Document:

Exhibit 10.1

 

RICHARD D. ELLISON

RETIREMENT AGREEMENT

FROM TRC COMPANIES, INC.

 

The following Retirement Agreement (the “Agreement”)
is entered into by and between TRC Companies, Inc. (“TRC”) and the
independent members of TRC’s Board of Directors (the “Board”; collectively with
TRC, the “Company”), on the one hand, and by Richard D. Ellison (“Ellison”;
collectively with the Company, the “Parties”), on the other hand:

 

•      The Board of the Company will accept
Ellison’s notice of retirement to be effective January 1, 2006.

 

•                  Ellison
shall be nominated for election to the Board at the November 2005 annual
meeting.  Following his retirement, the
Parties anticipate that Ellison will remain as Chairman of the Board until at
least the November 2006 annual meeting.

 

•                  Ellison
shall be paid an amount equal to his current salary rate through April 1,
2007, with a payment equal to six months’ salary being made on July 3,
2006, and the remainder of such amount being paid in accordance with the normal
payroll practices of the Company.

 

•                  Consistent
with the Board resolutions of September 23, 2005, Chris Vincze will remain
Chief Operating Officer of the Company. 
From the date of this agreement through Ellison’s retirement effective January 1,
2006, Ellison and Vincze will jointly determine the remaining operational
issues with which Ellison should remain involved. Any issues which Ellison may
have with the remaining bulk of the Company’s operations pending his retirement
may also be discussed with any other member of the Board. The executive
responsibility for all operations of the Company are immediately vested in
Chris Vincze as COO, and Vincze will report directly to the Board, including
Ellison.

 

•                  Until
the later of 12 months after Ellison is no longer is a Board member or June 1,
2007 (the “Non-Compete Period”), Ellison agrees that he will neither, directly
or indirectly, compete with, nor solicit any employee to be in competition with
the Company, although Ellison may join a consulting firm or undertake other
management or investment activities not inconsistent with this obligation of
non-competition/non-solicitation.  Upon
expiration of the Non Compete Period, Ellison’s obligation of non-competition
and non-solicitation to the Company shall immediately cease and shall be of no
further force or effect. If there is a project during the Non Compete Period
which may raise a question of competition, Ellison shall present the project to
the Board for resolution of the question and potential waiver of Ellison’s
obligation of non-competition on that project.

 

•                  Upon
Ellison’s departure from the Board, the Board agrees to immediately vest and
reconfigure all options then currently held by Ellison so that they are
exercisable until up to one year after his departure from the Board, unless
such options otherwise expire according to their terms prior thereto.

 

•                  The
following miscellaneous items shall be implemented:

 

A.            Ellison’s
cell phone, laptop and home fax and home printer shall become Ellison’s sole
property.

 

 

B.            Ellison
shall be paid for all unused vacation accrued prior to December 31, 2005.

 

C.                                     Ellison’s
current life insurance policy issued by Farmer’s New World Life shall continue
in full force and effect and shall remain unchanged through June 30, 2007.

 

D.                                    Ellison’s
health insurance shall continue in full force and effect and shall remain
unchanged through June 30, 2007.

 

E.                                      The
Company shall continue the lease on Ellison’s automobile for the remainder of
the term of that lease and Ellison shall have full and exclusive use thereof.

 

F.                                      Ellison’s
membership at Shady Canyon Country Club shall continue in full force and effect
and shall remain unchanged through December 31, 2006.

 

•                  The
provisions of this Agreement shall be deemed to obligate, extend to, and inure
to the benefit of the legal predecessors, successors, assigns, transferees,
grantees, heirs executors, administrators, principals, trustees and
beneficiaries of each of the Parties.

 

•                  This
Agreement is made and entered into in the State of California and shall in all
respects be interpreted, enforced and governed by and under the laws of the
State of California alone, without regard to any conflict or choice of law
principles.

 

•                  The
Parties acknowledge and agree that original and exclusive jurisdiction of any
dispute arising out of or related to this Agreement shall rest in the State of
California and shall be instituted and maintained only in Orange County,
California, in accordance with the mandatory, binding arbitration provisions of
the Judicial Arbitration and Mediation Services (“JAMS”).

 

•                  The
individuals signing this Agreement on behalf of an entity each respectively
warrant and represent that (a) he/she has full authority to execute this
Agreement on behalf of the entity for whom he/she is signing; (b) he/she
is acting with the course and scope of such authority in executing this
Agreement; (c) the provisions and execution of this Agreement have been
validly approved and ratified; and (d) neither the execution of this
Agreement nor the performance or compliance with its terms conflicts with any
provision of the certificate of incorporation or bylaws or results in a breach,
violation of or default under, any order, writ, injunction, decree, license,
authorization or term of any agreement or instrument known to any such
individual.

 

WHEREFORE, the Parties execute this Agreement
and make it fully effective as of October 12, 2005.

 

	
   

  	
  TRC COMPANIES, INC.

  
	
   

  	
   

  
	
  Dated:

  	
  October 12, 2005

  	
   

  	
  By:

  	
  /s/

  	
  Martin H. Dodd

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Martin H.
  Dodd, General Counsel

  
	
   

  	
   

  
	
   

  	
  RICHARD D. ELLISON

  

 

 

	
  Dated:

  	
  October 12, 2005

  	
   

  	
   

  	
  /s/

  	
  Richard D. Ellison

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Richard D.
  Ellison, an individual

  

 

 

2

 

	
  APPROVED BY THE INDEPENDENT BOARD MEMBERS:

  
	
   

  	
   

  
	
  /s/

  	
  Friedrich K. M. Böhm

  	
   

  	
  /s/

  	
  Edward G. Jepsen

  
	
   

  	
  Friedrich K. M. Böhm

  	
   

  	
   

  	
  Edward G.
  Jepsen

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/

  	
  Edward W. Large

  	
   

  	
  /s/

  	
  John M. F. MacDonald

  
	
   

  	
  Edward W. Large

  	
   

  	
   

  	
  John M. F. MacDonald

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/

  	
  J. Jeffrey McNealey

  	
   

  	
   

  
	
   

  	
  J. Jeffrey McNealey

  	
   

  	
   

  

 

3Exhibit
10.1

 

EXECUTION
COPY

 

 

THIRD
AMENDED AND RESTATED

LOAN
AND SECURITY AGREEMENT

 

DATED AS
OF OCTOBER 14, 2005

 

 

among

 

BEACON
SALES ACQUISITION, INC.,

as
Borrower,

 

THE
DOMESTIC SUBSIDIARIES OF BEACON SALES

ACQUISITION,
INC. NAMED HEREIN,

as
Domestic Subsidiary Guarantors,

 

GENERAL
ELECTRIC CAPITAL CORPORATION,

as Agent,
L/C Issuer and a Lender,

 

and

 

THE
FINANCIAL INSTITUTION(S) LISTED

ON THE
SIGNATURE PAGES HEREOF,

as
Lenders,

 

and

 

GECC
CAPITAL MARKETS GROUP, INC.,

as Sole
Lead Arranger and Sole Bookrunner

 

and

 

JPMORGAN
CHASE BANK, N.A.

as
Syndication Agent

 

and

 

WACHOVIA
CAPITAL FINANCE CORPORATION (CENTRAL) and

THE CIT
GROUP/BUSINESS CREDIT, INC.

as Co-Documentation Agents

 

 

TABLE
OF CONTENTS

 

	
  SECTION 1.
  DEFINITIONS AND ACCOUNTING TERMS

  	
   

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  CERTAIN
  DEFINED TERMS

  	
   

  
	
  1.2

  	
  ACKNOWLEDGEMENT
  OF EXISTING OBLIGATIONS AND RESTATEMENT THEREOF

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 2. LOANS AND
  COLLATERAL

  	
   

  
	
   

  	
   

  
	
  2.1

  	
  LOANS

  	
   

  
	
  2.2

  	
  INTEREST

  	
   

  
	
  2.3

  	
  FEES

  	
   

  
	
  2.4

  	
  PAYMENTS AND PREPAYMENTS

  	
   

  
	
  2.5

  	
  APPLICATION OF PREPAYMENT
  PROCEEDS

  	
   

  
	
  2.6

  	
  TERM OF THIS AGREEMENT

  	
   

  
	
  2.7

  	
  STATEMENTS

  	
   

  
	
  2.8

  	
  GRANT OF SECURITY INTEREST

  	
   

  
	
  2.9

  	
  YIELD PROTECTION

  	
   

  
	
  2.10

  	
  TAXES

  	
   

  
	
  2.11

  	
  REQUIRED TERMINATION AND PREPAYMENT

  	
   

  
	
  2.12

  	
  OPTIONAL PREPAYMENT/REPLACEMENT
  OF LENDERS

  	
   

  
	
  2.13

  	
  COMPENSATION

  	
   

  
	
  2.14

  	
  BOOKING OF LIBOR LOANS

  	
   

  
	
  2.15

  	
  ASSUMPTIONS
  CONCERNING FUNDING OF LIBOR LOANS

  	
   

  
	
  2.16

  	
  INCREASE IN REVOLVING LOAN
  COMMITMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 3.
  CONDITIONS TO LOANS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 4.
  OBLIGORS’ REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS

  	
   

  
	
   

  	
   

  
	
  4.1

  	
  ORGANIZATION, POWERS,
  CAPITALIZATION

  	
   

  
	
  4.2

  	
  AUTHORIZATION OF BORROWING,
  NO CONFLICT

  	
   

  
	
  4.3

  	
  FINANCIAL CONDITION

  	
   

  
	
  4.4

  	
  INDEBTEDNESS AND LIABILITIES

  	
   

  
	
  4.5

  	
  ACCOUNT WARRANTIES AND COVENANTS

  	
   

  
	
  4.6

  	
  NAMES AND LOCATIONS

  	
   

  
	
  4.7

  	
  TITLE TO PROPERTIES; LIENS

  	
   

  
	
  4.8

  	
  LITIGATION; ADVERSE FACTS

  	
   

  
	
  4.9

  	
  PAYMENT OF TAXES

  	
   

  
	
  4.10

  	
  PERFORMANCE OF AGREEMENTS

  	
   

  
	
  4.11

  	
  EMPLOYEE BENEFIT PLANS

  	
   

  
	
  4.12

  	
  INTELLECTUAL PROPERTY

  	
   

  
	
  4.13

  	
  BROKER’S FEES

  	
   

  
	
  4.14

  	
  ENVIRONMENTAL MATTERS

  	
   

  
	
  4.15

  	
  SOLVENCY

  	
   

  
	
  4.16

  	
  DISCLOSURE

  	
   

  

 

i

 

	
  4.17

  	
  INSURANCE

  	
   

  
	
  4.18

  	
  COMPLIANCE WITH LAWS

  	
   

  
	
  4.19

  	
  BANK ACCOUNTS

  	
   

  
	
  4.20

  	
  EMPLOYEE MATTERS

  	
   

  
	
  4.21

  	
  GOVERNMENTAL REGULATION

  	
   

  
	
  4.22

  	
  ACCESS TO ACCOUNTANTS AND
  MANAGEMENT

  	
   

  
	
  4.23

  	
  INSPECTION; FIELD EXAMS

  	
   

  
	
  4.24

  	
  COLLATERAL RECORDS

  	
   

  
	
  4.25

  	
  COLLECTION OF ACCOUNTS AND
  PAYMENTS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 5.
  REPORTING AND OTHER AFFIRMATIVE COVENANTS

  	
   

  
	
   

  	
   

  
	
  5.1

  	
  FINANCIAL STATEMENTS AND OTHER
  REPORTS

  	
   

  
	
  5.2

  	
  ENDORSEMENT

  	
   

  
	
  5.3

  	
  MAINTENANCE OF PROPERTIES

  	
   

  
	
  5.4

  	
  COMPLIANCE WITH LAWS

  	
   

  
	
  5.5

  	
  FURTHER ASSURANCES

  	
   

  
	
  5.6

  	
  MORTGAGES; CONSENTS AND
  WAIVERS; TITLE INSURANCE; SURVEYS

  	
   

  
	
  5.7

  	
  USE OF PROCEEDS AND MARGIN
  SECURITY

  	
   

  
	
  5.8

  	
  BAILEE

  	
   

  
	
  5.9

  	
  THIRD PARTY INVENTORY

  	
   

  
	
  5.10

  	
  ENVIRONMENTAL MATTERS

  	
   

  
	
  5.11

  	
  CURRENCY RATE AGREEMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 6.
  FINANCIAL COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 7.
  NEGATIVE COVENANTS

  	
   

  
	
   

  	
   

  
	
  7.1

  	
  INDEBTEDNESS AND LIABILITIES

  	
   

  
	
  7.2

  	
  CONTINGENT OBLIGATIONS

  	
   

  
	
  7.3

  	
  TRANSFERS, LIENS AND RELATED
  MATTERS

  	
   

  
	
  7.4

  	
  INVESTMENTS AND LOANS

  	
   

  
	
  7.5

  	
  RESTRICTED JUNIOR
  PAYMENTS

  	
   

  
	
  7.6

  	
  RESTRICTION ON FUNDAMENTAL
  CHANGES

  	
   

  
	
  7.7

  	
  CHANGES RELATING TO INDEBTEDNESS

  	
   

  
	
  7.8

  	
  TRANSACTIONS WITH AFFILIATES

  	
   

  
	
  7.9

  	
  CONDUCT OF BUSINESS

  	
   

  
	
  7.10

  	
  TAX CONSOLIDATIONS

  	
   

  
	
  7.11

  	
  SUBSIDIARIES

  	
   

  
	
  7.12

  	
  FISCAL YEAR; TAX DESIGNATION

  	
   

  
	
  7.13

  	
  PRESS RELEASE; PUBLIC OFFERING
  MATERIALS

  	
   

  
	
  7.14

  	
  BANK ACCOUNTS

  	
   

  
	
  7.15

  	
  IRS FORM 8821

  	
   

  
	
  7.16

  	
  HAZARDOUS MATERIALS

  	
   

  
	
  7.17

  	
  CIGNA IMPRESS ACCOUNT

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 8.
  DEFAULT, RIGHTS AND REMEDIES

  	
   

  
	
   

  	
   

  
	
  8.1

  	
  EVENT OF DEFAULT

  	
   

  
	
  8.2

  	
  SUSPENSION OF COMMITMENTS

  	
   

  

 

ii

 

	
  8.3

  	
  ACCELERATION

  	
   

  
	
  8.4

  	
  REMEDIES

  	
   

  
	
  8.5

  	
  APPOINTMENT OF
  ATTORNEY-IN-FACT

  	
   

  
	
  8.6

  	
  LIMITATION ON DUTY OF AGENT
  WITH RESPECT TO COLLATERAL

  	
   

  
	
  8.7

  	
  APPLICATION OF PROCEEDS

  	
   

  
	
  8.8

  	
  LICENSE OF INTELLECTUAL PROPERTY

  	
   

  
	
  8.9

  	
  WAIVERS; NON-EXCLUSIVE REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 9.
  AGENT

  	
   

  
	
   

  	
   

  
	
  9.1

  	
  AGENT

  	
   

  
	
  9.2

  	
  NOTICE OF DEFAULT

  	
   

  
	
  9.3

  	
  ACTION BY AGENT

  	
   

  
	
  9.4

  	
  AMENDMENTS, WAIVERS AND
  CONSENTS

  	
   

  
	
  9.5

  	
  ASSIGNMENTS AND
  PARTICIPATIONS IN LOANS

  	
   

  
	
  9.6

  	
  SET OFF AND SHARING OF PAYMENTS

  	
   

  
	
  9.7

  	
  DISBURSEMENT OF FUNDS

  	
   

  
	
  9.8

  	
  SETTLEMENTS, PAYMENTS AND
  INFORMATION

  	
   

  
	
  9.9

  	
  DISCRETIONARY ADVANCES

  	
   

  
	
  9.10

  	
  BANKING SERVICES; INTEREST RATE
  AGREEMENTS; CURRENCY RATE AGREEMENTS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 10.
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  
	
  10.1

  	
  EXPENSES AND ATTORNEYS’ FEES

  	
   

  
	
  10.2

  	
  INDEMNITY

  	
   

  
	
  10.3

  	
  NOTICES

  	
   

  
	
  10.4

  	
  SURVIVAL OF REPRESENTATIONS AND
  WARRANTIES AND CERTAIN AGREEMENTS

  	
   

  
	
  10.5

  	
  INDULGENCE NOT WAIVER

  	
   

  
	
  10.6

  	
  MARSHALING; PAYMENTS SET
  ASIDE

  	
   

  
	
  10.7

  	
  ENTIRE AGREEMENT

  	
   

  
	
  10.8

  	
  SEVERABILITY

  	
   

  
	
  10.9

  	
  LENDERS’ OBLIGATIONS SEVERAL;
  INDEPENDENT NATURE OF LENDERS’ RIGHTS

  	
   

  
	
  10.10

  	
  HEADINGS

  	
   

  
	
  10.11

  	
  APPLICABLE LAW

  	
   

  
	
  10.12

  	
  SUCCESSORS AND ASSIGNS

  	
   

  
	
  10.13

  	
  NO FIDUCIARY RELATIONSHIP;
  NO DUTY; LIMITATION OF LIABILITIES

  	
   

  
	
  10.14

  	
  CONSENT TO JURISDICTION

  	
   

  
	
  10.15

  	
  WAIVER OF JURY TRIAL

  	
   

  
	
  10.16

  	
  CONSTRUCTION

  	
   

  
	
  10.17

  	
  COUNTERPARTS;
  EFFECTIVENESS

  	
   

  
	
  10.18

  	
  CONFIDENTIALITY

  	
   

  
	
  10.19

  	
  SYNDICATION AGENT AND
  CO-DOCUMENTATION AGENTS

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 11.
  DEFINITIONS AND ACCOUNTING TERMS

  	
   

  
	
   

  	
   

  
	
  11.1

  	
  CERTAIN DEFINED TERMS

  	
   

  
	
  11.2

  	
  ACCOUNTING TERMS

  	
   

  
	
  11.3

  	
  OTHER DEFINITIONAL PROVISIONS

  	
   

  

 

iii

 

	
  SECTION 12.
  GUARANTY

  	
   

  
	
   

  	
   

  
	
  12.1

  	
  GUARANTY

  	
   

  
	
  12.2

  	
  WAIVERS BY DOMESTIC SUBSIDIARY
  GUARANTORS

  	
   

  
	
  12.3

  	
  BENEFIT OF GUARANTY

  	
   

  
	
  12.4

  	
  WAIVER OF SUBROGATION, ETC

  	
   

  
	
  12.5

  	
  ELECTION OF REMEDIES

  	
   

  
	
  12.6

  	
  LIMITATION

  	
   

  
	
  12.7

  	
  CONTRIBUTION WITH RESPECT
  TO GUARANTY OBLIGATIONS

  	
   

  
	
  12.8

  	
  LIABILITY CUMULATIVE

  	
   

  
	
   

  	
   

  	
   

  
	
  SECTION 13.
  RESTATEMENT OF EXISTING LOAN AGREEMENT

  	
   

  

 

iv

 

INDEX OF
DEFINED TERMS

 

	
  Defined Term

  	
   

  	
  Defined in Section

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Accounting
  Changes

  	
   

  	
  §11.2

  	
   

  
	
  Accounts

  	
   

  	
  §11.1

  	
   

  
	
  Activation Notice

  	
   

  	
  §11.1

  	
   

  
	
  Activation Period

  	
   

  	
  §11.1

  	
   

  
	
  Acquisition Pro Forma

  	
   

  	
  §7.6

  	
   

  
	
  Acquisition Projections

  	
   

  	
  §7.6

  	
   

  
	
  Additional Mortgaged Property

  	
   

  	
  §11.1

  	
   

  
	
  Advance

  	
   

  	
  §11.1

  	
   

  
	
  Affected Lender

  	
   

  	
  §2.11

  	
   

  
	
  Affiliate

  	
   

  	
  §11.1

  	
   

  
	
  Agent

  	
   

  	
  §11.1

  	
   

  
	
  Agent’s Account

  	
   

  	
  §11.1

  	
   

  
	
  Agreement

  	
   

  	
  §11.1

  	
   

  
	
  Applicable Margins

  	
   

  	
  §11.1

  	
   

  
	
  Applicable Revolver Index Margin

  	
   

  	
  §11.1

  	
   

  
	
  Applicable Revolver LIBOR Margin

  	
   

  	
  §11.1

  	
   

  
	
  Asset Disposition

  	
   

  	
  §11.1

  	
   

  
	
  Assignment and Acceptance Agreement

  	
   

  	
  §11.1

  	
   

  
	
  Banking Services

  	
   

  	
  §11.1

  	
   

  
	
  Beacon Canada

  	
   

  	
  §11.1

  	
   

  
	
  Beacon Canada Accounts

  	
   

  	
  §11.1

  	
   

  
	
  Beacon Canada Consolidating Borrowing Base

  	
   

  	
  §11.1

  	
   

  
	
  Beacon Canada Holdings

  	
   

  	
  Recitals

  	
   

  
	
  Best Distribution

  	
   

  	
  §11.1

  	
   

  
	
  Blocked Accounts

  	
   

  	
  §4.25

  	
   

  
	
  Borrower

  	
   

  	
  Recitals

  	
   

  
	
  Borrowing Base

  	
   

  	
  §2.1(B)(2)

  	
   

  
	
  Borrowing Base Certificate

  	
   

  	
  §11.1

  	
   

  
	
  Business Day

  	
   

  	
  §11.1

  	
   

  
	
  C$or C Dollars

  	
   

  	
  §11.1

  	
   

  
	
  Canadian Collateral

  	
   

  	
  §11.1

  	
   

  
	
  Canadian Facility Agent

  	
   

  	
  §11.1

  	
   

  
	
  Canadian Facility Credit Agreement

  	
   

  	
  §11.1

  	
   

  
	
  Canadian Facility Intercreditor Agreement

  	
   

  	
  §11.1

  	
   

  
	
  Canadian Facility Lenders

  	
   

  	
  §11.1

  	
   

  
	
  Canadian Facility Loan Documents

  	
   

  	
  §11.1

  	
   

  
	
  Canadian Facility Revolving Loan Commitment

  	
   

  	
  §11.1

  	
   

  
	
  Canadian Facility Revolving Loans

  	
   

  	
  §11.1

  	
   

  
	
  Capital Expenditures

  	
   

  	
  §11.1

  	
   

  
	
  Capital Lease

  	
   

  	
  §11.1

  	
   

  
	
  Capitalization/Acquisition Documents

  	
   

  	
  §11.1

  	
   

  
	
  Cash Equivalents

  	
   

  	
  §11.1

  	
   

  
	
  Certificate of Exemption

  	
   

  	
  §2.9(C)

  	
   

  

 

v

 

	
  Defined Term

  	
   

  	
  Defined in Section

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  CIT

  	
   

  	
  Preamble

  	
   

  
	
  Closing Date

  	
   

  	
  §11.1

  	
   

  
	
  CHS

  	
   

  	
  §11.1

  	
   

  
	
  CIGNA Impress Account

  	
   

  	
  §11.1

  	
   

  
	
  Co-Documentation Agents

  	
   

  	
  Preamble

  	
   

  
	
  Collateral

  	
   

  	
  §2.7

  	
   

  
	
  Collecting Banks

  	
   

  	
  §4.25

  	
   

  
	
  Commitment(s)

  	
   

  	
  §11.1

  	
   

  
	
  Compliance Certificate

  	
   

  	
  §11.1

  	
   

  
	
  Consolidated Borrowing Base

  	
   

  	
  §2.1(B)

  	
   

  
	
  Consolidating Borrowing Base

  	
   

  	
  §2.1(B)

  	
   

  
	
  Contingent Obligation

  	
   

  	
  §11.1

  	
   

  
	
  Credit Memoranda Reserve

  	
   

  	
  §2.1(B)

  	
   

  
	
  Currency Rate Agreement

  	
   

  	
  §5.11

  	
   

  
	
  Daily Interest Amount

  	
   

  	
  §9.8(A)(3)

  	
   

  
	
  Daily Interest Rate

  	
   

  	
  §9.8(A)(3)

  	
   

  
	
  Daily Loan Balance

  	
   

  	
  §9.8(A)(3)

  	
   

  
	
  Default

  	
   

  	
  §11.1

  	
   

  
	
  Defaulted Amount

  	
   

  	
  §11.1

  	
   

  
	
  Defaulting Lender

  	
   

  	
  §11.1

  	
   

  
	
  Default Rate

  	
   

  	
  §2.2(A)

  	
   

  
	
  Dilution Reserve

  	
   

  	
  §2.1(B)

  	
   

  
	
  Discretionary Advances

  	
   

  	
  §9.9

  	
   

  
	
  EBITDA

  	
   

  	
  §11.1

  	
   

  
	
  Eligible Accounts

  	
   

  	
  §2.1(D)

  	
   

  
	
  Eligible Assignee

  	
   

  	
  §11.1

  	
   

  
	
  Eligible Inventory

  	
   

  	
  §2.1(D)

  	
   

  
	
  Employee Benefit Plan

  	
   

  	
  §11.1

  	
   

  
	
  Environmental Claims

  	
   

  	
  §11.1

  	
   

  
	
  Environmental Laws

  	
   

  	
  §11.1

  	
   

  
	
  Environmental Liabilities

  	
   

  	
  §11.1

  	
   

  
	
  Environmental Permits

  	
   

  	
  §11.1

  	
   

  
	
  Equipment

  	
   

  	
  §11.1

  	
   

  
	
  ERISA

  	
   

  	
  §11.1

  	
   

  
	
  ERISA Affiliate

  	
   

  	
  §11.1

  	
   

  
	
  Equity Documents

  	
   

  	
  §11.1

  	
   

  
	
  Event of Default

  	
   

  	
  §8.1

  	
   

  
	
  Excess Availability

  	
   

  	
  §11.1

  	
   

  
	
  Excess Cash Flow

  	
   

  	
  §11.1

  	
   

  
	
  Excess Interest

  	
   

  	
  §2.2(C)

  	
   

  
	
  Existing Agent

  	
   

  	
  Recitals

  	
   

  
	
  Existing Lenders

  	
   

  	
  Recitals

  	
   

  
	
  Existing Loan Agreement

  	
   

  	
  Recitals

  	
   

  
	
  Existing Obligations

  	
   

  	
  §11.1

  	
   

  

 

vi

 

	
  Defined Term

  	
   

  	
  Defined in Section

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Existing Revolver Balance

  	
   

  	
  §1.2

  	
   

  
	
  Existing Term Loan A Balance

  	
   

  	
  §1.2

  	
   

  
	
  Existing Term Loan B Balance

  	
   

  	
  §1.2

  	
   

  
	
  Federal Funds Effective Rate

  	
   

  	
  §11.1

  	
   

  
	
  Fiscal Year

  	
   

  	
  §11.1

  	
   

  
	
  Fixed Charge Coverage

  	
   

  	
  §11.1

  	
   

  
	
  Fixed Charges

  	
   

  	
  §11.1

  	
   

  
	
  Foreign Lender

  	
   

  	
  §2.9(C)

  	
   

  
	
  Free Cash Flow

  	
   

  	
  §11.1

  	
   

  
	
  Funding Date

  	
   

  	
  §11.1

  	
   

  
	
  GAAP

  	
   

  	
  §11.1

  	
   

  
	
  GE Capital

  	
   

  	
  Preamble

  	
   

  
	
  Hazardous Material

  	
   

  	
  §11.1

  	
   

  
	
  Holdings

  	
   

  	
  §11.1

  	
   

  
	
  Holdings’ Accountants

  	
   

  	
  §11.1

  	
   

  
	
  Indebtedness

  	
   

  	
  §11.1

  	
   

  
	
  Indemnified Liabilities

  	
   

  	
  §10.2

  	
   

  
	
  Indemnitees

  	
   

  	
  §10.2

  	
   

  
	
  Intellectual Property

  	
   

  	
  §11.1

  	
   

  
	
  Index Rate

  	
   

  	
  §11.1

  	
   

  
	
  Index Rate Loans

  	
   

  	
  §11.1

  	
   

  
	
  Interest Expense

  	
   

  	
  §11.1

  	
   

  
	
  Interest Period

  	
   

  	
  §11.1

  	
   

  
	
  Interest Rate

  	
   

  	
  §2.2(A)

  	
   

  
	
  Interest Rate Agreement

  	
   

  	
  §11.1

  	
   

  
	
  Interest Rate Excess Availability

  	
   

  	
  §11.1

  	
   

  
	
  Interest Ratio

  	
   

  	
  §9.8(A)(3)

  	
   

  
	
  Interest Settlement Date

  	
   

  	
  §9.8(A)(4)

  	
   

  
	
  Inventory

  	
   

  	
  §11.1

  	
   

  
	
  Inventory Advance Rate Percentage

  	
   

  	
  §2.1(B)

  	
   

  
	
  IPO

  	
   

  	
  §11.1

  	
   

  
	
  IRC

  	
   

  	
  §11.1

  	
   

  
	
  IRS

  	
   

  	
  §7.15

  	
   

  
	
  JGA

  	
   

  	
  Preamble

  	
   

  
	
  JPMorgan

  	
   

  	
  Preamble

  	
   

  
	
  L/C Issuer

  	
   

  	
  §11.1

  	
   

  
	
  Lender(s)

  	
   

  	
  Recitals

  	
   

  
	
  Letter of Credit

  	
   

  	
  §2.1(H)

  	
   

  
	
  Letter of Credit Obligations

  	
   

  	
  §11.1

  	
   

  
	
  Letter of Non-Exemption

  	
   

  	
  §2.9(C)

  	
   

  
	
  Liabilities

  	
   

  	
  §11.1

  	
   

  
	
  LIBOR

  	
   

  	
  §11.1

  	
   

  
	
  LIBOR Loans

  	
   

  	
  §11.1

  	
   

  
	
  Lien

  	
   

  	
  §11.1

  	
   

  

 

vii

 

	
  Defined Term

  	
   

  	
  Defined in Section

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Loan or Loans

  	
   

  	
  §11.1

  	
   

  
	
  Loan Documents

  	
   

  	
  §11.1

  	
   

  
	
  Loan Party

  	
   

  	
  §11.1

  	
   

  
	
  Loan Year

  	
   

  	
  §11.1

  	
   

  
	
  London Banking Day

  	
   

  	
  §11.1

  	
   

  
	
  Material Adverse Effect

  	
   

  	
  §11.1

  	
   

  
	
  Master Documentary Agreement

  	
   

  	
  §11.1

  	
   

  
	
  Master Standby Agreement

  	
   

  	
  §11.1

  	
   

  
	
  Maximum Rate

  	
   

  	
  §2.1(C)

  	
   

  
	
  Maximum Revolving Loan Amount

  	
   

  	
  §2.1(B)(1)

  	
   

  
	
  Moody’s

  	
   

  	
  §11.1

  	
   

  
	
  Mortgage

  	
   

  	
  §11.1

  	
   

  
	
  Mortgage Policies

  	
   

  	
  §5.6(A)

  	
   

  
	
  Mortgaged Property

  	
   

  	
  §11.1

  	
   

  
	
  Notes

  	
   

  	
  §11.1

  	
   

  
	
  Notice of Borrowing

  	
   

  	
  §11.1

  	
   

  
	
  Obligations

  	
   

  	
  §11.1

  	
   

  
	
  Obligor

  	
   

  	
  Preamble

  	
   

  
	
  Orderly Liquidation Value

  	
   

  	
  §2.1(B)

  	
   

  
	
  Permitted Acquisition

  	
   

  	
  §7.6

  	
   

  
	
  Permitted Small Acquisition

  	
   

  	
  §11.1

  	
   

  
	
  Permitted Encumbrances

  	
   

  	
  §11.1

  	
   

  
	
  Person

  	
   

  	
  §11.1

  	
   

  
	
  Pro Forma

  	
   

  	
  §11.1

  	
   

  
	
  Pro Forma EBITDA

  	
   

  	
  §11.1

  	
   

  
	
  Pro Rata Share

  	
   

  	
  §11.1

  	
   

  
	
  Projections

  	
   

  	
  §11.1

  	
   

  
	
  Quality

  	
   

  	
  Recitals

  	
   

  
	
  Real Estate

  	
   

  	
  §11.1

  	
   

  
	
  Register

  	
   

  	
  §9.5(E)

  	
   

  
	
  Related Fund

  	
   

  	
  §9.5(D)

  	
   

  
	
  Related Transaction

  	
   

  	
  §11.1

  	
   

  
	
  Related Transactions Documents

  	
   

  	
  §11.1

  	
   

  
	
  Release

  	
   

  	
  §11.1

  	
   

  
	
  Replacement Lender

  	
   

  	
  §2.11

  	
   

  
	
  Requisite Lenders

  	
   

  	
  §11.1

  	
   

  
	
  Reserves

  	
   

  	
  §11.1

  	
   

  
	
  Restricted Junior Payment

  	
   

  	
  §11.1

  	
   

  
	
  Revolving Advance

  	
   

  	
  §11.1

  	
   

  
	
  Revolving Loan

  	
   

  	
  §11.1

  	
   

  
	
  Revolving Loan Commitment

  	
   

  	
  §11.1

  	
   

  
	
  Revolving Note

  	
   

  	
  §11.1

  	
   

  
	
  RFC

  	
   

  	
  Preamble

  	
   

  
	
  SDI Holding

  	
   

  	
  Preamble

  	
   

  

 

viii

 

	
  Defined Term

  	
   

  	
  Defined in Section

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  SDI Guarantor

  	
   

  	
  Preamble

  	
   

  
	
  Seasonal Inventory Advance Rate Percentage

  	
   

  	
  §2.1(B)

  	
   

  
	
  Scheduled Installment

  	
   

  	
  §2.1(A)

  	
   

  
	
  Senior Indebtedness

  	
   

  	
  §11.1

  	
   

  
	
  Shelter

  	
   

  	
  Preamble

  	
   

  
	
  Shelter Acquisition

  	
   

  	
  Preamble

  	
   

  
	
  Shelter Acquisition Agreement

  	
   

  	
  §11.1

  	
   

  
	
  Shelter Acquisition Documents

  	
   

  	
  §11.1

  	
   

  
	
  Settlement Date

  	
   

  	
  §9.8(A)(2)

  	
   

  
	
  Subsidiary

  	
   

  	
  §11.1

  	
   

  
	
  Syndication Agent

  	
   

  	
  §11.1

  	
   

  
	
  Target

  	
   

  	
  §7.6

  	
   

  
	
  Tax Liabilities

  	
   

  	
  §2.9(A)

  	
   

  
	
  Term Loans

  	
   

  	
  §11.1

  	
   

  
	
  Term Loan A

  	
   

  	
  §11.1

  	
   

  
	
  Term Loan A Commitment

  	
   

  	
  §11.1

  	
   

  
	
  Term Loan B

  	
   

  	
  §11.1

  	
   

  
	
  Term Loan B Commitment

  	
   

  	
  §11.1

  	
   

  
	
  Term Notes

  	
   

  	
  §11.1

  	
   

  
	
  Termination Date

  	
   

  	
  §2.6

  	
   

  
	
  Total Indebtedness

  	
   

  	
  §11.1

  	
   

  
	
  Total Loan Commitment

  	
   

  	
  §11.1

  	
   

  
	
  UCC

  	
   

  	
  §11.1

  	
   

  
	
  Unused Line Fee Margin

  	
   

  	
  §11.1

  	
   

  
	
  Wachovia

  	
   

  	
  Preamble

  	
   

  

 

ix

 

THIRD
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

This AGREEMENT is dated
as of October 14, 2005 and entered into among BEACON SALES ACQUISITION,
INC., a Delaware corporation (“Borrower”); each of QUALITY ROOFING SUPPLY
COMPANY, INC., a Delaware corporation (“Quality”), BEACON CANADA, INC., a
Delaware corporation (“Beacon Canada Holdings”), BEST DISTRIBUTING CO., a North
Carolina corporation (“Best Distribution”), THE ROOF CENTER, INC., a Delaware
corporation (“RFC”), WEST END LUMBER COMPANY, INC., a Delaware corporation
(“West End”), J.G.A. BEACON, INC., a Delaware corporation (“JGA”), SDI HOLDING,
INC., a Delaware corporation (“SDI Holding”), SDI ACQUISITION GUARANTOR, INC.,
a Delaware corporation (“SDI Guarantor”) and SHELTER DISTRIBUTION, INC., a
Delaware corporation (“Shelter”) (each individually a “Domestic Subsidiary
Guarantor” and collectively “Domestic Subsidiary Guarantors” and, together with
Borrower and each other domestic Subsidiary of Borrower which hereafter becomes
a party to this Agreement with the consent of Agent, each individually an
“Obligor” and collectively “Obligors”); the financial institution(s) listed on
the signature pages hereof, and their respective successors and Eligible
Assignees (each individually a “Lender” and collectively “Lenders”); GENERAL
ELECTRIC CAPITAL CORPORATION, a Delaware corporation (in its individual
capacity, “GE Capital”), for itself as a Lender, as the initial L/C Issuer and
as Agent; JPMORGAN CHASE BANK, N.A. (“JPMorgan”), as Syndication Agent; and WACHOVIA CAPITAL FINANCE CORPORATION
(CENTRAL) (“Wachovia”) and THE CIT GROUP/BUSINESS CREDIT, INC. (“CIT”),
as Co-Documentation Agents.

 

WHEREAS, pursuant to the
Shelter Acquisition Agreement and the other Shelter Acquisition Documents
executed and delivered in connection therewith, Borrower is acquiring all of
the issued and outstanding shares of capital stock and outstanding warrants to
purchase shares of capital stock of SDI Holding, and, indirectly, of all of the
issued and outstanding shares of capital stock of SDI Guarantor and of Shelter
(such transaction being referred to as the “Shelter Acquisition”);

 

WHEREAS, the Obligors
signatory thereto (the “Existing Obligors”), General Electric Capital
Corporation, a Delaware corporation, as agent (“Existing Agent”), and the
lenders signatory thereto (the “Existing Lenders”), are parties to that certain
Second Amended and Restated Loan and Security Agreement dated as of
March 12, 2004 (as heretofor amended, modified and supplemented, the
“Existing Loan Agreement”); and

 

WHEREAS, the parties
hereto desire to restate and to further amend the provisions of the Existing
Loan Agreement for the purposes of (i) increasing the Revolving Loan
Commitment by $111,500,000 to $230,000,000 in the aggregate, increasing the
Term Loan A Commitment by $10,840,000 to $25,000,000 in the aggregate, and increasing
the Term Loan B Commitment by $44,000,000 to $55,000,000 in the aggregate,
(ii) restating the terms of the Existing Obligations and the security
interests granted under the Existing Loan Agreement, (iii) providing for
the additional Obligations and the additional grants of security interests set
forth herein, (iv) providing funding for a portion of the Shelter
Acquisition and (v) providing funding for the repayment of certain
indebtedness of Shelter and (vi) for working capital and other general corporate
purposes;

 

 

NOW, THEREFORE, in
consideration of the premises and the agreements, provisions and covenants
herein contained, Obligors, Agent and Lenders agree as follows:

 

SECTION 1.

DEFINITIONS AND ACCOUNTING TERMS

 

1.1                                 Certain
Defined Terms.  The capitalized terms
not otherwise defined in this Agreement and the accounting terms used in this
Agreement shall have the meanings set forth in Section 11 of this
Agreement.

 

1.2                                 Acknowledgement
of Existing Obligations and Restatement Thereof.  The Loan Parties, the Agent and the Lenders
acknowledge and agree that under the Existing Loan Agreement, the aggregate
principal balance of all Obligations (excluding Letter of Credit Obligations)
owing by Loan Parties on October 14, 2005 totaled $82,330,754.72 (exclusive
of interest, fees and expenses), of which $57,170,754.72 constituted
the aggregate principal balance of the Revolving Loans (the “Existing Revolver Balance”),
(ii) $14,160,000 constituted the aggregate principal balance of the Term
Loan A (the “Existing Term Loan A
Balance”) and (iii) $11,000,000 constituted the aggregate principal
balance of the Term Loan B (the “Existing Term Loan B Balance”).  The Loan Parties acknowledge and agree that
all Obligations (including without limitation Letter of Credit Obligations)
outstanding as of the Closing Date under the Existing Loan Agreement constitute
valid and binding obligations of the Loan Parties without offset, counterclaim,
defense or recoupment of any kind.  The
Loan Parties, Agent and Lenders acknowledge and agree that effective as of the
Closing Date pursuant to the terms of this Agreement:  (i) the Existing Revolver Balance
outstanding under the Existing Loan Agreement shall be allocated to and
constitute the initial principal balance of the Revolving Loans under this
Agreement and shall be deemed fully funded as of the Closing Date,
(ii) the Existing Term Loan A Balance shall be allocated to constitute a
portion of the initial principal balance of the Term Loan A under this
Agreement and such portion of the Term Loan A shall be deemed fully funded as
of the Closing Date and (iii) the Existing Term Loan B Balance shall be
allocated to constitute a portion of the initial principal balance of the Term
Loan B under this Agreement and such portion of the Term Loan B shall be deemed
fully funded as of the Closing Date.  The
Loan Parties, Agent and Lenders acknowledge and agree that all interest, fees
and expenses together with all other Obligations outstanding under the Existing
Loan Agreement which remain unpaid and outstanding as of the Closing Date shall
be and remain outstanding and payable under this Agreement and the other Loan
Documents.

 

SECTION 2.

LOANS AND COLLATERAL

 

2.1                                 Loans.

 

(A)                              Term
Loans.

 

(1)                                  Term Loan A. 
Each Lender, severally, agrees to lend to Borrower, on the Closing Date,
its Pro Rata Share of the Term Loan A Commitment which is in the aggregate
amount of $25,000,000, subject to the following sentence.  Borrower acknowledges and agrees that Lenders
have previously funded the Existing Term Loan A Balance to the

 

2

 

Borrower
and have fully performed Lenders’ Term Loan A Commitment with respect to the
Existing Term Loan A Balance.  The Term
Loan A shall be funded in one drawing. 
Amounts borrowed under this subsection 2.1(A)(1) and
repaid may not be reborrowed.  Borrower
shall make principal payments in the amount of the applicable Scheduled
Installment of the Term Loan A (or such lesser principal amount as shall then be
outstanding) on the dates set forth below.

 

“Scheduled Installment” of the Term Loan A means, for
each date set forth below, the amount set forth opposite such date.

 

	
  Date

  	
   

  	
  Scheduled Installment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31,
  2005

  	
   

  	
  $

  	
  750,000

  	
   

  
	
  March 31,
  2006

  	
   

  	
  $

  	
  750,000

  	
   

  
	
  June 30,
  2006

  	
   

  	
  $

  	
  750,000

  	
   

  
	
  September 30,
  2006

  	
   

  	
  $

  	
  750,000

  	
   

  
	
  December 31,
  2006

  	
   

  	
  $

  	
  750,000

  	
   

  
	
  March 31,
  2007

  	
   

  	
  $

  	
  750,000

  	
   

  
	
  June 30,
  2007

  	
   

  	
  $

  	
  750,000

  	
   

  
	
  September 30,
  2007

  	
   

  	
  $

  	
  750,000

  	
   

  
	
  December 31,
  2007

  	
   

  	
  $

  	
  750,000

  	
   

  
	
  March 31,
  2008

  	
   

  	
  $

  	
  750,000

  	
   

  
	
  June 30,
  2008

  	
   

  	
  $

  	
  750,000

  	
   

  
	
  September 30,
  2008

  	
   

  	
  $

  	
  750,000

  	
   

  
	
  December 31,
  2008

  	
   

  	
  $

  	
  750,000

  	
   

  
	
  March 31,
  2009

  	
   

  	
  $

  	
  750,000

  	
   

  
	
  June 30,
  2009

  	
   

  	
  $

  	
  750,000

  	
   

  
	
  September 30,
  2009

  	
   

  	
  $

  	
  750,000

  	
   

  
	
  December 31,
  2009

  	
   

  	
  $

  	
  750,000

  	
   

  
	
  March 31,
  2010

  	
   

  	
  $

  	
  750,000

  	
   

  
	
  June 30,
  2010

  	
   

  	
  $

  	
  750,000

  	
   

  
	
  October 14,
  2010

  	
   

  	
  $

  	
  10,750,000

  	
   

  

 

(2)                                  Term Loan B. 
Each Lender, severally, agrees to lend to Borrower on the Closing Date
its Pro Rata Share of the Term Loan B Commitment which is in the aggregate
amount of $55,000,000, subject to the following sentence.  Borrower acknowledges and agrees that Lenders
have previously funded the Existing Term Loan B Balance to the Borrower and
have fully performed Lenders’ Term Loan B Commitment with respect to the
Existing Term Loan B Balance.  The Term
Loan B shall be funded in one drawing. 
Amounts borrowed under this subsection 2.1(A)(2) and
repaid may not be reborrowed.  Borrower
shall make principal payments in the amounts of the applicable Scheduled
Installments of Term Loan B (or such lesser principal amount of Term Loan B as
shall then be outstanding) on the dates set forth below.

 

“Scheduled Installment” of Term Loan B means, for each
date set forth below, the amount set forth opposite such date.

 

3

 

	
  Date

  	
   

  	
  Scheduled Installment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31,
  2005

  	
   

  	
  $

  	
  4,583,333

  	
   

  
	
  March 31,
  2006

  	
   

  	
  $

  	
  4,583,333

  	
   

  
	
  June 30,
  2006

  	
   

  	
  $

  	
  4,583,333

  	
   

  
	
  September 30,
  2006

  	
   

  	
  $

  	
  4,583,333

  	
   

  
	
  December 31,
  2006

  	
   

  	
  $

  	
  4,583,333

  	
   

  
	
  March 31,
  2007

  	
   

  	
  $

  	
  4,583,333

  	
   

  
	
  June 30,
  2007

  	
   

  	
  $

  	
  4,583,333

  	
   

  
	
  September 30,
  2007

  	
   

  	
  $

  	
  4,583,333

  	
   

  
	
  December 31,
  2007

  	
   

  	
  $

  	
  4,583,334

  	
   

  
	
  March 31,
  2008

  	
   

  	
  $

  	
  4,583,334

  	
   

  
	
  June 30,
  2008

  	
   

  	
  $

  	
  4,583,334

  	
   

  
	
  September 30,
  2008

  	
   

  	
  $

  	
  4,583,334

  	
   

  

 

(3)                                  The final installment shall in all
events equal the entire remaining principal balance of Term Loan A and Term
Loan B, respectively.  Notwithstanding
the foregoing, the outstanding principal balance of the Term Loans shall be due
and payable in full on the Termination Date.

 

(B)                                Revolving
Loan. Each Lender, severally, agrees to lend to Borrower from time to time
its Pro Rata Share of each advance under the Revolving Loan Commitment.  The aggregate amount of the Revolving Loan
Commitment shall not at any time exceed $230,000,000, as such amount may be
increased in accordance with subsection 2.16.  Amounts borrowed under this subsection 2.1(B) may
be repaid and reborrowed at any time prior to the earlier of (i) the
termination of the Revolving Loan Commitment pursuant to subsection 8.3 or
(ii) the Termination Date.  Except
as otherwise provided herein, no Lender shall have any obligation to make a
Revolving Advance to the extent such Revolving Advance would cause the
Revolving Loan (after giving effect to any immediate application of the
proceeds thereof) to exceed the Maximum Revolving Loan Amount.

 

“Maximum Revolving Loan
Amount” means, as of any date of determination, the lesser of (a) the
Revolving Loan Commitments of all Lenders less the balance of Letter of
Credit Obligations and (b) the Consolidated Borrowing Base less the
sum of (i) the balance of Letter of Credit Obligations, and (ii) the
outstanding balance of the Canadian Facility Revolving Loans (converted from
Canadian Dollars into an Equivalent Amount of U.S. Dollars).

 

“Consolidating Borrowing
Base” means, for any Obligor as of any date of determination, an amount equal
to the sum of (a) up to 85% of such Obligor’s Eligible Accounts less
such Obligor’s Dilution Reserve and less such Obligor’s Credit Memoranda
Reserve, plus (b) up to the Inventory Advance Rate Percentage (the
Seasonal Inventory Advance Rate Percentage during the period from
January 1 through March 31 of each year) of such Obligor’s Eligible
Inventory, and less, in each case, such other Reserves (excluding Credit
Memoranda Reserves and Dilution Reserves included in the definition thereof) as
Agent in its reasonable credit judgment may elect to establish with prior or
contemporaneous written notice to Borrower.

 

4

 

“Consolidated Borrowing
Base” means, as of any date of determination, an amount equal to the sum of the
aggregate Consolidating Borrowing Bases plus the Beacon Canada
Consolidating Borrowing Base (converted from Canadian Dollars into an
Equivalent Amount of U.S. Dollars).

 

“Credit Memoranda
Reserve” means, for any Obligor as of any date of determination, a reserve
equal to the aggregate credits to account debtors provided under credit
memoranda issued by such Obligor more than thirty (30) days after the creation
of the Accounts giving rise to such credits. 
The Credit Memoranda Reserve for Obligors as of the Closing Date is
reflected in the Borrowing Base Certificate delivered as of such date and shall
thereafter be adjusted after each field examination audit of the Collateral
conducted by Agent or any duly authorized representative of Agent.

 

“Dilution Reserve” means,
for any Obligor as of any date of determination, a reserve for the amount by
which the total dilution of such Obligor’s Accounts exceeds five percent (5%);
with dilution referring to all actual and potential offsets to an Account of such
Obligor, including, without limitation, customer payment and/or volume
discounts, write-offs, credit memoranda, returns and allowances, and billing
errors.  The Dilution Reserve for each
Obligor shall be adjusted after each field examination audit of the Collateral
conducted by Agent or any authorized representative designated by Agent.

 

“Inventory Advance Rate
Percentage” means, initially, 64.5%, as such percentage may hereafter be
adjusted in the manner set forth below; provided that the Inventory
Advance Rate Percentage shall never exceed 64.5%.

 

“Seasonal Inventory
Advance Rate Percentage” means, initially, 69.5%, as such percentage may
hereafter be adjusted in the manner set forth below; provided that the
Seasonal Inventory Advance Rate Percentage shall never exceed 69.5%.

 

With reasonable
promptness following Agent’s receipt of each Inventory appraisal obtained
pursuant to Paragraph H of the Reporting Rider (each such appraisal, an
“Inventory Appraisal”), Agent shall determine the aggregate net orderly
liquidation value of all Inventory of Obligors and Beacon Canada as of the date
of such Inventory Appraisal, such determination to be made by Agent in good
faith based upon the net orderly liquidation values set forth in such Inventory
Appraisal (such aggregate net orderly liquidation value, the “Orderly
Liquidation Value”).  Effective five
(5) Business Days following delivery by Agent to Borrower of written
notice of such determination (and any resulting adjustments to the Inventory
Advance Rate and the Seasonal Inventory Advance Rate):

 

(1)                                  the Inventory Advance Rate shall be
adjusted (if necessary) by Agent to a percentage equal to the lower of (x)
64.5% and (y) that percentage which, when multiplied by the aggregate Eligible
Inventory of Obligors and Beacon Canada (under the Canadian Credit Facility
Agreement) as of the date of such Inventory Appraisal (determined at the lower
of cost, excluding intercompany charges or profits included in cost, on a
weighted average basis, or market), results in an amount not exceeding 85% of
the Orderly Liquidation Value of all Inventory of Obligors and Beacon Canada as
of such date.

 

5

 

(2)                                  the Seasonal Inventory Advance Rate
shall be adjusted (if necessary) by Agent to a percentage equal to the lower of
(x) 69.5% and (y) that percentage which, when multiplied by the aggregate
Eligible Inventory of Obligors and Beacon Canada as of the date of such
Inventory Appraisal (determined at the lower of cost, excluding intercompany
charges or profits included in cost, on a weighted average basis, or market),
results in an amount not exceeding 95% of the Orderly Liquidation Value of all
Inventory of Obligors and Beacon Canada as of such date.

 

All such adjustments to
the Inventory Advance Rate and the Seasonal Inventory Advance Rate made by
Agent hereunder shall be final and binding upon the Loan Parties and Lenders
absent demonstrable error by Agent.

 

(C)                                [Intentionally Deleted].

 

(D)                               Eligible
Collateral.

 

“Eligible Accounts”
means, for any Obligor as at any date of determination, the aggregate of all
Accounts of such Obligor that Agent, in its reasonable credit judgment, deems
to be eligible for borrowing purposes. 
Without limiting the generality of the foregoing, the Agent may determine
that the following Accounts are not Eligible Accounts:

 

(1)                                  Accounts which, at the date of
issuance of the respective invoice therefor, were payable more than ninety (90)
days after the date of issuance;

 

(2)                                  Accounts which remain unpaid for
more than the earlier of sixty (60) days after the due date specified in the
original invoice or one hundred twenty (120) days after invoice date;

 

(3)                                  Accounts which are otherwise
eligible with respect to which the account debtor is owed a credit by any Loan
Party, but only to the extent of such credit;

 

(4)                                  Accounts due from an account debtor
whose principal place of business is located outside the United States of
America or Canada (excluding the Northwest Territories and the Territory of
Nunavut) unless such Account is backed by a letter of credit, in form and
substance acceptable to Agent and issued or confirmed by a bank that is
organized under the laws of the United States of America or a State thereof,
that is acceptable to Agent; provided that such letter of credit has
been delivered to Agent as additional Collateral;

 

(5)                                  Accounts due from an account debtor
which Agent, in the exercise of its reasonable credit judgment, has notified
Borrower does not have a satisfactory credit standing;

 

(6)                                  Accounts in excess of $20,000 in the
aggregate with respect to which the account debtor is the United States of
America, any state or any municipality, or any department, agency or
instrumentality thereof, unless the applicable Obligor has, with respect to
such Accounts, complied with the Federal Assignment of Claims Act of 1940 as
amended (31 U.S.C. Section 3727 et. seq.) or any applicable statute or
municipal ordinance of similar purpose and effect;

 

6

 

(7)                                  Accounts with respect to which the
account debtor is an Affiliate of any Loan Party or a director, officer, agent,
stockholder or employee of any Loan Party or any of its Affiliates;

 

(8)                                  Accounts due from an account debtor
if more than fifty percent (50%) of the aggregate amount of all Accounts of
Obligors (together with all Beacon Canada Accounts) due from such account
debtor have at the time remained unpaid for more than the earlier of sixty (60)
days after due date or one hundred twenty (120) days after the invoice date;

 

(9)                                  Accounts with respect to which there
is any unresolved dispute with the respective account debtor (but only to the
extent of such dispute);

 

(10)                            Accounts evidenced by an
“instrument” or “chattel paper” (as defined in the UCC) not in the possession
of Agent, on behalf of itself and Lenders;

 

(11)                            Accounts with respect to which
Agent, on behalf of itself and Lenders, does not have a valid, first priority
and fully perfected security interest;

 

(12)                            Accounts subject to any Lien except
those in favor of Agent, on behalf of itself and Lenders, and those in favor of
Canadian Facility Agent, on behalf of itself and Canadian Facility Lenders;

 

(13)                            Accounts with respect to which the
account debtor is the subject of any bankruptcy or other insolvency proceeding;

 

(14)                            Accounts due from an account debtor
to the extent that such Accounts exceed in the aggregate an amount equal to ten
percent (10%) of the aggregate of all Accounts of all Obligors (together with
all Beacon Canada Accounts) at said date;

 

(15)                            Accounts with respect to which the
account debtor’s obligation to pay is conditional or subject to a repurchase
obligation or right to return or with respect to which the goods or services
giving rise to such Account have not been delivered (or performed, as
applicable) and accepted by such account debtor, including progress billings,
bill and hold sales, guarantied sales, sale or return transactions, sales on
approval or consignment sales;

 

(16)                            Accounts with respect to which the
account debtor is located in New Jersey, or any other state denying creditors
access to its courts in the absence of a Notice of Business Activities Report
or other similar filing, unless the applicable Loan Party has either qualified
as a foreign corporation authorized to transact business in such state or has
filed a Notice of Business Activities Report or similar filing with the
applicable state agency for the then current year;

 

(17)                            Accounts with respect to which the
account debtor is a creditor of any Loan Party; provided, however,
that any such Account shall only be ineligible as to that portion of such
Account which is less than or equal to the amount owed by the Loan Parties to
such Person; and

 

7

 

(18)                            that portion of Accounts which
represents service charges, late fees or similar charges.

 

“Eligible Inventory”
means, for any Obligor as at any date of determination, the value (determined
at the lower of cost, excluding intercompany charges or profits included in
cost, on a weighted average cost basis, or market) of all Inventory owned by
such Obligor and located in the United States of America that Agent, in its
reasonable credit judgment, deems to be eligible for borrowing purposes.  Without limiting the generality of the
foregoing, the Agent may determine that the following is not Eligible
Inventory:

 

(1)                                  work-in-process that is not readily
marketable in its current form;

 

(2)                                  finished goods which do not meet the
specifications of the purchase order for such goods and which are not readily
saleable in their current form by Obligors in the ordinary course of business;

 

(3)                                  Inventory which Agent determines in
the exercise of its reasonable credit judgment, is unacceptable for borrowing
purposes due to age, quality, type, category and/or quantity, including without
limitation (a) Inventory on hand for more than 12 months and
(b) Inventory purchased or otherwise acquired more than 3 months prior to
any date of determination which is in excess of a twelve-month supply;

 

(4)                                  packaging, shipping materials or
supplies consumed in the applicable Loan Party’s business;

 

(5)                                  Inventory with respect to which
Agent, on behalf of itself and Lenders, does not have a valid, first priority
and fully perfected security interest;

 

(6)                                  Inventory with respect to which
there exists any Lien in favor of any Person other than Agent, on behalf of
itself and Lenders, and Canadian Facility Agent, on behalf of itself and
Canadian Facility Lenders;

 

(7)                                  Inventory produced in violation of
the Fair Labor Standards Act and subject to the so-called “hot goods”
provisions contained in Title 29 U.S.C. 215 (a)(i) or any replacement
statute;

 

(8)                                  Inventory located at any location
other than those identified pursuant to subsection 4.6;

 

(9)                                  Inventory located at a vendor’s location
or with a consignee;

 

(10)                            Inventory located with a
warehouseman, bailee, processor or similar third party, unless such Person has
executed a waiver of interest satisfactory to Agent; and

 

(11)                            unless
otherwise agreed by Agent, Inventory in any location for which Agent has not
received an agreement, in form and substance acceptable to Agent,

 

8

 

acknowledging
Agent’s rights and waiving its own interest in such Inventory from each lessor
and sublessor and each mortgagee of such location.

 

(E)                                 [Intentionally Deleted].

 

(F)                                 Borrowing
Mechanics.  (1) LIBOR Loans made
on any Funding Date shall be in an aggregate minimum amount of $5,000,000 and
integral multiples of $100,000 in excess of such amount.  (2) On any day when Borrower desires a
Revolving Advance under this subsection 2.1, Borrower shall give Agent
written or telephonic notice of the proposed borrowing by 1:00 p.m.
Chicago time on the Funding Date of an Index Rate Loan less than $10,000,000,
written or telephonic notice by 1:00 p.m. Chicago time one
(1) Business Day prior to the Funding Date of an Index Rate Loan equal to
or greater than $10,000,000, and three (3) Business Days in advance of the
Funding Date of a LIBOR Loan, which notice shall specify the proposed Funding
Date (which shall be a Business Day), whether such Loans shall consist of Index
Rate Loans or LIBOR Loans, and, for LIBOR Loans, the Interest Period applicable
thereto.  Any such telephonic notice
shall be confirmed with a Notice of Borrowing on the same day as such
request.  Neither Agent nor Lender shall
incur any liability to Borrower for acting upon any telephonic notice or a
Notice of Borrowing Agent believes in good faith to have been given by a duly
authorized officer or other person authorized to borrow on behalf of Borrower
or for otherwise acting in good faith under this subsection 2.1(F).  Neither Agent nor Lender will be required to
make any advance pursuant to any telephonic or written notice or a Notice of
Borrowing, unless all of the terms and conditions set forth in Section 3
and the Conditions Rider have been satisfied and Agent has also received the
most recent Consolidating Borrowing Base Certificates and Consolidated
Borrowing Base Certificate and all other documents required under
Section 5 and the Reporting Rider by 1:00 p.m. Chicago time on the
date of such funding request.  Each
Advance shall be deposited by wire transfer in immediately available funds in
such account as Borrower may from time to time designate to Agent in
writing.  The becoming due of any amount
required to be paid under this Agreement or any of the other Loan Documents as
principal, Lender Letter of Credit reimbursement obligation, accrued interest,
fees, compensation or any other amounts shall be deemed irrevocably to be an
automatic request by Borrower for a Revolving Advance, which shall be an Index
Rate Loan on the due date of, and in the amount required to pay (as set forth
on Agent’s books and records), such principal, Lender Letter of Credit
reimbursement obligation, accrued interest fees, compensation or any other
amounts.

 

(G)                                Notes.  Borrower shall execute and deliver to each
Lender with appropriate insertions (i) a Note to evidence the Revolving
Loans, such Note to be in principal amount of such Lenders Pro Rata Share of
the Revolving Loan Commitment and (ii) a Note to evidence each Term Loan,
such Notes to be in the principal amount of such Lender’s Pro Rata Share of
each Term Loan.  In the event of an
assignment under subsection 9.5, Borrower shall, upon surrender of the
assigning Lender’s Notes, issue new Notes to reflect the interest held by the
assigning Lender and its Eligible Assignee.

 

(H)                               Letters
of Credit. The Revolving Loan Commitments may, in addition to Revolving
Advances, be utilized, upon the request of Borrower, for the issuance of
Letters of Credit.  Immediately upon the
issuance by an L/C Issuer of a Letter of Credit, and without further action on
the part of Agent or any of the Lenders, each Lender shall be deemed to have

 

9

 

purchased from such L/C Issuer
a participation in such Letter of Credit (or in its obligation under a risk
participation agreement with respect thereto) equal to such Lender’s Pro Rata
Share of the aggregate amount available to be drawn under such Letter of
Credit.  In no event shall any Letter of
Credit be issued to the extent that the issuance of such Letter of Credit would
cause the sum of the balance of the Letter of Credit Obligations (after giving
effect to such issuance), plus the Revolving Loan to exceed the lesser of (x)
the Consolidated Borrowing Base less the Canadian Facility Revolving Loans and
(y) the Revolving Loan Commitments.

 

(1)                                  Maximum Amount. 
The aggregate amount of Letter of Credit Obligations with respect to all
Letters of Credit outstanding at any time shall not exceed $10,000,000.

 

(2)                                  Reimbursement. 
Borrower shall be irrevocably and unconditionally obligated forthwith
without presentment, demand, protest or other formalities of any kind, to
reimburse any L/C Issuer on demand in immediately available funds for any
amounts paid by such L/C Issuer with respect to a Letter of Credit, including
all reimbursement payments, fees, charges, costs and expenses paid by such L/C
Issuer.  Borrower hereby authorizes and
directs Agent, at Agent’s option, to debit Borrower’s account (by increasing
the outstanding principal balance of the Revolving Loan) in the amount of any
payment made by an L/C Issuer with respect to any Letter of Credit.  All amounts paid by an L/C Issuer with
respect to any Letter of Credit that are not immediately repaid by Borrower
with the proceeds of a Revolving Advance or otherwise shall bear interest at
the interest rate applicable to Revolving Loans which are Index Rate Loans
plus, at the election of Requisite Lenders, an additional two percent (2.00%)
per annum.  Each Lender agrees to fund
its Pro Rata Share of any Revolving Loan made pursuant to this subsection 2.1(H)(2).  In the event Agent elects not to debit Borrower’s
account and Borrower fails to reimburse the L/C Issuer in full on the date of
any payment in respect of a Letter of Credit, Agent shall promptly notify each
Lender of the amount of such unreimbursed payment and the accrued interest
thereon and each Lender, on the next Business Day prior to 2:00 p.m. (Chicago time), shall
deliver to Agent an amount equal to its Pro Rata Share thereof in same day
funds.  Each Lender hereby absolutely and
unconditionally agrees to pay to the L/C Issuer upon demand by the L/C Issuer
such Lender’s Pro Rata Share of each payment made by the L/C Issuer in respect
of a Letter of Credit and not immediately reimbursed by Borrower or satisfied
through a debit of Borrower’s account. 
Each Lender acknowledges and agrees that its obligations pursuant to
this subsection in respect of Letters of Credit are absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including setoff, counterclaim, the occurrence and continuance of a Default or
an Event of Default or any failure by Borrower to satisfy any of the conditions
set forth in Section 3 and the Conditions Rider.  If any Lender fails to make available to the
L/C Issuer the amount of such Lender’s Pro Rata Share of any payments made by
the L/C Issuer in respect of a Letter of Credit as provided in this subsection 2.1(H)(2),
the L/C Issuer shall be entitled to recover such amount on demand from such
Lender together with interest at the Index Rate.

 

(3)                                  Request for Letters of Credit. 
Borrower shall give Agent at least three (3) Business Days prior
written notice specifying the date a Letter of Credit is requested to be
issued, the amount and the name and address of the beneficiary and a
description of the transactions proposed to be supported thereby.  If Agent informs Borrower that the L/C Issuer
cannot issue the requested Letter of Credit directly, Borrower may request that
L/C Issuer 

 

10

 

arrange
for the issuance of the requested Letter of Credit under a risk participation
agreement with another financial institution reasonably acceptable to Agent,
L/C Issuer and Borrower.  The issuance of
any Letter of Credit under this Agreement shall be subject to the conditions
that the Letter of Credit (i) supports a transaction entered into in the
ordinary course of business of Borrower and (ii) is in a form, is for an
amount and contains such terms and conditions as are reasonably satisfactory to
the L/C Issuer and, in the case of standby letters of credit, Agent.  The initial notice requesting the issuance of
a Letter of Credit shall be accompanied by the form of the Letter of Credit and
the Master Standby Agreement or Master Documentary Agreement, as applicable,
and an application for a letter of credit, if any, then required by the L/C
Issuer completed in a manner satisfactory to such L/C Issuer.  If any provision of any application or
reimbursement agreement is inconsistent with the terms of this Agreement, then
the provisions of this Agreement, to the extent of such inconsistency, shall
control.

 

(4)                                  Expiration Dates of Letters of
Credit.  The expiration date of each Letter of Credit
shall be on a date which is not later than the earlier of (a) one year
from its date of issuance or (b) the thirtieth (30th) day prior
to the date set forth in clause (a) of the definition of the term
Termination Date.  Notwithstanding the
foregoing, a Letter of Credit may provide for automatic extensions of its
expiration date for one (1) or more successive one (1) year periods
provided that the L/C Issuer has the right to terminate such Letter of Credit
on each such annual expiration date and no renewal term may extend the term of
the Letter of Credit to a date that is later than the thirtieth (30th) day
prior to the date set forth in clause (a) of the definition of the term
Termination Date.  The L/C Issuer may
elect not to renew any such Letter of Credit and, upon direction by Agent or
Requisite Lenders, shall not renew any such Letter of Credit at any time during
the continuance of an Event of Default, provided that, in the case of a
direction by Agent or Requisite Lenders, the L/C Issuer receives such
directions prior to the date notice of non-renewal is required to be given by
the L/C Issuer and the L/C Issuer has had a reasonable period of time to act on
such notice.

 

(5)                                  Obligations Absolute. 
The obligation of Borrower to reimburse the L/C Issuer, Agent and
Lenders for payments made in respect of Letters of Credit shall be
unconditional and irrevocable and shall be paid under all circumstances
strictly in accordance with the terms of this Agreement, including the
following circumstances: (a) any lack of validity or enforceability of any
Letter of Credit; (b) any amendment or waiver of or any consent or
departure from all or any of the provisions of any Letter of Credit or any Loan
Document; (c) the existence of any claim, set-off, defense or other right
which Borrower, any of its Subsidiaries or Affiliates or any other Person may
at any time have against any beneficiary of any Letter of Credit, Agent, any
L/C Issuer, any Lender or any other Person, whether in connection with this
Agreement, any other Loan Document or any other related or unrelated agreements
or transactions; (d) any draft or other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect;
(e) payment under any Letter of Credit against presentation of a draft or
other document that does not substantially comply with the terms of such Letter
of Credit; or (f) any other act or omission to act or delay of any kind of
any L/C Issuer, Agent, any Lender or any other Person or any other event or
circumstance whatsoever that might, but for the provisions of this subsection 2.1(H)(5),
constitute a legal or equitable discharge of Borrower’s obligations hereunder.

 

11

 

(6)                                  Obligations of L/C Issuers. 
Each L/C Issuer (other than GE Capital) hereby agrees that it will not
issue a Letter of Credit hereunder until it has provided Agent with written
notice specifying the amount and intended issuance date of such Letter of
Credit and Agent has returned a written acknowledgment of such notice to L/C
Issuer.  Each L/C Issuer (other than GE
Capital) further agrees to provide to Agent: 
(a) a copy of each Letter of Credit issued by such L/C Issuer
promptly after its issuance; (b) a weekly report summarizing available
amounts under Letters of Credit issued by such L/C Issuer, the dates and
amounts of any draws under such Letters of Credit, the effective date of any
increase or decrease in the face amount of any Letters of Credit during such
week and the amount of any unreimbursed draws under such Letters of Credit; and
(c) such additional information reasonably requested by Agent from time to
time with respect to the Letters of Credit issued by such L/C Issuer.  Without limiting the generality of the
foregoing, it is expressly understood and agreed by Borrower that the absolute and
unconditional obligation of Borrower to Agent and Lenders hereunder to
reimburse payments made under a Letter of Credit will not be excused by the
gross negligence or willful misconduct of the L/C Issuer.  However, the foregoing shall not be construed
to excuse an L/C Issuer from liability to Borrower to the extent of any direct
damages (as opposed to consequential damages, with Borrower hereby waiving all
claims for any consequential damages to the extent permitted by applicable law)
suffered by Borrower that are subject to indemnification under the Master
Standby Agreement or the Master Documentary Agreement.

 

(I)                                    Availability
of a Lender’s Pro Rata Share.

 

(1)                                  Lender’s Amounts Available on a
Funding Date.  Unless Agent receives written notice from a Lender
on or prior to any Funding Date that such Lender will not make available to
Agent as and when required such Lender’s Pro Rata Share of any requested Loan
or Advance, Agent may assume that each Lender will make such amount available
to Agent in immediately available funds on the Funding Date and Agent may (but
shall not be so required), in reliance upon such assumption, make available to
Borrower on such date a corresponding amount.

 

(2)                                  Lender’s Failure to Fund. 
A Defaulting Lender shall pay interest to Agent at the Federal Funds
Effective Rate on the Defaulted Amount from the Business Day following the
applicable Funding Date of such Defaulted Amount until the date such Defaulted
Amount is paid to Agent.  A notice of
Agent submitted to any Lender with respect to amounts owing under this
subsection shall be conclusive, absent manifest error. If such amount is
not paid when due to Agent, Agent, at its option, may notify Borrower of such
failure to fund and, upon demand by Agent, Borrower shall pay the unpaid amount
to Agent for Agent’s account, together with interest thereon for each day
elapsed since the date of such borrowing, at a rate per annum equal to the
interest rate applicable at the time to the Loan made by the other Lenders on
such Funding Date.  The failure of any
Lender to make available any portion of its Commitment on any Funding Date or
to fund its participation in a Lender Letter of Credit shall not relieve any
other Lender of any obligation hereunder to fund such Lender’s Commitment on such
Funding Date or to fund any such participation, but no Lender shall be
responsible for the failure of any other Lender to honor its Commitment on any
Funding Date or to fund any participation to be funded by any other Lender.

 

12

 

(3)                                  Payments to a Defaulting Lender. 
Agent shall not be obligated to transfer to a Defaulting Lender any
payment made by Borrower to Agent or any amount otherwise received by Agent for
application to the Obligations nor shall a Defaulting Lender be entitled to the
sharing of any interest, fees or payments hereunder.

 

(4)                                  Defaulting Lender’s Right to Vote. 
For purposes of voting or consenting to matters with respect to
(i) the Loan Documents or (ii) any other matter concerning the Loans,
a Defaulting Lender shall be deemed not to be a “Lender” and such Lender’s
Commitments and outstanding Loans and Advances shall be deemed to be zero.

 

2.2                                 Interest.

 

(A)                              Rate
of Interest.  From the date the Loans
are made and the date the other Obligations become due the Loans and the other
Obligations shall bear interest at the applicable rates set forth below
(collectively, the “Interest Rate”):

 

(1)                                  The Revolving Loan and all other
Obligations for which no other interest rate is specified shall bear interest
as follows:

 

(a)                                  If
an Index Rate Loan, then at the sum of the Index Rate plus the
Applicable Revolver Index Margin per annum.

 

(b)                                 If
a LIBOR Loan, then at the sum of the LIBOR plus the Applicable Revolver
LIBOR Margin per annum.

 

As of the Closing Date,
the Applicable Revolver Index Margin shall be 0.50% and the Applicable Revolver
LIBOR Margin shall be 1.75%.  Adjustments
in Applicable Margins will be determined by reference to the following grids: 

 

	
  If Interest Rate Excess
  Availability is:

  	
   

  	
  Level of Applicable Margins:

  
	
  < $20,000,000

  	
   

  	
  Level I

  
	
  > $20,000,000,
  but < $50,000,000

  	
   

  	
  Level II

  
	
  > $50,000,000

  	
   

  	
  Level III

  

 

	
   

  	
   

  	
  Applicable Margins

  	
   

  
	
   

  	
   

  	
  Level I

  	
   

  	
  Level II

  	
   

  	
  Level III

  	
   

  
	
  Applicable
  Revolver Index Margin

  	
   

  	
  0.50

  	
  %

  	
  0.375

  	
  %

  	
  0.25

  	
  %

  
	
  Applicable
  Revolver LIBOR Margin

  	
   

  	
  1.75

  	
  %

  	
  1.625

  	
  %

  	
  1.50

  	
  %

  

 

The Applicable Margins
shall be adjusted (up or down) prospectively on April 30, 2006 and, thereafter, on the first day of each fiscal quarter
(commencing July 1, 2006), based upon Interest Rate Excess Availability.  If an Event of Default has occurred and is
continuing at the time any reduction in the Applicable Margins is to be
implemented, that reduction shall be deferred until the first day of the first
calendar month following the date on which such Event of Default is waived or
cured.

 

(2)                                  Term Loan A shall bear interest as
follows:

 

13

 

(a)                                  If
an Index Rate Loan, then at the sum of the Index Rate plus one half of
one percent (0.50%).

 

(b)                                 If
a LIBOR Loan then at the sum of the LIBOR plus one and three quarters of
one percent (1.75%).

 

(3)                                  Term Loan B shall bear interest as
follows:

 

(a)                                  If
an Index Rate Loan, then at the sum of the Index Rate plus one and one
half of one percent (1.50%).

 

(b)                                 If
a LIBOR Loan then at the sum of the LIBOR plus two and three quarters of
one percent (2.75%).

 

Subject to the provisions
of subsection 2.1(F), Borrower shall designate to Agent whether a
Loan shall be an Index Rate Loan or LIBOR Loan at the time a Notice of
Borrowing is given pursuant to subsection 2.1(F).  Such designation by Borrower may be changed
from time to time pursuant to subsection 2.2(D).  If on any day a Loan or a portion of any Loan
is outstanding with respect to which notice has not been delivered to Agent in
accordance with the terms of this Agreement specifying the basis for
determining the rate of interest or if LIBOR has been specified and no LIBOR
quote is available, then for that day that Loan or portion thereof shall bear
interest determined by reference to the Index Rate.

 

After the occurrence and
during the continuance of an Event of Default (i) the Loans and all other
Obligations shall, at the election of Requisite Lenders, bear interest at a
rate per annum equal to two percent (2%) plus the applicable Interest Rate (the
“Default Rate”), (ii) each LIBOR Loan shall automatically convert to an
Index Rate Loan at the end of any applicable Interest Period and (iii) no
Loans may be made or continued as, or converted to, LIBOR Loans.

 

(B)                                Computation
and Payment of Interest.  Interest on
the LIBOR Loans and all other Obligations (other than the Index Rate Loans)
shall be computed on the daily principal balance on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.  Interest on the Index Rate Loans shall be
computed on the daily principal balance on the basis of a three hundred sixty
five (365) day year or three hundred sixty six (366) day year, as applicable,
for the actual number of days elapsed.  
In computing interest on any Loan, the date of funding of the Loan or
the first day of an Interest Period applicable to such Loan or, with respect to
an Index Rate Loan being converted from a LIBOR Loan, the date of conversion of
such LIBOR Loan to such Index Rate Loan, shall be included; and the date of
payment of such Loan or the expiration date of an Interest Period applicable to
such Loan, or with respect to an Index Rate Loan being converted to a LIBOR
Loan, the date of conversion of such Index Rate Loan to such LIBOR Loan, shall
be excluded; provided that if a Loan is repaid on the same day on which it is
made, one (1) day’s interest shall be paid on that Loan.  Interest on Index Rate Loans and all other
Obligations other than LIBOR Loans shall be payable to Agent for the benefit of
Lenders monthly in arrears on the first day of each month, on the date of any
prepayment of Loans, and at maturity, 

 

14

 

whether by acceleration or
otherwise.  Interest on LIBOR Loans shall
be payable to Agent for the benefit of Lenders on the last day of the
applicable Interest Period for such Loan, on the date of any prepayment of the
Loans, and at maturity, whether by acceleration or otherwise.  In addition, for each LIBOR Loan having an
Interest Period longer than three (3) months, interest accrued on such
Loan shall also be payable on the last day of each three (3) month
interval during such Interest Period.

 

(C)                                Interest
Laws.  Notwithstanding any provision
to the contrary contained in this Agreement or any other Loan Document,
Borrower shall not be required to pay, and neither Agent nor any Lender shall
be permitted to collect, any amount of interest in excess of the maximum amount
of interest permitted by applicable law (“Excess Interest”).  If any Excess Interest is provided for or
determined by a court of competent jurisdiction to have been provided for in
this Agreement or in any other Loan Document, then in such event:  (1) the provisions of this subsection shall
govern and control; (2) neither Borrower nor any other Loan Party shall be
obligated to pay any Excess Interest; (3) any Excess Interest that Agent
or any Lender may have received hereunder shall be, at such Lender’s option,
(a) applied as a credit against the outstanding principal balance of the
Obligations or accrued and unpaid interest (not to exceed the maximum amount
permitted by law), (b) refunded to the payor thereof, or (c) any
combination of the foregoing; (4) the interest rate(s) provided for herein
shall be automatically reduced to the maximum lawful rate allowed from time to
time under applicable law (the “Maximum Rate”), and this Agreement and the
other Loan Documents shall be deemed to have been and shall be, reformed and
modified to reflect such reduction; and (5) neither Borrower nor any Loan
Party shall have any action against Agent or any Lender for any damages arising
out of the payment or collection of any Excess Interest.  Notwithstanding the foregoing, if for any
period of time interest on any Obligations is calculated at the Maximum Rate
rather than the applicable rate under this Agreement, and thereafter such
applicable rate becomes less than the Maximum Rate, the rate of interest
payable on such Obligations shall remain at the Maximum Rate until each Lender
shall have received the amount of interest which such Lender would have
received during such period on such Obligations had the rate of interest not
been limited to the Maximum Rate during such period.

 

(D)                               Conversion
or Continuation.  Subject to the
other provisions of this Agreement, Borrower shall have the option to
(1) convert at any time all or any part of outstanding Loans equal to
$5,000,000 and integral multiples of $100,000 in excess of that amount from
Index Rate Loans to LIBOR Loans or (2) upon the expiration of any Interest
Period applicable to a LIBOR Loan, to (a) continue all or any portion of
such LIBOR Loan equal to $5,000,000 and integral multiples of $100,000 in
excess of that amount as a LIBOR Loan or (b) convert all or any portion of
such LIBOR Loan to an Index Rate Loan. 
The succeeding Interest Period(s) of such continued or converted Loan
commence on the last day of the Interest Period of the Loan to be continued or
converted; provided that no outstanding Loan may be continued as, or be
converted into, a LIBOR Loan having an Interest Period of more than one month,
when any Default has occurred and is continuing; provided further, that no
outstanding Loan may be continued as, or be converted into, a LIBOR Loan, when
any Event of Default has occurred and is continuing.

 

Borrower shall deliver a
Notice of Borrowing with respect to any such conversion/continuation to Agent
no later than 12:00 noon (Chicago time) at least three (3) Business Days
in advance of the proposed conversion/continuation date.  The Notice of Borrowing with respect to such
conversion/continuation shall certify: 
(1) the proposed conversion/continuation date (which shall be a
Business Day); (2) the amount of the Loan to be

 

15

 

converted/continued; (3) the nature of the
proposed conversion/continuation; (4) in the case of conversion to, or a
continuation of, a LIBOR Loan, the requested Interest Period; and (5) that
no Default or Event of Default has occurred and is continuing or would result
from the proposed conversion/continuation.

 

In lieu of delivering a
Notice of Borrowing with respect to any such conversion/continuation, Borrower
may give Agent telephonic notice by the required time of any proposed
conversion/continuation under this subsection 2.2(D); provided that
such notice shall be promptly confirmed in writing by delivery of a Notice of
Borrowing (in form and substance described herein) with respect to such
conversion/continuation to Agent on or before the proposed conversion/continuation
date.

 

Neither Agent nor any
Lender shall incur any liability to Borrower in acting upon any telephonic
notice or a Notice of Borrowing referred to above that Agent believes in good
faith to have been given by an officer or other person authorized to act on
behalf of Borrower or for otherwise acting in good faith under this subsection 2.2(D).

 

2.3                                 Fees.

 

(A)                              Unused
Line Fee.  Borrower shall pay to
Agent, for the benefit of Lenders, a fee in an amount equal to the Revolving
Loan Commitment less the sum of (i) the average daily balance of each of
the Revolving Loans plus, (ii) the average daily balance of the Letter of
Credit Obligations during the preceding month, multiplied by (iii) the
Unused Line Fee Margin per annum.  Such
fee to be calculated on the basis of a three hundred sixty (360) day year for
the actual number of days elapsed and to be payable monthly in arrears on the
first day of each month following the Closing Date.

 

(B)                                Letter
of Credit Fees.  Borrower shall pay
to Agent a fee with respect to the Letters of Credit (i) for the benefit
of all Lenders with a Revolving Loan Commitment (based on their respective Pro
Rata Share) in the amount of the average daily balance of Letter of Credit
Obligations outstanding during such month multiplied by 1.75% per annum.  Such fee will be calculated on the basis of a
three hundred sixty (360) day year for the actual number of days elapsed and
will be payable monthly in arrears on the first day of each month.  In addition, Borrower shall pay to any L/C
Issuer, on demand, such fees (including all customary fees and charges) and
expenses of such L/C Issuer in respect of the issuance, negotiation,
acceptance, amendment, transfer and payment of such Letter of Credit or
otherwise payable pursuant to the application and related documentation under
which such Letter of Credit is issued.

 

(C)                                Audit
Fees.  Borrower agrees to pay all
fees and expenses of the firm or individual(s) engaged by Agent to perform
audits of Borrower’s operations. 
Notwithstanding the foregoing, if Agent uses its internal auditors to
perform any such audit, Borrower agrees to pay to Agent, for its own account,
an audit fee with respect to each such audit equal to $800 per internal auditor
per day or any portion thereof, together with all out of pocket expenses.

 

(D)                               Other
Fees and Expenses.  Borrower shall
pay to Agent, for its own account, all charges for returned items and all other
bank charges incurred by Agent, as well as Agent’s standard wire transfer
charges for each wire transfer made under this Agreement.

 

16

 

(E)                                 Fee Letter.  Borrower shall pay to GE Capital,
individually, the fees specified in that certain letter agreement dated as of August 9,
2005 among Borrower, Beacon Canada, GE Capital and Canadian Facility Agent, in
the amounts and at the times specified therein.

 

2.4                                 Payments
and Prepayments.

 

(A)                              Manner and Time of
Payment.  In its sole discretion,
Agent may elect to honor the automatic requests by Borrower for Revolving
Advances for all principal, Letter of Credit reimbursement obligations,
interest, fees, compensation and any other amounts due hereunder or under any
of the other Loan Documents on their applicable due dates pursuant to subsection 2.1
(F), up to the Revolving Loan
Commitment of all Revolving Loan Lenders, and the proceeds of each such Revolving
Advance, if made, shall be applied as a direct payment of the relevant
Obligation.  To the extent such amounts
exceed the Revolving Loan Commitment of all Revolving Loan Lenders, or if Agent
elects to bill Borrower for any amount due hereunder or under any of the other
Loan Documents, such amount shall be immediately due and payable with interest
thereon as provided herein.  All payments
made by Borrower with respect to the Obligations shall be made without deduction,
defense, setoff or counterclaim.  All
payments to Agent hereunder shall, unless otherwise directed by Agent, be made
to Agent’s Account or in accordance with subsection 4.25, in each case in
immediately available funds.  All
payments remitted to Agent’s Account in immediately available funds shall be
credited to the Obligations on the Business Day received; provided, that,
solely for the purpose of computing interest, payments received in accordance
with this sentence for application to the Revolving Loan shall be applied to
the Revolving Loan one (1) Business Day following Agent’s receipt thereof
in immediately available funds.

 

(B)                                Mandatory
Prepayments.

 

(1)                                  Overadvance.  Subject to subsection 9.9, at any
time that the Revolving Loan exceeds the Maximum Revolving Loan Amount,
Borrower shall, immediately repay the Revolving Loan to the extent necessary to
reduce the aggregate principal balance to an amount equal to or less than the
Maximum Revolving Loan Amount.

 

(2)                                  Prepayments
from Proceeds of Asset Dispositions.  Immediately upon receipt by Borrower or any
of its Subsidiaries of any Net Proceeds (excluding Net Proceeds received by
Beacon Canada to the extent required to reduce the outstanding principal
balance of the Canadian Facility Credit Agreement) in excess of $100,000 in the
aggregate during any Fiscal Year, Borrower shall prepay the Obligations in an
amount equal to such proceeds.  All such
prepayments shall be applied to the Loans in accordance with subsection 2.5;
provided, however, if Borrower reasonably expects the Net Proceeds
of any Asset Disposition to be reinvested within one hundred eighty (180) days
to repair or replace such assets with like assets, Borrower shall deliver the
proceeds to Agent to be applied to the Revolving Loan and Agent shall establish
a reserve against available funds for borrowing purposes under the Revolving
Loan for such amount, until such time as such proceeds have been re-borrowed or
applied to other Obligations as set forth herein.  If Borrower so elects to deliver such
proceeds to Agent, Borrower may, so long as no Default or Event of Default
shall have occurred and be continuing, reborrow such proceeds only for such
repair or replacement.  If Borrower fails
to reinvest such 

 

17

 

proceeds
within one hundred eighty (180) days, Borrower hereby authorizes Agent and
Lenders to make a Revolving Loan advance to repay the Loans in the manner set
forth in subsection 2.5.

 

(3)                                  Prepayments
from Excess Cash Flow.  On May 15
of each Fiscal Year commencing on May 15, 2006, Borrower shall prepay the
Obligations in an amount equal to 50% of Excess Cash Flow for the prior Fiscal
Year (provided that such prepayment shall not exceed $2,500,000 with
respect to any Fiscal Year), calculated on the basis of the audited financial
statements for such Fiscal Year delivered to Agent and Lenders pursuant to the
Reporting Rider.  All such prepayments
from Excess Cash Flow shall be applied to the Loans in accordance with subsection 2.5.  Concurrently with the making of any such
payment, Borrower shall deliver to Agent and Lenders a certificate of Borrower’s
chief executive officer or chief financial officer demonstrating its
calculation of the amount required to be paid.

 

(4)                                  Prepayments
from Issuance of Securities.  Immediately upon the receipt by Holdings or
any of its Subsidiaries of the proceeds of the issuance of equity securities
other than (1) proceeds of the issuance of equity securities by Holdings
to members of the management of Holdings or any of its Subsidiaries, (2) proceeds
of the issuance of equity securities to Borrower or any Subsidiary of Borrower,
(3) proceeds of the issuance of equity securities by Holdings in
connection with a Permitted Acquisition, and (4) proceeds of the issuance
of equity securities by Holdings in a primary public offering in an aggregate
amount not to exceed, with respect to any such offering, the sum of $60,000,000
plus 50% of the amount of such proceeds in excess of $60,000,000, and
not otherwise described in the preceding clauses (1), (2) and (3),
Borrower shall prepay the Loans in an amount equal to such proceeds, net of
underwriting discounts and commissions and other reasonable costs associated
therewith.  All such prepayments shall be
applied to the Loans in accordance with subsection 2.5.

 

(C)                                Voluntary
Prepayments and Repayments.  Borrower
may, at any time upon not less than three (3) Business Days prior notice
to Agent, prepay the Term Loans or terminate the Revolving Loan Commitment;
provided, however, the Revolving Loan Commitment may not be terminated by
Borrower until all Obligations are paid in full.  Any prepayment of the Obligations permitted
in this subsection 2.4(C) shall be subject to the payment of all fees
set forth in subsection 2.3, and the payment of any amounts owing pursuant
to subsection 2.13 resulting from such prepayment.  In the event any Letters of Credit are
outstanding at the time that Borrower prepays the Obligations and desires to
terminate the Revolving Loan Commitment, Borrower shall cause L/C Issuer, Agent
and each Lender to be released from all liability under any Letters of Credit
or, at Agent’s option, Borrower shall (1) deposit with Agent for the
benefit of all Lenders with a Revolving Loan Commitment cash in an amount equal
to one hundred and five percent (105%) of the aggregate balance of Letter of
Credit Obligations to be available to Agent to reimburse payments of drafts
drawn under such Letters of Credit and pay any fees and expenses related
thereto and (2) prepay the fees payable under subsection 2.3(B) with
respect to such Letters of Credit for the full remaining terms of such Letters
of Credit.  Upon termination of any such
Letter of Credit, the unearned portion of such prepaid fee attributable to such
Letter of Credit shall be refunded to Borrower. 
Notwithstanding the foregoing, any Lender holding any portion of Term
Loan B may elect that prepayments of Term Loan B made in conjunction with a
partial prepayment of the Loans be applied to Term Loan A in accordance with
subsection 2.5 or as otherwise may be agreed by Requisite Lenders.

 

18

 

(D)                               Payments on Business
Days.  Whenever any payment to be
made hereunder shall be stated to be due on a day that is not a Business Day,
the payment may be made on the next succeeding Business Day and such extension
of time shall be included in the computation of the amount of interest or fees
due hereunder.

 

2.5                                 Application
of Prepayment Proceeds.  With respect
to the prepayments described in subsections 2.4(B)(2) and 2.4(B)(4),
such prepayments shall first be applied in payment of Scheduled Installments of
the Term Loan A in inverse order of maturity, and shall then be applied in payment of Scheduled Installments of
Term Loan B in inverse order of maturity, and,
at any time after the Term Loans shall have been repaid in full, such payments
shall be applied to reduce the outstanding principal balance of the Revolving
Loans but not as a permanent reduction of the Revolving Loan Commitment.  With respect to the prepayments described in subsections
2.4(B)(3), such prepayments shall first be applied in payment of Scheduled
Installments of the Term Loan B in inverse order of maturity, and shall then be applied in payment of
Scheduled Installments of Term Loan A in inverse order of maturity, and, at any time after the Term Loans
shall have been repaid in full, such payments shall be applied to reduce the
outstanding principal balance of the Revolving Loans but not as a permanent
reduction of the Revolving Loan Commitment. 
Considering each type of Loan being prepaid separately, any such
prepayment shall be applied first to Index Rate Loans of the type required to
be prepaid before application to LIBOR Loans of the type required to be
prepaid, in each case in any manner which minimizes any resulting LIBOR
breakage fees.

 

2.6                                 Term
of this Agreement.  This Agreement
shall be effective until the earliest of (a) October 14, 2010, (b) the
acceleration of all Obligations pursuant to subsection 8.3 and (c) the
date of termination of Canadian Lenders’ obligations to make the Canadian
Facility Revolving Loans or permit existing Canadian Facility Revolving Loans
to remain outstanding (other than in connection with a sale of Beacon Canada
(or all or substantially all of its assets) approved by Lenders in accordance
with the terms of this Agreement) (the “Termination Date”).  The Commitments shall terminate  (unless earlier terminated pursuant to the
terms hereunder) upon the Termination Date and all Obligations shall become
immediately due and payable without notice or demand.  Notwithstanding any termination, until all
Obligations (other than contingent indemnity obligations to the extent no
unsatisfied claim has been asserted) have been fully paid and satisfied, Agent,
on behalf of itself and Lenders, shall be entitled to retain security interests
in and liens upon all Collateral, and even after payment of all Obligations
hereunder, Obligors’ obligation to indemnify Agent and each Lender in
accordance with the terms hereof shall continue.

 

2.7                                 Statements.  Agent shall render a monthly statement of
account to Borrower within twenty (20) days after the end of each month.  Such statement of account shall constitute an
account stated unless Borrower makes written objection thereto within thirty
(30) days from the date such statement is mailed to Borrower. Agent shall
record in its books and records, including computer records, (a) all
Loans, interest charges and payments thereof, (b) all Letter of Credit
Liability, (c) the charging and payment of all fees, costs and expenses
and (d) all other debits and credits pursuant to this Agreement.  The balance in the loan accounts shall
constitute presumptive evidence, absent demonstrable error, of the accuracy of
the information contained therein; provided, however, that any
failure by Agent to so record shall not limit or affect the Borrower’s
obligation to pay.

 

19

 

2.8                                 Grant
of Security Interest.  To secure the
payment and performance of the Obligations, including all renewals, extensions,
restructurings and refinancings of any or all of the Obligations, each Obligor
hereby grants to Agent, on behalf of Agent and Lenders (and any Affiliates of
Lenders to the extent such Affiliates are parties to Loan Documents), a
continuing security interest, lien and mortgage in and to all right, title and
interest of such Obligor in all of such Obligor’s personal and real property,
whether now owned or existing or hereafter acquired or arising and regardless
of where located (all being collectively referred to as the “Collateral”)
including, without limitation, (A) Accounts, and all guaranties and
security therefor, and all goods and rights represented thereby or arising
therefrom including the rights of stoppage in transit, replevin and
reclamation; (B) Inventory and other goods; (C) general intangibles
(as defined in the UCC); (D) documents (as defined in the UCC) or other
receipts covering, evidencing or representing goods; (E) instruments (as
defined in the UCC); (F) chattel paper (as defined in the UCC); (G) Equipment;
(H) Mortgaged Property; (I) investment property (as defined in the UCC)
including, without limitation, all securities (certificated and uncertificated)
security accounts, security entitlements, commodity contracts and commodity
accounts; (J) Intellectual Property; (K) commercial tort claims (including
those specified on Schedule 2.8); (L) letter of credit rights (as
defined in the UCC) and supporting obligations (as defined in the UCC); (M) all
deposit accounts of such Obligor maintained with any bank or financial
institution; (N) all cash and other monies and property of such Obligor in the
possession or under the control of Agent, any Lender or any participant; (O)
all books, records, ledger cards, files, correspondence, computer programs,
tapes, disks and related data processing software that at any time evidence or
contain information relating to any of the property described above or are
otherwise necessary or helpful in the collection thereof or realization
thereon; and (P) proceeds and products of all or any of the property described
above, including, without limitation, the proceeds of any insurance policies
covering any of the above described property.

 

2.9                                 Yield
Protection.  

 

(A)                              Capital Adequacy and
Other Adjustments.  In the event any
Lender shall have determined that the adoption after the date hereof of any
law, treaty, governmental (or quasi-governmental) rule, regulation, guideline
or order regarding capital adequacy, reserve requirements or similar
requirements or compliance by such Lender or any corporation controlling such
Lender with any request or directive regarding capital adequacy, reserve
requirements or similar requirements (whether or not having the force of law
and whether or not failure to comply therewith would be unlawful) from any
central bank or governmental agency or body having jurisdiction does or shall
have the effect of increasing the amount of capital, reserves or other funds
required to be maintained by such Lender or any corporation controlling such
Lender and thereby reducing the rate of return on such Lender’s or such
corporation’s capital as a consequence of its obligations hereunder, then
Borrower shall within fifteen (15) days after notice and demand from such Lender
(together with the certificate referred to in the next sentence and with a copy
to Agent) pay to Agent, for the account of such Lender, additional amounts
sufficient to compensate such Lender for such reduction.  A certificate as to the amount of such cost
and showing the basis of the computation of such cost submitted by such Lender
to Borrower shall, absent demonstrable error, be final, conclusive and binding
for all purposes.

 

(B)                                Increased LIBOR
Funding Costs.  If, after the date
hereof, the introduction of, change in or interpretation of any law, rule,
regulation, treaty or directive would impose or

 

20

 

increase reserve requirements (other than as taken into account in the
definition of LIBOR) or otherwise increase the cost to any Lender of making or
maintaining a LIBOR Loan, then Borrower shall from time to time within fifteen
(15) days after notice and demand from such affected Lenders (together with the
certificate referred to in the next sentence and with a copy to Agent) pay to
Agent, for the account of such affected Lenders, additional amounts sufficient
to compensate such Lenders for such increased cost.  A certificate as to the amount of such cost
and showing the basis of the computation of such cost submitted by such
affected Lenders to Borrower and Agent shall, absent demonstrable error, be
final, conclusive and binding for all purposes.

 

2.10                           Taxes

 

(A)                              No Deductions.  Any and all payments or reimbursements made
hereunder shall be made free and clear of and without deduction for any and all
taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto (all such taxes, levies, imposts, deductions,
charges or withholdings and all liabilities with respect thereto referred to
herein as “Tax Liabilities”; excluding, however, net income taxes, or franchise
taxes imposed in lieu of net income taxes, to the extent imposed on the net
income of any Lender or Agent by the jurisdiction under the laws of which Agent
or such Lender is organized or doing business or any political subdivision
thereof and taxes imposed on its net income by the jurisdiction of Agent’s or
such Lender’s applicable lending office or any political subdivision).  If Borrower shall be required by law to
deduct any such Tax Liabilities from or in respect of any sum payable hereunder
to Agent or any Lender, then the sum payable hereunder shall be increased as
may be necessary so that, after making all required deductions, Agent or such
Lender receives an amount equal to the sum it would have received had no such
deductions been made.

 

(B)                                Changes in Tax Laws.  In the event that, subsequent to the Closing
Date, (i) any changes in any existing law, regulation, treaty or directive
or in the interpretation or application thereof, (ii) any new law,
regulation, treaty or directive enacted or any interpretation or application
thereof, or (iii) compliance by Lender with any request or directive
(whether or not having the force of law) from any governmental authority,
agency or instrumentality:

 

(1)                                  does or shall
subject Agent or any Lender to any tax of any kind whatsoever with respect to
this Agreement, the other Loan Documents or any Loans made or Lender Letters of
Credit issued hereunder, or change the basis of taxation of payments to Agent
or such Lender of principal, fees, interest or any other amount payable
hereunder (except for net income taxes, or franchise taxes imposed in lieu of
net income taxes, imposed generally by federal, state or local taxing authorities
with respect to interest or commitment or other fees payable hereunder or
changes in the rate of tax on the overall net income of Agent or such Lender);
or

 

(2)                                  does or shall
impose on Agent or any Lender any other condition or increased cost in connection
with the transactions contemplated hereby or participations herein; and the
result of any of the foregoing is to increase the cost to Agent or such Lender
of issuing any Lender Letter of Credit or making or continuing any Loan
hereunder, as the case may be, or to reduce any amount receivable hereunder;

 

21

 

then, in any such case, Borrower shall promptly pay to Agent or such
Lender, upon its notice and demand, any additional amounts necessary to compensate
Agent or such Lender, on an after-tax basis, for such additional cost or
reduced amount receivable, as determined by Agent or such Lender with respect
to this Agreement or the other Loan Documents. 
If Agent or any Lender becomes entitled to claim any additional amounts
pursuant to this subsection, it shall promptly notify Borrower of the event by
reason of which Agent or such Lender has become so entitled (with any such
Lender concurrently notifying Agent).  A certificate
as to any additional amounts payable pursuant to the foregoing sentence
submitted by Agent or any Lender to Borrower shall, absent demonstrable error,
be final, conclusive and binding for all purposes.

 

(C)                                Foreign Lenders.  Each Lender organized under the laws of a
jurisdiction outside the United States (a “Foreign Lender”) as to which
payments to be made under this Agreement are exempt from United States
withholding tax under an applicable statute or tax treaty shall provide to
Borrower and Agent (i) a properly completed and executed Internal Revenue
Service Form W-8BEN or Form W-8ECI or other applicable form,
certificate or document prescribed by the Internal Revenue Service of the
United States of America certifying as to such Foreign Lender’s entitlement to
such exemption with respect to payments to be made to such Foreign Lender under
this Agreement, (a “Certificate of Exemption”), or (ii) a letter from any
such Foreign Lender stating that it is not entitled to any such exemption (a “Letter
of Non-Exemption”).  Prior to becoming a
Lender under this Agreement and within fifteen (15) days after a reasonable
written request of Borrower or Agent from time to time thereafter, each Foreign
Lender that becomes a Lender under this Agreement shall provide a Certificate
of Exemption or a Letter of Non-Exemption to Borrower and Agent; provided that
no Person who would otherwise be a Foreign Lender shall become a Lender
hereunder unless such Person is able to deliver a Certificate of Exception at
the time it becomes a Lender.

 

If a Foreign Lender is entitled to an
exemption with respect to payments to be made to such Foreign Lender under this
Agreement and does not provide a Certificate of Exemption to Borrower and Agent
within the time periods set forth in the preceding paragraph, Borrower shall
withhold taxes from payments to such Foreign Lender at the applicable statutory
rates and Borrower shall not be required to pay any additional amounts as a
result of such withholding; provided, however, that all such
withholding shall cease upon delivery by such Foreign Lender of a Certificate
of Exemption to Borrower and Agent.

 

2.11                           Required
Termination and Prepayment.  If on
any date any Lender shall have reasonably determined (which determination shall
be final and conclusive and binding upon all parties) that the making or
continuation of its LIBOR Loans has become unlawful or impossible by compliance
by such Lender in good faith with any law, governmental rule, regulation or
order (whether or not having the force of law and whether or not failure to comply
therewith would be unlawful), then, and in any such event, that Lender shall
promptly give notice (by telephone confirmed in writing) to Borrower and Agent
of that determination.  Subject to prior
withdrawal of a Notice of Borrowing or prepayment of LIBOR Loans as
contemplated by subsection 2.13, the obligation of such Lender to make or
maintain its LIBOR Loans during any such period shall be terminated at the
earlier of the termination of the Interest Period then in effect or when
required by law and Borrower shall no later than the termination of the
Interest Period in effect at the time any such determination pursuant to this
subsection 2.11 is made or, earlier when

 

22

 

required by law, repay or prepay LIBOR Loans together with all interest
accrued thereon or convert LIBOR Loans to Index Rate Loans.

 

2.12                           Optional
Prepayment/Replacement of Lenders. 
Within fifteen (15) days after receipt by Borrower of: (i) written
notice and demand from any Lender for payment of additional costs as provided
in subsection 2.9 or subsection 2.10, or (ii) written notice of
any Lender’s inability to make LIBOR Loans as provided in subsection 2.11,
(any such Lender demanding such payment or having such inability being referred
to herein as an “Affected Lender”), Borrower may, at its option notify Agent
and such Affected Lender of its intention to take one of the actions set forth
herein in subparagraphs (A) or (B) below.

 

(A)                              Replacement of an
Affected Lender.  Borrower may
obtain, at Borrower’s expense, a replacement Lender (“Replacement Lender”) for
an Affected Lender, which Replacement Lender shall be reasonably satisfactory
to Agent.  In the event Borrower obtains
a Replacement Lender that will purchase all outstanding Obligations owed to
such Affected Lender and assume its Commitments hereunder within ninety (90)
days following notice of Borrower’s intention to do so, the Affected Lender
shall sell and assign its Loans and Commitments to such Replacement Lender in
accordance with the provisions of subsection 9.5; provided, however,
Borrower has (i) reimbursed such Affected Lender for any administrative
fee payable by such Affected Lender to Agent pursuant to subsection 9.5
and, (ii) in any case where such replacement occurs as the result of a
demand for payment of certain costs pursuant to subsection 2.9 or subsection 2.10,
paid all increased costs for which such Affected Lender is entitled to under
subsection 2.9 or subsection 2.10 through the date of such sale and
assignment; or

 

(B)                                Prepayment of an
Affected Lender.  Borrower may prepay
in full all outstanding Obligations owed to an Affected Lender and terminate
such Affected Lender’s Commitments. 
Borrower shall, within ninety (90) days following notice of its
intention to do so, prepay in full all outstanding Obligations owed to such
Affected Lender, including such Affected Lender’s increased costs for which it
is entitled to reimbursement under this Agreement through the date of such
prepayment, and terminate such Affected Lender’s Commitments.

 

2.13                           Compensation.  Borrower shall promptly compensate Agent for
the benefit of Lenders (Agent’s calculation of such amounts shall, absent
manifest error, be conclusive and binding upon all parties hereto), for any
losses, expenses and liabilities including, without limitation, any loss
(including interest paid) sustained by such Lender in connection with the
re-employment of such funds: (i) if for any reason (other than a default
by any Lender) a borrowing of any LIBOR Loan does not occur on a date specified
therefor in a Notice of Borrowing or a telephonic request of borrowing by
Borrower; (ii) if any prepayment of any of its LIBOR Loans occurs on a
date that is not the last day of an Interest Period applicable to that Loan
(regardless of the source of such prepayment and whether voluntary, by
acceleration or otherwise); (iii) if any prepayment of any of its LIBOR
Loans is not made on any date specified in a notice of prepayment given by
Borrower; or (iv) as a consequence of any other default by Borrower to
repay its LIBOR Loans when required by the terms of this Agreement; provided
that during the period while any such amounts have not been paid, Agent may, in
its sole discretion, (a) in accordance with subsection 2.4(A) and
upon contemporaneous notice to Borrower, elect to honor the automatic request
by Borrower for a Revolving Advance for such amount pursuant to

 

23

 

subsection 2.1(F) or (b) reserve an equal amount from
amounts otherwise available to be borrowed under the Revolving Loan.

 

2.14                           Booking
of LIBOR Loans.  Each Lender may
make, carry or transfer LIBOR Loans at, to, or for the account of, any of its
branch offices or the office of an affiliate of such Lender.

 

2.15                           Assumptions
Concerning Funding of LIBOR Loans. 
Calculation of all amounts payable to each Lender under subsection 2.13
shall be made as though each Lender had actually funded its relevant LIBOR Loan
through the purchase of a LIBOR deposit bearing interest at LIBOR in an amount
equal to the amount of that LIBOR Loan and having maturity comparable to the
relevant Interest Period and through the transfer of such LIBOR deposit from an
offshore office to a domestic office in the United States of America; provided,
however, each Lender may fund each of its LIBOR Loans in any manner it sees fit
and the foregoing assumption shall be utilized only for the calculation of
amounts payable under subsection 2.13.

 

2.16                           Increase
in Revolving Loan Commitment.

 

(A)                              At any time or from time
to time prior to the fourth anniversary of the Closing Date, on not more than
three occasions, Borrower may propose to increase the Revolving Loan Commitment
(i) in minimum increments of $10,000,000 and (ii) by up to
$50,000,000 in the aggregate, in accordance with and pursuant to this subsection 2.16.

 

(B)                                Any such proposal (an “Increased
Commitment Proposal”) shall be delivered by Borrower to Agent and shall set
forth (i) the amount of increase of the Revolving Loan Commitment (as to
any Increased Commitment Proposal, the “Additional Revolving Loan Commitment”,
and as to any Revolving Loan to be advanced thereunder, the “Additional
Revolving Loan”) and (ii) the proposed interest rate and closing fee that
would apply to the Additional Revolving Loan.

 

(C)                                The Increased
Commitment Proposal shall be offered to existing Lenders and/or Eligible
Assignees, on such basis as shall be determined by Agent in its sole
discretion; provided that no Lender shall be obligated to accept any portion of
the Additional Revolving Loan Commitment.

 

(D)                               To the extent that the
interest rate on the Additional Revolving Loan (exclusive of any closing fee
associated therewith) is greater than the interest rate applicable to the then
existing Revolving Loan, the interest rate on the then existing Revolving Loan
shall be increased upon the effectiveness of the increase in the Revolving Loan
Commitment such that the interest rate for the then existing Revolving Loan
shall equal the interest rate applicable to the Additional Revolving Loan.

 

(E)                                 No increase in
Revolving Loan Commitment shall become effective under this subsection 2.16
unless, at the time of any such increase (i) no Default or Event of
Default has occurred and is continuing, and no Default or Event of Default would
arise from such increase or the making of the Additional Revolving Loan; and (ii) Obligors
and those Lenders accepting such Increased Commitment Proposal and the Eligible
Assignees accepting such Increased Commitment Proposal shall have entered into
an agreement (an “Increased

 

24

 

Commitment Agreement”) in form and substance reasonably satisfactory to
Agent pursuant to which, among other things, (1) those Lenders and
Eligible Assignees party thereto shall have accepted the Increased Commitment
Proposal, (2) the Eligible Assignees shall have agreed to be bound by this
Agreement and shall have made the representations and warranties required of an
assignee of Loans and Commitments under subsection 9.5, (3) the terms
of the Increased Commitment Proposal and the terms required by this subsection 2.16
shall have been incorporated into this Agreement (which incorporation shall
constitute an amendment of this Agreement and shall not (so long as such
Increased Commitment Agreement is limited to implementing the Increased
Commitment Proposal and provisions reasonably related thereto as reasonably
determined by Agent) require the consent of the Requisite Lenders or Lenders), (4) Obligors
shall have consented to the terms of the Increased Commitment Agreement and (5) Borrower
shall have issued to each Lender a new Revolving Note in an amount equal to the
Revolving Loan Commitment of such Lender (after giving effect to the increase
of such Lender’s Revolving Loan Commitment).

 

(F)                                 From and after the
effective date of any increase in the Revolving Loan Commitments under this subsection 2.16,
(i) except as provided in clause (ii) below, to the extent necessary
to cause the Equalization Time to occur (x) all Revolving Loans shall be made
under the Additional Revolving Loan Commitment and (y) all repayments of
Revolving Loans shall be applied to the Revolving Loans held by Lenders whose
percentage share of the Revolving Loans exceeds their respective Pro Rata
Shares of the Revolving Loan Commitment (after giving effect to such increase
in the Revolving Loan Commitment), in each case, until the time, if any (the “Equalization
Time”) that the percentage share of the Revolving Loans held by each Lender
equals its Pro Rata Share of the Revolving Loan Commitment, (ii) the
percentage interest of each Lender in each participation in each undrawn Letter
of Credit (whether then outstanding or thereafter issued) shall equal its
percentage interest in the Revolving Loan Commitment (after giving effect to
such increase in the Revolving Loan Commitment), (iii) in the event that
the Revolving Loan Commitment terminates prior to the Equalization Time, each
Lender whose percentage interest in the Revolving Loans shall be less than its
percentage interest in the Revolving Loan Commitment shall immediately purchase
from the Lenders whose percentage shares of the Revolving Loans are greater
than their respective Pro Rata Shares of the Revolving Loan Commitment,
Revolving Loans until the percentage share of Revolving Loans held by each
Lender equals the Pro Rata Share of such Lender of the Revolving Loan
Commitment (after giving effect to such increase in the Revolving Loan
Commitment) (in any case, in such amounts as shall be determined by Agent and Agent
may allocate repayments of Revolving Loans in a manner required to achieve such
equality in the event of the failure of any Lender to effect any such
purchase), and (iv) from and after the Equalization Time, each Revolving
Advance shall be made in accordance with the Revolving Loan Commitment after
giving effect to such increase in the Revolving Loan Commitment, and from and
after the earlier of the Equalization Time and the termination of the Revolving
Loan Commitment, each repayment of a Revolving Loan shall be applied in
accordance with the Revolving Loan Commitment after giving effect to such
increase in the Revolving Loan Commitment.

 

All advances made pursuant to the Additional
Revolving Loan Commitment shall constitute Revolving Advances, shall constitute
Obligations, shall be secured by the Collateral and shall be repaid (except as
otherwise provided in paragraph (f) above) as required for
Revolving Loans.

 

25

 

SECTION 3.

CONDITIONS TO LOANS

 

The obligations of Agent and each Lender to
make Loans and the obligation of L/C Issuer to issue Letters of Credit on the
Closing Date and on each Funding Date are subject to satisfaction of all of the
terms and conditions set forth in this Agreement and in the Conditions Rider
attached hereto, and the accuracy of all the representations and warranties of
Borrower and the other Loan Parties (as applicable) set forth herein and in the
other Loan Documents.

 

SECTION 4.

OBLIGORS’ REPRESENTATIONS, WARRANTIES AND CERTAIN COVENANTS

 

To induce Agent and each Lender to enter into
the Loan Documents, to make and to continue to make Loans and to issue or cause
to be issued Letters of Credit, each Obligor represents, warrants and covenants
to Agent and each Lender that the following statements are and (when deemed
remade hereunder) will be true, correct and complete and, unless specifically
limited, shall remain so for so long as any of the Commitments hereunder shall
be in effect and until payment in full of all Obligations:

 

4.1                                 Organization,
Powers, Capitalization.

 

(A)                              Organization and
Powers.  Each of the Loan Parties is
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and qualified to do business in all jurisdictions
where such qualification is required except where failure to be so qualified
could not reasonably be expected to have a Material Adverse Effect.  Each of the Loan Parties has all requisite
organizational power and authority to own and operate its properties, to carry
on its business as now conducted and proposed to be conducted and to enter into
each Loan Document.

 

(B)                                Capitalization.  As of the Closing Date, the authorized
capital stock of each of the Loan Parties and its respective Subsidiaries is as
set forth on Schedule 4.1(B), including all preemptive or other
outstanding rights, options, warrants, conversion rights or similar agreements
or understandings for the purchase or acquisition from any Loan Party of any
shares of capital stock or other securities of any such entity.  All issued and outstanding shares of capital
stock of each of Borrower and its Subsidiaries are duly authorized and validly
issued, fully paid, nonassessable, free and clear of all Liens other than those
in favor of Agent for the benefit of Agent and Lenders, and such shares were
issued in compliance with all applicable state and federal laws concerning the
issuance of securities.  Borrower will
promptly notify Lender of any change in the ownership or corporate structure of
any Loan Party that would result in the occurrence of an Event of Default
pursuant to paragraph (F) of subsection 8.1.

 

4.2                                 Authorization
of Borrowing, No Conflict.  Each of
the Obligors has the organizational power and authority to incur the
Obligations and to grant security interests in the Collateral.  On the Closing Date, the execution, delivery
and performance of the Loan Documents by each Loan Party signatory thereto will
have been duly authorized by all necessary corporate and shareholder
action.  The execution, delivery and
performance by each Loan Party of each Loan Document to which it is a party and
the consummation of the transactions

 

26

 

contemplated by the Loan Documents by each Loan Party do not contravene
any applicable law, the corporate charter or bylaws or other organizational
documents of any Loan Party or any agreement or order by which any Loan Party
or any Loan Party’s property is bound. The Loan Documents are the legally valid
and binding obligations of the applicable Loan Parties respectively, each
enforceable against the Loan Parties, as applicable, in accordance with their
respective terms.

 

4.3                                 Financial
Condition.  All financial statements
concerning the Loan Parties (except for the financial statements concerning SDI
Holdings and its Subsidiaries for periods ending on or prior to June 30,
2005, which are addressed in the following paragraph) which have been or will
hereafter be furnished to Agent or any Lender pursuant to this Agreement have
been or will be prepared in accordance with GAAP consistently applied
throughout the periods involved (except as disclosed therein and, in the case
of interim financial statements, except for the absence of footnotes and
non-material year-end adjustments) and do or will present fairly in all
material respects the financial condition of the entities covered thereby as at
the dates thereof and the results of their operations for the periods then
ended.

 

The audited consolidated financial statements
of SDI Holdings (consisting of the audited consolidated balance sheets of SDI
Holdings and the related audited consolidated statements of operations, changes
in stockholders’ equity and cash flow of SDI Holdings) as of and for the five
month period ending December 31, 2002 and as of and for the fiscal years
ended December 31, 2003 and 2004, and the unaudited consolidated financial
statements of SDI Holdings (consisting of the unaudited consolidated balance
sheet of SDI Holdings and the related unaudited consolidated statements of
operations, changes in stockholders’ equity and cash flow of SDI Holdings) as
of and for the six (6) month period ended June 30, 2005 (true,
complete and correct copies of which have been furnished to Agent and Lenders),
have been prepared in accordance with GAAP, consistently applied, and present
fairly, in all material respects, the consolidated financial position of SDI
and its Subsidiaries as of the dates indicated and the results of operations
for the periods then ended, subject, in the case of interim financial
statements, to (a) normal year end adjustments, and (b) the absence
of disclosures normally made in footnotes.

 

The Pro Forma was prepared by Borrower based
on the unaudited consolidated balance sheet of Holdings and its Subsidiaries
dated June 30, 2005 and the audited consolidated balance sheet of SDI
Holdings and its Subsidiaries dated June 30, 2005.

 

The Projections delivered by Borrower will be prepared in light of the
past operations of the business of Holdings and its Subsidiaries, and such
Projections will represent the good faith estimate of Borrower and its senior
management concerning the reasonably expected course of the Loan Parties’
business as of the date such Projections are delivered; it being recognized
that the Projections (as they relate to future events) are not to be viewed as
fact and that actual results during the period or periods covered by the
Projections may differ by a material amount from the Projections.

 

Since September 30, 2004 (June 30, 2005, in the case of SDI
Holding, SDI Guarantor and Shelter) there have been no events or changes in
facts or circumstances affecting any Loan Party

 

27

 

which individually or in the aggregate have had or could reasonably be
expected to have a Material Adverse Effect and that have not been disclosed
herein or in the attached Schedules.

 

4.4                                 Indebtedness
and Liabilities.  As of the Closing
Date, neither Holdings nor any of its Subsidiaries has (a) any
Indebtedness except as reflected on the Pro Forma; or (b) any Liabilities
other than as reflected on the Pro Forma or as incurred in the ordinary course
of business following the date of the Pro Forma.  Borrower shall promptly deliver copies of all
notices given or received by Holdings and any of its Subsidiaries with respect
to noncompliance with any term or condition related to any Indebtedness in an
amount exceeding $200,000, and shall promptly notify Agent of any potential or
actual Event of Default with respect to any such Indebtedness.

 

4.5                                 Account
Warranties and Covenants. Except as otherwise disclosed to Agent in
writing, as to each Account (excluding Accounts in an aggregate amount not
exceeding $200,000 at any time) that, at the time of its creation, the Account
is a valid, bona fide account, representing an undisputed indebtedness incurred
by the named account debtor for goods actually sold and delivered or for
services completely rendered; there are no setoffs, offsets or counterclaims,
genuine or otherwise, against the Account; the Account does not represent a
sale to an Affiliate or a consignment, sale or return or a bill and hold
transaction; no agreement exists permitting any deduction or discount (other
than the discount stated on the invoice); the applicable Obligor is the lawful
owner of the Account and has the right to assign the same to Agent, for the
benefit of Agent and Lenders; the Account is free of all security interests,
liens and encumbrances other than those in favor of Agent, on behalf of itself
and Lenders, and the Account is due and payable in accordance with its
terms.  Each Obligor shall, at its own
expense: (a) cause all invoices evidencing Accounts and all copies thereof
to bear a notice that such invoices are payable to the lockboxes established in
accordance with subsection 4.25 and (b) use its diligent
efforts to assure prompt payment of all amounts due or to become due under the
Accounts.  No discounts, credits or
allowances will be issued, granted or allowed by any Obligor to customers and no
returns will be accepted without Agent’s prior written consent; provided,
however, until Agent notifies Borrower to the contrary, Obligors may
presume consent.  Borrower will
immediately notify Agent in the event that a customer alleges any dispute or claim
with respect to an Account or of any other circumstances known to any Obligor
that may impair the validity or collectibility of an Account.  Agent shall have the right, at any time or
times hereafter, to verify the validity, amount or any other matter relating to
an Account, by mail, telephone or in person. 
After the occurrence of an Event of Default and upon notice from Agent
to Borrower, no Obligor shall, without the prior consent of Agent, adjust,
settle or compromise the amount or payment of any Account, or release wholly or
partly any customer or obligor thereof, or allow any credit or discount
thereon.

 

4.6                                 Names
and Locations.  Schedule 4.6
sets forth as of the Closing Date all names, trade names, fictitious names and
business names under which Borrower and each of its Subsidiaries currently
conducts business or has at any time during the past five years conducted
business and the name of any entity which Borrower or any of its Subsidiaries
has acquired in whole or in part or from whom Borrower or any of its
Subsidiaries has acquired a significant amount of assets within the past five
years and sets forth the location of Borrower’s and each of its Subsidiaries’
principal place of business, the location of Borrower’s and each of its
Subsidiary’s books and records, the location of all other offices of Borrower
and each of its

 

28

 

Subsidiaries and all Collateral locations, and such locations are
Borrower’s or each of its Subsidiary’s sole locations for its business and the
Collateral.  Borrower and each of its
Subsidiaries will give Agent at least thirty (30) days advance written notice
of: (a) any change of name or of any new trade name or fictitious business
name, (b) change of principal place of business or jurisdiction of
incorporation or organization, (c) any change in the location of such
Person’s books and records or the Collateral, or (d) any new location for
such Person’s books and records or the Collateral.  Schedule 4.6 sets forth each
Obligor’s organizational identification number or states that one does not
exist.

 

4.7                                 Title
to Properties; Liens.  Borrower and
each of its Subsidiaries has good, sufficient and legal title, to all of its
respective material properties and assets, in each case, free and clear of all
Liens except Permitted Encumbrances. 
Except for matters disclosed on Schedule 2.8, no Obligor
owns any commercial tort claims (as identified in the UCC) in excess of
$250,000 individually.

 

4.8                                 Litigation;
Adverse Facts.  There are no judgments
outstanding against any Loan Party or affecting any property of any Loan Party
nor is there any action, charge, claim, demand, suit, proceeding, petition,
governmental investigation or arbitration now pending or, to the best knowledge
of any Obligor after due inquiry, threatened against or affecting any Loan
Party or any property of any Loan Party (including without limitation any tort
claim in respect of asbestos products sold or distributed by any Loan Party)
which could reasonably be expected to result in any Material Adverse
Effect.  Promptly upon any officer of any
Obligor obtaining knowledge of (a) the institution of any material action,
suit, proceeding, governmental investigation or arbitration against or
affecting any Loan Party or any property of any Loan Party not previously
disclosed by Borrower to Agent or (b) any material development in any
action, suit, proceeding, governmental investigation or arbitration at any time
pending against or affecting any Loan Party or any property of any Loan Party
which could reasonably be expected to have a Material Adverse Effect, Borrower
will promptly give notice thereof to Agent and provide such other information
as may be reasonably available to enable Agent and its counsel to evaluate such
matter.

 

4.9                                 Payment
of Taxes.  All material tax returns
and reports of each Loan Party required to be filed by any of them have been
timely filed and are complete and accurate in all material respects.  All taxes, assessments, fees and other
governmental charges which are due and payable by each Loan Party have been
paid when due; provided that no such tax need be paid if any Loan Party
is contesting same in good faith by appropriate proceedings promptly instituted
and diligently conducted and if such Loan Party has established appropriate
reserves as shall be required in conformity with GAAP.  As of the Closing Date, none of the income
tax returns of any Loan Party are under audit and Borrower shall promptly
notify Agent in the event that any Loan Party’s tax returns become the subject
of an audit.  No tax liens have been
filed against any Loan Party.  The
charges, accruals and reserves on the books of each Loan Party in respect of
any taxes or other governmental charges are in accordance with GAAP.  Each Obligor’s federal tax identification
number is as set forth on Schedule 4.9 hereto.

 

4.10                           Performance
of Agreements.  None of the Loan
Parties and none of their respective Subsidiaries is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any material contractual obligation of any such

 

29

 

Person, and no condition exists that, with the giving of notice or the
lapse of time or both, would constitute such a default, in any such case which
could reasonably be expected to have a Material Adverse Effect.  Borrower shall promptly notify Agent of (a) the
occurrence of any material default or breach under any material contractual
obligation of any Loan Party, (b) the termination of any material
contractual obligation of any Loan Party, in a manner adverse in any material
respect to any Loan Party, or (c) the material amendment or modification
of any material contractual obligation of any Loan Party, in a manner adverse
in any material respect to any Loan Party.

 

4.11                           Employee
Benefit Plans.  Each Loan Party and
each ERISA Affiliate is in compliance, and will continue to remain in
compliance, in all material respects with all applicable provisions of ERISA,
the IRC and all other applicable laws and the regulations and interpretations
thereof with respect to all Employee Benefit Plans.  No material liability has been incurred by
any Loan Party or any ERISA Affiliate which remains unsatisfied for any funding
obligation, taxes or penalties with respect to any Employee Benefit Plan.

 

4.12                           Intellectual
Property.  Borrower and each of its
Subsidiaries owns, is licensed to use or otherwise has the right to use, all
Intellectual Property used in or necessary for the conduct of its business as
currently conducted, and, as of the Closing Date, all patents, trademarks and
registered copyrights owned by any Loan Party and all licenses in respect of
Intellectual Property to which any Loan Party is a party, are identified on Schedule 4.12.  All federally registered Intellectual
Property owned by Borrower and each of its Subsidiaries is valid, subsisting
and enforceable and all filings necessary to maintain the effectiveness of such
registrations have been made, except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect.

 

4.13                           Broker’s
Fees.  No broker’s or finder’s fee or
commission will be payable with respect to any of the transactions contemplated
hereby.

 

4.14                           Environmental
Matters.

 

(A)                              Except as set forth in Schedule 4.14,
as of the Closing Date:  (i) the
Real Estate is free of contamination from any Hazardous Material except for
such contamination that could not reasonably be expected to adversely impact
the value or marketability of such Real Estate and that could not reasonably be
expected to result in Environmental Liabilities of the Loan Parties in excess
of $500,000 in the aggregate; (ii) no Loan Party has caused or suffered to
occur any Release of Hazardous Materials on, at, in, under, above, to, from or
about any of their Real Estate; (iii) the Loan Parties are and have been
in compliance with all Environmental Laws, except for such noncompliance that
could not reasonably be expected to result in Environmental Liabilities of the
Loan Parties in excess of $500,000 in the aggregate; (iv) the Loan Parties
have obtained, and are in compliance with, all Environmental Permits required
by Environmental Laws for the operations of their respective businesses as
presently conducted or as proposed to be conducted, except where the failure to
so obtain or comply with such Environmental Permits could not reasonably be
expected to result in Environmental Liabilities of the Loan Parties in excess
of $500,000 in the aggregate, and all such Environmental Permits are valid,
uncontested and in good standing; (v) no Loan Party is involved in
operations or knows of any facts, circumstances or conditions, including any
Releases of Hazardous Materials, that are likely to

 

30

 

result in any Environmental Liabilities of such Loan Party which could
reasonably be expected to be in excess of $500,000 in the aggregate, and no
Loan Party has permitted any current or former tenant or occupant of the Real
Estate to engage in any such operations; (vi) there is no Litigation
arising under or related to any Environmental Laws, Environmental Permits or
Hazardous Material that seeks damages, penalties, fines, costs or expenses in
excess of $500,000 in the aggregate or injunctive relief against, or that
alleges criminal misconduct by any Loan Party; (vii) no notice has been
received by any Loan Party identifying any of them as a “potentially
responsible party” or requesting information under CERCLA or analogous state
statutes, and to the knowledge of the Loan Parties, there are no facts,
circumstances or conditions that may result in any of the Loan Parties being
identified as a “potentially responsible party” under CERCLA or analogous state
statues; and (viii) the Loan Parties have provided to Agent copies of all
existing environmental reports, reviews and audits and all written information
pertaining to actual or potential Environmental Liabilities, in each case
relating to any of the Loan Parties.

 

(B)                                Each Obligor hereby acknowledges
and agrees that (i) to its knowledge, Agent is not now, and has not ever
been, in control of any of the Real Estate or affairs of such Loan Party, and (ii) Agent
does not have the capacity through the provisions of the Loan Documents or
otherwise to influence any Loan Party’s conduct with respect to the ownership,
operation or management of any of their Real Estate or compliance with
Environmental Laws or Environmental Permits.

 

4.15                           Solvency.
From and after the date of this Agreement, each Loan Party:  (a) owns assets the fair salable value
of which on a going concern basis are greater than the total amount of its
liabilities (including contingent liabilities); (b) has capital that is
not unreasonably small in relation to its business as presently conducted or
any contemplated or undertaken transaction; and (c) does not intend to
incur and does not believe that it will incur debts beyond its ability to pay
such debts as they become due.

 

4.16                           Disclosure.  No representation or warranty of any Obligor
or any other Loan Party contained in this Agreement, the financial statements,
the other Loan Documents, or any other document, certificate or written
statement furnished to Agent or any Lender by or on behalf of any such Person
for use in connection with the Loan Documents contains any untrue statement of
a material fact or omitted, omits or will omit to state a material fact
necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made.   There is no material fact known to any
Obligor that has had or could have a Material Adverse Effect and that has not
been disclosed herein or in such other documents, certificates and statements
furnished to Agent or any Lender for use in connection with the transactions
contemplated hereby.

 

4.17                           Insurance.  Borrower and each of its Subsidiaries
maintains adequate insurance policies for public liability, property damage,
product liability, and business interruption with respect to its business and
properties and the business and properties of its Subsidiaries against loss or
damage of the kinds customarily carried or maintained by corporations of
established reputation engaged in similar businesses and in amounts acceptable
to Agent. Borrower shall cause Agent to be named as loss payee on all insurance
policies relating to any Collateral and shall cause Agent to be named as
additional insured under all liability policies, in each case 

 

31

 

pursuant to appropriate endorsements in form and substance satisfactory
to Agent and shall collaterally assign to Agent, for itself and on behalf of
Lenders, as security for the payment of the Obligations all business
interruption insurance of Borrowers and its Subsidiaries.  No notice of cancellation has been received
with respect to such policies and Borrower and each of its Subsidiaries is in
compliance with all conditions contained in such policies.  Borrower shall apply any proceeds received
from any policies of insurance relating to any Collateral to the Obligations as
set forth in subsection 2.5. 
In the event Borrower fails to provide Agent with evidence of the
insurance coverage required by this Agreement, Agent may, but is not required
to, purchase insurance at Borrower’s expense to protect Agent’s and the Lender’s
interests in the Collateral.  This
insurance may, but need not, protect Obligors’ interests.  The coverage purchased by Agent may not pay
any claim made by any Obligor or any claim that is made against any Obligor in
connection with the Collateral.  Borrower
may later cancel any insurance purchased by Agent, but only after providing
Agent with evidence that Borrower has obtained insurance as required by this
Agreement.  If Agent purchases insurance
for the Collateral, Borrower will be responsible for the costs of that
insurance, including interest thereon and other charges imposed on Agent in
connection with the placement of the insurance, until the effective date of the
cancellation or expiration of the insurance, and such costs may be added to the
Obligations.  The costs of the insurance
may be more than the cost of insurance any Obligor is able to obtain on its
own.

 

4.18                           Compliance
with Laws.  Neither Borrower nor any
of its Subsidiaries is in violation of any law, ordinance, rule, regulation,
order, policy, guideline or other requirement of any domestic or foreign
government or any instrumentality or agency thereof, having jurisdiction over
the conduct of its business or the ownership of its properties, including,
without limitation, any Environmental Law, which violation would subject
Borrower or any of its Subsidiaries, or any of their respective officers to
criminal liability or have a Material Adverse Effect and no such violation which
could reasonably be expected to have a Material Adverse Effect has been
alleged.

 

4.19                           Bank
Accounts.  Schedule 4.19
sets forth the account numbers and locations of all bank accounts of Borrower
and its Subsidiaries.  Neither Borrower
nor any of its Subsidiaries shall establish any new bank accounts, or amend or
terminate any Blocked Account or lockbox agreement without Agent’s prior
written consent.

 

4.20                           Employee
Matters.  Except as set forth on Schedule 4.20,
(a) no Loan Party nor any of such Loan Party’s employees is subject to any
collective bargaining agreement, (b) no petition for certification or
union election is pending with respect to the employees of any Loan Party and
no union or collective bargaining unit has sought such certification or recognition
with respect to the employees of any Loan Party and (c) there are no
strikes, slowdowns, work stoppages or controversies pending or, to the
best knowledge of any Obligor after due inquiry, threatened between any Loan
Party and its respective employees, other than employee grievances arising in
the ordinary course of business, which could reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect.  Except as set forth on Schedule 4.20,
as of the Closing Date none of the Loan Parties is subject to an employment
contract.

 

32

 

4.21                           Governmental
Regulation.  None of the Loan Parties
is subject to regulation under the Public Utility Holding Company Act of 1935,
the Federal Power Act or the Investment Company Act of 1940 or to any federal
or state statute or regulation limiting its ability to incur indebtedness for
borrowed money.

 

4.22                           Access
to Accountants and Management. 
Obligors authorize Agent and Lenders to discuss the financial condition
and financial statements of the Loan Parties with Holdings’ Accountants upon
reasonable notice to Borrower of its intention to do so, and authorize Holdings’
Accountants to respond to all of Agent’s inquiries. Agent and each Lender may,
with the consent of Agent, which will not be unreasonably denied, and upon
prior notice (in the absence of an Event of Default), confer with the Loan
Parties’ management directly regarding the Loan Parties’ business, operations
and financial condition.

 

4.23                           Inspection;
Field Exams.  Obligors shall permit
Agent and any authorized representatives designated by Agent to visit and
inspect any of the properties of Borrower or any of its Subsidiaries, including
their financial and accounting records, and, in conjunction with such
inspection, to make copies and take extracts therefrom, and to discuss their
affairs, finances and business with their officers and Holdings’ Accountants,
upon prior notice (in the absence of an Event of Default) and at such reasonable
times during normal business hours and as often as may be reasonably
requested.  Each Lender may with the
consent of Agent, which will not be unreasonably denied, accompany Agent on any
such visit or inspection (at such Lender’s expense in the absence of a
continuing Event of Default described in either of subsections 8.1(A) or
8.1(C) (as a result of any breach of the Financial Covenants
Rider)).  Obligors shall permit Agent and
any authorized representatives designated by Agent to conduct field examinations
with respect to any of the properties of Borrower or any of its Subsidiaries,
from time to time, upon prior notice (in the absence of an Event of Default)
and at such reasonable times during normal business hours and as often as may
be reasonably requested; provided, however, so long as no Default
or Event of Default is continuing, (1) Agent shall not conduct field
audits during the first Loan Year other than during the period from January 1,
2006 through March 31, 2006 and (2) following the first Loan Year,
Agent shall not conduct field examinations with respect to any division of the
Obligors more than once every Loan Year.

 

4.24                           Collateral
Records. Each Obligor shall keep full and accurate books and records
relating to the Collateral and shall mark such books and records to indicate
Agent’s security interests in the Collateral, for the benefit of Agent and
Lenders.

 

4.25                           Collection
of Accounts and Payments.  On or
prior to the Closing Date (subject to Paragraph M of the Conditions
Rider), Obligors shall have established lockboxes and blocked accounts
(collectively, “Blocked Accounts”) in Obligors’ names with such banks (“Collecting
Banks”) as are acceptable to Agent (subject to irrevocable instructions
acceptable to Agent as hereinafter set forth) to which all account debtors
shall directly remit all payments on Accounts of Obligors and in which Obligors
will immediately deposit all payments made for Inventory or other payments
constituting proceeds of Collateral in the identical form in which such payment
was made, whether by cash or check.  The
Collecting Banks shall acknowledge and agree, in a manner satisfactory to
Agent, that the Collecting Banks have no right to setoff against the Blocked
Accounts at any time.  The Collecting
Banks shall further acknowledge and agree, in a manner satisfactory to Agent,
that during the Activation Period:  (i) all
payments made to the

 

33

 

Blocked Accounts are the sole and exclusive property of Agent and
Canadian Facility Agent, for their benefit and for the benefit of Lenders and
Canadian Facility Lenders, and (ii) all such payments received will be
promptly transferred to Agent’s Account. 
Obligors hereby agree that (i) Agent and Canadian Facility Agent,
for their benefit and for the benefit of Lenders and Canadian Facility Lenders,
have been granted a Lien on such Blocked Accounts and all funds on deposit
therein as additional collateral security for the Obligations and the
indebtedness and obligations under the Canadian Facility Credit Agreement and,
upon execution of blocked account agreements with such Collecting Banks, “control”
will have been established with respect to such Blocked Accounts as defined in Section 9-104
of the UCC and (ii) during the Activation Period, all payments made to
such Blocked Accounts or otherwise received by Agent and whether on the
Accounts or as proceeds of other Collateral or otherwise will be the sole and
exclusive property of Agent and Canadian Facility Agent, for their benefit and
for the benefit of Lenders and Canadian Facility Lenders.  Obligors shall irrevocably instruct each
Collecting Bank to promptly transfer, during the Activation Period, all
payments or deposits to the Blocked Accounts into Agent’s Account.  If any Obligor, or any if its Affiliates,
employees, agents or other Person acting for or in concert with any Obligor,
shall during the Activation Period receive any monies, checks, notes, drafts or
any other payments relating to and/or proceeds of Accounts or other Collateral,
such Obligor or such Person shall hold such instrument or funds in trust for
Agent, and, immediately upon receipt thereof, shall remit the same or cause the
same to be remitted, in kind, to the Blocked Accounts or to Agent at its
address set forth in subsection 10.3 below.  Notwithstanding any provision to the contrary
herein or in any other Loan Document, prior to the Activation Period: (i) the
Obligors shall have sole dominion and control over the funds in the Blocked
Accounts and the Collecting Banks shall transfer or apply funds on deposit
therein in accordance with the instructions of the Obligors, (ii) the
Obligors shall have no obligation to apply the funds in the Blocked Accounts to
reduce any Obligations, and the Lenders and Canadian Facility Lenders shall not
have any right to cause such funds to be so applied, and (iii) neither the
Agent nor the Canadian Facility Agent shall have any right to endorse or
collect any payments made to the Blocked Accounts, or to withdraw any funds
from the Blocked Accounts, or to direct how the funds in the Blocked Accounts
are applied.  An Activation Notice shall
not be given unless and until either (i) an Event of Default occurs or (ii) Excess
Availability is less than $10,000,000 and, in the case of this clause (ii),
Requisite Lenders have directed that such Activation Notice be given or have
consented thereto.

 

Borrower may amend any one or more of the
Schedules referred to in this Section 4 (subject to prior notice to
Agent, as applicable) and any representation, warranty, or covenant contained
herein which refers to any such Schedule shall from and after the date of
any such amendment refer to such Schedule as so amended; provided  however,
that in no event shall the amendment of any such Schedule constitute a
waiver by Agent and Lenders of any Default or Event of Default that exists
notwithstanding the amendment of such Schedule.

 

SECTION 5.

REPORTING AND OTHER AFFIRMATIVE COVENANTS

 

Each Obligor covenants and agrees that, so
long as any of the Commitments hereunder shall be in effect and until payment
in full of all Obligations, Obligors shall perform, and shall cause the other Loan Parties to perform, all
covenants in this Section 5.

 

34

 

5.1                                 Financial
Statements and Other Reports. 
Borrower will deliver to Agent and each Lender (unless specified to be
delivered solely to Agent) the financial statements and other reports contained
in the Reporting Rider attached hereto.

 

5.2                                 Endorsement.
Each Obligor hereby constitutes and appoints Agent and all Persons designated
by Agent for that purpose as such Obligor’s true and lawful attorney-in-fact,
with power to endorse such Obligor’s name to any of the items of payment or
proceeds described in subsection 4.25 above and all proceeds of
Collateral that come into Agent’s possession or under Agent’s control.  Both the appointment of Agent as each Obligor’s
attorney and Agent’s rights and powers are coupled with an interest and are
irrevocable until payment in full and complete performance of all of the
Obligations (other than contingent indemnity obligations to the extent no
unsatisfied claim has been asserted).

 

5.3                                 Maintenance
of Properties. Obligors will maintain or cause to be maintained in good
repair, working order and condition all material properties used in the
businesses of Obligors and their Subsidiaries and will make or cause to be made
all appropriate repairs, renewals and replacements thereof.

 

5.4                                 Compliance
with Laws.  Obligors will, and will cause their Subsidiaries to,
comply with the requirements of all applicable laws, rules, regulations and
orders of any governmental authority as now in effect and which may be imposed
in the future in all jurisdictions in which Obligors or any of their
Subsidiaries is now doing business or may hereafter be doing business, other
than those laws the noncompliance with which would not have a Material Adverse
Effect.

 

5.5                                 Further
Assurances. Obligors shall, and
shall cause their Subsidiaries to, from time to time, execute such guaranties,
financing or continuation statements, documents, security agreements, reports
and other documents or deliver to Agent such instruments, certificates of
title, mortgages, deeds of trust, or other documents as Agent at any time may
reasonably request to evidence, perfect or otherwise implement the guaranties
and security for repayment of the Obligations provided for in the Loan
Documents.  Without limiting the
foregoing, (a) Obligors shall, and shall cause their Subsidiaries to,
execute and file such financing and continuation statements, or amendments
thereto, and such other instruments, documents or notices as Agent may request,
in order to create, preserve and protect the security interests granted or
purported to be granted hereby or pursuant to any other Loan Document and (b) each
Obligor shall cause each Person, upon its becoming a Subsidiary of such Obligor
(provided that this shall not be construed to constitute consent by any of the
Lenders to any transaction referred to above which is not expressly permitted
by the terms of this Agreement), promptly to guaranty the Obligations and to
grant to Agent, for the benefit of Agent and Lenders, security interests in the
property of such Person to secure the Obligations and shall pledge, or cause to
be pledged, to Agent, for the benefit of Agent and Lenders, all of the equity
interests of such Subsidiary to secure the Obligations.

 

5.6                                 Mortgages;
Consents and Waivers; Title Insurance; Surveys.

 

(A)                              Title Insurance;
Consents and Waivers.  On or before the
Closing Date (or within thirty (30) days following delivery of any Mortgage
with respect to Additional Mortgaged

 

35

 

Property), Borrower shall, except as otherwise agreed by Agent, deliver
or cause to be delivered to Agent ALTA lender’s title insurance policies or
date down endorsement to any existing title insurance policies issued by title
insurers reasonably satisfactory to Agent (the “Mortgage Policies”) in form and
substance and in amounts reasonably satisfactory to Agent assuring Agent that
the Mortgages are valid and enforceable first priority mortgage liens on the
respective Mortgaged Property or Additional Mortgaged Property, free and clear
of all defects and encumbrances except Permitted Encumbrances.  The Mortgage Policies shall be in form and
substance reasonably satisfactory to Agent and shall include an endorsement
insuring against the effect of future advances under this Agreement, for
mechanics’ liens and for any other matter that Agent may reasonably
request.  Subject to Paragraph M of the
Conditions Rider, in the case of each leasehold where Collateral is stored or
located, Agent shall have received such estoppel letters, consents and waivers
from the landlords and non-disturbance agreements from any holders of mortgages
or deeds of trust on such real estate as may have been requested by Agent,
which letters shall be in form and substance satisfactory to Agent; provided
that no such letters shall be required with respect to any location where the
aggregate value of Inventory located at such location does not exceed $400,000
so long as the aggregate value of Inventory located at all such locations does
not exceed $2,000,000 in the aggregate at any time (it being understood that
Agent may elect, in its discretion, to exclude Inventory at such locations from
Eligible Inventory or establish reserves against the Consolidating Borrowing
Bases in respect of Inventory at such locations).

 

(B)                                Additional Mortgaged
Property.  Borrower shall as promptly
as possible (and in any event within sixty (60) days after such designation)
deliver to Agent a fully executed Mortgage, in form and substance satisfactory
to Agent together with title insurance policies and surveys on any Additional
Mortgaged Property designated by Agent.

 

(C)                                Surveys.  On or before the Closing Date (or within
thirty (30) days following delivery of any Mortgage with respect to Additional
Mortgaged Property), Borrower shall, to the extent necessary to obtain the
Mortgage Policies, deliver or cause to be delivered to Agent current surveys,
certified by a licensed surveyor, for all real property that is the subject of
the Mortgage Policies including Additional Mortgaged Property for which a
Mortgage Policy is issued.  All such
surveys shall be sufficient to allow the issuer of the Mortgage Policy to issue
an ALTA lender’s policy.

 

5.7                                 Use
of Proceeds and Margin Security. 
Borrower shall use the proceeds of all Loans for proper business
purposes (as described in the recitals to this Agreement) consistent with all
applicable laws, statutes, rules and regulations.  No portion of the proceeds of any Loan shall
be used by Borrower or any of its Subsidiaries for the purpose of purchasing or
carrying margin stock within the meaning of Regulation U, or in any manner that
might cause the borrowing or the application of such proceeds to violate
Regulation T or Regulation X or any other regulation of the Board of Governors
of the Federal Reserve System or to violate the Exchange Act.

 

5.8                                 Bailee.   If any Collateral is at any time in the
possession or control of any warehouseman, bailee or any Obligor’s agents or
processors, such Obligor shall, upon the request of Agent, notify such
warehouseman, bailee, agent or processor of the security interests

 

36

 

in favor of Agent, for the benefit of Agent and Lenders, created hereby
and shall instruct such Person to hold all such Collateral for Agent’s account
subject to Agent’s instructions.

 

5.9                                 Third
Party Inventory.  All inventory and
products owned by Persons other than an Obligor and located on any premises
owned, leased or controlled by any Obligor, shall be separately and
conspicuously identified as such and shall be segregated from such Obligor’s
own Inventory located at such premises.

 

5.10                           Environmental
Matters.  Each Obligor shall and
shall cause each Person within its control to: 
(a) conduct its operations and keep and maintain its Real Estate in
compliance with all Environmental Laws and Environmental Permits other than
noncompliance that could not reasonably be expected to have a Material Adverse
Effect; (b) implement any and all investigation, remediation, removal and
response actions that are appropriate or necessary to maintain the value and
marketability of the Real Estate or to otherwise comply with Environmental Laws
and Environmental Permits pertaining to the presence, generation, treatment,
storage, use, disposal, transportation or Release of any Hazardous Material on,
at, in, under, above, to, from or about any of its Real Estate, in each case
except where the failure to do so could not reasonably be expected to have a
Material Adverse Effect; (c) notify Agent promptly after such Obligor or
any Person within its control becomes aware of any violation of Environmental
Laws or Environmental Permits or any Release on, at, in, under, above, to, from
or about any Real Estate that is reasonably likely to result in a Material
Adverse Effect; and (d) promptly forward to Agent a copy of any order,
notice, request for information or any communication or report received by such
Obligor or any Person within its control in connection with any such violation
or Release or any other matter relating to any Environmental Laws or
Environmental Permits that could reasonably be expected to result in a Material
Adverse Effect.  If Agent at any time has
a reasonable basis to believe that there may be a violation of any
Environmental Laws or Environmental Permits by any Loan Party or any Environmental
Liability arising thereunder, or a Release of Hazardous Materials on, at, in,
under, above, to, from or about any of its Real Estate, that, in each case,
could reasonably be expected to have a Material Adverse Effect, then Obligor
and its Subsidiaries shall, upon Agent’s written request (i) cause the
performance of such environmental audits including subsurface sampling of soil
and groundwater, and preparation of such environmental reports at Borrower’s
expense, as Agent may from time to time reasonably request, which shall be
conducted by reputable environmental consulting firms reasonably acceptable to
Agent and shall be in form and substance reasonably acceptable to Agent, and (ii) permit
Agent or its representatives to have access to all Real Estate for the purpose
of conducting such environmental audits and testing as Agent deems appropriate,
including subsurface sampling of soil and groundwater.  Borrower shall reimburse Agent for the costs
of such audits and tests and the same will constitute a part of the Obligations
secured hereunder.

 

5.11                           Currency
Rate Agreement.  If Agent shall
determine in its reasonable credit judgment that Borrower and its Subsidiaries
at any time hereafter have a material Canadian Dollar currency rate risk
exposure relative to Borrower’s Obligations hereunder, then, within sixty (60)
days after a request by Agent to do so, Borrower shall enter into (and
thereafter maintain) Currency Rate Agreements to hedge such currency rate
exposure in a manner, and upon terms and conditions, reasonably satisfactory to
Agent.

 

37

 

“Currency Rate Agreement” means any currency
rate swap agreement, currency forward purchase contract or similar agreement or
arrangement entered into between Borrower and any Lender (or Affiliate of any
Lender), designed to protect Borrower against fluctuations currency exchange
rates entered into in accordance with this subsection 5.11.

 

SECTION 6.

FINANCIAL COVENANTS

 

Obligors covenant and agree that so long as
any of the Commitments remain in effect and until indefeasible payment in full
of all Obligations and termination of all Letters of Credit, Obligors shall
comply with and shall cause the other Loan Parties to comply with all covenants
contained in the Financial Covenants Rider.

 

SECTION 7.

NEGATIVE COVENANTS

 

Obligors covenant and agree that so long as
any of the Commitments remain in effect and until indefeasible payment in full
of all Obligations and termination of all Letters of Credit, Obligors shall not
and will not permit any other Loan Party (except where indicated) to:

 

7.1                                 Indebtedness
and Liabilities.  Directly or
indirectly create, incur, assume, guaranty, or otherwise become or remain
directly or indirectly liable, on a fixed or contingent basis, with respect to
any Indebtedness except:

 

(A)                              the Obligations;

 

(B)                                intercompany
Indebtedness (i) outstanding on the Closing Date and (ii) made
following the Closing Date to fund working capital requirements of such
Subsidiaries in the ordinary course of business and to fund Permitted Acquisitions;
provided, however, that the aggregate outstanding principal amount of
intercompany loans from Borrower to Beacon Canada Holdings and Beacon Canada
shall not exceed an amount equal to the outstanding balance of such
intercompany loan as of the Closing Date (after giving effect to the Related
Transactions on the Closing Date) plus $3,000,000 at any time; provided,
further, that upon the request of Agent at any time, such Indebtedness shall be
evidenced by promissory notes having terms reasonably satisfactory to Agent,
the sole originally executed counterparts of which shall be delivered to Agent
and shall be pledged to (i) Agent, for the benefit of Agent and Lenders,
as security for the Obligations and (ii) Canadian Facility Agent, for the
benefit of Canadian Facility Agent and Canadian Lenders, as security for the
obligations under the Canadian Facility Loan Documents;

 

(C)                                Indebtedness of Beacon
Canada pursuant to the Canadian Facility Loan Documents;

 

(D)                               Indebtedness not to
exceed $12,000,000 in the aggregate at any time outstanding secured by purchase
money Liens on fixed assets or incurred with respect to Capital Leases;

 

38

 

(E)                                 unsecured Indebtedness
not to exceed $15,000,000 in the aggregate at any time outstanding which is
subordinated to the Obligations in a manner satisfactory to Agent and Requisite
Lenders;

 

(F)                                 Indebtedness existing
on the Closing Date and identified on Schedule 7.1;

 

(G)                                unsecured Indebtedness
of Holdings incurred in connection with any Permitted Acquisition; provided,
however, that any such Indebtedness shall (i) have a maturity date no
earlier than ninety (90) days after the date set forth in clause (a) of
the definition of “Termination Date”, (ii) shall be fully subordinated to
the Obligations in a manner satisfactory to Agent and (iii) be otherwise
issued pursuant to terms and conditions reasonably satisfactory to Agent; and

 

(H)                               “earn-out” payment
obligations of Borrower under the Shelter Acquisition Documents.

 

Obligors will not, and will not permit the
other Loan Parties to, incur any Liabilities except for Indebtedness permitted
herein and trade payables and normal accruals in the ordinary course of
business not yet due and payable or with respect to which any Obligors or any
of the other Loan Parties is contesting in good faith the amount or validity
thereof by appropriate proceedings and then only to the extent that such
Obligor or such other Loan Party has established adequate reserves therefor
under GAAP.

 

7.2                                 Contingent
Obligations.  Directly or indirectly
create or become or be liable with respect to any Contingent Obligation (other
than in respect of the Obligations) except:

 

(A)                              Letter of Credit
Obligations;

 

(B)                                those resulting from
Currency Rate Agreements and Interest Rate Agreements entered into by Borrower
with any Lender (or Affiliate of a Lender) or otherwise with Agent’s prior
written approval, including the Interest Rate Agreement in effect on the
Closing Date between Borrower and LaSalle Bank National Association;

 

(C)                                those resulting from
endorsement of negotiable instruments for collection in the ordinary course of
business;

 

(D)                               those existing on the
Closing Date and described in Schedule 7.2 annexed hereto;

 

(E)                                 those arising under
indemnity agreements to title insurers to cause such title insurers to issue to
Agent mortgagee title insurance policies;

 

(F)                                 those arising with
respect to customary indemnification obligations incurred in connection with
Asset Dispositions or Permitted Acquisitions;

 

(G)                                those incurred in the
ordinary course of business with respect to surety and appeal bonds,
performance and return-of-money bonds and other similar obligations not
exceeding at any time outstanding $200,000 in aggregate liability;

 

39

 

(H)                               those incurred with
respect to Indebtedness permitted by clauses (A), (C), (D), and (E) of subsection 7.1,
provided that any guaranty of Indebtedness that is subordinated to the
Obligations shall be subordinated to the same extent that such Indebtedness is
subordinated to the Obligations;

 

(I)                                    those incurred by
Holdings with respect to Indebtedness permitted by clause (H) of subsection 7.1;
and

 

(J)                                   any other Contingent
Obligation not expressly permitted by clauses (A) through (J) above, so
long as any such other Contingent Obligations, in the aggregate at any time
outstanding, do not exceed $500,000.

 

7.3                                 Transfers,
Liens and Related Matters.

 

(A)                              Transfers.  Sell, assign (by operation of law or
otherwise) or otherwise dispose of, or grant any option with respect to any of
the Collateral or the assets of any Loan Party, except that Borrower and its
Subsidiaries may (i) sell inventory to customers in the ordinary course of
business and dispose of obsolete equipment not used or useful in the business
for fair value; and (ii) make Asset Dispositions if all of the following
conditions are met: (1) the aggregate market value of assets sold or
otherwise disposed of in any Fiscal Year does not exceed $750,000; (2) the
consideration received is at least equal to the fair market value of such
assets; (3) at least 75% of the consideration received is cash;  (4) the net proceeds of such Asset
Disposition are applied as required by subsection 2.4; (5) after
giving effect to the sale or other disposition of the assets included within
the Asset Disposition and the repayment of the Obligations with the proceeds
thereof, Obligors are in compliance on a pro forma basis with the
covenants set forth in the Financial Covenants Rider recomputed for the most
recently ended fiscal quarter for which information is available and is in
compliance with all other terms and conditions contained in this Agreement; and
(6) no Default or Event of Default shall then exist or result from such
sale or other disposition.

 

(B)                                Liens.  Except for Permitted Encumbrances, directly
or indirectly create, incur, assume or permit to exist any Lien on or with
respect to any of the Collateral or the assets of any Loan Party or any
proceeds, income or profits therefrom.

 

(C)                                No Negative Pledges.  Enter into or assume any agreement (other
than the Loan Documents and the Canadian Facility Loan Documents) prohibiting
the creation or assumption of any Lien upon the properties or assets of any
Loan Party, whether now owned or hereafter acquired.

 

(D)                               No Restrictions on
Subsidiary Distributions to Borrower. 
Except as provided herein and in the Canadian Facility Loan Documents,
directly or indirectly create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of any Subsidiary of Borrower to: (1) pay dividends or make any other
distribution on any of such Subsidiary’s capital stock owned by Borrower or any
Subsidiary of Borrower; (2) pay any indebtedness owed to Borrower or any
other Subsidiary; (3) make loans or advances to Borrower or any other
Subsidiary; or (4) transfer any of its property or assets to Borrower or
any other Subsidiary.

 

40

 

7.4                                 Investments
and Loans.  Make or permit to exist
investments in or loans to any other Person, except:  (a) Cash Equivalents; (b) intercompany
loans by Borrower to its Subsidiaries to the extent permitted under subsection 7.1;
(c) loans and advances to employees for moving, entertainment, travel and
other similar expenses in the ordinary course of business in an aggregate
outstanding amount not in excess of $300,000 at any time; (d) promissory
notes of employees issued to Holdings in consideration for shares of capital
stock issued by Holdings to such employees in an aggregate outstanding amount
not exceeding $750,000 at any time; and (e) Permitted Acquisitions
consummated by Obligors.

 

7.5                                 Restricted
Junior Payments.  Directly or
indirectly declare, order, pay, make or set apart any sum for any Restricted
Junior Payment, except that:

 

(A)                              Borrower may make
payments and distributions to Holdings that are used by Holdings to pay federal
and state income taxes then due and owing, franchise taxes and other similar
licensing expenses incurred in the ordinary course of business; provided that
Borrower’s aggregate contribution to taxes as a result of the filing of a
consolidated or combined return by Holdings shall not be greater, nor the
aggregate receipt of tax benefits less, than they would have been had Borrower
and its Subsidiaries not filed a consolidated or combined return with Holdings;

 

(B)                                Subsidiaries of
Borrower may make Restricted Junior Payments to Borrower;

 

(C)                                Borrower may make
distributions to Holdings to permit Holdings to redeem (and Holdings may
redeem) shares of its capital stock (or warrants or options to acquire any such
shares) from employees of Borrower and its Subsidiaries upon the death or other
termination of employment of such employees, provided all of the following
conditions are satisfied:

 

(1)                                  no Default or
Event of Default shall have occurred and be continuing or would arise as a
result of such distribution or payment;

 

(2)                                  after giving
effect to such distribution and payment, Obligors shall be in compliance on a
pro forma basis with all financial covenants set forth in the Financial
Covenants Rider (excluding Paragraph A thereof) recomputed for the
twelve-month period ending on the last day of the most recent fiscal quarter
for which Agent has received the monthly financial statements required to be
delivered pursuant to paragraph (A) of the Reporting Rider;

 

(3)                                  the aggregate
amount of such distributions permitted in any fiscal year of the Borrower shall
not exceed $500,000; and

 

(4)                                  after giving
effect to such distribution and payment and the making of any Revolving Loan to
fund such distribution, Excess Availability is at least $10,000,000; and

 

(D)                               Borrower may pay the “earn-out”
amount in accordance with the terms of the Shelter Acquisition Documents, provided
that (1) no Event of Default shall have occurred and be continuing or
would arise as a result of such payment, (2) after giving effect to such
payment and the making of any Revolving Loan to fund such payment, Excess
Availability is at

 

41

 

least $20,000,000 in excess of the minimum Excess Availability required
under clause (A) of the Financial Covenants Rider and (3) average
daily Excess Availability for the 60-day period preceding the date of such payment
(as mutually calculated by Borrower and Agent in accordance with this
Agreement) exceeds the minimum Excess Availability required under clause (A) of
the Financial Covenants Rider by at least $20,000,000 on a pro forma basis
(after giving effect to such payment and the making of any Revolving Loan to
fund such payment as if made on the first day of such period).

 

7.6                                 Restriction
on Fundamental Changes.

 

(A)                              Enter into any
transaction of merger or consolidation; (B) liquidate, wind-up or dissolve
itself (or suffer any liquidation or dissolution); (C) convey, sell,
lease, sublease, transfer or otherwise dispose of, in one transaction or a
series of transactions, all or any substantial part of its business or assets,
or the capital stock of any of its Subsidiaries, whether now owned or hereafter
acquired; or (D) acquire by purchase or otherwise all or any substantial
part of the business or assets of, or stock or other beneficial ownership of,
any Person.

 

Notwithstanding the foregoing, Borrower may
acquire all or substantially all of the assets or equity securities of any
Person (the “Target”) (in each case, a “Permitted Acquisition”) subject to the
satisfaction of each of the following conditions:

 

(1)                                  Agent shall
receive at least 10 Business Days’ prior written notice of such proposed
Permitted Acquisition, which notice shall include a reasonably detailed
description of such proposed Permitted Acquisition;

 

(2)                                  such Permitted
Acquisition shall only involve assets located in the United States and
comprising a business, or those assets of a business, of a similar type engaged
in by Obligors as of the Closing Date, and which business would not subject
Agent or any Lender to regulatory or third party approvals in connection with
the exercise of its rights and remedies under this Agreement or any other Loan
Documents other than approvals applicable to the exercise of such rights and
remedies with respect to Obligors prior to such Permitted Acquisition;

 

(3)                                  such Permitted
Acquisition shall be consensual and shall have been approved by the Target’s
board of directors;

 

(4)                                  no additional
Indebtedness, Contingent Obligations or other liabilities shall be incurred,
assumed or otherwise be reflected on a consolidated balance sheet of Obligor
and Target after giving effect to such Permitted Acquisition, except (A) Loans
made hereunder, (B) ordinary course trade payables, accrued expenses and
unsecured Indebtedness of the Target to the extent no Default or Event of
Default has occurred and is continuing or would result after giving effect to
such Permitted Acquisition and (C) Indebtedness permitted under subsection 7.1(G);

 

(5)                                  the business
and assets acquired in such Permitted Acquisition shall be free and clear of
all Liens (other than Permitted Encumbrances);

 

42

 

 

(6)                                  at or prior to
the closing of any Permitted Acquisition, Agent will be granted a first
priority perfected Lien (subject to Permitted Encumbrances) in all assets
acquired pursuant thereto or in the assets and equity securities of the Target,
and Holdings and Obligor and the Target shall have executed such documents and
taken such actions as may be required by Agent in connection therewith;

 

(7)                                  at the time of
such Permitted Acquisition (before and after giving effect to such Permitted
Acquisition and all Loans funded in connection therewith), Excess Availability
shall exceed $12,500,000;

 

(8)                                  Within five (5) Business
Days following delivery of the notice referred to in clause (1) above with
respect to any Permitted Acquisition other than a Permitted Small Acquisition
(unless otherwise requested by Agent with respect to any Permitted Small
Acquisition), Borrower shall have delivered to Agent, in form and substance
reasonably satisfactory to Agent:

 

(a)                                  a pro forma
consolidated balance sheet, income statement and cash flow statement of
Holdings and its Subsidiaries (the “Acquisition Pro Forma”), based on recent
financial statements, which shall be complete and shall fairly present in all
material respects the assets, liabilities, financial condition and results of
operations of Holdings and its Subsidiaries in accordance with GAAP
consistently applied, but taking into account such Permitted Acquisition and
the funding of all Loans in connection therewith, and such Acquisition Pro
Forma shall reflect that average daily Excess Availability for the 30-day
period preceding the consummation of such Permitted Acquisition would have
exceeded $12,500,000 on a pro forma basis (after giving effect to such
Permitted Acquisition and all Loans funded in connection therewith as if made
on the first day of such period) and the Acquisition Projections (as
hereinafter defined) shall reflect that such Excess Availability of $12,500,000
shall continue for at least 30 days after the consummation of such Permitted
Acquisition and on a pro forma basis, no Event of Default has occurred and is
continuing or would result after giving effect to such Permitted Acquisition
and Borrower would have been in compliance with the financial covenants set
forth in the Financial Covenants Rider recomputed for the twelve month period
ending on the last day of the most recent fiscal quarter for which Agent has
received the monthly financial statements required to be delivered pursuant to paragraph
A of the Reporting Rider (after giving effect to such Permitted Acquisition
and all Loans funded in connection therewith as if made on the first day of
such period);

 

(b)                                 updated versions of
the most recently delivered Projections covering the 1 year period commencing
on the date of such Permitted Acquisition and otherwise prepared in accordance
with the Projections (the “Acquisition Projections”) and based upon historical
financial data of a recent date reasonably satisfactory to Agent, taking into
account such Permitted Acquisition;

 

(c)                                  a certificate of the
chief financial officer of Borrower on behalf of Borrower to the effect that:
(w) the Parties will be Solvent upon the consummation of the Permitted
Acquisition; (x) the Acquisition Pro Forma fairly presents the financial
condition of Holdings and its Subsidiaries (on a consolidated basis) as of the
date thereof after giving effect to the Permitted Acquisition; (y) the
Acquisition Projections are reasonable estimates of the future

 

43

 

financial performance of Holdings and its Subsidiaries subsequent to
the date thereof based upon the historical performance of Holdings and its
Subsidiaries and the Target and show that Holdings and its Subsidiaries shall
continue to be in compliance with the financial covenants set forth in the
Financial Covenants Rider for the 1 year period thereafter; and (z) Holdings
and its Subsidiaries have completed their due diligence investigation with
respect to the Target and such Permitted Acquisition, which investigation was
conducted in a manner similar to that which would have been conducted by a
prudent purchaser of a comparable business and the results of which
investigation were delivered to Agent and Lenders; and

 

(d)                                 any documentation
required to be delivered in accordance with Section 5.5;

 

(9)                                  on or prior to
the date of such Permitted Acquisition, Agent shall have received, in form and
substance reasonably satisfactory to Agent, environmental assessments
satisfactory to Agent, copies of the acquisition agreement and related
agreements and instruments, and all opinions, certificates, lien search results
and other documents reasonably requested by Agent, including any landlord
waivers requested by Agent; and

 

(10)                            at the time of
such Permitted Acquisition and after giving effect thereto, no Default or Event
of Default has occurred and is continuing.

 

Notwithstanding the foregoing, the Accounts
and Inventory of Target shall not be included in Eligible Accounts and Eligible
Inventory unless Agent shall have received the reports, listings and agings set
forth in paragraph (G) of the Reporting Rider with respect to
Target.

 

7.7                                 Changes
Relating to Indebtedness.  Change or
amend the terms of any of its Indebtedness permitted by clause (B) through
(F) of subsection 7.1 if the effect of such amendment
is an attempt to: (a) increase the interest rate on such Indebtedness; (b) change
the dates upon which payments of principal or interest are due on such
Indebtedness; (c) change any event of default or add any covenant with
respect to such Indebtedness; (d) change the payment provisions of such
Indebtedness; (e) change the subordination provisions thereof; or (f) change
or amend any other term if such change or amendment would materially increase
the obligations of the obligor or confer additional material rights on the
holder of such Indebtedness in a manner adverse to any Loan Party, Agent or any
Lender.

 

7.8                                 Transactions
with Affiliates.  Directly or
indirectly, enter into or permit to exist any transaction (including the
purchase, sale or exchange of property or the rendering of any service) with
any Affiliate or with any officer, director or employee of any Loan Party,
except (a) for transactions in the ordinary course of and pursuant to the
reasonable requirements of the business of any Loan Party and upon fair and
reasonable terms which are fully disclosed to Agent and are no less favorable
to such Loan Party than would be obtained in a comparable arm’s length
transaction with a Person that is not an Affiliate, (b) for payment of
reasonable compensation to officers and employees for services actually
rendered to such Loan Party and (c) for payment of reasonable fees to
independent directors.

 

44

 

7.9                                 Conduct
of Business.  From and after the
Closing Date, engage in any business other than businesses of the type engaged
in by such Loan Party on the Closing Date.

 

7.10                           Tax
Consolidations.  File or consent to
the filing of any consolidated income tax return with any Person other than the
Loan Parties; provided that the contribution of Borrower and its
Subsidiaries with respect to taxes as a result of the filing of a consolidated
return with Holdings shall not be greater, nor the receipt of tax benefits
less, than they would have been had Borrower and its Subsidiaries not filed a
consolidated return with Holdings.

 

7.11                           Subsidiaries.  Other than the Subsidiaries set forth on Schedule 7.11,
establish, create or acquire any new Subsidiaries other than in connection with
a Permitted Acquisition.

 

7.12                           Fiscal
Year; Tax Designation.  Change its
Fiscal Year; or, in the case of the Loan Parties other than Beacon Canada,
elect to be designated as an entity other than a C corporation; or, in the case
of Beacon Canada, elect to be designated as an entity other than an unlimited
liability company.

 

7.13                           Press
Release; Public Offering Materials. 
Issue any press releases or other public disclosure (including any
prospectus, proxy statement or other materials filed with any governmental
authority relating to a public offering of the capital stock or other equity
securities of any Loan Party) using the name of GE Capital or its affiliates or
specifically referring to this Agreement, the other Loan Documents or the
Related Transactions Documents without at least two (2) Business Days’
prior notice to GE Capital and without the prior written consent of GE Capital
except that, to the extent (and only to the extent) such disclosure is required
under applicable law or under the applicable rules of any national
securities exchange, national securities association, national market system or
other-self-regulatory organization, the Loan Parties may make such disclosure
without the consent of GE Capital and, except in the case of any material
disclosure, without giving prior notice to GE Capital, provided that the Loan
Parties must in all events use reasonable efforts to consult with GE Capital
before making such disclosure.  Each
Obligor consents to the publication by Agent or any Lender of a tombstone or
similar advertising material relating to the financing transactions
contemplated by this Agreement.  Agent or
such Lender shall provide a draft of any such tombstone or similar advertising
material to Borrower for review and comment prior to the publication
thereof.  Agent reserves the right to
provide to industry trade organizations information necessary and customary for
inclusion in league table measurements.

 

7.14                           Bank
Accounts.  Establish any new bank
accounts, or attempt to amend or terminate any Blocked Account or lockbox
agreement without Agent’s prior written consent.

 

7.15                           IRS Form 8821.  Revoke United States of America Internal
Revenue Service (“IRS”) Form 8821 designating Agent as Borrower’s
appointee to receive directly from the IRS, on an on-going basis, certain tax
information, notices and other written communication or fail to take actions
necessary to renew such Form 8821 prior to its expiration for all time
periods prior to the Termination Date.

 

7.16                           Hazardous
Materials.  Cause or permit a Release
of any Hazardous Material on, at, in, under, above, to, from or about any of
the Real Estate where such Release would

 

45

 

(a) violate in any respect, or form the basis for any
Environmental Liabilities by the Loan Parties under, any Environmental Laws or
Environmental Permits or (b) otherwise adversely impact the value or
marketability of any of the Real Estate or any of the Collateral, other than
such violations or Environmental Liabilities that could not reasonably be expected,
in either case, to have a Material Adverse Effect.

 

7.17                           CIGNA
Impress Account.  Maintain more than
$125,000 on deposit in the CIGNA Impress Account.

 

SECTION 8.

DEFAULT, RIGHTS AND REMEDIES

 

8.1                                 Event
of Default.  “Event of Default” shall
mean the occurrence or existence of any one or more of the following (for each
subsection a different grace or cure period may be specified, if no grace
or cure period is specified, such occurrence or existence constitutes an
immediate Event of Default):

 

(A)                              Payment.  (1) Failure to pay any installments or
other payments of principal of any Loan when due, or to repay the Revolving
Loan to reduce its balance to the Maximum Revolving Loan Amount or to reimburse
Agent, L/C Issuer or any Lender for any payment made by Agent, L/C Issuer or
such Lender under or in respect of any Lender Letter of Credit when due or (2) failure
to pay, within five (5) days after the due date, any interest on any Loan
or any other amount due (other than principal of any Loan) under this Agreement
or any of the other Loan Documents; or

 

(B)                                Default in Other
Agreements.  (1) Failure of any
Loan Party to pay when due any principal or interest on any Indebtedness (other
than the Obligations) or (2) breach or default of any Loan Party with respect
to any Indebtedness (other than the Obligations); if such failure to pay,
breach or default entitles the holder to cause such Indebtedness having an
individual principal amount in excess of $200,000 or having an aggregate
principal amount in excess of $300,000 to become or be declared due prior to
its stated maturity; or

 

(C)                                Breach of Certain
Provisions.  (1) Failure of any
Obligor to perform or comply with any term or condition contained in paragraphs
(A) and (C) of the Reporting Rider, that portion of subsection 4.17
relating to Obligors’ obligations to maintain insurance or subsection 5.1
or contained in Section 7 or the Financial Covenants Rider; or (2) failure
of any Obligor to perform or comply with any term or condition contained in
paragraphs (E), (F) and (K) of the Reporting Rider and such failure is not
remedied or waived within five (5) Business Days (two (2) Business
Days in the case of any term or condition contained in paragraph (F) of
the Reporting Rider to be performed on a weekly basis) after the date such
failure first occurs; or

 

(D)                               Breach of Warranty.  Any representation, warranty, certification
or other statement made by any Loan Party in any Loan Document or in any
statement or certificate at any time given by such Person in writing pursuant
or in connection with any Loan Document is false in any material respect on the
date made; or

 

(E)                                 Other Defaults
Under Loan Documents.  Borrower or
any other Loan Party defaults in the performance of or compliance with any term
contained in this Agreement

 

46

 

other than those otherwise set forth in this subsection 8.1, or
defaults in the performance of or compliance with any term contained in the
other Loan Documents and such default is not remedied or waived within fifteen
(15) days after notice from Agent, or, as required, Requisite Lenders, to
Borrower of such default; or

 

(F)                                 Change of Control.  (1) Any person or group of persons
(within the meaning of the Securities Exchange Act of 1934) other than the
underwriters in a public offering or CHS shall acquire beneficial ownership
(within the meaning of Rule 13d-3 promulgated by the Securities Exchange
Commission under the Securities Exchange Act of 1934) of 25% or more of the
issued and outstanding shares of capital stock of Holdings having the right to
vote for the election of directors of Holdings under ordinary circumstances; or
(2) Holdings ceases to beneficially and of record own and control all of
the issued and outstanding capital stock or other equity securities of Borrower
free and clear of all Liens other than Liens in favor of Agent and Canadian
Facility Agent; or (3) Borrower ceases to beneficially own and control,
directly or indirectly, free and clear of all Liens other than Liens in favor
of Agent and Canadian Facility Agent, 100% of the issued and outstanding shares
of each class of capital stock or other equity securities entitled (without
regard to the occurrence of any contingency) to vote for the election of a
majority of the members of the boards of directors of any Loan Party other than
Borrower and Holdings; or

 

(G)                                Involuntary
Bankruptcy; Appointment of Receiver, etc. 
(1) A court enters a decree or order for relief with respect to any
Loan Party in an involuntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, which decree or order is not
stayed or other similar relief is not granted under any applicable federal or
state law; or (2) the continuance of any of the following events for
forty-five (45) days unless dismissed, bonded or discharged: (a) an
involuntary case is commenced against any Loan Party, under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect; or (b) a
receiver, liquidator, sequestrator, trustee, custodian or other fiduciary
having similar powers over any Loan Party, or over all or a substantial part of
their respective property, is appointed; or

 

(H)                               Voluntary Bankruptcy;
Appointment of Receiver, etc.  (1) Any
Loan Party, Borrower or any of its Subsidiaries commences a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consents to the entry of an order for relief in an
involuntary case or to the conversion of an involuntary case to a voluntary
case under any such law or consents to the appointment of or taking possession
by a receiver, trustee or other custodian for all or a substantial part of its
property; or (2) any Loan Party makes any assignment for the benefit of
creditors; or (3) the board of directors of any Loan Party adopts any
resolution or otherwise authorizes action to approve any of the actions
referred to in this subsection 8.1(H); or

 

(I)                                    Liens.  Any lien, levy or assessment is filed or
recorded with respect to or otherwise imposed upon all or any part of the
Collateral or the assets of Borrower or any of its Subsidiaries by the United
States or any department or instrumentality thereof or by any state, county,
municipality or other governmental agency (other than Permitted Encumbrances)
and such lien, levy or assessment is not stayed, vacated, paid or discharged
within ten (10) days; or

 

47

 

(J)                                   Judgment and
Attachments.  Any money judgment,
writ or warrant of attachment, or similar process involving (1) an amount
in any individual case in excess of $300,000 or (2) an amount in the
aggregate at any time in excess of $500,000 (in either case not adequately
covered by insurance as to which the insurance company has acknowledged
coverage) is entered or filed against any Loan Party or any of their respective
assets and remains undischarged, unvacated, unbonded or unstayed for a period
of thirty (30) days, but in any event not later than five (5) days prior
to the date of any proposed sale thereunder; or

 

(K)                               Dissolution.  Any order, judgment or decree is entered
against any Loan Party decreeing the dissolution or split up of such Loan Party
and such order remains undischarged or unstayed for a period in excess of
fifteen (15) days, but in any event not later than five (5) days prior to
the date of any proposed dissolution or split up; or

 

(L)                                 Solvency. Any
Loan Party ceases to be solvent (as represented by Obligors in subsection 4.15)
or admits in writing its present or prospective inability to pay its debts as
they become due; or

 

(M)                            Injunction. Any Loan
Party is enjoined, restrained or in any way prevented by the order of any court
or any administrative or regulatory agency from conducting all or any material
part of its business and such order continues for fifteen (15) days or more; or

 

(N)                               Invalidity of Loan
Documents.  Any of the Loan Documents
for any reason, other than a partial or full release in accordance with the
terms thereof, ceases to be in full force and effect or is declared to be null
and void, or any Loan Party denies that it has any further liability under any
Loan Documents to which it is party, or gives notice to such effect; or

 

(O)                               Failure of Security.  Agent, on behalf of itself and Lenders, does
not have or ceases to have a valid and perfected first priority security
interest in the Collateral (subject to Permitted Encumbrances), in each case,
for any reason other than the failure of Agent or any Lender to take any action
within its control; or

 

(P)                                 Damage, Strike,
Casualty.  Any material damage to, or
loss, theft or destruction of, any Collateral, whether or not insured, or any
strike, lockout, labor dispute, embargo, condemnation, act of God or public
enemy, or other casualty which causes, for more than fifteen (15) consecutive
days, the cessation or substantial curtailment of revenue producing activities
at any facility of Borrower or any of its Subsidiaries if any such event or
circumstance could reasonably be expected to have a Material Adverse Effect; or

 

(Q)                               Licenses and Permits.  The loss, suspension or revocation of, or
failure to renew, any license or permit now held or hereafter acquired by
Borrower or any of its Subsidiaries, if such loss, suspension, revocation or
failure to renew could reasonably be expected to have a Material Adverse
Effect; or

 

(R)                                Forfeiture.  There is filed against any Loan Party of any
civil or criminal action, suit or proceeding under any federal or state
racketeering statute (including, without limitation, the Racketeer Influenced
and Corrupt Organization Act of 1970), which action, suit or proceeding (1) is
not dismissed within one hundred twenty (120) days; and (2) could
reasonably be expected to result in the confiscation or forfeiture of any
material portion of the Collateral, or

 

48

 

(S)                                 Default under
Canadian Facility Credit Agreement. 
Any Event of Default (as defined under the Canadian Facility Credit
Agreement) shall occur under the Canadian Facility Credit Agreement.

 

8.2                                 Suspension
of Commitments.  Upon the occurrence
of any Default or Event of Default, notwithstanding any grace period or right
to cure, Agent may or upon demand by Requisite Lenders shall, without notice or
demand, immediately cease making additional Loans and the Commitments shall be
suspended; provided that, in the case of a Default, if the subject
condition or event is waived or cured within any applicable grace or cure
period, the Commitments shall be reinstated.

 

8.3                                 Acceleration.  Upon the occurrence of any Event of Default
described in the foregoing subsections 8.1(G) or 8.1(H), all
Obligations shall automatically become immediately due and payable, without
presentment, demand, protest or other requirements of any kind, all of which
are hereby expressly waived by Obligors, and the Commitments shall thereupon
terminate.  Upon the occurrence and
during the continuance of any other Event of Default, Agent may, and upon
demand by Requisite Lenders shall, by written notice to Borrower, (a) declare
all or any portion of the Obligations to be, and the same shall forthwith
become, immediately due and payable and the Commitments shall thereupon
terminate and (b) demand that Borrower immediately deposit with Agent an
amount equal to one hundred five percent (105%) of the balance of Letter of
Credit Obligations to enable Agent or L/C Issuer to make payments under the
Letters of Credit when required and such amount shall become immediately due
and payable.

 

8.4                                 Remedies.  If any Event of Default shall have occurred
and be continuing, in addition to and not in limitation of any other rights or
remedies available to Agent and Lenders at law or in equity, Agent may, and
shall upon the request of Requisite Lenders, exercise in respect of the
Collateral, in addition to all other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the UCC (whether or not the UCC applies to the affected
Collateral) and may also (a) require Obligors to, and each Obligor hereby
agrees that it will, at its expense and upon request of Agent forthwith,
assemble all or part of the Collateral as directed by Agent and make it
available to Agent at a place to be designated by Agent which is reasonably
convenient to both parties; (b) withdraw all cash in the Blocked Accounts
and apply such monies in payment of the Obligations in the manner provided in subsection 8.7;
and (c) without notice or demand or legal process, enter upon any premises
of Borrower and take possession of the Collateral. Obligors agree that, to the
extent notice of sale of the Collateral or any part thereof shall be required
by law, at least ten (10) days notice to Borrower of the time and place of
any public sale or the time after which any private sale is to be made shall
constitute reasonable notification.  At
any sale of the Collateral (whether public or private), if permitted by law,
Agent or any Lender may bid (which bid may be, in whole or in part, in the form
of cancellation of indebtedness) for the purchase of the Collateral or any
portion thereof for the account of Agent or such Lender.  Agent shall not be obligated to make any sale
of Collateral regardless of notice of sale having been given.  Obligors shall remain liable for any deficiency.  Agent may adjourn any public or private sale
from time to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place to which
it was so adjourned.  To the extent
permitted by law, Obligors hereby specifically waive all rights of redemption,
stay or appraisal which it has or may have under any

 

49

 

law now existing or hereafter enacted. 
Agent shall not be required to proceed against any Collateral but may
proceed against any Obligor directly.

 

8.5                                 Appointment
of Attorney-in-Fact. Each Obligor hereby constitutes and appoints Agent as
such Obligor’s attorney-in-fact with full authority in the place and stead of
such Obligor and in the name of such Obligor, Agent or otherwise, from time to
time in Agent’s discretion while an Event of Default is continuing to take any
action and to execute any instrument that Agent may deem necessary or advisable
to accomplish the purposes of this Agreement, including: (a) to ask,
demand, collect, sue for, recover, compound, receive and give acquittance and
receipts for moneys due and to become due under or in respect of any of the
Collateral; (b) to adjust, settle or compromise the amount or payment of
any Account, or release wholly or partly any customer or obligor thereunder or
allow any credit or discount thereon; (c) to receive, endorse, and collect
any drafts or other instruments, documents and chattel paper, in connection
with clause (a) above; (d) to file any claims or take any action or
institute any proceedings that Agent may deem necessary or desirable for the
collection of or to preserve the value of any of the Collateral or otherwise to
enforce the rights of Agent and Lenders with respect to any of the Collateral;
and (e) to sign and endorse any invoices, freight or express bills, bills
of lading, storage or warehouse receipts, assignments, verifications and
notices in connection with Accounts and other documents relating to the
Collateral.  The appointment of Agent as
each Obligor’s attorney and Agent’s rights and powers are coupled with an
interest and are irrevocable until indefeasible payment in full and complete
performance of all of the Obligations and termination of the Commitments.

 

8.6                                 Limitation
on Duty of Agent with Respect to Collateral.  Beyond the safe custody thereof, Agent and
each Lender shall have no duty with respect to any Collateral in its possession
or control (or in the possession or control of any agent or bailee) or with
respect to any income thereon or the preservation of rights against prior
parties or any other rights pertaining thereto. 
Agent shall be deemed to have exercised reasonable care in the custody
and preservation of the Collateral in its possession if the Collateral is
accorded treatment substantially equal to that which Agent accords its own
property.  Neither Agent nor any Lender
shall be liable or responsible for any loss or damage to any of the Collateral,
or for any diminution in the value thereof, by reason of the act or omission of
any warehouseman, carrier, forwarding agency, consignee, broker or other agent
or bailee selected by any Obligor or selected by Agent in good faith.

 

8.7                                 Application
of Proceeds.  Notwithstanding
anything to the contrary contained in this Agreement, upon the occurrence and
during the continuance of an Event of Default, (a) Obligors irrevocably
waive the right to direct the application of any and all payments at any time
or times thereafter received by Agent from or on behalf of any Obligor, and
Agent shall have the continuing and exclusive right to apply and to reapply any
and all payments received at any time or times after the occurrence and during
the continuance of an Event of Default against the Obligations in such manner
as Agent may deem advisable notwithstanding any previous application by Agent
and (b) in the absence of a specific determination by Agent with respect
thereto, the proceeds of any sale of, or other realization upon, all or any
part of the Collateral shall be applied: first, to all fees, costs and
expenses incurred by or owing to Agent and then any Lender with respect to this
Agreement, the other Loan Documents or the Collateral; second, to
accrued and unpaid interest on the Obligations (including any interest which
but for the

 

50

 

provisions of any bankruptcy or insolvency law would have accrued on
such amounts); third, to the principal amounts of the Loans and the
Letter of Credit Obligations outstanding; and fourth, to any other
Obligations of Borrower owing to Agent or any Lender under the Loan Documents
or any Interest Rate Agreement or Currency Rate Agreement or in respect of any
Banking Services.  Any balance remaining
shall be delivered to Obligors or to whomever may be lawfully entitled to
receive such balance or as a court of competent jurisdiction may direct.

 

8.8                                 License
of Intellectual Property. Each Obligor hereby assigns, transfers and
conveys to Agent, for the benefit of Agent and Lenders, effective upon the
occurrence of any Event of Default hereunder, the non-exclusive right and
license to use all Intellectual Property owned or used by such Obligor together
with any goodwill associated therewith, all to the extent necessary to enable
Agent to realize on the Collateral and any successor or assign to enjoy the
benefits of the Collateral.  This right
and license shall inure to the benefit of all successors, assigns and
transferees of Agent and its successors, assigns and transferees, whether by
voluntary conveyance, operation of law, assignment, transfer, foreclosure, deed
in lieu of foreclosure or otherwise. 
Such right and license is granted free of charge.

 

8.9                                 Waivers;
Non-Exclusive Remedies.  No failure
on the part of Agent or any Lender to exercise, and no delay in exercising and
no course of dealing with respect to, any right under this Agreement or the
other Loan Documents shall operate as a waiver thereof; nor shall any single or
partial exercise by Agent or any Lender of any right under this Agreement or
any other Loan Document preclude any other or further exercise thereof or the
exercise of any other right.  The rights
in this Agreement and the other Loan Documents are cumulative and shall in no
way limit any other remedies provided by law.

 

SECTION 9.

AGENT

 

9.1                                 Agent.

 

(A)                              Appointment.  Each Lender hereto and, upon obtaining an
interest in any Loan, any participant, transferee or other assignee of any
Lender irrevocably appoints, designates and authorizes GE Capital as Agent to
take such actions or refrain from taking such action as its agent on its behalf
and to exercise such powers hereunder and under the other Loan Documents as are
delegated by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto.  Neither
the Agent nor any of its directors, officers, employees or agents shall be
liable for any action so taken.  The
provisions of this subsection 9.1 are solely for the benefit of Agent and
Lenders and no Obligor nor any other Loan Party shall have any rights as a
third party beneficiary of any of the provisions hereof.  In performing its functions and duties under
this Agreement and the other Loan Documents, Agent shall act solely as agent of
Lenders and does not assume and shall not be deemed to have assumed any
obligation toward or relationship of agency or trust with or for any Obligor or
any other Loan Party.  Agent may perform
any of its duties hereunder, or under the Loan Documents, by or through its
agents or employees.  For the purposes of
holding any security granted by any Loan Party pursuant to the laws of the
Province of Quebec, Agent shall be the holder of an irrevocable power of
attorney for all present and future Lenders. 
By executing an Assignment and Acceptance Agreement, any future Lender
shall be deemed to ratify the power of attorney granted to Agent
hereunder.  Lenders and each

 

51

 

Loan Party agree that notwithstanding Section 32 of “the Act
respecting the Special Powers of Legal Persons (Quebec)”, Agent may, as the
person holding the power of attorney of Lenders, acquire any debentures or
other title of indebtedness secured by any hypothec granted by any Loan Party
to Agent pursuant to the laws of the Province of Quebec.

 

(B)                                Nature of Duties.  Agent shall have no duties, obligations or
responsibilities except those expressly set forth in this Agreement or in the
Loan Documents.  The duties of Agent
shall be mechanical and administrative in nature.  Agent shall not have by reason of this
Agreement a fiduciary, trust or agency relationship with or in respect of any
Lender, any Obligor or any other Loan Party. 
Nothing in this Agreement or any of the Loan Documents, express or
implied, is intended to or shall be construed to impose upon Agent any
obligations in respect of this Agreement or any of the Loan Documents except as
expressly set forth herein or therein. 
Each Lender shall make its own appraisal of the credit worthiness of the
Loan Parties, and shall have independently taken whatever steps it considers
necessary to evaluate the financial condition and affairs of the Loan Parties,
and Agent shall have no duty or responsibility, either initially or on a
continuing basis, to provide any Lender with any credit or other information with
respect thereto (other than as expressly required herein), whether coming into
its possession before the Closing Date or at any time or times thereafter.  If Agent seeks the consent or approval of any
Lenders to the taking or refraining from taking any action hereunder, then
Agent shall send notice thereof to each Lender. 
Agent shall promptly notify each Lender any time that the Requisite
Lenders have instructed Agent to act or refrain from acting pursuant hereto

 

(C)                                Rights, Exculpation,
Etc.  Neither Agent nor any of its
officers, directors, employees or agents shall be liable to any Lender for any
action taken or omitted by them hereunder or under any of the Loan Documents,
or in connection herewith or therewith, except that Agent shall be liable to the
extent of its own gross negligence or willful misconduct as determined by a
court of competent jurisdiction.  Agent
shall not be liable for any apportionment or distribution of payments made by
it in good faith and if any such apportionment or distribution is subsequently
determined to have been made in error, the sole recourse of any Lender to whom
payment was due but not made, shall be to recover from other Lenders any
payment in excess of the amount to which they are determined to be entitled
(and such other Lenders hereby agree to return to such Lender any such
erroneous payments received by them).  In
performing its functions and duties hereunder, Agent shall exercise the same
care which it would in dealing with loans for its own account, but neither Agent
nor any of its agents or representatives shall be responsible to any Lender for
any recitals, statements, representations or warranties herein or for the
execution, effectiveness, genuineness, validity, enforceability,
collectibility, or sufficiency of this Agreement or any of the Loan Documents
or the transactions contemplated thereby, or for the financial condition of any
Loan Party.  Agent shall not be required
to make any inquiry concerning either the performance or observance of any of
the terms, provisions or conditions of this Agreement or any of the Loan
Documents or the financial condition of any Loan Party, or the existence or
possible existence of any Default or Event of Default.  Agent may at any time request instructions
from Lenders with respect to any actions or approvals which by the terms of
this Agreement or of any of the Loan Documents Agent is permitted or required
to take or to grant, and if such instructions are promptly requested, Agent
shall be absolutely entitled to refrain from taking any action or to withhold
any approval and shall not be under any liability whatsoever to any Person for
refraining from any action or

 

52

 

withholding any approval under any of the Loan Documents until it shall
have received such instructions from Requisite Lenders or all or such other
portion of the Lenders as shall be prescribed by this Agreement.  Without limiting the foregoing, no Lender
shall have any right of action whatsoever against Agent as a result of Agent
acting or refraining from acting under this Agreement or any of the other Loan
Documents in accordance with the instructions of Requisite Lenders in the
absence of an express requirement for a greater percentage of Lender approval
hereunder for such action.

 

(D)                               Reliance.  Agent shall be under no duty to examine,
inquire into, or pass upon the validity, effectiveness or genuineness of this
Agreement, any other Loan Document, or any instrument, document or
communication furnished pursuant hereto or in connection herewith.   Agent shall be entitled to rely, and shall
be fully protected in relying, upon any written or oral notices, statements,
certificates, orders or other documents or any telephone message or other
communication (including any writing, fax, telecopy or telegram) believed by it
in good faith to be genuine and correct and to have been signed, sent or made
by the proper Person, and with respect to all matters pertaining to this
Agreement or any of the Loan Documents and its duties hereunder or
thereunder.  Agent shall be entitled to
rely upon the advice of legal counsel, independent accountants, and other
experts selected by Agent in its sole discretion.

 

(E)                                 Indemnification.  Lenders will reimburse and indemnify Agent
for and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including, without
limitation, attorneys’ fees and expenses), advances or disbursements of any
kind or nature whatsoever which may be imposed on, incurred by, or asserted
against Agent in any way relating to or arising out of this Agreement or any of
the Loan Documents or any action taken or omitted by Agent under this Agreement
or any of the Loan Documents, in proportion to each Lender’s Pro Rata Share,
but only to the extent that any of the foregoing is not promptly reimbursed by
Borrower; provided, however, no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses, advances or disbursements resulting from Agent’s gross
negligence or willful misconduct as determined by a final non-appealable
judgment by a court of competent jurisdiction. 
If any indemnity furnished to Agent for any purpose shall, in the opinion
of Agent, be insufficient or become impaired, Agent may call for additional
indemnity and cease, or not commence, to do the acts indemnified against, even
if so directed by Lenders or Requisite Lenders, until such additional indemnity
is furnished.  The obligations of Lenders
under this subsection 9.1(E) shall survive the payment in full of the
Obligations and the termination of this Agreement.

 

(F)                                 GE Capital
Individually.  With respect to its
Commitments and the Loans made by it, GE Capital shall have and may exercise
the same rights and powers hereunder and is subject to the same obligations and
liabilities as and to the extent set forth herein for any other Lender.  The terms “Lenders” or “Requisite Lenders” or
any similar terms shall, unless the context clearly otherwise indicates,
include GE Capital in its individual capacity as a Lender or one of the
Requisite Lenders.  GE Capital, either
directly or through strategic affiliations, may lend money to, acquire equity
or other ownership interests in, provide advisory services to and generally
engage in any kind of banking, trust or other business with any Loan Party as
if it were not acting as Agent pursuant hereto and without any duty to account
therefor to Lenders.  GE

 

53

 

Capital, either directly or through strategic affiliations, may accept
fees and other consideration from any Loan Party for services in connection
with this Agreement or otherwise without having to account for the same to
Lenders.  Each Lender acknowledges that
GE Capital has purchased certain equity interests in Holdings and the potential conflict of interest of GE Capital
as Agent and as a Lender and as a holder of an
equity interest in, and
subordinated indebtedness of, Holdings and consents thereto.

 

(G)                                Successor Agent.

 

(1)                                  Resignation.  Agent may resign from the performance of all
its agency functions and duties hereunder at any time by giving at least thirty
(30) Business Days’ prior written notice to Borrower and the Lenders.  Such resignation shall take effect upon the
acceptance by a successor Agent of appointment as provided below.

 

(2)                                  Appointment of
Successor.  Upon any
such notice of resignation pursuant to clause (G)(1) above, Requisite
Lenders shall appoint a successor Agent which, unless an Event of Default has
occurred and is continuing, shall be reasonably acceptable to Borrower.  If a successor Agent shall not have been so
appointed within said thirty (30) Business Day period, the retiring Agent, upon
notice to Borrower, shall then appoint a successor Agent who shall serve as
Agent until such time, if any, as Requisite Lenders appoint a successor Agent
as provided above.

 

(3)                                  Successor Agent.  Upon the acceptance of any appointment as
Agent under the Loan Documents by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations under the Loan Documents.  After any retiring Agent’s resignation as
Agent, the provisions of this Section 9 shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent.

 

(H)                               Collateral Matters.

 

(1)                                  Release of
Collateral.  Lenders
hereby irrevocably authorize Agent, at its option and in its discretion, to
release any Lien granted to or held by Agent upon any Collateral (i) upon
termination of the Commitments and upon payment and satisfaction of all
Obligations (other than contingent indemnification obligations to the extent no
claims giving rise thereto have been asserted); or (ii) constituting
property being sold or disposed of if Borrower certifies to Agent that the sale
or disposition is made in compliance with the provisions of this Agreement (and
Agent may rely in good faith conclusively on any such certificate, without
further inquiry).  In addition, with the
consent of Requisite Lenders, Agent may release Liens granted to or held by
Agent upon any Collateral having a book value of not greater than five percent
(5%) of the total book value of all Collateral, as determined by Agent, either
in a single transaction or in a series of related transactions; provided,
however, in no event will Agent, acting under the authority granted to
it pursuant to this sentence, release during any calendar year Liens granted to
or held by Agent upon any Collateral having a total book value in excess of ten
percent (10%) of the total book value of all Collateral, as determined by
Agent.

 

54

 

(2)                                  Confirmation of
Authority; Execution of Releases.  Without in any manner limiting Agent’s
authority to act without any specific or further authorization or consent by
Lenders (as set forth in subsection 9.1(H)(1) above), each
Lender agrees to confirm in writing, upon request by Agent or Borrower, the
authority to release any Collateral conferred upon Agent under clauses (i) and
(ii) of subsection 9.1(H)(1). 
Upon receipt by Agent of confirmation from the requisite percentage of
Lenders (as set forth in subsection 9.1(H)(1) above), if any,
of Agent’s authority to release any Liens upon any Collateral, and upon at
least ten (10) Business Days prior written request by Borrower, Agent
shall, and is hereby irrevocably authorized by Lenders to, execute such
documents as may be necessary to evidence the release of the Liens granted to
Agent, for the benefit of Agent and Lenders, upon such Collateral; provided,
however, that (i) Agent shall not be required to execute any such
document on terms which, in Agent’s opinion, would expose Agent to liability or
create any obligation or entail any consequence other than the release of such
Liens without recourse or warranty, and (ii) such release shall not in any
manner discharge, affect or impair the Obligations or any Liens granted to
Agent on behalf of Agent and Lenders upon (or obligations of any Loan Party, in
respect of) all interests retained by any Loan Party, including, without
limitation, the proceeds of any sale, all of which shall continue to constitute
part of the property covered by this Agreement or the Loan Documents.

 

(3)                                  Absence of Duty.  Agent shall have no obligation whatsoever to
any Lender or any other Person to assure that the property covered by this
Agreement or the Loan Documents exists or is owned by any Obligor or is cared
for, protected or insured or has been encumbered or that the Liens granted to
Agent on behalf of Agent and Lenders herein or pursuant hereto have been
properly or sufficiently or lawfully created, perfected, protected or enforced
or are entitled to any particular priority, or to exercise at all or in any
particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to Agent in this Agreement or in any of the Loan Documents, it being
understood and agreed that in respect of the property covered by this Agreement
or the Loan Documents or any act, omission or event related thereto, Agent may
act in any manner it may deem appropriate, in its discretion, given Agent’s own
interest in property covered by this Agreement or the Loan Documents as one of
the Lenders and that Agent shall have no duty or liability whatsoever to any of
the other Lenders; provided, however, that Agent shall exercise
the same care which it would in dealing with loans for its own account.

 

(I)                                    Agency for
Perfection.

 

Agent and each Lender hereby appoint each
other Lender as agent for the purpose of perfecting Agent’s security interest
in assets which, in accordance with the Uniform Commercial Code in any
applicable jurisdiction, can be perfected only by possession.  Should any Lender (other than Agent) obtain
possession of any such assets, such Lender shall notify Agent thereof, and,
promptly upon Agent’s request therefor, shall deliver such assets to Agent or
in accordance with Agent’s instructions. 
The Agent may file such proofs of claim or documents as may be necessary
or advisable in order to have the claims of the Agent and the Lenders
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Agent and the Lenders, their respective agents, financial
advisors and counsel), allowed in any judicial proceedings relative to any of
the Loan Parties, or any of their respective creditors or property, and shall
be entitled and empowered to collect, receive and distribute any monies,

 

55

 

securities or other property payable or deliverable on any such claims.  Any custodian in any judicial proceedings
relative to any Loan Party is hereby authorized by each Lender to make payments
to the Agent and, in the event that the Agent shall consent to the making of
such payments directly to the Lenders, to pay to the Agent any amount due for
the reasonable compensation, expenses, disbursements and advances of the Agent,
its agents, financial advisors and counsel, and any other amounts due the
Agent.  Nothing contained in this Agreement
or the other Loan Documents shall be deemed to authorize the Agent to authorize
or consent to or accept or adopt on behalf of any Lender any plan of
reorganization, arrangement, adjustment or composition affecting the Loans, or
the rights of any holder thereof, or to authorize the Agent to vote in respect
of the claim of any Lender in any such proceeding, except as specifically
permitted herein.

 

(J)                                   Exercise of
Remedies.

 

Each Lender agrees that it will not have any
right individually to enforce or seek to enforce this Agreement or any Loan
Document or to realize upon any collateral security for the Loans, unless
instructed to do so by Agent, it being understood and agreed that such rights
and remedies may be exercised only by Agent.

 

9.2                                 Notice
of Default.

 

Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default except with
respect to defaults in the payment of principal, interest and fees required to
be paid to Agent for the account of Lenders, unless Agent shall have received
written notice from a Lender or an Obligor referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a “notice
of default”.  Agent will notify each
Lender of its receipt of any such notice.

 

9.3                                 Action
by Agent.  Agent shall take such
action with respect to any Default or Event of Default as may be requested by
Requisite Lenders in accordance with Section 8.  Unless and until Agent has received any such
request, Agent may (but shall not be obligated to) take such action, or refrain
from taking such action, with respect to any Default or Event of Default as it
shall deem advisable or in the best interests of Lenders.

 

9.4                                 Amendments,
Waivers and Consents.

 

(A)                              Percentage of Lenders
Required.  Except as otherwise
provided herein or in any of the other Loan Documents, no amendment,
modification, termination or waiver of any provision of this Agreement or any
other Loan Document, or consent to any departure by any Loan Party therefrom,
shall in any event be effective unless the same shall be in writing and signed
by Requisite Lenders (or, Agent, if expressly set forth herein or in any of the
other Loan Documents) and the applicable Loan Party; provided however, no
amendment, modification, termination, waiver or consent shall be effective,
unless in writing and signed by all Lenders (other than Defaulting Lenders) and
all Canadian Facility Lenders (other than “Defaulting Lenders” as defined in
the Canadian Facility Credit Agreement), to do any of the following: (i) increase
any of the Commitments; (ii) reduce the principal of or the rate of
interest on any Loan or reduce the fees payable with respect to any Loan or
Letter of Credit; (iii) extend the

 

56

 

Termination Date or the scheduled due date for all or any portion of
principal of the Loans or any interest or fees due hereunder; (iv) amend
the definitions of the term “Requisite Lenders” or the percentage of Lenders
which shall be required for Lenders to take any action hereunder; (v) amend
or waive this subsection 9.4 or the definitions of the terms used in this
subsection 9.4 insofar as the definitions affect the substance of this subsection 9.4;
(vi) increase the percentages contained in the definition of Consolidating
Borrowing Base (or in the definition of Beacon Canada Consolidating Borrowing
Base under the Canadian Facility Credit Agreement) or amend the definitions of
the terms “Consolidating Borrowing Base”, “Consolidated Borrowing Base” and “Beacon
Canada Consolidating Borrowing Base” or the definitions of the terms used
therein insofar as the definitions effect the substance of such terms; (vii) amend
Paragraph A of the Financial Covenants Rider or the definitions of the terms
used therein insofar as the definitions effect the substance of said Paragraph
A; (viii) release Collateral (except if the sale, disposition or release
of such Collateral is permitted under subsection 7.3 or subsection 9.1
or under any other Loan Document); (ix) amend the definition of the term “Obligations”
or the definitions of the terms used therein insofar as the definitions effect
the substance of such term; (x) consent to the assignment, delegation or other
transfer by any Loan Party of any of its rights and obligations under any Loan
Document; (xi) amend or waive subsection 8.7; or (xii) increase the “Commitments”
under (and as defined in) the Canadian Facility Credit Agreement; provided,
further, that no amendment, modification, termination, waiver or consent
affecting the rights or duties of Agent under this Section 9 or under any
Loan Document shall in any event be effective, unless in writing and signed by
Agent, in addition to the Lenders required to take such action.  Any amendment, modification, termination,
waiver or consent effected in accordance with this Section 9 shall be
binding upon each Lender or future Lender and, if signed by a Loan Party, on
such Loan Party.  Notwithstanding the
foregoing, the amendments contemplated by subsection 2.16 and the effects
thereof shall not require the consent of any Lender, except as provided in subsection 2.16.

 

(B)                                Specific Purpose or
Intent.  Each amendment,
modification, termination, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it was given.  No amendment, modification, termination,
waiver or consent shall be required for Agent to take additional Collateral.

 

(C)                                Failure to Give
Consent; Replacement of Non-Consenting Lender.  In the event Agent requests the consent of a
Lender and does not receive a written consent or denial thereof within ten (10) Business
Days after such Lender’s receipt of such request, then such Lender will be
deemed to have denied the giving of such consent.  If, in connection with any proposed
amendment, modification, termination or waiver of any of the provisions of this
Agreement requiring the consent or approval of all Lenders under this subsection 9.4,
the consent of Requisite Lenders is obtained but the consent of one or more
other Lenders whose consent is required is not obtained, then Borrower shall
have the right, so long as all such non-consenting Lenders are either replaced
or prepaid as described in clauses (A) or (B) below, to either (A) replace
the non-consenting Lenders with one or more Replacement Lenders pursuant to subsection 2.12(A),
as if such Lender were an Affected Lender thereunder, but only so long as each
such Replacement Lender consents to the proposed amendment, modification,
termination or waiver, or (B) prepay in full the Obligations of the non-consenting
Lenders and terminate the non-consenting Lenders’ Commitments pursuant to subsection 2.12(B),
as if such Lender were an Affected Lender thereunder.

 

57

 

Notwithstanding anything in this subsection 9.4,
Agent and Obligors, without the consent of either Requisite Lenders or all
Lenders, may execute amendments to this Agreement and the Loan Documents, which
consist solely of the making of typographical corrections.

 

9.5                                 Assignments
and Participations in Loans.

 

(A)                              Assignments.  Each Lender may assign its rights and
delegate its obligations under this Agreement to an Eligible Assignee;
provided, however, (1) such Lender (other than GE Capital) shall first
obtain the written consent of Agent and Borrower (unless assigning to a Lender
or an Affiliate of a Lender), which consent in either case shall not be
unreasonably withheld (provided that such consent of Borrower shall not be
required at any time that an Event of Default exists), (2) the amount of
Commitments and Loans of the assigning Lender being assigned shall in no event
be less than the lesser of (a) $5,000,000 or (b) the entire amount of
the Commitments and Loans of such assigning Lender and (3) the parties to
such assignment shall execute and deliver to Agent for acceptance and recording
a Assignment and Acceptance Agreement together with (i) a processing and
recording fee of $3,500 payable by the assigning Lender to Agent and (ii) each
of the Notes originally delivered to the assigning Lender.  The administrative fee referred to in clause (3) of
the preceding sentence shall not apply to an assignment of a security interest
in all or any portion of a Lender’s rights under this Agreement or the other
Loan Documents, as described in paragraph (D)(1) below. Upon receipt of
all of the foregoing, Agent shall notify Borrower of such assignment and
Borrower shall comply with its obligations under the last sentence of subsection 2.1(G).  In the case of an assignment authorized under
this subsection 9.5, the assignee shall be considered to be a “Lender”
hereunder (and without limiting the generality of the foregoing, the assignee
shall be considered to be a Lender under, and bound by, the Canadian Facility
Intercreditor Agreement) and Obligors hereby acknowledge and agree that any
assignment will give rise to a direct obligation of Obligors to the assignee.
The assigning Lender shall be relieved of its obligations to make Loans
hereunder with respect to the assigned portion of its Commitment.

 

(B)                                Participations.  Each Lender may sell participations in all or
any part of any Loans or Commitments made by it to another Person; provided,
however, such Lender shall first obtain the prior written consent of Agent,
which consent shall not be unreasonably withheld, and any such participation
shall be in a minimum amount of $5,000,000. 
All amounts payable by Borrower hereunder shall be determined as if that
Lender had not sold such participation and the holder of any such participation
shall not be entitled to require such Lender to take or omit to take any action
hereunder except action directly effecting (1) any reduction in the
principal amount or an interest rate on any Loan in which such holder
participates; (2) any extension of the Termination Date or the date fixed for
any payment of interest or principal payable with respect to any Loan in which
such holder participates; and (3) any release of substantially all of the
Collateral.  Borrower hereby acknowledges
and agrees that the participant under each participation shall for purposes of
subsections 2.9, 2.10, 2.11, 9.6 and 10.2 be considered to be a “Lender”;
provided, that no such participant shall be entitled to receive any greater
amount pursuant to such subsections from the participating Lender would have
been entitled to receive in respect of the portion of such Loan or Commitment
in which such participation was sold.

 

(C)                                No Relief of
Obligations; Cooperation; Ability to Make LIBOR Loans.  Except as otherwise provided in subsection 9.5(A) no
Lender shall, as between Borrower and

 

58

 

that Lender, be relieved of any of its obligations hereunder as a
result of any sale, assignment, transfer or negotiation of, or granting of
participation in, all or any part of the Loans or other Obligations owed to
such Lender.  Each Lender may furnish any
information concerning the Loan Parties in the possession of that Lender from
time to time to Eligible Assignees and participants (including prospective
assignees and participants), subject to the provisions of subsection 10.18.  Each Obligor agrees that it will use its
diligent efforts to assist and cooperate with Agent and any Lender in any
manner reasonably requested by Agent or such Lender to effect the sale of a
participation or an assignment described above, including without limitation
assistance in the preparation of appropriate disclosure documents or placement
memoranda.  Notwithstanding anything
contained in this Agreement to the contrary, so long as the Requisite Lenders
shall remain capable of making LIBOR Loans, no Person shall become a Lender
hereunder unless such Person shall also be capable of making LIBOR Loans.

 

(D)                               Security Interests;
Assignment to Affiliates. 
Notwithstanding any other provision set forth in this Agreement, any
Lender may at any time following written notice to Agent (1) pledge the
Obligations held by it or create a security interest in all or any portion of
its rights under this Agreement or the other Loan Documents in favor of any
Person; provided, however  (a) no
such pledge or grant of security interest to any Person shall release such
Lender from its obligations hereunder or under any other Loan Document and (b) the
acquisition of title to such Lender’s Obligations pursuant to any foreclosure
or other exercise of remedies by such Person shall be subject to the provisions
of this Agreement and the other Loan Documents in all respects including,
without limitation, any consent required by subsection 9.5; and (2) subject
to complying with the provisions of subsection 9.5 (A), assign all or any
portion of its funded loans to an Eligible Assignee which is a Subsidiary of
such Lender or its parent company, to one or more other Lenders, or to a
Related Fund.  For purposes of this paragraph,
a “Related Fund” shall mean, with respect to any Lender, a fund or other
investment vehicle that invests in commercial loans and is managed by such
Lender or by the same investment advisor that manages such Lender or by an
Affiliate of such investment advisor.

 

(E)                                 Recording of
Assignments.  Agent shall maintain at
its office in Chicago, Illinois a copy of each Assignment and Acceptance
Agreement delivered to it and a register for the recordation of the names and
addresses of Lenders, and the commitments of, and principal amount of the Loans
owing to each Lender pursuant to the terms hereof from time to time (the “Register”).  The entries in the Register shall be
presumptive evidence of the amounts due and owing to Lender in the absence of
manifest error.  Each Obligor, Agent and
each Lender may treat each Person whose name is recorded in the Register
pursuant to the terms hereof as a Lender hereunder for all purposes of this
Agreement.  The Register shall be
available for inspection by Borrower and any Lender, at any reasonable time
upon reasonable prior notice.

 

9.6                                 Set
Off and Sharing of Payments.  In
addition to any rights now or hereafter granted under applicable law and not by
way of limitation of any such rights, upon the occurrence and during the
continuance of any Event of Default, each Lender is hereby authorized by
Obligors at any time or from time to time, with reasonably prompt subsequent
notice to Borrower (any prior or contemporaneous notice being hereby expressly
waived) to set off and to appropriate and to apply any and all (a) balances
held by such Lender at any of its offices for the account of any Obligor or any
of its Subsidiaries (regardless of whether such balances are then due to such
Obligor or its Subsidiaries), and (b) other property at any time held or
owing by such

 

59

 

Lender to or for the credit or for the account of any Obligor or any of
its Subsidiaries, against and on account of any of the Obligations; except that
no Lender shall exercise any such right without the prior written consent of
Agent.  Any Lender exercising its right
to set off shall purchase for cash (and the other Lenders shall sell) interests
in each of such other Lender’s Pro Rata Share of the Obligations as would be
necessary to cause all Lenders to share the amount so set off with each other
Lender in accordance with their respective Pro Rata Shares.  Obligors agree, to the fullest extent
permitted by law, that any Lender may exercise its right to set off with
respect to amounts in excess of its Pro Rata Share of the Obligations and upon
doing so shall deliver such amount so set off to Agent for the benefit of Agent
and of all Lenders in accordance with their Pro Rata Shares.

 

9.7                                 Disbursement
of Funds.  Agent may, on behalf of
Lenders, disburse funds to Borrower for Loans requested.  Each Lender shall reimburse Agent on demand
for all funds disbursed on its behalf by Agent, or if Agent so requests, each
Lender will remit to Agent its Pro Rata Share of any Loan or Advance before Agent
disburses same to Borrower.  If Agent
elects to require that each Lender make funds available to Agent prior to a
disbursement by Agent to Borrower, Agent shall advise each Lender by telephone,
telex, fax or telecopy of the amount of such Lender’s Pro Rata Share of the
Loan requested by Borrower no later than 1:00 p.m. Chicago time on the
Funding Date applicable thereto, and each such Lender shall pay Agent such
Lender’s Pro Rata Share of such requested Loan, in same day funds, by wire
transfer to Agent’s account on such Funding Date.

 

9.8                                 Settlements,
Payments and Information.

 

(A)                              Revolving Advances and
Payments; Fee Payments

 

(1)                                  Fluctuation of
Revolving Loan Balance.  The
Revolving Loan balance may fluctuate from day to day through Agent’s
disbursement of funds to, and receipt of funds from, Borrower.  In order to minimize the frequency of
transfers of funds between Agent and each Lender notwithstanding terms to the
contrary set forth in Section 2 and subsection 9.7,
Revolving Advances and repayments will
be settled according to the procedures described in this subsection 9.8.
Notwithstanding these procedures, each Lender’s obligation to fund its portion
of any advances made by Agent to Borrower will commence on the date such
advances are made by Agent.  Such
payments will be made by such Lender without set-off, counterclaim or reduction
of any kind.

 

(2)                                  Settlement
Dates.  Once each week for the
Revolving Loan or more frequently (including daily), if Agent so elects (each
such day being a “Settlement Date”), Agent will advise each Lender by
telephone, fax or telecopy of the amount of each such Lender’s Pro Rata Share
of the Revolving Loan.  In the event
payments are necessary to adjust the amount of such Lender’s required Pro Rata
Share of the Revolving Loan balance to such Lender’s actual Pro Rata Share of
the Revolving Loan balance as of any Settlement Date, the party from which such
payment is due will pay the other, in same day funds, by wire transfer to the
other’s account not later than 3:00 p.m. Chicago time on the Business Day
following the Settlement Date.

 

(3)                                  Settlement
Definitions.  For
purposes of this subsection 9.8(A), the following terms and
conditions will have the meanings indicated:

 

60

 

(a)                                  “Daily
Loan Balance” means an amount calculated as of the end of each calendar day by
subtracting (i) the cumulative principal amount paid by Agent to a Lender
on a Loan from the Closing Date through and including such calendar day, from (ii) the
cumulative principal amount on a Loan advanced by such Lender to Agent on that
Loan from the Closing Date through and including such calendar day.

 

(b)                                 “Daily
Interest Rate” means an amount calculated by dividing the interest rate payable
to a Lender on a Loan (as set forth in subsection 2.2) as of each
calendar day by three hundred sixty (360).

 

(c)                                  “Daily
Interest Amount” means an amount calculated by multiplying the Daily Loan
Balance of a Loan by the associated Daily Interest Rate on that Loan.

 

(d)                                 “Interest
Ratio” means a number calculated by dividing the total amount of the interest
on a Loan received by Agent with respect to the immediately preceding month by
the total amount of interest on that Loan due from Borrower during the
immediately preceding month.

 

(4)                                  Settlement
Payments.  On the
first Business Day of each month (“Interest Settlement Date”), Agent will
advise each Lender by telephone, fax or telecopy of the amount of such Lender’s
share of interest and fees on each of the Loans as of the end of the last day
of the immediately preceding month. 
Provided that such Lender has made all payments required to be made by
it under this Agreement, Agent will pay to such Lender, by wire transfer to
such Lender’s account (as specified by such Lender on the signature page of
this Agreement or the applicable Assignment and Acceptance Agreement, as
amended by such Lender from time to time after the date hereof or in the
applicable Assignment and Acceptance Agreement) not later than 3:00 p.m.
Chicago time on the next Business Day following the Interest Settlement Date,
such Lender’s share of interest and fees on each of the Loans.  Such Lender’s share of interest on each Loan
will be calculated for that Loan by adding together the Daily Interest Amounts
for each calendar day of the prior month for that Loan and multiplying the
total thereof by the Interest Ratio for that Loan.  Such Lender’s share of
the Unused Line Fee described in subsection 2.3(A) shall be an
amount equal to (a)(i) such Lender’s average Revolving Loan Commitment
during such month, less (ii) the sum of (x) such Lender’s average
Daily Loan Balance of the Revolving Loans, plus (y) such Lender’s Pro
Rata Share of the average daily aggregate balance of Letter of Credit
Obligations, in each case for the preceding month, multiplied by (b) the
percentage required by subsection 2.3(A).  Such Lender’s share of all other fees paid to
Agent for the benefit of Lenders hereunder shall be paid and calculated based
on such Lender’s Commitment with respect to the Loans on which such fees are
associated.  To the extent Agent does not
receive the total amount of any fee owing by Borrower under this Agreement,
each amount payable by Agent to a Lender under this subsection 9.8(A)(4) with
respect to such fee shall be reduced on a pro rata basis.  Any funds disbursed or received by Agent
pursuant to this Agreement, including, without limitation, under subsections
9.7, 9.8(A)(1), and 9.9, prior to the Settlement Date for
such disbursement or payment shall be deemed advances or remittances by
GE Capital, in its capacity as a Lender, for purposes of calculating
interest and fees pursuant to this subsection 9.8(A)(4).

 

61

 

(B)                                Term Loan Principal
Payments.  Provided that such Lender
has made all payments required to be made by it under this Agreement, payments
of principal of the Term Loans will be settled on the date of receipt if
received by Agent on the last Business Day of a month and on the Business Day
immediately following the date of receipt if received on any day other than the
last Business Day of a month.

 

(C)                                Return of
Payments.  

 

(1)                                  Recovery After
Non-Receipt of Expected Payment.  If Agent pays an amount to a Lender under
this Agreement in the belief or expectation that a related payment has been or
will be received by Agent from Borrower and such related payment is not
received by Agent, then Agent will be entitled to recover such amount from such
Lender without set-off, counterclaim or deduction of any kind together with
interest thereon, for each day from and including the date such amount is made
available by Agent to such Lender to but excluding the date of repayment to
Agent, at the greater of the Federal Funds Effective Rate and a rate determined
by Agent in accordance with banking industry rules on interbank
compensation.

 

(2)                                  Recovery of
Returned Payment.  If Agent
determines at any time that any amount received by Agent under this Agreement
must be returned to any Obligor or paid to any other Person pursuant to any
requirement of law, court order or otherwise, then, notwithstanding any other
term or condition of this Agreement, Agent will not be required to distribute
any portion thereof to any Lender.  In
addition, each Lender will repay to Agent on demand any portion of such amount
that Agent has distributed to such Lender, together with interest at such rate,
if any, as Agent is required to pay to any Obligor or such other Person,
without set-off, counterclaim or deduction of any kind.

 

9.9                                 Discretionary
Advances.  Notwithstanding anything
contained herein to the contrary, Agent may, in its sole discretion, make
Revolving Advances on behalf of the Lenders having Revolving Loan Commitments
in an aggregate amount of not more than $10,000,000 in excess of the limitations
set forth in the Consolidated Borrowing Base for the purpose of preserving or
protecting the Collateral or the value thereof or for incurring any costs
associated with collection or enforcing rights or remedies against the
Collateral, or incurred in any action to enforce this Agreement or any other
Loan Document (such Revolving Advances, “Discretionary Advances”); provided,
that Agent shall not make additional Discretionary Advances at any time when
the Revolving Loan has exceeded the limitations set forth in the Consolidated
Borrowing Base for more than sixty (60) consecutive days.  Discretionary Advances shall be payable on
demand by the Agent.

 

9.10                           Banking
Services; Interest Rate Agreements; Currency Rate Agreements.  Each Lender shall, upon the request of the
Agent, provide the Agent with such information as the Agent may reasonably
request regarding any Banking Service in respect of such Lender (or Affiliate
of a Lender) or any Interest Rate Agreement or any Currency Rate Agreements
entered into by such Lender (or Affiliate of a Lender) with Borrower.

 

62

 

SECTION 10.

MISCELLANEOUS

 

10.1                           Expenses
and Attorneys’ Fees.  Whether or not
the transactions contemplated hereby shall be consummated, Borrower agrees to
promptly pay all reasonable fees, costs and expenses incurred in connection
with any matters contemplated by or arising out of this Agreement or the other
Loan Documents including the following, and all such fees, costs and expenses
shall be part of the Obligations, payable on demand and secured by the
Collateral: (a) fees, costs and expenses incurred by Agent (including
attorneys’ fees and expenses, the allocated costs of Agent’s internal legal
staff and fees of environmental consultants, accountants and other
professionals retained by Agent) incurred in connection with the examination,
review, due diligence investigation, documentation and closing of the financing
arrangements evidenced by the Loan Documents; (b) fees, costs and expenses
incurred by Agent (including attorneys’ fees and expenses, the allocated costs
of Agent’s internal legal staff and fees of environmental consultants,
accountants and other professionals retained by Agent) incurred in connection
with the review, negotiation, preparation, documentation, execution,
syndication and administration of the Loan Documents, the Loans, and any
amendments, waivers, consents, forbearances and other modifications relating
thereto or any subordination or intercreditor agreements, including reasonable
documentation charges assessed by Agent for amendments, waivers, consents and
any other documentation prepared by Agent’s internal legal staff; (c) fees,
costs and expenses (including attorneys’ fees and allocated costs of internal
legal staff) incurred by Agent or any Lender in creating, perfecting and
maintaining perfection of Liens in favor of Agent, on behalf of Agent and
Lenders; (d) fees, costs and expenses incurred by Agent in connection with
forwarding to Borrower the proceeds of Loans including Agent’s or any Lenders’
standard wire transfer fee; (e) fees, costs, expenses and bank charges,
including bank charges for returned checks, incurred by Agent or any Lender in
establishing, maintaining and handling lock box accounts, blocked accounts or other
accounts for collection of the Collateral; (f) fees, costs, expenses
(including attorneys’ fees and allocated costs of internal legal staff) of
Agent or any Lender and costs of settlement incurred in collecting upon or
enforcing rights against the Collateral or incurred in any action to enforce
this Agreement or the other Loan Documents or to collect any payments due from
Borrower or any other Loan Party under this Agreement or any other Loan
Document or incurred in connection with any refinancing or restructuring of the
credit arrangements provided under this Agreement, whether in the nature of a “workout”
or in connection with any insolvency or bankruptcy proceedings or otherwise.

 

10.2                           Indemnity.  In addition to the payment of expenses
pursuant to subsection 10.1, whether or not the transactions
contemplated hereby shall be consummated, Borrower agrees to indemnify, pay and
hold Agent, each Lender, each L/C Issuer and the officers, directors,
employees, agents, consultants, auditors, persons engaged by Agent or any
Lender, to evaluate or monitor the Collateral, affiliates and attorneys of
Agent, Lenders, L/C Issuers and such holders (collectively called the “Indemnitees”)
harmless from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including the fees and
disbursements of counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not such Indemnitee shall be designated a party thereto) that may be
imposed on, incurred by, or asserted against that Indemnitee, in any manner
relating to or arising out of this Agreement or the other Loan Documents, the
consummation of the transactions contemplated by this Agreement, the statements
contained in the commitment letters, if any, delivered by Agent or any Lender,
Agent’s and each Lender’s agreement to make the Loans hereunder, the use or
intended use of the proceeds of any of the Loans or the exercise

 

63

 

of any right or remedy hereunder or under the other Loan Documents (the
“Indemnified Liabilities”); provided that Borrower shall have no
obligation to an Indemnitee hereunder with respect to Indemnified Liabilities
arising from the gross negligence or willful misconduct of that Indemnitee as
determined by a final non-appealable judgment by a court of competent
jurisdiction.

 

10.3                           Notices.  Unless otherwise specifically provided
herein, all notices shall be in writing addressed to the respective party as
set forth below and may be personally served, faxed, telecopied or sent by
overnight courier service or United States mail and shall be deemed to have been
given: (a) if delivered in person, when delivered; (b) if delivered
by fax or telecopy, on the date of transmission if transmitted on a Business
Day before 4:00 p.m. Chicago time or, if not, on the next succeeding
Business Day; (c) if delivered by overnight courier, two (2) days
after delivery to such courier properly addressed; or (d) if by U.S. Mail,
four (4) Business Days after depositing in the United States mail, with
postage prepaid and properly addressed.

 

	
  If to any Obligor:

  	
   

  	
  Beacon Sales Acquisition, Inc.

  
	
   

  	
   

  	
  50 Webster

  
	
   

  	
   

  	
  Somerville, Massachusetts  02143

  
	
   

  	
   

  	
  Attn: 
  Robert Buck/David Grace

  
	
   

  	
   

  	
  Fax/Telecopy No.:  (617) 629-2939

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Code Hennessy & Simmons III, L.P.

  
	
   

  	
   

  	
  10 South Wacker Drive, Suite 3175

  
	
   

  	
   

  	
  Chicago, Illinois  60606

  
	
   

  	
   

  	
  Attn: 
  Peter M. Gotsch

  
	
   

  	
   

  	
  Fax/Telecopy No.:  (312) 876-3854

  
	
   

  	
   

  	
   

  
	
  If to Agent or to GE Capital:

  	
   

  	
  GENERAL ELECTRIC CAPITAL

  
	
   

  	
   

  	
  CORPORATION

  
	
   

  	
   

  	
  500 West Monroe Street – Suite 1700

  
	
   

  	
   

  	
  Chicago, Illinois  60661

  
	
   

  	
   

  	
  ATTN:  
  Salman Mukhtar

  
	
   

  	
   

  	
  Fax: 
  (312) 441-7920

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  GENERAL ELECTRIC CAPITAL

  
	
   

  	
   

  	
  CORPORATION

  
	
   

  	
   

  	
  201 Merritt 7

  
	
   

  	
   

  	
  P.O. Box 5201

  
	
   

  	
   

  	
  Norwalk, Connecticut  06851

  
	
   

  	
   

  	
  ATTN: 
  General Counsel – GE

  
	
   

  	
   

  	
  Global Sponsor Finance

  
	
   

  	
   

  	
  Fax: 
  (203) 956-4216

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  

 

64

 

	
   

  	
   

  	
  GENERAL ELECTRIC CAPITAL

  CORPORATION

  
	
   

  	
   

  	
  500 West Monroe Street – Suite 1700

  
	
   

  	
   

  	
  Chicago, Illinois 60661

  
	
   

  	
   

  	
  ATTN: 
  General Counsel – GE

  
	
   

  	
   

  	
  Global Sponsor Finance

  
	
   

  	
   

  	
  Fax: 
  (312) 441-6876

  
	
   

  	
   

  	
   

  
	
  If to any Lender:

  	
   

  	
  Its address indicated on the signature page hereto,
  in an Assignment and Acceptance Agreement or in a notice to Agent and
  Borrower or to such other address as the party addressed shall have
  previously designated by written notice to the serving party, given in
  accordance with this subsection 10.3.

  

 

10.4                           Survival
of Representations and Warranties and Certain Agreements.  All agreements, representations and
warranties made herein shall survive the execution and delivery of this
Agreement and the making of the Loans hereunder.  Notwithstanding anything in this Agreement or
implied by law to the contrary, the agreements of Obligors and Lender set forth
in subsections 10.1, 10.2, 10.6, 10.11, 10.14,
and 10.15 and in Section 12 (Borrower’s agreement to pay
fees, Borrower’s agreement to indemnify Lender, the reinstatement of
Obligations, the parties’ agreement as to choice of law and jurisdiction,
Obligors’ and Lender’s waiver of a jury trial and Domestic Subsidiary
Guarantors’ guaranty of Borrower’s Obligations) shall survive the payment of
the Loans and the termination of this Agreement.

 

10.5                           Indulgence
Not Waiver.  No failure or delay on
the part of Agent, any Lender or any holder of any Note in the exercise of any power, right or privilege
hereunder or under any Note shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude other
or further exercise thereof or of any other right, power or privilege.

 

10.6                           Marshaling;
Payments Set Aside.  Neither Agent
nor any Lender shall be under any obligation to marshal any assets in favor of
any Loan Party or any other party or against or in payment of any or all of the
Obligations.  To the extent that any Loan
Party makes a payment or payments to Agent and/or any Lender or Agent and/or
any Lender enforces its security interests or exercise its rights of setoff,
and such payment or payments or the proceeds of such enforcement or setoff or
any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, state or federal law, common law or
equitable cause, then to the extent of such recovery, the Obligations or part
thereof originally intended to be satisfied, and all Liens, rights and remedies
therefor, shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.

 

10.7                           Entire
Agreement.  This Agreement and the
other Loan Documents embody the entire agreement among the parties hereto and
supersede all prior commitments, agreements, representations, and
understandings, whether written or oral, relating to the subject matter hereof,
and may not be contradicted or varied by evidence of prior, contemporaneous, or
subsequent oral agreements or discussions of the parties hereto.

 

65

 

10.8                           Severability.  The invalidity, illegality or
unenforceability in any jurisdiction of any provision in or obligation under
this Agreement or the other Loan Documents shall not affect or impair the
validity, legality or enforceability of the remaining provisions or obligations
under this Agreement, or the other Loan Documents.

 

10.9                           Lenders’
Obligations Several; Independent Nature of Lenders’ Rights.  The obligation of each Lender hereunder is
several and not joint and neither Agent nor any Lender shall be responsible for
the obligation or Commitment of any other Lender hereunder.  In the event that any Lender at any time
should fail to make a Loan as herein provided, the Lenders, or any of them, at
their sole option, may make the Loan that was to have been made by the Lender
so failing to make such Loan.  Nothing
contained in any Loan Document and no action taken by Agent or any Lender
pursuant hereto or thereto shall be deemed to constitute Lenders to be a
partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and, provided Agent fails or refuses to exercise any remedies
against any Obligor after receiving the direction of the Requisite Lenders,
each Lender shall be entitled to protect and enforce its rights arising out of
this Agreement and it shall not be necessary for any other Lender to be joined
as an additional party in any proceeding for such purpose.

 

10.10                     Headings.  Section and subsection headings in
this Agreement are included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other purpose or be given any
substantive effect.

 

10.11                     APPLICABLE
LAW.  THIS AGREEMENT SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES.

 

10.12                     Successors
and Assigns.  This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided, however, no Obligor
may assign its rights or obligations hereunder without the written consent of
Lenders.

 

10.13                     No
Fiduciary Relationship; No Duty; Limitation of Liabilities.

 

(A)                              No Fiduciary
Relationship.  No provision in this Agreement
or in any of the other Loan Documents and no course of dealing between the
parties shall be deemed to create any fiduciary duty by Agent or any Lender to
any Obligor.

 

(B)                                No Duty.  All attorneys, accountants, appraisers, and
other professional Persons and consultants retained by Agent or any Lender
shall have the right to act exclusively in the interest of Agent or such Lender
and shall have no duty of disclosure, duty of loyalty, duty of care, or other
duty or obligation of any type or nature whatsoever to any Obligor or any of
such Obligor’s shareholders or any other Person.

 

(C)                                Limitation of
Liabilities.  Neither Agent nor any
Lender, nor any affiliate, officer, director, shareholder, employee, attorney,
or agent of Agent or any Lender shall have any liability with respect to, and
each Obligor hereby waives, releases, and agrees not to sue any of them upon,
any claim for any special, indirect, incidental, or consequential damages
suffered or

 

66

 

incurred by any Obligor in connection with, arising out of, or in any
way related to, this Agreement or any of the other Loan Documents, or any of
the transactions contemplated by this Agreement or any of the other Loan
Documents.  Each Obligor hereby waives,
releases, and agrees not to sue Agent or any Lender or any of Agent’s or any
Lender’s affiliates, officers, directors, employees, attorneys, or agents for
punitive damages in respect of any claim in connection with, arising out of, or
in any way related to, this Agreement or any of the other Loan Documents, or
any of the transactions contemplated by this Agreement or any of the
transactions contemplated hereby.

 

10.14                     CONSENT TO
JURISDICTION. EACH OBLIGOR HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE
OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK, STATE OF ILLINOIS AND
IRREVOCABLY AGREES THAT, SUBJECT TO AGENT’S ELECTION, ALL ACTIONS OR
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. 
EACH OBLIGOR EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE
AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS.  EACH OBLIGOR HEREBY WAIVES PERSONAL SERVICE
OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE
MADE UPON EACH OBLIGOR BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT
REQUESTED, ADDRESSED TO BORROWER, AT THE ADDRESS SET FORTH IN THIS AGREEMENT
AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS
BEEN POSTED.  IN ANY LITIGATION, TRIAL,
ARBITRATION OR OTHER DISPUTE RESOLUTION PROCEEDING RELATING TO THIS AGREEMENT
OR ANY OF THE OTHER LOAN DOCUMENTS, ALL DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS OF ANY OBLIGOR OR OF ITS AFFILIATES SHALL BE DEEMED TO BE EMPLOYEES OR
MANAGING AGENTS OF SUCH OBLIGOR FOR PURPOSES OF ALL APPLICABLE LAW OR COURT
RULES REGARDING THE PRODUCTION OF WITNESSES BY NOTICE FOR TESTIMONY (WHETHER IN
A DEPOSITION, AT TRIAL OR OTHERWISE). 
EACH OBLIGOR AGREES THAT AGENT’S OR ANY LENDER’S COUNSEL IN ANY SUCH
DISPUTE RESOLUTION PROCEEDING MAY EXAMINE ANY OF THESE INDIVIDUALS AS IF
UNDER CROSS-EXAMINATION AND THAT ANY DISCOVERY DEPOSITION OF ANY OF THEM MAY BE
USED IN THAT PROCEEDING AS IF IT WERE AN EVIDENCE DEPOSITION.  EACH OBLIGOR IN ANY EVENT WILL USE ALL
COMMERCIALLY REASONABLE EFFORTS TO PRODUCE IN ANY SUCH DISPUTE RESOLUTION
PROCEEDING, AT THE TIME AND IN THE MANNER REQUESTED BY AGENT OR ANY LENDER, ALL
PERSONS, DOCUMENTS (WHETHER IN TANGIBLE, ELECTRONIC OR OTHER FORM) OR OTHER
THINGS UNDER ITS CONTROL AND RELATING TO THE DISPUTE.

 

10.15                     WAIVER OF
JURY TRIAL.  EACH OBLIGOR, AGENT AND
EACH LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS.  EACH OBLIGOR, AGENT AND
EACH LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO
A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO
THIS AGREEMENT AND THE OTHER LOAN 

 

67

 

DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR
RELATED FUTURE DEALINGS.  EACH OBLIGOR,
AGENT AND EACH LENDER WARRANT AND REPRESENT THAT EACH HAS HAD THE OPPORTUNITY
OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.

 

10.16                     Construction.  Each Obligor, Agent and each Lender each
acknowledge that it has had the benefit of legal counsel of its own choice and
has been afforded an opportunity to review this Agreement and the other Loan
Documents with its legal counsel and that this Agreement and the other Loan
Documents shall be construed as if jointly drafted by each Obligor, Agent and
each Lender.

 

10.17                     Counterparts;
Effectiveness.  This Agreement and
any amendments, waivers, consents, or supplements may be executed via
telecopier or facsimile transmission in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all of which
counterparts together shall constitute one and the same instrument. This
Agreement shall become effective upon the execution of a counterpart hereof by
each of the parties hereto.

 

10.18                     Confidentiality.  Agent and each Lender agree to exercise their
best efforts to keep confidential any non-public information delivered pursuant
to the Loan Documents and identified as such by Borrower and not to disclose
such information to Persons other than to: its respective affiliates, officers,
directors and employees; or its potential assignees or participants; or Persons
employed by or engaged by Agent, a Lender or a Lender’s assignees or
participants including, without limitation, attorneys, auditors, professional
consultants, rating agencies and portfolio management services.  The confidentiality provisions contained in
this subsection shall not apply to disclosures (i) required to be
made by Agent or any Lender to any regulatory or governmental agency or
pursuant to legal process or (ii) consisting of general portfolio
information that does not identify any Loan Party.  The obligations of Agent and Lenders under
this subsection 10.18 shall supersede and replace the obligations
of Agent and Lenders under any confidentiality agreement in respect of this financing
executed and delivered by Agent or any Lender prior to the date hereof.  In no event shall Agent or any Lender be
obligated or required to return any materials furnished by any Loan Party; provided,
however, each potential assignee or participant shall be required to agree
that if it does not become an assignee (or participant) it shall return all
materials furnished to it by any Loan Party in connection herewith.

 

10.19                     Syndication
Agent and Co-Documentation Agents. 
JPMorgan, in its capacity as Syndication Agent, shall not have any
rights, powers, duties or responsibilities hereunder or under any other Loan
Document in such capacity, and no implied rights, powers, duties or
responsibilities shall be read into this Agreement or any other Loan Document
or otherwise exist on behalf of or against JPMorgan in such capacity.  In addition, neither Wachovia nor CIT, in its
capacity as Co-Documentation Agent, shall have any rights, powers, duties or
responsibilities hereunder or under any other Loan Document in such capacity,
and no implied rights, powers, duties or responsibilities shall be read into
this Agreement or any other Loan Document or otherwise exist on behalf of or
against either Wachovia or CIT in such capacity.

 

68

 

 

SECTION 11.

DEFINITIONS AND ACCOUNTING TERMS

 

11.1                           Certain
Defined Terms.  The following terms
used in this Agreement shall have the following meanings:

 

“Accounts” means all “accounts” (as defined
in the UCC), accounts receivable, contract rights and general intangibles
relating thereto, notes, drafts and other forms of obligations owed to or owned
by any Obligor arising or resulting from the sale of goods or the rendering of
services, whether or not earned by performance.

 

“Activation Notice” means written notice from
Agent or Canadian Facility Agent that gives notice that Agent or Canadian
Facility Agent is exercising control of a Blocked Account and that instructs
the Collecting Bank to transfer funds in such Blocked Account to Agent or
Canadian Facility Agent.

 

“Activation Period” means, with respect to a
Blocked Account at a Collecting Bank, the period which commences as soon as
possible but in any event within a reasonable period of time (not to exceed two
Business Days) after such Collecting Bank’s receipt of an Activation Notice
with respect to such Blocked Account.

 

“Additional Mortgaged Property” means all
real property owned or leased by any Obligor or any of its Subsidiaries in
which after the Closing Date Agent requires a mortgage to secure the Obligations.

 

“Advance” shall mean an advance under the
Revolving Loan.

 

“Affiliate” means, with respect to any
Person, any other Person (other than Agent or any Lender): (a) directly or
indirectly controlling, controlled by, or under common control with, any such
Person; (b) directly or indirectly owning or holding ten percent (10%) or
more of any equity interest in such Person; or (c) ten percent (10%) or
more of whose stock or other equity interest having ordinary voting power for
the election of directors or the power to direct or cause the direction of
management, is directly or indirectly owned or held by such Person.  For purposes of this definition, “control”
(including with correlative meanings, the terms “controlling”, “controlled by”
and “under common control with”) means the possession directly or indirectly of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or other equity
interest, or by contract or otherwise.

 

“Agent” means GE Capital in its capacity as
agent for the Lenders under the Loan Documents and any successor in such
capacity appointed pursuant to subsection 9.1(G).

 

69

 

“Agent’s Account” means:

 

ABA No. 021-001-033

Account Number 502-328-54

Bankers Trust Company

New York, New York

ACCOUNT NAME: GECC/CAF DEPOSITORY

Reference: 
GE Capital re Beacon Sales Acquisition, Inc.

 

“Agreement” means this Loan and Security
Agreement as it may be amended, restated, supplemented or otherwise modified
from time to time.

 

“Applicable Margins” means collectively the
Applicable Revolver Index Margin and the Applicable Revolver LIBOR Margin.

 

“Applicable Revolver Index Margin” means the
per annum interest rate margin from time to time in effect and payable in
addition to the Index Rate applicable to the Revolving Loan, as determined by
reference to Section 2.2(A).

 

“Applicable Revolver LIBOR Margin” means the
per annum interest rate from time to time in effect and payable in addition to
the LIBOR Rate applicable to the Revolving Loan, as determined by reference to Section 2.2(A).

 

“Asset Disposition” means the disposition,
whether by sale, lease, transfer, loss, damage, destruction, condemnation or
otherwise, of any or all of the assets of any Obligor or any of its
Subsidiaries other than sales of Inventory in the ordinary course of business.

 

“Assignment and Acceptance Agreement” shall
mean an Assignment and Acceptance Agreement substantially in the form of Exhibit A.

 

“Banking Services” means treasury management
services (including, without limitation, controlled disbursement, automated
clearinghouse transactions, returned items, overdrafts and interstate
depository network services) provided to any Loan Party by any Lender (or
Affiliate of a Lender).

 

“Beacon Canada” means Beacon Roofing Supply
Canada Company, a Nova Scotia unlimited liability company.

 

“Beacon Canada Accounts” means all “Accounts”
of Beacon Canada, as defined in the Canadian Facility Credit Agreement.

 

“Beacon Canada Borrowing Base Certificate”
means the “Borrowing Base Certificate”, as defined in the Canadian Facility
Credit Agreement.

 

“Beacon Canada Consolidating Borrowing Base”
means the “Canadian Borrowing Base” as defined under the Canadian Facility
Credit Agreement.

 

“Best Distribution” means Best Distributing
Co, a North Carolina corporation.

 

70

 

“Borrowing Base Certificates” means the
Consolidating Borrowing Base Certificates, the Consolidated Borrowing Base
Certificate and the Beacon Canada Borrowing Base Certificate.

 

“Business Day” means any day excluding
Saturday, Sunday and any day which is a legal holiday under the laws of the
States of Illinois, Pennsylvania or is a day on which banking institutions
located in any such state are closed, or for the purposes of LIBOR Loans only,
a day on which commercial banks are open for dealings in Dollar deposits in the
London, England (U.K.) market.

 

“C Dollars”, “C$” and “Canadian Dollars” each
means the lawful money of Canada.

 

“Canadian Collateral” shall mean all assets
and property of Beacon Canada in which Agent, on behalf of Lenders, has been
granted a lien and security interest pursuant to the Canadian Facility Loan
Documents.

 

“Canadian Facility Agent” means
GE Canada Finance Holding Company as agent under the Canadian Facility
Loan Documents and any successor in such capacity appointed pursuant to subsection 9.1(G) under
the Canadian Facility Credit Agreement.

 

“Canadian Facility Credit Agreement” means
the Second Amended and Restated Loan and Security Agreement dated as of the
Closing Date among Beacon Canada, Canadian Facility Agent and Canadian Facility
Lenders.

 

“Canadian Facility Intercreditor Agreement”
means the Intercreditor Agreement dated as of the Closing Date among Agent,
Canadian Facility Agent, Lenders and Canadian Facility Lenders party thereto.

 

“Canadian Facility Lenders” means the lenders
party to the Canadian Facility Credit Agreement.

 

“Canadian Facility Loan Documents” means the
Canadian Facility Credit Agreement and the other “Loan Documents” as defined
therein.

 

“Canadian Facility Revolving Loan Commitment”
means the “Revolving Loan Commitment” as defined under the Canadian Facility
Credit Agreement.

 

“Canadian Facility Revolving Loans” means the
“Revolving Loans” as defined under the Canadian Facility Credit Agreement.

 

“Capital Expenditures” means all expenditures
(including deposits) for, or contracts for expenditures (excluding contracts
for expenditures under or with respect to Capital Leases, but including cash
down payments for assets acquired under Capital Leases) with respect to any
fixed assets or improvements, or for replacements, substitutions or additions
thereto, which have a useful life of more than one year, including the direct
or indirect acquisition of such assets by way of increased product or service
charges, offset items or otherwise.

 

71

 

“Capital Lease” means any lease of any
property (whether real, personal or mixed) that, in conformity with GAAP,
should be accounted for as a capital lease.

 

“Capitalization/Acquisition Documents” means,
collectively: (a) any or all of the stock certificates, notes, debentures
or other instruments representing securities bought, sold or issued, or loans
made, to facilitate the consummation of the Related Transactions; (b) the
indentures or other documents pursuant to which such stock, notes, debentures
or other instruments are issued or to be issued; (c) each document
governing the issuance of, or setting forth the terms of, such stock, notes,
debentures or other instruments; (d) any stockholders, registration or
intercreditor agreement among or between the holders of such stock, notes,
debentures or other instruments; (e) the Shelter Acquisition Documents;
and (f) the Equity Documents; but excluding all Loan Documents and all
Canadian Facility Loan Documents.

 

“Cash Equivalents” means: (a) marketable
direct obligations issued or unconditionally guaranteed by the United States
Government or issued by any agency thereof and backed by the full faith and
credit of the United States, in each case maturing within six (6) months
from the date of acquisition thereof; (b) commercial paper maturing no
more than six (6) months from the date issued and, at the time of
acquisition, having a rating of at least A-1 from Standard & Poor’s
Corporation or at least P-1 from Moody’s Investors Service, Inc.; and (c) certificates
of deposit or bankers’ acceptances maturing within six (6) months from the
date of issuance thereof issued by, or overnight reverse repurchase agreements
from any commercial bank organized under the laws of the United States of
America, or any state thereof or the District of Columbia, having combined
capital and surplus of not less than $250,000,000 and not subject to setoff
rights in favor of such bank.

 

“CHS” means Code, Hennessy & Simmons
III, L.P., a Delaware limited partnership.

 

“CIGNA Impress Account” means that certain
Citibank Delaware depository account number 30548966, for the account of Beacon
Roofing Supply Company, Inc.

 

“Closing Date” means October 14, 2005.

 

“Co-Documentation Agents” means Wachovia and
CIT.

 

“Commitment” or “Commitments” means the
commitment or commitments of Lenders to make Loans as set forth in subsections
2.1(A) and/or 2.1(B) and to provide Letters of Credit as set
forth in subsection 2.1(H).

 

“Compliance Certificate” means a certificate
duly executed on behalf of Borrower by the chief executive officer or chief
financial officer of Borrower appropriately completed and in substantially the
form of Exhibit D.

 

“Consolidated Borrowing Base Certificate”
means a certificate and schedule duly executed by an officer of Borrower
appropriately completed and in substantially the form of Exhibit B-1.

 

72

 

“Consolidating Borrowing Base Certificate”
mean, with respect to each Obligor, a certificate and schedule duly
executed by an officer of Borrower appropriately completed and substantially in
the form of Exhibit B-2.

 

“Contingent Obligation”, as applied to any
Person, means any direct or indirect liability of that Person:  (i) with respect to any Indebtedness,
lease, dividend or other obligation of another Person if the purpose or intent
of the Person incurring such liability, or the effect thereof, is to provide
assurance to the obligee of such liability that such liability will be paid or
discharged, or that any agreements relating thereto will be complied with, or
that the holders of such liability will be protected (in whole or in part)
against loss with respect thereto; (ii) with respect to any letter of
credit issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings; (iii) under any foreign
exchange contract, currency swap agreement, interest rate swap agreement or
other similar agreement or arrangement designed to alter the risks of that
Person arising from fluctuations in currency values or interest rates; (iv) to
make take-or-pay or similar payments if required regardless of nonperformance
by any other party or parties to an agreement; or (v) pursuant to any
agreement to purchase, repurchase or otherwise acquire any obligation or any
property constituting security therefor, to provide funds for the payment or
discharge of such obligation or to maintain the solvency, financial condition
or any balance sheet item or level of income of another.  The amount of any Contingent Obligation shall
be equal to the amount of the obligation so guaranteed or otherwise supported
or, if not a fixed and determined amount, the maximum amount so guaranteed.

 

“Default” means a condition, act or event
that, after notice or lapse of time or both, would constitute an Event of
Default if that condition, act or event were not cured or removed within any
applicable grace or cure period.

 

“Defaulted Amount” means, with respect to any
Lender at any time, any amount required to be paid hereunder or under any other
Loan Document by such Lender to the Agent or any other Lender which has not
been so paid.

 

“Defaulting Lender” means, at any time, any
Lender that owes a Defaulted Amount.

 

“EBITDA” means, for any period, without
duplication, the total of the following for Holdings and its Subsidiaries on a
consolidated basis, each calculated for such period:  (1) net income determined in accordance
with GAAP; plus, to the extent included in the calculation of net
income, (2) the sum of (a) income, capital and franchise taxes paid
or accrued;  (b) interest expenses,
net of interest income, paid or accrued; (c) amortization and
depreciation, (d) other non-cash charges (excluding accruals for cash
expenses made in the ordinary course of business) and (e) out-of-pocket
expenses incurred in connection with the consummation of the IPO or any other
primary public offering of equity securities by Holdings; less, to the
extent included in the calculation of net income, (3) the sum of (a) the
income of any Person (other than Borrower and wholly-owned Subsidiaries of
Borrower) in which Holdings or a wholly-owned Subsidiary of Holdings has an
ownership interest except to the extent such income is received by Borrower or
a wholly-owned Subsidiary of Borrower in a cash distribution during such
period; (b) gains or losses from sales or other dispositions of assets
(other than Inventory in the normal course of

 

73

 

business); and (c) extraordinary or non-recurring gains, but not
net of extraordinary or non-recurring “cash” losses.

 

“Eligible Assignee” shall mean (a) any
Lender, any Affiliate of any Lender and, with respect to any Lender that is an
investment fund that invests in commercial loans, any other investment fund
that invests in commercial loans and that is managed or advised by the same
investment advisor as such Lender or by an Affiliate of such investment
advisor, and (b) any commercial bank, savings and loan association or
savings bank or any other entity which is an “accredited investor” (as defined
in Regulation D under the Securities Act of 1933) which extends credit or buys
loans as one of its businesses, including insurance companies, mutual funds,
lease financing companies and commercial finance companies, in each case, which
has a rating of BBB or higher from S&P and a rating of Baa2 or higher from
Moody’s at the date that it becomes a Lender and which, through its applicable
lending office, is capable of lending to Borrower without the imposition of any
withholding or similar taxes; provided that no Person determined by Agent to be
acting in the capacity of a vulture fund or distressed debt purchaser shall be
an Eligible Assignee and no Affiliate of any Loan Party shall be an Eligible
Assignee.

 

“Employee Benefit Plan” means any employee
benefit plan within the meaning of Section 3(3) of ERISA which
(a) is maintained for employees of any Loan Party or any ERISA Affiliate
or (b) has at any time within the preceding 6 years been maintained for
the employees of any Loan Party or any current or former ERISA Affiliate.

 

“Environmental Claims” means claims,
liabilities, investigations, litigation, administrative proceedings, judgments
or orders relating to Hazardous Materials.

 

“Environmental Laws” means all applicable
federal, state, local and foreign laws, statutes, ordinances, codes, rules,
standards and regulations, now or hereafter in effect, and any applicable
judicial or administrative interpretation thereof, including any applicable
judicial or administrative order, consent decree, order or judgment, imposing
liability or standards of conduct for or relating to the regulation and
protection of human health, safety, the environment and natural resources
(including ambient air, surface water, groundwater, wetlands, land surface or
subsurface strata, wildlife, aquatic species and vegetation).  Environmental Laws include the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. §§ 9601
et seq.) (“CERCLA”); the Hazardous Materials Transportation
Authorization Act of 1994 (49 U.S.C. §§ 5101 et seq.); the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. §§ 136 et seq.);
the Solid Waste Disposal Act (42 U.S.C. §§ 6901 et seq.); the Toxic
Substance Control Act (15 U.S.C. §§ 2601 et seq.); the Clean Air
Act (42 U.S.C. §§ 7401 et seq.); the Federal Water Pollution Control
Act (33 U.S.C. §§ 1251 et seq.); the Occupational Safety and Health
Act (29 U.S.C. §§ 651 et seq.); and the Safe Drinking Water Act (42
U.S.C. §§ 300(f) et seq.), and any and all regulations
promulgated thereunder, and all analogous state, local and foreign counterparts
or equivalents and any transfer of ownership notification or approval statutes.

 

“Environmental Liabilities” means, with
respect to any Person, all liabilities, obligations, responsibilities,
response, remedial and removal costs, investigation and feasibility study
costs, capital costs, operation and maintenance costs, losses, damages,
punitive damages, property damages, natural resource damages, consequential
damages, treble damages, costs and

 

74

 

expenses (including all reasonable fees, disbursements and expenses of
counsel, experts and consultants), fines, penalties, sanctions and interest
incurred as a result of or related to any claim, suit, action, investigation,
proceeding or demand by any Person, whether based in contract, tort, implied or
express warranty, strict liability, criminal or civil statute or common law,
including any arising under or related to any Environmental Laws, Environmental
Permits, or in connection with any Release or threatened Release or presence of
a Hazardous Material whether on, at, in, under, from or about or in the
vicinity of any real or personal property.

 

“Environmental Permits” means all permits,
licenses, authorizations, certificates, approvals or registrations required by
any Governmental Authority under any Environmental Laws.

 

“Equipment” means all “equipment” (as defined
in the UCC), all furniture, furnishings, “fixtures” (as defined in the UCC),
machinery, motor vehicles, trucks, trailers, vessels, aircraft and rolling
stock and all parts thereof and all additions and accessions thereto and
replacements therefor.

 

“Equity Documents” means (i) the Chief
Executive Securities Agreement dated as of August 21, 1997 by and among
Holdings, CHS and Andrew Logie and (ii) the Executive Securities
Agreements among Holdings, CHS and certain managers of the Loan Parties.

 

“Equivalent Amount” means, on any date of
determination, with respect to amounts denominated in Canadian Dollars, the
amount of U.S. Dollars which would result from the conversion of Canadian
Dollars into U.S. Dollars at the 12:00 noon (Toronto time) rate quoted on the
Reuters Screen Page BOFC on the date of the most recent Borrowing Base
Certificates required to be delivered hereunder or, at the discretion of Agent,
on a more recent date (or if such display or service ceases to exist, any other
display and service in existence as of the relevant time designated by Agent).

 

“ERISA” means the Employee Retirement Income
Security Act of 1974, as amended from time to time, and any successor statute
and all rules and regulations promulgated thereunder.

 

“ERISA Affiliate”, as applied to any Loan
Party, means any Person who is a member of a group which is under common
control with any Loan Party, who together with any Loan Party is treated as a
single employer within the meaning of Section 414(b) and (c) of
the IRC.

 

“Excess Availability” means, for any date, an
amount equal to (a) the Maximum Revolving Loan Amount on such date minus (b) the
outstanding Revolving Loan on such date.

 

“Excess Cash Flow” means, for any period, the
greater of (A) zero (0); or (B) without duplication, the total of the
following for Holdings and its Subsidiaries on a consolidated basis, each
calculated for such period: (1) EBITDA; plus (2) tax refunds
actually received; less (3) Capital Expenditures (to the extent
actually made in cash and/or due to be made in cash within such period but in
no event more than the amount permitted in paragraph B of the Financial
Covenants Rider); less (4) income, capital and franchise taxes paid
or accrued excluding any provision for deferred taxes included in the
determination of net income; less (5) 

 

75

 

decreases in deferred income taxes resulting from payments of deferred
taxes accrued in prior periods; less (6) Interest Expense; less
(7) scheduled amortization of Indebtedness actually paid in cash and/or
due to be paid in cash within such period and permitted under subsection 7.1;
less (8) voluntary prepayments made under subsection 2.4(C);
less (9) mandatory prepayments made under subsection 2.4(B)(2),
but only to the extent that the transaction that precipitated the mandatory
prepayment increased net income of Holdings determined in accordance with GAAP.

 

“Existing Obligations” means the “Obligations”
under the Existing Loan Agreement outstanding on the Closing Date.

 

“Existing Revolver Balance” has the meaning
assigned to that term in subsection 1.2.

 

“Existing Term Loan A Balance” has the meaning
assigned to that term in subsection 1.2.

 

“Existing Term Loan B Balance” has the
meaning assigned to that term in subsection 1.2.

 

“Federal Funds Effective Rate” means, for any
day, 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 on the immediately following Business Day by the Board of
Governors of the Federal Reserve System as the Federal Funds Rate or Federal
Reserve Statistical Release H.15(519) entitled “Selected Interest Rates” or any
successor publication of the Federal Reserve System reporting the Federal Funds
Effective Rate or its equivalent or, if such rate is not published for any
Business Day, the average of the quotations for the day of the requested Loan
received by Agent from three Federal funds brokers of recognized standing
selected by Agent.

 

“Fiscal Year” means each twelve (12) month
period ending on the last day of September in each year.

 

“Fixed Charge Coverage” means, for any
period, Free Cash Flow divided by Fixed Charges.

 

“Fixed Charges” means, for any period, and
each calculated for such period (without duplication), (a) Interest
Expense of Holdings and its Subsidiaries; plus (b) scheduled
payments of principal with respect to all Indebtedness of Holdings and its
Subsidiaries.

 

“Free Cash Flow” means, for any period, (a) EBITDA;
less (b) any provision for (to the extent it is greater than zero)
income, capital or franchise taxes included in the determination of net income,
excluding any provision for deferred taxes; less (c) payment of
deferred taxes accrued in any prior period; less (d) unfinanced
Capital Expenditures.

 

“Funding Date” means the date of each funding
of a Loan or issuance of a Letter of Credit.

 

76

 

“GAAP” means generally accepted accounting
principles set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board that
are applicable to the circumstances as of the date of determination.

 

“Hazardous Material” means any substance,
material or waste that is regulated by, or forms the basis of liability now or
hereafter under, any Environmental Laws, including any material or substance
that is (a) defined as a “solid waste,” “hazardous waste,” “hazardous
material,” “hazardous substance,” “extremely hazardous waste,”  “restricted hazardous waste,” “pollutant,” “contaminant,”
“hazardous constituent,” “special waste,” “toxic substance” or other similar
term or phrase under any Environmental Laws, or (b) petroleum or any
fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB’s), or
any radioactive substance.

 

“Holdings” means Beacon Roofing Supply, Inc.,
a Delaware corporation.

 

“Holdings’ Accountants” means the independent
certified public accountants selected by Holdings and its Subsidiaries and
reasonably acceptable to Agent, which selection shall not be modified during
the term of this Agreement without Agent’s prior written consent.

 

“Indebtedness” as applied to any Person,
means: (a) all indebtedness for borrowed money; (b) that portion of
obligations with respect to capital leases that is properly classified as a
liability on a balance sheet in conformity with GAAP; (c) any obligation
under any lease (a “synthetic lease”) treated as an operating lease under GAAP
and as a loan or financing for United States income tax purposes or creditors
rights purposes; (d) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed
money; (e) any obligation owed for all or any part of the deferred
purchase price of property or services if the purchase price is due more than
six (6) months from the date the obligation is incurred or is evidenced by
a note or similar written instrument; (f) ”earnouts” and similar payment
obligations (but excluding Borrower’s “earn-out” payment obligations under the
Shelter Acquisition Documents), which obligations shall, for purposes of
determining outstanding Indebtedness in connection with calculating Borrower’s
compliance with the covenants contained in Section 7, be valued
based upon the amount thereof required to be recorded as a liability on a
balance sheet prepared in accordance with GAAP; (g) all indebtedness
secured by any Lien on any property or asset owned or held by that Person
regardless of whether the indebtedness secured thereby shall have been assumed
by that Person or is nonrecourse to the credit of that Person and (h) obligations
in respect of letters of credit.

 

“Index Rate” means, for any day, a floating
rate equal to the higher of (i) the rate publicly quoted from time to time
by The Wall Street Journal as the “base rate on corporate
loans posted by at least 75% of the nation’s 30 largest banks” (or, if The Wall Street
Journal ceases quoting a base rate of the type described, the highest per
annum rate of interest published by the Federal Reserve Board in Federal
Reserve statistical release H.15 (519) entitled “Selected Interest Rates”
as the Bank prime loan rate or its equivalent), or (ii) the Federal Funds
Rate plus 50 basis points per annum. 
Each change in any interest rate provided for in the Agreement based
upon the Index Rate shall take effect at the time of such change in the Index
Rate.

 

77

 

“Index Rate Loans” means at any time that
portion of the Loans bearing interest at rates determined by reference to the
Index Rate.

 

“Intellectual Property” means all present and
future designs, patents, patent rights and applications therefor, trademarks
and registrations or applications therefor, trade names, inventions, copyrights
and all applications and registrations therefor, software or computer programs,
license rights, trade secrets, methods, processes, know-how, drawings,
specifications, descriptions, and all memoranda, notes and records with respect
to any research and development, whether now owned or hereafter acquired, all
goodwill associated with any of the foregoing, and proceeds of all of the
foregoing, including, without limitation, proceeds of insurance policies
thereon.

 

“Interest Expense” means, without
duplication, for any period, the following, for Holdings and its Subsidiaries
each calculated for such period: 
interest expenses deducted in the determination of net income (excluding
(i) the amortization of fees and costs with respect to the Related
Transactions which have been capitalized as transaction costs in accordance
with the provisions of subsection 11.2; and (ii) interest paid
in kind).

 

“Interest Period” means, in connection with
each LIBOR Loan, an interest period which Borrower shall elect to be applicable
to such Loan, which Interest Period shall be either a one(1), two (2), three
(3), or six (6) month period; provided that:

 

(1)                                  the initial Interest
Period for any LIBOR Loan shall commence on the Funding Date of such Loan;

 

(2)                                  in the case of
successive Interest Periods, each successive Interest Period shall commence on
the day on which the immediately preceding Interest Period expires;

 

(3)                                  if an Interest Period
expiration date is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day; provided that if any Interest Period expiration
date is not a Business Day but is a day of the month after which no further
Business Day occurs in such month, such Interest Period shall expire on the
immediately preceding Business Day;

 

(4)                                  any Interest Period
that begins on the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end of
such Interest Period) shall, subject to part (5) below, end on the last
Business Day of a calendar month;

 

(5)                                  no Interest Period
shall extend beyond the Termination Date;

 

(6)                                  no Interest Period
for any portion of a Term Loan shall extend beyond the date of the final
Scheduled Installment thereof;

 

(7)                                  no Interest Period
may extend beyond a scheduled principal payment date of any Loan, unless the
aggregate principal amount of such Loan that is an Index Rate Loan or that has
Interest Periods expiring on or before such scheduled principal payment date
equals or

 

78

 

exceeds the principal amount required to be paid on such Loan on such
scheduled principal payment date; and

 

(8)                                  there shall be no
more than eight (8) Interest Periods relating to LIBOR Loans outstanding
at any time.

 

“Interest Rate Agreement” means any interest
rate swap agreement, interest rate cap agreement, interest rate collar
agreement or similar agreement or arrangement designed to protect Borrower
against fluctuations in interest rates entered into between Borrower and any
Lender (or Affiliate of any Lender), including without limitation, the Interest
Rate Agreement in effect on the Closing Date between Borrower and LaSalle Bank
National Association.

 

“Interest Rate Excess Availability” means, as
of any adjustment date with respect to the Applicable Margins, the average
daily Excess Availability for the three-month period immediately preceding such
date, as determined by the Agent.

 

“Inventory” means all “inventory” (as defined
in the UCC), including, without limitation, finished goods, raw materials, work
in process and other materials and supplies used or consumed in a Person’s
business, and goods which are returned or repossessed.

 

“IPO” means the initial public offering of
Holdings’ common stock consummated on September 9, 2004.

 

“IRC” means the Internal Revenue Code of
1986, as amended from time to time, and any successor statute and all rules and
regulations promulgated thereunder.

 

“L/C Issuer” means GE Capital or a Subsidiary
thereof or a bank or other legally authorized Person selected by or acceptable
to Agent in its sole discretion, in such Person’s capacity as an issuer of
Letters of Credit hereunder.

 

“Letters of Credit” means documentary or
standby letters of credit issued for the account of Borrower by L/C Issuers,
and bankers’ acceptances issued by Borrower, for which Agent and Lenders have
incurred Letter of Credit Obligations.

 

“Letter of Credit Obligations” means all
outstanding obligations incurred by Agent and Lenders at the request of
Borrower, whether direct or indirect, contingent or otherwise, due or not due,
in connection with the issuance of Letters of Credit by L/C Issuers or the
purchase of a participation as set forth in Section 2.1(H) with
respect to any Letter of Credit.  The
amount of such Letter of Credit Obligations shall equal the maximum amount that
may be payable by Agent and Lenders thereupon or pursuant thereto.

 

“Liabilities” shall have the meaning given
that term in accordance with GAAP and shall include Indebtedness.

 

“LIBOR” means, for each Interest Period, a
rate per annum equal to:

 

79

 

(a)                                  the
offered rate for deposits in United States Dollars for the applicable Interest
Period that appears on Telerate Page 3750 as of 11:00 a.m. (London
time), on the second full Business Day next preceding the first day of such
Interest Period; divided by

 

(b)                                 a
number equal to 1.0 minus the aggregate (but without duplication) of the
rates (expressed as a decimal fraction) of reserve requirements in effect on
the day that is two (2) Business Days prior to the beginning of such
Interest Period (including basic, supplemental, marginal and emergency reserves
under any regulations of the Federal Reserve Board or other governmental
authority having jurisdiction with respect thereto, as now and from time to
time in effect) for Eurocurrency funding (currently referred to as “Eurocurrency
Liabilities” in Regulation D of the Federal Reserve Board that are required to
be maintained by a member bank of the Federal Reserve System).

 

If such interest rates shall cease to be
available from Telerate News Service, LIBOR shall be determined from such
financial reporting service or other information as shall be available to
Agent.

 

“LIBOR Loans” means at any time that portion
of the Loans bearing interest at rates determined by reference to LIBOR.

 

“Lien” means any lien, mortgage, pledge,
security interest, charge or encumbrance of any kind, whether voluntary or
involuntary, (including any conditional sale or other title retention
agreement, any lease in the nature thereof, and any agreement to give any
security interest).

 

“Loan” or “Loans” means an advance or
advances under the Term Loan A Commitment or the Term Loan B Commitment or the Revolving Loan Commitment.

 

“Loan Documents” means this Agreement, the
Notes, all security agreements, pledge agreements, mortgages and similar
agreements guaranteeing payment of or granting a Lien upon property as security
for payment of all or any portion of the Obligations, the Canadian Facility
Intercreditor Agreement, any Interest Rate Agreement with a Lender (or
Affiliate of a Lender), any Currency Rate Agreements with a Lender (or
Affiliate of a Lender) pursuant to Section 5.11, the letter
agreement referenced in subsection 2.3(E) and all other
documents, instruments and agreements executed by or on behalf of any Loan
Party and delivered previously or concurrently herewith or at any time
hereafter to or for Agent or any Lender in connection with the Loans, any
Letter of Credit, and any other transaction contemplated by this Agreement, all
as amended, restated, supplemented or modified from time to time but excluding
all Capitalization/Acquisition Documents.

 

“Loan Party” means each of Holdings, Borrower
and each Subsidiary of Borrower.

 

“Loan Year” means each period of twelve (12)
consecutive months commencing on the Closing Date and on each anniversary
thereof.

 

“London Banking Day”  means any day on which dealings in deposits
in U.S. dollars are transacted in the London Interbank market.

 

80

 

“Master Documentary Agreement” means the
Master Agreement for Documentary Letters of Credit between Borrower, as
applicant, and GE Capital.

 

“Master Standby Agreement” means the Master
Agreement for Standby Letters of Credit between Borrower, as applicant, and GE
Capital.

 

“Material Adverse Effect” means a material
adverse effect upon (a) the business, operations, prospects, properties,
assets or condition (financial or otherwise) of Holdings and its Subsidiaries
taken as a whole or (b) the ability of any Loan Party to perform its
obligations under any Loan Document to which it is a party or of Agent or any
Lender to enforce or collect any of the Obligations.  In determining whether any individual event
would result in a Material Adverse Effect, notwithstanding that such event does
not of itself have such effect, a Material Adverse Effect shall be deemed to
have occurred if the cumulative effect of such event and all other then
existing events would result in a Material Adverse Effect.

 

“Maximum Revolving Loan Amount” has the
meaning assigned to that term in subsection 2.1(B).

 

“Moody’s” means Moody’s Investor Services, Inc.

 

“Mortgage” means each of the mortgages, deeds
of trust, leasehold mortgages, leasehold deeds of trust, collateral assignments
of leases or other real estate security documents delivered by any Loan Party
to Agent, on behalf of Agent and Lenders, with respect to Mortgaged Property or
Additional Mortgaged Property, all in form and substance satisfactory to Agent.

 

“Mortgaged Property” means the real property
owned or leased by Borrower or its Subsidiaries as described on Schedule 11.1(A).

 

“Net Proceeds” means cash proceeds received
by Borrower or any of its Subsidiaries from any Asset Disposition (including
insurance proceeds, awards of condemnation, and payments under notes or other
debt securities received in connection with any Asset Disposition), net of (a) the
costs of such sale, lease, transfer or other disposition (including taxes
attributable to such sale, lease or transfer) and (b) amounts applied to
repayment of Indebtedness (other than the Obligations) secured by a Lien on the
asset or property disposed.

 

“Notes” means the Revolving Notes and the
Term Notes.

 

“Notice of Borrowing” means a notice duly executed
by an authorized representative of Borrower appropriately completed and in the
form of Exhibit E.

 

“Obligations” means all obligations,
liabilities and indebtedness of every nature of each Loan Party from time to
time owed to Agent or to any Lender (or any Affiliate of any Lender) under the
Loan Documents (whether incurred before or after the Termination Date)
including the principal amount of all debts, claims and indebtedness, accrued
and unpaid interest and all fees, costs and expenses, whether primary,
secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from
time to time hereafter owing, due or payable including, without limitation, all
interest, fees, cost and expenses accrued or incurred after the filing of any 

 

81

 

petition under any bankruptcy or insolvency law whether or not allowed
in such proceeding.  Obligations shall
also include all obligations of the Loan Parties to any Lender (or any
Affiliate of any Lender) in respect of Banking Services.

 

“Permitted Small Acquisition” means a
Permitted Acquisition for which the purchase price payable in connection
therewith (together with all transaction costs incurred in connection
therewith) does not exceed $4,000,000.

 

“Permitted Encumbrances” means the following
types of Liens: (a) Liens (other than Liens relating to Environmental
Claims or ERISA) for taxes, assessments or other governmental charges not yet
due and payable; (b) statutory Liens of landlords, carriers, warehousemen,
mechanics, materialmen and other similar liens imposed by law, which are
incurred in the ordinary course of business for sums not more than thirty (30)
days delinquent; (c) Liens (other than any Lien imposed by ERISA) incurred
or deposits made in the ordinary course of business in connection with workers’
compensation, unemployment insurance and other types of social security,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, trade contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money); (d) deposits, in an aggregate amount not to exceed $250,000 made
in the ordinary course of business to secure liability to insurance carriers; (e) easements,
rights-of-way, restrictions, and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the business
of any Loan Party or any of its Subsidiaries; (f) Liens on fixed assets
for purchase money obligations, provided that (i) the purchase of
the asset subject to any such Lien is permitted under paragraph B of the
Financial Covenants Rider, (ii) the Indebtedness secured by any such Lien
is permitted under subsection 7.1, (iii) such Lien encumbers
only the asset so purchased and (iv) the Indebtedness or other obligation
secured by such Liens is incurred within ninety (90) days after the purchase or
lease of such asset; (g) Liens in favor of Agent, on behalf of itself and
Lenders; (h) Liens under the Canadian Facility Loan Documents in favor of
Canadian Facility Agent, for the benefit of Canadian Facility Agent and
Canadian Facility Lenders, and (i) Liens set forth on Schedule 11.1(B).

 

“Person” means and includes natural persons,
corporations, limited partnerships, general partnerships, limited liability
companies, limited liability partnerships, joint stock companies, joint
ventures, associations, companies, trusts, banks, trust companies, land trusts,
business trusts or other organizations, whether or not legal entities, and
governments and agencies and political subdivisions thereof.

 

“Pro Forma” means the unaudited consolidated
and consolidating balance sheet of Holdings and its Subsidiaries prepared in
accordance with GAAP as of the
Closing Date after giving effect to the transactions contemplated by this
Agreement.  The Pro Forma is attached
hereto as Schedule 11.1(C).

 

“Pro Forma EBITDA” means, with respect to any
Target, EBITDA of such Target for the trailing twelve-month period preceding
the date of the Permitted Acquisition of such Target, as determined based upon
the Target’s financial statements for its most recently completed fiscal year
and its most recent interim financial period completed within sixty (60)

 

82

 

days prior to the date of consummation of such Permitted Acquisition,
taking into account verifiable cost addbacks approved by Agent.

 

“Pro Rata Share” means (a) with respect
to matters relating to a particular Commitment of a Lender, the percentage
obtained by dividing (i) such Commitment of that Lender by (ii) all
such Commitments of all Lenders and (b) with respect to all other matters,
the percentage obtained by dividing (i) the Total Loan Commitment of a
Lender by (ii) the Total Loan Commitments of all Lenders, in either (a) or
(b), as such percentage may be adjusted by assignments permitted pursuant to subsection 9.5;
provided, however, if any Commitment is terminated pursuant to
the terms hereof, then “Pro Rata Share” means the percentage obtained by
dividing (x) the aggregate amount of such Lender’s outstanding Loans related to
such Commitment by (y) the aggregate amount of all outstanding Loans related to
such Commitment.

 

“Projections” means Holdings’ forecasted
consolidated and consolidating:  (a) balance
sheets; (b) profit and loss statements; (c) cash flow statements; and
(d) capitalization statements, all prepared on a division by division and
Subsidiary by Subsidiary basis consistent with Borrower’s historical financial
statements and based upon good faith estimates and assumptions by Borrower
believed to be reasonable at the time made, together with appropriate
supporting details and a statement of underlying assumptions.

 

“Real Estate” means all of the real property
owned, leased, subleased, or used by any of Borrower, each other Obligor and
Holdings or any of their Subsidiaries.

 

“Related Transactions” means the Shelter
Acquisition, the execution and delivery of the Related Transactions Documents
entered into in connection with those Related Transactions consummated on the
Closing Date, the funding of all Loans on the Closing Date, and the payment of
all fees, costs and expenses associated with all of the foregoing.

 

“Related Transactions Documents” means the
Loan Documents, the Capitalization/Acquisition Documents, and all other
agreements, instruments and documents executed or delivered in connection with
the Related Transactions.

 

“Release” means any release, threatened
release, spill, emission, leaking, pumping, pouring, emitting, emptying,
escape, injection, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Material in the indoor or outdoor environment,
including the movement of Hazardous Material through or in the air, soil,
surface water, ground water or property.

 

“Requisite Lenders” means Lenders (including
for purposes hereof, Canadian Facility Lenders) (other than (i) Defaulting
Lenders hereunder and (ii) ”Defaulting Lenders” as defined in the Canadian
Facility Credit Agreement) having (together with their Affiliates) (a) more
than 50% of the sum of (i) the Revolving Loan Commitment and the aggregate
outstanding principal balance of the Term Loans of all Lenders that are not
Defaulting Lenders plus (ii) the Canadian Facility Revolving Loan
Commitment (expressed in U.S. Dollars) or (b) if the Revolving Loan
Commitment has been terminated, more than 50% of the sum of (i) the
aggregate outstanding principal balance of the Loans of all Lenders that are
not Defaulting Lenders plus (ii) the aggregate Pro Rata Share of
Letter of Credit Obligations of all Lenders that

 

83

 

are not Defaulting Lenders plus (iii) the aggregate
outstanding principal balance of the Canadian Facility Revolving Loans
(expressed in U.S. Dollars) of all Canadian Facility Lenders that are not “Defaulting
Lenders” as defined in the Canadian Facility Credit Agreement; provided, that,
in each case, Requisite Lenders shall at all times consist of at least three
Lenders.

 

“Reserves” means, with respect to the
Borrowing Base (a) the Credit Memoranda Reserve and the Dilution Reserve,
and (b) reserves against Eligible Accounts, Eligible Inventory or
Consolidated Borrowing Base that Agent may, in its reasonable credit judgment,
establish from time to time, with prior or contemporaneous notice to Borrower.

 

“Restricted Junior Payment” means:  (a) any dividend or other distribution,
direct or indirect, on account of any shares of any class of stock or other
equity securities, or ownership interest in, any Loan Party now or hereafter
outstanding, except a dividend payable solely with shares of the class of stock
on which such dividend is declared; (b) any redemption, conversion,
exchange, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of stock
or other equity security of, or ownership interest in, any Loan Party now or
hereafter outstanding, or the issuance of a notice of any intention to do any
of the foregoing (including without limitation, any payment of the “earn-out”
amount under the Shelter Acquisition Documents); (c) any payment or
prepayment of interest on, principal of, premium, if any, redemption,
conversion, exchange, purchase, retirement, defeasance, sinking fund or similar
payment with respect to, any Indebtedness subordinated to the Obligations, or
the issuance of a notice of any intention to do any of the foregoing; (d) any
payment made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of any class of stock or
other equity security of, or ownership interest in, any Loan Party now or
hereafter outstanding; and (e) any payment by Borrower or any of its
Subsidiaries of any management, consulting or similar fees to any Affiliate,
whether pursuant to a management agreement or otherwise.

 

“Revolving Advance” means each advance made
by Lender(s) under the Revolving Loan Commitment pursuant to subsection 2.1
(B).

 

“Revolving Loan” means the outstanding balance
of all Revolving Advances and any amounts added to the principal balance of the
Revolving Loan pursuant to this Agreement.

 

“Revolving Loan Commitment” means (a) as
to any Lender, the commitment of such Lender to make Revolving Advances
pursuant to subsection 2.1 (B), and to incur its Pro Rata Share of
Letter of Credit Obligations in the aggregate amount set forth on the signature
page of this Agreement below such Lender’s signature or in the most recent
Assignment and Acceptance Agreement, if any, executed by such Lender and (b) as
to all Lenders, the aggregate commitment of all Lenders to make Revolving
Advances and to incur Letter of Credit Obligations.

 

“Revolving Note” means each promissory note
of Borrower in form and substance reasonably acceptable to Agent, issued to
evidence the Revolving Loan Commitments.

 

“Senior Indebtedness” means the aggregate
outstanding principal balance of all Indebtedness of Holdings and its
Subsidiaries on a consolidated basis, but excluding any

 

84

 

Indebtedness which, by its express terms is subordinated to the
Obligations on a basis satisfactory to Agent.

 

“Shelter Acquisition Agreement” means that
certain Securities Purchase Agreement dated as of August 9, 2005 among
Borrower, SDI Holding, each of the Persons party thereto as Sellers (as defined
therein) and Brazos Private Equity Partners, LLC.

 

“Shelter Acquisition Documents” means the
Shelter Acquisition Agreement and all agreements, instruments and documents
executed or delivered in connection therewith, but excluding all Loan Documents
and all Canadian Facility Loan Documents.

 

“Subsidiary” means, with respect to any
Person, any corporation, association or other business entity of which more
than fifty percent (50%) of the total voting power of shares of stock (or
equivalent ownership or controlling interest) entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or indirectly,
by that Person or one or more of the other subsidiaries of that Person or a
combination thereof.

 

“Syndication Agent” means JPMorgan Chase
Bank, N.A.

 

“Term Loans” mean(s) the unpaid balance of
the term loans made pursuant to subsection 2.1 (A).

 

“Term Loan A” means the advances made
pursuant to subsection 2.1(A)(1).

 

“Term Loan A Commitment” means (a) as to
any Lender, the commitment of such Lender to make its Pro Rata share of the
Term Loan A in the maximum aggregate amount set forth on the signature page of
this Agreement below such Lender’s signature or in the most recent Assignment
and Acceptance Agreements, if any, executed by such Lender and (b) as to
all Lenders, the aggregate commitment of all Lenders to make the Term Loan A.

 

“Term Loan B” means the advances made
pursuant to subsection 2.1(A)(2).

 

“Term Loan B Commitment” means (a) as to
any Lender, the commitment of such Lender to make its Pro Rata share of Term
Loan B in the maximum aggregate amount set forth on the signature page of
this Agreement opposite such Lender’s signature or in the most recent
Assignment and Acceptance Agreements, if any, executed by such Lender and (b) as
to all Lenders, the aggregate commitment of all Lenders to make Term Loan B.

 

“Term Note” or “Term Notes” means each
promissory note of Borrower in form and substance acceptable to Agent, issued
to evidence the Term Loan A Commitment and the Term Loan B Commitment.

 

“Total Indebtedness” means the aggregate
outstanding principal balance of all Indebtedness of Holdings and its
Subsidiaries on a consolidated basis.

 

85

 

“Total Loan Commitment” means as to any
Lender the aggregate commitments of such Lender with respect to its Revolving
Loan Commitment and Term Loan A Commitment and
Term Loan B Commitment.

 

“Unused Line Fee Margin” means with respect
to any month (or portion thereof) for which the unused line fee under Section 2.3
is being calculated, a per annum rate equal to three-eighths of one percent
(0.375%).

 

“UCC” means the Uniform Commercial Code as
the same may, from time to time, be enacted and in effect in the State of
Illinois; provided, that to the extent that the UCC is used to define
any term herein or in any Loan Document and such term is defined differently in
different Articles or Divisions of the UCC, the definition of such term
contained in Article or Division 9 shall govern; provided further,
that in the event that, by reason of mandatory provisions of law, any or all of
the attachment, perfection or priority of, or remedies with respect to, Agent’s
or any Lender’s Lien on any Collateral is governed by the Uniform Commercial
Code as enacted and in effect in a jurisdiction other than the State of
Illinois, the term “UCC” shall
mean the Uniform Commercial Code as enacted and in effect in such other
jurisdiction solely for purposes of the provisions thereof relating to such
attachment, perfection, priority or remedies and for purposes of definitions
related to such provisions.

 

11.2                           Accounting
Terms.  For purposes of this
Agreement, all accounting terms not otherwise defined herein shall have the
meanings assigned to such terms in conformity with GAAP.  Financial statements and other information
furnished to Agent or any Lender pursuant to subsection 5.1 shall
be prepared in accordance with GAAP (as in effect at the time of such
preparation) on a consistent basis.  In
the event any “Accounting Changes” (as defined below) shall occur and such
changes affect financial covenants, standards or terms in this Agreement, then
Borrower and Lenders agree to enter into negotiations in order to amend such
provisions of this Agreement so as to equitably reflect such Accounting Changes
with the desired result that the criteria for evaluating the financial
condition of Borrower shall be the same after such Accounting Changes as if
such Accounting Changes had not been made, and until such time as such an
amendment shall have been executed and delivered by Borrower and Requisite
Lenders, (A) all financial covenants, standards and terms in this
Agreement shall be calculated and/or construed as if such Accounting Changes
had not been made, and (B) Borrower shall prepare footnotes to each
Compliance Certificate and the
financial statements required to be delivered hereunder that show the
differences between the certificate or financial statements delivered (which
reflect such Accounting Changes) and the basis for calculating financial
covenant compliance (without reflecting such Accounting Changes). “Accounting
Changes” means: (a) changes in accounting principles required by GAAP and
implemented by Holdings; (b) changes in accounting principles recommended
by Holdings’ Accountants; and (c) changes in carrying value of Holdings’
or any of its Subsidiaries’ assets, liabilities or equity accounts resulting
from (i) the application of purchase accounting principles (A.P.B. 16
and/or 17 and EITF 88-16 and FASB 109) to the Related Transactions or (ii) any
other adjustments that, in each case, were applicable to, but not included in,
the Pro Forma.  All such adjustments
resulting from expenditures made subsequent to the Closing Date (including, but
not limited to, capitalization of costs and expenses or payment of pre-Closing
Date liabilities) shall be treated as expenses in the period the expenditures
are made and deducted as part of the calculation of EBITDA in such period.

 

86

 

11.3                           Other
Definitional Provisions.  References
to “Sections”, “subsections”, “Riders”, “Exhibits”, “Schedules” and “Addendums”
shall be to Sections, subsections, Riders, Exhibits,  Schedules and Addendums, respectively, of
this Agreement unless otherwise specifically provided.  Any of the terms defined in subsection 11.1
may, unless the context otherwise requires, be used in the singular or the
plural depending on the reference.  In
this Agreement, words importing any gender include the other genders; the words
“including,” “includes” and “include” shall be deemed to be followed by the
words “without limitation”; references to agreements and other contractual
instruments shall be deemed to include subsequent amendments, assignments, and
other modifications thereto, but only to the extent such amendments,
assignments and other modifications are not prohibited by the terms of this
Agreement or any other Loan Document; references to Persons include their
respective permitted successors and assigns or, in the case of governmental
Persons, Persons succeeding to the relevant functions of such Persons; and all
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations.

 

SECTION 12.

GUARANTY

 

12.1                           Guaranty.  Each Domestic Subsidiary Guarantor hereby
agrees that such Domestic Subsidiary Guarantor is jointly and severally liable
for, and hereby absolutely and unconditionally guarantees to Agent and Lenders,
and their respective successors and assigns, the full and prompt payment when
due (whether at stated maturity, by acceleration or otherwise), and performance
of, all Obligations owed or hereafter owing by Borrower to Agent and
Lenders.  Each Domestic Subsidiary
Guarantor agrees that its guaranty obligation hereunder is a continuing
guaranty of payment and performance and not of collection, and that its
obligation under this Section 12 shall be absolute and
unconditional, irrespective of, and unaffected by,

 

(A)                              the
genuineness, validity, regularity, enforceability or any future amendment of,
or change in, this Agreement, any other Loan Document or any other agreement,
document or instrument to which any Obligor is or may become a party;

 

(B)                                the absence of
any action to enforce this Agreement (including this Section 12) or any
other Loan Document or the waiver or consent by Agent and Lenders with respect
to any of the provisions thereof.

 

(C)                                the existence,
value or condition of, or failure to perfect its Lien against, any security for
the Obligations or any action, or the absence of any action, by Agent and
Lenders in respect thereof (including the release of any such security);

 

(D)                               the insolvency
of any Obligor; or

 

(E)                                 any other
action or circumstances which might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor,

 

(F)                                 it being agreed
by each Domestic Subsidiary Guarantor that its obligations under this Section 12
shall not be discharged until the performance and payment in full of the
Obligations.  Each Domestic Subsidiary
Guarantor shall be regarded, and shall be in the same position, as principal
debtor with respect to the Obligations guaranteed hereunder.

 

87

 

12.2                           Waivers
by Domestic Subsidiary Guarantors. 
Each Domestic Subsidiary Guarantor expressly waives all rights it may
have now or in the future under any statute, or at common law, or at law or in
equity, or otherwise, to compel Agent or Lenders to marshall assets or to
proceed in respect of the Obligations guaranteed hereunder against any other
Obligor, any other party or against any security for the payment and
performance of the Obligations before proceeding against, or as a condition to
proceeding against, such Domestic Subsidiary Guarantor.  It is agreed among each Obligor, Agent and
Lenders that the foregoing waivers are of the essence of the transaction
contemplated by this Agreement and the other Loan Documents and that, but for
the provisions of this Section 12 and such waivers, Agent and
Lenders would decline to enter into this Agreement.

 

12.3                           Benefit
of Guaranty.  Each Obligor agrees
that the provisions of this Section 12 are for the benefit of Agent
and Lenders and their respective successors, transferees, endorsees and
assigns, and nothing herein contained shall impair, as between any other
Obligor and Agent or Lenders, the obligations of such other Obligor under the
Loan Documents.

 

12.4                           Waiver
of Subrogation, Etc.  Notwithstanding
anything to the contrary in this Agreement or in any other Loan Document, each
Domestic Subsidiary Guarantor hereby expressly and irrevocably agrees not to
assert or enforce (whether by or in a legal or equitable proceeding or
otherwise) any and all rights at law or in equity to subrogation,
reimbursement, exoneration, contribution, indemnification or set off and any
and all defenses available to a surety, guarantor or accommodation co-obligor
until the final payment in full of the Obligations and the termination of all
Commitments.  Each Domestic Subsidiary
Guarantor acknowledges and agrees that this waiver is intended to benefit Agent
and Lenders and shall not limit or otherwise affect such Domestic Subsidiary
Guarantor’s liability hereunder or the enforceability of this Section 12,
and that Agent, Lenders and their respective successors and assigns are
intended third party beneficiaries of the waivers and agreements set forth in
this Section 12.4.

 

12.5                           Election
of Remedies.  If Agent or any Lender
may, under applicable law, proceed to realize its benefits under any of the
Loan Documents giving Agent or such Lender a Lien upon any Collateral, whether
owned by any Obligor or by any other Person, either by judicial foreclosure or
by non-judicial sale or enforcement, Agent or any Lender may, at its sole
option, determine which or its remedies or rights it may pursue without
affecting any of its rights and remedies under this Section 12.  If, in the exercise of any of its rights and
remedies, Agent or any Lender shall forfeit any of its rights or remedies,
including its right to enter a deficiency judgment against any Obligor or any
other Person, whether because of any applicable laws pertaining to “election of
remedies” or the like, each Obligor hereby consents to such action by Agent or
such Lender and waives any claim based upon such action, even if such action by
Agent or such Lender shall result in a full or partial loss of any rights of
subrogation which each Obligor might otherwise have had but for such action by
Agent or such Lender.  Any election of
remedies which results in the denial or impairment of the right of Agent or any
Lender to seek a deficiency judgment against any Obligor shall not impair any
Domestic Subsidiary Guarantor’s obligation to pay the full amount of the
Obligations.  In the event Agent or any
Lender shall bid at any foreclosure or trustee’s sale or at any private sale
permitted by law or the Loan Documents, Agent or such Lender may bid all or
less than the amount of the Obligations and the amount of such bid need not be
paid by Agent or such Lender but shall be credited against the
Obligations.  The amount of the
successful bid at any such sale, whether Agent, Lender or any

 

88

 

other party is the successful bidder, shall be conclusively deemed to
be the fair market value of the Collateral and the difference between such bid
amount and the remaining balance of the Obligations shall be conclusively
deemed to be the amount of the Obligations guaranteed under this Section 12,
notwithstanding that any present or future law or court decision or ruling may
have the effect of reducing the amount of any deficiency claim to which Agent
or any Lender might otherwise be entitled but for such bidding at any such
sale.

 

12.6                           Limitation.  Notwithstanding any provision contained
herein or in any other Loan Document to the contrary, each Domestic Subsidiary
Guarantor’s liability under this Section 12, shall be limited to an
amount not to exceed as of any date of determination the greater of:

 

(A)                              the net amount
of all Loans advanced to the Borrower under this Agreement and then re-loaned
or otherwise transferred to, or for the benefit of, such Guarantor; and

 

(B)                                the amount
which could be claimed by Agent and Lenders from such Domestic Subsidiary
Guarantor under this Section 12, without rendering such claim voidable or
avoidable under Section 548 of Chapter 11 of the Bankruptcy code or under
any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent
Conveyance Act or similar statute or common law after taking into account,
among other things, all rights of subrogation, contribution, reimbursement, indemnity
or similar rights of such Domestic Subsidiary Guarantor against any Loan Party
or any other Person, including without limitation, such Domestic Subsidiary
Guarantor’s right of contribution and indemnification from each other Domestic
Subsidiary under Section 12.7.

 

12.7                           Contribution
with Respect to Guaranty Obligations.

 

(A)                              To the extent
that any Domestic Subsidiary Guarantor shall make a payment under this Section 12
of all or any of the Obligations (a “Guarantor Payment”) which, taking into
account all other Guarantor Payments then previously or concurrently made by
any other Domestic Subsidiary Guarantor, exceeds the amount which such Domestic
Subsidiary Guarantor would otherwise have paid if each Domestic Subsidiary
Guarantor had paid the aggregate Obligations satisfied by such Guarantor
Payment in the same proportion that such Domestic Subsidiary Guarantor’s “Allocable
Amount” (as defined below) (as determined immediately prior to such Guarantor
Payment) bore to the aggregate Allocable Amounts of each of the Domestic
Subsidiary Guarantors as determined immediately prior to the making of such
Guarantor Payment, then, following the final payment in full of the Obligations
and termination of all Commitments, such Domestic Subsidiary Guarantor shall be
entitled to receive contribution and indemnification payments from, and be
reimbursed by, each other Domestic Subsidiary Guarantor for the amount of such
excess, pro rata based upon their respective Allocable Amounts in effect
immediately prior to such Guarantor Payment.

 

(B)                                As of any date
of determination, the “Allocable Amount” of any Domestic Subsidiary Guarantor
shall be equal to the maximum amount of the claim which could then be recovered
from such Domestic Subsidiary Guarantor under this Section 12 without
rendering such claim voidable or avoidable under Section 548 of Chapter 11
of the Bankruptcy Code or

 

89

 

under
any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent
Conveyance Act or similar statute or common law.

 

(C)                                This Section 12.7
is intended only to define the relative rights of Domestic Subsidiary
Guarantors.  Nothing set forth in this Section 12.7
is intended to or shall impair the obligations of Domestic Subsidiary Guarantors,
jointly and severally, to pay any amounts as and when the same shall become due
and payable in accordance with the terms of this Agreement, including the other
provisions of this Section 12. 
Nothing contained in this Section 12.7 shall limit the liability of
any Domestic Subsidiary Guarantor to pay fees and expenses with respect thereto
for which such Domestic Subsidiary Guarantor shall be primarily liable.

 

(D)                               The parties
hereto acknowledge that the rights of contribution and indemnification hereunder
shall constitute assets of the Domestic Subsidiary Guarantor to which such
contribution and indemnification is owing.

 

(E)                                 The rights of
any indemnifying Domestic Subsidiary Guarantor against other Domestic
Subsidiary Guarantors under this Section 12.7 shall be exercisable upon
the final payment in full of the Obligations and the termination of all
Commitments.

 

12.8                           Liability
Cumulative.  The liability of
Domestic Subsidiary Guarantors under this Section 12 is in addition
to and shall be cumulative with all liabilities of each Domestic Subsidiary
Guarantor to Agent and Lenders under this Agreement and the other Loan
Documents to which such Domestic Subsidiary Guarantor is a party or in respect
of any Obligations or obligation of any other Domestic Subsidiary Guarantor,
without any limitation as to amount, unless the instrument or agreement
evidencing or creating such other liability specifically provides to the
contrary.

 

SECTION 13.

RESTATEMENT OF EXISTING LOAN AGREEMENT

 

The parties hereto agree that on the Closing
Date, the following transactions shall be deemed to occur automatically,
without further action by any party hereto:

 

(1)                                  The Existing
Loan Agreement shall be deemed to be amended and restated in its entirety in
the form of this Agreement;

 

(2)                                  All Existing
Obligations shall, to the extent not paid on the Closing Date, be deemed to be
Obligations outstanding hereunder;

 

(3)                                  the guaranties
and Liens in favor of the Agent for the benefit of the Existing Lenders
securing payment of the Existing Obligations shall remain in full force and
effect with respect to the Obligations; and

 

(4)                                  all references
in the other Loan Documents to the Existing Loan Agreement shall be deemed to
refer without further amendment to this Agreement.

 

The parties acknowledge and agree that this Agreement and the other
Loan Documents do not constitute a novation, payment and reborrowing or
termination of the Existing Obligations and

 

90

 

that all such Existing Obligations are in all respects continued and
outstanding as Obligations under this Agreement and the Notes with only the
terms being modified from and after the effective date of this Agreement as
provided in this Agreement, the Notes and the other Loan Documents.  After giving effect to this Agreement, the
aggregate outstanding principal balances of each Lender’s Loans on the Closing
Date are as set forth on Schedule 13 hereto.

 

[Signature
Pages Follow]

 

91

 

Witness the due execution hereof by the
respective duly authorized officers of the undersigned as of the date first
written above.

 

 

	
   

  	
  BEACON SALES ACQUISITION, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David R. Grace

  	
   

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  	
   

  
	
   

  	
  FEIN: 36-4173366

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  QUALITY ROOFING SUPPLY

  
	
   

  	
  COMPANY, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David R. Grace

  	
   

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  	
   

  
	
   

  	
  FEIN: 23-2969912

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BEACON CANADA, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David R. Grace

  	
   

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  	
   

  
	
   

  	
  FEIN: 36-4304111

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BEST DISTRIBUTING CO.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David R. Grace

  	
   

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  	
   

  
	
   

  	
  FEIN: 36-4378608

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE ROOF CENTER, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David R. Grace

  	
   

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  	
   

  
	
   

  	
  FEIN: 04-3561558

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WEST END LUMBER COMPANY, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David R. Grace

  	
   

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  	
   

  
	
   

  	
  FEIN:

  	
  04-3563234

  	
   

  
										

 

[Obligor Signature Page to Loan
and Security Agreement]

 

 

	
   

  	
  J.G.A. BEACON, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David R. Grace

  	
   

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  	
   

  
	
   

  	
  FEIN:

  	
  84-1663264

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SDI HOLDING, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David R. Grace

  	
   

  
	
   

  	
  Title:

  	
  Co-Chief Financial Officer

  	
   

  
	
   

  	
  FEIN:

  	
  30-0097329

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SDI ACQUISITION GUARANTOR, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David R. Grace

  	
   

  
	
   

  	
  Title:

  	
  Co-Chief Financial Officer

  	
   

  
	
   

  	
  FEIN:

  	
  35-2175474

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SHELTER DISTRIBUTION, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David R. Grace

  	
   

  
	
   

  	
  Title:

  	
  Co-Chief Financial Officer

  	
   

  
	
   

  	
  FEIN:

  	
  36-4094316

  	
   

  
								

 

[Obligor Signature Page to Loan
and Security Agreement]

 

 

	
   

  	
  GENERAL ELECTRIC CAPITAL

  CORPORATION, as Agent, an L/C Issuer and a

  Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ken Brown

  	
   

  
	
   

  	
  Title:

  	
  Duly Authorized Signatory

  	
   

  
	
   

  	
   

  
	
   

  	
  Revolving Loan Commitment: $65,290,322.58

  
	
   

  	
   

  
	
   

  	
  Term Loan A Commitment: $7,096,774.19

  
	
   

  	
   

  
	
   

  	
  Term Loan B Commitment: $15,612,903.23

  
	
   

  	
   

  
	
   

  	
  Address:

  	
  500 West Monroe Street

  
	
   

  	
   

  	
  Chicago, Illinois 60606

  
						

 

[Lender Signature Page to Loan
and Security Agreement]

 

 

	
   

  	
  JPMORGAN CHASE BANK, N.A.,

  
	
   

  	
  as Syndication Agent, and as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Stephen Christ

  	
   

  
	
   

  	
  Title:

  	
  Account Executive

  	
   

  
	
   

  	
   

  
	
   

  	
  Revolving Loan Commitment: $30,419,354.84

  
	
   

  	
   

  
	
   

  	
  Term Loan A Commitment: $3,306,451.61

  
	
   

  	
   

  
	
   

  	
  Term Loan B Commitment: $7,274,193.55

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  120 S. LaSalle St., Floor 8

  
	
   

  	
  Mail Code IL 1-148

  
	
   

  	
  Chicago, IL 60603

  
	
   

  	
  Attn. Stephen Christ

  
					

 

[Lender Signature Page to Loan
and Security Agreement]

 

 

	
   

  	
  WACHOVIA CAPITAL FINANCE

  
	
   

  	
  CORPORATION (CENTRAL),

  
	
   

  	
  as Co-Documentation Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Vicky Geist

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
  Revolving Loan Commitment: $30,419,354.84

  
	
   

  	
   

  
	
   

  	
  Term Loan A Commitment: $3,306,451.61

  
	
   

  	
   

  
	
   

  	
  Term Loan B Commitment: $7,274,193.55

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  150 South Wacker Drive

  
	
   

  	
  Suite 2200

  
	
   

  	
  Chicago, IL 60606

  
					

 

[Lender Signature Page to Loan
and Security Agreement]

 

 

	
   

  	
  THE CIT GROUP/BUSINESS CREDIT, INC.,

  as Co-Documentation Agent and as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Grant Weiss

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
  Revolving Loan Commitment: $30,419,354.84

  
	
   

  	
   

  
	
   

  	
  Term Loan A Commitment: $3,306,451.61

  
	
   

  	
   

  
	
   

  	
  Term Loan B Commitment: $7,274,193.55

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  5420 LBJ Freeway, Suite 200

  
	
   

  	
  Dallas, TX 75240

  
	
   

  	
  Attn: Regional Credit Manager

  
					

 

[Lender Signature Page to Loan
and Security Agreement]

 

 

	
   

  	
  BANK OF AMERICA, N.A.,

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jason Riley

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
  Revolving Loan Commitment: $14,096,774.19

  
	
   

  	
   

  
	
   

  	
  Term Loan A Commitment: $1,532,258.06

  
	
   

  	
   

  
	
   

  	
  Term Loan B Commitment: $3,370,967.74

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  One South Wacker Drive

  
	
   

  	
  Suite 3400

  
	
   

  	
  Chicago, Illinois 60606

  
					

 

[Lender Signature Page to Loan
and Security Agreement]

 

 

	
   

  	
  LASALLE BANK NATIONAL

  
	
   

  	
  ASSOCIATION, a
  national banking

  
	
   

  	
  association, as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Andrew Heinz

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
  Revolving Loan Commitment: $23,741,935.48

  
	
   

  	
   

  
	
   

  	
  Term Loan A Commitment: $2,580,645.16

  
	
   

  	
   

  
	
   

  	
  Term Loan B Commitment: $5,677,419.35

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  135 South LaSalle Street

  
	
   

  	
  Suite 425

  
	
   

  	
  Chicago, IL 60603

  
					

 

[Lender Signature Page to Loan
and Security Agreement]

 

 

	
   

  	
  UPS CAPITAL CORPORATION,
  as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John P. Holloway

  	
   

  
	
   

  	
  Title:

  	
  Director of Portfolio Management

  	
   

  
	
   

  	
   

  
	
   

  	
  Revolving Loan Commitment: $10,758,064.52

  
	
   

  	
   

  
	
   

  	
  Term Loan A Commitment: $1,169,354.84

  
	
   

  	
   

  
	
   

  	
  Term Loan B Commitment: $2,572,580.65

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  35 Glenlake Parkway

  	
   

  
	
   

  	
  Atlanta, GA 30328

  	
   

  
	
   

  	
   

  	
   

  
						

 

[Lender Signature Page to Loan
and Security Agreement]

 

 

	
   

  	
  FIFTH THIRD BANK,
  as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Penny

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  
	
   

  	
   

  
	
   

  	
  Revolving Loan Commitment: $10,758,064.52

  
	
   

  	
   

  
	
   

  	
  Term Loan A Commitment: $1,169,354.84

  
	
   

  	
   

  
	
   

  	
  Term Loan B Commitment: $2,572,580.65

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  111 S. Calvert St., Suite 2700

  	
   

  
	
   

  	
  Baltimore, MD 21202

  	
   

  
	
   

  	
   

  	
   

  
						

 

[Lender Signature Page to Loan
and Security Agreement]

 

 

	
   

  	
  ANTARES CAPITAL CORPORATION,

  
	
   

  	
  as a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John Martin

  	
   

  
	
   

  	
  Title:

  	
  Managing Director

  	
   

  
	
   

  	
   

  
	
   

  	
  Revolving Loan Commitment: $14,096,774.19

  
	
   

  	
   

  
	
   

  	
  Term Loan A Commitment: $1,532,258.06

  
	
   

  	
   

  
	
   

  	
  Term Loan B Commitment: $3,370,967.74

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
  311 S. Wacker Drive

  	
   

  
	
   

  	
  Chicago, IL 60606

  	
   

  
	
   

  	
   

  	
   

  
						

 

[Lender Signature Page to Loan and
Security Agreement]

 

 

EXHIBITS

 

	
  A.

  	
   

  	
  Assignment and Acceptance Agreement

  
	
  B-1.

  	
   

  	
  Consolidated Borrowing Base Certificate

  
	
  B-2.

  	
   

  	
  Consolidating Borrowing Base Certificate

  
	
  C.

  	
   

  	
  [Intentionally
  Deleted]

  
	
  D.

  	
   

  	
  Compliance Certificate

  
	
  E.

  	
   

  	
  Notice of Borrowing

  
	
  F.

  	
   

  	
  Inventory Report

  

 

 

SCHEDULES

	
  2.8

  	
   

  	
  Commercial Tort Claims

  
	
  3

  	
   

  	
  List of Closing Documents

  
	
  4.1(B)

  	
   

  	
  Capitalization of Loan Parties

  
	
  4.6

  	
   

  	
  Business and Trade Names (Present and Past
  Five Years); Location of

  Principal Place of Business, Books and Records and Collateral

  
	
  4.9

  	
   

  	
  FEIN for each Obligor

  
	
  4.12

  	
   

  	
  Intellectual Property

  
	
  4.19

  	
   

  	
  Bank Accounts

  
	
  4.20

  	
   

  	
  Employee Matters

  
	
  7.1

  	
   

  	
  Indebtedness

  
	
  7.2

  	
   

  	
  Contingent Liabilities

  
	
  7.11

  	
   

  	
  Subsidiaries

  
	
  11.1(A)

  	
   

  	
  Mortgaged Property

  
	
  11.1(B)

  	
   

  	
  Other Liens

  
	
  11.1(C)

  	
   

  	
  Pro Forma

  
	
  13

  	
   

  	
  Outstanding Obligations

  

 

 

RIDERS

A.                                   Conditions
Rider

B.                                     Reporting
Rider

C.                                     Financial
Covenants Rider

 

 

CONDITIONS
RIDER

 

This Conditions Rider is attached to and made
a part of that certain Third Amended and Restated Loan and Security Agreement
dated as of October 14, 2005 and entered into among Beacon Sales
Acquisitions, Inc., Domestic Subsidiary Guarantors, Agent, L/C Issuer and
Lenders.

 

(A)                              Closing Deliveries.  Agent shall have received, in form and
substance satisfactory to Agent and Lenders, all documents, instruments and
information identified on Schedule 3.1 and all other agreements,
notes, certificates, orders, authorizations, financing statements, mortgages
and other documents which Agent may at any time reasonably request.

 

(B)                                Security Interests.  Agent shall have received satisfactory
evidence that all security interests and liens granted to Agent for the benefit
of Agent and Lenders pursuant to this Agreement or the other Loan Documents
have been duly perfected and constitute first priority liens on the Collateral,
subject only to Permitted Encumbrances.

 

(C)                                Closing Date
Availability; Leverage Ratio.  After
giving effect to the consummation of the transactions contemplated hereunder on
the Closing Date and the payment by Borrower of all costs, fees and expenses relating
thereto, (i) Excess Availability shall be at least $35,000,000, (ii) the
sum of all outstanding Revolving Loans plus the balance of Letter of
Credit Obligations shall not exceed $61,800,104.72, and (iii) the ratio of
total Indebtedness of Holdings and its Subsidiaries on a consolidated basis to
EBITDA shall not exceed 3.6.

 

(D)                               Representations and
Warranties.  The representations and
warranties contained herein and in the Loan Documents shall be true, correct
and complete in all material respects on and as of that Funding Date to the
same extent as though made on and as of that date, except for any
representation or warranty limited by its terms to a specific date and taking
into account any amendments to the Schedules or Exhibits as a result of any disclosures
made by Borrower to Agent after the Closing Date and approved by Agent.

 

(E)                                 Fees.  With respect to Loans or Letters of Credit to
be made or issued on the Closing Date, Borrower shall have paid all fees due to
Agent, L/C Issuer or any Lender and payable on the Closing Date.

 

(F)                                 No Default.  No event shall have occurred and be
continuing or would result from funding a Loan or issuing a Lender Letter of
Credit requested by Borrower that would constitute an Event of Default or a
Default.

 

(G)                                Performance of
Agreements.  Each Loan Party shall
have performed in all material respects all agreements and satisfied all
conditions which any Loan Document provides shall be performed by it on or
before that Funding Date.

 

(H)                               No Prohibition.  No order, judgment or decree of any court,
arbitrator or governmental authority shall purport to enjoin or restrain Agent
or any Lender from making any Loans or issuing any Lender Letters of Credit.

 

 

(I)                                    No Litigation.  There shall not be pending or, to the
knowledge of Borrower, threatened, any material action, charge, claim, demand,
suit, proceeding, petition, governmental investigation or arbitration by,
against or affecting any Loan Party or any of its Subsidiaries or any property
of any Loan Party or any of its Subsidiaries (including without limitation any
tort claims in respect of asbestos products sold or distributed by any Loan
Party) that has not been disclosed to Agent by Borrower in writing, and there
shall have occurred no development in any such action, charge, claim, demand,
suit, proceeding, petition, governmental investigation or arbitration that, in
the opinion of Agent, would reasonably be expected to have a Material Adverse
Effect.

 

(J)                                   Appraisal.  Agent shall have received appraisals as to
all Equipment and all Inventory of the Loan Parties, which shall be in form and
substance reasonably satisfactory to Agent.

 

(K)                               Field Examination.  Agent shall have completed its business and
legal due diligence with respect to the Shelter Acquisition, including, without
limitation, a field examination of business, environmental matters, operations,
financial condition and assets, with results reasonably satisfactory to Agent.

 

(L)                                 Consummation of
Related Transactions.  Agent shall
have received fully executed copies of the Shelter Acquisition Agreement and
final and complete copies of each of the other Related Transactions Documents,
each of which shall be in full force and effect in form and substance
reasonably satisfactory to Agent. The Shelter Acquisition shall have been
consummated in accordance with the terms of the Shelter Acquisition Agreement.

 

(M)                            Certain Post-Closing
Deliveries.  (i) Borrower shall
use commercially reasonable efforts to cause to be delivered to Agent, within
60 days following the Closing Date (provided that Borrower shall continue such
efforts beyond such period if so requested by Agent), executed landlord
agreements in the form previously provided by Agent to Borrower or otherwise on
terms reasonably satisfactory to Agent from landlords of the leaseholds listed
on Annex I to this Conditions Rider.  In
the event Borrower fails to obtain such landlord agreements with respect to any
of the foregoing locations within said 60-day period (or such longer period as
may be agreed to by Agent), Agent may elect, in its discretion, to exclude
Inventory at such location from Eligible Inventory or establish reserves
against the Consolidating Borrowing Bases in respect of Inventory at such
locations until such time (if any) as Borrower has obtained such landlord
agreements with respect to such locations.

 

(ii)                                  Borrower shall use
commercially reasonable efforts to cause to be delivered to Agent within 120
days following the Closing Date (provided that Borrower shall continue such
efforts beyond such period if requested by Agent), executed blocked account
agreements in the form previously provided by Agent to Borrower or otherwise on
terms reasonably satisfactory to Agent from the Collecting Banks listed on
Annex II to this Conditions Rider.  In
the event Borrower fails to obtain such blocked account agreements from any of
the foregoing Collecting Banks within said 120-day period (or such longer
period as may be agreed to by Agent), Borrower will, if required by Agent to do
so, replace all Blocked Accounts at such Collecting Banks with Blocked Accounts
at Collecting Banks subject to blocked account agreements with Agent.

 

 

REPORTING
RIDER

 

This Reporting Rider is attached and made a
part of that certain Third Amended and Restated Loan and Security Agreement, dated
as of October 14, 2005 and entered into among Beacon Sales Acquisition, Inc.,
the Domestic Subsidiary Guarantors, Agent, L/C Issuer and Lenders.

 

(A)                              Monthly Financials.  As soon as available and in any event within
thirty (30) days after the end of each month, Borrower will deliver to Agent
and Lenders (1) the consolidated and consolidating balance sheet of
Holdings and its Subsidiaries as at the end of such month and the related
consolidated and consolidating statements of income, stockholders’ equity and
cash flow for such month and for the period from the beginning of the then
current Fiscal Year to the end of such month, and (2) a schedule of
the outstanding Indebtedness for borrowed money of Holdings and its
Subsidiaries describing in reasonable detail each such debt issue or loan
outstanding and the principal amount and amount of accrued and unpaid interest
with respect to each such debt issue or loan.

 

(B)                                SEC Filings and
Press Releases.  Promptly upon their
becoming available, Borrower will deliver to Agent copies of (1) all
financial statements, reports, notices and proxy statements sent or made
available by Holdings to its stockholders, (2) all regular and periodic
reports and all registration statements and prospectuses, if any, filed by Holdings
with any securities exchange or with the Securities and Exchange Commission or
any private regulatory authority, and (3) all press releases and other
statements made available by Holdings to the public concerning developments in
the business of any Loan Party.

 

(C)                                Year-End Financials.  As soon as available and in any event within
ninety (90) days after the end of each Fiscal Year, Borrower will deliver to
Agent and Lenders: (1) the consolidated and consolidating balance sheet of
Holdings and its Subsidiaries as at the end of such year and the related
consolidated and consolidating statements of income, stockholders’ equity and
cash flow for such Fiscal Year; (2) a schedule of the outstanding
Indebtedness of Holdings and its Subsidiaries describing in reasonable detail
each such debt issue or loan outstanding and the principal amount and amount of
accrued and unpaid interest with respect to each such debt issue or loan; and (3) a
report with respect to the financial statements from Holdings’ Accountants,
which report shall be unqualified as to going concern and scope of audit of
Holdings and its Subsidiaries and shall state that (a) such consolidated
financial statements present fairly the consolidated financial position of
Holdings and its Subsidiaries as at the dates indicated and the results of
their operations and cash flow for the periods indicated in conformity with
GAAP applied on a basis consistent with prior years and (b) that the
examination by Holdings’ Accountants in connection with such consolidated
financial statements has been made in accordance with generally accepted
auditing standards; and (4) copies of the consolidating financial
statements of Holdings and its Subsidiaries, including (a) consolidating
balance sheets of Holdings and its Subsidiaries as at the end of such Fiscal
Year showing intercompany eliminations and (b) related consolidating
statements of income of Holdings and its Subsidiaries showing intercompany
eliminations.

 

(D)                               Accountants’
Certification and Reports.  Together
with each delivery of consolidated and consolidating financial statements of
Holdings and its Subsidiaries pursuant to

 

 

paragraph (C) above, Borrower will deliver a written statement by
Holdings’ Accountants (1) stating that the examination has included a review
of the terms of this Agreement as same relate to accounting matters and (2) stating
whether, in connection with the examination, any condition or event that
constitutes a Default or an Event of Default has come to their attention and,
if such a condition or event has come to their attention, specifying the nature
and period of existence thereof. 
Promptly upon receipt thereof, Borrower will deliver to Agent and
Lenders copies of all significant reports submitted to Holdings by Holdings’
Accountants in connection with each annual, interim or special audit of the
financial statements of Holdings made by Holdings’ Accountants, including the
comment letter submitted by Holdings’ Accountants to management in connection
with their annual audit.

 

(E)                                 Compliance
Certificate.  (i) Together with
the delivery of each set of financial statements referenced in paragraphs (A) and
(C) above, Borrower will deliver to Agent and Lenders a Compliance
Certificate, together with (in the case of financial statements delivered for
any period ending on the last day of a fiscal quarter) copies of the
calculations and work-up employed to determine Obligors’ compliance or
noncompliance with those financial covenants set forth in the Financial
Covenants Rider.

 

(F)                                 Consolidating and
Consolidated Borrowing Base Certificates, Registers and Journals.  On the Closing Date and thereafter, within
five (5) Business Days after the last day of each month (provided
that (a) at any time during the months of January, February and March when
the sum of the outstanding Revolving Loan plus the balance of Letter of
Credit Obligations plus the outstanding balance of the Canadian facility
Revolving Loans (converted from Canadian Dollars to an equivalent amount of US
Dollars) exceeds the Consolidated Borrowing Base (calculated without giving
effect to the Seasonal Inventory Advance Rate Percentage) and (b) at all
times when Excess Availability is less than $15,000,000, such delivery shall
also be made on each Monday following the end of the prior week), Borrower
shall deliver to Agent for the last Business Day of such period: (1) a
Consolidating Borrowing Base Certificate for each Obligor updated to reflect
the most recent sales and collections of each Obligor and setting forth the
Consolidating Borrowing Base of each Obligor together with a Consolidated
Borrowing Base Certificate setting forth the Consolidated Borrowing Base; (2) an
invoice register or sales journal (or a similar summary report satisfactory to
Agent) describing all sales of Obligors, in form and substance satisfactory to
Agent, and, if Agent so requests, copies of invoices evidencing such sales and
proofs of delivery relating thereto; (3) a cash receipts journal (or a
similar summary report satisfactory to Agent); (4) a credit memo journal
(or a similar summary report satisfactory to Agent); and (5) an adjustment
journal (or a similar summary report satisfactory to Agent), setting forth all
adjustments to Obligors’ accounts receivable. 
Borrower shall cause Beacon Canada to deliver to Agent copies of all
deliveries required under paragraph F of the Reporting Rider to the Canadian
Facility Credit Agreement (including without limitation, a copy of the Beacon
Canada Borrowing Base Certificate expressed in U.S. Dollars), contemporaneously
with providing such deliveries to Canadian Facility Agent.

 

(G)                                Inventory Reports
and Listings and Agings.  On the
Closing Date and within five (5) Business Days after the last day of each
month and from time to time upon the request of Agent, Borrower will deliver to
Agent: (1) an aged trial balance of all then existing Accounts; and (2) an
Inventory Report duly executed by an officer of Borrower and substantially

 

 

in the form of Exhibit F as of the last day of such
period.  As soon as available and in any event
within five (5) Business Days after the last day of each month, and from
time to time upon the request of Agent, Borrower will deliver to Agent: (1) an
aged trial balance of all then existing accounts payable; and (2) a
detailed inventory listing and cover summary report.  All such reports shall be in form and
substance satisfactory to Agent and, unless otherwise directed by Agent, may be
transmitted to Agent pursuant to an electronic transmitting reporting system.  Borrower shall cause Beacon Canada to deliver
to Agent copies of all deliveries required under paragraph G of the Reporting
Rider to the Canadian Facility Credit Agreement, contemporaneously with
providing such deliveries to Canadian Facility Agent.

 

(H)                               Appraisals.  From time to time, upon the request of Agent,
Borrower will obtain and deliver to Agent, at Borrower’s expense, appraisal
reports in form and substance and from appraisers satisfactory to Agent,
stating the then current fair market and Orderly Liquidation Values of all or
any portion of the Collateral and the Canadian Collateral; provided, however,
so long as no Default or Event of Default is continuing, Agent shall not
request an appraisal as to any particular category of Collateral or Canadian
Collateral to be performed more than once every Loan Year at Borrower’s
expense.  Without limiting the generality
of the foregoing, Agent shall request, and Borrower will obtain and deliver to
Agent, at least once every Loan Year, an appraisal report stating the then
current orderly liquidation value of Obligors’ and Canadian Borrower’s
Inventory.

 

(I)                                    Government
Notices.  Borrower will deliver to
Agent and Lenders promptly after receipt copies of all notices, requests,
subpoenas, inquiries or other writings received from any governmental agency
concerning any Employee Benefit Plan, the violation or alleged violation of any
Environmental Laws, the storage, use or disposal of any Hazardous Material, the
violation or alleged violation of the Fair Labor Standards Act or any Loan
Party’s payment or non-payment of any taxes including any tax audit.

 

(J)                                   Events of
Default, etc.  Promptly upon any
officer of Borrower obtaining knowledge of any of the following events or
conditions, Borrower shall deliver copies of all notices given or received by
any Loan Party with respect to any such event or condition to Agent a
certificate on behalf of Borrower signed on behalf of Borrower by Borrower’s
chief executive officer specifying the nature and period of existence of such
condition or event and what action such Loan Party has taken, is taking and
proposes to take with respect thereto: (1) any condition or event that
constitutes an Event of Default or Default; (2) any notice of default that
any Person has given to any Loan Party or any other action taken with respect
to a claimed default; or (3) any Material Adverse Effect or (4) any
default or event of default with respect to any Indebtedness of Holdings or any
of its Subsidiaries.

 

(K)                               Projections.  As soon as available and in any event no
later than 45 days after the end of each of Holdings’ Fiscal Year, Borrower
will deliver to Agent and Lenders consolidated and consolidating Projections of
Holdings and its Subsidiaries for the forthcoming Fiscal Year, month by month.

 

(L)                                 Other Information.  With reasonable promptness, Borrower will
deliver such other information and data as Agent or Lenders may reasonably
request from time to time.

 

 

FINANCIAL
COVENANTS RIDER

 

This Financial Covenants Rider is attached
and made a part of that certain Third Amended and Restated Loan and Security
Agreement, dated as of October 14, 2005 and entered into among Beacon
Sales Acquisition, Inc., the Domestic Subsidiary Guarantors, Agent and
Lenders.

 

A.                                   Excess
Availability. Borrower shall at all times maintain Excess Availability of
at least $5,000,000.

 

B.                                     Capital
Expenditure Limits.  The aggregate
amount of all Capital Expenditures, Capital Leases with respect to fixed assets
of Borrower and its Subsidiaries (which shall be considered to be expended in
full on the date such Capital Lease is entered into) and other contracts with
respect to fixed assets initially capitalized on Borrower’s or any Subsidiary’s
balance sheet prepared in accordance with GAAP (which shall be considered to be
expended in full on the date such contract is entered into) (excluding, in each
case, expenditures for trade-ins and replacement of assets to the extent funded
with casualty insurance proceeds and excluding the purchase price allocated to
fixed assets acquired in connection with the Shelter Acquisition or a Permitted
Acquisition) will not in any Fiscal Year exceed one and one-half percent
(1.50%) of gross revenues of Holdings and its Subsidiaries on a consolidated
basis (determined in accordance with GAAP) for such Fiscal Year.

 

C.                                     Fixed Charge
Coverage.  Borrower shall not permit
Fixed Charge Coverage for any twelve (12) month period ending as of any date
set forth below to be less than the ratio set forth below for such date:

 

	
  Date

  	
   

  	
  Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31,
  2005 and the last day of each fiscal quarter thereafter

  	
   

  	
  1.20

  	
   

  

 

D.                                    Senior
Indebtedness to EBITDA.  Borrower
shall not permit the ratio of Senior Indebtedness calculated as of any date set
forth below to EBITDA for the twelve (12) month period ending on such date to
be greater than the ratio set forth below for such date:

 

	
  Date

  	
   

  	
  Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31,
  2005 and the last day of each fiscal quarter thereafter through December 31,
  2007

  	
   

  	
  3.50

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31,
  2008 and the last day of each fiscal quarter thereafter

  	
   

  	
  3.25

  	
   

  

 

The aggregate balance of the Revolving Loan included in Senior
Indebtedness as of any date of determination shall be equal to the average
balance of the Revolving Loan for such date and the last day of the two
immediately preceding months.

 

 

With respect to each Target acquired by Borrower during any such twelve
month period, EBITDA shall be adjusted by an amount equal to the Pro Forma
EBITDA of such Target for the portion of such twelve month period which
precedes the acquisition of such Target.

 

E.                                      Total
Indebtedness to EBITDA.  Borrower
shall not permit the ratio of Total Indebtedness calculated as of any date set
forth below to EBITDA for the twelve (12) month period ending on such date to
be greater than the ratio set forth below for such date:

 

	
  Date

  	
   

  	
  Ratio

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December 31,
  2005 and the last day of each fiscal quarter thereafter through December 31,
  2007

  	
   

  	
  4.75

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 31,
  2008 and the last day of each fiscal quarter thereafter

  	
   

  	
  4.50

  	
   

  

 

The aggregate balance of the Revolving Loan included in Total
Indebtedness as of any date of determination shall be equal to the average
balance of the Revolving Loan for such date and the last day of the two
immediately preceding months.

 

With respect to each Target acquired by Borrower during any such twelve
month period, EBITDA shall be adjusted by an amount equal to the Pro Forma
EBITDA of such Target for the portion of such twelve month period which
precedes the acquisition of such Target.

 

F.                                      Lease Limits.  Borrower will not and will not permit any of
its Subsidiaries directly or indirectly to become or remain liable in any way,
whether directly or by assignment or as a guarantor or other surety, for the
obligations of the lessee under any operating lease, synthetic lease or similar
off-balance sheet financing, if the aggregate amount of all rents (or
substantially equivalent payments) paid by Borrower and its Subsidiaries under
all such leases (excluding any lease providing for aggregate annual rental
payments of less than $100,000) would exceed $22,000,000 in any fiscal year of
Borrower.

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