Document:

Exhibit
10.7

 

August
6, 2004

 

BY HAND DELIVERY

 

Robert J. Perez

Cubist Pharmaceuticals, Inc.

65 Hayden Avenue

Lexington, MA  02421

 

Re:  Retention Letter

 

Dear Rob:

 

You are a highly valuable
employee of Cubist Pharmaceuticals, Inc. (“Cubist”).  Cubist wishes to retain you as an employee,
and is therefore willing to make certain commitments in order to induce you to
remain an employee.  This letter will
confirm the agreement between you and Cubist (“Agreement”) in that regard.  The Agreement is as follows:

 

1.             Definitions.  For the purposes of this Agreement, the
following definitions apply:

 

(a)                                  “Cause”
means: (i) you commit of an act of fraud or misrepresentation in connection
with your employment; (ii) you are convicted of, or plead nolo contendere to, a
felony or a crime involving moral turpitude; (iii) you breach any material
obligation under your Proprietary Information and Inventions Agreement;  (iv) you engage in substantial or continuing
inattention to or neglect of your duties and responsibilities reasonably
assigned to you by Cubist; or (v) you engage in substantial or continuing acts
to the detriment of Cubist or you engage in substantial or continuing acts
inconsistent with Cubist’s policies or practices.

 

(b)                                 “Good Reason”
means: (i) the failure of Cubist to employ you in your current or a
substantially similar position such that your duties and responsibilities are
materially diminished without your consent; (ii) a reduction in your base
salary rate and potential annual bonus without your consent (unless such
reduction is in connection with a proportional reduction in compensation to all
or substantially all of Cubist’s employees); or (iii) a relocation of your
primary place of employment more than 20 miles from your current site of
employment without your consent.

 

(c)                                  a “Change of Control” occurs: (i) when any
person or entity other than Cubist or one of its subsidiaries becomes the owner
of fifty percent (50%) or more of Cubist’s common stock or (ii) upon the
effective date of an agreement of 

 

1

 

acquisition, merger, or
consolidation that has been approved by Cubist’s stockholders and that
contemplates that all or substantially all of the business and/or assets of
Cubist shall be owned or otherwise controlled by another person or entity upon
the effective date of such agreement.

 

2.                                       Severance. 
In the event that your employment is terminated by Cubist for any reason
other than for Cause, or by you for Good Reason, Cubist shall make a one-time,
lump-sum payment to you equal to eighteen (18) months of your then-current base
salary on the later of (i) your termination date or (ii) the eighth day
following receipt by Cubist of your signed release, as more fully described in
section 7 below.

 

3.                                       Withholding.  All payments made by Cubist under this
Agreement shall be reduced by any tax or other amounts required to be withheld
by Cubist under applicable law.

 

4.                                       Medical and Dental Benefits.  In the event that your
employment is terminated by Cubist for any reason other than for Cause, or by
you for Good Reason, then Cubist will maintain your medical and dental
insurance coverage for a period of up to eighteen (18) months after the month
in which your employment terminates, provided that you pay the employee portion
for such coverage by making a payment to Cubist during the first five (5) days
of any month in which you elect to continue such coverage.  Except for any right you have to continue
participation in Cubist’s group health and dental plans as provided herein or
under the federal law known as “COBRA,” all employee benefits shall terminate
in accordance with the terms of the applicable benefit plans as of the date of
termination of your employment. The “qualifying event” under COBRA, which
triggers your right to continue your health insurance post employment, shall be
deemed to have occurred on your termination date.

 

5.                                       Acceleration of Options.  In the event that, within
twenty-four (24) months after a Change of Control, your employment is
terminated either (i) by Cubist for any reason other than for Cause or (ii) by
you for Good Reason, then all outstanding unvested stock options and/or
restricted stock awards granted to you under any Cubist stock option plan prior
to the Change of Control shall become exercisable and vested in full, and all
restrictions thereon shall lapse, notwithstanding any vesting schedule or other
provisions to the contrary in the agreements evidencing such options or awards,
and Cubist and you hereby agree that such stock option agreements and
restricted stock awards are hereby, and will be deemed to be, amended to give
effect to this provision.

 

6.                                       No Contract of Employment.  This Agreement is not a contract
of employment for a specific term, and your employment is “At Will” and may be
terminated by Cubist at any time.

 

2

 

7.                                       Employee Release.  Any obligation of Cubist to provide you
severance payments or other benefits under this Agreement is expressly
conditioned upon your reviewing and signing (and not revoking during any
applicable revocation period) a general release of claims in a form reasonably
satisfactory to Cubist.  Cubist shall
provide you with the general release promptly after the date on which you give
or receive, as the case may be, notice of termination of your employment.

 

8.                                       Assignment. 
You shall not make any assignment of this Agreement or any interest in
it, by operation of law or otherwise, without the prior written consent of
Cubist.  Cubist may assign its rights and
obligations under this Agreement without your consent. This Agreement shall
inure to the benefit of and be binding upon you and Cubist, and each of our
respective successors, executors, administrators, heirs and permitted assigns.

 

9.                                       Severability.  If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of
competent jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other than those as
to which it is so declared illegal or unenforceable, shall not be affected
thereby, and each portion and provision hereof shall be valid and enforceable
to the fullest extent permitted by law.

 

10.                                 Miscellaneous.  This Agreement sets forth the entire agreement
between you and Cubist in connection with the subject matter hereof, and
replaces all prior and contemporaneous communications, agreements and
understandings, written or oral, with respect to the subject matter hereof and
any obligations set forth in your employee confidentiality agreement with
Cubist, which obligations shall remain in full force and effect.  In consideration of the benefits provided to
you hereunder, you agree that, in the event of your termination from Cubist,
such benefits shall be in complete satisfaction of any and all obligations that
Cubist may have to you.  This Agreement
may not be modified or amended, and no breach shall be deemed to be waived,
unless agreed to in writing by you and an expressly authorized representative of
Cubist.  This Agreement may be executed
in two counterparts, each of which shall be an original and all of which
together shall constitute one and the same instrument.  This Agreement shall be governed by the laws
of the Commonwealth of Massachusetts, without regard to its conflicts of laws
principles, and all disputes hereunder shall be adjudicated in the courts of
the Commonwealth of Massachusetts, to whose personal jurisdiction you hereby
consent.

 

3

 

If
the foregoing is acceptable to you, please sign both copies of this letter in
the space provided, at which time this letter will take effect as a binding
agreement between you and Cubist.  Please
keep one original for your records and return one original to me.

 

	
   

  	
  Cubist Pharmaceuticals, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael W. Bonney

  	
   

  
	
   

  	
   

  	
  Michael W. Bonney

  
	
   

  	
   

  	
  President and Chief Executive Officer

  
	
   

  	
   

  
	
  Accepted and Agreed:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Robert J. Perez

  	
   

  	
   

  
	
  Name: Robert J. Perez

  	
   

  
	
  Date: 8/11/04

  	
   

  
						

 

4Exhibit 10.1

 

 

364-DAY REVOLVING CREDIT AGREEMENT

 

dated as of September 30, 2004

 

among

 

WINMARK CORPORATION,

as the Company and a Loan Party

 

THE SUBSIDIARIES OF THE COMPANY,

as Loan Parties,

 

and

 

LASALLE BANK NATIONAL ASSOCIATION,

as Lender

 

 

 

	
  SECTION 1

  	
  DEFINITIONS.

  	
   

  
	
  1.1

  	
  Definitions

  	
   

  
	
  1.2

  	
  Other Interpretive Provisions

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2

  	
  COMMITMENTS OF THE LENDER; BORROWING,
  CONVERSION AND LETTER OF CREDIT PROCEDURES.

  	
   

  
	
  2.1

  	
  Commitments

  	
   

  
	
   

  	
  2.1.1

  	
  Loan Commitment

  	
   

  
	
   

  	
  2.1.2

  	
  L/C
  Commitment

  	
   

  
	
  2.2

  	
  Loan Procedures.

  	
   

  
	
   

  	
  2.2.1

  	
  Various Types of Loans

  	
   

  
	
   

  	
  2.2.2

  	
  Borrowing Procedures.

  	
   

  
	
   

  	
  2.2.3

  	
  Conversion and Continuation Procedures.

  	
   

  
	
  2.3

  	
  Letter of Credit Procedures.

  	
   

  
	
   

  	
  2.3.1

  	
  L/C Applications

  	
   

  
	
   

  	
  2.3.2

  	
  Reimbursement Obligations.

  	
   

  
	
  2.4

  	
  Certain Conditions

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3

  	
  EVIDENCING OF LOANS.

  	
   

  
	
  3.1

  	
  Notes

  	
   

  
	
  3.2

  	
  Recordkeeping

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 4

  	
  INTEREST.

  	
   

  
	
  4.1

  	
  Interest
  Rates

  	
   

  
	
  4.2

  	
  Interest Payment Dates

  	
   

  
	
  4.3

  	
  Setting and Notice of LIBOR Rates

  	
   

  
	
  4.4

  	
  Computation of Interest

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5

  	
  FEES.

  	
   

  
	
  5.1

  	
  Letter of Credit Fees.

  	
   

  
	
  5.2

  	
  Lender’s
  Fees

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 6

  	
  REDUCTION OR TERMINATION OF THE REVOLVING
  COMMITMENT; PREPAYMENTS.

  	
   

  
	
  6.1

  	
  Prepayments.

  	
   

  
	
   

  	
  6.1.1

  	
  Voluntary Prepayments

  	
   

  
	
   

  	
  6.1.2

  	
  Mandatory Prepayments

  	
   

  
	
   

  	
  6.1.3

  	
  Manner of Prepayments

  	
   

  
	
  6.2

  	
  Repayments

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7

  	
  MAKING AND PRORATION OF PAYMENTS; SETOFF;
  TAXES.

  	
   

  
	
  7.1

  	
  Making of Payments

  	
   

  
	
  7.2

  	
  Application of Certain Payments

  	
   

  
	
  7.3

  	
  Due Date Extension

  	
   

  
	
  7.4

  	
  Setoff

  	
   

  

 

 

	
  7.5

  	
  Taxes.

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8

  	
  INCREASED COSTS; SPECIAL PROVISIONS FOR
  LIBOR LOANS.

  	
   

  
	
  8.1

  	
  Increased Costs.

  	
   

  
	
  8.2

  	
  Basis for Determining Interest Rate
  Inadequate or Unfair

  	
   

  
	
  8.3

  	
  Changes in Law Rendering LIBOR Loans
  Unlawful

  	
   

  
	
  8.4

  	
  Funding
  Losses

  	
   

  
	
  8.5

  	
  Right of the Lender to Fund through Other
  Offices

  	
   

  
	
  8.6

  	
  Discretion of the Lender as to Manner of
  Funding

  	
   

  
	
  8.7

  	
  Mitigation of Circumstances

  	
   

  
	
  8.8

  	
  Conclusiveness of Statements; Survival of Provisions

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9

  	
  REPRESENTATIONS AND WARRANTIES.

  	
   

  
	
  9.1

  	
  Organization

  	
   

  
	
  9.2

  	
  Authorization; No Conflict

  	
   

  
	
  9.3

  	
  Validity and Binding Nature

  	
   

  
	
  9.4

  	
  Financial Condition

  	
   

  
	
  9.5

  	
  No Material Adverse Change

  	
   

  
	
  9.6

  	
  Litigation and Contingent Liabilities

  	
   

  
	
  9.7

  	
  Ownership of Properties; Liens

  	
   

  
	
  9.8

  	
  Equity Ownership; Subsidiaries

  	
   

  
	
  9.9

  	
  Pension
  Plans.

  	
   

  
	
  9.10

  	
  Investment Company Act

  	
   

  
	
  9.11

  	
  Public Utility Holding Company Act

  	
   

  
	
  9.12

  	
  Regulation
  U

  	
   

  
	
  9.13

  	
  Taxes; Tax Shelter Registration.

  	
   

  
	
  9.14

  	
  Solvency,
  etc.

  	
   

  
	
  9.15

  	
  Environmental Matters

  	
   

  
	
  9.16

  	
  Insurance

  	
   

  
	
  9.17

  	
  Real
  Property

  	
   

  
	
  9.18

  	
  Information

  	
   

  
	
  9.19

  	
  Intellectual Property

  	
   

  
	
  9.20

  	
  Burdensome Obligations

  	
   

  
	
  9.21

  	
  Labor
  Matters

  	
   

  
	
  9.22

  	
  No
  Default

  	
   

  
	
  9.23

  	
  Accounts

  	
   

  
	
  9.24

  	
  Anti-Terrorism Law Compliance

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 10

  	
  AFFIRMATIVE COVENANTS.

  	
   

  
	
  10.1

  	
  Reports, Certificates and Other Information

  	
   

  
	
   

  	
  10.1.1

  	
  Annual Report

  	
   

  
	
   

  	
  10.1.2

  	
  Monthly Reports

  	
   

  
	
   

  	
  10.1.3

  	
  Quarterly
  Reports

  	
   

  
	
   

  	
  10.1.4

  	
  Compliance Certificates

  	
   

  
	
   

  	
  10.1.5

  	
  Reports to the SEC and to Shareholders

  	
   

  
	
   

  	
  10.1.6

  	
  Notice
  of Default, Litigation and ERISA Matters

  	
   

  

 

ii

 

	
   

  	
  10.1.7

  	
  Borrowing Base Certificates

  	
   

  
	
   

  	
  10.1.8

  	
  Management Reports

  	
   

  
	
   

  	
  10.1.9

  	
  Subordinated Debt Notices

  	
   

  
	
   

  	
  10.1.10

  	
  Other
  Information

  	
   

  
	
  10.2

  	
  Books, Records and Inspections

  	
   

  
	
  10.3

  	
  Maintenance of Property; Insurance.

  	
   

  
	
  10.4

  	
  Compliance with Laws; Payment of Taxes and Liabilities

  	
   

  
	
  10.5

  	
  Maintenance of Existence, etc.

  	
   

  
	
  10.6

  	
  Use of Proceeds

  	
   

  
	
  10.7

  	
  Employee Benefit Plans.

  	
   

  
	
  10.8

  	
  Environmental Matters

  	
   

  
	
  10.9

  	
  Tax Shelter Registration

  	
   

  
	
  10.10

  	
  Further Assurances

  	
   

  
	
  10.11

  	
  Cash Management Systems

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 11

  	
  NEGATIVE COVENANTS

  	
   

  
	
  11.1

  	
  Debt

  	
   

  
	
  11.2

  	
  Liens

  	
   

  
	
  11.3

  	
  Operating
  Leases

  	
   

  
	
  11.4

  	
  Restricted Payments

  	
   

  
	
  11.5

  	
  Mergers, Consolidations, Sales

  	
   

  
	
  11.6

  	
  Modification of Organizational Documents

  	
   

  
	
  11.7

  	
  Affiliate Transactions

  	
   

  
	
  11.8

  	
  Unconditional Purchase Obligations

  	
   

  
	
  11.9

  	
  Inconsistent Agreements

  	
   

  
	
  11.10

  	
  Business Activities

  	
   

  
	
  11.11

  	
  Restriction of Amendments to Certain Documents

  	
   

  
	
  11.12

  	
  Fiscal Year

  	
   

  
	
  11.13

  	
  Tangible Net Worth

  	
   

  
	
  11.14

  	
  Control Agreements

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 12

  	
  EFFECTIVENESS; CONDITIONS OF LENDING, ETC.

  	
   

  
	
  12.1

  	
  Initial Credit Extension

  	
   

  
	
   

  	
  12.1.1

  	
  Note

  	
   

  
	
   

  	
  12.1.2

  	
  Authorization Documents

  	
   

  
	
   

  	
  12.1.3

  	
  Consents, etc.

  	
   

  
	
   

  	
  12.1.4

  	
  Security Documents

  	
   

  
	
   

  	
  12.1.5

  	
  Financing Statements

  	
   

  
	
   

  	
  12.1.6

  	
  Opinions of Counsel

  	
   

  
	
   

  	
  12.1.7

  	
  Insurance

  	
   

  
	
   

  	
  12.1.8

  	
  Payment of Fees

  	
   

  
	
   

  	
  12.1.9

  	
  Search Results; Lien Terminations

  	
   

  
	
   

  	
  12.1.10

  	
  Filings, Registrations and Recordings

  	
   

  
	
   

  	
  12.1.11

  	
  Borrowing Base Certificate

  	
   

  
	
   

  	
  12.1.12

  	
  Closing Certificate

  	
   

  
	
   

  	
  12.1.13

  	
  Other

  	
   

  

 

iii

 

	
  12.2

  	
  Conditions

  	
   

  
	
   

  	
  12.2.1

  	
  Compliance with Warranties, No Default,
  etc.

  	
   

  
	
   

  	
  12.2.2

  	
  Confirmatory Certificate

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 13

  	
  EVENTS OF DEFAULT AND THEIR EFFECT.

  	
   

  
	
  13.1

  	
  Events
  of Default

  	
   

  
	
   

  	
  13.1.1

  	
  Non-Payment of the Loans, etc.

  	
   

  
	
   

  	
  13.1.2

  	
  Non-Payment of Other Debt

  	
   

  
	
   

  	
  13.1.3

  	
  Other Material Obligations

  	
   

  
	
   

  	
  13.1.4

  	
  Bankruptcy, Insolvency, etc.

  	
   

  
	
   

  	
  13.1.5

  	
  Non-Compliance with Loan Documents

  	
   

  
	
   

  	
  13.1.6

  	
  Representations; Warranties

  	
   

  
	
   

  	
  13.1.7

  	
  Pension Plans

  	
   

  
	
   

  	
  13.1.8

  	
  Judgments

  	
   

  
	
   

  	
  13.1.9

  	
  Invalidity of Collateral Documents, etc.

  	
   

  
	
   

  	
  13.1.10

  	
  Invalidity of Subordination Provisions, etc.

  	
   

  
	
   

  	
  13.1.11

  	
  Change
  of Control

  	
   

  
	
   

  	
  13.1.12

  	
  Material Adverse Effect

  	
   

  
	
  13.2

  	
  Effect of Event of Default

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 14

  	
  THE LOAN PARTIES.

  	
   

  
	
  14.1

  	
  Appointment of the Company

  	
   

  
	
  14.2

  	
  Relationship Among the Loan Parties.

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 15

  	
  GENERAL.

  	
   

  
	
  15.1

  	
  Waiver; Amendments

  	
   

  
	
  15.2

  	
  Confirmations

  	
   

  
	
  15.3

  	
  Notices

  	
   

  
	
  15.4

  	
  Computations

  	
   

  
	
  15.5

  	
  Costs, Expenses and Taxes

  	
   

  
	
  15.6

  	
  Assignments; Participations.

  	
   

  
	
  15.7

  	
  GOVERNING LAW

  	
   

  
	
  15.8

  	
  Confidentiality

  	
   

  
	
  15.9

  	
  Severability

  	
   

  
	
  15.10

  	
  Nature of Remedies

  	
   

  
	
  15.11

  	
  Entire
  Agreement

  	
   

  
	
  15.12

  	
  Counterparts

  	
   

  
	
  15.13

  	
  Successors and Assigns

  	
   

  
	
  15.14

  	
  Captions

  	
   

  
	
  15.15

  	
  INDEMNIFICATION BY THE LOAN PARTIES

  	
   

  
	
  15.16

  	
  Nonliability of Lender

  	
   

  
	
  15.17

  	
  FORUM SELECTION AND CONSENT TO JURISDICTION

  	
   

  
	
  15.18

  	
  WAIVER OF JURY TRIAL

  	
   

  

 

iv

 

	
  SCHEDULES

  
	
   

  
	
  SCHEDULE 9.6

  	
  Litigation and Contingent Liabilities

  	
   

  
	
  SCHEDULE 9.7

  	
  Ownership of Properties; Liens

  	
   

  
	
  SCHEDULE 9.8

  	
  Subsidiaries

  	
   

  
	
  SCHEDULE 9.17

  	
  Real Property

  	
   

  
	
  SCHEDULE 9.23

  	
  Accounts

  	
   

  
	
  SCHEDULE 11.7

  	
  Affiliate Transactions

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBITS

  
	
   

  	
   

  	
   

  
	
  EXHIBIT A

  	
  Form of Note

  	
   

  
	
  EXHIBIT B

  	
  Form of Compliance Certificate

  	
   

  
	
  EXHIBIT C

  	
  Form of Borrowing Base Certificate

  	
   

  
	
  EXHIBIT D

  	
  Form of Master Letter of Credit Agreement

  	
   

  
	
  EXHIBIT E

  	
  Form of Notice of Borrowing

  	
   

  
	
  EXHIBIT F

  	
  Form of Notice of Conversion/Continuation

  	
   

  
	
  EXHIBIT G

  	
  Form of Security Agreement

  	
   

  
	
  EXHIBIT H

  	
  Form of Pledge Agreement

  	
   

  

 

 

364-DAY REVOLVING CREDIT AGREEMENT

 

THIS 364-DAY REVOLVING CREDIT AGREEMENT dated as of
September 30, 2004 (this “Agreement”) is entered into among WINMARK
CORPORATION  (the “Company”), the
Subsidiaries of the Company that are or may from time to time become parties
hereto (together with the Company and their respective successors and assigns,
the “Loan Parties”) and LASALLE BANK NATIONAL ASSOCIATION (in its
individual capacity, “LaSalle”), as the Lender.

 

The Lender has agreed to make available to the Company
a 364-day revolving credit facility (which includes letters of credit) upon the
terms and conditions set forth herein.

 

In consideration of the mutual agreements herein
contained, the parties hereto agree as follows:

 

DEFINITIONS.

Definitions.  When used herein the following terms shall
have the following meanings:

 

“Account”: 
As defined in the UCC.

 

“Acquisition”: 
Any transaction or series of related transactions for the purpose of or
resulting, directly or indirectly, in (a) the acquisition of all or
substantially all of the assets of a Person, or of all or substantially all of
any business or division of a Person, (b) the acquisition of all or any portion
of the Capital Securities of any Person, (c) a merger or consolidation or any
other combination with another Person (other than a Person that is already a
Subsidiary), or (d) any other Investment in a Person; provided, however,
that an Investment in publicly-traded securities of a Person shall not
constitute an Acquisition so long as such Investment does not result in (i) the
acquisition of all or substantially all of the assets or Capital Securities of
such Person, or (ii) a merger, consolidation or other combination with such
Person.

 

“Affected Loan”:  As
defined in Section 8.3.

 

“Affiliate”: 
With respect to any Person, (a) any other Person which, directly or
indirectly, controls or is controlled by or is under common control with such
Person, (b) any officer or director of such Person and (c) with respect to the
Lender, any entity administered or managed by the Lender or an Affiliate or
investment advisor thereof and which is engaged in making, purchasing, holding
or otherwise investing in commercial loans. 
A Person shall be deemed to be “controlled by” any other Person if such
Person possesses, directly or indirectly, power to vote 5% or more of the
securities (on a fully diluted basis) having ordinary voting power for the
election of directors or managers or power to direct or cause the direction of
the management and

 

 

policies of such Person
whether by contract or otherwise.  Unless
expressly stated otherwise herein, the Lender shall not be deemed an Affiliate of
any Loan Party.

 

“Agreement”:  As defined
in the Preamble.

 

“Applicable Margin”:  For
any day, a rate per annum of (i) for LIBOR Loans, 2.00% or (ii) for Base
Rate Loans, 0.00%.

 

“Asset Disposition”:  The sale, lease, assignment or other transfer
for value (each, a “Disposition”) by any Loan Party to any Person (other
than a Loan Party) of any asset or right of such Loan Party (including, the
loss, destruction or damage of any thereof or any actual or threatened (in
writing to any Loan Party) condemnation, confiscation, requisition, seizure or
taking thereof) other than (a) the Disposition of any asset which is to be
replaced, and is in fact replaced, within 30 days with another asset performing
the same or a similar function and (b) the sale or lease of inventory in the
ordinary course of business.

 

“Attorney Costs”:  With respect to any Person, all reasonable
fees and charges of any counsel to such Person, the reasonable allocable cost
of internal legal services of such Person, all reasonable disbursements of such
internal counsel and all court costs and similar legal expenses.

 

“Bank Product Agreements”:  Those certain cash management service
agreements entered into from time to time between any Loan Party and the Lender
or its Affiliates in connection with any of the Bank Products.

 

“Bank Product Obligations”:  All obligations, liabilities, contingent
reimbursement obligations, fees, and expenses owing by the Loan Parties to the
Lender or its Affiliates pursuant to or evidenced by the Bank Product Agreements
and irrespective of whether for the payment of money, whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, and including all such amounts that a Loan Party is
obligated to reimburse to the Lender as a result of the Lender purchasing
participations or executing indemnities or reimbursement obligations with
respect to the Bank Products provided to the Loan Parties pursuant to the Bank
Product Agreements.

 

“Bank Products”:  Any service or facility extended to any Loan
Party by the Lender or its Affiliates including:  (a) credit cards, (b) credit card processing
services, (c) debit cards, (d) purchase cards, (e) ACH Transactions, (f) cash
management, including controlled disbursement, accounts or services, or (g)
Hedging Agreements.

 

“Base Rate”: 
At any time the greater of (a) the Federal Funds Rate plus
0.5% and (b) the Prime Rate.

 

“Base Rate Loan”:  Any Loan which bears interest at or by
reference to the Base Rate.

 

2

 

“Borrowing Base”:  As of the end of any month, an amount equal
to EBITDA for the twelve consecutive months ended or most recently ended on
such month times two (2).

 

“Borrowing Base Certificate”:  A certificate substantially in the form of Exhibit
C.

 

“BSA”: 
As defined in Section 10.4.

 

“Business Day”: 
Any day on which LaSalle is open for commercial banking business in
Minneapolis, Minnesota and Chicago, Illinois and, in the case of a Business Day
which relates to a LIBOR Loan, on which dealings are carried on in the London
interbank eurodollar market.

 

“Capital Expenditures”:  All expenditures which, in accordance with
GAAP, would be required to be capitalized and shown on the consolidated balance
sheet of the Company, including expenditures in respect of Capital Leases, but
excluding expenditures made in connection with the replacement, substitution or
restoration of assets to the extent financed (a) from insurance proceeds (or
other similar recoveries) paid on account of the loss of or damage to the
assets being replaced or restored or (b) with awards of compensation arising
from the taking by eminent domain or condemnation of the assets being replaced.

 

“Capital Lease”:  With respect to any Person, any lease of (or
other agreement conveying the right to use) any real or personal property by
such Person that, in conformity with GAAP, is accounted for as a capital lease
on the balance sheet of such Person.

 

“Capital Securities”:  With respect to any Person, all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person’s capital, whether now outstanding or
issued or acquired after the Closing Date, including common shares, preferred
shares, membership interests in a limited liability company, limited or general
partnership interests in a partnership or any other equivalent of such
ownership interest.

 

“Cash Collateralize”:  To deliver cash collateral to the Lender, to
be held as cash collateral for outstanding Letters of Credit, pursuant to
documentation satisfactory to the Lender. 
Derivatives of such term have corresponding meanings.

 

“Change of Control”:  The occurrence of any of the following
events: (a) any Person or two or more Persons acting in concert acquiring
beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934), directly or
indirectly, of Capital Securities of the Company representing 50% or more of
the combined voting power of all Capital Securities of the Company entitled to
vote in the election of directors; (b) any Person or two or more Persons acting
in concert acquiring by contract or otherwise, or entering into a contract or
arrangement which upon consummation will result in its or their acquisition of,
control over Capital Securities of the Company representing 50% or more of the
combined voting power of all Capital Securities of the Company entitled to vote
in the election of directors; or (c) the Company shall cease to, directly or
indirectly, own and control 100% of each class of the outstanding Capital
Securities of each Subsidiary.

 

3

 

“Closing Date”:  As
defined in Section 12.1.

 

“Code”:  The Internal
Revenue Code of 1986.

 

“Collateral Access Agreement”:  An agreement in form and substance reasonably
satisfactory to the Lender pursuant to which a mortgagee or lessor of real
property on which collateral is stored or otherwise located, or a warehouseman,
processor or other bailee of Inventory or other property owned by any Loan
Party, acknowledges the Liens of the Lender and waives any Liens held by such
Person on such property, and, in the case of any such agreement with a
mortgagee or lessor, permits the Lender reasonable access to and use of such
real property following the occurrence and during the continuance of an Event
of Default to assemble, complete and sell any collateral stored or otherwise
located thereon.

 

“Collateral Documents”:  Collectively, the Security Agreement, the
Pledge Agreement, each Collateral Access Agreement, each UCC-1 financing
statement, each Control Agreement and any other agreement or instrument
pursuant to which the Company, any other Loan Party or any other Person grants
or purports to grant collateral to the Lender or otherwise relates to such
collateral.

 

“Commitment”: 
The Lender’s commitment to make Loans, and to issue Letters of Credit,
under this Agreement, as reduced from time to time pursuant to Section 6.1.  The initial amount of the Lender’s commitment
to make Loans is $15,000,000; provided that not more than $10,000,000 of
such amount is available for the leasing operations of the Loan Parties.

 

“Company”:  As defined in
the Preamble.

 

“Compliance Certificate”: 
A Compliance Certificate in substantially the form of Exhibit B.

 

“Contingent Liability”:  With respect to any Person, each obligation
and liability of such Person and all such obligations and liabilities of such
Person incurred pursuant to any agreement, undertaking or arrangement by which
such Person:  (a) guarantees, endorses or
otherwise becomes or is contingently liable upon (by direct or indirect
agreement, contingent or otherwise, to provide funds for payment, to supply
funds to, or otherwise to invest in, a debtor, or otherwise to assure a
creditor against loss) the indebtedness, dividend, obligation or other
liability of any other Person in any manner (other than by endorsement of
instruments in the course of collection), including any indebtedness, dividend
or other obligation which may be issued or incurred at some future time; (b)
guarantees the payment of dividends or other distributions upon the Capital
Securities of any other Person; (c) undertakes or agrees (whether contingently
or otherwise):  (i) to purchase,
repurchase, or otherwise acquire any indebtedness, obligation or liability of
any other Person or any or any property or assets constituting security
therefor, (ii) to advance or provide funds for the payment or discharge of any
indebtedness, obligation or liability of any other Person (whether in the form
of loans, advances, stock purchases, capital contributions or otherwise), or to
maintain solvency, assets, level of income, working capital or other financial
condition of any other Person, or (iii) to make payment to any other Person
other

 

4

 

than for value received;
(d) agrees to lease property or to purchase securities, property or services
from such other Person with the purpose or intent of assuring the owner of such
indebtedness or obligation of the ability of such other Person to make payment
of the indebtedness or obligation; (e) to induce the issuance of, or in
connection with the issuance of, any letter of credit for the benefit of such
other Person; or (f) undertakes or agrees otherwise to assure a creditor
against loss.  The amount of any
Contingent Liability shall (subject to any limitation set forth herein) be
deemed to be the outstanding principal amount (or maximum permitted principal
amount, if larger) of the indebtedness, obligation or other liability
guaranteed or supported thereby.

 

“Control Agreement”:  An account control agreement, in form and
substance satisfactory to the Lender, among the Lender, the applicable Loan
Party and the depository or securities intermediary for any deposit, checking
or brokerage account opened or maintained by a Loan Party.

 

“Controlled Group”:  All members of a controlled group of
corporations, all members of a controlled group of trades or businesses
(whether or not incorporated) under common control and all members of an
affiliated service group which, together with the Company or any of its
Subsidiaries, are treated as a single employer under Section 414 of the
Code or Section 4001 of ERISA.

 

“Debt”: 
With respect to any Person, without duplication, (a) all indebtedness of
such Person, (b) all borrowed money of such Person, whether or not evidenced by
bonds, debentures, notes or similar instruments, (c) all obligations of such
Person as lessee under Capital Leases which have been or should be recorded as
liabilities on a balance sheet of such Person in accordance with GAAP, not
including obligations of a Loan Party under non-recourse discounted leases, (d)
all obligations of such Person to pay the deferred purchase price of property
or services (excluding trade accounts payable in the ordinary course of
business), (e) all indebtedness secured by a Lien on the property of such
Person, whether or not such indebtedness shall have been assumed by such
Person; provided that if such Person has not assumed or otherwise become
liable for such indebtedness, such indebtedness shall be measured at the fair
market value of such property securing such indebtedness at the time of
determination, (f) all obligations, contingent or otherwise, with respect to
the face amount of all letters of credit (whether or not drawn), bankers’
acceptances and similar obligations issued for the account of such Person
(including the Letters of Credit), (g) all Hedging Obligations of such Person,
(h) all Contingent Liabilities of such Person and (i) all Debt of any
partnership of which such Person is a general partner.

 

“Dollar” and the sign “$”:  Lawful money of the United States of America.

 

“EBITDA”: 
For any period, the Borrowers’ “Income from Operations” (as set forth on
the Borrowers’ consolidated income statement) plus depreciation, plus
amortization, plus compensation expense related to the granting of stock
options.

 

5

 

“Environmental Claims”:  All claims, however asserted, by any
governmental, regulatory or judicial authority or other Person alleging
potential liability or responsibility for violation of any Environmental Law,
or for release or injury to the environment.

 

“Environmental Laws”:  All present or future federal, state or local
laws, statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative or judicial orders, consent agreements,
directed duties, requests, licenses, authorizations and permits of, and
agreements with, any governmental authority, in each case relating to any
matter arising out of or relating to public health and safety, or pollution or
protection of the environment or workplace, including any of the foregoing
relating to the presence, use, production, generation, handling, transport,
treatment, storage, disposal, distribution, discharge, emission, release,
threatened release, control or cleanup of any Hazardous Substance.

 

“ERISA”:  The Employee
Retirement Income Security Act of 1974.

 

“Event of Default”:  Any of the events described in Section 13.1.

 

“Excluded Taxes”:  Taxes based upon, or measured by, the
Lender’s (or a branch of the Lender’s) overall net income, overall net
receipts, or overall net profits (including franchise taxes imposed in lieu of
such taxes), but only to the extent such taxes are imposed by a taxing
authority (a) in a jurisdiction in which the Lender is organized, (b) in a
jurisdiction which the Lender’s principal office is located, or (c) in a
jurisdiction in which the Lender’s lending office (or branch) in respect of
which payments under this Agreement are made is located.

 

“Federal Funds Rate”:  For
any day, a fluctuating interest rate 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 so published for any day which is a Business Day, the average of
the quotations for such day on such transactions received by the Lender from
three Federal funds brokers of recognized standing selected by the Lender.  The Lender’s determination of such rate shall
be binding and conclusive absent manifest error.

 

“Fiscal Quarter”:  A
fiscal quarter of a Fiscal Year.

 

“Fiscal Year”: 
The fiscal year of the Company and its Subsidiaries, which period shall
be the 12-month period ending on the last Saturday of each year.  References to a Fiscal Year with a number
corresponding to any calendar year (e.g., “Fiscal Year 2003”) refer to
the Fiscal Year ending on the last Saturday  of such
calendar year.

 

“FRB”: 
The Board of Governors of the Federal Reserve System or any successor
thereto.

 

6

 

“Funded Debt”: 
As to any Person, all Debt of such Person that matures more than one
year from the date of its creation (or is renewable or extendible, at the
option of such Person, to a date more than one year from such date).

 

“GAAP”: 
Generally accepted accounting principles set forth from time to time in
the opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S.
accounting profession) and the Securities and Exchange Commission, which are
applicable to the circumstances as of the date of determination.

 

“Group”:  As defined in Section 2.2.1.

 

“Hazardous Substances”: 
(a) Any petroleum or petroleum products, radioactive materials,
asbestos in any form that is or could become friable, urea formaldehyde foam
insulation, dielectric fluid containing levels of polychlorinated biphenyls,
radon gas and mold; (b) any chemicals, materials, pollutant or substances
defined as or included in the definition of “hazardous substances”, “hazardous
waste”, “hazardous materials”, “extremely hazardous substances”, “restricted
hazardous waste”, “toxic substances”, “toxic pollutants”, “contaminants”,
“pollutants” or words of similar import, under any applicable Environmental
Law; and (c) any other chemical, material or substance, the exposure to,
or release of which is prohibited, limited or regulated by any governmental
authority or for which any duty or standard of care is imposed pursuant to, any
Environmental Law.

 

“Hedging Agreement”:  Any interest rate, currency or commodity swap
agreement, cap agreement or collar agreement, and any other agreement or
arrangement designed to protect a Person against fluctuations in interest
rates, currency exchange rates or commodity prices.

 

“Hedging Obligation”:  With respect to any Person, any liability of
such Person under any Hedging Agreement. 
The amount of any Person’s obligation in respect of any Hedging
Obligation shall be deemed to be the incremental obligation that would be
reflected in the financial statements of such Person in accordance with GAAP.

 

“Indemnified Liabilities”:  As defined in Section 15.16.

 

“Interest Expense”:  For any period, the consolidated interest
expense of the Company and its Subsidiaries for such period (including all
imputed interest on Capital Leases).

 

“Interest Period”:  As to any LIBOR Loan, the period commencing
on the date such Loan is borrowed or continued as, or converted into, a LIBOR
Loan and ending on the date one, two or three months thereafter as selected by
the Company pursuant to Section 2.2.2 or 2.2.3, as the case
may be; provided that:

 

(a)                                  if
any Interest Period would otherwise end on a day that is not a Business Day,
such Interest Period shall be extended to the following Business

 

7

 

Day unless the result of such extension would be to
carry such Interest Period into another calendar month, in which event such
Interest Period shall end on the preceding Business Day;

 

(b)                                 any
Interest Period that begins on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period
shall end on the last Business Day of the calendar month at the end of such
Interest Period; and

 

(c)                                  the
Company may not select any Interest Period for a Loan which would extend beyond
the scheduled Termination Date.

 

“Inventory”: 
As defined in the Security Agreement.

 

“Investment”: 
With respect to any Person, any investment in another Person, whether by
acquisition of any Capital Security, by making any loan or advance, or by
making an Acquisition.

 

“LaSalle”:  As defined in
the Preamble.

 

“L/C Application”:  With respect to any request for the issuance
of a Letter of Credit, a letter of credit application in the form being used by
the Lender at the time of such request for the type of letter of credit
requested.

 

“L/C Fee Rate”:  A rate
per annum of 2%.

 

“Lender”: 
LaSalle.  In addition to the
foregoing, for the purpose of identifying the Persons entitled to share in the
Collateral and the proceeds thereof under, and in accordance with the
provisions of, this Agreement and the Collateral Documents, the term “Lender”
shall include Affiliates of a Lender providing a Bank Product.

 

“Lender Party”:  As
defined in Section 15.15.

 

“Letter of Credit”:  As
defined in Section 2.1.2.

 

“LIBOR Loan”: 
Any Loan which bears interest at a rate determined by reference to the
LIBOR Rate.

 

“LIBOR Office”: 
The office or offices of the Lender which shall be making or maintaining
the LIBOR Loans.  A LIBOR Office may be,
at the option of the Lender, either a domestic or foreign office.

 

“LIBOR Rate”: 
A rate of interest equal to (a) the per annum rate of interest at which
United States dollar deposits in an amount comparable to the amount of the
relevant LIBOR Loan and for a period equal to the relevant Interest Period are
offered in the London Interbank Eurodollar market at 11:00 A.M. (London time)
two (2) Business Days prior to the commencement of such Interest Period, as
displayed in the Bloomberg Financial Markets system

 

8

 

(or other authoritative
source selected by the Lender in its sole discretion) or, if the Bloomberg Financial Markets system or another authoritative
source is not available, as the LIBOR Rate is otherwise determined by the
Lender in its sole and absolute discretion, divided by (b) a number determined
by subtracting from 1.00 the then stated maximum reserve percentage for
determining reserves to be maintained by member banks of the Federal Reserve System
for Eurocurrency funding or liabilities as defined in Regulation D (or any
successor category of liabilities under Regulation D), such rate to remain
fixed for such Interest Period.  The
Lender’s determination of the LIBOR Rate shall be conclusive, absent manifest
error.

 

“Lien”: 
With respect to any Person, any interest granted by such Person in any
real or personal property, asset or other right owned or being purchased or
acquired by such Person (including an interest in respect of a Capital Lease) which
secures payment or performance of any obligation and shall include any
mortgage, lien, encumbrance, title retention lien, charge or other security
interest of any kind, whether arising by contract, as a matter of law, by
judicial process or otherwise.

 

“Loan Availability”:  The lesser of (i) the Commitment and (ii) the
Borrowing Base.

 

“Loan Documents”:  This Agreement, the Note, the Letters of
Credit, the Master Letter of Credit Agreement, the L/C Applications, the
Collateral Documents, the Subordination Agreements and all documents,
instruments and agreements delivered in connection with the foregoing.

 

“Loan Party”: 
The Company and each Subsidiary.

 

“Loan or Loans”:  As defined in Section 2.1.1.

 

“Margin Stock”: 
Any “margin stock” as defined in Regulation U.

 

“Master Letter of Credit Agreement”:  At any time, with respect to the issuance of
Letters of Credit, a master letter of credit agreement or reimbursement
agreement in the form of Exhibit D, or successor form designated by the
Lender.

 

“Material Adverse Effect”:  (a) A material adverse change in, or a
material adverse effect upon, the financial condition, operations, assets,
business, properties or prospects of the Loan Parties taken as a whole, (b) a
material impairment of the ability of any Loan Party to perform any of the
Obligations under any Loan Document or (c) a material adverse effect upon any
substantial portion of the collateral under the Collateral Documents or upon
the legality, validity, binding effect or enforceability against any Loan Party
of any Loan Document.

 

“Multiemployer Pension Plan”:  A multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which the Company or any other member of
the Controlled Group may have any liability.

 

9

 

“Note”: 
A promissory note in the form of Exhibit A.

 

“Notice of Borrowing”:  As
defined in Section 2.2.2.

 

“Notice of Conversion/Continuation”:  As defined in Section 2.2.3.

 

“Obligations”:  All
obligations (monetary (including post-petition interest, allowed or not) or
otherwise) of any Loan Party under this Agreement and any other Loan Document
including Attorney Costs and any reimbursement obligations of each Loan Party
in respect of Letters of Credit and surety bonds, all Hedging Obligations
permitted hereunder which are owed to the Lender or its Affiliates, and all
Bank Products Obligations, all in each case howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent, now or hereafter
existing, or due or to become due.

 

“OFAC”:  As defined in Section 9.24.

 

“Operating Lease”:  Any lease of (or other agreement conveying
the right to use) any real or personal property by any Loan Party, as lessee,
other than any Capital Lease.

 

“Outstandings”: 
At any time, the sum of (a) the aggregate principal amount of all
outstanding Loans, plus (b) the Stated Amount of all Letters of Credit.

 

“PBGC”: 
The Pension Benefit Guaranty Corporation and any entity succeeding to
any or all of its functions under ERISA.

 

“Pension Plan”: 
A “pension plan”, as such term is defined in Section 3(2) of ERISA,
which is subject to Title IV of ERISA or the minimum funding standards of ERISA
(other than a Multiemployer Pension Plan), and as to which the Company or any
member of the Controlled Group may have any liability, including any liability
by reason of having been a substantial employer within the meaning of
Section 4063 of ERISA at any time during the preceding five years, or by
reason of being deemed to be a contributing sponsor under Section 4069 of
ERISA.

 

“Person”: 
Any natural person, corporation, partnership, trust, limited liability
company, association, governmental authority or unit, or any other entity,
whether acting in an individual, fiduciary or other capacity.

 

“Pledge Agreement”:  A Pledge Agreement in the form of Exhibit
H executed and delivered by the Company.

 

“Prime Rate”: 
For any day, the rate of interest in effect for such day as publicly
announced from time to time by the Lender as its prime rate (whether or not such
rate is actually charged by the Lender), which is not intended to be the
Lender’s lowest or most favorable rate of interest at any one time.  Any change in the Prime Rate announced by the
Lender shall take effect

 

10

 

at the opening of
business on the day specified in the public announcement of such change; provided
that the Lender shall not be obligated to give notice of any change in the
Prime Rate.

 

“Regulation D”: 
Regulation D of the FRB.

 

“Regulation U”: 
Regulation U of the FRB.

 

“Reportable Event”:  A reportable event as defined in
Section 4043 of ERISA and the regulations issued thereunder as to which
the PBGC has not waived the notification requirement of Section 4043(a),
or the failure of a Pension Plan to meet the minimum funding standards of
Section 412 of the Code (without regard to whether the Pension Plan is a
plan described in Section 4021(a)(2) of ERISA) or under Section 302
of ERISA.

 

“SEC”: 
The Securities and Exchange Commission or any other governmental
authority succeeding to any of the principal functions thereof.

 

“Security Agreement”:  A Security Agreement in the form of Exhibit
G executed and delivered by the Loan Parties.

 

“Senior Debt”: 
All Debt of the Company and its Subsidiaries other than Subordinated
Debt.

 

“Senior Officer”:  With respect to any Loan Party, any of the
chief executive officer, the chief financial officer, the chief operating
officer or the treasurer of such Loan Party.

 

“Stated Amount”:  With respect to any Letter of Credit at any
date of determination, (a) the maximum aggregate amount available for drawing
thereunder under any and all circumstances plus (b) the aggregate amount
of all unreimbursed payments and disbursements under such Letter of Credit.

 

“Subordinated Debt”:  Any unsecured Debt of the Company which has
subordination terms, covenants, pricing and other terms which have been
approved in writing by the Lender.

 

“Subordinated Debt Documents”:  All documents and instruments relating to the
Subordinated Debt and all amendments and modifications thereof approved by the
Lender.

 

“Subordination Agreements”:  All subordination agreements executed by a
holder of Subordinated Debt in favor of the Lender from time to time after the
Closing Date.

 

“Subsidiary”: 
With respect to any Person, a corporation, partnership, limited
liability company or other entity of which such Person owns, directly or
indirectly, such number of outstanding Capital Securities as have more than 50%
of the ordinary voting power for the election of directors or other managers of
such corporation, partnership, limited liability company or other entity.  Unless the context otherwise requires, each
reference to Subsidiaries herein shall be a reference to Subsidiaries of the
Company.

 

11

 

“Tangible Net Worth”:  As of any date of determination, the sum of
the amounts set forth on the balance sheet of the Company and the Subsidiaries
as total shareholder equity of the Company and the Subsidiaries, plus
any Subordinated Debt, minus the book value of all intangible assets of
the Company and the Subsidiaries (including all such items as goodwill, trade
names, service marks, copyrights, patents, licenses, deferred items,
unamortized debt discount, prepaid expenses and any other items deemed
intangible by the Lender), minus Investments in non-public companies net
of cash dividends received in respect of such Investments.

 

“Taxes”: 
Any and all present and future taxes, duties, levies, imposts,
deductions, assessments, charges or withholdings, and any and all liabilities
(including interest and penalties and other additions to taxes) with respect to
the foregoing, but excluding Excluded Taxes.

 

“Termination Date”:  The earlier to occur of (a)
September 29, 2005 or (b) such other date on which the Commitment
terminates pursuant to Section 13.

 

“Termination Event”:  With respect to a Pension Plan that is
subject to Title IV of ERISA, (a) a Reportable Event, (b) the withdrawal of
Company or any other member of the Controlled Group from such Pension Plan
during a plan year in which Company or any other member of the Controlled Group
was a “substantial employer” as defined in Section 4001(a)(2) of ERISA or
was deemed such under Section 4068(f) of ERISA, (c) the termination of
such Pension Plan, the filing of a notice of intent to terminate the Pension
Plan or the treatment of an amendment of such Pension Plan as a termination
under Section 4041 of ERISA, (d) the institution by the PBGC of
proceedings to terminate such Pension Plan or (e) any event or condition that
might constitute grounds under Section 4042 of ERISA for the termination
of, or appointment of a trustee to administer, such Pension Plan.

 

“Total Plan Liability”:  At any time, the present value of all vested
and unvested accrued benefits under all Pension Plans, determined as of the
then most recent valuation date for each Pension Plan, using PBGC actuarial
assumptions for single employer plan terminations.

 

“type”: 
As defined in Section 2.2.1.

 

“UCC”:  As
defined in the Security Agreement.

 

“Unfunded Liability”:  The amount (if any) by which the present
value of all vested and unvested accrued benefits under all Pension Plans
exceeds the fair market value of all assets allocable to those benefits, all
determined as of the then most recent valuation date for each Pension Plan,
using PBGC actuarial assumptions for single employer plan terminations.

 

“Unmatured Event of Default”:  Any event that, if it continues uncured,
will, with lapse of time or notice or both, constitute an Event of Default.

 

12

 

“Wholly-Owned Subsidiary”:  As to any Person, a Subsidiary all of the
Capital Securities of which (except directors’ qualifying Capital Securities)
are at the time directly or indirectly owned by such Person and/or another
Wholly-Owned Subsidiary of such Person.

 

Other Interpretive Provisions.

 

(a)                                  The
meanings of defined terms are equally applicable to the singular and plural
forms of the defined terms.

 

(b)                                 Section, Annex, Schedule and Exhibit
references are to this Agreement unless otherwise specified.

 

(c)                                  The term “including” is not limiting and
means “including without limitation.”

 

(d)                                 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.”

 

(e)                                  Unless otherwise expressly provided
herein, (i) references to agreements (including this Agreement and the
other Loan Documents) and other contractual instruments shall be deemed to
include all subsequent amendments, restatements, supplements and other
modifications thereto, but only to the extent such amendments, restatements,
supplements and other modifications are not prohibited by the terms of any Loan
Document, and (ii) references to any statute or regulation shall be
construed as including all statutory and regulatory provisions amending,
replacing, supplementing or interpreting such statute or regulation.

 

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

 

(g)                                 This Agreement and the other Loan
Documents are the result of negotiations among and have been reviewed by
counsel to the Company, the Lender and the other parties thereto and are the
products of all parties.  Accordingly,
they shall not be construed against the Lender merely because of the Lender’s
involvement in their preparation.

 

COMMITMENTS
OF THE LENDER; BORROWING, CONVERSION AND LETTER OF
CREDIT PROCEDURES.

 

Commitments.
 On and subject to the terms and
conditions of this Agreement, the Lender agrees to make loans to, and to issue
letters of credit for the account of, the Loan Parties, jointly or severally,
as follows:

 

Loan Commitment.  The Lender agrees to make loans on a
revolving basis (“Loans”) from time to time until the Termination Date
in the amounts as the Company may request from the Lender; provided that
(i) the Outstandings will not at any time exceed Loan Availability and (ii) the
Outstandings with respect to the leasing operations of the Loan Parties will
not at any time exceed $10,000,000.

 

L/C Commitment.  Subject to Section 2.3.1, the
Lender agrees to issue letters of credit, in each case containing such terms
and conditions as are permitted by this Agreement and are reasonably
satisfactory to the Issuing Lender (each, a “Letter of Credit”), at the
request of and for the account of the Company from time to time before the
scheduled Termination Date; provided that (a) the aggregate Stated
Amount of all Letters of Credit shall not at

 

13

 

any time exceed $500,000 and (b) the Outstandings shall not at any
time exceed Loan Availability.

 

Loan
Procedures.

 

Various Types of Loans.  Each Loan shall be divided into tranches
which are either a Base Rate Loan or a LIBOR Loan (each a “type” of
Loan), as the Company shall specify in the related notice of borrowing or
conversion pursuant to Section 2.2.2 or 2.2.3.  LIBOR Loans having the same Interest Period
are sometimes called a “Group” or, collectively, “Groups”.  Base Rate Loans and LIBOR Loans may be
outstanding at the same time, provided that not more than ten (10)
different Groups of LIBOR Loans shall be outstanding at any one time.

 

Borrowing Procedures.The Company shall
give written notice (each such written notice, a “Notice of Borrowing”)
substantially in the form of Exhibit E or telephonic notice (followed
immediately by a Notice of Borrowing) to the Lender of each proposed borrowing
not later than (a) in the case of a Base Rate borrowing, 11:00 A.M.,
Minneapolis time, on the proposed date of such borrowing, and (b) in the
case of a LIBOR borrowing, 11:00 A.M., Minneapolis time, at least two
Business Days prior to the proposed date of such borrowing.  Each such notice shall be effective upon
receipt by the Lender, shall be irrevocable, and shall specify the date, amount
and type of borrowing and, in the case of a LIBOR borrowing, the initial
Interest Period therefor.  So long as the
Lender has not received written notice that the conditions precedent set forth
in Section 11 with respect to such borrowing have not been
satisfied, the Lender shall pay over to the Company, in immediately available
funds the amount of the proposed borrowing on the requested borrowing
date.  Each borrowing shall be on a
Business Day.  Each Base Rate borrowing
shall be in an aggregate amount of at least $100,000 or a higher integral
multiple of $100,000, and each LIBOR borrowing shall be in an aggregate amount
of at least $100,000 or a higher integral multiple of $100,000.

 

Conversion and Continuation Procedures.Subject to Section 2.2.1, the Company may,
upon irrevocable written notice to the Lender in accordance with clause (b)
below: 

 

elect, as of any Business Day, to convert any
Loans (or any part thereof in an aggregate amount not less than $100,000 or a
higher integral multiple of $100,000) into Loans of the other type; or

 

elect, as of the last day of the applicable
Interest Period, to continue any LIBOR Loans having Interest Periods expiring
on such day (or any part thereof in an aggregate amount not less than $100,000
or a higher integral multiple of $100,000) for a new Interest Period;

 

provided that after giving effect to
any prepayment, conversion or continuation, the aggregate principal amount of
each Group of LIBOR Loans shall be at least $100,000 or a higher integral
multiple of $100,000.

 

The Company shall give
written notice (each such written notice, a “Notice of
Conversion/Continuation”) substantially in the form of Exhibit F or telephonic
notice (followed immediately by a Notice of Conversion/Continuation) to the
Lender of each proposed

 

14

 

conversion or
continuation not later than (i) in the case of conversion into Base Rate Loans,
11:00 A.M., Minneapolis time, on the proposed date of such conversion and (ii)
in the case of conversion into or continuation of LIBOR Loans, 11:00 A.M.,
Minneapolis time, at least two Business Days prior to the proposed date of such
conversion or continuation, specifying in each case:

 

the proposed date of conversion or continuation;

the aggregate amount of Loans to be converted or
continued;

the type of Loans resulting from the proposed
conversion or continuation; and

in the case of conversion into, or continuation of,
LIBOR Loans, the duration of the requested Interest Period therefor.

 

If upon the expiration of
any Interest Period applicable to LIBOR Loans, the Company has failed to select
timely a new Interest Period to be applicable to such LIBOR Loans, the Company
shall be deemed to have elected to convert such LIBOR Loans into Base Rate
Loans effective on the last day of such Interest Period.

 

Any conversion of a LIBOR
Loan on a day other than the last day of an Interest Period therefor shall be
subject to Section 8.4.

 

Letter
of Credit Procedures.

 

L/C Applications.  The Loan Parties shall execute and deliver to
the Lender the Master Letter of Credit Agreement from time to time in
effect.  The Company shall give notice to
the Lender of the proposed issuance of each Letter of Credit on a Business Day
which is at least three Business Days (or such lesser number of days as the
Lender shall agree in any particular instance in its sole discretion) prior to
the proposed date of issuance of such Letter of Credit.  Each such notice shall be accompanied by an
L/C Application, duly executed by the Company and in all respects satisfactory
to the Lender, together with such other documentation as the Lender may request
in support thereof, it being understood that each L/C Application shall
specify, among other things, the date on which the proposed Letter of Credit is
to be issued, the expiration date of such Letter of Credit (which shall not be
later than the earlier of thirty (30) days prior to (i) one year after the date
of issuance thereof and (ii) the scheduled Termination Date (unless such Letter
of Credit is Cash Collateralized) provided, a Letter of Credit with an
expiration date of one year may provide for renewal thereof in additional
one-year periods, subject to the preceding clause (ii)) and whether such Letter
of Credit is to be transferable in whole or in part.  So long as the Lender has not received
written notice that the conditions precedent set forth in Section 12
with respect to the issuance of such Letter of Credit have not been satisfied,
the Lender shall issue such Letter of Credit on the requested issuance
date.  In the event of any inconsistency
between the terms of the Master Letter of Credit Agreement, any L/C Application
and the terms of this Agreement, the terms of this Agreement shall control.

 

Reimbursement
Obligations.

 

Each Loan Party hereby
unconditionally and irrevocably agrees to reimburse the Lender for each payment
or disbursement made by the Lender under any Letter of Credit honoring any
demand for payment made by the beneficiary thereunder, in each case on the date
that such payment or disbursement is made. 
Any amount not reimbursed on the date of such payment 

 

15

 

or disbursement shall
bear interest from the date of such payment or disbursement to the date that
the Lender is reimbursed by the Company therefor, payable on demand, at a rate
per annum equal to the Base Rate from time to time in effect plus the Base Rate
Margin from time to time in effect plus, beginning on the third Business Day
after receipt of notice from the Issuing Lender of such payment or
disbursement, 2%.  The Lender shall
notify the Company whenever any demand for payment is made under any Letter of
Credit by the beneficiary thereunder; provided that the failure of the Lender
to so notify the Company shall not affect the rights of the Lender in any
manner whatsoever.

 

The Loan Parties’
reimbursement obligations hereunder shall be irrevocable and unconditional
under all circumstances, including (a) any lack of validity or enforceability
of any Letter of Credit, this Agreement or any other Loan Document, (b) the
existence of any claim, set-off, defense or other right which any Loan Party
may have at any time against a beneficiary named in a Letter of Credit, any
transferee of any Letter of Credit (or any Person for whom any such transferee
may be acting), the Lender or any other Person, whether in connection with any
Letter of Credit, this Agreement, any other Loan Document, the transactions
contemplated herein or any unrelated transactions (including any underlying
transaction between any Loan Party and the beneficiary named in any Letter of
Credit), (c) the validity, sufficiency or genuineness of any document which the
Lender has determined complies on its face with the terms of the applicable
Letter of Credit, even if such document should later prove to have been forged,
fraudulent, invalid or insufficient in any respect or any statement therein
shall have been untrue or inaccurate in any respect, or (d) the surrender or
impairment of any security for the performance or observance of any of the
terms hereof.

 

Certain
Conditions. 
Notwithstanding any other provision of this Agreement, the Lender shall
not have an obligation to make any Loan, or to permit the continuation of or
any conversion into any LIBOR Loan, or to issue any Letter of Credit, if an
Event of Default or Unmatured Event of Default exists.

 

EVIDENCING OF
LOANS.

 

Notes.  The Loans shall be evidenced by a Note,
with appropriate insertions, payable to the order of the Lender in a face
principal amount equal to the Commitment.

 

Recordkeeping.  The Lender shall record in its records, the
date and amount of each Loan made by the Lender, each repayment or conversion
thereof and, in the case of each LIBOR Loan, the dates on which each Interest
Period for such Loan shall begin and end. 
The aggregate unpaid principal amount so recorded shall be rebuttably
presumptive evidence of the principal amount of the Loans owing and
unpaid.  The failure to so record any
such amount or any error in so recording any such amount shall not, however,
limit or otherwise affect the Obligations of the Loan Parties hereunder or
under any Note to repay the principal amount of the Loans hereunder, together
with all interest accruing thereon.

 

16

 

INTEREST.

 

Interest
Rates. 
The Loan Parties, jointly and severally, promise to pay interest on the
unpaid principal amount of each Loan for the period commencing on the date of
such Loan until such Loan is paid in full as follows:

 

at all times while such
Loan is a Base Rate Loan, at a rate per annum equal to the sum of the Base Rate
from time to time in effect plus the Applicable Margin; and

 

at all times while such
Loan is a LIBOR Loan, at a rate per annum equal to the sum of the LIBOR Rate
applicable to each Interest Period for such Loan plus the Applicable Margin;

provided that at any time an Event
of Default exists, unless the Lender otherwise consents, the interest rate
applicable to each Loan shall be increased by 2% (and, in the case of
Obligations not bearing interest, such Obligations shall bear interest at the
Base Rate plus 2%), provided  further that such increase
may thereafter be rescinded by the Lender. 
Notwithstanding the foregoing, upon the occurrence of an Event of
Default under Section 13.1.1 or 13.1.4, such increase shall
occur automatically.

 

Interest
Payment Dates.  Accrued interest on each Base Rate Loan shall
be payable in arrears on the first day of each calendar month and at
maturity.  Accrued interest on each LIBOR
Loan shall be payable on the last day of each Interest Period relating to such
Loan, upon a prepayment of such Loan, and at maturity.  After maturity, and at any time an Event of
Default exists, accrued interest on all Loans shall be payable on demand.

 

Setting
and Notice of LIBOR Rates.  The applicable LIBOR Rate for each Interest
Period shall be determined by the Lender, and notice thereof shall be given by
the Lender promptly to the Company.  Each
determination of the applicable LIBOR Rate by the Lender shall be conclusive
and binding upon the parties hereto, in the absence of demonstrable error.  The Lender shall, upon written request of the
Company, deliver to the Company a statement showing the computations used by
the Lender in determining any applicable LIBOR Rate hereunder.

 

Computation
of Interest. 
Interest shall be computed for the actual number of days elapsed on the
basis of a year of 360 days.  The
applicable interest rate for each Base Rate Loan shall change simultaneously
with each change in the Base Rate.

 

FEES.

 

Letter
of Credit Fees.

 

(a)                                  The Loan Parties, jointly and severally,
agree to pay to the Lender a letter of credit fee for each Letter of Credit
equal to the L/C Fee Rate of the Stated Amount of such Letter of Credit
(computed for the actual number of days elapsed on the basis of a year of 360
days); provided that, unless the Lender otherwise consents, the rate
applicable to each Letter of Credit shall be increased by 2% at any time that
an Event of Default exists.  Such letter
of credit fee shall be payable in arrears on the first day of each calendar
month and on the Termination Date (or such later date on which such Letter of
Credit expires or is terminated) for the period from the date of the issuance
of each Letter of Credit (or the last day on which the letter of credit fee was
paid with respect thereto) to the date such payment is due or, if earlier, the
date on which such Letter of Credit expired or was terminated.

 

(b)                                 In addition, with respect to each Letter
of Credit, the Company agrees to pay to the Lender such fees and expenses as
the Lender customarily requires in connection with the issuance,

 

17

 

negotiation, processing
and/or administration of letters of credit in similar situations and (ii) a
letter of credit fronting fee in the amount and at the times agreed to by the
Company and the Lender.

 

Lender’s
Fees. 
The Loan Parties, jointly and severally, agree to pay to the Lender such
fees and expenses as are mutually agreed to from time to time by the Company
and the Lender, including the fees required to be paid in accordance with
Section 15.5.

 

REDUCTION
OR TERMINATION OF THE REVOLVING COMMITMENT;
PREPAYMENTS.

 

Prepayments.

 

Voluntary Prepayments.  The Loan Parties may from time to time prepay
the Loans in whole or in part; provided that the Company shall give the
Lender notice thereof not later than 11:00 A.M., Minneapolis time, on the day
of such prepayment (which shall be a Business Day), specifying the Loans to be
prepaid and the date and amount of prepayment.

 

Mandatory Prepayments.  If on any day the Outstandings exceed the
Borrowing Base, the Loan Parties shall immediately prepay the Loans and/or Cash
Collateralize the outstanding Letters of Credit, or do a combination of the
foregoing, in an amount sufficient to eliminate such excess.

 

Manner of Prepayments.  Each voluntary partial prepayment shall be in
a principal amount of $25,000 or a higher integral multiple of $5,000.  Any partial prepayment of a Group of LIBOR
Loans shall be subject to the proviso to Section 2.2.3(a).  Any prepayment of a LIBOR Loan on a day other
than the last day of an Interest Period therefor shall include interest on the
principal amount being repaid and shall be subject to Section 8.4.  Except as otherwise provided by this
Agreement, all principal payments in respect of the Loans shall be applied
first, to repay outstanding Base Rate Loans and then to repay outstanding LIBOR
Rate Loans in direct order of Interest Period maturities.

 

Repayments.  The Loans shall be paid in full and the
Commitment shall terminate on the Termination Date.

 

MAKING AND
PRORATION OF PAYMENTS; SETOFF; TAXES.

 

Making of
Payments. 
All payments of principal or interest on the Note, and of all fees,
shall be made by the Company to the Lender in immediately available funds at
the office specified by the Lender not later than noon, Minneapolis time, on
the date due; and funds received after that hour shall be deemed to have been
received by the Lender on the following Business Day.  All payments under Section 8.1 shall be
made by the Company directly to the Lender without setoff, counterclaim or
other defense.

 

Application
of Certain Payments.  So long as no Unmatured Event of Default or
Event of Default has occurred and is continuing, (a) payments matching specific
scheduled payments then due shall be applied to those scheduled payments and
(b) voluntary and mandatory prepayments shall be applied as set forth in Sections
6.2 and 6.3.  After the
occurrence and during the continuance of an Unmatured Event of Default or Event
of Default, all amounts collected or received by the

 

18

 

Lender as proceeds from the sale of, or other realization upon, all or
any part of the collateral shall be applied as the Lender shall determine in
its discretion.

 

Due Date
Extension. 
If any payment of principal or interest with respect to any of the
Loans, or of any fees, falls due on a day which is not a Business Day, then
such due date shall be extended to the immediately following Business Day
(unless, in the case of a LIBOR Loan, such immediately following Business Day
is the first Business Day of a calendar month, in which case such due date shall
be the immediately preceding Business Day) and, in the case of principal,
additional interest shall accrue and be payable for the period of any such
extension.

 

Setoff.  Each Loan Party agrees that the Lender has
all rights of set-off and bankers’ lien provided by applicable law, and in
addition thereto, each Loan Party agrees that at any time any Event of Default
exists, the Lender may apply to the payment of any Obligations of the Loan
Parties hereunder, whether or not then due, any and all balances, credits,
deposits, accounts or moneys of any Loan Party then or thereafter with the
Lender.

 

Taxes.

 

(a)                                  All payments made by any Loan Party
hereunder or under any Loan Documents shall be made without setoff,
counterclaim, or other defense.  To the
extent permitted by applicable law, all payments hereunder or under the Loan
Documents (including any payment of principal, interest, or fees) to, or for
the benefit, of any person shall be made by the Loan Parties free and clear of
and without deduction or withholding for, or account of, any Taxes now or
hereinafter imposed by any taxing authority.

 

(b)                                 If a Loan Party makes any payment
hereunder or under any Loan Document in respect of which it is required by
applicable law to deduct or withhold any Taxes, such Loan Party shall increase
the payment hereunder or under any such Loan Document such that after the
reduction for the amount of Taxes withheld (and any taxes withheld or imposed
with respect to the additional payments required under this Section 7.5(b)),
the amount paid to the Lender equals the amount that was payable hereunder or
under any such Loan Document without regard to this Section 7.5(b).  To the extent a Loan Party withholds any
Taxes on payments hereunder or under any Loan Document, such Loan Party shall
pay the full amount deducted to the relevant taxing authority within the time
allowed for payment under applicable law and shall deliver to the Lender within
30 days after it has made payment to such authority a receipt issued by such
authority (or other evidence satisfactory to the Lender) evidencing the payment
of all amounts so required to be deducted or withheld from such payment.

 

(c)                                  If the Lender is required by law to make
any payments of any Taxes on or in relation to any amounts received or receivable
hereunder or under any other Loan Document, or any Tax is assessed against the
Lender with respect to amounts received or receivable hereunder or under any
other Loan Document, the Loan Parties, jointly and severally, will indemnify
such person against (i) such Tax (and any reasonable counsel fees and expenses
associated with such Tax) and (ii) any taxes imposed as a result of the receipt
of the payment under this Section 7.5(c).  A certificate prepared in good faith as to
the amount of such payment by the Lender shall, absent manifest error, be
final, conclusive, and binding on all parties.

 

INCREASED COSTS; SPECIAL PROVISIONS FOR LIBOR LOANS.

 

Increased
Costs.

 

(a)                                  If, after the date hereof, the adoption
of, or any change in, any applicable law, rule or regulation, or any change in
the interpretation or administration of any applicable law, rule or regulation

 

19

 

by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Lender with any request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency:  (i)
shall impose, modify or deem applicable any reserve (including any reserve
imposed by the FRB, but excluding any reserve included in the determination of
the LIBOR Rate pursuant to Section 4), special deposit or similar
requirement against assets of, deposits with or for the account of, or credit
extended by the Lender; or (ii) shall impose on the Lender any other condition
affecting its LIBOR Loans, its Note or its obligation to make LIBOR Loans; and
the result of anything described in clauses (i) and (ii) above is to increase
the cost to (or to impose a cost on) the Lender (or any LIBOR Office of the
Lender) of making or maintaining any LIBOR Loan, or to reduce the amount of any
sum received or receivable by the Lender (or its LIBOR Office) under this
Agreement or under its Note with respect thereto, then upon demand by the
Lender (which demand shall be accompanied by a statement setting forth the
basis for such demand and a calculation of the amount thereof in reasonable
detail, the Loan Parties shall pay to the Lender such additional amount as will
compensate the Lender for such increased cost or such reduction, so long as
such amounts have accrued on or after the day which is 180 days prior to the
date on which the Lender first made demand therefor.

 

(b)                                 If the Lender shall reasonably determine
that any change in, or the adoption or phase-in of, any applicable law, rule or
regulation regarding capital adequacy of the Lender, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or the compliance by the Lender or any Person controlling the Lender
with any request or directive regarding capital adequacy of the Lender (whether
or not having the force of law) by any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on the Lender’s or such controlling Person’s capital as a consequence of the
Lender’s obligations hereunder or under any Letter of Credit to a level below
that which the Lender or such controlling Person could have achieved but for
such change, adoption, phase-in or compliance (taking into consideration the
Lender’s or such controlling Person’s policies with respect to capital adequacy
of the Lender) by an amount deemed by the Lender or such controlling Person to
be material, then from time to time, upon demand by the Lender (which demand
shall be accompanied by a statement setting forth the basis for such demand and
a calculation of the amount thereof in reasonable detail), the Loan Parties
shall pay to the Lender such additional amount as will compensate the Lender or
such controlling Person for such reduction so long as such amounts have accrued
on or after the day which is 180 days prior to the date on which the Lender
first made demand therefor.

 

Basis for Determining Interest Rate
Inadequate or Unfair.  If:

 

the Lender reasonably determines (which determination shall be binding
and conclusive on the Loan Parties) that by reason of circumstances affecting
the interbank LIBOR market adequate and reasonable means do not exist for
ascertaining the applicable LIBOR Rate; or the Lender reasonably determines
that the LIBOR Rate will not adequately and fairly reflect the cost to the
Lender of maintaining or funding LIBOR Loans for such Interest Period (taking
into account any amount to which the Lender may be entitled under
Section 8.1) or that the making or funding of LIBOR Loans has become
impracticable as a result of an event occurring after the date of this Agreement
which in the opinion of the Lender materially affects such Loans;

 

then the Lender shall promptly
notify the Company thereof and, so long as such circumstances shall continue,
(i) the Lender shall be under no obligation to make or convert any Base Rate

 

20

 

Loans into LIBOR Loans and (ii) on the last day of the
current Interest Period for each LIBOR Loan, such Loan shall, unless then
repaid in full, automatically convert to a Base Rate Loan.

 

Changes in
Law Rendering LIBOR
Loans Unlawful.  If any
change in, or the adoption of any new, law or regulation, or any change in the
interpretation of any applicable law or regulation by any governmental or other
regulatory body charged with the administration thereof, should make it (or in
the good faith judgment of the Lender cause a substantial question as to
whether it is) unlawful for the Lender to make, maintain or fund LIBOR Loans,
then the Lender shall promptly notify the Company and, so long as such
circumstances shall continue, (a) the Lender shall have no obligation to make
or convert any Base Rate Loan into a LIBOR Loan and (b) on the last day of the
current Interest Period for each LIBOR Loan of the Lender (or, in any event, on
such earlier date as may be required by the relevant law, regulation or
interpretation), such LIBOR Loan shall, unless then repaid in full,
automatically convert to a Base Rate Loan. 
Each Base Rate Loan made by the Lender which, but for the circumstances
described in the foregoing sentence, would be a LIBOR Loan (an “Affected
Loan”) shall remain outstanding for the period corresponding to the Group
of LIBOR Loans of which such Affected Loan would be a part absent such
circumstances.

 

Funding
Losses. 
The Loan Parties hereby agree that upon demand by the Lender (which
demand shall be accompanied by a statement setting forth the basis for the
amount being claimed), the Loan Parties will indemnify the Lender against any
net loss or expense which the Lender may sustain or incur (including any net loss
or expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by the Lender to fund or maintain any LIBOR Loan), as
reasonably determined by the Lender, as a result of (a) any payment, prepayment
or conversion of any LIBOR Loan of the Lender on a date other than the last day
of an Interest Period for such Loan (including any conversion pursuant to Section 8.3)
or (b) any failure of the Company or another Loan Party to borrow, convert or
continue any Loan on a date specified therefor in a notice of borrowing,
conversion or continuation pursuant to this Agreement.  For this purpose, all notices to the Lender
pursuant to this Agreement shall be deemed to be irrevocable.

 

Right of
the Lender to Fund
through Other Offices. 
The Lender may, if it so elects, fulfill its commitment as to any LIBOR
Loan by causing a foreign branch or Affiliate of the Lender to make such Loan; provided
that in such event for the purposes of this Agreement such Loan shall be deemed
to have been made by the Lender and the obligation of the Company to repay such
Loan shall nevertheless be to the Lender and shall be deemed held by it, to the
extent of such Loan, for the account of such branch or Affiliate.

 

Discretion
of the Lender as to
Manner of Funding. 
Notwithstanding any provision of this Agreement to the contrary, the
Lender shall be entitled to fund and maintain its funding of all or any part of
its Loans in any manner it sees fit, it being understood, however, that for the
purposes of this Agreement all determinations hereunder shall be made as if the
Lender had actually funded and maintained each LIBOR Loan during each Interest
Period for such Loan through the

 

21

 

purchase of deposits having a maturity corresponding to such Interest
Period and bearing an interest rate equal to the LIBOR Rate for such Interest
Period.

 

Mitigation
of Circumstances.  The Lender shall promptly notify the Company
of any event of which it has knowledge which will result in, and will use
reasonable commercial efforts available to it (and not, in the Lender’s sole
judgment, otherwise disadvantageous to the Lender) to mitigate or avoid, (i)
any obligation by the Loan Parties to pay any amount pursuant to Section 7.6
or 8.1 or (ii) the occurrence of any circumstances described in Section 8.2
or 8.3 (and, if the Lender has given notice of any such event described
in clause (i) or (ii) above and thereafter such event ceases to exist, the
Lender shall promptly so notify the Company). 
Without limiting the foregoing, the Lender will designate a different
funding office if such designation will avoid (or reduce the cost to the Loan
Parties of) any event described in clause (i) or (ii) above and such
designation will not, in the Lender’s sole judgment, be otherwise
disadvantageous to the Lender.

 

Conclusiveness
of Statements;
Survival of Provisions. 
Determinations and statements of the Lender pursuant to Section 8.1,
8.2, 8.3 or 8.4 shall be conclusive absent demonstrable
error.  The Lender may use reasonable
averaging and attribution methods in determining compensation under Sections
8.1 and 8.4, and the provisions of such Sections shall survive
repayment of the Obligations, cancellation of the Note, expiration or
termination of the Letters of Credit and termination of this Agreement.

 

REPRESENTATIONS
AND WARRANTIES.

 

To induce the Lender to enter into this Agreement and
to induce the Lender to make Loans and issue Letters of Credit hereunder, each
Loan Party represents and warrants to the Lender that:

 

Organization.  Each Loan Party is validly existing and in
good standing under the laws of its jurisdiction of organization; and each Loan
Party is duly qualified to do business in each jurisdiction where, because of
the nature of its activities or properties, such qualification is required,
except for such jurisdictions where the failure to so qualify would not have a
Material Adverse Effect.

 

Authorization;
No Conflict. 
Each Loan Party is duly authorized to execute and deliver each Loan
Document to which it is a party, is duly authorized to borrow monies hereunder
and is duly authorized to perform its Obligations under each Loan Document to
which it is a party.  The execution,
delivery and performance by each Loan Party of each Loan Document to which it
is a party, and the borrowings by the Loan Parties hereunder, do not and will
not (a) require any consent or approval of any governmental agency or authority
(other than any consent or approval which has been obtained and is in full force
and effect), (b) conflict with (i) any provision of law, (ii) the charter,
by-laws or other organizational documents of any Loan Party or (iii) any
agreement, indenture, instrument or other document, or any judgment, order or
decree, which is binding upon any Loan Party or any of their respective
properties or (c) require, or result in, the

 

22

 

creation or imposition of any Lien on any asset of any Loan Party
(other than Liens in favor of the Lender created pursuant to the Collateral
Documents).

 

Validity
and Binding Nature.  Each of this Agreement and each other Loan
Document to which any Loan Party is a party is the legal, valid and binding
obligation of such Person, enforceable against such Person in accordance with
its terms, subject to bankruptcy, insolvency and similar laws affecting the
enforceability of creditors’ rights generally and to general principles of
equity.

 

Financial
Condition. 
The audited consolidated financial statements of the Company and its
Subsidiaries as at December 27, 2003 and the unaudited consolidated
financial statements of the Company and the Subsidiaries as at June 26,
2004 copies of each of which have been delivered to the Lender, were prepared
in accordance with GAAP (subject, in the case of such unaudited statements, to
the absence of footnotes and to normal year-end adjustments) and present fairly
the consolidated financial condition of the Company and its Subsidiaries as at
such dates and the results of their operations for the periods then ended.

 

No
Material Adverse Change.  Since December 27, 2003  there has been no material adverse change in the financial
condition, operations, assets, business, properties or prospects of the Loan
Parties taken as a whole.

 

Litigation and Contingent Liabilities.  No litigation (including derivative actions),
arbitration proceeding or governmental investigation or proceeding is pending
or, to the knowledge of any Loan Party, threatened against any Loan Party which
might reasonably be expected to have a Material Adverse Effect, except as set
forth in Schedule 9.6.  Other
than any liability incident to such litigation or proceedings, no Loan Party
has any material contingent liabilities not listed on Schedule 9.6
or permitted by Section 11.1.

 

Ownership
of Properties; Liens.  Each Loan Party owns good and, in the case of
real property,  marketable title to all
of its properties and assets, real and personal, tangible and intangible, of
any nature whatsoever (including patents, trademarks, trade names, service
marks and copyrights), free and clear of all Liens, charges and claims
(including infringement claims with respect to patents, trademarks, service
marks, copyrights and the like) except as permitted by Section 11.2
and listed in Schedule 9.7.

 

Equity
Ownership; Subsidiaries.  All issued and outstanding Capital Securities
of each Loan Party are duly authorized and validly issued, fully paid,
non-assessable, and free and clear of all Liens other than those in favor of
the Lender, and such securities were issued in compliance with all applicable
state and federal laws concerning the issuance of securities.  As of the Closing Date, the Company has no
Subsidiaries other than those specifically disclosed in part (a) of Schedule 9.8
and no Loan Party has material Investments in any other corporation or entity
other than those specifically disclosed in part (b) of Schedule 9.8.  As of the Closing Date, each Subsidiary is a
Wholly-Owned Subsidiary and all of the issued and outstanding Capital Securities
of each Wholly-Owned Subsidiary is, directly or indirectly, owned by the
Company.

 

23

 

Pension Plans.

 

(a)                                  The Unfunded Liability of all Pension
Plans does not in the aggregate exceed twenty percent of the Total Plan
Liability for all such Pension Plans. 
Each Pension Plan complies in all material respects with all applicable
requirements of law and regulations.  No
contribution failure under Section 412 of the Code, Section 302 of
ERISA or the terms of any Pension Plan has occurred with respect to any Pension
Plan, sufficient to give rise to a Lien under Section 302(f) of ERISA, or
otherwise to have a Material Adverse Effect. 
There are no pending or, to the knowledge of any Loan Party, threatened,
claims, actions, investigations or lawsuits against any Pension Plan, any
fiduciary of any Pension Plan, or the Company or any other member of the
Controlled Group with respect to a Pension Plan or a Multiemployer Pension Plan
which could reasonably be expected to have a Material Adverse Effect.  Neither the Company nor any other member of
the Controlled Group has engaged in any prohibited transaction (as defined in
Section 4975 of the Code or Section 406 of ERISA) in connection with
any Pension Plan or Multiemployer Pension Plan which would subject that Person
to any material liability.  Within the
past five years, neither the Company nor any other member of the Controlled
Group has engaged in a transaction which resulted in a Pension Plan with an
Unfunded Liability being transferred out of the Controlled Group, which could
reasonably be expected to have a Material Adverse Effect.  No Termination Event has occurred or is
reasonably expected to occur with respect to any Pension Plan, which could
reasonably be expected to have a Material Adverse Effect.

 

(b)                                 All contributions (if any) have been made
to any Multiemployer Pension Plan that are required to be made by the Company
or any other member of the Controlled Group under the terms of the plan or of
any collective bargaining agreement or by applicable law; neither the Company
nor any other member of the Controlled Group has withdrawn or partially
withdrawn from any Multiemployer Pension Plan, incurred any withdrawal
liability with respect to any such plan or received notice of any claim or
demand for withdrawal liability or partial withdrawal liability from any such
plan, and no condition has occurred which, if continued, could result in a
withdrawal or partial withdrawal from any such plan; and neither the Company
nor any other member of the Controlled Group has received any notice that any
Multiemployer Pension Plan is in reorganization, that increased contributions
may be required to avoid a reduction in plan benefits or the imposition of any
excise tax, that any such plan is or has been funded at a rate less than that
required under Section 412 of the Code, that any such plan is or may be
terminated, or that any such plan is or may become insolvent.

 

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

 

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

 

Regulation
U.  No
Loan Party is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying
Margin Stock.

 

Taxes; Tax Shelter Registration.

 

(a)                                  Each Loan Party has timely filed all tax
returns and reports required by law to have been filed by it and has paid all
taxes and governmental charges due and payable with respect to such return,
except any such taxes or charges which are being diligently contested in good
faith by appropriate proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on its books.  The Loan Parties have made adequate reserves
on their books and records in accordance with

 

24

 

GAAP for all taxes that
have accrued but which are not yet due and payable.  No Loan Party has participated in any
transaction that relates to a year of the taxpayer (which is still open under
the applicable statute of limitations) which is a “reportable transaction”
within the meaning of Treasury Regulation section 1.6011-4(b)(2)
(irrespective of the date when the transaction was entered into).

 

(b)                                 No Loan Party intends to treat any of the
transactions contemplated by any Loan Document as being a “reportable
transaction” within the meaning of Treasury Regulation Section 1.6011-4.

 

Solvency, etc.  On
the Closing Date, and immediately prior to and after giving effect to the
issuance of each Letter of Credit and each borrowing hereunder and the use of
the proceeds thereof, with respect to each Loan Party, individually, (a) the
fair value of its assets is greater than the amount of its liabilities
(including disputed, contingent and unliquidated liabilities) as such value is
established and liabilities evaluated, (b) the present fair saleable value of
its assets is not less than the amount that will be required to pay the
probable liability on its debts as they become absolute and matured, (c) it is
able to realize upon its assets and pay its debts and other liabilities
(including disputed, contingent and unliquidated liabilities) as they mature in
the normal course of business, (d) it does not intend to, and does not believe
that it will, incur debts or liabilities beyond its ability to pay as such
debts and liabilities mature and (e) it is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
its property would constitute unreasonably small capital.

 

Environmental
Matters. 
The on-going operations of each Loan Party comply in all respects with
all Environmental Laws, except such non-compliance which could not (if enforced
in accordance with applicable law) reasonably be expected to result, either
individually or in the aggregate, in a Material Adverse Effect.  Each Loan Party has obtained, and maintained
in good standing, all licenses, permits, authorizations, registrations and
other approvals required under any Environmental Law and required for their
respective ordinary course operations, and for their reasonably anticipated
future operations, and each Loan Party is in compliance with all terms and
conditions thereof, except where the failure to do so could not reasonably be
expected to result in material liability to any Loan Party and could not
reasonably be expected to result, either individually or in the aggregate, in a
Material Adverse Effect.  No Loan Party
or any of its properties or operations is subject to, or reasonably anticipates
the issuance of, any written order from or agreement with any Federal, state or
local governmental authority, nor subject to any judicial or docketed
administrative or other proceeding, respecting any Environmental Law,
Environmental Claim or Hazardous Substance. 
There are no Hazardous Substances or other conditions or circumstances
existing with respect to any property, arising from operations prior to the
Closing Date, or relating to any waste disposal, of any Loan Party that would
reasonably be expected to result, either individually or in the aggregate, in a
Material Adverse Effect.  No Loan Party
has any underground storage tanks that are not properly registered or permitted
under applicable Environmental Laws or that at any time have released, leaked,
disposed of or otherwise discharged Hazardous Substances.

 

Insurance.  Each Loan Party and its properties are
insured with financially sound and reputable insurance companies which are not
Affiliates of the Loan Parties, in such amounts, with such

 

25

 

deductibles and covering such risks as are customarily carried by
companies engaged in similar businesses and owning similar properties in
localities where such Loan Parties operate.

 

Real
Property. 
Set forth on Schedule 9.17 is a complete and accurate list,
as of the Closing Date, of the address of all real property owned or leased by
any Loan Party, together with, in the case of leased property, the name and
mailing address of the lessor of such property.

 

Information.  All information heretofore or
contemporaneously herewith furnished in writing by any Loan Party to the Lender
for purposes of or in connection with this Agreement and the transactions
contemplated hereby is, and all written information hereafter furnished by or
on behalf of any Loan Party to the Lender pursuant hereto or in connection
herewith will be, true and accurate in every material respect on the date as of
which such information is dated or certified, and none of such information is
or will be incomplete by omitting to state any material fact necessary to make
such information not misleading in light of the circumstances under which made
(it being recognized by the Lender that any projections and forecasts provided
by any Loan Party are based on good faith estimates and assumptions believed by
such Loan Party to be reasonable as of the date of the applicable projections
or assumptions and that actual results during the period or periods covered by
any such projections and forecasts may differ from projected or forecasted
results).

 

Intellectual
Property. 
Each Loan Party owns and possesses or has a license or other right to
use all patents, patent rights, trademarks, trademark rights, trade names,
trade name rights, service marks, service mark rights and copyrights as are
necessary for the conduct of the businesses of the Loan Parties, without any
infringement upon rights of others which could reasonably be expected to have a
Material Adverse Effect.

 

Burdensome
Obligations. 
No Loan Party is a party to any agreement or contract or subject to any
restriction contained in its organizational documents which could reasonably be
expected to have a Material Adverse Effect.

 

Labor
Matters. 
No Loan Party is subject to any labor or collective bargaining
agreement.  There are no existing or
threatened strikes, lockouts or other labor disputes involving any Loan Party
that singly or in the aggregate could reasonably be expected to have a Material
Adverse Effect.  Hours worked by and
payment made to employees of the Loan Parties are not in violation of the Fair
Labor Standards Act or any other applicable law, rule or regulation dealing
with such matters.

 

No Default.  No Event of Default or Unmatured Event of
Default exists or would result from the incurrence by any Loan Party of any
Debt hereunder or under any other Loan Document.

 

Accounts.  No Loan Party maintains any deposit,
checking, brokerage or similar account with any bank, savings association,
financial institution or similar financial intermediary, other than those
identified on Schedule 9.23.

 

26

Anti-Terrorism
Law Compliance.  None of the Loan Parties is subject to or in
violation of any law, regulation or list of any government agency including,
without limitation, the U.S. Office of Foreign Asset Control (“OFAC”)
list, Executive Order 13224 or the USA Patriot Act) that prohibits or limits
the conduct of business with or receiving of funds, goods or services to or for
the benefit of certain Persons specified therein or that prohibits or limits
any Bank from making any Advance or extension of credit to any Loan Party or
from otherwise conducting business with any Loan Party.

 

AFFIRMATIVE
COVENANTS.

Until the
expiration or termination of the Commitment and thereafter until all
Obligations hereunder and under the other Loan Documents are paid in full and
all Letters of Credit have been terminated, each Loan Party agrees that, unless
at any time the Lender shall otherwise expressly consent in writing, it will:

 

Reports, Certificates and Other Information.  Furnish to the Lender:

 

Annual Report.  Promptly when available and in any event
within ninety (90) days after the end of each Fiscal Year (a) a copy of the
annual audit report of the Company and its Subsidiaries for such Fiscal Year,
including therein consolidated balance sheets and consolidated statements of
income or operations, shareholder’s equity and cash flows of the Company and
its Subsidiaries as at the end of such Fiscal Year, together with a written
opinion from independent auditors of national standing selected by the Company
and reasonably acceptable to the Lender that (A) such consolidated financial
statements present fairly, in all material respects, the financial position for
the periods indicated in conformity with GAAP and (B) in making the examination
necessary for the signing of such annual audit report, nothing came to the
attention of such auditors that caused them to believe that the Company was not
in compliance with any provision of Section 11.1, 11.3, 11.4 or 11.13 of
this Agreement; (b) a comparison with the budget for such Fiscal Year and a
comparison with the previous Fiscal Year, certified by a Senior Officer of the
Company; and (c) statements of forecasted consolidated income for the Company
and its Subsidiaries for each Fiscal Quarter in the current Fiscal Year and a
forecasted consolidated balance sheet of the Company and its Subsidiaries as at
the end of such Fiscal Year, together with supporting assumptions, all in
reasonable detail and scope satisfactory to the Lender and certified by a
Senior Officer of the Company.

 

Monthly Reports.  Promptly when available and in any event
within thirty (30) days after the end of each month, consolidated balance
sheets of the Company and its Subsidiaries as of the end of such month,
together with consolidated statements of income or operations for such month,
together with a comparison with the corresponding period of the previous Fiscal
Year and for the statements of income a comparison with the budget for such
period of the current Fiscal Year, certified by a Senior Officer of the Company.

 

Quarterly Reports.  Promptly when available and in any event
within forty-five (45) days after the end of each quarter, consolidated balance
sheets of the Company and its Subsidiaries

 

27

 

as of the end of such quarter, together with consolidated statements of
income or operations for such quarter, and a consolidated statement of cash
flows for the period beginning with the first day of such Fiscal Year and
ending on the last day of such quarter, together with a comparison with the
corresponding period of the previous Fiscal Year and for the statements of
income a comparison with the budget for such period of the current Fiscal Year,
certified by a Senior Officer of the Company.

 

Compliance
Certificates. 
Contemporaneously with the furnishing of a copy of each annual audit
report pursuant to Section 10.1.1 and each set of monthly
statements pursuant to Section 10.1.2, a duly completed compliance
certificate in the form of Exhibit B, with appropriate insertions, dated
the date of such annual report or such monthly statements and signed by a
Senior Officer of the Company, containing (i) a computation of each of the
financial ratio set forth in Section 11.14 and to the effect that
such officer has not become aware of any Event of Default or Unmatured Event of
Default that has occurred and is continuing or, if there is any such event,
describing it and the steps, if any, being taken to cure it and (ii) a written
statement of the Company’s management setting forth a discussion of the
Company’s financial condition, changes in financial condition and results of
operations.

 

Reports to the SEC and to Shareholders.  Promptly upon the filing or sending thereof,
copies of all regular, periodic or special reports of any Loan Party filed with
the SEC; copies of all registration statements of any Loan Party filed with the
SEC (other than on Form S-8); and copies of all proxy statements or other
communications made to security holders generally.

 

Notice of Default, Litigation
and ERISA Matters. 
Promptly upon becoming aware of any of the following, written notice
describing the same and the steps being taken by the Company or the Subsidiary
affected thereby with respect thereto:

 

the occurrence of an
Event of Default or an Unmatured Event of Default;

 

any litigation,
arbitration or governmental investigation or proceeding not previously
disclosed by the Company to the Lender which has been instituted or, to the
knowledge of any Loan Party, is threatened against any Loan Party or to which
any of the properties of any thereof is subject which might reasonably be
expected to have a Material Adverse Effect;

 

the institution of any
steps by any member of the Controlled Group or any other Person to terminate
any Pension Plan, or the failure of any member of the Controlled Group to make
a required contribution to any Pension Plan (if such failure is sufficient to
give rise to a Lien under Section 302(f) of ERISA) or to any Multiemployer
Pension Plan, or the taking of any action with respect to a Pension Plan which
could result in the requirement that the Company furnish a bond or other
security to the PBGC or such Pension Plan, or the occurrence of any event with
respect to any Pension Plan or Multiemployer Pension Plan which could result in
the incurrence by any member of the Controlled Group of any material liability,
fine or penalty (including any claim or demand for withdrawal liability or
partial withdrawal from any Multiemployer Pension Plan), or any material
increase in the contingent liability of the

 

28

 

Company with respect to
any post-retirement welfare benefit plan or other employee benefit plan of the
Company or another member of the Controlled Group, or any notice that any Multiemployer
Pension Plan is in reorganization, that increased contributions may be required
to avoid a reduction in plan benefits or the imposition of an excise tax, that
any such plan is or has been funded at a rate less than that required under
Section 412 of the Code, that any such plan is or may be terminated, or
that any such plan is or may become insolvent;

 

any cancellation or
material change in any insurance maintained by any Loan Party; or

 

any other event
(including (i) any violation of any Environmental Law or the assertion of any
Environmental Claim or (ii) the enactment or effectiveness of any law, rule or
regulation) which might reasonably be expected to have a Material Adverse
Effect.

 

Borrowing Base Certificates.  Within thirty (30)
days of the end of each month, a Borrowing Base Certificate dated as of the end
of such month and executed by a Senior Officer of the Company on behalf of the
Company (provided that (a) the Company may deliver a Borrowing Base
Certificate more frequently if it chooses and (b) at any time an Event of
Default exists, the Lender may require the Company to deliver Borrowing Base
Certificates more frequently).

 

Management Reports.  Promptly upon receipt thereof, copies of all
detailed financial and management reports submitted to the Company by
independent auditors in connection with each annual or interim audit made by
such auditors of the books of the Company.

 

Subordinated Debt Notices.  Promptly following
receipt, copies of any notices (including notices of default or acceleration)
received from any holder or trustee of, under or with respect to any
Subordinated Debt.

 

Other Information.  Promptly from time to time, such other
information concerning the Loan Parties as the Lender may reasonably request.

 

Books, Records and Inspections.  Keep, and cause each other Loan Party to
keep, its books and records in accordance with sound business practices
sufficient to allow the preparation of financial statements in accordance with
GAAP; implement and maintain a cash management system reasonably acceptable to
the Lender; permit, and cause each other Loan Party to permit, the Lender or
any representative thereof to inspect the properties and operations of the Loan
Parties; and permit, and cause each other Loan Party to permit, at any
reasonable time and with reasonable notice (or at any time without notice if an
Event of Default exists), the Lender or any representative thereof to visit any
or all of its offices, to discuss its financial matters with its officers and
its independent auditors (and the Company hereby authorizes such independent
auditors to discuss such financial matters with the Lender or any
representative thereof), and to examine (and, at the expense of the Loan
Parties, photocopy extracts from) any of its books or other records; and
permit, and cause each other Loan Party to permit, the Lender and its
representatives to inspect the Inventory and other tangible assets of the Loan
Parties, to perform appraisals of the equipment of the Loan Parties, and to
inspect, audit, check and make copies of and extracts from the books, records,
computer data, computer programs, journals, orders, receipts, correspondence
and other data relating to Inventory, Accounts and any other collateral.

 

29

 

All such inspections or audits by the Lender shall be at the Company’s
expense, provided that so long as no
Event of Default or Unmatured Event of Default exists, the Company shall not be
required to reimburse the Lender for inspections or audits more frequently than
once each Fiscal Year.

 

Maintenance
of Property; Insurance.

 

(a)                                  Keep,
and cause each other Loan Party to keep, all property useful and necessary in
the business of the Loan Parties in good working order and condition, ordinary
wear and tear excepted.

 

(b)                                 Maintain,
and cause each other Loan Party to maintain, with responsible insurance
companies, such insurance coverage as may be required by any law or
governmental regulation or court decree or order applicable to it and such other
insurance, to such extent and against such hazards and liabilities, as is
customarily maintained by companies similarly situated; and, upon request of
the Lender, furnish to the Lender a certificate setting forth in reasonable
detail the nature and extent of all insurance maintained by the Loan
Parties.  The Company shall cause each
issuer of an insurance policy to provide the Lender with an endorsement (i)
showing the Lender as loss payee with respect to each policy of property or
casualty insurance and naming the Lender as an additional insured with respect
to each policy of liability insurance, (ii) providing that 30 days’ notice will
be given to the Lender prior to any cancellation of, material reduction or
change in coverage provided by or other material modification to such policy
and (iii) reasonably acceptable in all other respects to the Lender.

 

Compliance
with Laws; Payment of Taxes and
Liabilities.  (1)  Comply, and cause each other Loan Party to
comply, in all material respects with all applicable laws, rules, regulations,
decrees, orders, judgments, licenses and permits, except where failure to
comply could not reasonably be expected to have a Material Adverse Effect; (b)
without limiting clause (a) above, ensure, and cause each other Loan Party
to ensure, that no person who owns a controlling interest in or otherwise
controls a Loan Party is or shall be (i) listed on the Specially Designated
Nationals and Blocked Person List maintained by the OFAC, Department of the
Treasury, and/or any other similar lists maintained by OFAC pursuant to any
authorizing statute, Executive Order or regulation or (ii) a person designated
under Section 1(b), (c) or (d) of Executive Order No. 13224
(September 23, 2001), any related enabling legislation or any other
similar Executive Orders, (c) without limiting clause (a) above, comply,
and cause each other Loan Party to comply, with all applicable Bank Secrecy Act
(“BSA”) and anti-money laundering laws and regulations and (d) pay, and
cause each other Loan Party to pay, prior to delinquency, all taxes and other
governmental charges against it or any collateral, as well as claims of any
kind which, if unpaid, could become a Lien on any of its property; provided
that the foregoing shall not require any Loan Party to pay any such tax or
charge so long as it shall contest the validity thereof in good faith by
appropriate proceedings and shall set aside on its books adequate reserves with
respect thereto in accordance with GAAP and, in the case of a claim which could
become a Lien on any collateral, such contest proceedings shall stay the
foreclosure of such Lien or the sale of any portion of the collateral to
satisfy such claim.

 

Maintenance
of Existence, etc.  Maintain and preserve, and (subject to Section 11.5)
cause each other Loan Party to maintain and preserve, (a) its existence and
good standing in the jurisdiction of its organization and (b) its qualification
to do business and good standing in each jurisdiction where the nature of its
business makes such qualification necessary (other than such jurisdictions

 

30

 

in which the failure to be qualified or in good standing could not
reasonably be expected to have a Material Adverse Effect).

 

Use of
Proceeds. 
Use the proceeds of the Loans and the Letters of Credit solely for
working capital purposes, for Acquisitions permitted by Section 11.5,
for Capital Expenditures and for other general business purposes; and not use
or permit (i) the Outstandings with respect to the leasing operations of the
Loan Parties to exceed $10,000,000, or (ii) any proceeds of any Loan to be
used, either directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of “purchasing or carrying” any Margin Stock.

 

Employee
Benefit Plans.

 

(a)                                  Maintain,
and cause each other member of the Controlled Group to maintain, each Pension
Plan in substantial compliance with all applicable requirements of law and
regulations.

 

(b)                                 Make,
and cause each other member of the Controlled Group to make, on a timely basis,
all required contributions to any Multiemployer Pension Plan.

 

(c)                                  Not,
and not permit any other member of the Controlled Group to (i) seek a waiver of
the minimum funding standards of ERISA, (ii) terminate or withdraw from any Pension
Plan or Multiemployer Pension Plan or (iii) take any other action with respect
to any Pension Plan that would reasonably be expected to entitle the PBGC to
terminate, impose liability in respect of, or cause a trustee to be appointed
to administer, any Pension Plan, unless the actions or events described in
clauses (i), (ii) and (iii) individually or in the aggregate would not have a
Material Adverse Effect.

 

Environmental
Matters.  If any release or threatened release or other
disposal of Hazardous Substances shall occur or shall have occurred on any real
property or any other assets of any Loan Party, the Company or the applicable
Loan Party shall cause the prompt containment and removal of such Hazardous
Substances and the remediation of such real property or other assets as
necessary to comply with all Environmental Laws and to preserve the value of
such real property or other assets. 
Without limiting the generality of the foregoing, each Loan Party shall
comply with any Federal or state judicial or administrative order requiring the
performance at any real property of any Loan Party of activities in response to
the release or threatened release of a Hazardous Substance.  To the extent that the transportation of
Hazardous Substances is permitted by this Agreement, the Company shall, and
shall cause its Subsidiaries to, dispose of such Hazardous Substances, or of
any other wastes, only at licensed disposal facilities operating in compliance
with Environmental Laws.

 

Tax
Shelter Registration.  Notify the Lender of any action (or the
intention to take an action) inconsistent with the representation in Section 9.13(b).  If the Company so notifies the Lender, the
Company acknowledges and agrees that the Lender may treat the transactions
contemplated hereby (or any single transaction contemplated hereby) as part of
a transaction that is subject to Treasury Regulation Section 301.6112-1,
and the Lender, as applicable, may maintain the lists and other regulations
required by such Treasury Regulation.  To
the extent the Lender determines to maintain such list, each Loan Party shall
cooperate with the Lender in obtaining the information required under such
Treasury Regulation.  Within 10 days
after notifying the Lender under this Section 10.9, the Company
shall deliver to the Lender a duly completed copy of IRS Form 8886 or any
successor form.

 

31

 

Further
Assurances. 
Take such actions as are necessary or as the Lender may reasonably
request from time to time to ensure that the Obligations of each Loan Party
under the Loan Documents are secured by substantially all of the assets of the
Loan Parties (including, upon the acquisition or creation thereof, any
Subsidiary acquired or created after the Closing Date), in each case as the
Lender may determine, including the execution and delivery of guaranties,
security agreements, pledge agreements, mortgages, deeds of trust, financing
statements and other documents, and the filing or recording of any of the
foregoing and the delivery of certificated securities and other collateral with
respect to which perfection is obtained by possession.

 

Cash
Management Systems.  The Loan Parties shall provide to the Lender
all documents and other information relating to the Loan Parties’ cash
management system (including all deposit, checking, or brokerage accounts
opened or maintained by a Loan Party) as requested from time to time by the
Lender, and such cash management systems shall be reasonably acceptable to the
Lender.

 

NEGATIVE
COVENANTS

Until the expiration or termination of the Commitment and thereafter
until all Obligations hereunder and under the other Loan Documents are paid in
full and all Letters of Credit have been terminated, each Loan Party agrees
that, unless at any time the Lender shall otherwise expressly consent in
writing, it will:

 

32

 

Debt.  Not, and not permit any other Loan Party to,
incur, assume or suffer to exist any Debt, except:

 

Obligations under this
Agreement and the other Loan Documents;

 

Debt secured by Liens
permitted by Section 11.2(d), and extensions, renewals and refinancings
thereof; provided that the aggregate amount of all such Debt at any time
outstanding shall not exceed $500,000;

 

Debt of the Company to
any domestic Wholly-Owned Subsidiary or Debt of any domestic Wholly-Owned
Subsidiary to the Company or another domestic Wholly-Owned Subsidiary; provided
that such Debt shall be subordinated to the Obligations of the Loan Parties
hereunder in a manner reasonably satisfactory to the Lender;

 

Subordinated Debt;

 

Hedging Obligations
incurred in favor of the Lender or an Affiliate thereof for bona fide hedging
purposes and not for speculation;

 

Contingent Liabilities
arising with respect to customary indemnification obligations in favor of
sellers in connection with Acquisitions permitted under Section 11.5 and
purchasers in connection with dispositions permitted under Section 11.5;

 

other unsecured Debt, in
addition to the Debt listed above, in an aggregate outstanding amount not at
any time exceeding $250,000;

 

Accounts payable and
trade debt arising in the ordinary course of the Loan Parties’ business; and

 

Any non-recourse
obligation of a Loan Party arising from a discounting transaction in the
ordinary course of business.

 

Liens.  Not, and not permit any other Loan Party to,
create or permit to exist any Lien on any of its real or personal properties,
assets or rights of whatsoever nature (whether now owned or hereafter
acquired), except:

 

Liens for taxes or other
governmental charges not at the time delinquent or thereafter payable without
penalty or being contested in good faith by appropriate proceedings and, in
each case, for which it maintains adequate reserves;

 

Liens arising in the
ordinary course of business (such as (i) Liens of carriers, warehousemen,
mechanics and materialmen and other similar Liens imposed by law, (ii) Liens in
the form of deposits or pledges incurred in connection with worker’s
compensation, unemployment compensation and other types of social security
(excluding Liens arising under ERISA), and (iii) Liens created in the ordinary
course of business arising from non-recourse discounting transactions including
(without limitation) liens against (A) the particular lease, (B) all equipment
subject to such lease, (C) all lease collateral for such lease, (D) all
warranty and other rights a Loan Party may have with respect to such lease and
the related equipment against the manufacturers of such equipment and against
the sellers and assignors from whom such Loan Party may have acquired such
lease and such equipment, (E) proceeds from any and all of the foregoing.  Upon the written request of the Borrower, the
Lender agrees to execute a subordination agreement in form and substance satisfactory
to the Lender in connection with liens pursuant to Section 11.2(b)(iii); 

 

Liens arising in the
ordinary course of business in an amount of not more than $25,000;

 

33

 

subject to the
limitation set forth in Section 11.1(b), (i) Liens arising in connection
with Capital Leases (and attaching only to the property being leased),
(ii) Liens existing on property at the time of the acquisition thereof by
any Loan Party (and not created in contemplation of such acquisition) and (iii)
Liens that constitute purchase money security interests on any property
securing debt incurred for the purpose of financing all or any part of the cost
of acquiring such property, provided that any such Lien attaches to such property
within 60 days of the acquisition thereof and attaches solely to the property
so acquired;

 

attachments, appeal
bonds, judgments and other similar Liens, for sums not exceeding $250,000
arising in connection with court proceedings, provided the execution or other
enforcement of such Liens is effectively stayed and the claims secured thereby
are being actively contested in good faith and by appropriate proceedings;

 

easements, rights of
way, restrictions, minor defects or irregularities in title and other similar
Liens not interfering in any material respect with the ordinary conduct of the
business of any Loan Party; and 

 

Liens arising under the
Loan Documents.

 

Operating
Leases. 
Not permit the aggregate amount of all rental payments under Operating
Leases made (or scheduled to be made) by the Loan Parties (on a consolidated
basis) to exceed $1,000,000  in any Fiscal
Year.

 

Restricted
Payments. 
Not, and not permit any other Loan Party to, (a) make any distribution
to any holders of its Capital Securities, (b) purchase or redeem any of its
Capital Securities, (c) pay any management fees or similar fees to any of its
equityholders or any Affiliate thereof, (d) make any redemption, prepayment,
defeasance, repurchase or any other payment in respect of any Subordinated Debt
or (e) set aside funds for any of the foregoing.  Notwithstanding the foregoing, (i) any
Subsidiary may pay dividends or make other distributions to the Company or to a
domestic Wholly-Owned Subsidiary; (ii) the Company may purchase or redeem any
of its Capital Securities so long as after giving effect to such purchase or
redemption the Company will remain in compliance with Section 11.14, as
certified by the Company in form and substance satisfactory to the Lender;
(iii) the Company may make regularly scheduled payments of interest in respect
of Subordinated Debt to the extent permitted under the subordination provisions
thereof, and (iv) the Company may grant stock options pursuant to a plan
approved by the Shareholders of the Company.

 

Mergers, Consolidations, Sales.  Not, and not permit any other Loan Party to,
(a) be a party to any merger or consolidation, or purchase or otherwise acquire
all or substantially all of the assets or any Capital Securities of any class
of, or any partnership or joint venture interest in, any other Person, (b)
sell, transfer, convey or lease all or any substantial part of its assets or
Capital Securities (including the sale of Capital Securities of any Subsidiary)
except for sales of inventory in the ordinary course of business, or (c) sell
or assign with or without recourse any receivables, except for (i) any such
merger, consolidation, sale, transfer, conveyance, lease or assignment of or by
any Wholly-Owned Subsidiary into the Company or into any other domestic
Wholly-Owned Subsidiary; (ii) any such purchase or other acquisition by the
Company or any domestic Wholly-Owned Subsidiary of the assets or Capital
Securities of any Wholly-Owned Subsidiary; (iii) sales and dispositions of
assets for at least fair market value (as determined by

 

34

 

the Board of Directors of the Company) so long as the net book value of
all assets sold or otherwise disposed of in any Fiscal Year does not exceed 10%
of the net book value of the consolidated assets of the Loan Parties as of the
last day of the preceding Fiscal Year; (iv) the discounting of non-recourse
leases in the ordinary course of business, and (v) any Acquisition by the
Company or any domestic Wholly-Owned Subsidiary where:

 

(A) the business or
division acquired are for use, or the Person acquired or invested in is
engaged, in a business engaged in by a Loan Party on the Closing Date;

 

(B) immediately before
and after giving effect to such Acquisition, no Event of Default or Unmatured
Event of Default shall exist;

 

(C) the aggregate
consideration to be paid by the Loan Parties (including any Debt assumed or
issued in connection therewith, the amount thereof to be calculated in
accordance with GAAP) in connection with such Acquisition (or any series of
related Acquisitions) is less than $10,000,000 individually and the
aggregate consideration for all Acquisitions by the Loan Parties since the
Closing Date does not exceed $10,000,000;

 

(D) immediately
after giving effect to such Acquisition, the Company is in pro forma compliance
with all the financial ratios and restrictions set forth in Section 11.14
and Loan Availability minus Outstandings is greater than or equal to
$3,000,000;

 

(E) in the case of the
Acquisition of any Person, the Board of Directors of such Person has approved
such Acquisition;

 

(F) reasonably prior to
such Acquisition, the Lender shall have received complete executed or conformed
copies of each material document, instrument and agreement to be executed in connection
with such Acquisition together with all lien search reports and lien release
letters and other documents as the Lender may require to evidence the
termination of Liens on the assets or business to be acquired if applicable;

 

(G) not less than ten
(10) Business Days prior to such Acquisition, the Lender shall have received an
acquisition summary with respect to the Person and/or business or division to
be acquired or invested in, such summary to include a reasonably detailed
description thereof (including financial information) and operating results
(including financial statements for the most recent 12 month period for which
they are available and as otherwise available), the terms and conditions,
including economic terms, of the proposed Acquisition, and the Company’s
calculation of pro forma EBITDA relating thereto;

 

(H) consents have been
obtained in favor of the Lender to the collateral assignment of rights and
indemnities under the related acquisition documents and opinions of counsel for
the Loan Parties and (if delivered to the Loan Party) the selling party in
favor of the Lender have been delivered; and

 

35

 

(I) the provisions of Section 10.10
have been satisfied.

 

36

 

Modification
of Organizational Documents.  Not permit the charter, by-laws or other
organizational documents of any Loan Party to be amended or modified in any way
which could reasonably be expected to materially adversely affect the interests
of the Lender.

 

Affiliate
Transactions. 
Not, and not permit any other Loan Party to, enter into, or cause,
suffer or permit to exist any transaction, arrangement or contract with any of
its other Affiliates (other than the Loan Parties) which is on terms which are
less favorable than are obtainable from any Person which is not one of its
Affiliate, except for those listed on Schedule 11.7.

 

Unconditional Purchase Obligations.  Not, and not permit any other Loan Party to,
enter into or be a party to any contract for the purchase of materials,
supplies or other property or services if such contract requires that payment
be made by it regardless of whether delivery is ever made of such materials,
supplies or other property or services.

 

Inconsistent
Agreements. 
Not, and not permit any other Loan Party to, enter into any agreement
containing any provision which would (a) be violated or breached by any
borrowing by a Loan Party hereunder or by the performance by any Loan Party of
any of its Obligations hereunder or under any other Loan Document, (b) prohibit
any Loan Party from granting to the Lender, a Lien on any of its assets or (c)
create or permit to exist or become effective any encumbrance or restriction on
the ability of any Subsidiary to (i) pay dividends or make other distributions
to the Company or any other Subsidiary, or pay any Debt owed to the Company or
any other Subsidiary, (ii) make loans or advances to any Loan Party or (iii)
transfer any of its assets or properties to any Loan Party, other than (A)
customary restrictions and conditions contained in agreements relating to the
sale of all or a substantial part of the assets of any Subsidiary pending such
sale, provided that such restrictions and conditions apply only to the
Subsidiary to be sold and such sale is permitted hereunder,
(B) restrictions or conditions imposed by any agreement relating to
purchase money Debt, Capital Leases and other secured Debt permitted by this
Agreement if such restrictions or conditions apply only to the property or
assets securing such Debt and (C) customary provisions in leases and other
contracts restricting the assignment thereof.

 

Business
Activities. 
Not, and not permit any other Loan Party to, engage in any line of
business other than the businesses engaged in and businesses reasonably related
thereto.

 

Restriction
of Amendments to
Certain Documents.  Not
amend or otherwise modify, or waive any rights under,

 

Fiscal
Year. 
Not change its Fiscal Year.

 

Tangible
Net Worth. 
Not permit the Tangible Net Worth of the Company and the Subsidiaries at
any time to be less than Five Million Dollars ($5,000,000).

 

37

 

Control
Agreements. 
Not fail to deliver to the Lender within thirty (30) days after the
Lender’s request, a Control Agreement for any deposit, checking or brokerage
account opened or maintained by a Loan Party.

 

EFFECTIVENESS;
CONDITIONS OF LENDING, ETC.

 

The obligation of
the Lender to make the Loans and to issue Letters of Credit is subject to the following
conditions precedent:

 

Initial
Credit Extension.  The obligation of the Lender to make the
initial Loans and the obligation of the Lender to issue the initial Letter of
Credit (whichever first occurs) is, in addition to the conditions precedent specified
in Section 12.2, subject to the condition precedent that the Lender
shall have received all of the following, each duly executed and dated the
Closing Date (or such earlier date as shall be satisfactory to the Lender), in
form and substance satisfactory to the Lender (and the date on which all such
conditions precedent have been satisfied or waived in writing by the Lender is
called the “Closing Date”):

 

Note.  A Note duly executed by the Loan Parties.

 

Authorization Documents.  For each Loan Party, such Person’s (a)
charter (or similar formation document), certified by the appropriate
governmental authority; (b) good standing certificates in its state of
incorporation (or formation) and in each other state requested by the Lender;
(c) bylaws (or similar governing document); (d) resolutions of its board of
directors (or similar governing body) approving and authorizing such Person’s
execution, delivery and performance of the Loan Documents to which it is party
and the transactions contemplated thereby; and (e) signature and incumbency
certificates of its officers executing any of the Loan Documents (it being
understood that the Lender may conclusively rely on each such certificate until
formally advised by a like certificate of any changes therein), all certified
by its secretary or an assistant secretary (or similar officer) as being in
full force and effect without modification.

 

Consents, etc.  Certified copies of all
documents evidencing any necessary corporate or partnership action,
consents and governmental approvals (if any) required for the execution,
delivery and performance by the Loan Parties of the documents referred to in
this Section 12.

 

Security Documents.  A counterpart of the Security Agreement
executed by each Loan Party, a counterpart of the Pledge Agreement executed by
the Company, and a counterpart of a Control Agreement for each account
identified by the Lender, executed by the applicable Loan Party and the
depository or financial intermediary, in each case together with all instruments,
transfer powers and other items required to be delivered in connection
therewith.

 

Financing Statements.  UCC-1 financing statements relating to the
Collateral (as defined in the Security Agreement) and the Capital Securities
pledged pursuant to the Pledge

 

38

 

Agreement, completed and, if required, executed by each Loan Party, for
filing in each jurisdiction reasonably requested by the Lender.

 

Opinions of Counsel.  Opinions of counsel for each Loan Party,
including local counsel reasonably requested by the Lender.

 

Insurance.  Evidence of the existence of insurance
required to be maintained pursuant to Section 10.3(b), together
with evidence that the Lender has been named as a lender’s loss payee and an
additional insured on all related insurance policies.

 

Payment of Fees.  Evidence of payment by the Company of all
accrued and unpaid fees, costs and expenses to the extent then due and payable
on the Closing Date, together with all Attorney Costs of the Lender to the
extent invoiced prior to the Closing Date, plus such additional amounts
of Attorney Costs as shall constitute the Lender’s reasonable estimate of
Attorney Costs incurred or to be incurred by the Lender through the closing
proceedings (provided that such estimate shall not thereafter preclude
final settling of accounts between the Company and the Lender).

 

Search Results; Lien
Terminations.  Certified
copies of Uniform Commercial Code search reports and pending suit judgments and
tax lien search reports dated a date reasonably near to the Closing Date,
listing all effective financing statements, suits, judgments or tax liens which
name any Loan Party (under their present names and any previous names) as
debtors, together with copies of any such financing statements, suits,
judgments and tax liens.

 

Filings, Registrations and Recordings.  The Lender shall have received each document
(including Uniform Commercial Code financing statements) required by the
Collateral Documents or under law or reasonably requested by the Lender to be
filed, registered or recorded in order to create in favor of the Lender, a
perfected Lien on the collateral described therein, prior to any other Liens
(subject only to Liens permitted pursuant to Section 11.2), in
proper form for filing, registration or recording.

 

Borrowing Base Certificate.  A Borrowing Base Certificate dated as of the
Closing Date.

 

Closing Certificate.  A certificate executed by an officer of the
Company on behalf of the Company certifying the matters set forth in Section 12.2.1
as of the Closing Date.

 

Other.  Such other documents as the Lender may
reasonably request.

 

Conditions.  The obligation (a) of the Lender to
make each Loan and (b) of the Lender to issue each Letter of Credit is
subject to the following further conditions precedent that:

 

39

 

Compliance with Warranties,
No Default, etc.  Both
before and after giving effect to any borrowing and the issuance of any Letter
of Credit, the following statements shall be true and correct:

 

the representations and
warranties of each Loan Party set forth in this Agreement and the other Loan
Documents shall be true and correct in all respects with the same effect as if
then made (except to the extent stated to relate to a specific earlier date, in
which case such representations and warranties shall be true and correct as of
such earlier date); and no Event of Default or Unmatured Event of Default shall
have then occurred and be continuing.

 

Confirmatory Certificate.  If requested by the Lender, the Lender shall
have received a certificate dated the date of such requested Loan or
Letter of Credit and signed by a duly authorized representative of the Company
as to the matters set out in Section 12.2.1 (it being understood
that each request by the Company for the making of a Loan or the issuance of a
Letter of Credit shall be deemed to constitute a representation and warranty by
the Company that the conditions precedent set forth in Section 12.2.1
will be satisfied at the time of the making of such Loan or the issuance of
such Letter of Credit), together with such other documents as the Lender may
reasonably request in support thereof.

 

EVENTS OF DEFAULT
AND THEIR EFFECT.

 

Events of Default.  Each of the following shall constitute
an Event of Default under this Agreement:

 

Non-Payment of the Loans, etc.  Default in the payment when due of the
principal of any Loan; or default, and continuance thereof for five days, in
the payment when due of any interest, fee, reimbursement obligation with
respect to any Letter of Credit or other amount payable by the Loan Parties
hereunder or under any other Loan Document.

 

Non-Payment of Other Debt.  Any default shall occur under the terms
applicable to any Debt of any Loan Party in an aggregate amount (for all such
Debt so affected and including undrawn committed or available amounts and
amounts owing to all creditors under any combined or syndicated credit
arrangement) exceeding $250,000 and such default shall (a) consist of the
failure to pay such Debt when due, whether by acceleration or otherwise, or (b)
accelerate the maturity of such Debt or permit the holder or holders thereof,
or any trustee or agent for such holder or holders, to cause such Debt to
become due and payable (or require any Loan Party to purchase or redeem such
Debt or post cash collateral in respect thereof) prior to its expressed
maturity.

 

Other Material Obligations.  Default in the payment when due, or in the
performance or observance of, any material obligation of, or condition agreed
to by, any Loan Party with respect to any material purchase or lease of goods
or services where such default, singly or in the aggregate with all other such
defaults, might reasonably be expected to have a Material Adverse Effect.

 

40

 

Bankruptcy,
Insolvency, etc.  Any Loan
Party becomes insolvent or generally fails to pay, or admits in writing its
inability or refusal to pay, debts as they become due; or any Loan Party
applies for, consents to, or acquiesces in the appointment of a trustee,
receiver or other custodian for such Loan Party or any property thereof, or
makes a general assignment for the benefit of creditors; or, in the absence of
such application, consent or acquiescence, a trustee, receiver or other
custodian is appointed for any Loan Party or for a substantial part of the
property of any thereof and is not discharged within 60 days; or any
bankruptcy, reorganization, debt arrangement, or other case or proceeding under
any bankruptcy or insolvency law, or any dissolution or liquidation proceeding,
is commenced in respect of any Loan Party, and if such case or proceeding is
not commenced by such Loan Party, it is consented to or acquiesced in by such
Loan Party, or remains for 60 days undismissed; or any Loan Party takes any
action to authorize, or in furtherance of, any of the foregoing.

 

Non-Compliance with Loan
Documents.  (a) Failure by
any Loan Party to comply with or to perform any covenant set forth in Section 10.1.5,
10.3(b), 10.5, or 10.9 or Section 11; or
(b) failure by any Loan Party to comply with or to perform any other
provision of this Agreement or any other Loan Document (and not constituting an
Event of Default under any other provision of this Section 13) and
continuance of such failure described in this clause (b) for 30 days.

 

Representations;
Warranties.  Any
representation or warranty made by any Loan Party herein or any other Loan
Document is breached or is false or misleading in any material respect, or any
schedule, certificate, financial statement, report, notice or other writing
furnished by any Loan Party to the Lender in connection herewith is false or
misleading in any material respect on the date as of which the facts therein
set forth are stated or certified.

 

Pension Plans.  (a) Any Person institutes steps to
terminate a Pension Plan if as a result of such termination the Company or any
member of the Controlled Group could be required to make a contribution to such
Pension Plan, or could incur a liability or obligation to such Pension Plan, in
excess of $250,000; (b) a contribution failure occurs with respect to any
Pension Plan sufficient to give rise to a Lien under Section 302(f) of
ERISA; (c) the Unfunded Liability exceeds twenty percent of the Total Plan
Liability, or (d) there shall occur any withdrawal or partial withdrawal
from a Multiemployer Pension Plan and the withdrawal liability (without
unaccrued interest) to Multiemployer Pension Plans as a result of such
withdrawal (including any outstanding withdrawal liability that the Company or
any member of the Controlled Group have incurred on the date of such
withdrawal) exceeds $250,000.

 

Judgments.  Final judgments which exceed an aggregate of
$250,000 shall be rendered against any Loan Party and shall not have been paid,
discharged or vacated or had execution thereof stayed pending appeal within 30
days after entry or filing of such judgments.

 

41

 

Invalidity of Collateral Documents, etc.  Any Collateral Document shall cease to be in
full force and effect; or any Loan Party (or any Person by, through or on
behalf of any Loan Party) shall contest in any manner the validity, binding
nature or enforceability of any Collateral Document.

 

Invalidity of Subordination Provisions, etc.  Any subordination provision in any document
or instrument governing Subordinated Debt, or any subordination provision in
any guaranty by any Subsidiary of any Subordinated Debt, shall cease to be in
full force and effect, or any Loan Party or any other Person (including the
holder of any applicable Subordinated Debt) shall contest in any manner the
validity, binding nature or enforceability of any such provision.

 

Change of
Control. 
A Change of Control shall occur.

 

Material
Adverse Effect. The occurrence of any event
having a Material Adverse Effect.

 

Effect of
Event of Default.  If any Event of Default described in Section 13.1.4
shall occur in respect of the Company, the Commitment shall immediately
terminate and the Loans and all other Obligations hereunder shall become
immediately due and payable and the Loan Parties shall become immediately
obligated to Cash Collateralize all Letters of Credit, all without presentment,
demand, protest or notice of any kind; and, if any other Event of Default shall
occur and be continuing, the Lender may declare the Commitment to be terminated
in whole or in part and/or declare all or any part of the Loans and all other
Obligations hereunder to be due and payable and/or demand that the Loan Parties
immediately Cash Collateralize all or any Letters of Credit, whereupon the
Commitment shall immediately terminate (or be reduced, as applicable) and/or
the Loans and other Obligations hereunder shall become immediately due and
payable (in whole or in part, as applicable) and/or the Loan Parties shall
immediately become obligated to Cash Collateralize the Letters of Credit (all
or any, as applicable), all without presentment, demand, protest or notice of
any kind.  The Lender shall promptly
advise the Company of any such declaration, but failure to do so shall not
impair the effect of such declaration. 
Any cash collateral delivered hereunder shall be held by the Lender
(without liability for interest thereon) and applied to the Obligations arising
in connection with any drawing under a Letter of Credit.  After the expiration or termination of all
Letters of Credit, such cash collateral shall be applied by the Lender to any
remaining Obligations hereunder and any excess shall be delivered to the
Company for the benefit of the Loan Parties or as a court of competent
jurisdiction may elect.

 

THE LOAN
PARTIES.

 

Appointment
of the Company.  Each Loan Party hereby appoints and
authorizes the Company to take such action as its agent on its behalf and to
exercise such powers under the Loan Documents as are delegated to the Company
by the terms thereof, together with such power that are reasonably incidental
thereto, and the Company hereby accepts such appointment.

 

42

 

Relationship
Among the Loan Parties.

 

JOINT
AND SEVERAL LIABILITY.  EACH LOAN PARTY
AGREES THAT IT IS LIABLE, JOINTLY AND SEVERALLY WITH EACH OTHER LOAN PARTY, FOR
THE PAYMENT OF ALL OBLIGATIONS OF THE LOAN PARTIES UNDER THIS AGREEMENT AND
EACH OTHER LOAN DOCUMENT, AND THAT THE LENDER CAN ENFORCE SUCH OBLIGATIONS
AGAINST ANY OR ALL LOAN PARTIES, IN THE LENDER’S SOLE AND UNLIMITED DISCRETION.

 

Waivers
of Defenses.  The obligations of the Loan
Parties hereunder shall not be released, in whole or in part, by any action or
thing which might, but for this provision of this Agreement, be deemed a legal
or equitable discharge of a surety or guarantor, other than irrevocable payment
and performance in full of the Obligations (except for contingent indemnity and
other contingent Obligations not yet due and payable) at a time after any
obligation of the Lender hereunder to make the Loans and to issue Letters of
Credit shall have expired or been terminated and all outstanding Letters of
Credit shall have expired or the liability of the Lender thereon shall have
otherwise been discharged.  The purpose
and intent of this Agreement is that the Obligations constitute the direct and
primary obligations of each Loan Party and that the covenants, agreements and
all obligations of each Loan Party hereunder be absolute, unconditional and
irrevocable.  Each Loan Party shall be
and remain liable for any deficiency remaining after foreclosure of any
mortgage, deed of trust or security agreement securing all or any part of the
Obligations, whether or not the liability of any other Person for such
deficiency is discharged pursuant to statute, judicial decision or otherwise.

 

Other
Transactions.  The Lender is expressly
authorized to exchange, surrender or release with or without consideration any
or all collateral and security which may at any time be placed with it by the
Loan Parties or by any other Person on behalf of the Loan Parties, or to
forward or deliver any or all such collateral and security directly to the Loan
Parties for collection and remittance or for credit.  No invalidity, irregularity or
unenforceability of any security for the Obligations or other recourse with
respect thereto shall affect, impair or be a defense to the Loan Parties’
obligations under this Agreement or any other Loan Document. The liabilities of
each Loan Party hereunder shall not be affected or impaired by any failure,
delay, neglect or omission on the part of the Lender to realize upon any of the
Obligations of any other Loan Party to the Lender, or upon any collateral or
security for any or all of the Obligations, nor by the taking by the Lender of
(or the failure to take) any guaranty or guaranties to secure the Obligations,
nor by the taking by the Lender of (or the failure to take or the failure to
perfect its security interest in or other lien on) collateral or security of
any kind.  No act or omission of the
Lender, whether or not such action or failure to act varies or increases the
risk of, or affects the rights or remedies of a Loan Party, shall affect or
impair the obligations of the Loan Parties hereunder.

 

Actions
Not Required.  Each Loan Party, to the
extent permitted by applicable law, hereby waives any and all right to cause a
marshaling of the assets of any other Loan Party or any other action by any
court or other governmental body with respect thereto or to cause the Lender to
proceed against any security for the Obligations or any other recourse which
the Lender may have with respect thereto and further waives any

 

43

 

and
all requirements that the Lender institute any action or proceeding at law or
in equity, or obtain any judgment, against any other Loan Party or any other
Person, or with respect to any collateral security for the Obligations, as a
condition precedent to making demand on or bringing an action or obtaining
and/or enforcing a judgment against, such Loan Party under this Agreement or
any other Loan Document.

 

No
Subrogation.  Notwithstanding any payment
or payments made by any Loan Party hereunder or any setoff or application of
funds of any Loan Party by the Lender, such Loan Party shall not be entitled to
be subrogated to any of the rights of the Lender against any other Loan Party
or any other guarantor or any collateral security or guaranty or right of
offset held by the Lender for the payment of the Obligations, nor shall such
Loan Party seek or be entitled to seek any contribution or reimbursement from
any other Loan Party or any other guarantor in respect of payments made by such
Loan Party hereunder, until all amounts owing to the Lender by the Loan Parties
on account of the Obligations are irrevocably paid in full.  If any amount shall be paid to a Loan Party
on account of such subrogation rights at any time when all of the Obligations
shall not have been irrevocably paid in full, such amount shall be held by that
Loan Party in trust for the Lender, segregated from other funds of that Loan
Party, and shall, forthwith upon receipt by the Loan Party, be turned over to
the Lender in the exact form received by the Loan Party (duly indorsed by the
Loan Party to the Lender, if required), to be applied against the Obligations,
whether matured or unmatured, in such order as the Lender may determine.

 

Application
of Payments.  Any and all payments upon
the Obligations made by the Loan Parties or by any other Person, and/or the
proceeds of any or all collateral or security for any of the Obligations, may
be applied by the Lender on such items of the Obligations as the Lender may
elect.

 

Recovery
of Payment.  If any payment received by
the Lender and applied to the Obligations is subsequently set aside, recovered,
rescinded or required to be returned for any reason (including, without
limitation, the bankruptcy, insolvency or reorganization of a Loan Party or any
other obligor), the Obligations to which such payment was applied shall, to the
extent permitted by applicable law, be deemed to have continued in existence,
notwithstanding such application, and each Loan Party shall be jointly and
severally liable for such Obligations as fully as if such application had never
been made.  References in this Agreement
to amounts “irrevocably paid” or to “irrevocable payment” refer to payments
that cannot be set aside, recovered, rescinded or required to be returned for
any reason.

 

Loan
Parties’ Financial Condition.  Each Loan
Party is familiar with the financial condition of the other Loan Parties, and
each Loan Party has executed and delivered this Agreement based on that Loan
Party’s own judgment and not in reliance upon any statement or representation
of the Lender.  The Lender shall have no
obligation to provide any Loan Party with any advice whatsoever or to inform
any Loan Party at any time of the Lender’s actions, evaluations or conclusions
on the financial condition or any other matter concerning the Loan Parties.

 

Bankruptcy
of the Loan Parties.  Each Loan Party
expressly agrees that, to the extent permitted by applicable law, the
liabilities and obligations of that Loan Party

 

44

 

under
this Agreement shall not in any way be impaired or otherwise affected by the
institution by or against any other Loan Party or any other Person of any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or any other similar proceedings for relief under any bankruptcy law or similar
law for the relief of debtors and that any discharge of any of the Obligations
pursuant to any such bankruptcy or similar law or other law shall not diminish,
discharge or otherwise affect in any way the obligations of that Loan Party
under this Agreement or any other Loan Document, and that upon the institution
of any of the above actions, such obligations shall be enforceable against that
Loan Party.

 

Limitation;
Insolvency Laws.  As used in this
Section 14.2(j): (a) the term “Applicable Insolvency Laws” means the laws
of the United States of America or of any State, province, nation or other
governmental unit relating to bankruptcy, reorganization, arrangement,
adjustment of debts, relief of debtors, dissolution, insolvency, fraudulent
transfers or conveyances or other similar laws (including, without limitation,
11 U. S. C. §547, §548, §550 and other “avoidance” provisions of Title 11 of
the United Stated Code) as applicable in any proceeding in which the validity
and/or enforceability of this Agreement against any Loan Party, or any
Specified Lien is in issue; and (b) “Specified Lien” means any security
interest, mortgage, lien or encumbrance granted by any Loan Party securing the
Obligations, in whole or in part. 
Notwithstanding any other provision of this Agreement, if, in any
proceeding, a court of competent jurisdiction determines that with respect to
any Loan party, this Agreement or any other Loan Document or any Specified Lien
would, but for the operation of this Section, be subject to avoidance and/or
recovery or be unenforceable by reason of Applicable Insolvency Laws, this
Agreement and each such Specified Lien shall be valid and enforceable against
such Loan Party, only to the maximum extent that would not cause this
Agreement, such other Loan Document or such Specified Lien to be subject to
avoidance, recovery or unenforceability. 
To the extent that any payment to, or realization by, the Lender on the
Obligations exceeds the limitations of this Section and is otherwise
subject to avoidance and recovery in any such proceeding, the amount subject to
avoidance shall in all events be limited to the amount by which such actual
payment or realization exceeds such limitation, and this Agreement and such
other Loan Document as limited shall in all events remain in full force and
effect and be fully enforceable against such Loan Party.  This Section is intended solely to
reserve the rights of the Lender hereunder against each Loan Party, in such
proceeding to the maximum extent permitted by Applicable Insolvency Laws and
neither the Loan Parties, any guarantor of the Obligations nor any other Person
shall have any right, claim or defense under this Section that would not
otherwise be available under Applicable Insolvency Laws in such proceeding.

 

GENERAL.

 

Waiver; Amendments.  No delay on the part of the Lender in the
exercise of any right, power or remedy shall operate as a waiver thereof, nor
shall any single or partial exercise by any of them of any right, power or
remedy preclude other or further exercise thereof, or the exercise of any other
right, power or remedy.  No amendment,
modification or waiver of, or consent with respect to, any provision of this
Agreement or the other Loan Documents shall in any event be effective

 

45

 

unless the same shall be in writing and acknowledged by the Lender, and
then any such amendment, modification, waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.

 

Confirmations.  Each Loan Party and the Lender agree from
time to time, upon written request received by it from the other, to confirm to
the other in writing the aggregate unpaid principal amount of the Loans then
outstanding under the Note.

 

Notices.  Except as otherwise provided in Sections 2.2.2
and 2.2.3, all notices hereunder shall be in writing (including
facsimile transmission) and shall be sent to the applicable party at its
address shown on the signature page or at such other address as such party may,
by written notice received by the other parties, have designated as its address
for such purpose.  Notices sent by
facsimile transmission shall be deemed to have been given when sent; notices
sent by mail shall be deemed to have been given three Business Days after the
date when sent by registered or certified mail, postage prepaid; and notices
sent by hand delivery or overnight courier service shall be deemed to have been
given when received.  For purposes of Sections
2.2.2 and 2.2.3, the Lender shall be entitled to rely on telephonic
instructions from any person that the Lender in good faith believes is an
authorized officer or employee of the Company, and the Company shall hold the
Lender harmless from any loss, cost or expense resulting from any such
reliance.

 

Computations.  Where the character or amount of any
asset or liability or item of income or expense is required to be determined,
or any consolidation or other accounting computation is required to be made,
for the purpose of this Agreement, such determination or calculation shall, to
the extent applicable and except as otherwise specified in this Agreement, be
made in accordance with GAAP, consistently applied; provided that if the
Company notifies the Lender that the Company (or any other Loan Party) wishes
to amend any covenant in Section 10 (or any related definition) to
eliminate or to take into account the effect of any change in GAAP on the
operation of such covenant (or if the Lender notifies the Company that the
Lender wishes to amend Section 10 (or any related definition) for such
purpose), then the Loan Parties’ compliance with such covenant shall be
determined on the basis of GAAP in effect immediately before the relevant
change in GAAP became effective, until either such notice is withdrawn or such
covenant (or related definition) is amended in a manner satisfactory to the
Company and the Lender.

 

Costs, Expenses and Taxes.  The Loan Parties agree to pay on demand all
reasonable out-of-pocket costs and expenses of the Lender (including Attorney
Costs and any Taxes) in connection with the preparation, execution, delivery
and administration (including perfection and protection of any collateral, if
applicable) of this Agreement, the other Loan Documents and all other documents
provided for herein or delivered or to be delivered hereunder or in connection
herewith (including any amendment, supplement or waiver to any Loan Document),
whether or not the transactions contemplated hereby or thereby shall be
consummated, and all reasonable out-of-pocket costs and expenses (including
Attorney Costs and any Taxes) incurred by the Lender after an Event of Default
in connection with the collection of the Obligations or the enforcement of this
Agreement the other Loan Documents or any such other documents or during any
workout, restructuring or negotiations in respect thereof.  In addition, the Company agrees to

 

46

 

pay, and to save the Lender harmless from all liability for, any fees
of the Company’s auditors in connection with any reasonable exercise by the
Lender of its rights pursuant to Section 10.2.  All Obligations provided for in this Section 15.5
shall survive repayment of the Loans, cancellation of the Note, expiration or
termination of the Letters of Credit and termination of this Agreement.

 

Assignments;
Participations.

 

(a)                                  The
Lender may at any time assign to one or more Persons all or any portion of the
Lender’s Loans and Commitments, with the prior written consent of the Company
(which consent (i) shall be required only so long as no Event of Default
exists, (ii) shall not be unreasonably withheld or delayed and (iii) shall not
be required for an assignment by a Lender to a Lender or an Affiliate of a
Lender).  Any such assignment shall be in
a minimum aggregate amount equal to $5,000,000 or, if less, the remaining
Commitment and Loans held by the Lender. 
The Company shall be deemed to have granted its consent to any
assignment requiring its consent hereunder unless the Company has expressly
objected to such assignment within three Business Days after notice thereof.

 

(b)                                 The
Lender may at any time pledge or assign a security interest in all or any
portion of its rights under this Agreement to secure obligations of the Lender,
including any pledge or assignment to secure obligations to a Federal Reserve
Bank, and this Section shall not apply to any such pledge or assignment of
a security interest; provided that no such pledge or assignment of a
security interest shall release the Lender from any of its obligations
hereunder or substitute any such pledgee or assignee for the Lender as a party
hereto.

 

(c)                                  The
Lender may at any time sell to one or more Persons participating interests in
its Loans, Commitments or other interests hereunder.  In the event of a sale by the Lender of a
participating interest, (i) the Lender’s obligations hereunder shall remain
unchanged for all purposes, (ii) the Company shall continue to deal solely and
directly with the Lender in connection with the Lender’s rights and obligations
hereunder and (iii) all amounts payable by the Company shall be determined
as if the Lender had not sold such participation and shall be paid directly to
the Lender.  No Participant shall have
any direct or indirect voting rights hereunder. 
The Company agrees that if amounts outstanding under this Agreement are
due and payable (as a result of acceleration or otherwise), each participant
shall be deemed to have the right of set-off in respect of its participating
interest in amounts owing under this Agreement and with respect to any Letter
of Credit to the same extent as if the amount of its participating interest
were owing directly to it as a Lender under this Agreement; provided
that such right of set-off shall be subject to the obligation of each
participant to share with the Lender, and the Lender agrees to share with each
participant.  The Company also agrees
that each participant shall be entitled to the benefits of Section 7.5
or 8 as if it were a Lender (provided that on the date of the
participation no participant shall be entitled to any greater compensation
pursuant to Section 7.5 or 8 than would have been paid to
the Lender on such date if no participation had been sold.

 

GOVERNING LAW.  THIS AGREEMENT AND EACH
NOTE SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF
THE STATE OF MINNESOTA APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED
ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.

 

Confidentiality.  The Lender agrees to use commercially
reasonable efforts (equivalent to the efforts the Lender applies to maintain
the confidentiality of its own confidential information) to maintain as
confidential all information provided to it by any Loan Party and designated as
confidential, except that the Lender may disclose such information (a) to
Persons employed or engaged by the

 

47

 

Lender in evaluating, approving, structuring or administering the Loans
and the Commitment; (b) to any assignee or participant or potential assignee or
participant that has agreed to comply with the covenant contained in this Section 15.8
(and any such assignee or participant or potential assignee or participant may
disclose such information to Persons employed or engaged by them as described
in clause (a) above); (c) as required or requested by any federal or state
regulatory authority or examiner, or any insurance industry association, or as
reasonably believed by the Lender to be compelled by any court decree, subpoena
or legal or administrative order or process; (d) as, on the advice of the
Lender’s counsel, is required by law; (e) in connection with the exercise of
any right or remedy under the Loan Documents or in connection with any
litigation to which the Lender is a party; (f) to any nationally recognized
rating agency that requires access to information about the Lender’s investment
portfolio in connection with ratings issued with respect to the Lender; (g) to
any Affiliate of the Lender who may provide Bank Products to the Loan Parties;
or (h) that ceases to be confidential through no fault of the Lender.  Notwithstanding the foregoing, the Company
consents to the publication by the Lender of a tombstone or similar advertising
material relating to the financing transactions contemplated by this Agreement,
and the Lender reserves the right to provide to industry trade organizations
information necessary and customary for inclusion in league table
measurements.  Notwithstanding anything
in this Agreement or any other Loan Document to the contrary, any information
with respect to the “tax treatment” or “tax structure” (in each case, within
the meaning of Treasury Regulation Section 1.6011-4) of the transactions
contemplated hereby shall not be confidential and the Lender and other parties
hereto may disclose without limitation of any kind any information that is
provided to the Lender with respect to the “tax treatment” or “tax structure”
(in each case, within the meaning of Treasury Regulation
Section 1.6011-4); provided, that to the extent any Loan Document
contains information that relates to the “tax treatment” or “tax structure” and
contains other information, this paragraph shall only apply to the information
regarding the “tax treatment” or “tax structure.”

 

Severability.  Whenever possible each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.  All obligations of the
Loan Parties and rights of the Lender expressed herein or in any other Loan
Document shall be in addition to and not in limitation of those provided by
applicable law.

 

Nature of
Remedies. 
All Obligations of the Loan Parties and rights of the Lender expressed
herein or in any other Loan Document shall be in addition to and not in
limitation of those provided by applicable law. 
No failure to exercise and no delay in exercising, on the part of the
Lender, any right, remedy, power or privilege hereunder, shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege.

 

Entire
Agreement. 
This Agreement, together with the other Loan Documents, embodies the
entire agreement and understanding among the parties hereto and supersedes all
prior or

 

48

 

contemporaneous agreements and understandings of such Persons, verbal
or written, relating to the subject matter hereof and thereof (except as
relates to the fees described in Section 5.3) and any prior
arrangements made with respect to the payment by the Loan Parties of (or any
indemnification for) any fees, costs or expenses payable to or incurred (or to
be incurred) by or on behalf of the Lender.

 

Counterparts.  This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts and each such counterpart shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same
Agreement.  Receipt of an executed
signature page to this Agreement by facsimile or other electronic transmission
shall constitute effective delivery thereof. 
Electronic records of executed Loan Documents maintained by the Lender
shall deemed to be originals.

 

Successors
and Assigns. 
This Agreement shall be binding upon each Loan Party and the Lender
and their respective successors and assigns, and shall inure to the benefit of
each Loan Party and the Lender and the successors and assigns of the
Lender.  No other Person shall be a
direct or indirect legal beneficiary of, or have any direct or indirect cause
of action or claim in connection with, this Agreement or any of the other Loan
Documents.  No Loan Party may assign or
transfer any of its rights or Obligations under this Agreement without the
prior written consent of the Lender.

 

Captions.  Section captions used in this
Agreement are for convenience only and shall not affect the construction
of this Agreement.

 

INDEMNIFICATION BY THE LOAN PARTIES.  IN CONSIDERATION OF THE
EXECUTION AND DELIVERY OF THIS AGREEMENT BY THE LENDER AND THE AGREEMENT TO
EXTEND THE COMMITMENT PROVIDED HEREUNDER, EACH LOAN PARTY HEREBY AGREES TO
INDEMNIFY, EXONERATE AND HOLD THE LENDER AND EACH OF THE OFFICERS, DIRECTORS,
EMPLOYEES, AFFILIATES AND AGENTS OF THE LENDER (EACH A “LENDER PARTY”)
FREE AND HARMLESS FROM AND AGAINST ANY AND ALL ACTIONS, CAUSES OF ACTION,
SUITS, LOSSES, LIABILITIES, DAMAGES AND EXPENSES, INCLUDING ATTORNEY COSTS
(COLLECTIVELY, THE “INDEMNIFIED LIABILITIES”), INCURRED BY THE LENDER
PARTIES OR ANY OF THEM AS A RESULT OF, OR ARISING OUT OF, OR RELATING TO (A)
ANY TENDER OFFER, MERGER, PURCHASE OF CAPITAL SECURITIES, PURCHASE OF ASSETS OR
OTHER SIMILAR TRANSACTION FINANCED OR PROPOSED TO BE FINANCED IN WHOLE OR IN
PART, DIRECTLY OR INDIRECTLY, WITH THE PROCEEDS OF ANY OF THE LOANS, (B) THE
USE, HANDLING, RELEASE, EMISSION, DISCHARGE, TRANSPORTATION, STORAGE, TREATMENT
OR DISPOSAL OF ANY HAZARDOUS SUBSTANCE AT ANY PROPERTY OWNED OR LEASED BY ANY
LOAN PARTY, (C) ANY VIOLATION OF ANY ENVIRONMENTAL LAWS WITH RESPECT TO
CONDITIONS AT ANY PROPERTY OWNED OR LEASED BY ANY LOAN PARTY OR THE OPERATIONS
CONDUCTED THEREON, (D) THE

 

49

 

INVESTIGATION, CLEANUP OR REMEDIATION OF OFFSITE LOCATIONS AT WHICH ANY
LOAN PARTY OR THEIR RESPECTIVE PREDECESSORS ARE ALLEGED TO HAVE DIRECTLY OR
INDIRECTLY DISPOSED OF HAZARDOUS SUBSTANCES OR (E) THE EXECUTION,
DELIVERY, PERFORMANCE OR ENFORCEMENT OF THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT BY ANY OF THE LENDER PARTIES, EXCEPT FOR ANY SUCH INDEMNIFIED
LIABILITIES ARISING ON ACCOUNT OF THE APPLICABLE LENDER PARTY’S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT AS DETERMINED BY A FINAL, NONAPPEALABLE
JUDGMENT BY A COURT OF COMPETENT JURISDICTION. 
IF AND TO THE EXTENT THAT THE FOREGOING UNDERTAKING MAY BE UNENFORCEABLE
FOR ANY REASON, EACH LOAN PARTY HEREBY AGREES TO MAKE THE MAXIMUM CONTRIBUTION
TO THE PAYMENT AND SATISFACTION OF EACH OF THE INDEMNIFIED LIABILITIES WHICH IS
PERMISSIBLE UNDER APPLICABLE LAW.  ALL
OBLIGATIONS PROVIDED FOR IN THIS SECTION 15.15 SHALL SURVIVE
REPAYMENT OF THE LOANS, CANCELLATION OF THE NOTE, EXPIRATION OR TERMINATION OF
THE LETTERS OF CREDIT, ANY FORECLOSURE UNDER, OR ANY MODIFICATION, RELEASE OR
DISCHARGE OF, ANY OR ALL OF THE COLLATERAL DOCUMENTS AND TERMINATION OF THIS
AGREEMENT.

 

Nonliability
of Lender. 
The relationship between the Loan Parties on the one hand and the Lender
on the other hand shall be solely that of Loan Parties and lender.  The Lender has no fiduciary relationship with
or duty to any Loan Party arising out of or in connection with this Agreement
or any of the other Loan Documents, and the relationship between the Loan
Parties, on the one hand, and the Lender, on the other hand, in connection
herewith or therewith is solely that of debtor and creditor.  The Lender does not undertake any responsibility
to any Loan Party to review or inform any Loan Party of any matter in
connection with any phase of any Loan Party’s business or operations.  Each Loan Party agrees, on behalf of itself
and each other Loan Party, that the Lender shall have no liability to any Loan
Party (whether sounding in tort, contract or otherwise) for losses suffered by
any Loan Party in connection with, arising out of, or in any way related to the
transactions contemplated and the relationship established by the Loan Documents,
or any act, omission or event occurring in connection therewith, unless it is
determined in a final non-appealable judgment by a court of competent
jurisdiction that such losses resulted from the gross negligence or willful
misconduct of the party from which recovery is sought.  NO LENDER PARTY SHALL HAVE
ANY LIABILITY WITH RESPECT TO, AND EACH OTHER LOAN PARTY HEREBY WAIVES,
RELEASES AND AGREES NOT TO SUE FOR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL
DAMAGES RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ARISING OUT OF
ITS ACTIVITIES IN CONNECTION HEREWITH OR THEREWITH (WHETHER BEFORE OR AFTER THE
CLOSING DATE).  Each Loan
Party acknowledges that it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents to which
it is a party.  No joint venture is
created hereby or by the other Loan

 

50

 

Documents or otherwise exists by virtue of the transactions
contemplated hereby among the Loan Parties and the Lender.

 

FORUM
SELECTION AND CONSENT TO JURISDICTION.  ANY LITIGATION BASED
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS
OF THE STATE OF MINNESOTA OR IN THE UNITED STATES DISTRICT COURT SITTING IN
MINNEAPOLIS, MINNESOTA; PROVIDED THAT NOTHING IN THIS AGREEMENT SHALL BE
DEEMED OR OPERATE TO PRECLUDE THE LENDER FROM BRINGING SUIT OR TAKING OTHER
LEGAL ACTION IN ANY OTHER JURISDICTION. 
EACH LOAN PARTY HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE
JURISDICTION OF THE COURTS OF THE STATE OF MINNESOTA AND OF THE UNITED STATES
COURT SITTING IN HENNEPIN COUNTY, MINNESOTA FOR THE PURPOSE OF ANY SUCH
LITIGATION AS SET FORTH ABOVE.  EACH LOAN
PARTY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED
MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF
MINNESOTA.  EACH LOAN PARTY HEREBY
EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH
LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY
SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

WAIVER OF JURY
TRIAL. 
EACH LOAN PARTY AND THE LENDER HEREBY WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS UNDER THIS AGREEMENT, ANY NOTE, ANY OTHER LOAN DOCUMENT AND ANY
AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY
LENDING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, AND
AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY.

 

[The next page is the signature page.]

 

51

 

The parties hereto have caused this Agreement to be duly executed and
delivered by their duly authorized officers as of the date first set forth
above.

 

	
   

  	
  WINMARK CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/  Brett D. Heffes

  	
   

  
	
   

  	
  Name:

  	
  Brett D. Heffes

  	
   

  
	
   

  	
  Title: 

  	
  Chief Financial Officer and Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WINMARK BUSINESS SOLUTIONS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/  Brett D. Heffes

  	
   

  
	
   

  	
  Name:

  	
  Brett D. Heffes

  	
   

  
	
   

  	
  Title:

  	
  Chief Financial Officer and Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WINMARK CAPITAL CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/  Brett D. Heffes

  	
   

  
	
   

  	
  Name:

  	
  Brett D. Heffes

  	
   

  
	
   

  	
  Title:

  	
  Chief Financial Officer and Treasurer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GROW BIZ GAMES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/  Mark T. Hooley

  	
   

  
	
   

  	
  Name:

  	
  Mark T. Hooley

  	
   

  
	
   

  	
  Title:

  	
  Vice President and General Counsel

  
						

 

Address for Notices:

 

c/o Winmark Corporation

4200 Dahlberg Drive Suite 100

Minneapolis, MN 55422

Attention: Mark Hooley,

Vice President and General Counsel

Telephone:  (763) 520-8500

Fax:  (763) 520-8410

 

52

 

	
   

  	
  LASALLE BANK NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/  F. Ward Nixon

  	
   

  
	
   

  	
  Name: 

  	
  F. Ward Nixon

  	
   

  
	
   

  	
  Title:

  	
   Senior Vice President and

  Regional Manager

  
					

 

 

Notices of Borrowing , Conversion, Continuation and Letter of Credit
Issuance

 

50 South Sixth Street

Minneapolis, MN 55402

Attention:  Amy Hafenbrack

Telephone: (612) 752-9880

Facsimile:  (612) 752-9881

 

All Other Notices

 

50 South Sixth Street

Minneapolis, MN 55402

Attention:  F. Ward Nixon

Christina Miller

Telephone: (612) 752-9889

Facsimile:  (612) 752-9881

 

53

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