,
      2010

              	
                $5,386,000

              
	 	 
	
                for
      the twelve (12) consecutive month period ending November 30,
      2010

              	
                $5,469,000

              
	 	 
	
                for
      the twelve (12) consecutive month period ending December 31,
      2010

              	
                $5,116,000

              
	 	 
	
                for
      the twelve (12) consecutive month period ending January 31,
      2011

              	
                $5,234,000

              
	 	 
	
                for
      the twelve (12) consecutive month period ending February 28,
      2011

              	
                $5,414,000

              
	 	 
	
                for
      the twelve (12) consecutive month period ending March 31,
    2011

              	
                $5,592,000

              
	 	 
	
                for
      the twelve (12) consecutive month period ending April 30,
    2011

              	
                $5,782,000

              
	 	 
	
                for
      the twelve (12) consecutive month period ending May 31,
    2011

              	
                $5,936,000

              
	 	 
	
                for
      the twelve (12) consecutive month period ending June 30,
    2011

              	
                $6,138,000

              

      

    

    
      
         

      

      
        99

        
          

        

      

      
         

      

    

    

    
      
        	
                Period

              	
                Minimum
      EBITDA

              
	 	 
	
                for
      the twelve (12) consecutive month period ending July 31,
    2011

              	
                $6,295,000

              
	 	 
	
                for
      the twelve (12) consecutive month period ending August 31,
      2011

              	
                $6,458,000

              
	 	 
	
                for
      the twelve (12) consecutive month period ending September 30,
      2011

              	
                $6,850,000

              
	 	 
	
                for
      the twelve (12) consecutive month period ending October 31,
      2011

              	
                $7,066,000

              
	 	 
	
                for
      the twelve (12) consecutive month period ending November 30,
      2011

              	
                $7,282,000

              
	 	 
	
                for
      the twelve (12) consecutive month period ending December 31,
      2011

              	
                $7,532,000

              
	 	 
	
                for
      the twelve (12) consecutive month period ending January 31,
      2012

              	
                $7,397,000

              
	 	 
	
                for
      the twelve (12) consecutive month period ending February 28,
      2012

              	
                $7,158,000

              
	 	 
	
                for
      the twelve (12) consecutive month period ending March 31,
    2012

              	
                $6,784,000

              
	 	 
	
                for
      the twelve (12) consecutive month period ending April 30,
    2012

              	
                $6,517,000

              
	 	 
	
                for
      the twelve (12) consecutive month period ending May 31,
    2012

              	
                $6,217,000

              
	 	 
	
                for
      the twelve (12) consecutive month period ending June 30,
    2012

              	
                $5,871,000

              

      

    

    

    9.18           License
Agreements.

     

    (a)           Each
Borrower and Guarantor shall (i) promptly and faithfully observe and perform all
of the material terms, covenants, conditions and provisions of the material
License Agreements to which it is a party to be observed and performed by it, at
the times set forth therein, if any, (ii) not do, permit, suffer or refrain from
doing anything that could reasonably be expected to result in a default under or
breach of any of the terms of any material License Agreement, (iii) not cancel,
surrender, modify, amend, waive or release any material License Agreement in any
material respect or any term, provision or right of the licensee thereunder in
any material respect, or consent to or permit to occur any of the foregoing;
except, that, subject to
Section 9.18(b) below, such Borrower or Guarantor may cancel, surrender or
release any material License Agreement in the ordinary course of the business of
such Borrower or Guarantor; provided, that, such Borrower
or Guarantor (as the case may be) shall give Agent not less than thirty (30)
days prior written notice of its intention to so cancel, surrender and release
any such material License Agreement, (iv) give

     

    
      
         

      

      
        100

        
          

        

      

      
         

      

    

    Agent
prompt written notice of any material License Agreement entered into by such
Borrower or Guarantor after the date hereof, together with a true, correct and
complete copy thereof and such other information with respect thereto as Agent
may request, (v) give Agent prompt written notice of any material breach of any
obligation, or any default, by any party under any material License Agreement,
and deliver to Agent (promptly upon the receipt thereof by such Borrower or
Guarantor in the case of a notice to such Borrower or Guarantor and concurrently
with the sending thereof in the case of a notice from such Borrower or
Guarantor) a copy of each notice of default and every other notice and other
communication received or delivered by such Borrower or Guarantor in connection
with any material License Agreement which relates to the right of such Borrower
or Guarantor to continue to use the property subject to such License Agreement,
and (vi) furnish to Agent, promptly upon the request of Agent, such information
and evidence as Agent may reasonably require from time to time concerning the
observance, performance and compliance by such Borrower or Guarantor or the
other party or parties thereto with the material terms, covenants or provisions
of any material License Agreement.

     

    (b)           Each
Borrower and Guarantor will either exercise any option to renew or extend the
term of each material License Agreement to which it is a party in such manner as
will cause the term of such material License Agreement to be effectively renewed
or extended for the period provided by such option and give prompt written
notice thereof to Agent or give Agent prior written notice that such Borrower or
Guarantor does not intend to renew or extend the term of any such material
License Agreement or that the term thereof shall otherwise be expiring, not less
than sixty (60) days prior to the date of any such non-renewal or
expiration.  In the event of the failure of such Borrower or Guarantor
to extend or renew any material License Agreement to which it is a party, Agent
shall have, and is hereby granted, the irrevocable right and authority, at its
option, to renew or extend the term of such material License Agreement, whether
in its own name and behalf, or in the name and behalf of a designee or nominee
of Agent or in the name and behalf of such Borrower or Guarantor, as Agent shall
determine at any time that an Event of Default shall exist or have occurred and
be continuing.  Agent may, but shall not be required to, perform any
or all of such obligations of such Borrower or Guarantor under any of the
License Agreements, including, but not limited to, the payment of any or all
sums due from such Borrower or Guarantor thereunder.  Any sums so paid
by Agent shall constitute part of the Obligations.

     

    9.19           Foreign Assets Control
Regulations, Etc.  None of the requesting or borrowing of the
Loans or the requesting or issuance, extension or renewal of any Letter of
Credit or the use of the proceeds of any thereof will violate the Trading With
the Enemy Act (50 USC §1 et seq., as amended) (the “Trading With the Enemy Act”)
or any of the foreign assets control regulations of the United States Treasury
Department (31 C.F.R., Subtitle B, Chapter V, as amended) (the “Foreign
Assets Control Regulations”) or any enabling legislation or executive order
relating thereto (including, but not limited to (a) Executive order 13224 of September 21, 2001
Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten
to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the “Executive
Order”) and (b) the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism Act of 2001 (Public Law 107-56).  None of Borrowers
or any of their Subsidiaries or other Affiliates is or will become a “blocked
person” as described in the Executive Order, the Trading with the Enemy Act or
the Foreign Assets Control Regulations or  engages or will engage in
any dealings or transactions, or be otherwise associated, with any such “blocked
person”.

     

    
      
         

      

      
        101

        
          

        

      

      
         

      

    

    9.20           Costs and
Expenses.  Borrowers and Guarantors
shall pay to Agent on demand all reasonable costs, expenses, filing fees and
taxes paid or payable in connection with the preparation, negotiation,
execution, delivery, recording, syndication, administration, collection,
liquidation, enforcement and defense of the Obligations, Agent’s rights in the
Collateral, this Agreement, the other Financing Agreements and all other
documents related hereto or thereto, including any amendments, supplements or
consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including:  (a) all costs and expenses of filing or recording
(including UCC or PPSA financing statement filing taxes and fees, documentary
taxes, intangibles taxes and mortgage recording taxes and fees, if applicable);
(b) reasonable costs and expenses and fees
for insurance premiums, environmental audits, title insurance premiums, surveys,
assessments, engineering reports and inspections, appraisal fees.  and search fees, costs
and expenses of remitting loan proceeds, collecting checks and other items of
payment, and establishing and maintaining the Blocked Accounts, together with
Agent’s customary charges and fees with respect thereto; (c) customary charges, fees or expenses charged by
any bank or issuer in connection with the Letter of Credit Obligations; (d) reasonable costs and expenses of preserving and
protecting the Collateral; (e) reasonable
costs and expenses paid or incurred in connection with obtaining payment of the
Obligations, enforcing the security interests and liens of Agent in the
Collateral, selling or otherwise realizing upon the Collateral, and otherwise
enforcing the provisions of this Agreement and the other Financing Agreements or
defending any claims made or threatened against Agent or any Lender arising out
of the transactions contemplated hereby and thereby (including preparations for
and consultations concerning any such matters); (f) all reasonable out-of-pocket expenses and costs
heretofore and from time to time hereafter incurred by Agent during the course
of periodic field examinations of the Collateral and such Borrower’s or
Guarantor’s operations, plus a
per diem charge at Agent’s then standard rate for Agent’s examiners in the field
and office (which rate as of the date hereof is $950 per person per day);
(g) any VAT incurred by Agent or any
Lender; and (h) the reasonable fees and
disbursements of counsel (including legal assistants) to Agent in connection
with any of the foregoing.

     

    9.21           Applications under
Insolvency Statutes.  Each
Borrower and Guarantor acknowledges that its business and financial
relationships with Agent and Lenders are unique from its relationship with any
other of its creditors, and agrees that it shall not file any plan of
arrangement under the Companies’ Creditors Arrangement Act (Canada) or make any
proposal under the Bankruptcy and Insolvency Act (Canada) which provides for, or
would permit directly or indirectly, Agent or any Lender to be classified with
any other creditor as an “affected” creditor for purposes of such plan or
proposal or otherwise.

     

    9.22           After Acquired Real
Property.  If any
Borrower or Guarantor hereafter acquires any Real Property, fixtures or any
other property that is of the kind or nature described in the Mortgages and such
Real Property, fixtures or other property is adjacent to, contiguous with or
necessary or related to or used in connection with any Real Property then
subject to a Mortgage, or if such Real Property is not adjacent to, contiguous
with or related to or used in connection with such Real Property, then if such
Real Property, fixtures or other property at any location (or series of
adjacent, contiguous or related locations, and regardless of the number of
parcels) has a fair market value in an amount equal to or greater than $250,000
(or if a Default or Event of Default exists, then regardless of the fair market
value of such assets), without limiting any other rights of Agent or any Lender,
or duties or obligations of any Borrower or Guarantor, promptly upon Agent’s
request, such Borrower or Guarantor shall execute and deliver to Agent a
mortgage, deed of trust or deed to secure debt, as

     

    
      
         

      

      
        102

        
          

        

      

      
         

      

    

    Agent
may determine, in form and substance substantially similar to the Mortgages and
as to any provisions relating to specific state laws satisfactory to Agent and
in form appropriate for recording in the real estate records of the jurisdiction
in which such Real Property or other property is located granting to Agent a
first and only lien and mortgage on and security interest in such Real Property,
fixtures or other property (except as such Borrower or Guarantor would otherwise
be permitted to incur hereunder or under the Mortgages or as otherwise consented
to in writing by Agent) and such other agreements, documents and instruments as
Agent may require in connection therewith.

     

    9.23           Further
Assurances.  At the
request of Agent at any time and from time to time, Borrowers and Guarantors
shall, at their expense, duly execute and deliver, or cause to be duly executed
and delivered, such further agreements, documents and instruments, and do or
cause to be done such further acts as may be necessary or proper to evidence,
perfect, maintain and enforce the security interests and the priority thereof in
the Collateral and to otherwise effectuate the provisions or purposes of this
Agreement or any of the other Financing Agreements.  Agent may at any
time and from time to time request a certificate from an officer of any Borrower
or Guarantor representing that all conditions precedent to the making of Loans
and providing Letters of Credit contained herein are satisfied.  In
the event of such request by Agent, Agent and Lenders may, at Agent’s option,
cease to make any further Loans or provide any further Letters of Credit until
Agent has received such certificate and, in addition, Agent has determined that
such conditions are satisfied.

     

    
      
        	
                SECTION
      10.  EVENTS OF DEFAULT AND
      REMEDIES

              

      

    

     

    10.1           Events of
Default.  The
occurrence or existence of any one or more of the following events are referred
to herein individually as an “Event of Default”, and collectively as “Events of
Default”:

     

    (a)           (i)
any Borrower fails to pay any of the Obligations when due or (ii) any Borrower
or Guarantor fails to perform any of the covenants contained in Sections 9.2,
9.3, 9.4, 9.6, 9.8, 9.13, 9.14, 9.15, and 9.16 of this Agreement and such
failure shall continue for thirty (30) days; provided, that, such thirty
(30) day period shall not apply in the case of: (A) any failure to observe any
such covenant which is not capable of being cured at all or within such thirty
(30) day period or which has been the subject of a prior failure within a six
(6) month period or (B) an intentional breach by any Borrower or Guarantor of
any such covenant or (iii) any Borrower or Guarantor fails to perform any of the
terms, covenants, conditions or provisions contained in this Agreement or any of
the other Financing Agreements other than those described in Sections 10.1(a)(i)
and 10.1(a)(ii) above and such failure shall continue for five (5) days; provided, that, such five (5)
day period shall not apply in the case of: (A) any failure to observe any such
covenant which is not capable of being cured at all or within such five (5) day
period or which has been the subject of a prior failure within a six (6) month
period or (B) an intentional breach by any Borrower or Guarantor of any such
term, covenant, condition or provision;

     

    (b)           any
representation, warranty or statement of fact made by any Borrower or Guarantor
to Agent in this Agreement, the other Financing Agreements or any other written
agreement, schedule, confirmatory assignment or otherwise shall when made or
deemed made be false or misleading in any material respect;

     

    
      
         

      

      
        103

        
          

        

      

      
         

      

    

    (c)           any
Guarantor revokes or terminates or purports to revoke or terminate or fails to
perform any of the terms, covenants, conditions or provisions of any guarantee,
endorsement or other agreement of such party in favor of Agent or any
Lender;

     

    (d)           any
judgment for the payment of money is rendered against any Borrower or Guarantor
in excess of $100,000 in any one case or in excess of $250,000 in the aggregate
(to the extent not covered by insurance where the insurer has assumed
responsibility in writing for such judgment) and shall remain undischarged or
unvacated for a period in excess of thirty (30) days or execution shall at any
time not be effectively stayed, or any judgment other than for the payment of
money, or injunction, attachment, garnishment or execution is rendered against
any Borrower or Guarantor or any of the Collateral having a value in excess of
$100,000;

     

    (e)           any
Borrower or Guarantor, which is a partnership, limited liability company,
limited partnership or a corporation, dissolves or suspends or discontinues
doing business;

     

    (f)           any
Borrower or Guarantor makes an assignment for the benefit of
creditors;

     

    (g)           a
case or proceeding under the bankruptcy laws of the United States of America now
or hereafter in effect or a petition, case, application or proceeding under any
bankruptcy or insolvency laws of Canada (including the Bankruptcy and Insolvency
Act (Canada) and the Companies’ Creditors Arrangement Act (Canada)) or under any
insolvency, reorganization, receivership, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction now or hereafter in effect
(whether at law or in equity) is filed against any Borrower or Obligor or all or
any part of its properties and such petition, case, application or proceeding is
not dismissed within sixty (60) days after the date of its filing or any
Borrower or Obligor shall file any answer admitting or not contesting such
petition, case, application or proceeding or indicates its consent to,
acquiescence in or approval of, any such action or proceeding or the relief
requested is granted sooner;

     

    (h)           (i)  a
case or proceeding under the bankruptcy laws of the United States of America now
or hereafter in effect or under any insolvency, reorganization, receivership,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction now or hereafter in effect (whether at a law or equity) is filed by
any Borrower or Obligor or for all or any part of its property or (ii) a
petition, case, application or proceeding under any bankruptcy or insolvency
laws of Canada (including the Bankruptcy and Insolvency Act (Canada) and the
Companies’ Creditors Arrangement Act (Canada)), or any similar law now or
hereafter in effect in any jurisdiction or under any insolvency, arrangement,
reorganization, moratorium, administration, receivership, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction now or hereafter
in effect (whether at a law or equity) is filed, taken or commenced after the
date hereof by any Borrower or Obligor or for all or any part of its property,
including, without limitation, if any Borrower or Obligor shall:  (A)
apply for, request or consent to the appointment of a receiver, administrative
receiver, receiver and manager, examiner, judicial custodian, trustee,
liquidator, official manager, administrator, controller or any other similar
official of it or of all or a substantial part of its property and assets, (B)
be generally unable, or admit in writing its inability, to pay its debts as they
become due, (C) make a general assignment for the benefit of creditors, (D) file
a voluntary petition or assignment in bankruptcy or a proposal seeking a
reorganization, compromise, moratorium or arrangement with its creditors, (E)
take advantage of any insolvency or other similar law pertaining to
arrangements, moratoriums, compromises or reorganizations, or admit the material
allegations of a petition or application filed in respect of it in any
bankruptcy, reorganization or insolvency proceeding, or (F) take any corporate
action for the purpose of effecting any of the foregoing;

     

    
      
         

      

      
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    (i)           any
material provision hereof or of any of the other Financing Agreements shall for
any reason cease to be valid, binding and enforceable with respect to any party
hereto or thereto (other than Agent) in accordance with its terms, or any such
party shall challenge the enforceability hereof or thereof, or shall assert in
writing, or take any action or fail to take any action based on the assertion
that any provision hereof or of any of the other Financing Agreements has ceased
to be or is otherwise not valid, binding or enforceable in accordance with its
terms, or any security interest provided for herein or in any of the other
Financing Agreements shall cease to be a valid and perfected first priority
security interest in any of the Collateral purported to be subject thereto
(except as otherwise permitted herein or therein);

     

    (j)           any
(i)(A) Termination Event under or in respect of any of the Faunus Factoring
Documents or (B) default of any Borrower or Obligor in respect of any
Indebtedness (other than Indebtedness owing to Agent and Lenders hereunder or
under the Faunus Factoring Documents) in any case in an amount in excess of
$250,000, in the case of clauses (A) or (B) which Termination Event and/or
default continues for more than the applicable cure period, if any, with respect
thereto and/or is not waived in writing by the other parties thereto, or (ii)
default by any Borrower or Obligor under any Material Contract, which default
continues for more than the applicable cure period, if any, with respect thereto
and/or is not waived in writing by the other parties thereto;

     

    (k)           an
ERISA Event shall occur which results in or could reasonably be expected to
result in liability of any Borrower in an aggregate amount in excess of
$100,000;

     

    (l)           any
Change of Control;

     

    (m)           the
indictment by any Governmental Authority, or as Agent may reasonably and in good
faith determine, the threatened indictment by any Governmental Authority of any
Borrower or Guarantor of which any Borrower, Guarantor or Agent receives notice,
in either case, as to which there is a reasonable possibility of an adverse
determination, in the good faith determination of Agent, under any criminal
statute, or commencement or threatened commencement of criminal or civil
proceedings against such Borrower or Guarantor, pursuant to which statute or
proceedings the penalties or remedies sought or available include forfeiture of
(i) any of the Collateral having a value in excess of $50,000 or (ii) any other
property of any Borrower or Guarantor which is necessary or material to the
conduct of its business;

     

    (n)           there
shall occur a Material Adverse Effect;

     

    (o)           a
requirement from the Minister of National Revenue for payment pursuant to
Section 224, or any successor section, of the Income Tax Act (Canada) or Section
317, or any successor section, of the Excise Tax Act (Canada), or any comparable
provisions of similar legislation shall have been received by Agent or any
Lender or any other Person in respect of any Borrower or is otherwise issued in
respect of any Borrower involving an amount in excess of the US Dollar
Equivalent of $250,000; or

     

    (p)           there
shall be an event of default under any of the other Financing
Agreements.

     

    
      
         

      

      
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    10.2           Remedies.

     

    (a)           At
any time an Event of Default exists or has occurred and is continuing, Agent and
Lenders shall have all rights and remedies provided in this Agreement, the other
Financing Agreements, the UCC, the PPSA and other applicable law, all of which
rights and remedies may be exercised without notice to or consent by any
Borrower or Obligor, except as such notice or consent is expressly provided for
hereunder or required by applicable law.  All rights, remedies and
powers granted to Agent and Lenders hereunder, under any of the other Financing
Agreements, the UCC, the PPSA or other applicable law, are cumulative, not
exclusive and enforceable, in Agent’s discretion, alternatively, successively,
or concurrently on any one or more occasions, and shall include, without
limitation, the right to apply to a court of equity for an injunction to
restrain a breach or threatened breach by any Borrower or Obligor of this
Agreement or any of the other Financing Agreements.  Subject to
Section 12 hereof, Agent may, and at the direction of the Required Lenders
shall, at any time or times, proceed directly against any Borrower or Obligor to
collect the Obligations without prior recourse to the Collateral.

     

    (b)           Without
limiting the generality of the foregoing, at any time an Event of Default exists
or has occurred and is continuing, Agent may, at its option and shall upon the
direction of the Required Lenders, (i) upon notice to Administrative Borrower,
accelerate the payment of all Obligations and demand immediate payment thereof
to Agent for itself and the benefit of Lenders (provided, that, upon the
occurrence of any Event of Default described in Sections 10.1(g) and 10.1(h),
all Obligations shall automatically become immediately due and payable), and
(ii) terminate the Commitments and this Agreement (provided, that, upon the
occurrence of any Event of Default described in Sections 10.1(g) and 10.1(h),
the Commitments and any other obligation of the Agent or a Lender hereunder
shall automatically terminate).

     

    (c)           Without
limiting the foregoing, at any time an Event of Default exists or has occurred
and is continuing, Agent may, in its discretion (i) with or without judicial
process or the aid or assistance of others, enter upon any premises on or in
which any of the Collateral may be located and take possession of the Collateral
or complete processing, manufacturing and repair of all or any portion of the
Collateral, (ii) require any Borrower or Guarantor, at Borrowers’ expense, to
assemble and make available to Agent any part or all of the Collateral at any
place and time designated by Agent, (iii) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (iv) remove any or
all of the Collateral from any premises on or in which the same may be located
for the purpose of effecting the sale, foreclosure or other disposition thereof
or for any other purpose, (v) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including entering into contracts
with respect thereto, public or private sales at any exchange, broker’s board,
at any office of Agent or elsewhere) at such prices or terms as Agent may deem
reasonable, for cash, upon credit or for future delivery, with the Agent having
the right to purchase the whole or any part of the Collateral at any such public
sale, all of the foregoing being free from any right or equity of redemption of
any Borrower or Guarantor, which right or equity of redemption is hereby
expressly waived and released by Borrowers and Guarantors and/or (vi) terminate
this Agreement.  If any of the Collateral is sold or leased by Agent
upon credit terms or for future delivery, the Obligations shall not be reduced
as a result thereof until payment therefor is finally collected by
Agent.  If notice of disposition of Collateral is required by law, ten
(10) days prior notice by Agent to Administrative Borrower designating the time
and place of any public sale or the time after which any private sale or other
intended disposition of Collateral is to be made, shall be

     

    
      
         

      

      
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    deemed
to be reasonable notice thereof and Borrowers and Guarantors waive any other
notice.  In the event Agent institutes an action to recover any
Collateral or seeks recovery of any Collateral by way of prejudgment remedy,
each Borrower and Guarantor waives the posting of any bond which might otherwise
be required. At any time an Event of Default exists or has occurred and is
continuing, upon Agent’s request, Borrowers will either, as Agent shall specify,
furnish cash collateral to Issuing Bank to be used to secure and fund the
reimbursement obligations to Issuing Bank in connection with any Letter of
Credit Obligations or furnish cash collateral to Agent for the Letter of Credit
Obligations.  Such cash collateral shall be in the amount equal to one
hundred five (105%) percent of the amount of the Letter of Credit Obligations
plus the amount
of any fees and expenses payable in connection therewith through the end of the
latest expiration date of the Letters of Credit giving rise to such Letter of
Credit Obligations.

     

    (d)           At
any time or times that an Event of Default exists or has occurred and is
continuing, Agent may, in its discretion, enforce the rights of any Borrower or
Guarantor against any account debtor, secondary obligor or other obligor in
respect of any of the Accounts or other Receivables.  Without limiting
the generality of the foregoing, Agent may, in its discretion, at such time or
times (i) notify any or all account debtors, secondary obligors or other
obligors in respect thereof that the Receivables have been assigned to Agent and
that Agent has a security interest therein and Agent may direct any or all
account debtors, secondary obligors and other obligors to make payment of
Receivables directly to Agent, (ii) extend the time of payment of, compromise,
settle or adjust for cash, credit, return of merchandise or otherwise, and upon
any terms or conditions, any and all Receivables or other obligations included
in the Collateral and thereby discharge or release the account debtor or any
secondary obligors or other obligors in respect thereof without affecting any of
the Obligations, (iii) demand, collect or enforce payment of any Receivables or
such other obligations, but without any duty to do so, and Agent and Lenders
shall not be liable for any failure to collect or enforce the payment thereof
nor for the negligence of its agents or attorneys with respect thereto and (iv)
take whatever other action Agent may deem necessary or desirable for the
protection of its interests and the interests of Lenders.  At any time
that an Event of Default exists or has occurred and is continuing, at Agent’s
request, all invoices and statements sent to any account debtor shall state that
the Accounts and such other obligations have been assigned to Agent and are
payable directly and only to Agent and Borrowers and Guarantors shall deliver to
Agent such originals of documents evidencing the sale and delivery of goods or
the performance of services giving rise to any Accounts as Agent may
require.  In the event any account debtor returns Inventory when an
Event of Default exists or has occurred and is continuing, Borrowers shall, upon
Agent’s request, hold the returned Inventory in trust for Agent, segregate all
returned Inventory from all of its other property, dispose of the returned
Inventory solely according to Agent’s instructions, and not issue any credits,
discounts or allowances with respect thereto without Agent’s prior written
consent.

     

    (e)           To
the extent that applicable law imposes duties on Agent or any Lender to exercise
remedies in a commercially reasonable manner (which duties cannot be waived
under such law), each Borrower and Guarantor acknowledges and agrees that it is
not commercially unreasonable for Agent or any Lender (i) to fail to incur
expenses reasonably deemed significant by Agent or any Lender to prepare
Collateral for disposition or otherwise to complete raw material or work in
process into finished goods or other finished products for disposition, (ii) to
fail to obtain

     

    
      
         

      

      
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    third
party consents for access to Collateral to be disposed of, or to obtain or, if
not required by other law, to fail to obtain consents of any Governmental
Authority or other third party for the collection or disposition of Collateral
to be collected or disposed of, (iii) to fail to exercise collection remedies
against account debtors, secondary obligors or other persons obligated on
Collateral or to remove liens or encumbrances on or any adverse claims against
Collateral, (iv) to exercise collection remedies against account debtors and
other persons obligated on Collateral directly or through the use of collection
agencies and other collection specialists, (v) to advertise dispositions of
Collateral through publications or media of general circulation, whether or not
the Collateral is of a specialized nature, (vi) to contact other persons,
whether or not in the same business as any Borrower or Guarantor, for
expressions of interest in acquiring all or any portion of the Collateral, (vii)
to hire one or more professional auctioneers to assist in the disposition of
Collateral, whether or not the collateral is of a specialized nature, (viii) to
dispose of Collateral by utilizing Internet sites that provide for the auction
of assets of the types included in the Collateral or that have the reasonable
capability of doing so, or that match buyers and sellers of assets, (ix) to
dispose of assets in wholesale rather than retail markets, (x) to disclaim
disposition warranties, (xi) to purchase insurance or credit enhancements to
insure Agent or Lenders against risks of loss, collection or disposition of
Collateral or to provide to Agent or Lenders a guaranteed return from the
collection or disposition of Collateral, or (xii) to the extent deemed
appropriate by Agent, to obtain the services of other brokers, investment
bankers, consultants and other professionals to assist Agent in the collection
or disposition of any of the Collateral. Each Borrower and Guarantor
acknowledges that the purpose of this Section is to provide non-exhaustive
indications of what actions or omissions by Agent or any Lender would not be
commercially unreasonable in the exercise by Agent or any Lender of remedies
against the Collateral and that other actions or omissions by Agent or any
Lender shall not be deemed commercially unreasonable solely on account of not
being indicated in this Section. Without limitation of the foregoing, nothing
contained in this Section shall be construed to grant any rights to any Borrower
or Guarantor or to impose any duties on Agent or Lenders that would not have
been granted or imposed by this Agreement or by applicable law in the absence of
this Section.

     

    (f)           For
the purpose of enabling Agent to exercise the rights and remedies hereunder,
each Borrower and Guarantor hereby grants to Agent, to the extent assignable, an
irrevocable, non-exclusive license (exercisable at any time an Event of Default
shall exist or have occurred and for so long as the same is continuing) without
payment of royalty or other compensation to any Borrower or Guarantor, to use,
assign, license or sublicense any of the trademarks, service-marks, trade names,
business names, trade styles, designs, logos and other source of business
identifiers and other Intellectual Property and general intangibles now owned or
hereafter acquired by any Borrower or Guarantor, wherever the same may be
located, including in such license reasonable access to all media in which any
of the licensed items may be recorded or stored and to all computer programs
used for the compilation or printout thereof.

     

    (g)           At
any time an Event of Default exists or has occurred and is continuing, Agent may
apply the cash proceeds of Collateral actually received by Agent from any sale,
lease, foreclosure or other disposition of the Collateral to payment of the
Obligations, in whole or in part and in accordance with the terms hereof,
whether or not then due or may hold such proceeds as cash collateral for the
Obligations.  Borrowers and Guarantors shall remain liable to Agent
and Lenders for the payment of any deficiency with interest at the highest rate
provided for herein and all costs and expenses of collection or enforcement,
including attorneys’ fees and expenses.

     

    
      
         

      

      
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    (h)           Without
limiting the foregoing, upon the occurrence of a Default or an Event of Default,
(i) Agent and Lenders may, at Agent’s option, and upon the occurrence of an
Event of Default at the direction of the Required Lenders, Agent and Lenders
shall, without notice, (A) cease making Loans or arranging for Letters of Credit
or reduce the lending formulas or amounts of Loans and Letters of Credit
available to Borrowers and/or (B) terminate any provision of this Agreement
providing for any future Loans or Letters of Credit to be issued by Issuing Bank
and (ii) Agent may, at its option, establish such Reserves as Agent determines,
without limitation or restriction, notwithstanding anything to the contrary
contained herein.

     

    (i)           Agent
may seek the appointment of a receiver, receiver-manager or keeper
(a ”Receiver”) under the laws of Canada or any Province thereof to take
possession of all or any portion of the Collateral of a Canadian Borrower or to
operate same and, to the maximum extent permitted by law, may seek the
appointment of such a receiver without the requirement of prior notice or a
hearing.  Any such Receiver shall, so far as concerns responsibility
for his/her acts, be deemed agent of Canadian Borrower and not Agent and the
Lenders, and Agent and the Lenders shall not be in any way responsible for any
misconduct, negligence or non-feasance on the part of any such Receiver, his/her
servants or employees.  Subject to the provisions of the instrument
appointing him/her, any such Receiver shall have power to take possession of
Collateral of a Canadian Borrower, to preserve Collateral of a Canadian Borrower
or its value, to carry on or concur in carrying on all or any part of the
business of a Canadian Borrower and to sell, lease, license or otherwise dispose
of or concur in selling, leasing, licensing or otherwise disposing of Collateral
of a Canadian Borrower.  To facilitate the foregoing powers, any such
Receiver may, to the exclusion of all others, including a Canadian Borrower,
enter upon, use and occupy all premises owned or occupied by a Canadian Borrower
wherein Collateral of a Canadian Borrower may be situated, maintain Collateral
of a Canadian Borrower upon such premises, borrow money on a secured or
unsecured basis and use Collateral of a Canadian Borrower directly in carrying
on a Canadian Borrower’s business or as security for loans or advances to enable
the Receiver to carry on a Canadian Borrower’s business or otherwise, as such
Receiver shall, in its discretion, determine.  Except as may be
otherwise directed by Agent, all money received from time to time by such
Receiver in carrying out his/her appointment shall be received in trust for and
paid over to Agent.  Every such Receiver may, in the discretion of
Agent, be vested with all or any of the rights and powers of Agent and the
Canadian Lenders.  Agent may, either directly or through its nominees,
exercise any or all powers and rights given to a Receiver by virtue of the
foregoing provisions of this paragraph.

     

    
      	
              SECTION
      11.

            	
              JURY TRIAL WAIVER;
      OTHER WAIVERS AND CONSENTS; GOVERNING
LAW

            

    

     

    11.1           Governing Law; Choice of
Forum; Service of Process; Jury Trial Waiver.

     

    (a)           The
validity, interpretation and enforcement of this Agreement and the other
Financing Agreements (except as otherwise provided therein) and any dispute
arising out of the relationship between the parties hereto, whether in contract,
tort, equity or otherwise, shall be governed by the internal laws of the State
of New York but excluding any principles of conflicts of law or other rule of
law that would cause the application of the law of any jurisdiction other than
the laws of the State of New York.

     

    
      
         

      

      
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    (b)           Borrowers,
Guarantors, Agent, Lenders and Issuing Bank irrevocably consent and submit to
the non-exclusive jurisdiction of the Supreme Court of the State of New York,
New York County and the United States District Court for the Southern District
of New York, whichever Lender may elect, and waive any objection based on venue
or forum non conveniens with
respect to any action instituted therein arising under this Agreement or any of
the other Financing Agreements or in any way connected with or related or
incidental to the dealings of the parties hereto in respect of this Agreement or
any of the other Financing Agreements or the transactions related hereto or
thereto, in each case whether now existing or hereafter arising, and whether in
contract, tort, equity or otherwise, and agree that any dispute with respect to
any such matters shall be heard only in the courts described above (except, that, Agent and
Lenders shall have the right to bring any action or proceeding against any
Borrower or Guarantor or its or their property in the courts of any other
jurisdiction which Agent deems necessary or appropriate in order to realize on
the Collateral or to otherwise enforce its rights against any Borrower or
Guarantor or its or their property).

     

    (c)           Each
Borrower and Guarantor hereby waives personal service of any and all process
upon it and consents that all such service of process may be made by certified
mail (return receipt requested) directed to its address set forth herein and
service so made shall be deemed to be completed five (5) days after the same
shall have been so deposited in the U.S. mails, or, at Agent’s option, by
service upon any Borrower or Guarantor (or Administrative Borrower on behalf of
such Borrower or Guarantor) in any other manner provided under the rules of any
such courts.  Within thirty (30) days after such service, such
Borrower or Guarantor shall appear in answer to such process, failing which such
Borrower or Guarantor shall be deemed in default and judgment may be entered by
Agent against such Borrower or Guarantor for the amount of the claim and other
relief requested.

     

    (d)           BORROWERS,
GUARANTORS, AGENT, ISSUING BANK AND LENDERS EACH HEREBY WAIVES ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR IN ANY WAY CONNECTED WITH
OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF
THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR
OTHERWISE.  BORROWERS, GUARANTORS, AGENT, ISSUING BANK AND LENDERS
EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY BORROWER, ANY
GUARANTOR, AGENT OR ANY LENDER OR ISSUING BANK MAY FILE AN ORIGINAL COUNTERPART
OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

     

    (e)           Agent,
Lenders and Issuing Bank shall not have any liability to any Borrower or
Guarantor (whether in tort, contract, equity or otherwise) for losses suffered
by such Borrower or Guarantor in connection with, arising out of, or in any way
related to the transactions or relationships contemplated by this Agreement, or
any act, omission or event occurring in connection herewith, unless it is
determined by a final and non-appealable judgment or court order binding on
Agent, such Lender and Issuing Bank, that the losses were the result of acts or
omissions constituting gross

     

    
      
         

      

      
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    negligence
or willful misconduct.  In any such litigation, Agent, Lenders and
Issuing Bank shall be entitled to the benefit of the rebuttable presumption that
it acted in good faith and with the exercise of ordinary care in the performance
by it of the terms of this Agreement.  Each Borrower and
Guarantor:  (36) certifies that neither Agent, any Lender, Issuing
Bank nor any representative, agent or attorney acting for or on behalf of Agent,
any Lender or Issuing Bank has represented, expressly or otherwise, that Agent,
Lenders and Issuing Bank would not, in the event of litigation, seek to enforce
any of the waivers provided for in this Agreement or any of the other Financing
Agreements and (37) acknowledges that in entering into this Agreement and the
other Financing Agreements, Agent, Lenders and Issuing Bank are relying upon,
among other things, the waivers and certifications set forth in this Section
11.1 and elsewhere herein and therein.

     

    11.2           Waiver of
Notices.  Each
Borrower and Guarantor hereby expressly waives demand, presentment, protest and
notice of protest and notice of dishonor with respect to any and all instruments
and chattel paper, included in or evidencing any of the Obligations or the
Collateral, and any and all other demands and notices of any kind or nature
whatsoever with respect to the Obligations, the Collateral and this Agreement,
except such as are expressly provided for herein.  No notice to or
demand on any Borrower or Guarantor which Agent or any Lender may elect to give
shall entitle such Borrower or Guarantor to any other or further notice or
demand in the same, similar or other circumstances.

     

    11.3           Amendments and
Waivers.

     

    (a)           Neither
this Agreement nor any other Financing Agreement nor any terms hereof or thereof
may be amended, waived, discharged or terminated unless such amendment, waiver,
discharge or termination is in writing signed by Agent and the Required Lenders
or at Agent’s option, by Agent with the authorization or consent of the Required
Lenders, and as to amendments to any of the Financing Agreements (other than
with respect to any provision of Section 12 hereof), by any Borrower and such
amendment, waiver, discharger or termination shall be effective and binding as
to all Lenders and Issuing Bank only in the specific instance and for the
specific purpose for which given; except, that, no such amendment, waiver,
discharge or termination shall:

     

    (i)           reduce
the interest rate or any fees or extend the time of payment of principal,
interest or any fees or reduce the principal amount of any Loan or Letters of
Credit, in each case without the consent of each Lender directly affected
thereby,

     

    (ii)           increase
the Commitment of any Lender over the amount thereof then in effect or provided
hereunder, in each case without the consent of the Lender directly affected
thereby,

     

    (iii)           increase
the amount of the Maximum Credit, the US Revolving Loan Maximum Amount or the
Canadian Revolving Loan Maximum Amount without the consent of all
Lenders;

     

    (iv)           release
any Collateral (except as expressly required hereunder or under any of the other
Financing Agreements or applicable law and except as permitted under Section
12.11(b) hereof), without the consent of Agent and all of Lenders,

     

    
      
         

      

      
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    (v)           reduce
any percentage specified in the definition of Required Lenders, without the
consent of Agent and all of Lenders,

     

    (vi)           consent
to the assignment or transfer by any Borrower or Guarantor of any of their
rights and obligations under this Agreement, without the consent of Agent and
all of Lenders,

     

    (vii)           amend,
modify or waive any terms of this Section 11.3 hereof, without the consent of
Agent and all of Lenders, or

     

    (viii)           increase
the advance rates constituting part of the Borrowing Base or increase the
sublimits with respect to Revolving Loans based on Eligible Inventory Loan Limit
or the Letter of Credit Limit, without the consent of Agent and all of
Lenders.

     

    (b)           Agent,
Lenders and Issuing Bank shall not, by any act, delay, omission or otherwise be
deemed to have expressly or impliedly waived any of its or their rights, powers
and/or remedies unless such waiver shall be in writing and signed as provided
herein.  Any such waiver shall be enforceable only to the extent
specifically set forth therein.  A waiver by Agent, any Lender or
Issuing Bank of any right, power and/or remedy on any one occasion shall not be
construed as a bar to or waiver of any such right, power and/or remedy which
Agent, any Lender or Issuing Bank would otherwise have on any future occasion,
whether similar in kind or otherwise.

     

    (c)           Notwithstanding
anything to the contrary contained in Section 11.3(a) above, in connection with
any amendment, waiver, discharge or termination, in the event that any Lender
whose consent thereto is required shall fail to consent or fail to consent in a
timely manner (such Lender being referred to herein as a “Non-Consenting
Lender”), but the consent of any other Lenders to such amendment, waiver,
discharge or termination that is required are obtained, if any, then Wachovia
shall have the right, but not the obligation, at any time thereafter, and upon
the exercise by Wachovia of such right, such Non-Consenting Lender shall have
the obligation, to sell, assign and transfer to Wachovia or such Eligible
Transferee as Wachovia may specify, the Commitment of such Non-Consenting Lender
and all rights and interests of such Non-Consenting Lender pursuant
thereto.  Wachovia shall provide the Non-Consenting Lender with prior
written notice of its intent to exercise its right under this Section, which
notice shall specify on date on which such purchase and sale shall
occur.  Such purchase and sale shall be pursuant to the terms of an
Assignment and Acceptance (whether or not executed by the Non-Consenting
Lender); except, that, on the date of
such purchase and sale, Wachovia, or such Eligible Transferee specified by
Wachovia, shall pay to the Non-Consenting Lender (except as Wachovia and such
Non-Consenting Lender may otherwise agree) the amount equal to:  (38)
the principal balance of the Loans held by the Non-Consenting Lender outstanding
as of the close of business on the business day immediately preceding the
effective date of such purchase and sale, plus (39) amounts
accrued and unpaid in respect of interest and fees payable to the Non-Consenting
Lender to the effective date of the purchase (but in no event shall the
Non-Consenting Lender be deemed entitled to any early termination fee), minus (40) the amount
of the closing fee received by the Non-Consenting Lender pursuant to the terms
hereof or of any of the other Financing Agreements multiplied by the fraction,
the numerator of which is the number of months remaining in the then current
term of the Credit Facility and the denominator of which is the number of months
in the then current term thereof.  Such purchase and sale shall be
effective on the date of the payment of such amount to the Non-Consenting Lender
and the Commitment of the Non-Consenting Lender shall terminate on such
date.

     

    
      
         

      

      
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    (d)           The
consent of Agent shall be required for any amendment, waiver or consent
affecting the rights or duties of Agent hereunder or under any of the other
Financing Agreements, in addition to the consent of the Lenders otherwise
required by this Section and the exercise by Agent of any of its rights
hereunder with respect to Reserves or Eligible Accounts or Eligible Inventory
shall not be deemed an amendment to the advance rates provided for in this
Section 11.3.  The consent of Issuing Bank shall be required for any
amendment, waiver or consent affecting the rights or duties of Issuing Bank
hereunder or under any of the other Financing Agreements, in addition to the
consent of the Lenders otherwise required by this Section; provided, that, the consent of
Issuing Bank shall not be required for any other amendments, waivers or
consents.  Notwithstanding anything to the contrary contained in
Section 11.3(a) above, (41) in the event that Agent shall agree that any items
otherwise required to be delivered to Agent as a condition of the initial Loans
and Letters of Credit hereunder may be delivered after the date hereof, Agent
may, in its discretion, agree to extend the date for delivery of such items or
take such other action as Agent may deem appropriate as a result of the failure
to receive such items as Agent may determine or may waive any Event of Default
as a result of the failure to receive such items, in each case without the
consent of any Lender and (42) Agent may consent to any change in the type of
organization, jurisdiction of organization or other legal structure of any
Borrower, Guarantor or any of their Subsidiaries and amend the terms hereof or
of any of the other Financing Agreements as may be necessary or desirable to
reflect any such change, in each case without the approval of any
Lender.

     

    (e)           The
consent of Agent and a Bank Product Provider that is providing Bank Products and
has outstanding any such Bank Products at such time that are secured hereunder
shall be required for any amendment to the priority of payment of Obligations
arising under or pursuant to any Hedge Agreements of a Borrower or Guarantor or
other Bank Products as set forth in Section 6.4(a) hereof.

     

    11.4           Waiver of
Counterclaims.  Each
Borrower and Guarantor waives all rights to interpose any claims, deductions,
setoffs or counterclaims of any nature (other then compulsory counterclaims) in
any action or proceeding with respect to this Agreement, the Obligations, the
Collateral or any matter arising therefrom or relating hereto or
thereto.

     

    11.5           Indemnification.  Each
Borrower and Guarantor shall, jointly and severally, indemnify and hold Agent,
each Lender and Issuing Bank, and their respective officers, directors, agents,
employees, advisors and counsel and their respective Affiliates (each such
person being an “Indemnitee”), harmless from and against any and all losses,
claims, damages, liabilities, costs or expenses (including attorneys’ fees and
expenses) imposed on, incurred by or asserted against any of them in connection
with any litigation, investigation, claim or proceeding commenced or threatened
related to the negotiation, preparation, execution, delivery, enforcement,
performance or administration of this Agreement, any other Financing Agreements,
or any undertaking or proceeding related to any of the transactions contemplated
hereby or any act, omission, event or transaction related or attendant thereto,
including amounts paid in settlement, court costs, and the fees and expenses of
counsel except that Borrowers and Guarantors shall not have any obligation under
this Section 11.5 to indemnify an Indemnitee with respect to a matter covered
hereby resulting from the gross negligence or willful misconduct of such
Indemnitee as determined pursuant to a

     

    
      
         

      

      
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    final,
non-appealable order of a court of competent jurisdiction (but without limiting
the obligations of Borrowers or Guarantors as to any other
Indemnitee).   To the extent that the undertaking to indemnify,
pay and hold harmless set forth in this Section may be unenforceable because it
violates any law or public policy, Borrowers and Guarantors shall pay the
maximum portion which it is permitted to pay under applicable law to Agent and
Lenders in satisfaction of indemnified matters under this Section.  To
the extent permitted by applicable law, no Borrower or Guarantor shall assert,
and each Borrower and Guarantor hereby waives, any claim against any Indemnitee,
on any theory of liability, for special, indirect, consequential or punitive
damages (as opposed to direct or actual damages) arising out of, in connection
with, or as a result of, this Agreement, any of the other Financing Agreements
or any undertaking or transaction contemplated hereby.  No Indemnitee
referred to above shall be liable for any damages arising from the use by
unintended recipients of any information or other materials distributed by it
through telecommunications, electronic or other information transmission systems
in connection with this Agreement or any of the other Financing Agreements or
the transaction contemplated hereby or thereby.  All amounts due under
this Section shall be payable upon demand. The foregoing indemnity shall survive
the payment of the Obligations and the termination or non-renewal of this
Agreement.

     

    
      	
              SECTION
      12.

            	
              THE
      AGENT

            

    

     

    12.1           Appointment, Powers and
Immunities.

     

    (a)           Each
Lender and Issuing Bank irrevocably designates, appoints and authorizes Wachovia
to act as Agent hereunder and under the other Financing Agreements with such
powers as are specifically delegated to Agent by the terms of this Agreement and
of the other Financing Agreements, together with such other powers as are
reasonably incidental thereto.  Agent (43) shall have no duties or
responsibilities except those expressly set forth in this Agreement and in the
other Financing Agreements, and shall not by reason of this Agreement or any
other Financing Agreement be a trustee or fiduciary for any Lender; (44) shall
not be responsible to Lenders for any recitals, statements, representations or
warranties contained in this Agreement or in any of the other Financing
Agreements, or in any certificate or other document referred to or provided for
in, or received by any of them under, this Agreement or any other Financing
Agreement, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Financing Agreement
or any other document referred to or provided for herein or therein or for any
failure by any Borrower or any Guarantor or any other Person to perform any of
its obligations hereunder or thereunder; and (45) shall not be responsible to
Lenders for any action taken or omitted to be taken by it hereunder or under any
other Financing Agreement or under any other document or instrument referred to
or provided for herein or therein or in connection herewith or therewith, except
for its own gross negligence or willful misconduct as determined by a final
non-appealable judgment of a court of competent jurisdiction.  Agent
may employ agents and attorneys in fact and shall not be responsible for the
negligence or misconduct of any such agents or attorneys in fact selected by it
in good faith.  Agent may deem and treat the payee of any note as the
holder thereof for all purposes hereof unless and until the assignment thereof
pursuant to an agreement (if and to the extent permitted herein) in form and
substance satisfactory to Agent shall have been delivered to and acknowledged by
Agent.

     

    
      
         

      

      
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    (b)           Without
prejudice to Section 12.1(a) above, each of the Secured Parties hereby
irrevocably designates and appoints the Agent, as the person holding the power
of attorney (fondé de pouvoir) of Secured Parties as contemplated under Article
2692 of the Civil Code of Québec, to enter into, to take and to hold on their
behalf, and for their benefit, any deed of hypothec (“Deed of Hypothec”) to be
executed by any Borrower or Guarantor of any Obligations granting a lien (i.e.
hypothec) pursuant to the applicable law of the Province of Québec and to
exercise such powers and duties which are conferred thereupon under such
deed.  Each of the Secured Parties hereby additionally irrevocably
designates and appoints the Agent, as agent, mandatary, custodian and depositary
for and on behalf of Secured Parties (46) to hold and to be the sole registered
holder of any bond (“Bond”) issued under the Deed of Hypothec, the whole
notwithstanding Section 32 of the Act respecting the Special Powers of Legal
Persons (Québec) or any other applicable law, and (47) to enter into, to take
and to hold on their behalf, and for their benefit, a bond pledge agreement
(“Pledge”) to be executed by such Borrower or Guarantor pursuant to the
applicable law of the Province of Québec and creating a lien (i.e., hypothec) on
the Bond as security for the payment and performance of, inter
alia the
Obligations.  In this respect, (a) the Agent as agent, mandatary,
custodian and depositary for and on behalf of Secured Parties, shall keep a
record indicating the names and addresses of, and the pro rata portion of the
obligations and indebtedness secured by the Pledge, owing to each of Secured
Parties for and on behalf of whom the Bond is so held from time to time, and (b)
each of the Secured Parties will be entitled to the benefits of the security
created by the Deed of Hypothec on any property or assets charged under the Deed
of Hypothec and the Pledge and will participate in the proceeds of realization
of any such property or assets.  The Agent, in such aforesaid
capacities shall (i) have the sole and exclusive right and authority to
exercise, except as may be otherwise specifically restricted by the terms
hereof, all rights and remedies given to the Agent with respect to the property
or assets charged under the Deed of Hypothec and Pledge, any other applicable
law or otherwise, and (ii) benefit from and be subject to all provisions hereof
with respect to the Agent mutatis mutandis, including, without limitation, all
such provisions with respect to the liability or responsibility to and
indemnification by Secured Parties, Borrowers or Guarantors.  The
execution prior to the date hereof by the Agent of any Deed of hypothec, Pledge
or other security documents made pursuant to the applicable law of the Province
of Québec is hereby ratified and confirmed.  The constitution of the
Agent as the Person holding the power of attorney (fondé de pouvoir), and of the
Agent as agent, mandatary, custodian and depositary with respect to any bond
that may be issued and pledged from time to time to the Agent for the benefit of
Secured Parties, shall be deemed to have been ratified and confirmed by each
Person accepting an assignment of, a participation in or an arrangement in
respect of, all or any potion of any of the Secured Parties’ rights and
obligations under this Agreement by the execution of an assignment, including an
Assignment and Acceptance or other agreement pursuant to which it becomes such
assignee or participant, and by each successor Agent by the execution of an
Assignment Agreement or other agreement, or by the compliance with other
formalities, as the case may be, pursuant to which it becomes a successor Agent
under this Agreement.

     

    12.2           Reliance by
Agent.  Agent
shall be entitled to rely upon any certification, notice or other communication
(including any thereof by telephone, telecopy, telex, telegram or cable)
believed by it to be genuine and correct and to have been signed or sent by or
on behalf of the proper Person or Persons, and upon advice and statements of
legal counsel, independent accountants and other experts selected by
Agent.  As to any matters not expressly provided for by this Agreement
or any other Financing Agreement, Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder or thereunder in accordance with
instructions given by the Required Lenders or all of Lenders as is required in
such circumstance, and such instructions of such Agents and any action taken or
failure to act pursuant thereto shall be binding on all Lenders.

     

    
      
         

      

      
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    12.3           Events of
Default.

     

    (a)           Agent
shall not be deemed to have knowledge or notice of the occurrence of a Default
or an Event of Default or other failure of a condition precedent to the Loans
and Letters of Credit hereunder, unless and until Agent has received written
notice from a Lender, or Borrower specifying such Event of Default or any
unfulfilled condition precedent, and stating that such notice is a “Notice of
Default or Failure of Condition”.  In the event that Agent receives
such a Notice of Default or Failure of Condition, Agent shall give prompt notice
thereof to the Lenders.  Agent shall (subject to Section 12.7) take
such action with respect to any such Event of Default or failure of condition
precedent as shall be directed by the Required Lenders to the extent provided
for herein; provided, that, unless and
until Agent shall have received such directions, Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to or by reason of such Event of Default or failure of condition precedent, as
it shall deem advisable in the best interest of Lenders.  Without
limiting the foregoing, and notwithstanding the existence or occurrence and
continuance of an Event of Default or any other failure to satisfy any of the
conditions precedent set forth in Section 4 of this Agreement to the contrary,
unless and until otherwise directed by the Required Lenders, Agent may, but
shall have no obligation to, continue to make Loans and Issuing Bank may, but
shall have no obligation to, issue or cause to be issued any Letter of Credit
for the ratable account and risk of Lenders from time to time if Agent believes
making such Loans or issuing or causing to be issued such Letter of Credit is in
the best interests of Lenders.

     

    (b)           Except
with the prior written consent of Agent, no Lender or Issuing Bank may assert or
exercise any enforcement right or remedy in respect of the Loans, Letter of
Credit Obligations or other Obligations, as against any Borrower or Guarantor or
any of the Collateral or other property of any Borrower or
Guarantor.

     

    12.4           Wachovia in its Individual
Capacity.  With
respect to its Commitment and the Loans made and Letters of Credit issued or
caused to be issued by it (and any successor acting as Agent), so long as
Wachovia shall be a Lender hereunder, it shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though it were not
acting as Agent, and the term “Lender” or “Lenders” shall, unless the context
otherwise indicates, include Wachovia in its individual capacity as Lender
hereunder.  Wachovia (and any successor acting as Agent) and its
Affiliates may (without having to account therefor to any Lender) lend money to,
make investments in and generally engage in any kind of business with Borrowers
(and any of its Subsidiaries or Affiliates) as if it were not acting as Agent,
and Wachovia and its Affiliates may accept fees and other consideration from any
Borrower or Guarantor and any of its Subsidiaries and Affiliates for services in
connection with this Agreement or otherwise without having to account for the
same to Lenders.

     

    12.5           Indemnification.  Lenders
agree to indemnify Agent and Issuing Bank (to the extent not reimbursed by
Borrowers hereunder and without limiting any obligations of Borrowers hereunder)
ratably, in accordance with their Pro Rata Shares, for any and all claims of any
kind and nature whatsoever that may be imposed on, incurred by or asserted
against Agent (including by any Lender) arising out of or by reason of any
investigation in or in any way relating to or arising out of this Agreement or
any other Financing Agreement or any other documents contemplated by or referred
to herein or therein or the transactions contemplated hereby or thereby
(including the costs and expenses that Agent is obligated to pay hereunder) or
the enforcement of any of the terms hereof

     

    
      
         

      

      
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    or
thereof or of any such other documents; provided, that, no Lender shall be liable for
any of the foregoing to the extent it arises from the gross negligence or
willful misconduct of the party to be indemnified as determined by a final
non-appealable judgment of a court of competent jurisdiction.  The
foregoing indemnity shall survive the payment of the Obligations and the
termination or non-renewal of this Agreement.

     

    12.6           Non-Reliance on Agent and
Other Lenders.  Each
Lender agrees that it has, independently and without reliance on Agent or other
Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of Borrowers and Guarantors and has
made its own decision to enter into this Agreement and that it will,
independently and without reliance upon Agent or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own analysis and decisions in taking or not taking action
under this Agreement or any of the other Financing Agreements.  Agent
shall not be required to keep itself informed as to the performance or
observance by any Borrower or Guarantor of any term or provision of this
Agreement or any of the other Financing Agreements or any other document
referred to or provided for herein or therein or to inspect the properties or
books of any Borrower or Guarantor.  Agent will use reasonable efforts
to provide Lenders with any information received by Agent from any Borrower or
Guarantor which is required to be provided to Lenders or deemed to be requested
by Lenders hereunder and with a copy of any Notice of Default or Failure of
Condition received by Agent from any Borrower or any Lender; provided, that, Agent shall not be liable to any
Lender for any failure to do so, except to the extent that such failure is
attributable to Agent’s own gross negligence or willful misconduct as determined
by a final non-appealable judgment of a court of competent
jurisdiction.  Except for notices, reports and other documents
expressly required to be furnished to Lenders by Agent or deemed requested by
Lenders hereunder, Agent shall not have any duty or responsibility to provide
any Lender with any other credit or other information concerning the affairs,
financial condition or business of any Borrower or Guarantor that may come into
the possession of Agent.

     

    12.7           Failure to Act.  Except
for action expressly required of Agent hereunder and under the other Financing
Agreements, Agent shall in all cases be fully justified in failing or refusing
to act hereunder and thereunder unless it shall receive further assurances to
its satisfaction from Lenders of their indemnification obligations under Section
12.5 hereof against any and all liability and expense that may be incurred by it
by reason of taking or continuing to take any such action.

     

    12.8           Additional Loans.  Agent
shall not make any Revolving Loans or Issuing Bank provide any Letter of Credit
to Borrowers on behalf of Lenders intentionally and with actual knowledge that
such Revolving Loans or Letter of Credit would cause the aggregate amount of the
total outstanding Revolving Loans and Letters of Credit to Borrowers to exceed
the Borrowing Base, without the prior consent of all Lenders, except, that,
Agent may make such additional Revolving Loans or Issuing Bank may provide such
additional Letter of Credit on behalf of Lenders, intentionally and with actual
knowledge that such Revolving Loans or Letter of Credit will cause the total
outstanding Revolving Loans and Letters of Credit to Borrowers to exceed the
Borrowing Base, as Agent may deem necessary or advisable in its discretion;
provided, that: lxv) the total
principal amount of the additional Revolving Loans or additional Letters of
Credit to any Borrower which Agent may make or provide after obtaining such
actual knowledge that the aggregate principal amount of the Revolving Loans
equal or exceed the Borrowing Bases of Borrowers, plus the amount of Special Agent
Advances made pursuant to Section 12.11(a)(ii) hereof then outstanding, shall
not

     

    
      
         

      

      
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    exceed
the aggregate amount equal to one hundred five(105%) of the Maximum Credit and
shall not cause the total principal amount of the Loans and Letters of Credit to
exceed the Maximum Credit and lxvi) no such
additional Revolving Loan or Letter of Credit shall be outstanding more than
ninety (90) days after the date such additional Revolving Loan or Letter of
Credit is made or issued (as the case may be), except as the Required Lenders
may otherwise agree.  Each Lender shall be obligated to pay Agent the
amount of its Pro Rata Share of any such additional Revolving Loans or Letters
of Credit.

     

    12.9           Concerning the Collateral
and the Related Financing Agreements.  Each
Lender authorizes and directs Agent to enter into this Agreement and the other
Financing Agreements.  Each Lender agrees that any action taken by
Agent or Required Lenders in accordance with the terms of this Agreement or the
other Financing Agreements and the exercise by Agent or Required Lenders of
their respective powers set forth therein or herein, together with such other
powers that are reasonably incidental thereto, shall be binding upon all of the
Lenders.

     

    12.10           Field Audit, Examination
Reports and other Information; Disclaimer by Lenders.  By
signing this Agreement, each Lender:

     

    (a)           is
deemed to have requested that Agent furnish such Lender, promptly after it
becomes available, a copy of each field audit or examination report and report
with respect to the Borrowing Base prepared or received by Agent (each field
audit or examination report and report with respect to the Borrowing Base being
referred to herein as a “Report” and collectively, “Reports”), appraisals with
respect to the Collateral and financial statements with respect Parent and its
Subsidiaries received by Agent;

     

    (b)           expressly
agrees and acknowledges that Agent (1) does not make any representation or
warranty as to the accuracy of any Report, appraisal or financial statement or
(2) shall not be liable for any information contained in any Report, appraisal
or financial statement;

     

    (c)           expressly
agrees and acknowledges that the Reports are not comprehensive audits or
examinations, that Agent or any other party performing any audit or examination
will inspect only specific information regarding Borrowers and Guarantors and
will rely significantly upon Borrowers’ and Guarantors’ books and records, as
well as on representations of Borrowers’ and Guarantors’ personnel;
and

     

    (d)           agrees
to keep all Reports confidential and strictly for its internal use in accordance
with the terms of Section 13.5 hereof, and not to distribute or use any Report
in any other manner.

     

    12.11           Collateral
Matters.

     

    (a)           Agent
may, at its option, from time to time, at any time on or after an Event of
Default and for so long as the same is continuing or upon any other failure of a
condition precedent to the Loans and Letters of Credit hereunder, make such
disbursements and advances (“Special Agent Advances”) which Agent, in its sole
discretion, (3) deems necessary or desirable either to preserve or protect the
Collateral or any portion thereof or (4) to enhance the likelihood or maximize
the amount of repayment by Borrowers and Guarantors of the Loans and other
Obligations; provided, that, the aggregate
principal amount of the Special Agent Advances pursuant to this
clause

     

    
      
         

      

      
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    (5)
outstanding at any time, plus the then
outstanding principal amount of the additional Loans and Letters of Credit which
Agent may make or provide as set forth in Section 12.8 hereof, shall not exceed
the amount equal to one hundred five (105%) percent of the Maximum Credit, or
(6) to pay any other amount chargeable to any Borrower or Guarantor pursuant to
the terms of this Agreement or any of the other Financing Agreements consisting
of (a) costs, fees and expenses and (b) payments to Issuing Bank in respect of
any Letter of Credit Obligations.  The Special Agent Advances shall be
repayable on demand and together with all interest thereon shall constitute
Obligations secured by the Collateral.  Special Agent Advances shall
not constitute Loans but shall otherwise constitute Obligations
hereunder.  Interest on Special Agent Advances shall be payable at the
Interest Rate then applicable to Base Rate Loans and shall be payable on
demand.  Without limitation of its obligations pursuant to Section
6.11, each Lender agrees that it shall make available to Agent, upon Agent’s
demand, in immediately available funds, the amount equal to such Lender’s Pro
Rata Share of each such Special Agent Advance.  If such funds are not
made available to Agent by such Lender, such Lender shall be deemed a Defaulting
Lender and Agent shall be entitled to recover such funds, on demand from such
Lender together with interest thereon for each day from the date such payment
was due until the date such amount is paid to Agent at the Federal Funds Rate
for each day during such period (as published by the Federal Reserve Bank of New
York or at Agent’s option based on the arithmetic mean determined by Agent of
the rates for the last transaction in overnight Federal funds arranged prior to
9:00 a.m. (New York City time) on that day by each of the three leading brokers
of Federal funds transactions in New York City selected by Agent) and if such
amounts are not paid within three (3) days of Agent’s demand, at the highest
Interest Rate provided for in Section 3.1 hereof applicable to Base Rate
Loans.

     

    (b)           Lenders
hereby irrevocably authorize Agent, at its option and in its discretion to
release any security interest in, mortgage or lien upon, any of the Collateral
(7) upon termination of the Commitments and payment and satisfaction of all of
the Obligations and delivery of cash collateral to the extent required under
Section 13.1 below, or (8) constituting property being sold or disposed of if
Administrative Borrower or any Borrower or Guarantor certifies to Agent that the
sale or disposition is made in compliance with Section 9.7 hereof (and Agent may
rely conclusively on any such certificate, without further inquiry), or (9)
constituting property in which any Borrower or Guarantor did not own an interest
at the time the security interest, mortgage or lien was granted or at any time
thereafter, or (10) having a value in the aggregate in any twelve (12) month
period of less than $2,000,000, and to the extent Agent may release its security
interest in and lien upon any such Collateral pursuant to the sale or other
disposition thereof, such sale or other disposition shall be deemed consented to
by Lenders, or (11) if required or permitted under the terms of any of the other
Financing Agreements, including any intercreditor agreement, or (12) approved,
authorized or ratified in writing by all of Lenders.  Except as
provided above, Agent will not release any security interest in, mortgage or
lien upon, any of the Collateral without the prior written authorization of all
of Lenders. Upon request by Agent at any time, Lenders will promptly confirm in
writing Agent’s authority to release particular types or items of Collateral
pursuant to this Section.  In no event shall the consent or approval
of Issuing Bank to any release of Collateral be required.

     

    (c)           Without
any manner limiting Agent’s authority to act without any specific or further
authorization or consent by the Required Lenders, each Lender agrees to confirm
in writing, upon request by Agent, the authority to release Collateral conferred
upon Agent under this Section.  Agent shall (and is hereby irrevocably
authorized by Lenders to) execute such documents as may be necessary to evidence
the release of the security interest, mortgage or liens granted to Agent
upon

     

    
      
         

      

      
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    any
Collateral to the extent set forth above; provided, that, (13) Agent
shall not be required to execute any such document on terms which, in Agent’s
opinion, would expose Agent to liability or create any obligations or entail any
consequence other than the release of such security interest, mortgage or liens
without recourse or warranty and (14) such release shall not in any manner
discharge, affect or impair the Obligations or any security interest, mortgage
or lien upon (or obligations of any Borrower or Guarantor in respect of) the
Collateral retained by such Borrower or Guarantor.

     

    (d)           Agent
shall have no obligation whatsoever to any Lender, Issuing Bank or any other
Person to investigate, confirm or assure that the Collateral exists or is owned
by any Borrower or Guarantor or is cared for, protected or insured or has been
encumbered, or that any particular items of Collateral meet the eligibility
criteria applicable in respect of the Loans or Letters of Credit hereunder, or
whether any particular reserves are appropriate, or that the liens and security
interests granted to Agent pursuant hereto or any of the Financing Agreements or
otherwise have been properly or sufficiently or lawfully created, perfected,
protected or enforced or are entitled to any particular priority, or to exercise
at all or in any particular manner or under any duty of care, disclosure or
fidelity, or to continue exercising, any of the rights, authorities and powers
granted or available to Agent in this Agreement or in any of the other Financing
Agreements, it being understood and agreed that in respect of the Collateral, or
any act, omission or event related thereto, subject to the other terms and
conditions contained herein, Agent may act in any manner it may deem
appropriate, in its discretion, given Agent’s own interest in the Collateral as
a Lender and that Agent shall have no duty or liability whatsoever to any other
Lender or Issuing Bank.

     

    12.12           Agency for
Perfection.  Each
Lender and Issuing Bank hereby appoints Agent and each other Lender and Issuing
Bank as agent and bailee for the purpose of perfecting the security interests in
and liens upon the Collateral of Agent in assets which, in accordance with
Article 9 of the UCC can be perfected only by possession (or where the security
interest of a secured party with possession has priority over the security
interest of another secured party) and Agent and each Lender and Issuing Bank
hereby acknowledges that it holds possession of any such Collateral for the
benefit of Agent as secured party.  Should any Lender or Issuing Bank
obtain possession of any such Collateral, such Lender shall notify Agent
thereof, and, promptly upon Agent’s request therefor shall deliver such
Collateral to Agent or in accordance with Agent’s instructions.

     

    12.13           Successor Agent.  Agent
may resign as Agent upon thirty (30) days’ notice to Lenders and Parent. If
Agent resigns under this Agreement, the Required Lenders shall appoint from
among the Lenders a successor agent for Lenders.  If no successor
agent is appointed prior to the effective date of the resignation of Agent,
Agent may appoint, after consulting with Lenders and Parent, a successor agent
from among Lenders.  Upon the acceptance by the Lender so selected of
its appointment as successor agent hereunder, such successor agent shall succeed
to all of the rights, powers and duties of the retiring Agent and the term
“Agent” as used herein and in the other Financing Agreements shall mean such
successor agent and the retiring Agent’s appointment, powers and duties as Agent
shall be terminated.  After any retiring Agent’s resignation hereunder
as Agent, the provisions of this Section 12 shall inure to its benefit as to any
actions taken or omitted by it while it was Agent under this
Agreement.  If no successor agent has accepted appointment as Agent by
the date which is thirty (30) days after the date of a retiring Agent’s notice
of resignation, the retiring Agent’s resignation shall nonetheless thereupon
become effective and Lenders shall perform all of the duties of Agent hereunder
until such time, if any, as the Required Lenders appoint a successor agent as
provided for above.

     

    
      
         

      

      
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    12.14           Other Agent
Designations.  Agent may at any time and from time to time
determine that a Lender may, in addition, be a “Co-Agent”, “Syndication Agent”,
“Documentation Agent” or similar designation hereunder and enter into an
agreement with such Lender to have it so identified for purposes of this
Agreement.  Any such designation shall be effective upon written
notice by Agent to Administrative Borrower of any such
designation.  Any Lender that is so designated as a Co-Agent,
Syndication Agent, Documentation Agent or such similar designation by Agent
shall have no right, power, obligation, liability, responsibility or duty under
this Agreement or any of the other Financing Agreements other than those
applicable to all Lenders as such.  Without limiting the foregoing,
the Lenders so identified shall not have or be deemed to have any fiduciary
relationship with any Lender and no Lender shall be deemed to have relied, nor
shall any Lender  rely, on a Lender so identified as a Co-Agent,
Syndication Agent, Documentation Agent or such similar designation in deciding
to enter into this Agreement or in taking or not taking action
hereunder.

     

    
      	
              SECTION
      13.

            	
              TERM OF AGREEMENT;
      MISCELLANEOUS

            

    

     

    13.1           Term.

     

    (a)           This
Agreement and the other Financing Agreements shall become effective as of the
date set forth on the first page hereof and shall continue in full force and
effect for a term ending on the date three (3) years from the date hereof (the
“Maturity Date”).  In addition, Administrative Borrower (on behalf of
Borrowers) may terminate this Agreement at any time upon thirty (30) days prior
written notice to Agent (which notice shall be irrevocable) and Agent may, at
its option, and shall at the direction of Required Lenders, terminate this
Agreement at any time on or after an Event of Default.  Upon the
Maturity Date or any other effective date of termination of the Financing
Agreements, Borrowers shall pay to Agent all outstanding and unpaid Obligations
and shall furnish cash collateral to Agent (or at Agent’s option, a letter of
credit issued for the account of Borrowers and at Borrowers’ expense, in form
and substance satisfactory to Agent, by an issuer acceptable to Agent and
payable to Agent as beneficiary) in such amounts as Agent determines are
reasonably necessary to secure Agent, Lenders and Issuing Bank from loss, cost,
damage or expense, including attorneys’ fees and expenses, in connection with
any contingent Obligations, including issued and outstanding Letter of Credit
Obligations and checks or other payments provisionally credited to the
Obligations and/or as to which Agent or any Lender has not yet received final
and indefeasible payment and any continuing obligations of Agent or any Lender
pursuant to any Deposit Account Control Agreement and for any of the Obligations
arising under or in connection with any Bank Products in such amounts as the
Bank Product Provider providing such Bank Products may require (unless such
Obligations arising under or in connection with any Bank Products are paid in
full in cash and terminated in a manner satisfactory to such Bank Product
Provider).  The amount of such cash collateral (or letter of credit,
as Agent may determine) as to any Letter of Credit Obligations shall be in the
amount equal to one hundred five (105%) percent of the amount of the Letter of
Credit Obligations plus the amount of
any fees and expenses payable in connection therewith through the end of the
latest expiration date of the Letters of Credit giving rise to such Letter of
Credit Obligations.  Such payments in respect of the Obligations and
cash collateral shall be remitted by wire transfer in Federal funds to the Agent
Payment Account or such other bank account of Agent, as Agent may, in its
discretion, designate in writing to Administrative Borrower for such
purpose.  Interest shall be due until and including the next Business
Day, if the amounts so paid by Borrowers to the Agent Payment Account or other
bank account designated by Agent are received in such bank account later than
12:00 noon New York City time.

     

    
      
         

      

      
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    (b)           No
termination of the Commitments, this Agreement or any of the other Financing
Agreements shall relieve or discharge any Borrower or Guarantor of its
respective duties, obligations and covenants under this Agreement or any of the
other Financing Agreements until all Obligations have been fully and finally
discharged and paid, and Agent’s continuing security interest in the Collateral
and the rights and remedies of Agent and Lenders hereunder, under the other
Financing Agreements and applicable law, shall remain in effect until all such
Obligations have been fully and finally discharged and
paid.  Accordingly, each Borrower and Guarantor waives any rights it
may have under the UCC to demand the filing of termination statements with
respect to the Collateral and Agent shall not be required to send such
termination statements to Borrowers or Guarantors, or to file them with any
filing office, unless and until this Agreement shall have been terminated in
accordance with its terms and all Obligations paid and satisfied in full in
immediately available funds.

     

    (c)           If
for any reason this Agreement is terminated prior to the Maturity Date, in view
of the impracticality and extreme difficulty of ascertaining actual damages and
by mutual agreement of the parties as to a reasonable calculation of Agent’s and
each Lender’s lost profits as a result thereof, Borrowers agree to pay to Agent,
for the benefit of Lenders, upon the effective date of such termination, an
early termination fee in the amount equal to:

     

    
      	
              Amount

            	
              Period

            
	
              (15)   1.5%
      of Maximum Credit

            	
              From
      the date hereof to and including the first anniversary of the date
      hereof.

            
	
              (16)  1%
      of Maximum Credit

            	
              From
      and after the first anniversary of the date hereof to and including the
      second anniversary of the date hereof.

            
	
              (17)  .50%
      of Maximum Credit

            	
              After
      the second anniversary of the date hereof to the third anniversary of the
      date hereof.

            

    

    

    Such
early termination fee shall be presumed to be the amount of damages sustained by
Agent and Lenders as a result of such early termination and Borrowers and
Guarantors agree that it is reasonable under the circumstances currently
existing (including, but not limited to, the borrowings that are reasonably
expected by Borrowers hereunder and the interest, fees and other charges that
are reasonably expected to be received by Agent and Lenders pursuant to the
Credit Facility).  In addition, Agent and Lenders shall be entitled to
such early termination fee upon the occurrence of any Event of Default described
in Sections 10.1(g) and 10.1(h) hereof, even if Agent and Lenders do not
exercise the right to terminate this Agreement, but elect, at their option, to
provide financing to any Borrower or permit the use of cash collateral under the
United States Bankruptcy Code.  The early termination fee provided for
in this Section 13.1 shall be deemed included in the Obligations.

     

    13.2           Interpretative
Provisions.

     

    
      
         

      

      
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    (a)           All
terms used herein which are defined in Article 1, Article 8 or Article 9 of the
UCC shall have the meanings given therein unless otherwise defined in this
Agreement.

     

    (b)           All
references to the plural herein shall also mean the singular and to the singular
shall also mean the plural unless the context otherwise requires.

     

    (c)           All
references to any Borrower, Guarantor, Canadian Borrower, Canadian Guarantor, US
Borrower, US Guarantor, Agent, Lenders and Secured Parties pursuant to the
definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns.

     

    (d)           The
words “hereof”, “herein”, “hereunder”, “this Agreement” and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not any particular provision of this Agreement and as this Agreement now exists
or may hereafter be amended, modified, supplemented, extended, renewed, restated
or replaced.

     

    (e)           The
word “including” when used in this Agreement shall mean “including, without
limitation” and the word “will” when used in this Agreement shall be construed
to have the same meaning and effect as the word “shall”.

     

    (f)           An
Event of Default shall exist or continue or be continuing until such Event of
Default is waived in accordance with Section 11.3 or is cured in a manner
satisfactory to Agent, if such Event of Default is capable of being cured as
determined by Agent.

     

    (g)           All
references to the term “good faith” used herein when applicable to Agent or any
Lender shall mean, notwithstanding anything to the contrary contained herein or
in the UCC, honesty in fact in the conduct or transaction
concerned.  Borrowers and Guarantors shall have the burden of proving
any lack of good faith on the part of Agent or any Lender alleged by any
Borrower or Guarantor at any time.

     

    (h)           Any
accounting term used in this Agreement shall have, unless otherwise specifically
provided herein, the meaning customarily given in accordance with GAAP, and all
financial computations hereunder shall be computed unless otherwise specifically
provided herein, in accordance with GAAP as consistently applied and using the
same method for inventory valuation as used in the preparation of the financial
statements of Parent most recently received by Agent prior to the date
hereof.  Notwithstanding anything to the contrary contained in GAAP or
any interpretations or other pronouncements by the Financial Accounting
Standards Board or otherwise, the term “unqualified opinion” as used herein to
refer to opinions or reports provided by accountants shall mean an opinion or
report that is unqualified and also does not include any explanation,
supplemental comment or other comment concerning the ability of the applicable
person to continue as a going concern or the scope of the audit.

     

    (i)           In
the computation of periods of time from a specified date to a later specified
date, the word “from” means “from and including”, the words “to” and “until”
each mean “to but excluding” and the word “through” means “to and
including”.

     

    
      
         

      

      
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    (j)           Unless
otherwise expressly provided herein, (18) references herein to any agreement,
document or instrument shall be deemed to include all subsequent amendments,
modifications, supplements, extensions, renewals, restatements or replacements
with respect thereto, but only to the extent the same are not prohibited by the
terms hereof or of any other Financing Agreement, and (19) references to any
statute or regulation are to be construed as including all statutory and
regulatory provisions consolidating, amending, replacing, recodifying,
supplementing or interpreting the statute or regulation.

     

    (k)           The
captions and headings of this Agreement are for convenience of reference only
and shall not affect the interpretation of this Agreement.

     

    (l)           This
Agreement and other Financing Agreements may use several different limitations,
tests or measurements to regulate the same or similar matters.  All
such limitations, tests and measurements are cumulative and shall each be
performed in accordance with their terms.

     

    (m)           This
Agreement and the other Financing Agreements are the result of negotiations
among and have been reviewed by counsel to Agent and the other parties, and are
the products of all parties.  Accordingly, this Agreement and the
other Financing Agreements shall not be construed against Agent or Lenders
merely because of Agent’s or any Lender’s involvement in their
preparation.

     

    (n)           For
all purposes pursuant to which the interpretation or construction of this
Agreement may be subject to the laws of the Province of Québec or a court or
tribunal exercising jurisdiction in the Province of Québec, (20) “personal
property” shall include “movable property”, (21) “real property” shall include
“immovable property”, (22) “tangible property” shall include “corporeal
property”, (23) “intangible property” shall include “incorporeal property”, (24)
“security interest”, “mortgage” and “lien” shall include a “hypothec”, “prior
claim” and a “resolutory clause”, (25) all references to filing, registering or
recording under the UCC or PPSA shall include publication under the Civil Code
of Québec, (26) all references to “perfection” of or “perfected” liens or
security interest shall include a reference to an “opposable” or “set up” lien
or security interest as against third parties, (27) any “right of offset”,
“right of setoff” or similar expression shall include a “right of compensation”,
(28) “goods” shall include corporeal movable property” other than chattel paper,
documents of title, instruments, money and securities, (29) an “agent” shall
include a “mandatary”, (30) “construction liens” shall include “legal
hypothecs”, (31) “joint and several” shall include solidary, (32) “gross
negligence or willful misconduct” shall be deemed to be “intentional or gross
fault”, (33) “beneficial ownership” shall include “ownership on behalf of
another as mandatary”, (34) “easement” shall include “servitude”, (35)
“priority” shall include “prior claim”, (36) “survey” shall include “certificate
of location and plan”, (37) “state” shall include “province”, (38) “fee simple
title” shall include “absolute ownership”.  The parties hereto confirm
that it is their wish that this Agreement and any other document executed in
connection with the transactions contemplated herein be drawn up in the English
language only and that all other documents contemplated thereunder or relating
thereto, including notices, may also be drawn up in the English language
only.  Les parties aux présentes confirment que c’est leur volonté que
cette convention et les autres documents de crédit soient rédigés en langue
anglaise seulement et que tous les documents, y compris tous avis, envisagés par
cette convention et les autres documents peuvent être rédigés en langue anglaise
seulement.

     

    
      
         

      

      
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    13.3           Notices.

     

    (a)           All
notices, requests and demands hereunder shall be in writing and deemed to have
been given or made:  if delivered in person, immediately upon
delivery; if by telex, telegram or facsimile transmission, immediately upon
sending and upon confirmation of receipt; if by nationally recognized overnight
courier service with instructions to deliver the next Business Day, one (1)
Business Day after sending; and if by certified mail, return receipt requested,
five (5) days after mailing.  Notices delivered through electronic
communications shall be effective to the extent set forth in Section 13.3(b)
below.  All notices, requests and demands upon the parties are to be
given to the following addresses (or to such other address as any party may
designate by notice in accordance with this Section):

     

    
      	
              If
      to any Borrower or Guarantor:

            	
              c/o
      American Biltrite, Inc.

              57
      River Street

              Wellesley
      Hills, Massachusetts 02481

              Attention:  Howard
      N. Feist III

              Telephone
      No.  781-237-6655

              Telecopy
      No.:  781-237-6880

              Email:  sfeist@alumni.princeton.edu

               

            
	
              If
      to Agent, Lenders or Issuing Bank:

            	
              Wachovia
      Bank, National Association

              1133
      Avenue of the Americas

              New
      York, New York  10036

              Attention:  Portfolio
      Administrator

              Telephone
      No.:  212-840-2000

              Telecopy
      No.:  212-545-4283

              E-mail:  steven.walfisch@wachovia.com

            

    

    

    (b)           Notices
and other communications to Lenders and Issuing Bank hereunder may be delivered
or furnished by electronic communication (including e-mail and Internet or
intranet websites) pursuant to procedures approved by Agent or as otherwise
determined by Agent; provided, that, the foregoing
shall not apply to notices to any Lender or Issuing Bank pursuant to Section 2
hereof if such Lender or Issuing Bank, as applicable, has notified Agent that it
is incapable of receiving notices under such Section by electronic
communication.  Unless Agent otherwise requires, (39) notices and
other communications sent to an e-mail address shall be deemed received upon the
sender’s receipt of an acknowledgement from the intended recipient (such as by
the “return receipt requested” function, as available, return e-mail or other
written acknowledgement); provided, that, if such notice
or other communication is not given during the normal business hours of the
recipient, such notice shall be deemed to have been sent at the opening of
business on the next Business Day for the recipient, and (ii) notices or
communications posted to an Internet or intranet website shall be deemed
received upon the deemed receipt by the intended recipient at its e-mail address
as described in the foregoing clause (i) of notification that such notice or
communications is available and identifying the website address
therefor.

     

    13.4           Partial
Invalidity.  If any
provision of this Agreement is held to be invalid or unenforceable, such
invalidity or unenforceability shall not invalidate this Agreement as a whole,
but this Agreement shall be construed as though it did not contain the
particular provision held to be invalid or unenforceable and the rights and
obligations of the parties shall be construed and enforced only to such extent
as shall be permitted by applicable law.

     

    
      
         

      

      
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    13.5           Confidentiality.

     

    (a)           Agent,
each Lender and Issuing Bank shall use all reasonable efforts to keep
confidential, in accordance with its customary procedures for handling
confidential information and safe and sound lending practices, any non-public
information supplied to it by any Borrower pursuant to this Agreement which is
clearly and conspicuously marked as confidential at the time such information is
furnished by such Borrower to Agent, such Lender or Issuing Bank; provided, that, nothing
contained herein shall limit the disclosure of any such information: (41) to the
extent required by statute, rule, regulation, subpoena or court order, (42) to
bank examiners and other regulators, auditors and/or accountants, in connection
with any litigation to which Agent, such Lender or Issuing Bank is a party, (43)
to any Lender or Participant (or prospective Lender or Participant) or Issuing
Bank or to any Affiliate of any Lender so long as such Lender or Participant (or
prospective Lender or Participant), Issuing Bank or Affiliate shall have been
instructed to treat such information as confidential in accordance with this
Section 13.5, or (44) to counsel for Agent or any Lender or Participant (or
prospective Lender or Participant) or Issuing Bank.

     

    (b)           In
the event that Agent, any Lender or Issuing Bank receives a request or demand to
disclose any confidential information pursuant to any subpoena or court order,
Agent or such Lender or Issuing Bank, as the case may be, agrees (45) to the
extent permitted by applicable law or if permitted by applicable law, to the
extent Agent or such Lender or Issuing Bank determines in good faith that it
will not create any risk of liability to Agent or such Lender or Issuing Bank,
Agent or such Lender or Issuing Bank will promptly notify Administrative
Borrower of such request so that Administrative Borrower may seek a protective
order or other appropriate relief or remedy and (46) if disclosure of such
information is required, disclose such information and, subject to reimbursement
by Borrowers of Agent’s or such Lender’s or Issuing Bank’s expenses, cooperate
with Administrative Borrower in the reasonable efforts to obtain an order or
other reliable assurance that confidential treatment will be accorded to such
portion of the disclosed information which Administrative Borrower so
designates, to the extent permitted by applicable law or if permitted by
applicable law, to the extent Agent or such Lender or Issuing Bank determines in
good faith that it will not create any risk of liability to Agent or such Lender
or Issuing Bank.

     

    (c)           In
no event shall this Section 13.5 or any other provision of this Agreement, any
of the other Financing Agreements or applicable law be deemed: (47) to apply to
or restrict disclosure of information that has been or is made public by any
Borrower, Guarantor or any third party or otherwise becomes generally available
to the public other than as a result of a disclosure in violation hereof, (48)
to apply to or restrict disclosure of information that was or becomes available
to Agent or any Lender (or any Affiliate of any Lender) or Issuing Bank on a
non-confidential basis from a person other than a Borrower or Guarantor, (49) to
require Agent, any Lender or Issuing Bank to return any materials furnished by a
Borrower or Guarantor to Agent, a Lender or Issuing Bank or prevent Agent, a
Lender or Issuing Bank from responding to routine informational
requests  in accordance with the Code of Ethics for the Exchange of
Credit Information promulgated by The Robert Morris Associates or other
applicable industry standards relating to the exchange of credit
information.  The obligations of Agent, Lenders and Issuing Bank under
this Section 13.5 shall supersede and replace the obligations of Agent, Lenders
and Issuing Bank under any confidentiality letter signed prior to the date
hereof or any other arrangements concerning the confidentiality of information
provided by any Borrower or Guarantor to Agent or any Lender.  In
addition, Agent and Lenders may disclose information relating to the Credit
Facility to Gold Sheets and other similar bank trade publications, with such
information to consist of deal terms and other information customarily found in
such publications and that Wachovia may otherwise use the corporate name and
logo of Borrowers and Guarantors or deal terms in “tombstones” or other
advertisements, public statements or marketing materials..

     

    
      
         

      

      
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    13.6           Successors.  This
Agreement, the other Financing Agreements and any other document referred to
herein or therein shall be binding upon and inure to the benefit of and be
enforceable by Agent, Lenders, Issuing Bank, Borrowers, Guarantors and their
respective successors and assigns; except, that, Borrower may not assign its
rights under this Agreement, the other Financing Agreements and any other
document referred to herein or therein without the prior written consent of
Agent and Lenders.  Any such purported assignment without such express
prior written consent shall be void.  No Lender may assign its rights
and obligations under this Agreement without the prior written consent of Agent,
except as provided in Section 13.7 below. The terms and provisions of this
Agreement and the other Financing Agreements are for the purpose of defining the
relative rights and obligations of Borrowers, Guarantors, Agent, Lenders and
Issuing Bank with respect to the transactions contemplated hereby and there
shall be no third party beneficiaries of any of the terms and provisions of this
Agreement or any of the other Financing Agreements.

     

    13.7           Assignments;
Participations.

     

    (a)           Each
Lender may, with the prior written consent of Agent and the consent of the
Administrative Borrower (unless an Event of Default has occurred and is
continuing at the time of such assignment), assign all or, if less than all, a
portion equal to at least $5,000,000 in the aggregate for the assigning Lender,
of such rights and obligations under this Agreement to one or more Eligible
Transferees (but not including for this purpose any assignments in the form of a
participation), each of which assignees shall become a party to this Agreement
as a Lender by execution of an Assignment and Acceptance; provided, that, (50) such
transfer or assignment will not be effective until recorded by Agent on the
Register and (51) Agent shall have received for its sole account payment of a
processing fee from the assigning Lender or the assignee in the amount of
$5,000.

     

    (b)           Agent
(acting for this purpose as agent for Borrowers but without any liability to
Borrowers or Guarantors whatsoever) shall maintain a register of the names and
addresses of Lenders, their Commitments and the principal amount of their Loans
(the “Register”).  Agent shall also maintain a copy of each Assignment
and Acceptance delivered to and accepted by it and shall modify the Register to
give effect to each Assignment and Acceptance.  The entries in the
Register shall be conclusive and binding for all purposes, absent manifest
error, and any Borrowers, Guarantors, Agent and Lenders may treat each Person
whose name is recorded in the Register as a Lender hereunder for all purposes of
this Agreement.  The Register shall be available for inspection by
Administrative Borrower and any Lender at any reasonable time and from time to
time upon reasonable prior notice.

     

    (c)           Upon
such execution, delivery, acceptance and recording, from and after the effective
date specified in each Assignment and Acceptance, the assignee thereunder shall
be a party hereto and to the other Financing Agreements and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, have the rights and obligations (including, without
limitation, the obligation to participate in Letter of Credit Obligations) of a
Lender hereunder and thereunder and  the assigning Lender shall, to
the extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement.

     

    
      
         

      

      
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    (d)           By
execution and delivery of an Assignment and Acceptance, the assignor and
assignee thereunder confirm to and agree with each other and the other parties
hereto as follows:  (52) other than as provided in such Assignment and
Acceptance, the assigning Lender makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement or any of the other Financing
Agreements or the execution, legality, enforceability, genuineness, sufficiency
or value of this Agreement or any of the other Financing Agreements furnished
pursuant hereto, (53) the assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of any
Borrower, Guarantor or any of their Subsidiaries or the performance or
observance by any Borrower or Guarantor of any of the Obligations; (54) such
assignee confirms that it has received a copy of this Agreement and the other
Financing Agreements, together with such other documents and information it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance, (55) such assignee will, independently and
without reliance upon the assigning Lender, Agent and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement and the
other Financing Agreements, (56) such assignee appoints and authorizes Agent to
take such action as agent on its behalf and to exercise such powers under this
Agreement and the other Financing Agreements as are delegated to Agent by the
terms hereof and thereof, together with such powers as are reasonably incidental
thereto, and (57) such assignee agrees that it will perform in accordance with
their terms all of the obligations which by the terms of this Agreement and the
other Financing Agreements are required to be performed by it as a
Lender.  Agent and Lenders may furnish any information concerning any
Borrower or Guarantor in the possession of Agent or any Lender from time to time
to assignees and Participants.

     

    (e)           Each
Lender may sell participations to one or more banks or other entities in or to
all or a portion of its rights and obligations under this Agreement and the
other Financing Agreements (including, without limitation, all or a portion of
its Commitments and the Loans owing to it and its participation in the Letter of
Credit Obligations, without the consent of Agent or the other Lenders); provided, that, (58) such
Lender’s obligations under this Agreement (including, without limitation, its
Commitment hereunder) and the other Financing Agreements shall remain unchanged,
(59) such Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations, and Borrowers, Guarantors, the other
Lenders and Agent shall continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations under this Agreement and
the other Financing Agreements, and (60) the Participant shall not have any
rights under this Agreement or any of the other Financing Agreements (the
Participant’s rights against such Lender in respect of such participation to be
those set forth in the agreement executed by such Lender in favor of the
Participant relating thereto) and all amounts payable by any Borrower or
Guarantor hereunder shall be determined as if such Lender had not sold such
participation.

     

    (f)           Nothing
in this Agreement shall prevent or prohibit any Lender from pledging its Loans
hereunder to a Federal Reserve Bank in support of borrowings made by such
Lenders from such Federal Reserve Bank; provided, that, no such pledge
shall release such Lender from any of its obligations hereunder or substitute
any such pledgee for such Lender as a party hereto.

     

    
      
         

      

      
        128

        
          

        

      

      
         

      

    

    (g)           Borrowers
and Guarantors shall assist Agent or any Lender permitted to sell assignments or
participations under this Section 13.7 in whatever manner reasonably necessary
in order to enable or effect any such assignment or participation, including
(but not limited to) the execution and delivery of any and all agreements, notes
and other documents and instruments as shall be requested and the delivery of
informational materials, appraisals or other documents for, and the
participation of relevant management in meetings and conference calls with,
potential Lenders or Participants. Borrowers shall certify the correctness,
completeness and accuracy, in all material respects, of all descriptions of
Borrowers and Guarantors and their affairs provided, prepared or reviewed by any
Borrower or Guarantor that are contained in any selling materials and all other
information provided by it and included in such materials.

     

    (h)           Any
Lender that is an Issuing Bank may at any time assign all of its Commitments
pursuant to this Section 13.7.  If such Issuing Bank ceases to be a
Lender, it may, at its option, resign as Issuing Bank and such Issuing Bank’s
obligations to issue Letters of Credit shall terminate but it shall retain all
of the rights and obligations of Issuing Bank hereunder with respect to Letters
of Credit outstanding as of the effective date of its resignation and all Letter
of Credit Obligations with respect thereto (including the right to require
Lenders to make Revolving Loans or fund risk participations in outstanding
Letter of Credit Obligations), shall continue.

     

    13.8           Entire Agreement.  This
Agreement, the other Financing Agreements, any supplements hereto or thereto,
and any instruments or documents delivered or to be delivered in connection
herewith or therewith represents the entire agreement and understanding
concerning the subject matter hereof and thereof between the parties hereto, and
supersede all other prior agreements, understandings, negotiations and
discussions, representations, warranties, commitments, proposals, offers and
contracts concerning the subject matter hereof, whether oral or
written.  In the event of any inconsistency between the terms of this
Agreement and any schedule or exhibit hereto, the terms of this Agreement shall
govern.

     

    13.9           USA Patriot Act.  Each
Lender subject to the USA PATRIOT Act (Title III of Pub.L. 107-56 (signed into
law October 26, 2001) (the “Act”) hereby notifies Borrowers and Guarantors that
pursuant to the requirements of the Act, it is required to obtain, verify and
record information that identifies each person or corporation who opens an
account and/or enters into a business relationship with it, which information
includes the name and address of Borrowers and Guarantors and other information
that will allow such Lender to identify such person in accordance with the Act
and any other applicable law.  Borrowers and Guarantors are hereby
advised that any Loans or Letters of Credit hereunder are subject to
satisfactory results of such verification.

     

    13.10           Counterparts,
Etc.  This Agreement or any of the other Financing Agreements
may be executed in any number of counterparts, each of which shall be an
original, but all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of this Agreement or any of the
other Financing Agreements by telefacsimile or other electronic method of
transmission shall have the same force and effect as the delivery of an original
executed counterpart

     

    
      
         

      

      
        129

        
          

        

      

      
         

      

    

    of
this Agreement or any of such other Financing Agreements.  Any party
delivering an executed counterpart of any such agreement by telefacsimile or
other electronic method of transmission shall also deliver an original executed
counterpart, but the failure to do so shall not affect the validity,
enforceability or binding effect of such agreement.

     

    

    

    [SIGNATURE
PAGES FOLLOW]

    

    

    
      
         

      

      
        130

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, Agent, Lenders, Borrowers and Guarantors have caused these
presents to be duly executed as of the day and year first above
written.

     

    
      	
              AGENT

               

            	 
      
	
              WACHOVIA
      BANK, NATIONAL ASSOCIATION

               

              By:            /s/ Marc J.
      Breier

              Name:            Marc J.
      Breier

              Title:            Managing
      Director

               

            	 
      
	
              ISSUING
      BANK

               

            	 
      
	
              WACHOVIA
      BANK, NATIONAL ASSOCIATION

               

              By:            /s/ Marc J.
      Breier

              Name:            Marc J.
      Breier

              Title:            Managing
      Director

               

            	 
      
	 
      	 
      
	
              LENDERS

               

            	 
      
	
              WACHOVIA
      BANK, NATIONAL ASSOCIATION

               

              By:            /s/ Marc J.
      Breier

              Name:            Marc J.
      Breier

              Title:            Managing
      Director

               

              US
      Commitment: $30,000,000

               

            	 
      
	
              WACHOVIA
      CAPITAL FINANCE CORPORATION (CANADA)

               

              By:            /s/ Laurence S.
      Forte

              Name:            Laurence S.
      Forte

              Title:            Managing
      Director

               

              Canadian
      Commitment: $12,000,000

              (The
      Canadian Commitment is a sublimit of the US Commitment)

            	 
      

    

    
      
        
          [Signature Page to Loan and
Security Agreement-ABI]

          

        

         

      

      
        
        

        
          

        

      

      
         

      

    

    

    
      	
              U.S.
      BORROWERS

               

            	
              CANADIAN
      BORROWER

            
	
              AMERICAN
      BILTRITE INC.

               

               

              By:            /s/ Richard G.
      Marcus

              Name:            Richard G.
      Marcus

              Title:            President

               

            	
              AMERICAN
      BILTRITE (CANADA) LTD.

               

               

              By:            /s/ Richard G.
      Marcus

              Name:            Richard G.
      Marcus

              Title:            President

            
	
              IDEAL
      TAPE CO., INC.

               

               

              By:            /s/ Richard G.
      Marcus

              Name:            Richard G.
      Marcus

              Title:            President

               

            	 
      
	
              K&M
      ASSOCIATES L.P.

               

              By:  AIMPAR,
      Inc., its General Partner

               

              By:            /s/ Richard G.
      Marcus

              Name:            Richard G.
      Marcus

              Title:            President

               

            	 
      

    

    
      
        
          [Signature Page to Loan and
Security Agreement-ABI]

          

        

         

      

      
        
        

        
          

        

      

      
         

      

    

    

    
      	
              U.S.
      GUARANTORS

               

            	 
      
	
              425
      DEXTER ASSOCIATES, L.P.

               

              By:  AIMPAR,
      Inc., its General Partner

               

              By:            /s/ Richard G.
      Marcus

              Name:            Richard G.
      Marcus

              Title:            President

               

            	 
      
	
              OCEAN
      STATE JEWELRY, INC.

               

               

              By:            /s/ Richard G.
      Marcus

              Name:            Richard G.
      Marcus

              Title:            President

               

            	 
      
	
              MAJESTIC
      JEWELRY, INC.

               

               

              By:            /s/ Richard G.
      Marcus

              Name:            Richard G.
      Marcus

              Title:            President

               

            	 
      
	
              AMERICAN
      BILTRITE FAR EAST, INC.

               

               

              By:            /s/ Richard G.
      Marcus

              Name:            Richard G.
      Marcus

              Title:            President

               

            	 
      
	 
      	 
      

    

    

    

    
      
        
          [Signature Page to Loan and
Security Agreement-ABI]

          

        

         

      

      
        
        

        
          

        

      

      
         

      

    

    

    EXHIBIT
A

     

    to

     

    LOAN
AND SECURITY AGREEMENT

     

    ASSIGNMENT AND ACCEPTANCE
AGREEMENT

     

    

     

    This
ASSIGNMENT AND ACCEPTANCE AGREEMENT (this “Assignment and Acceptance”) dated as
of _____________, 20__ is made between ________________________ (the “Assignor”)
and ____________________ (the “Assignee”).

     

    W I T N E S S E T
H:

     

    

     

    WHEREAS,
Wachovia Bank, National Association, in its capacity as agent pursuant to the
Loan Agreement (as hereinafter defined) acting for and on behalf of the
financial institutions which are parties thereto as lenders (in such capacity,
“Agent”), and the financial institutions which are parties to the Loan Agreement
as lenders (individually, each a “Lender” and collectively, “Lenders”) have
entered or are about to enter into financing arrangements pursuant to which
Agent and Lenders may make loans and advances and provide other financial
accommodations to American Biltrite Inc., a Delaware corporation (“Parent”),
Ideal Tape Co., Inc., a Delaware corporation (“Ideal Tape”), K&M Associates
L.P., a Rhode Island limited partnership (“K&M”; together with Parent and
Ideal tape, each individually a “US Borrower” and collectively, “US Borrowers”
as hereinafter further defined), and American Biltrite (Canada) Ltd., a Canadian
corporation (“Canadian Borrower”; together with US Borrowers, each individually
a “Borrower” and collectively, “Borrowers”), as set forth in the Loan and
Security Agreement, dated as of June 30, 2009, by and among Borrowers, 425
Dexter Associates, L.P., a Rhode Island limited partnership (“Dexter”), Ocean
State Jewelry, Inc., a Rhode Island corporation (“Ocean State”), Majestic
Jewelry, Inc., a Delaware corporation (“Majestic”), American Biltrite Far East,
Inc., a Delaware corporation (“Far East”; together with Dexter, Ocean State and
Majestic, each individually a “US Guarantor” and collectively, “US Guarantors”),
Agent and Lenders (as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, the “Loan Agreement”),
and the other agreements, documents and instruments referred to therein or at
any time executed and/or delivered in connection therewith or related thereto
(all of the foregoing, together with the Loan Agreement, as the same now exist
or may hereafter be amended, amended and restated, modified, supplemented,
extended, renewed, restated or replaced, being collectively referred to herein
as the “Financing Agreements”);

     

    WHEREAS,
as provided under the Loan Agreement, Assignor committed to making Loans (the
“Committed Loans”) to Borrowers in an aggregate amount not to exceed
$___________ (the “Commitment”); and

     

    WHEREAS,
Assignor wishes to assign to Assignee [part of the] [all] rights and obligations of
Assignor under the Loan Agreement in respect of its Commitment in an amount
equal to $______________ (the “Assigned Commitment Amount”) on the terms and
subject to the conditions set forth herein and Assignee wishes to accept
assignment of such rights and to assume such obligations from Assignor on such
terms and subject to such conditions.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    NOW,
THEREFORE, in consideration of the foregoing and the mutual agreements contained
herein, the parties hereto agree as follows:

     

    1.           Assignment and
Acceptance.

     

    (a)           Subject
to the terms and conditions of this Assignment and Acceptance, Assignor hereby
sells, transfers and assigns to Assignee, and  Assignee hereby
purchases, assumes and undertakes from Assignor, without recourse and without
representation or warranty (except as provided in this Assignment and
Acceptance) an interest in (i) the Commitment and each of the Committed Loans of
Assignor and (ii) all related rights, benefits, obligations, liabilities and
indemnities of the Assignor under and in connection with the Loan Agreement and
the other Financing Agreements, so that after giving effect thereto, the
Commitment of Assignee shall be as set forth below and the Pro Rata Share of
Assignee shall be _______ (__%) percent.

     

    (b)           With
effect on and after the Effective Date (as defined in Section 5 hereof),
Assignee shall be a party to the Loan Agreement and succeed to all of the rights
and be obligated to perform all of the obligations of a Lender under the Loan
Agreement, including the requirements concerning confidentiality and the payment
of indemnification, with a Commitment in an amount equal to the Assigned
Commitment Amount.  Assignee agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Loan Agreement
are required to be performed by it as a Lender.  It is the intent of
the parties hereto that the Commitment of Assignor shall, as of the Effective
Date, be reduced by an amount equal to the Assigned Commitment Amount and
Assignor shall relinquish its rights and be released from its obligations under
the Loan Agreement to the extent such obligations have been assumed by Assignee;
provided, that, Assignor shall
not relinquish its rights under Sections 2.2, 6.4, 6.9, 11.5 and 12.5 of the
Loan Agreement to the extent such rights relate to the time prior to the
Effective Date.

     

    (c)           After
giving effect to the assignment and assumption set forth herein, on the
Effective Date Assignee’s Commitment will be $_____________.

     

    (d)           After
giving effect to the assignment and assumption set forth herein, on the
Effective Date Assignor’s Commitment will be $______________ (as such amount may
be further reduced by any other assignments by Assignor on or after the date
hereof).

     

    2.           Payments.

     

    (a)           As
consideration for the sale, assignment and transfer contemplated in Section 1
hereof, Assignee shall pay to Assignor on the Effective Date in immediately
available funds an amount equal to $____________, representing Assignee’s Pro
Rata Share of the principal amount of all Committed Loans.

     

    (b)           Assignee
shall pay to Agent the processing fee in the amount specified in Section 13.7(a)
of the Loan Agreement.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    3.           Reallocation of
Payments.  Any interest, fees and other payments accrued to the
Effective Date with respect to the Commitment, Committed Loans and outstanding
Letters of Credit shall be for the account of Assignor.  Any interest,
fees and other payments accrued on and after the Effective Date with respect to
the Assigned Commitment Amount shall be for the account of
Assignee.  Each of Assignor and Assignee agrees that it will hold in
trust for the other party any interest, fees and other amounts which it may
receive to which the other party is entitled pursuant to the preceding sentence
and pay to the other party any such amounts which it may receive promptly upon
receipt.

     

    4.           Independent Credit
Decision.  Assignee  acknowledges that it has
received a copy of the Loan Agreement and the Schedules and Exhibits thereto,
together with copies of the most recent financial statements of _____________
and its Subsidiaries, and such other documents and information as it has deemed
appropriate to make its own credit and legal analysis and decision to enter into
this Assignment and Acceptance and  agrees that it will, independently
and without reliance upon Assignor, Agent or any Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit and legal decisions in taking or not taking action under the
Loan Agreement.

     

    5.           Effective Date;
Notices.

     

    (a)           As
between Assignor and Assignee, the effective date for this Assignment and
Acceptance shall be _______________, 200_ (the “Effective Date”); provided, that, the following
conditions precedent have been satisfied on or before the Effective
Date:

     

    (i)           this
Assignment and Acceptance shall be executed and delivered by Assignor and
Assignee;

     

    (ii)           the
consent of Agent as required for an effective assignment of the Assigned
Commitment Amount by Assignor to Assignee shall have been duly obtained and
shall be in full force and effect as of the Effective Date;

     

    (iii)           written
notice of such assignment, together with payment instructions, addresses and
related information with respect to Assignee, shall have been given to
Administrative Borrower and Agent;

     

    (iv)           Assignee
shall pay to Assignor all amounts due to Assignor under this Assignment and
Acceptance; and

     

    (v)           the
processing fee referred to in Section 2(b) hereof shall have been paid to
Agent.

     

    6.           Promptly
following the execution of this Assignment and Acceptance, Assignor shall
deliver to Administrative Borrower and Agent for acknowledgment by Agent, a
Notice of Assignment in the form attached hereto as Schedule 1.

     

    7.           Agent.  [INCLUDE ONLY IF ASSIGNOR IS
AN AGENT]

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    (a)           Assignee
hereby appoints and authorizes Assignor in its capacity as Agent to take such
action as agent on its behalf to exercise such powers under the Loan Agreement
as are delegated to Agent by Lenders pursuant to the terms of the Loan
Agreement.

     

    (b)           Assignee
shall assume no duties or obligations held by Assignor in its capacity as Agent
under the Loan Agreement.]

     

    8.           Withholding
Tax.  Assignee (a) represents and warrants to Assignor, Agent
and Borrowers that under applicable law and treaties no tax will be required to
be withheld by Assignee, Agent or Borrowers with respect to any payments to be
made to Assignee hereunder or under any of the Financing Agreements, (b) agrees
to furnish (if it is organized under the laws of any jurisdiction other than the
United States or any State thereof) to Agent and Borrowers prior to the time
that Agent or Borrowers are required to make any payment of principal, interest
or fees hereunder, duplicate executed originals of either U.S. Internal Revenue
Service Form W-8BEN or W-8ECI, as applicable, and agrees to provide new such
forms upon the expiration of any previously delivered form or comparable
statements in accordance with applicable U.S. law and regulations and amendments
thereto, duly executed and completed by Assignee, (c) agrees to comply with all
applicable U.S. laws and regulations with regard to such withholding tax
exemption, and (d) is not a non-resident of Canada or the United States and deal
at arm’s length with each of the Canadian Loan Parties.

     

    9.           Representations and
Warranties.

     

    (a)           Assignor
represents and warrants that (i) it is the legal and beneficial owner of the
interest being assigned by it hereunder and that such interest is free and clear
of any security interest, lien, encumbrance or other adverse claim, (ii) it is
duly organized and existing and it has the full power and authority to take, and
has taken, all action necessary to execute and deliver this Assignment and
Acceptance and any other documents required or permitted to be executed or
delivered by it in connection with this Assignment and Acceptance and to fulfill
its obligations hereunder, (iii) no notices to, or consents, authorizations or
approvals of, any Person are required (other than any already given or obtained)
for its due execution, delivery and performance of this Assignment and
Acceptance, and apart from any agreements or undertakings or filings required by
the Loan Agreement, no further action by, or notice to, or filing with, any
Person is required of it for such execution, delivery or performance, and (iv)
this Assignment and Acceptance has been duly executed and delivered by it and
constitutes the legal, valid and binding obligation of Assignor, enforceable
against Assignor in accordance with the terms hereof, subject, as to
enforcement, to bankruptcy, insolvency, moratorium, reorganization and other
laws of general application relating to or affecting creditors’ rights and to
general equitable principles.

     

    (b)           Assignor
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
the Loan Agreement or any of the other Financing Agreements or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of the
Loan Agreement or any other instrument or document furnished pursuant
thereto.  Assignor makes no representation or warranty in connection
with, and assumes no responsibility with respect to, the solvency, financial
condition or statements of Borrowers, Guarantors or any of their respective
Affiliates, or the performance or observance by Borrowers, Guarantors or any
other Person, of any of its respective obligations under the Loan Agreement or
any other instrument or document furnished in connection therewith.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    (c)           Assignee
represents and warrants that (i) it is duly organized and existing and it has
full power and authority to take, and has taken, all action necessary to execute
and deliver this Assignment and Acceptance and any other documents required or
permitted to be executed or delivered by it in connection with this Assignment
and Acceptance, and to fulfill its obligations hereunder, (ii) no notices to, or
consents, authorizations or approvals of, any Person are required (other than
any already given or obtained) for its due execution, delivery and performance
of this Assignment and Acceptance, and apart from any agreements or undertakings
or filings required by the Loan Agreement, no further action by, or notice to,
or filing with, any Person is required of it for such execution, delivery or
performance; and (iii) this Assignment and Acceptance has been duly executed and
delivered by it and constitutes the legal, valid and binding obligation of
Assignee, enforceable against Assignee in accordance with the terms hereof,
subject, as to enforcement, to bankruptcy, insolvency, moratorium,
reorganization and other laws of general application relating to or affecting
creditors’ rights to general equitable principles.

     

    10.           Further
Assurances.  Assignor and Assignee each hereby agree to execute
and deliver such other instruments, and take such other action, as either party
may reasonably request in connection with the transactions contemplated by this
Assignment and Acceptance, including the delivery of any notices or other
documents or instruments to Borrowers or Agent, which may be required in
connection with the assignment and assumption contemplated hereby.

     

    11.           Miscellaneous.

     

    (a)           Any
amendment or waiver of any provision of this Assignment and Acceptance shall be
in writing and signed by the parties hereto.  No failure or delay by
either party hereto in exercising any right, power or privilege hereunder shall
operate as a waiver thereof and any waiver of any breach of the provisions of
this Assignment and Acceptance shall be without prejudice to any rights with
respect to any other for further breach thereof.

     

    (b)           All
payments made hereunder shall be made without any set-off or
counterclaim.

     

    (c)           Assignor
and Assignee shall each pay its own costs and expenses incurred in connection
with the negotiation, preparation, execution and performance of this Assignment
and Acceptance.

     

    (d)           This
Assignment and Acceptance may be executed in any number of counterparts and all
of such counterparts taken together shall be deemed to constitute one and the
same instrument.

     

    (e)           THIS
ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAW OF THE STATE OF NEW YORK.  Assignor and Assignee each
irrevocably submits to the non-exclusive jurisdiction of any State or Federal
court sitting in New York County, New York over any suit, action or proceeding
arising out of or relating to this Assignment and Acceptance and irrevocably
agrees that all claims in respect of such action or proceeding may be heard and
determined in such New York State or Federal court.  Each party to
this Assignment and Acceptance hereby irrevocably waives, to the fullest extent
it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    (f)           ASSIGNOR
AND ASSIGNEE EACH HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY
RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS ASSIGNMENT AND
ACCEPTANCE, THE LOAN AGREEMENT, ANY OF THE OTHER FINANCING AGREEMENTS OR ANY
RELATED DOCUMENTS AND AGREEMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, OR
STATEMENTS (WHETHER ORAL OR WRITTEN).

     

    IN
WITNESS WHEREOF, Assignor and Assignee have caused this Assignment and
Acceptance to be executed and delivered by their duly authorized officers as of
the date first above written.

     

    
      	 
      	
              [NAME OF ASSIGNOR]

            
	 
      	 
      	 
      
	 
      	
              By:

            	 
      
	 
      	
              Name:

            	 
      
	 
      	
              Title:

            	
               

            
	 
      	 
      	 
      
	 
      	
              [NAME OF ASSIGNEE]

            
	 
      	 
      	 
      
	 
      	
              By:

            	 
      
	 
      	
              Name:

            	 
      
	 
      	
              Title:

            	 
      

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    SCHEDULE
1

     

    NOTICE
OF ASSIGNMENT AND ACCEPTANCE

     

    

     

    ___,
20__

     

    

     

    _________________________

     

    _________________________

     

    __________________________

     

    Attn.:
_____________________

     

    Re:____________________________

     

    Ladies
and Gentlemen:

     

    Wachovia
Bank, National Association, in its capacity as agent pursuant to the Loan
Agreement (as hereinafter defined) acting for and on behalf of the financial
institutions which are parties thereto as lenders (in such capacity, “Agent”),
and the financial institutions which are parties to the Loan Agreement as
lenders (individually, each a “Lender” and collectively, “Lenders”) have entered
or are about to enter into financing arrangements pursuant to which Agent and
Lenders may make loans and advances and provide other financial accommodations
to American Biltrite Inc., a Delaware corporation (“Parent”), Ideal Tape Co.,
Inc., a Delaware corporation (“Ideal Tape”), K&M Associates L.P., a Rhode
Island limited partnership (“K&M”; together with Parent and Ideal tape, each
individually a “US Borrower” and collectively, “US Borrowers” as hereinafter
further defined), and American Biltrite (Canada) Ltd., a Canadian corporation
(“Canadian Borrower”; together with US Borrowers, each individually a “Borrower”
and collectively, “Borrowers”), as set forth in the Loan and Security Agreement,
dated as of June 30, 2009, by and among Borrowers, and 425 Dexter Associates,
L.P., a Rhode Island limited partnership (“Dexter”), Ocean State Jewelry, Inc.,
a Rhode Island corporation (“Ocean State”), Majestic Jewelry, Inc., a Delaware
corporation (“Majestic”), American Biltrite Far East, Inc., a Delaware
corporation (“Far East”; together with Dexter, Ocean State and Majestic, each
individually a “US Guarantor” and collectively, “US Guarantors”), Agent and
Lenders (as the same now exists or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced, the “Loan Agreement”),
and the other agreements, documents and instruments referred to therein or at
any time executed and/or delivered in connection therewith or related thereto
(all of the foregoing, together with the Loan Agreement, as the same now exist
or may hereafter be amended, amended and restated, modified, supplemented,
extended, renewed, restated or replaced, being collectively referred to herein
as the “Financing Agreements”).  Capitalized terms not otherwise
defined herein shall have the respective meanings ascribed thereto in the Loan
Agreement.

     

    1.  We
hereby give you notice of, and request your consent to, the assignment by
__________________________ (the “Assignor”) to ___________________________ (the
“Assignee”) such that after giving effect to the assignment Assignee shall have
an interest equal to ________ (__%) percent of the total Commitments pursuant to
the Assignment and Acceptance Agreement attached hereto (the “Assignment and
Acceptance”).  We understand that the Assignor’s Commitment shall be
reduced by $_____________, as the same may be further reduced by other
assignments on or after the date hereof.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    2.  Assignee
agrees that, upon receiving the consent of Agent to such assignment, Assignee
will be bound by the terms of the Loan Agreement as fully and to the same extent
as if the Assignee were the Lender originally holding such interest under the
Loan Agreement.

     

    3.  The
following administrative details apply to Assignee:

     

    
      	 
      	
              (A)

            	
              Notice
      address:

            
	 
      	 
      	 
      	 
      
	 
      	 
      	
              Assignee
      name:

            	
               

            
	 
      	 
      	
              Address:

            	 
      
	 
      	 
      	
              Attention:

            	 
      
	 
      	 
      	
              Telephone:

            	 
      
	 
      	 
      	
              Telecopier:

            	 
      
	 
      	 
      	 
      	 
      
	 
      	
              (B)

            	
              Payment
      instructions:

            
	 
      	 
      	 
      	 
      
	 
      	 
      	
              Account
      No.:

            	 
      
	 
      	 
      	
              At:

            	 
      
	 
      	 
      	
              Reference:

            	 
      
	 
      	 
      	
              Attention:

            	 
      

    

    

    4.  You
are entitled to rely upon the representations, warranties and covenants of each
of Assignor and Assignee contained in the Assignment and
Acceptance.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, Assignor and Assignee have caused this Notice of Assignment and
Acceptance to be executed by their respective duly authorized officials,
officers or agents as of the date first above mentioned.

     

    

    
      	 
      	
              Very
      truly yours,

            
	 
      	 
      
	 
      	
              [NAME OF ASSIGNOR]

            
	 
      	 
      	 
      
	 
      	
              By:

            	 
      
	 
      	
              Name:

            	 
      
	 
      	
              Title:

            	
               

            
	 
      	 
      	 
      
	 
      	
              [NAME OF ASSIGNEE]

            
	 
      	 
      	 
      
	 
      	
              By:

            	 
      
	 
      	
              Name:

            	 
      
	 
      	
              Title:

            	 
      

    

    

     

    ACKNOWLEDGED
AND ASSIGNMENT

    CONSENTED
TO:

    

    WACHOVIA
BANK, NATIONAL ASSOCIATION,

    as
Agent

    

    By:

    Name:

    Title:

    

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    EXHIBIT
B

     

    TO

     

    LOAN
AND SECURITY AGREEMENT

     

    Information
Certificate

     

    

     

    

     

    [See attached]

     

    

    

    
      
        
          
            	
                    1282224.18

                  	
                    B-

                  	 
      

          

          

        

         

      

      
        
        

        
          

        

      

      
         

      

    

    EXHIBIT
C

     

    TO

     

    LOAN
AND SECURITY AGREEMENT

     

    Compliance
Certificate

     

    
      	
              To:

            	
              Wachovia
      Bank, National Association, as
Agent

            

    

    
      	
               
      

            	
              1133
      Avenue of the Americas

            

    

    
      	
               
      

            	
              New
      York, New York 10036

            

    

    

    Ladies
and Gentlemen:

     

    I
hereby certify to you pursuant to Section 9.6 of the Loan Agreement (as defined
below) as follows:

     

    1.           I
am the duly elected chief financial officer of American Biltrite Inc., a
Delaware corporation (“Parent”).  Capitalized terms used herein
without definition shall have the meanings given to such terms in the Loan and
Security Agreement, dated as of June 30, 2009, by and among Wachovia Bank,
National Association, as agent for the financial institutions party thereto as
lenders (in such capacity, “Agent”), and the financial institutions party
thereto as lenders (collectively, “Lenders”), Parent, Ideal Tape Co., Inc., a
Delaware corporation (“Ideal Tape”), K&M Associates L.P., a Rhode Island
limited partnership (“K&M”; together with Parent and Ideal tape, each
individually a “US Borrower” and collectively, “US Borrowers” as hereinafter
further defined), and American Biltrite (Canada) Ltd., a Canadian corporation
(“Canadian Borrower”; together with US Borrowers, each individually a “Borrower”
and collectively, “Borrowers”), 425 Dexter Associates, L.P., a Rhode Island
limited partnership (“Dexter”), Ocean State Jewelry, Inc., a Rhode Island
corporation (“Ocean State”), Majestic Jewelry, Inc., a Delaware corporation
(“Majestic”), American Biltrite Far East, Inc., a Delaware corporation (“Far
East”; together with Dexter, Ocean State and Majestic, each individually a “US
Guarantor” and collectively, “US Guarantors”) (as such Loan and Security
Agreement is amended, amended and restated, modified or supplemented, from time
to time, the “Loan Agreement”).

     

    2.           I
have reviewed the terms of the Loan Agreement, and have made, or have caused to
be made under my supervision, a review in reasonable detail of the transactions
and the financial condition of Borrowers and Guarantors, during the immediately
preceding fiscal month.

     

    3.           The
review described in Section 2 above did not disclose the existence during or at
the end of such fiscal month, and I have no knowledge of the existence and
continuance on the date hereof, of any condition or event which constitutes a
Default or an Event of Default, except as set forth on Schedule I attached
hereto.  Described on Schedule I attached hereto are the exceptions,
if any, to this Section 3 listing, in detail, the nature of the condition or
event, the period during which it has existed and the action which any Borrower
or Guarantor has taken, is taking, or proposes to take with respect to such
condition or event.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    4.           I
further certify that, based on the review described in Section 2 above, no
Borrower or Guarantor has not at any time during or at the end of such fiscal
month, except as specifically described on Schedule II attached hereto or as
permitted by the Loan Agreement, done any of the following:

     

    (a)           Changed
its respective legal name, or transacted business under any trade name, style,
or fictitious name, other than those previously described to you and set forth
in the Financing Agreements.

     

    (b)           Changed
the location of its chief executive office, changed its jurisdiction of
organization, changed its type of organization (other than as permitted by
Section 9.1 of the Loan Agreement) or changed the location of or disposed of any
of its properties or assets (other than pursuant to the sale of Inventory in the
ordinary course of its business or as otherwise permitted by Section 9.7 of the
Loan Agreement), or established any new asset locations.

     

    (c)           Materially
changed the terms upon which it sells goods (including sales on consignment) or
provides services, nor has any vendor or trade supplier to any Borrower or
Guarantor during or at the end of such period materially adversely changed the
terms upon which it supplies goods to any Borrower or Guarantor.

     

    (d)           Permitted
or suffered to exist any security interest in or liens on any of its properties,
whether real or personal, other than as specifically permitted in the Financing
Agreements.

     

    (e)           Received
any notice of, or obtained knowledge of any of the following not previously
disclosed to Agent:  (i) the occurrence of any event involving the
release, spill or discharge of any Hazardous Material in violation of applicable
Environmental Law that has or could reasonably be expected to have a Material
Adverse Effect or (ii) any investigation, proceeding, complaint, order,
directive, claims, citation or notice with respect to: (A) any non-compliance
with or violation of any applicable Environmental Law by any Borrower or
Guarantor that has or could reasonably be expected to have a Material Adverse
Effect or (B) the release, spill or discharge of any Hazardous Material in
violation of applicable Environmental Law that has or could reasonably be
expected to have a Material Adverse Effect or (C) the generation, use, storage,
treatment, transportation, manufacture, handling, production or disposal of any
Hazardous Materials in violation of applicable Environmental Laws that has or
could reasonably be expected to have a Material Adverse Effect or (D) any other
environmental, health or safety matter, which has a Material Adverse Effect on
any Borrower or Guarantor or its business, operations or assets or any
properties at which such Borrower or Guarantor transported, stored or disposed
of any Hazardous Materials.

     

    (f)           Become
aware of, obtained knowledge of, or received notification of, any material
default under any instrument or agreement in respect of Indebtedness for money
borrowed by any Borrower or Guarantor.

     

    5.           Attached
hereto as Schedule III are the calculations used in determining, as of the end
of such fiscal month whether Borrowers and Guarantors are in compliance with the
covenants set forth in Section 9.17 of the Loan Agreement for such fiscal
month.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    The
foregoing certifications are made and delivered this day of _________ __,
20__.

     

    Very
truly yours,

    

    AMERICAN
BILTRITE INC.

    

    By:           _________________________

    Name:           _________________________

    Title:           _________________________

    

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    EXHIBIT
D

     

    TO

     

    LOAN
AND SECURITY AGREEMENT

     

    Form of Borrowing Base
Certificate

     

    

     

    [See attached]

     

    

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    Schedule
1.74

     

    TO

     

    LOAN
AND SECURITY AGREEMENT

     

    Existing
Lenders

     

    

    Bank
of America, National Association

    

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    

    Schedule
1.75

     

    TO

     

    LOAN
AND SECURITY AGREEMENT

     

    Existing Letters of
Credit

     

    

    1.           Letter
of credit numbered 1338987 in favor of Liberty Mutual Insurance Company in the
amount of $137,516.

    

    2.           Letter
of credit numbered 68007130 in favor of National Union Fire Insurance Co. of
Pittsburg, PA in the amount of $570,000.

    

    3.           Letter
of credit numbered SB104549/09 in favor of J. Richard's RCA in the amount of
$421,500 CDN.

    

    4.           Letter
of credit numbered IM105201/09 in favor of Asean M&L (Holding) Limited in
the amount of $84,321.23.

    

    5.           Letter
of credit numbered IM105194/09 in favor of Acquaty Company LTD in the amount of
$35,351.78.

    

    6.           Letter
of credit numbered IM105193/09 in favor of Acquaty Company LTD in the amount of
$132,124.51.

    

    7.           Letter
of credit numbered IM105198/09 in favor of Acquaty Company LTD in the amount of
$24,579.41.

    

    8.           Letter
of credit numbered IM105208/09 in favor of Acquaty Company LTD in the amount of
$26,926.08.

    

    9.           Letter
of credit numbered IM105207/09 in favor of Acquaty Company LTD in the amount of
$18,172.49.

    

    10.           Letter
of credit numbered IM105209/09 in favor of Acquaty Company LTD in the amount of
$29,268.76.

    

    11.           Letter
of credit numbered IM105212/09 in favor of Acquaty Company LTD in the amount of
$24,739.66.

    

    12.           Letter
of credit numbered IM105215/09 in favor of Acquaty Company LTD in the amount of
$133,705.41.ex10-2.htm

    Exhibit
10.2

     

    INTERCREDITOR
AND

    LIEN
SUBORDINATION AGREEMENT

     

    THIS
INTERCREDITOR AND LIEN SUBORDINATION AGREEMENT, dated as of June 30, 2009 (this
“Agreement”),
is by and among WACHOVIA BANK, NATIONAL ASSOCIATION, in its capacity as agent
(in such capacity, “Agent”
as hereinafter defined) pursuant to the Credit Agreement (as hereinafter
defined) acting for and on behalf of the Credit Agreement Creditors (as
hereinafter defined), FAUNUS GROUP INTERNATIONAL, INC., a Delaware corporation
(“FGI”),
AMERICAN BILTRITE INC., a Delaware corporation (“Parent”),
and AMERICAN BILTRITE FAR EAST, INC., a Delaware corporation (“Far
East”; together with Parent, individually a “Debtor”
and collectively, “Debtors”).

     

    BACKGROUND

     

    A.           Agent
and Lenders (as hereinafter defined) have made and may hereafter make revolving
loans and advances and have provided and may hereafter provide other financial
accommodations to Debtors and certain of their affiliates secured by certain of
their assets and properties; and

     

    B.           Parent
and FGI are parties to a certain Security Agreement, dated on or about the date
hereof (as amended, restated, supplemented or otherwise modified from time to
time, the “Parent
Agreement”), and a Debt Purchase Agreement, dated on or about the date
hereof (as amended, restated, supplemented or otherwise modified from time to
time, the “Parent
Receivables Finance Agreement”), pursuant to which Parent established
certain financing arrangements with FGI; and

     

    C.           Far
East and FGI are parties to a certain Security Agreement, dated on or about the
date hereof (as amended, restated, supplemented or otherwise modified from time
to time, the “Far East
Agreement”), and a Receivables Finance Agreement, dated on or about the
date hereof (as amended, restated, supplemented or otherwise modified from time
to time, the “Far East
Receivables Finance Agreement”), pursuant to which Far East established
certain financing arrangements with FGI;

     

    D.           Parent
has agreed to guaranty the obligations of Far East under the Far East Agreement
and the Far East Receivables Finance Agreement pursuant to the Guaranty, dated
on or about the date hereof, by Parent in favor of FGI (the “Parent
FGI Guaranty”), and to secure such Parent FGI Guaranty with a security
interest in certain assets and properties of Parent, subject to and in
accordance with the terms hereof;

     

    E.           Far
East has agreed to guaranty the obligations of Parent under the Parent Agreement
and the Parent Receivables Finance Agreement pursuant to the Guaranty, dated on
or about the date hereof, by Far East in favor of FGI (the “Far East
FGI Guaranty”), and to secure such Far East FGI Guaranty with a security
interest in certain assets and properties of Far East, subject to and in
accordance with the terms hereof; and

     

    F.           FGI
and Agent, for and on behalf of itself and Credit Agreement Creditors, desire to
enter into this Agreement in order to, inter alia, (i) confirm the
relative priority of the Liens of each party in the Agent Priority Collateral
and the FGI Priority Collateral, and (ii) provide for the orderly sharing
between FGI and Credit Agreement Creditors in accordance with such priorities,
of proceeds of the Agent Priority Collateral and/or FGI Priority Collateral upon
any sale thereof, foreclosure thereon or other disposition thereof.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    NOW,
THEREFORE, in consideration of the premises and the mutual agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:

     

    ARTICLE
I

    DEFINITIONS

     

    Section
1.1      For purposes of this Agreement, the following
terms shall have the following meanings:

     

    “Agent”
shall mean Wachovia Bank, National Association, a national banking association,
in its capacity as agent pursuant to the Credit Agreement acting for the benefit
and on behalf of Credit Agreement Creditors, and its successors and assigns (and
including, without limitation, any successor, assignee or additional person at
any time acting as agent for the benefit of or on behalf of it or Credit
Agreement Creditors).

     

    “Agent
Priority Collateral” means all assets of Debtors (other than FGI Priority
Collateral), whether now owned or hereafter created, acquired or arising, in
which Agent and Credit Agreement Creditors have been granted a security interest
in under the Credit Documents.

     

    “Bankruptcy
Event” means with respect to any Person, any voluntary or involuntary
dissolution, winding-up, total or partial liquidation or reorganization, or
bankruptcy, insolvency, receivership or other statutory or common law
proceedings or arrangements involving such Person or the readjustment of its
liabilities or any assignment for the benefit of creditors or any marshalling of
its assets or liabilities.

     

    “Credit
Agreement” shall mean the Loan and Security Agreement, dated of even date
herewith, among Agent, Lenders, Debtors and certain of their affiliates, as the
same now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced in accordance with this Agreement.

     

    “Credit
Agreement Creditors” shall mean, collectively, Agent and Lenders, the
provider of any cash management or other bank products to Debtors as provided in
the Credit Agreement and their respective successors and assigns (and including
any other lender or group of lenders that at any time (a) refinances or succeeds
to all or any portion of the Credit Agreement Obligations or (b) is otherwise
party to the Credit Documents); each sometimes being referred to herein
individually as “Credit
Agreement Creditor”.

     

    “Credit
Agreement Event of Default” means an “Event of Default” as defined in the
Credit Agreement.

     

    “Credit
Agreement Obligations” means the collective reference to all obligations,
now existing or hereafter arising, owing by any or all of the Credit Parties to
Credit Agreement Creditors under or pursuant to the Credit Documents (including,
without limitation, all of the “Obligations” as such term is defined in the
Credit Agreement, including, without limitation, interest accruing at
the

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    then
applicable rate provided in the Credit Agreements and any fees, costs or other
amounts arising after the commencement of any Bankruptcy Event or like
proceeding relating to any Credit Party (or would accrue or be payable but for
the commencement of such proceeding), whether or not a claim for post-filing or
post-petition interest, fees, costs or other amounts is allowed in such
proceeding), whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter incurred, which may arise under, out of,
or in connection with any of the Credit Documents, whether on account of
principal, advanced amounts, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without limitation, all
fees and disbursements of counsel to Agent and Credit Agreement Creditors that
are required to be paid by any Credit Party pursuant to the terms of the Credit
Documents).

     

    “Credit
Documents” means, collectively, the Credit Agreement and all agreements,
documents and instruments at any time executed and/or delivered by any Credit
Party or any other Person with, to or in favor of Agent or any Credit Agreement
Creditors in connection therewith or related thereto, as all of the foregoing
now exist or may hereafter be amended, restated, supplemented or otherwise
modified from time to time (and including any agreements which may be entered
into at any time and from time to time in connection with the refinancing or
replacement of the existing arrangements of Credit Agreement
Creditors).

     

    “Credit
Parties” means, collectively, Debtors together with their respective
successors and assigns (including, without limitation, a receiver, trustee or
debtor-in-possession on behalf of such Person or on behalf of such successor or
assign); sometimes individually referred to herein as a “Credit
Party”.

     

    “Event of
Default” means any Credit Agreement Event of Default or FGI Documents
Event of Default.

     

    “FGI
Documents” means, collectively, the Parent Agreement, the Far East
Agreement, the Parent Receivables Finance Agreement, the Far East Receivables
Financing Agreement, the Parent FGI Guaranty, the Far East FGI Guaranty and all
agreements, documents and instruments at any time executed and/or delivered by
any Credit Party or any other Person with, to or in favor of FGI in connection
therewith or related thereto, as all of the foregoing now exist or may hereafter
be amended, restated, supplemented or otherwise modified from time to time (and
including any agreements which may be entered into at any time and from time to
time in connection with the refinancing or replacement of the existing
arrangements of FGI).

     

    “FGI
Documents Event of Default” means an “Event of Default” as defined in any
FGI Document.

     

    “FGI
Documents Obligations” means all obligations, now existing or hereafter
arising, owing by any or all of the Credit Parties to FGI under or pursuant to
the FGI Documents (including, without limitation, all of the “Obligations” as
such term is defined in the Parent Agreement as in effect on the date hereof and
the Far East Agreement as in effect on the date hereof, as applicable),
including, without limitation interest accruing at the then applicable rate
provided in the FGI Documents and any fees, costs or other amounts arising after
the commencement of any Bankruptcy Event or like proceeding relating to any
Credit Party (or would accrue or be payable but for the commencement of such
proceeding), whether or not a claim for post-filing or post-petition
interest,

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    fees,
costs or other amounts is allowed in such proceeding), whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter incurred, which may arise under, out of, or in connection with the FGI
Documents, whether on account of principal, advanced amounts, interest,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel to FGI
that are required to be paid by any Credit Party pursuant to the terms of the
FGI Documents).

     

    “FGI
Priority Collateral” means certain Accounts
and other personal property of Debtors, whether now owned or hereafter created,
acquired or arising, listed on Exhibit A attached
hereto and made part hereof.

     

    “Financing
Agreements” means, collectively, the Credit Documents and the FGI
Documents.

     

    “First
Priority FGI Collateral Liens” shall have the meaning given to such term
in Section 2.1(b) hereof.

     

    “First
Priority Agent Collateral Liens” shall have the meaning given to such
term in Section 2.1(a) hereof.

     

    “Foreign
Accounts” shall have the meaning given to such term as set forth on Exhibit A.  Under
no circumstances shall Foreign Accounts include any Account payable by any
account debtor whose principal place of business or chief executive office is
located in the United States or Canada.

     

    “Guaranty
Obligations” means all obligations, now existing or hereafter arising,
owing by (a) Parent to FGI under or pursuant to the Parent FGI Guaranty
(including, without limitation, all of the “Obligations” as such term is defined
in the Parent FGI Guaranty, including, without limitation interest accruing at
the then applicable rate provided in the Far East Receivables Finance Agreement
and any fees, costs or other amounts arising after the commencement of any
Bankruptcy Event or like proceeding relating to Far East (or would accrue or be
payable but for the commencement of such proceeding), whether or not a claim for
post-filing or post-petition interest, fees, costs or other amounts is allowed
in such proceeding), whether direct or indirect, absolute or contingent, due or
to become due, now existing or hereafter incurred, which may arise under, out
of, or in connection with the FGI Documents, whether on account of principal,
advanced amounts, interest, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all fees and disbursements
of counsel to FGI that are required to be paid by any Credit Party pursuant to
the terms of the Parent FGI Guaranty) and (b) Far East to FGI under or pursuant
to the Far East FGI Guaranty (including, without limitation, all of the
“Obligations” as such term is defined in the Far East FGI Guaranty, including,
without limitation interest accruing at the then applicable rate provided in the
Parent Receivables Finance Agreement and any fees, costs or other amounts
arising after the commencement of any Bankruptcy Event or like proceeding
relating to Parent (or would accrue or be payable but for the commencement of
such proceeding), whether or not a claim for post-filing or post-petition
interest, fees, costs or other amounts is allowed in such proceeding), whether
direct or indirect, absolute or contingent, due or to become due, now existing
or hereafter incurred, which may arise under, out of, or in connection with the
FGI Documents, whether on account of principal, advanced amounts, interest,
reimbursement obligations, fees, indemnities, costs, expenses or otherwise
(including, without limitation, all fees and disbursements of counsel
to

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    FGI
that are required to be paid by any Credit Party pursuant to the terms of the
Far East FGI Guaranty).

     

    “Lenders”
shall mean, collectively, the lenders that are or may hereafter become parties
to the Credit Agreement and their respective successors and assigns (including
any other lender or group of lenders that at any time succeeds to or refinances,
replaces or substitutes for all or any portion of the Credit Agreement
Obligations at any time and from time to time); sometimes being referred to
herein individually as a “Lender”.

     

    “Lien”
means any mortgage, pledge, hypothecation, assignment, deposit arrangement,
security interest, encumbrance, lien (statutory or otherwise), option,
preference, priority or charge of any kind.

     

    “Maximum
FGI Debt” shall mean, as of any date of determination, (a) the lesser of
(i) the outstanding amount of the FGI Documents Obligations and (ii) $4,400,000,
plus (b) any interest on such amount (and including, without limitation, any
interest which would accrue and become due but for the commencement of a
Bankruptcy Event, whether or not such amounts are allowed or allowable in whole
or in part in such case or similar proceeding), plus iii) any fees, costs,
expenses and indemnities payable under the FGI Documents (and including, without
limitation, any fees, costs, expenses and indemnities which would accrue and
become due but for the commencement of a Bankruptcy Event, whether or not such
amounts are allowed or allowable in whole or in part in such case or similar
proceeding).

     

    “Obligations”
means, collectively, the Credit Agreement Obligations, the FGI Documents
Obligations and the Guaranty Obligations.

     

    “Person”
means any individual, corporation, partnership, limited liability partnership,
limited liability company, association, trust, unincorporated organization,
joint venture, court or government or political subdivision or agency thereof,
or other entity.

     

    “Second
Priority FGI Collateral Liens” shall have the meaning given to such term
in Section 2.1(a) hereof.

     

    “Second
Priority Agent Collateral Liens” shall have the meaning given to such
term in Section 2.1(b) hereof.

     

    “UCC”
means the Uniform Commercial Code of the State of New York or of any other state
the laws of which are required to be applied in connection with the perfection
of security interests in any collateral described herein.

     

    ARTICLE
II

    GENERAL
INTERCREDITOR AND SUBORDINATION PROVISIONS

     

    Section
2.1          Agreement to Subordinate
Liens.

     

    (a)           FGI
and Agent, for and on behalf of itself and Credit Agreement Creditors, agree
that, to the extent and in the manner set forth in this Section 2.1, all Liens
now or hereafter acquired by Credit Agreement Creditors in any or all of the
Agent Priority Collateral (the “First

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    Priority
Agent Collateral Liens”) shall at all times be prior and superior to any
Lien now held or hereafter acquired by FGI in the Agent Priority Collateral (the
“Second
Priority FGI Collateral Liens”).  Such priority shall be
applicable irrespective of the time or order of attachment or perfection of any
security interest or the time or order of filing of any financing statements or
other documents, or any statutes, rules of law, or court decisions to the
contrary.  The lien subordination provisions in this Section 2.1(a)
are for the benefit of and shall be enforceable by Credit Agreement Creditors,
and Credit Agreement Creditors shall be deemed to have acquired the Credit
Agreement Obligations in reliance upon this Agreement.

     

    (b)           Agent,
for and on behalf of itself and Credit Agreement Creditors, and FGI agree that,
to the extent and in the manner set forth in this Section 2.1, all Liens now or
hereafter acquired by FGI to secure the FGI Documents Obligations up to the
amount of the Maximum FGI Debt in any or all of the FGI Priority Collateral (the
“First
Priority FGI Collateral Liens”) shall at all times be prior and superior
to any Lien now held or hereafter acquired by Credit Agreement Creditors in the
FGI Priority Collateral (the “Second
Priority Agent Collateral Liens”).  Such priority shall be
applicable irrespective of the time or order of attachment or perfection of any
security interest or the time or order of filing of any financing statements or
other documents, or any statutes, rules of law, or court decisions to the
contrary.  The lien subordination provisions in this Section 2.1(b)
are for the benefit of and shall be enforceable by FGI, and FGI shall be deemed
to have acquired the FGI Documents Obligations in reliance upon this
Agreement.

     

    Section
2.2          Limitations on Rights and
Remedies; Standstill with respect to Agent Priority
Collateral.

     

    (a)           Until
the Credit Agreement Obligations have been fully and finally paid in cash and
satisfied and the Credit Documents have been terminated in accordance with their
terms, FGI shall not exercise any rights or remedies with respect to the Agent
Priority Collateral, including, without limitation, (i) enforcing any Second
Priority FGI Collateral Liens or selling or otherwise seeking to foreclose or
realize upon any portion of the Agent Priority Collateral or (ii) request any
action, institute proceedings give any instructions, or make any election with
respect to any portion of the Agent Priority Collateral.  In the event
that FGI shall receive any proceeds of the Agent Priority Collateral or
possession of any Agent Priority Collateral, it shall receive and hold the same
in trust, as trustee, for the benefit of Credit Agreement Creditors and shall
immediately deliver the same to Agent (together with any endorsement or
assignment, as the case may be, where reasonably necessary) for application in
accordance with Section 2.6 hereof.

     

    (b)           Until
the Credit Agreement Obligations have been fully and finally paid in cash and
satisfied and the Credit Documents have been terminated in accordance with their
terms, FGI shall cooperate with Credit Agreement Creditors at no cost or expense
to Credit Agreement Creditors so as not to impede or disrupt the collection
efforts of Credit Agreement Creditors with respect to the Agent Priority
Collateral.

     

    Section
2.3          Disposition of Agent
Priority Collateral.  FGI agrees that, notwithstanding anything
to the contrary contained in any of the FGI Documents or otherwise, until all
Credit Agreement Obligations have been fully and finally paid in cash and
satisfied and the Credit Documents have been terminated in accordance with their
terms, Credit Agreement Creditors shall have the exclusive right to restrict or
permit, or approve or disapprove, the sale, transfer or other

     

    
      
         

      

      
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    disposition
of any Agent Priority Collateral, and the exclusive right to foreclose upon,
compromise or otherwise dispose of, and exercise any other rights with respect
to, any or all of the Agent Priority Collateral, in each case free of the Second
Priority FGI Collateral Liens.  FGI shall, immediately upon the
request of Agent, release or otherwise terminate the Second Priority FGI
Collateral Liens, respectively, to the extent such Agent Priority Collateral is
sold or otherwise disposed of, with the consent of Agent, for and on behalf of
itself and Credit Agreement Creditors, under the Credit Agreement and will
immediately deliver such other release documents as Agent may reasonably require
in connection therewith.  Any proceeds from any such sale or other
disposition shall be applied in accordance with Section 2.6 hereof.

     

    Section
2.4          Limitations on Rights and
Remedies; Standstill with respect to FGI Priority
Collateral.

     

    (a)           Until
the FGI Documents Obligations have been paid in full in cash and satisfied and
the FGI Documents have been terminated, Agent and Credit Agreement Creditors
shall not exercise any rights or remedies with respect to the FGI Priority
Collateral, including, without limitation, (i) enforcing any Second Priority
Agent Collateral Liens or selling or otherwise seeking to foreclose or realize
upon any portion of the FGI Priority Collateral, or (ii) request any action,
institute proceedings give any instructions, or make any election with respect
to any portion of the FGI Priority Collateral.  In the event that
Agent or any Credit Agreement Creditor shall receive any proceeds of the FGI
Priority Collateral or possession of any FGI Priority Collateral, it shall
receive and hold the same in trust, as trustee, for the benefit of FGI and shall
immediately deliver the same to FGI (together with any endorsement or
assignment, as the case may be, where reasonably necessary) for application in
accordance with Section 2.6 hereof.

     

    (b)           Until
the FGI Documents Obligations have been paid in full in cash and satisfied and
the FGI Documents have been terminated, Agent and Credit Agreement
Creditors  shall cooperate with FGI so as not to impede or disrupt the
collection efforts of FGI with respect to the FGI Priority
Collateral.

     

    Section
2.5          Disposition of FGI Priority
Collateral.  Agent, for and on behalf of itself and Credit
Agreement Creditors, agrees that, notwithstanding anything to the contrary
contained in any of the Credit Documents or otherwise, until all FGI Documents
Obligations have been paid in full in cash and satisfied and the FGI Documents
have been terminated, FGI shall have the exclusive right to restrict or permit,
or approve or disapprove, the sale, transfer or other disposition of any FGI
Priority Collateral, and the exclusive right to foreclose upon or otherwise
dispose of, and exercise any other rights with respect to, any or all of the FGI
Priority Collateral, in each case, free of the Second Priority Agent Collateral
Liens.  Agent, for and on behalf of itself and Credit Agreement
Creditors, shall, immediately upon the request of FGI, release or otherwise
terminate the Second Priority Agent Collateral Liens, respectively, to the
extent such FGI Priority Collateral is sold or otherwise disposed of, with the
consent of FGI under the FGI Documents and will immediately deliver such other
release documents as FGI may reasonably require in connection
therewith.  Any proceeds from any such sale or other disposition shall
be applied in accordance with Section 2.6 hereof.

     

    
      
         

      

      
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    Section
2.6          Application of
Proceeds.

     

    (a)           Agent,
for and on behalf of itself and Credit Agreement Creditors, and FGI agree
between themselves that, the proceeds of the Agent Priority Collateral, or any
part thereof, shall, to the extent available for distribution, be distributed as
follows:

     

    (i)           First: to Credit
Agreement Creditors for application to the Credit Agreement Obligations in
accordance with the terms and provisions of the Credit Documents until all such
Credit Agreement Obligations are fully and finally paid in cash and
satisfied;

     

    (ii)           Second: to FGI for
application to the FGI Documents Obligations and the Guaranty Obligations in
accordance with the terms and provisions of the FGI Documents until all such FGI
Documents Obligations are fully and finally paid in cash and satisfied;
and

     

    (iii)           Third: if all
Obligations shall have been paid in full in cash and satisfied and the Financing
Agreements shall have been terminated, any surplus then remaining shall be paid
to Debtors or to such other Person as may be lawfully entitled to receive the
same or as a court of competent jurisdiction may direct.

     

    (b)           Agent,
for and on behalf of itself and Credit Agreement Creditors, and FGI agree
between themselves that, the proceeds of the FGI Priority Collateral, or any
part thereof, shall, to the extent available for distribution, be distributed as
follows:

     

    (i)           First: to FGI for
application to the FGI Documents Obligations in accordance with the terms and
provisions of the FGI Documents, up to the amount of the Maximum FGI
Debt;

     

    (ii)           Second: to Credit
Agreement Creditors for application to the Credit Agreement Obligations in
accordance with the terms and provisions of the Credit Documents until all such
Credit Agreement Obligations are fully and finally paid in cash and satisfied;
and

     

    (iii)           Third, if all
Obligations shall have been paid in full in cash and satisfied and the Financing
Agreements shall have been terminated, any surplus then remaining shall be paid
to Debtors or to such other Person as may be lawfully entitled to receive the
same or as a court of competent jurisdiction may direct.

     

    (c)           Agent,
for and on behalf of itself and Credit Agreement Creditors, and FGI consent and
agree to the right of Agent, for and on behalf of itself and Credit Agreement
Creditors, and FGI to so apply such proceeds and each waives and releases any
claim or right against the other in connection with such
determination.

     

    Section
2.7         Intercreditor Arrangements
in Bankruptcy.  This Agreement shall remain in full force and
effect and enforceable pursuant to its terms notwithstanding the occurrence of a
Bankruptcy Event, and all references herein to each Debtor shall be deemed to
apply to such Person as debtor in possession and to any trustee in bankruptcy
for the estate of such Person.

     

    
      
         

      

      
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    Section
2.8          Obligations of Credit
Parties Unconditional.

     

    (a)           Nothing
contained in this Agreement is intended to or shall relieve the obligations of
any Credit Party to FGI, Credit Agreement Creditors or any other Person with
respect to such Credit Party’s obligations under any of the Financing Agreements
to pay any amount in respect of the Obligations or any other amounts arising
under any of the Financing Agreements as and when such amount shall become due
and payable in accordance with the terms thereof, or to affect the relative
rights of FGI and Credit Agreement Creditors, on the one hand, and the other
creditors or any Credit Party, on the other hand.  All rights and
interests of FGI and Credit Agreement Creditors hereunder, and all agreements
and obligations of the Credit Parties, FGI and Credit Agreement Creditors
hereunder, shall remain in full force and effect irrespective of:

     

    (i)           any
lack of validity or enforceability of any of the Financing Agreements or any
other agreement or instrument relating thereto;

     

    (ii)           any
change in the time, manner or place of, or in any other term of, all or any of
the Obligations, or any amendment or waiver of or any consent to departure from
any provision of any of the Financing Agreements;

     

    (iii)           any
exchange, release, non-perfection, or unenforceability of any Lien or security
interest in any Agent Priority Collateral, FGI Priority Collateral or any other
collateral, or any release or amendment or waiver of or consent to departure
from any guarantee, for all or any of the Obligations; or

     

    (iv)           any
other circumstances which might otherwise constitute a defense available to, or
a discharge of, any Credit Party in respect of all or any of the
Obligations;

     

    (b)           Nothing
contained in this Agreement shall affect the obligation of any Credit Party to
make, or prevent any of the Credit Parties from making, at any time, payment of
any amount in respect of the respective Obligations.

     

    Section
2.9          No Other
Beneficiaries.  This Agreement and the provisions contained
herein are intended only for the benefit of the holders of the Obligations and
no other creditor of any Credit Party; provided, that, this Agreement is not for the
benefit of any Credit Party and any provision contained herein may be waived or
amended by FGI and Agent, for and on behalf of itself and Credit Agreement
Creditors, without notice to or consent of the Credit Parties.

     

    Section
2.10        Rights Not to be
Impaired.  No right of any present or future holder of any
Obligations to enforce any agreement as herein provided shall at any time in any
way be prejudiced or impaired by any act or omission in good faith by any such
holder, or by any noncompliance by any of the Credit Parties with the terms and
provisions and covenants herein regardless of any knowledge thereof that any
such holder may have or otherwise be charged with.

     

    Section
2.11        Waivers;
Acknowledgements.

     

    (a)           FGI
waives and releases any claim which FGI may now or hereafter have against Credit
Agreement Creditors arising out of any and all actions which Credit Agreement
Creditors, in good faith and in accordance with the terms of this Agreement,
takes or omits to take

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    with
respect to the Agent Priority Collateral, including without limitation, (i)
actions with respect to the creation, perfection or continuation of liens or
security interest in the Agent Priority Collateral, (ii) actions with respect to
the foreclosure upon, sale, release, or depreciation of, or failure to realize
upon, any of the Agent Priority Collateral, and (iii) any other action with
respect to the valuation, use, protection or disposition of the Agent Priority
Collateral.

     

    (b)           Agent,
for and on behalf of itself and Credit Agreement Creditors, waives and releases
any claim which Credit Agreement Creditors may now or hereafter have against FGI
arising out of any and all actions which FGI, in good faith and in accordance
with the terms of this Agreement, takes or omits to take with respect to the FGI
Priority Collateral, including without limitation, (i) actions with respect to
the creation, perfection or continuation of liens or security interest in the
FGI Priority Collateral, (ii) actions with respect to the foreclosure upon,
sale, release, or depreciation of, or failure to realize upon, any of the FGI
Priority Collateral, and (iii) any other action with respect to the valuation,
use, protection or disposition of the FGI Priority Collateral.

     

    Section
2.12        Assignment by Debtors of
Amounts Due From FGI.  Within three (3) days following the
receipt by FGI of written instruction by Agent in the form and text of Exhibit B attached
hereto and made a part hereof, and completed in full (the “Control
Notice”) following the occurrence of a Credit Agreement Event of Default,
each Debtor hereby directs FGI to pay to Agent, for itself and on behalf of
Credit Agreement Creditors, and, to the extent permitted pursuant to applicable
law, FGI agrees to pay to Agent, for itself and on behalf of Credit Agreement
Creditors, such sums representing any amounts which would be payable to either
Debtor from time to time pursuant to the FGI Documents (the “Amounts
Due From FGI”), as and when such sums become due to any Debtor under the
FGI Documents.  Such payment shall be for the account of Debtors and,
commencing within three (3) days following receipt by FGI of the Control Notice,
shall be made by wire transfer of immediately available funds to the account set
forth in such Control Notice.  FGI is hereby authorized to recognize
Credit Agreement Creditors’ claims and rights hereunder without investigating
the reason for any action taken by Credit Agreement Creditors, or the validity
or the amount of obligations of Debtors to Credit Agreement
Creditors.  Debtors understand that, after delivery of the Control
Notice, Agent, for itself and the benefit of Credit Agreement Creditors, may,
without notice to Debtors, collect, realize or otherwise deal with the Amounts
Due From FGI or any part thereof in such manner and at such times as it deems
advisable, and may charge on its own behalf or pay to others reasonable sums for
expenses incurred or services rendered (expressly including legal advice and
services) in or in connection with collecting, realizing, selling or obtaining
payment of the Amounts Due From FGI and may add the amount of such sums to the
Credit Agreement Obligations.  After delivery of the Control Notice,
Debtors shall have no right to receive from FGI any amounts which would be
payable to Debtors from time to time pursuant to the FGI Documents and any
monies received by Debtors in respect of  amounts which would be
payable to Debtors from time to time pursuant to the FGI Documents will be
received and held by it in trust for, and will immediately be paid over to,
Agent, for itself and the benefit of Credit Agreement Creditors.  Each
Debtor waives and releases any claim or right against FGI in connection with FGI
comply with the terms of this Section 2.12.

     

    
      
         

      

      
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    ARTICLE
III

    BANKRUPTCY
EVENTS

     

    Section
3.1         Bankruptcy
Financing.  If any Debtor becomes subject to any Bankruptcy
Event, until the full and final payment in cash and satisfaction of all the
Credit Agreement Obligations to Credit Agreement Creditors under the Credit
Documents has occurred, FGI agrees that:

     

    (a)           it
will raise no objection to, nor support any other Person objecting to, and will
be deemed to have consented to, the use of any Agent Priority Collateral
constituting cash collateral under Section 363 of the Bankruptcy Code, or any
comparable provision of any other Bankruptcy Law or any post-petition financing,
provided by Credit Agreement Creditors or any Person approved by Credit
Agreement Creditors under Section 364 of the Bankruptcy Code, or any comparable
provision of any other Bankruptcy Law (a “DIP
Financing”), will not request or accept adequate protection or any other
relief in connection with the use of such cash collateral or such DIP Financing
and will subordinate (and will be deemed hereunder to have subordinated) the
Liens granted to FGI to such DIP Financing on the same terms as such Liens are
subordinated to the Liens granted to Credit Agreement Creditors hereunder (and
such subordination will not alter in any manner the terms of this Agreement), to
any adequate protection provided to Credit Agreement Creditors and to any “carve
out” agreed to by Credit Agreement Creditors; provided, that:

     

    (i)           Credit
Agreement Creditors do not oppose or object to such use of cash collateral or
DIP Financing,

     

    (ii)           the
Liens granted to Agent, for and on behalf of itself and Credit Agreement
Creditors, or such other person in connection with such DIP Financing are
subject to this Agreement and considered to be Liens of Credit Agreement
Creditors for purposes hereof,

     

    (iii)           FGI
retains a Lien on the Agent Priority Collateral (including proceeds thereof)
with the same priority relative to the Liens of Credit Agreement Creditors as
existed prior to such Bankruptcy Event,

     

    (iv)           FGI
receives replacement Liens on all post-petition assets of Debtors in which
Credit Agreement Creditors obtain a replacement Lien, or which secure the DIP
Financing, with the same priority relative to the Liens of Credit Agreement
Creditors as existed prior to such Bankruptcy Event, and

     

    (v)           FGI
may oppose or object to such use of Cash Collateral or DIP Financing on the same
bases as an unsecured creditor, so long as such opposition or objection is not
based on FGI’s status as a secured creditor and in connection with such
opposition or objection, FGI affirmatively states that it is an undersecured
secured creditor; and

     

    (b)           FGI
shall not, directly or indirectly, provide, or seek to provide, DIP Financing
secured by Liens equal or senior in priority to the Liens on the Agent Priority
Collateral, without the prior written consent of Agent, for and on behalf of
itself and Credit Agreement Creditors.

     

    
      
         

      

      
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    Section
3.2         Relief from the Automatic
Stay.

     

    (a)           FGI
agrees that, so long as the full and final payment in cash and satisfaction of
all Obligations to Credit Agreement Creditors under the Credit Documents has not
occurred, FGI shall not, without the prior written consent of Credit Agreement
Creditors, seek or request relief from or modification of the automatic stay or
any other stay in any Bankruptcy Event in respect of any part of the Agent
Priority Collateral, any proceeds thereof or any Lien thereon securing any of
the obligations to FGI under the FGI Documents.  Notwithstanding
anything to the contrary set forth in this Agreement, Debtors do not waive and
shall not be deemed to have waived any rights under Section 362 of the
Bankruptcy Code.

     

    (b)           Agent,
for and on behalf of itself and Credit Agreement Creditors, agrees that, so long
as the full and final payment in cash and satisfaction of all Obligations to FGI
under the FGI Documents has not occurred, Credit Agreement Creditors shall not,
without the prior written consent of the FGI, seek or request relief from or
modification of the automatic stay or any other stay in any Bankruptcy Event in
respect of any part of the FGI Priority Collateral, any proceeds thereof or any
Lien thereon securing any of the obligations to Credit Agreement Creditors under
the Credit Documents.  Notwithstanding anything to the contrary set
forth in this Agreement, Debtors do not waive and shall not be deemed to have
waived any rights under Section 362 of the Bankruptcy Code.

     

    Section
3.3          Adequate
Protection.

     

    (a)           FGI
agrees that it shall raise no objection to, contest, or support any other Person
objecting to or contesting, (i) any request by Credit Agreement Creditors for
adequate protection or any adequate protection provided to Credit Agreement
Creditors, or (ii) any objection by Credit Agreement Creditors to any motion,
relief, action or proceeding based on a claim of a lack of adequate protection,
or (iii) the payment of interest, fees, expenses or other amounts to Credit
Agreement Creditors under Section 506(b) or 506(c) of the Bankruptcy Code or
otherwise.

     

    (b)           FGI
agrees that it shall not seek or accept adequate protection without the prior
written consent of Credit Agreement Creditors; except, that, the FGI shall
be permitted (i) to obtain adequate protection in the form of the benefit of
additional or replacement Liens on the Collateral (including proceeds thereof
arising after the commencement of any Bankruptcy Event), or additional or
replacement collateral to secure the obligations to FGI under the FGI Documents,
in connection with any DIP Financing or use of cash collateral as provided for
in Section 3.1 above, or in connection with any such adequate protection
obtained by Credit Agreement Creditors, as long as in each case, Credit
Agreement Creditors are also granted such additional or replacement Liens or
additional or replacement collateral and such Liens of FGI are subordinated to
the Liens securing the obligations to Credit Agreement Creditors under the
Credit Documents to the same extent as the Liens of FGI on the Collateral are
subordinated to the Liens of Credit Agreement Creditors and (ii) to obtain
adequate protection in the form of reports, notices, inspection rights and
similar forms of adequate protection to the extent granted to Credit Agreement
Creditors.

     

    Section
3.4          Reorganization
Securities.  If, in any Bankruptcy Event, debt obligations of
any reorganized Debtor secured by Liens upon any property of any reorganized
Debtor are distributed, pursuant to a plan of reorganization, on account of both
the obligations to Credit Agreement Creditors under the Credit Documents and the
obligations to FGI under the FGI

     

    
      
         

      

      
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    Documents,
then, to the extent the debt obligations so distributed are secured by Liens
upon the same assets or property, the provisions of this Agreement will survive
the distribution of such debt obligations pursuant to such plan and will apply
with like effect to the Liens securing such debt obligations.

     

    Section
3.5          Separate
Classes.  Each of the parties hereto irrevocably acknowledges
and agrees that (a) the claims and interests of Credit Agreement Creditors and
FGI are not “substantially similar” within the meaning of Section 1122 of the
Bankruptcy Code, or any comparable provision of any other Bankruptcy Law, (b)
the grants of the Liens to secure the obligations to Credit Agreement Creditors
under the Credit Documents and the grants of the Liens to secure the obligations
to FGI under the FGI Documents constitute two separate and distinct grants of
Liens, (c) Credit Agreement Creditors’ rights in the Collateral are
fundamentally different from FGI’s rights in the Collateral and (d) as a result
of the foregoing, among other things, obligations to Credit Agreement Creditors
under the Credit Documents and the obligations to FGI under the FGI Documents
must be separately classified in any plan of reorganization proposed or adopted
in any Bankruptcy Event.

     

    Section
3.6          Asset
Dispositions.

     

    (a)           Until
the full and final payment in cash and satisfaction of all Credit Agreement
Obligations to Credit Agreement Creditors under the Credit Documents has
occurred, FGI agrees that, in the event of any Bankruptcy Event, FGI will not
object or oppose (or support any Person in objecting or opposing) a motion to
any sale, lease, license, exchange, transfer or other disposition of any Agent
Priority Collateral free and clear of the Liens of FGI or other claims under
Section 363 of the Bankruptcy Code, or any comparable provision of any
Bankruptcy Law and shall be deemed to have consented to any such any sale,
lease, license, exchange, transfer or other disposition of any Agent Priority
Collateral under Section 363(f) of the Bankruptcy Code that has been consented
to by Credit Agreement Creditors; provided, that, the proceeds of
such sale, lease, license, exchange, transfer or other disposition of any
Collateral to be applied to the obligations to Credit Agreement Creditors under
the Credit Documents or the obligations to FGI under the FGI Documents, are
applied in accordance with Sections 2.6 hereof.

     

    (b)           Until
the full and final payment in cash and satisfaction of all FGI Documents
Obligations to FGI under the FGI Documents has occurred, Agent, for and on
behalf of itself and Credit Agreement Creditors, agrees that, in the event of
any Bankruptcy Event, Credit Agreement Creditors will not object or oppose (or
support any Person in objecting or opposing) a motion to any sale, lease,
license, exchange, transfer or other disposition of any FGI Priority Collateral
free and clear of the Liens of Credit Agreement Creditors or other claims under
Section 363 of the Bankruptcy Code, or any comparable provision of any
Bankruptcy Law and shall be deemed to have consented to any such any sale,
lease, license, exchange, transfer or other disposition of any FGI Priority
Collateral under Section 363(f) of the Bankruptcy Code that has been consented
to by the FGI; provided, that, the proceeds of
such sale, lease, license, exchange, transfer or other disposition of any
Collateral to be applied to obligations to Credit Agreement Creditors under the
Credit Documents or the obligations to FGI under the FGI Documents, are applied
in accordance with Sections 2.6 hereof.

     

    
      
         

      

      
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    Section
3.7          Avoidance
Issues.  If Credit Agreement Creditors or FGI are required in
the case of any Bankruptcy Event or otherwise to turn over or otherwise pay to
the estate of any Debtor any amount (a “Recovery”),
then Credit Agreement Creditors or FGI, as the case may be, shall be reinstated
to the extent of such Recovery.  If this Agreement shall have been
terminated prior to such Recovery, this Agreement shall be reinstated in full
force and effect, and such prior termination shall not diminish, release,
discharge, impair or otherwise affect the obligations of the parties hereto from
such date of reinstatement.

     

    Section
3.8          Certain Waivers as to
Section 1111(b)(2) of Bankruptcy Code.  FGI waives any claim it
may hereafter have against any Credit Agreement Creditors arising out of the
election by Credit Agreement Creditors of the application of Section 1111(b)(2)
of the Bankruptcy Code, or any comparable provision of any other Bankruptcy
Law.  Credit Agreement Creditors waives any claim they may hereafter
have against FGI arising out of the election by FGI of the application of
Section 1111(b)(2) of the Bankruptcy Code or any comparable provision of any
other Bankruptcy Law.

     

    Section
3.9          Other Bankruptcy
Laws.  In the event that a Bankruptcy Event is instituted in a
jurisdiction other than the United States or is governed by any Bankruptcy Law
other than the Bankruptcy Code, each reference in this Agreement to a section of
the Bankruptcy Code shall be deemed to refer to the substantially similar or
corresponding provision of the Bankruptcy Law applicable to such Bankruptcy
Event, or in the absence of any specific similar or corresponding provision of
the Bankruptcy Law, such other general Bankruptcy Law as may be applied in order
to achieve substantially the same result as would be achieved under each
applicable section of the Bankruptcy Code.

     

    ARTICLE
IV

    MISCELLANEOUS

     

    Section
4.1          Successors; Continuing
Effect.  This Agreement is being entered into for the benefit
of, and shall be binding upon, the parties hereto and their respective
successors and assigns (to the extent permitted under the applicable Financing
Agreements).

     

    Section
4.2          Terminations, Amendments,
Etc.  Each of the parties hereto agrees that this Agreement may
not be terminated, amended, supplemented, waived or modified unless such
termination, amendment, supplement, waiver or modification has been approved in
writing by FGI and Agent, for and on behalf of itself and Credit Agreement
Creditors.

     

    Section
4.3           Further
Assurances.  Each of the parties hereto will, and at any time
and from time to time, promptly execute and deliver all further instruments and
documents, and take all further action, that Agent, for and on behalf of itself
and Credit Agreement Creditors, and FGI may reasonably request in order to
perfect or otherwise protect any right or interest granted or purported to be
granted hereby or to enable FGI or Credit Agreement Creditors, as applicable, to
exercise and enforce their respective rights and remedies hereunder, but this
Agreement shall remain fully effective notwithstanding any failure to execute
any additional documents or instruments.

     

    Section
4.4           Expenses.  The
Credit Parties shall pay upon demand, the amount of any and all expenses of FGI
and Credit Agreement Creditors, including, without limitation, the
reasonable

     

    
      
         

      

      
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    fees
and expenses of counsel, which any of FGI and Credit Agreement Creditors may
incur in connection with the exercise or enforcement of any of their rights or
interests hereunder.

     

    Section
4.5           Notices.  All
notices required or permitted to be given hereunder shall be in writing and
shall be deemed duly given, made or received (a) if delivered in person,
immediately upon delivery, (b) if by facsimile transmission, immediately upon
sending and confirmation of receipt, (c) if by nationally recognized overnight
courier service with instructions to deliver the next business day, one (1)
Business Day after sending and (d) if by certified mail, return receipt
requested, five (5) days after mailing to the parties at their addresses set
forth below (or such other addresses as the parties may designate in accordance
with the provisions of this Section 4.5):

     

    If
to the
FGI:                 Faunus
Group International, Inc.

    80
Broad Street

    New
York, New York 10004

    Attention:                    Mr.
Sami Altaher

    Telephone
No.            212-248-3400

    Telecopy
No.:             212-248-3404

    

    If
to
Agent:                   Wachovia
Bank, National Association

               
1133 Avenue of the Americas

    New
York, New York 10036

    Attention:                    Portfolio
Manager

    Telephone
No.:           212-840-2000

    Telecopy
No.:             212-545-4283

    

    If
to
Debtors:                c/o
American Biltrite, Inc.

    57
River Street

    Wellesley
Hills, Massachusetts 02481

    Attention:                    Howard
N. Feist III

    Telephone
No.            781-237-6655

    Telecopy
No.:             781-237-6880

    

    Section
4.6           Marshalling.  Each
of the parties hereto agrees that during the term hereof it will not exercise
any rights it may have in law or equity to require the other party to marshall
Collateral.

     

    Section
4.7           Term.  This
Agreement shall remain in full force and effect until all of the Obligations
shall have been fully, finally and indefeasibly paid in cash and all financing
arrangements and commitments among Credit Parties and FGI and Credit Agreement
Creditors shall have been terminated.  This Agreement shall continue
to be effective or be reinstated, as the case may be, if at any time any payment
of any of the Obligations is rescinded or must otherwise be returned by either
FGI or Credit Agreement Creditors upon the insolvency, bankruptcy or
reorganization of any Credit Party or otherwise, all as though such payment had
not been made.  This is a continuing Agreement and FGI and Credit
Agreement Creditors may, in their discretion, continue to extend credit or other
financial accommodations and loan monies to or for the benefit of the Credit
Parties, on the faith hereof, under the Financing Documents, without notice to
the other party.

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

     

    Section
4.8           Severability.  Any
provision of this Agreement which is prohibited or unenforceable in any
jurisdiction, shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or invalidity without invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.

     

    Section
4.9           WAIVER OF JURY TRIAL.  EACH
OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY
COUNTERCLAIM THEREIN.

     

    Section
4.10         Entire
Agreement; Governing Law.  This
Agreement embodies the entire agreement and understanding of the parties hereto
regarding the subject matter hereof.  THIS AGREEMENT AND ALL MATTERS
RELATING HERETO OR THERETO OR ARISING THEREFROM (WHETHER SOUNDING IN CONTRACT
LAW, TORT LAW OR OTHERWISE), SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
CONFLICTS OF LAWS PRINCIPLES.  EACH OF THE PARTIES HERETO HEREBY
CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN NEW
YORK, STATE OF NEW YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO AGENT’S AND
FGI’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT SHALL BE LITIGATED IN SUCH COURTS.  EACH OF THE PARTIES
HERETO HEREBY EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS.  EACH
OF THE PARTIES HERETO HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND
AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON SUCH PARTY BY
CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO SUCH PARTY
AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE
TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.

     

    Section
4.11          Controlling
Agreements.  To the extent of any conflict between the terms
hereof, on the one hand, and the terms of any of the FGI Documents and the
Credit Documents, on the other hand, the provisions of this Agreement shall in
all respects be controlling.

     

    Section
4.12          Counterparts.  This
Agreement may be executed in any number of counterparts, each of which shall be
an original, but all of which taken together shall constitute one and the same
agreement.  Delivery of an executed counterpart of this Agreement by
telefacsimile or other electronic means shall have the same force and effect as
the delivery of an original executed counterpart of this
Agreement.  Any party delivering an executed counterpart of this
Agreement by telefacsimile or other electronic means shall also deliver an
original executed counterpart, but the failure to do so shall not affect the
validity, enforceability or binding effect of this Agreement.

     

    SIGNATURES
ON FOLLOWING PAGE

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed
and delivered by their duly authorized officers on the date and year first above
written.

     

    
      
        
          	
                  AGENT:

                   

                	
                  WACHOVIA
      BANK, NATIONAL ASSOCIATION

                   

                   

                  By:      /s/ Marc J.
      Breier                                                                             

                  Name: Marc J. Breier           

                  Title:    Managing Director          

                   

                
	 
      	 
      
	
                  FGI:

                   

                	
                  FAUNUS
      GROUP INTERNATIONAL, INC.

                   

                   

                  By:      /s/ David DiPiero                                                                             

                  Name: David DiPiero             

                  Title:    CEO/President            
      

                   

                
	 
      	 
      
	
                  DEBTORS:

                   

                	
                  AMERICAN
      BILTRITE INC.

                   

                   

                  By:      /s/ Richard G.
      Marcus                                                                           

                  Name: Richard G. Marcus          

                  Title:    President                

                   

                
	 
      	 
      
	 
      	
                  AMERICAN
      BILTRITE FAR EAST INC.

                   

                   

                  By:      /s/ Richard G.
      Marcus                                                                           

                  Name: Richard G. Marcus          

                  Title:    President                                                                                   

                

        

      

    

    

    

    [Signature
Page to Intercreditor and Lien Subordination Agreement]

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
A

     

    FGI
Priority Collateral

    

    All
of Debtors’ Accounts owing from account debtors whose principal place of
business or chief executive office is not located in the United States or Canada
and, in the case of Parent, arise directly from the sale of Inventory by
Parent’s Belgian division to account debtors whose principal place of business
or chief executive office is not located in the United States or Canada and, in
the case of Far East, arise directly from the sale of Inventory by Far East to
account debtors whose principal place of business or chief executive office is
not located in the United States or Canada (collectively referred to herein as
“Foreign
Accounts”), and all of Debtors’ money, contract rights, chattel paper,
documents, Deposit Accounts, securities accounts, securities, investment
property and Instruments with respect thereto, and all of Debtors’ rights,
remedies, security, Liens and supporting obligations, in, to and in respect of
the foregoing, including, without limitation, rights of stoppage in
transit, replevin, repossession and reclamation and other rights and remedies of
an unpaid vendor, lienor or secured party, guarantees or other contracts of
suretyship with respect to the Foreign Accounts, deposits or other security for
the obligation of any such Account Debtor, and credit and other
insurance;

     

    All
of Debtors’ money, securities, investment property, Deposit Accounts, Securities
Accounts, Instruments and other property and the proceeds thereof that are now
or hereafter held or received by, in transit to, in possession of, or under the
control of FGI or a bailee of FGI, whether for safekeeping, pledge, custody,
transmission, collection or otherwise, in each case only to the extent
exclusively related to the Foreign Accounts and not any other assets or
properties of Debtors;

     

    To
the extent not listed above, all of Debtors’ now owned or hereafter acquired
Deposit Accounts or Securities Accounts into which Foreign Accounts or the
proceeds of Foreign Accounts are deposited, including all signature cards,
account agreements and other documents relating to such Deposit Accounts or
Securities Accounts, in each case only to the extent exclusively related to the
Foreign Accounts and not any other assets or properties of Debtors;

     

    All
of Debtors’ right, title and interest in, to and in respect of all goods which
by sale have resulted in, Foreign Accounts, including, without limitation, all
goods described in invoices or other documents or instruments with respect to,
or otherwise representing or evidencing, any Foreign Account, and all returned,
reclaimed or repossessed goods;

     

    All
of Debtors’ general intangibles (including, without limitation, payment
intangibles) and other property of every kind and description with respect to
its Foreign Accounts, including, without limitation, all existing and future
customer lists, choses in action, claims, books, records, ledger cards,
contracts, licenses, formulae, tax and other types of refunds, returned and
unearned insurance premiums, rights and claims under insurance policies, and
computer programs, tapes, programs, discs, information, software, records, and
data, all computers, word processors, printers, switches, interfaces, source
codes, mask works, software, web servers, website service contracts and all
parts, accessories, additions, substitutions, or options together with all
property or equipment used in connection with any of the above or which are used
to operate or cause to operate any features, special applications, format
controls, options or software of any or all of the above-mentioned items as the
same relates to the Foreign Accounts or is otherwise necessary or helpful in the
collection

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    thereof
or realization thereon, in each case only to the extent exclusively related to
the Foreign Accounts and not any other assets or properties of Debtors;
and

     

    All
cash and non-cash proceeds of the foregoing, including insurance
proceeds.

     

    Unless
otherwise defined herein, capitalized terms on this Schedule A shall have
their respective meanings as set forth in the UCC.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
B

    

    CONTROL
NOTICE

    

    WACHOVIA
BANK, NATIONAL ASSOCIATION

    1133
Avenue of the Americas

    New
York, New York 10036

    

    ______________ 20__

    

    Faunus
Group International, Inc.

    80
Broad Street

    New
York, New York 10004

    Attention:  Mr.
Sami Altaher

    Telecopy
No.:  212-248-3404

     

                Re:           Notice Pursuant to
Assignment of Factoring Proceeds

    

    Ladies
and Gentlemen:

    

    Pursuant
to the Intercreditor and Lien Subordination Agreement, dated as of June 30, 2009
(the “Agreement”),
by and among you, WACHOVIA BANK, NATIONAL ASSOCIATION, in its capacity as agent
(in such capacity, “Agent”),
AMERICAN BILTRITE INC., a Delaware corporation (“Parent”),
and AMERICAN BILTRITE FAR EAST, INC., a Delaware corporation (“Far
East”; together with Parent, individually a “Debtor”
and collectively, “Debtors”),
this letter shall serve as the Control Notice as described in and contemplated
by the Agreement.  Capitalized terms used but not defined in this
letter shall have the meanings given them in the Agreement.  In
accordance with Section 2.12 of the Agreement, Agent hereby gives you notice
that a Credit Agreement Event of Default has occurred.  Accordingly,
we hereby instruct you to transfer all Amounts Due From FGI or any other amounts
payable by you to Debtors under the FGI Documents to the following
account:

     

    
      
        	 	
                Wachovia
      Bank, National Association

              
	 	
                ABA
      No.:

              	
                053000219

              
	 	
                Account
      No.:

              	
                5000000030279

              
	 	
                Account
      Name:

              	
                Wachovia
      Bank, National Association

              
	 	
                Reference:

              	
                American
      Biltrite

              

      

    

    

    

    
      
        	 	
                Very
      truly yours

              
	 	 
      
	 	
                WACHOVIA
      BANK, NATIONAL ASSOCIATION, as Agent

              
	 	 
      
	 	
                By:
      __________________________________________________

              
	 	
                Name:
      _______________________________________________

              
	 	
                Title
      _________________________________________________

              

      

    

    :

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