Document:

Exhibit 10.1

 

 

SUPERIOR ESSEX COMMUNICATIONS LP,

 

and

 

ESSEX GROUP, INC.,

 

as
Borrowers

 

 

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

Dated
as of April 14, 2006

 

$225,000,000

 

 

CERTAIN FINANCIAL INSTITUTIONS,

 

as
Lenders

 

with

 

GENERAL
ELECTRIC CAPITAL CORPORATION,

as Syndication Agent,

 

BANC OF
AMERICA SECURITIES LLC and

GECC CAPITAL MARKETS, INC., 

as Co-Lead Arrangers

 

and

 

BANK OF AMERICA, N.A.,

 

as
Agent

 

 

 

 

TABLE
OF CONTENTS

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.

  	
   

  	
  DEFINITIONS; RULES OF CONSTRUCTION

  	
  2

  
	
  1.1.

  	
   

  	
  Definitions

  	
  2

  
	
  1.2.

  	
   

  	
  Accounting Terms

  	
  30

  
	
  1.3.

  	
   

  	
  Certain Matters of
  Construction

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.

  	
   

  	
  CREDIT FACILITIES

  	
  31

  
	
  2.1.

  	
   

  	
  Revolver Commitment

  	
  31

  
	
  2.2.

  	
   

  	
  Letter of Credit
  Facility

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.

  	
   

  	
  INTEREST, FEES AND CHARGES

  	
  35

  
	
  3.1.

  	
   

  	
  Interest

  	
  35

  
	
  3.2.

  	
   

  	
  Fees

  	
  36

  
	
  3.3.

  	
   

  	
  Computation of
  Interest, Fees, Yield Protection

  	
  37

  
	
  3.4.

  	
   

  	
  Reimbursement
  Obligations

  	
  37

  
	
  3.5.

  	
   

  	
  Illegality

  	
  38

  
	
  3.6.

  	
   

  	
  Increased Costs

  	
  38

  
	
  3.7.

  	
   

  	
  Capital Adequacy

  	
  39

  
	
  3.8.

  	
   

  	
  Mitigation

  	
  39

  
	
  3.9.

  	
   

  	
  Funding Losses

  	
  40

  
	
  3.10.

  	
   

  	
  Maximum Interest

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.

  	
   

  	
  LOAN ADMINISTRATION

  	
  41

  
	
  4.1.

  	
   

  	
  Manner of Borrowing
  and Funding Revolver Loans

  	
  41

  
	
  4.2.

  	
   

  	
  Defaulting Lender

  	
  42

  
	
  4.3.

  	
   

  	
  Number and Amount
  of LIBOR Loans; Determination of Rate

  	
  43

  
	
  4.4.

  	
   

  	
  Borrower Agent

  	
  43

  
	
  4.5.

  	
   

  	
  One Obligation

  	
  43

  
	
  4.6.

  	
   

  	
  Effect of
  Termination

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.

  	
   

  	
  PAYMENTS

  	
  44

  
	
  5.1.

  	
   

  	
  General Payment
  Provisions

  	
  44

  
	
  5.2.

  	
   

  	
  Repayment of
  Revolver Loans

  	
  44

  
	
  5.3.

  	
   

  	
  Payment of Other
  Obligations

  	
  44

  
	
  5.4.

  	
   

  	
  Marshaling;
  Payments Set Aside

  	
  44

  
	
  5.5.

  	
   

  	
  Post-Default
  Allocation of Payments

  	
  45

  
	
  5.6.

  	
   

  	
  Application of
  Payments

  	
  46

  
	
  5.7.

  	
   

  	
  Loan Account;
  Account Stated

  	
  46

  
	
  5.8.

  	
   

  	
  Gross Up for Taxes

  	
  46

  
	
  5.9.

  	
   

  	
  Withholding Tax
  Exemption

  	
  47

  
	
  5.10.

  	
   

  	
  Nature and Extent
  of Each Borrower’s Liability

  	
  47

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.

  	
   

  	
  CONDITIONS PRECEDENT

  	
  50

  
	
  6.1.

  	
   

  	
  Conditions Precedent
  to Initial Loans

  	
  50

  
	
  6.2.

  	
   

  	
  Conditions
  Precedent to All Credit Extensions

  	
  51

  
	
  6.3.

  	
   

  	
  Limited Waiver of
  Conditions Precedent

  	
  51

  

 

i

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.

  	
   

  	
  COLLATERAL

  	
  52

  
	
  7.1.

  	
   

  	
  Grant of Security
  Interest

  	
  52

  
	
  7.2.

  	
   

  	
  Lien on Deposit
  Accounts; Cash Collateral

  	
  53

  
	
  7.3.

  	
   

  	
  Real Estate
  Collateral

  	
  53

  
	
  7.4.

  	
   

  	
  Other Collateral

  	
  53

  
	
  7.5.

  	
   

  	
  No Assumption of
  Liability

  	
  54

  
	
  7.6.

  	
   

  	
  Further Assurances

  	
  54

  
	
  7.7.

  	
   

  	
  Foreign Subsidiary
  Stock

  	
  54

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 8.

  	
   

  	
  COLLATERAL ADMINISTRATION

  	
  54

  
	
  8.1.

  	
   

  	
  Borrowing Base
  Certificates

  	
  54

  
	
  8.2.

  	
   

  	
  Administration of
  Eligible Accounts

  	
  55

  
	
  8.3.

  	
   

  	
  Administration of
  Inventory

  	
  56

  
	
  8.4.

  	
   

  	
  Administration of
  Equipment

  	
  57

  
	
  8.5.

  	
   

  	
  Administration of
  Deposit Accounts.

  	
  58

  
	
  8.6.

  	
   

  	
  General Provisions

  	
  58

  
	
  8.7.

  	
   

  	
  Power of Attorney

  	
  59

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 9.

  	
   

  	
  REPRESENTATIONS AND WARRANTIES

  	
  60

  
	
  9.1.

  	
   

  	
  General
  Representations and Warranties

  	
  60

  
	
  9.2.

  	
   

  	
  Complete Disclosure

  	
  65

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.

  	
   

  	
  COVENANTS AND CONTINUING AGREEMENTS

  	
  66

  
	
  10.1.

  	
   

  	
  Affirmative
  Covenants

  	
  66

  
	
  10.2.

  	
   

  	
  Negative Covenants

  	
  69

  
	
  10.3.

  	
   

  	
  Consolidated Fixed
  Charge Coverage Ratio.

  	
  76

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 11.

  	
   

  	
  EVENTS OF DEFAULT; REMEDIES ON DEFAULT

  	
  76

  
	
  11.1.

  	
   

  	
  Events of Default

  	
  76

  
	
  11.2.

  	
   

  	
  Remedies upon
  Default

  	
  78

  
	
  11.3.

  	
   

  	
  License

  	
  79

  
	
  11.4.

  	
   

  	
  Setoff

  	
  79

  
	
  11.5.

  	
   

  	
  Remedies
  Cumulative; No Waiver

  	
  79

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 12.

  	
   

  	
  AGENT

  	
  80

  
	
  12.1.

  	
   

  	
  Appointment,
  Authority and Duties of Agent

  	
  80

  
	
  12.2.

  	
   

  	
  Agreements
  Regarding Collateral and Field Examination Reports

  	
  81

  
	
  12.3.

  	
   

  	
  Reliance By Agent

  	
  82

  
	
  12.4.

  	
   

  	
  Action Upon Default

  	
  82

  
	
  12.5.

  	
   

  	
  Ratable Sharing

  	
  83

  
	
  12.6.

  	
   

  	
  Indemnification of
  Agent Indemnitees

  	
  83

  
	
  12.7.

  	
   

  	
  Limitation on
  Responsibilities of Agent

  	
  84

  
	
  12.8.

  	
   

  	
  Successor Agent and
  Co-Agents

  	
  84

  
	
  12.9.

  	
   

  	
  Due Diligence and
  Non-Reliance

  	
  85

  
	
  12.10.

  	
   

  	
  Replacement of
  Certain Lenders

  	
  85

  
	
  12.11.

  	
   

  	
  Remittance of
  Payments and Collections

  	
  86

  

 

ii

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  12.12.

  	
   

  	
  Agent in its
  Individual Capacity

  	
  86

  
	
  12.13.

  	
   

  	
  Syndication Agent

  	
  87

  
	
  12.14.

  	
   

  	
  No Third Party
  Beneficiaries

  	
  87

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 13.

  	
   

  	
  BENEFIT OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS

  	
  87

  
	
  13.1.

  	
   

  	
  Successors and
  Assigns

  	
  87

  
	
  13.2.

  	
   

  	
  Participations

  	
  87

  
	
  13.3.

  	
   

  	
  Assignments

  	
  88

  
	
  13.4.

  	
   

  	
  Tax Treatment

  	
  88

  
	
  13.5.

  	
   

  	
  Representation of
  Lenders

  	
  89

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 14.

  	
   

  	
  MISCELLANEOUS

  	
  89

  
	
  14.1.

  	
   

  	
  Consents,
  Amendments and Waivers

  	
  89

  
	
  14.2.

  	
   

  	
  General Indemnity

  	
  91

  
	
  14.3.

  	
   

  	
  Limitations of
  Indemnities

  	
  91

  
	
  14.4.

  	
   

  	
  Notices and
  Communications

  	
  91

  
	
  14.5.

  	
   

  	
  Performance of
  Borrowers’ Obligations

  	
  92

  
	
  14.6.

  	
   

  	
  Credit Inquiries

  	
  92

  
	
  14.7.

  	
   

  	
  Severability

  	
  92

  
	
  14.8.

  	
   

  	
  Cumulative Effect;
  Conflict of Terms

  	
  92

  
	
  14.9.

  	
   

  	
  Counterparts;
  Facsimile Signatures

  	
  93

  
	
  14.10.

  	
   

  	
  Entire Agreement

  	
  93

  
	
  14.11.

  	
   

  	
  Obligations of
  Lenders

  	
  93

  
	
  14.12.

  	
   

  	
  Confidentiality

  	
  93

  
	
  14.13.

  	
   

  	
  Certifications
  Regarding Indentures

  	
  94

  
	
  14.14.

  	
   

  	
  Governing Law

  	
  94

  
	
  14.15.

  	
   

  	
  Consent to Forum

  	
  94

  
	
  14.16.

  	
   

  	
  Waivers by
  Borrowers

  	
  94

  
	
  14.17.

  	
   

  	
  Patriot Act Notice

  	
  95

  
	
  14.18.

  	
   

  	
  JV Europe

  	
  95

  

 

iii

 

AMENDED AND
RESTATED 

LOAN AND SECURITY AGREEMENT

 

THIS AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT is dated as of April 14, 2006, among SUPERIOR ESSEX COMMUNICATIONS LP, a
Delaware limited partnership (“Communications”), ESSEX GROUP, INC., a Michigan
corporation (“Essex”, and together with Communications,
collectively, “Borrowers”), the financial institutions party to this
Agreement from time to time as lenders (collectively, “Lenders”), and BANK OF AMERICA, N.A., a national banking association, as
agent for the Lenders (“Agent”).

 

R E C I T A
L S:

 

Each Borrower has requested
that Lenders make available a revolving credit facility to Borrowers, which
shall be used by Borrowers to finance their mutual and collective business
enterprise.  In order to utilize the
financial powers of each Borrower in the most efficient and economical manner,
and in order to facilitate the financing of each Borrower’s needs, Lenders
will, at the request of Borrower Agent, make loans to all Borrowers under the
revolving credit facility on a combined basis and in accordance with the
provisions hereinafter set forth. 
Borrowers’ business is a mutual and collective enterprise and Borrowers
believe that the consolidation of all revolving credit loans under this
Agreement will enhance the aggregate borrowing powers of each Borrower and ease
the administration of their revolving credit loan relationship with Lenders,
all to the mutual advantage of Borrowers. 
Lenders’ willingness to extend credit to Borrowers and to administer
each Borrower’s collateral security therefor, on a combined and joint and
several basis as more fully set forth in this Agreement, is done solely as an
accommodation to Borrowers and at Borrowers’ request in furtherance of
Borrowers’ mutual and collective enterprise.

 

Each Borrower has agreed to guarantee the obligations of each of the
other Borrowers under this Agreement and each of the other Loan Documents.

 

Borrowers,
Agents, Lenders and the other parties named therein were parties to a certain
Credit Agreement dated November 10, 2003 (as amended from time to time prior to
the date hereof, the “Original Credit Agreement”), pursuant to which
Lenders made certain revolving credit loans, letters of credit, and other
financial accommodations to Borrowers.

 

The parties to
the Original Credit Agreement have requested that the Original Credit Agreement
be amended and restated in its entirety to become effective and binding on
Borrowers pursuant to the terms hereof, and Agent and Lenders have agreed,
subject to the terms of this Agreement, to amend and restate the Original
Credit Agreement in its entirety to read as set forth herein, and it has been
agreed by the parties hereto that (a) the commitments which the Lenders that
are parties hereto extended to the Borrowers under the Original Credit
Agreement shall be extended or advanced upon the amended and restated terms and
conditions contained in this Agreement and (b) the Loans and other Obligations
outstanding under the Original Credit Agreement shall be governed by and deemed
to be outstanding under the amended and restated terms and conditions contained
herein.

 

 

All existing
Obligations are and shall continue to be (and all Obligations incurred pursuant
hereto shall be) secured by, among other things, the Security Documents and the
other Loan Documents and shall be guaranteed pursuant to the Guaranties, and

 

NOW,
THEREFORE, the parties hereto hereby agree to amend and restate the Original
Credit Agreement and the Original Credit Agreement is hereby amended and
restated, in its entirety as follows:

 

NOW, THEREFORE, for
valuable consideration hereby acknowledged, the parties agree as follows:

 

Section 1.              DEFINITIONS; RULES OF CONSTRUCTION

 

1.1.         Definitions As used herein, the following terms have the
meanings set forth below:

 

Account - as defined in the UCC, including all
rights to payment for goods sold or leased, or for services rendered.

 

Account Debtor - a Person who is obligated
under an Account, Chattel Paper or General Intangible.

 

Accounts
Formula Amount - 85%
of the net amount of Eligible Accounts.  “Net amount” means the face amount of
an Account, minus any returns, rebates, discounts (which may, at Agent’s
option, be calculated on the shortest terms then being offered by the
applicable Borrower), credits, allowances or Taxes (including sales, excise or
other taxes but excluding income or franchise taxes of the Account Debtor) that
have been or could be claimed by the Account Debtor or any other Person.

 

Adjusted LIBOR - for any Interest Period, with
respect to LIBOR Loans, the per annum rate of interest determined pursuant to
the following formula:

 

	
   

  	
  Offshore Base Rate

  
	
  LIBOR   =

  	
  1.00 - Eurodollar Reserve Percentage

  

 

Where,

 

“Offshore
Base Rate” means the rate per annum (rounded upward, if necessary, to the
nearest 1/8th of 1%) appearing on Telerate Page 3750, or if such
page is unavailable, the Reuters Screen LIBO Page (or any successor page of
either, as applicable), as the London interbank offered rate for deposits in
Dollars at approximately 11:00 a.m. (London time) two (2) Business Days prior
to the first day of such Interest Period for a term comparable to such Interest
Period; provided, however, if the Reuters Screen LIBO Page is used and more than one
rate is shown on such page, the applicable rate shall be the arithmetic mean
thereof.  If for any reason none of the
foregoing rates is available, the Offshore Base Rate shall be the rate per
annum determined by Agent as the rate of interest at which Dollar deposits in
the approximate amount of the applicable LIBOR Loan would be offered to major
banks in the offshore Dollar market at or about 11:00 

 

2

 

a.m. (London time) two (2) Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period.

 

“Eurodollar
Reserve Percentage” means the reserve percentage (expressed as a decimal,
rounded upward to the next 1/16th of 1%) applicable to member banks under
regulations issued from time to time by the Board of Governors for determining
the maximum reserve requirement (including any emergency, supplemental or other
marginal reserve requirement) with respect to Eurocurrency funding (currently
referred to as “Eurocurrency liabilities”).

 

Adjusted Net Earnings - determined for any
fiscal period, on a Consolidated basis in accordance with GAAP for Borrowers
and Subsidiaries, means net earnings (or loss) for such period, excluding,
without duplication (a) any gain or loss arising from the sale of capital
assets; (b) any gain arising from write-up of assets; (c) earnings of any
entity (other than a Subsidiary) in which a Borrower has an ownership interest
unless such earnings have actually been received by such Borrower in the form
of cash Distributions; (d) any earnings of a Subsidiary that for any reason are
unavailable for payment of Distributions to a Borrower; (e) earnings of any
Person to which assets of a Borrower have been sold or transferred, or with
which a Borrower has merged, consolidated or otherwise combined, prior to the
date of such transaction (excluding any transfers, mergers or consolidations
among members of the Consolidated Group); (f) any gain arising from the
acquisition of Equity Interests of a Borrower; and (g) any gain arising from
extraordinary or non-recurring items.

 

Affiliate - with respect to any Person,
another Person (a) who directly, or indirectly through one or more
intermediaries, controls, is controlled by or is under common control with such
first Person; (b) who beneficially owns 10% or more of the voting securities or
any class of Equity Interests of such first Person; (c) at least 10% of whose
voting securities or any class of Equity Interests is beneficially owned,
directly or indirectly, by such first Person; or (d) who is an officer,
director, partner or managing member of such first Person.  “Control” means the possession,
directly or indirectly, of the power to direct or cause direction of the
management and policies of a Person, whether through ownership of Equity
Interests, by contract or otherwise. Notwithstanding the foregoing, no Lender
shall be deemed to be an “Affiliate” of any Borrower.

 

Agent Indemnitees - Agent and its officers, directors,
employees, Affiliates, agents and attorneys.

 

Agent Professionals - attorneys, accountants,
appraisers, auditors, business valuation experts, environmental engineers or
consultants, turnaround consultants, and other professionals and experts retained
by Agent.

 

Allocable Amount - as defined in Section 5.10.3.

 

Anti-Terrorism Laws - any laws relating to
terrorism or money laundering, including the Patriot Act.

 

Applicable Law - all laws, rules and
regulations applicable to the Person, conduct, transaction, material agreement
or matter in question, including all applicable statutory law,

 

3

 

common law and equitable principles, and all
provisions of constitutions, treaties, statutes, rules, regulations, orders and
decrees of Governmental Authorities.

 

Applicable Margin - with respect to any Type
of Loan, the margin set forth below, as determined by the Average Availability
of the Borrowers for the last Fiscal Quarter:

 

	
  Level

  	
   

  	
  Average Availability

  	
   

  	
  Base Rate 

  Revolver Loans

  	
   

  	
  LIBOR Revolver

  Loans

  	
   

  	
  Unused Line Fee

  	
   

  
	
  I

  	
   

  	
  < $35,000,000

  	
   

  	
  0.75

  	
  %

  	
  2.00

  	
  %

  	
  0.25

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  II

  	
   

  	
  > $35,000,000 but

  < $70,000,000

  	
   

  	
  0.50

  	
  %

  	
  1.75

  	
  %

  	
  0.25

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  III

  	
   

  	
  > $70,000,000 but

  < $105,000,000

  	
   

  	
  0.25

  	
  %

  	
  1.50

  	
  %

  	
  0.25

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  IV

  	
   

  	
  > $105,000,000 but

  < $140,000,000

  	
   

  	
  0.00

  	
  %

  	
  1.25

  	
  %

  	
  0.25

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  V

  	
   

  	
  > $140,000,000

  	
   

  	
  0.00

  	
  %

  	
  1.00

  	
  %

  	
  0.25

  	
  %

  

 

The margins shall be subject to increase or decrease upon receipt by
Agent of the Borrowing Base Certificates for the last applicable Fiscal
Quarter, which change shall be effective on the first Business Day of the
calendar month following receipt.Any increase or decrease in the Applicable
Margin provided for herein shall be effective three (3) Business Days after the
end of each Fiscal Quarter of Borrowers.

 

Approved Fund - any Person (other than a
natural person) that is engaged in making, holding or investing in extensions
of credit in its ordinary course of business and is administered or managed by
a Lender, an entity that administers or manages a Lender, or an Affiliate of
either.

 

Asset Disposition - a sale, lease, license,
consignment, transfer or other disposition of Property of an Obligor, including
a termination of rights of an Obligor under any lease, license or other
contract, or a disposition of Property in connection with a sale-leaseback
transaction or synthetic lease.

 

Assignment and Acceptance - an assignment
agreement between a Lender and Eligible Assignee, in the form of Exhibit F.

 

Availability - determined as of any date, the
amount that Borrowers are entitled to borrow as Revolver Loans, being the
Borrowing Base minus the principal balance of all Revolver Loans.

 

Availability Condition – maintenance by
Borrowers of Availability of no less than $30,000,000 at all times for the
ninety (90) consecutive day period preceding any calculation date and after
giving effect to any proposed transaction in connection with which Availability
of Borrowers is being tested.

 

4

 

Availability Reserve - on any date of
determination thereof, an amount equal to the sum of the following (without
duplication): (i) an amount equal to the product of the then applicable
Inventory advance rate percentage (as set forth in the definition of “Inventory
Formula Amount”) multiplied by the sum of (1) the Inventory Reserve, (2)
the Toll/Price Adjustment Reserve and (3) the Forward Revaluation Reserve; (ii) the Rent Reserve and all
amounts of past due rent, fees or other charges owing at such time by any
Obligor to any landlord of any premises where any of the Inventory is located
or to any processor, repairman, mechanic or other Person who is in possession
of any Inventory or has asserted any Lien or claim thereto; (iii) any
amounts which any Obligor is obligated to pay pursuant to the provisions of any
of the Loan Documents that Agent or any Lender elects to pay for the account of
such Obligor in accordance with authority contained in any of the Loan
Documents; (iv) the
LC Reserve; (v) an amount equal to the product of the then
applicable Accounts advance rate percentage (as set forth in the definition of “Accounts
Formula Amount”) multiplied by the
sum of (1) all customer deposits or
other prepayments held by Borrowers, (2) all sales Taxes accrued and owing by
Borrowers and (3) all accrued discounts, rebates and allowances; (vi) the
aggregate amount of all liabilities and obligations that are
secured by Liens upon any of the Inventory that are senior in priority to Agent’s
Liens if such Liens are not Permitted Liens (provided that the
imposition of a reserve hereunder on account of such Liens shall not be deemed
a waiver of any Event of Default that may arise from the existence of such
Liens) or are Permitted Liens under Section 10.2.2(e)
of the Agreement; and (vii) the aggregate amount of reserves established by
Agent from time to time in its discretion in respect of Bank Products
Debt; and (viii) such additional reserves, in such amounts and with
respect to such matters, as Agent may elect to impose from time to time.
Notwithstanding anything in the immediately preceding sentence to the contrary,
no Availability Reserve shall be instituted with respect to clauses (i) or (v)
above to the extent that any such items are used as a basis for not classifying
an Account or any Inventory as an Eligible Account or as Eligible Inventory, as
the case may be.

 

Average Availability – for any period, an
amount obtained by adding the aggregate of the actual amount of Availability as
of the close of business each Business Day during such period (as determined in
good faith by Agent) and dividing such sum by the actual number of Business
Days elapsed in such period.

 

Bank of America - Bank of America, N.A., a national banking
association, and its successors and assigns.

 

Bank Product - any of the following products, services or
facilities extended to any Borrower or Subsidiary by any Lender or any of its Affiliates:
(a) Cash Management Services; (b) products under Hedging Agreements; (c)
commercial credit card and merchant card services; and (d) other banking
products or services as may be requested by any Borrower or Subsidiary, other
than Letters of Credit; provided,
however, that for any of the foregoing to be included as an “Obligation”
for purposes of a distribution under Section 5.5.1, the applicable Secured
Party and Obligor must have previously provided written notice to Agent of (i)
the existence of such Bank Product, (ii) the maximum dollar amount of
obligations arising thereunder to be included as a Bank Product Reserve (“Bank
Product Amount”), and (iii) the methodology to be used by such parties in
determining the Bank Product Debt owing from time to time.  The Bank Product Amount may be changed from
time to time upon written notice to Agent by the Secured Party and
Obligor.  No Bank Product Amount may be
established or

 

5

 

increased at any time that a Default or Event
of Default exists, or if a reserve in such amount would cause an Overadvance.

 

Bank Product Amount - as defined in the
definition of Bank Product.

 

Bank Product Debt - Debt and other obligations of an Obligor
relating to Bank Products.

 

Bankruptcy Code - Title 11 of the United States Code.

 

Base Rate - the rate of interest announced by Bank of America from time
to time as its prime rate.  Such rate is
a reference rate only and Bank of America may make loans or other extensions of
credit at, above or below it.  Any change
in the prime rate announced by Bank of America shall take effect at the opening
of business on the effective day specified in the public announcement of the
change.

 

Base Rate Loan - any Loan that bears interest
based on the Base Rate.

 

Base Rate Revolver Loan - a Revolver Loan that
bears interest based on the Base Rate.

 

Belden Equipment Locations - those locations
designated as “Belden Equipment Locations” on Schedule
8.6.1.

 

Board of Governors - the Board of Governors of
the Federal Reserve System.

 

Borrowed Money - with respect to any Obligor,
without duplication, its (a) Debt (excluding trade payables owing in the
Ordinary Course of Business) that (i) arises from the lending of money by any
Person to such Obligor, (ii) is evidenced by notes, drafts, bonds, debentures,
credit documents or similar instruments, (iii) accrues interest or is a type
upon which interest charges are customarily paid, or (iv) was issued or assumed
as full or partial payment for Property; (b) Capital Leases; (c) reimbursement
obligations with respect to letters of credit; and (d) guaranties of any Debt
of the foregoing types owing by another Person.

 

Borrower Agent - as defined in Section 4.4.

 

Borrowers’ 9% Senior Notes due 2012 - those 9%
Senior Notes due 2012 issued by Borrowers pursuant to that certain Indenture
dated as of April 14, 2004 among Borrowers, Parent, SEI, Essex International,
Inc. and certain Subsidiaries of Borrowers, with The Bank of New York, as
Trustee in the original principal amount of $257,100,000 and including any “Exchange
Notes” issued in connection therewith.

 

Borrowing - a group of Loans of one Type that
are made on the same day or are converted into Loans of one Type on the same
day.

 

Borrowing Base - on any date of determination,
an amount equal to the lesser of (a) the aggregate amount of Revolver
Commitments, minus the LC Reserve; or (b) the sum of the Accounts Formula Amount, plus
the Inventory Formula Amount, minus Availability Reserve.

 

6

 

Borrowing Base Certificate - a certificate, in
form and substance satisfactory to Agent (which certificate shall be
substantially consistent with certificates required by Agent from its other
customers in the same or similar business as Borrowers (other than changes
necessary due to Borrowers’ specific business operations)), by which Borrowers
certify calculation of the Borrowing Base.

 

Brownwood Lease - the Lease Agreement, dated
as of December 16, 1993, as amended, between Communications (f/k/a
Superior Telecommunications Inc.) and ST (TX) LP.

 

Business Day - any day (a) excluding Saturday,
Sunday and any other day on which banks are permitted to be closed under the
laws of the State of Georgia or the State of North Carolina; and (b) when used
with reference to a LIBOR Loan, also excluding any day on which banks do not
conduct dealings in Dollar deposits on the London interbank market.

 

Capital Adequacy Regulation - any law, rule,
regulation, guideline, request or directive of any central bank or other
Governmental Authority, whether or not having the force of law, regarding
capital adequacy of a bank or any Person controlling a bank.

 

Capital Expenditures - expenditures made by a
Borrower or Subsidiary for the acquisition of any fixed assets, or any
improvements, replacements, substitutions or additions thereto which are
required to be capitalized for financial reporting purposes in accordance with
GAAP.

 

Capital Lease - any lease that is required to
be capitalized for financial reporting purposes in accordance with GAAP.

 

Cash Collateral – cash, or Cash Equivalents
and any interest or other income earned thereon, that is delivered to Agent to
Cash Collateralize any LC Obligations.

 

Cash Collateral Account - a demand deposit,
money market or other account established by Agent at such financial
institution as Agent may select in its discretion, which account shall be in
Agent’s name and subject to Agent’s Liens for the benefit of Secured Parties.

 

Cash Collateralize - the delivery of cash to
Agent, as security for the payment of Obligations, in an amount equal to (with
respect to LC Obligations), 105% of the aggregate LC Obligations.  “Cash Collateralization” has a
correlative meaning.

 

Cash Equivalents - (a) marketable obligations
issued or unconditionally guaranteed by, and backed by the full faith and
credit of, the United States government, maturing within 12 months of the date
of acquisition; (b) certificates of deposit, time deposits and bankers’
acceptances maturing within 12 months of the date of acquisition, and overnight
bank deposits, in each case which are issued by a commercial bank organized
under the laws of the United States or any state or district thereof, rated A-1
(or better) by S&P or P-1 (or better) by Moody’s at the time of
acquisition, and (unless issued by a Lender) not subject to offset rights; (c)
repurchase obligations with a term of not more than thirty (30) days for
underlying investments of the types described in clauses (a) and (b) entered
into with any financial institution meeting the qualifications specified in
clause (b); (d) commercial paper rated A-1 (or better) by S&P or P-1 (or
better) by Moody’s, and maturing within nine months of the date of acquisition;
and (e) shares of any money market fund that has substantially all of its
assets invested continuously in

 

7

 

the types of investments referred to above, has net assets of at least
$500,000,000 and has the highest rating obtainable from either Moody’s or
S&P.

 

Cash Management Services - any services
provided from time to time by Bank of America or its Affiliates or by other banking
or financial institutions, to any Borrower or Subsidiary in connection with
operating, collections, payroll, trust, or other depository or disbursement
accounts, including automatic clearinghouse, controlled disbursement,
depository, electronic funds transfer, information reporting, lockbox, stop
payment, overdraft and/or wire transfer services.

 

Catch Up Pension Contributions – any
contribution made by Borrowers to the Retirement Income Plan for Salaried
Employees of Essex Group, Inc. and the Retirement Plan for Hourly Employees of
Essex Group, Inc. over the amount of any contributions with respect to such
Plans shown as expenses in Borrowers’ income statements for such period and/or
calculated in Borrowers’ Consolidated net income for such period.

 

CERCLA - the Comprehensive Environmental
Response Compensation and Liability Act (42 U.S.C. § 9601 et  seq.).

 

Change of Control – the occurrence of any of
the following events after the date of this Agreement unless such event occurs
in connection with a transaction otherwise permitted under this Agreement:  (a) SEI ceases to own and control,
beneficially and of record, directly or indirectly, 100% of the common stock of
Parent; (b) Parent and Essex International, Inc. cease to own and control,
beneficially and of record, 100% of the common stock of the Borrowers; (c)
Essex shall cease to own 100% of any of its now existing and wholly-owned
Subsidiaries (other than as a result of the merger of any such Subsidiary with
Essex and/or any Subsidiary Guarantor); or (d) any “Change of Control”, “Change
in Control” or similar event or circumstance, however defined or designated
under the Indenture for the Borrowers’ 9% Senior Notes due 2012.

 

Chattel Paper - as defined in the UCC.

 

China Investment - Investments, loans, advances,
guarantees, capital contributions, sales or transfers of Property, made
directly or indirectly, without duplication, by one or more Borrowers in
connection with the development, construction and operation of a magnet wire,
distribution and related businesses in China in an amount up to $30,000,000
(excluding from such $30,000,000 limit Investments made at a time when
Borrowers satisfied the Availability Condition and no Event of Default
existed).

 

Claims - all liabilities, obligations, losses,
damages, penalties, judgments, proceedings, costs and expenses of any kind
(including remedial response costs, reasonable attorneys’ fees and
Extraordinary Expenses) at any time (including after Full Payment of the
Obligations, resignation or replacement of Agent, or replacement of any Lender)
incurred by or asserted against any Indemnitee in any way relating to (a) any
Loan Documents or transactions relating thereto, (b) any action taken or
omitted to be taken by any Indemnitee in connection with any Loan Documents,
(c) the existence or perfection of any Liens, or realization upon any
Collateral, (d) exercise of any rights or remedies under any Loan Documents or
Applicable Law, or (e) failure by any Obligor to perform or observe any terms
of any Loan Document, in each case including all costs and expenses relating to
any investigation, litigation, arbitration or other

 

8

 

proceeding (including an Insolvency Proceeding or appellate
proceedings), whether or not the applicable Indemnitee is a party thereto.

 

Closing Date - as defined in Section 6.1.

 

Collateral - all Property described in Section 7.1, all Property described in any
Security Documents as security for any Obligations, and all other Property that
now or hereafter secures (or is intended to secure) any Obligations.

 

Commercial Tort Claim - as defined in the UCC.

 

Commitment - for any Lender, the aggregate
amount of such Lender’s Revolver Commitment. 
“Commitments” means the aggregate amount of all Revolver Commitments.

 

Commitment Termination Date - the earliest to
occur of (a) the Revolver Termination Date; (b) the date on which Borrowers or
Agent terminate the Revolver Commitments pursuant to Section 2.1.4; or (c) the date on which the Revolver
Commitments are terminated pursuant to Section
11.2.

 

Compliance Certificate - a Compliance
Certificate to be provided by Borrowers to Agent pursuant to this Agreement, in
the form of Exhibit C, and all
supporting schedules

 

Consigned Inventory - Inventory of a Borrower that is in the
possession of another Person on a consignment or other basis that does not
constitute a final sale and acceptance of such Inventory.

 

Consigned Inventory Conditions - the following
conditions:  (i) the Inventory is
owned by a Borrower, (ii) the Inventory has been consigned to an Eligible
Consignee, (iii) the Inventory is located in the United States or Canada
(other than the Province of Quebec), and (iv) the Inventory would otherwise
constitute Eligible Inventory if it were not Consigned Inventory.

 

Consolidated – consolidated in accordance with
GAAP, but excluding to the extent consolidated under GAAP, SE Holding and its
Subsidiaries.

 

Consolidated EBITDA – for the Borrowers on a
Consolidated Basis, an amount equal to the sum for any fiscal period of (i)
Adjusted Net Earnings plus without duplication (ii) provision for Taxes
based on income plus (iii) Consolidated interest expense, plus
(iv) depreciation and amortization plus (v) other non-cash expenses
(including non-cash compensation relating to restricted stock, stock-option
grants and other equity awards) and any amounts deducted as a result of the
amortization of any one-time fees or expenses incurred in connection with the
initial incurrence of the Obligations on the Closing Date, plus (vi) any
amount deducted from earnings in respect of dividends in such period (whether
paid or accrued) on preferred Stock pursuant to Financial Accounting Standard
No. 150, plus (vii) to the extent deducted in determining Adjusted Net
Earnings, any non-recurring charge or restructuring charge in connection with
the implementation of the Plan of Reorganization (including, without
limitation, (1) all fees and expenses incurred in connection with the
execution, delivery and performance of the Indenture for the Borrowers’ 9%
Senior Notes due 2012; (2) payments made to Rothschild Inc. in its capacity as
financial advisor to the Debtors; and (3) all other reorganization and
restructuring costs and expenses incurred.

 

9

 

Consolidated Fixed Charge Coverage Ratio -
with respect to any period, the ratio of (a) the amount for any fiscal
period of (i) Consolidated EBITDA for such period minus (ii) Capital
Expenditures made during such period (and not financed by Debt other than the
Loans or equity) minus (iii) Taxes paid in cash during such period minus
(iv) Catch Up Pension Contributions made during such period minus (v) any Distribution by any Borrower
directly or indirectly to Parent the proceeds of which are used by Parent to
make payment of dividends with respect to the Parent Preferred Stock minus
(vi) Included Investments, if any, during such period, to (b) all
scheduled principal and cash interest payments on Money Borrowed for such
period (excluding any prepayments of Revolver Loans which do not result in a
permanent reduction of the Revolver Commitment).

 

Contingent Obligation - any obligation of a
Person arising from a guaranty (excluding guarantees of performance), indemnity
or other assurance of payment or performance of any Debt, lease, dividend or
other obligation (“primary obligations”)
of another obligor (“primary obligor”)
in any manner, whether directly or indirectly, including any obligation of such
Person under any (a) guaranty, endorsement, co-making or sale with recourse of
an obligation of a primary obligor; (b) obligation to make take-or-pay or
similar payments regardless of nonperformance by any other party to an
agreement; and (c) arrangement (i) to purchase any primary obligation or
security therefor, (ii) to supply funds for the purchase or payment of any
primary obligation, (iii) to maintain or assure working capital, equity
capital, net worth or solvency of the primary obligor, (iv) to purchase
Property or services for the purpose of assuring the ability of the primary
obligor to perform a primary obligation, or (v) otherwise to assure or hold
harmless the holder of any primary obligation against loss in respect thereof; provided,
however, that the term “Contingent Obligation” shall not include
(i) any product warranties extended in the Ordinary Course of Business, (ii)
indemnities made to officers and directors of any such Person whether pursuant
to the governing organizational documents of such Person or otherwise, and
(iii) any environmental indemnities identified on Schedule 9.1.15.  The
amount of any Contingent Obligation shall be deemed to be the stated or
determinable amount of the primary obligation (or, if less, the maximum amount
for which such Person may be liable under the instrument evidencing the
Contingent Obligation) or, if not stated or determinable, the maximum
reasonably anticipated liability with respect thereto (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.

 

Contribution Agreement - that certain Contribution and Formation
Agreement, dated July 27, 2005, between Essex, Nexans and the other parties
named therein, together with any exhibits thereto.

 

Credit Judgment - Agent’s judgment exercised
in a manner consistent with its customary practices or otherwise in good faith,
based upon its consideration of any factor that it reasonably believes (a)
could adversely affect the quantity, quality, mix or value of Collateral
(including any Applicable Law that may inhibit collection of an Account), the
enforceability or priority of Agent’s Liens, or the amount that Agent and
Lenders could receive in liquidation of any Collateral; (b) suggests that any
collateral report or financial information delivered by any Obligor is
incomplete, inaccurate or misleading in any material respect; (c) materially
increases the likelihood of any Insolvency Proceeding involving an Obligor; or
(d) creates or could result in a Default or Event of Default.  In exercising such judgment, Agent may
consider factors already included in the definitions of Eligible Accounts or
Eligible Inventory, as well as the financial and business climate of Borrowers’
industry, changes in collection history and dilution

 

10

 

of Accounts, changes in demand for and pricing of Inventory, changes in
concentration risks, and any factors that could materially increase the credit
risk of lending to Borrowers on the security of the Collateral.

 

Customer Contract Inventory – Inventory of
another Person at any time in the possession of any Borrower for processing,
repairing or otherwise.

 

CWA - the Clean Water Act (33 U.S.C. §§ 1251 et
seq.).

 

Debt - as applied to any Person, without
duplication, (a) all items that would be included as liabilities on a balance
sheet in accordance with GAAP, including Capital Leases but excluding trade
payables incurred and being paid in the Ordinary Course of Business; (b) all
Contingent Obligations; (c) all reimbursement obligations in connection with
letters of credit issued for the account of such Person; and (d) in the case of
a Borrower, the Obligations.  The Debt of
a Person shall include any recourse Debt of any partnership in which such
Person is a general partner or joint venturer.

 

Debtor – each of Superior TeleCom, Inc.,
Superior Telecommunications Inc., Superior Telecommunications Realty Company,
Essex International Inc., Essex, Superior Essex Realty Company, Active
Industries, Inc., Diamond Wire & Cable Co., Essex Funding, Inc., Essex
Services, Inc., Essex Canada, Inc., Essex Technology, Inc., Essex Wire
Corporation, Essex Group Mexico Inc. and Essex Mexico Holdings, L.L.C., and,
collectively “Debtors”.

 

Default - an event or condition that, with the
lapse of time or giving of notice, would constitute an Event of Default.

 

Default Rate - for any Obligation (including,
to the extent permitted by law, interest not paid when due), 2% plus the
interest rate otherwise applicable thereto.

 

Delphi – means the domestic subsidiaries of
Delphi Corporation.

 

Deposit Account - as defined in the UCC.

 

Deposit Account Control Agreements - the
Deposit Account control agreements to be executed by each depository
institution of a Borrower in favor of Agent, for the benefit of Secured
Parties, as security for the Obligations.

 

Designated Account - a deposit account of
Borrowers established with Agent or an Affiliate of Agent, into which Agent
shall fund Loans hereunder.

 

Distribution - any declaration or payment of a
distribution, interest or dividend on any Equity Interest (other than
payment-in-kind); any distribution, advance or repayment of Debt to a holder of
Equity Interests; or any purchase, redemption, or other acquisition or
retirement for value of any Equity Interest unless (x) made substantially contemporaneously from the net
proceeds of the sale of Equity Interests or (y) such purchase, redemption
or other acquisition or retirement was effected solely by the exchange of other
Equity Interests therefor.

 

Document - as defined in the UCC.

 

11

 

Dollars - lawful money of the United States of
America.

 

Domestic Subsidiary – a Subsidiary (other than
a Subsidiary that is a Borrower or IP Licensing) that is incorporated under the
laws of a state of the United States or the District of Columbia.

 

Eligible Account - an Account owing to a
Borrower that arises in the Ordinary Course of Business from the sale of goods, is payable in
Dollars and is deemed by Agent, in its Credit Judgment, to be an Eligible
Account.  Without limiting the foregoing,
no Account shall be an Eligible Account if (a) it is unpaid for more than sixty
(60) days
after the original due date, or more than one hundred twenty (120) days after the
original invoice date; (b) 50% or more of the Accounts owing by the Account Debtor
are not Eligible Accounts under the foregoing clause; (c) when aggregated with
other Accounts owing by the Account Debtor, it exceeds 20% of the aggregate Eligible Accounts (or
such higher percentage as Agent may establish for the Account Debtor from time
to time); (d) any covenant, representation or warranty in this Agreement with
respect to such Account has been breached; (e) it is owing by a creditor or
supplier, or is otherwise subject to a potential offset, counterclaim, dispute,
deduction, discount, recoupment, reserve, defense, chargeback, credit or
allowance (but ineligibility shall be limited to the amount thereof); (f) an
Insolvency Proceeding has been commenced by or against the Account Debtor
(excluding Delphi to the extent such Account arises post-petition and would
otherwise constitute an Eligible Account hereunder); or the Account Debtor has
failed, has suspended or ceased doing business, is liquidating, dissolving or
winding up its affairs, or is not Solvent; (g) the Account Debtor is organized
or has its principal offices or assets outside the United States, Canada or
Puerto Rico, unless the sale is backed
(A) by an irrevocable letter of credit issued or confirmed by a bank
acceptable to Agent and that is in form and substance acceptable to Agent and
payable in the full amount of the Account in freely convertible Dollars at a
place of payment within the United States and, if requested by Agent, such
letter of credit, or amounts payable thereunder, is assigned to Agent (with
such assignment acknowledged by the issuing or confirming bank) or (B) is
backed by credit insurance in form and substance acceptable to Agent and Agent
is named as sole loss payee with respect thereto; (h) it is owing by a
Government Authority, unless the Account Debtor is the United States of America
or any department, agency or instrumentality thereof and the Account has been
assigned to Agent in compliance with the Assignment of Claims Act; (i) it is
not subject to a duly perfected, first priority Lien in favor of Agent, or is
subject to any other Lien (except a Permitted Lien); (j) the goods giving rise
to it have not been delivered to and accepted by the Account Debtor, the
services giving rise to it have not been accepted by the Account Debtor, or it otherwise does not represent
a final sale; (k) it is evidenced by Chattel Paper or an Instrument of any kind
(unless such Chattel Paper or Instrument has been created in the Ordinary
Course of Business and not as a result of credit problems, has been delivered
to Agent fully endorsed, and is subject to a first priority perfected lien in
favor of Agent) or has been reduced to judgment; (l) its payment has been
extended, the Account Debtor has made a partial payment, or it arises from a
sale on a cash-on-delivery basis; (m) it arises from a sale to an Affiliate or
from a sale on a bill-and-hold, guaranteed sale, sale-or-return, sale-on-approval,
consignment (unless such Account arises from Eligible Inventory sold by an
Eligible Consignee to a third party purchaser), or other repurchase or return
basis; (n) it represents a progress billing or retainage; (o) it includes a
billing for interest, fees or late charges, but ineligibility shall be limited
to the extent of such billing; (p) it arises from a retail sale to a Person who
is purchasing for personal, family or household purposes; (q) the Account Debtor is located in any
state which imposes conditions on the right of a creditor to collect accounts

 

12

 

receivable
unless the applicable Borrower has either qualified to transact business in
such state as a foreign entity or filed a Notice of Business Activities Report
or other required report with the appropriate officials in those states for the
then current year; (r) the Account Debtor is located in a state in which
such Borrower is deemed to be doing business under the laws of such state and
which denies creditors access to its courts in the absence of qualification to
transact business in such state or of the filing of any reports with such
state, unless such Borrower has qualified as a foreign entity authorized to
transact business in such state or has filed all required reports; (s) the
Account is evidenced by a “memo”
or is otherwise the subject of memo billing; (t) such Borrower has made
any agreement with the Account Debtor for any deduction therefrom, except
for discounts or allowances which are made in the Ordinary Course of
Business for prompt payment and which discounts or allowances are reflected in
the calculation of the face value of each invoice related to such Account; or
(u) it arises from the sale of any Inventory that is not Eligible
Inventory pursuant to clause (b) of the definition of “Eligible Inventory.”

 

Eligible Assignee - a Person that is (a) a
Lender, U.S.-based Affiliate of a Lender or Approved Fund; (b) any other
financial institution approved by Agent and Borrower Agent (which approval by
Borrower Agent shall not be unreasonably withheld or delayed, and shall be deemed given if no objection is
made within five (5) Business Days after notice of the proposed assignment),
that is organized under the laws of the United States or any state or district
thereof, has total assets in excess of $5 billion, extends asset-based lending
facilities in its ordinary course of business and whose becoming an assignee
would not constitute a prohibited transaction under Section 4975 of ERISA or
any other Applicable Law; and (c) during any Event of Default, any Person
acceptable to Agent in its reasonable business judgment.

 

Eligible Consignee - a consignee which Agent,
in its reasonable Credit Judgment, deems to be an eligible consignee.  Without limiting the generality of the
foregoing, no consignee will be an Eligible Consignee unless:  (i) such consignee shall have executed a
consignment agreement, which permits assignment to Agent, granting the
applicable Borrower a security interest under the UCC or the PPSA, as
applicable, in all Consigned Inventory that is consigned by such Borrower to
such consignee; (ii) consignee and such Borrower shall have executed or
otherwise authorized the filing of financing statements under the UCC or the
PPSA, as applicable, based upon the requirements of the filing jurisdiction,
naming such consignee as debtor and such Borrower as secured party (and, if
requested by Agent, naming Agent as assignee), covering the Consigned
Inventory; such financing statement shall have been filed of record in all
appropriate filing locations for the perfection of a first priority security
interest in such Consigned Inventory and the identifiable proceeds thereof,
and, after filing of such financing statements, such Borrower shall have
conducted searches of all filings made against such consignee in such filing
offices and taken such other action as Agent may reasonably request, including
notification pursuant to Section 9-324 of the UCC (and similar applicable
provisions under the PPSA) to each holder of a conflicting Lien in such
Consigned Inventory, which shall confirm that the security interest in the
Consigned Inventory in favor of such Borrower that such Borrower has assigned
to Agent is and shall be a first priority Lien; 
(iii) if requested by Agent, Agent shall have received copies of
the consignment agreement, the filed financing statements under the UCC and the
PPSA, as applicable, and the UCC and the PPSA searches; and (v) the
creditworthiness of such consignee is acceptable to Agent, in Agent’s
reasonable credit judgment.

 

13

 

Eligible Inventory - Inventory owned by a
Borrower that Agent, in its Credit Judgment, deems to be Eligible Inventory.  Without limiting the foregoing, no Inventory
shall be Eligible Inventory unless it (a) is raw materials or finished goods or
work in process that is, in Agent’s reasonable Credit Judgment readily
marketable in its current form, and not raw materials, work-in-process,
packaging or shipping materials, labels, samples, display items, bags,
replacement parts or manufacturing supplies; (b) is not held on consignment
unless all Consigned Inventory Conditions have been satisfied with respect to
such Inventory and such Inventory is Permitted Consigned Inventory, nor subject
to any deposit, downpayment, guaranteed sale, sale-or-return, sale-on-approval
or repurchase arrangement; (c) is in saleable condition and is not damaged,
defective, shopworn or otherwise unfit for sale; (d) is not slow-moving,
obsolete or unmerchantable, and does not constitute returned or repossessed
goods; (e) meets all standards imposed by any Governmental Authority; (f)
conforms with the covenants and representations herein; (g) is subject to Agent’s
duly perfected, first priority Lien, and no other Lien except a Permitted Lien;
(h) is within the continental United States, Canada or Puerto Rico, is not in
transit except between locations of Borrowers, and is not consigned to any
Person other than an Eligible Consignee; (i) is not subject to any warehouse
receipt or negotiable Document; (j) is not subject to any License or other
arrangement that restricts such Borrower’s or Agent’s right to dispose of such
Inventory, unless Agent has received an appropriate
Lien Waiver; (k) is not located on leased premises or in the possession of a
warehouseman or processor unless the lessor, warehouseman or processor has delivered
a Lien Waiver or an appropriate Rent Reserve has been established; (l) is not
the subject of a store closing, liquidation, going-out-of business or similar
sale; (m) it does
not constitute Customer Contract Inventory or Toll Copper Inventory; (n) it
is in such Borrower’s possession and control, is not in transit or outside the
continental United States and is not consigned to any Person other than an
Eligible Consignee; (o) it has not been sold or leased and such Borrower
has not received any deposit or down payment in respect thereof in anticipation
of a sale;
and (p) it is not the subject of an Intellectual Property Claim.

 

Enforcement Action - any action to enforce any
Obligations or Loan Documents or to realize upon any Collateral (whether by judicial
action, self-help, notification of Account Debtors, exercise of setoff or
recoupment, or otherwise).

 

Environmental Laws - all Applicable Laws
(including all programs, permits and guidance promulgated by regulatory
agencies, to the extent having the force of law), relating to public health
(but excluding occupational safety and health, to the extent regulated by OSHA)
or the protection or pollution of the environment, including CERCLA, RCRA and
CWA.

 

Environmental Notice - a notice (whether
written or oral) from any Governmental Authority or other Person of any
possible noncompliance with, investigation of a possible violation of,
litigation relating to, or potential fine or liability under any Environmental
Law, or with respect to any Environmental Release, environmental pollution or
hazardous materials, including any complaint, summons, citation, order, claim,
demand or request for correction, remediation or otherwise.

 

Environmental Release - a release as defined
in CERCLA or under any other Environmental Law.

 

14

 

Equipment - as defined in the UCC, including
all machinery, apparatus, equipment, fittings, furniture, fixtures, motor
vehicles and other tangible personal Property (other than Inventory), and all
parts, accessories and special tools therefor, and accessions thereto.

 

Equity Interest - the interest of any (a)
shareholder in a corporation, (b) partner in a partnership (whether general,
limited, limited liability or joint venture), (c) member in a limited liability
company, or (d) other Person having any other form of equity security or
ownership interest.

 

ERISA - the Employee Retirement Income
Security Act of 1974 and all rules and regulations from time to time
promulgated thereunder.

 

Event of Default - as defined in Section 11.

 

Excluded
Tax - Tax on the overall net income or gross receipts of a Lender
imposed by the jurisdiction in which such Lender’s principal executive office
is located.

 

Extraordinary Expenses - all costs, expenses
or advances that Agent or any Lender may incur during an Event of Default, or
during the pendency of an Insolvency Proceeding of an Obligor, including those
relating to (a) any audit, inspection, repossession, storage, repair,
appraisal, insurance, manufacture, preparation or advertising for sale, sale,
collection, or other preservation of or realization upon any Collateral; (b)
any action, arbitration or other proceeding (whether instituted by or against
Agent, any Lender, any Obligor, any representative of creditors of an Obligor
or any other Person) in any way relating to any Collateral (including the
validity, perfection, priority or avoidability of Agent’s Liens with respect to
any Collateral), any Loan Documents, or the validity, allowance or amount of
any Obligations, including any lender liability or other Claims asserted
against Agent or any Lender; (c) the exercise, protection or enforcement of any
rights or remedies of Agent in, or the monitoring of, any Insolvency
Proceeding; (d) settlement or satisfaction of any taxes, charges or Liens with
respect to any Collateral; (e) any Enforcement Action; (f) negotiation and
documentation of any modification, waiver, workout, restructuring or
forbearance with respect to any Loan Documents or Obligations; or (g) Protective
Advances.  Such costs, expenses and
advances include transfer fees, taxes, storage fees, insurance costs, permit
fees, utility reservation and standby fees, legal fees, appraisal fees, brokers’
fees and commissions, auctioneers’ fees and commissions, accountants’ fees,
environmental study fees, wages and salaries paid to employees of any Obligor
or independent contractors in liquidating any Collateral, and travel expenses
but excluding compensation paid to employees (including inside legal counsel who
are employees) of Agent and any Lender.

 

Federal Funds Rate - a fluctuating interest
rate per annum equal to the weighted average of the rates on overnight federal
funds transactions among members of the Federal Reserve System arranged by
federal funds brokers, as published for the applicable day (or, if not a
Business Day, for the preceding Business Day) by the Federal Reserve Bank of
New York, or if such rate is not so published, the average of the quotations
for such day on such transactions received by Agent for three (3) federal funds
brokers of nationally recognized standing selected by Agent.

 

Fee Letter - the fee letter agreement, dated
on or about the Closing Date, between Agent and Borrowers.

 

15

 

Fiscal Quarter - each period of thirteen (13)
weeks, commencing on the first day of a Fiscal Year (and, in the case of any
Fiscal Year of fifty-three (53) weeks, the fourteen (14) week period occurring
at the end thereof.

 

Fiscal Year - the fiscal year of Borrowers and
Subsidiaries for accounting and tax purposes, ending on December 31 of each
year.

 

FLSA - the Fair Labor Standards Act of 1938.

 

Foreign Lender - any Lender that is organized
under the laws of a jurisdiction other than the laws of the United States, or
any state or district thereof.

 

Foreign Subsidiary - a Subsidiary that is not
a Domestic Subsidiary.

 

Forward Revaluation Amount - an amount equal
to any positive difference between the standard cost at which Borrowers
purchase copper Inventory and the actual cost paid for forward copper
contracts.

 

Forward Revaluation Reserve – a reserve equal
to the amount, if any, by which the Value of Borrowers’ Inventory consisting of
copper has been reduced by the Forward Revaluation Amount.

 

Full Payment - with respect to any Obligations
(other than any indemnification not due and payable when all of the Obligations
have been paid in full and the Commitments have been terminated), (a) the full
cash payment thereof, including all interest, fees and other charges under any
Loan Documents and including those accruing during an Insolvency Proceeding
(whether or not allowed in the proceeding); (b) if such Obligations are LC
Obligations or inchoate or contingent in nature, Cash Collateralization
thereof; and (c) a release of any Claims of Obligors against Agent, Lenders and
Issuing Bank arising on or before the payment date.  No Loans shall be deemed to have been paid in
full until all Commitments related to such Loans have expired or been
terminated.

 

GAAP - generally accepted accounting
principles in the United States of America in effect from time to time.

 

GECC – General Electric Capital Corporation, a
Delaware corporation.

 

General Intangibles - as defined in the UCC,
including choses in action, causes of action, company or other business
records, inventions, blueprints, designs, patents, patent applications,
trademarks, trademark applications, trade names, trade secrets, service marks,
goodwill, brand names, copyrights, registrations, licenses, franchises, customer
lists, permits, tax refund claims, computer programs, operational manuals,
internet addresses and domain names, insurance refunds and premium rebates, all
rights to indemnification, and all other intangible Property of any kind.

 

Goods - as defined in the UCC.

 

16

 

Governmental Approvals - all authorizations,
consents, approvals, licenses and exemptions of, registrations and filings
with, and required reports to, all Governmental Authorities.

 

Governmental Authority - any federal, state,
municipal, foreign or other governmental department, agency, commission, board,
bureau, court, tribunal, instrumentality, political subdivision, or other
entity or officer exercising executive, legislative, judicial, regulatory or
administrative functions for or pertaining to any government or court, in each
case whether associated with the United States, a state, district or territory
thereof, or a foreign entity or government.

 

Guarantor Payment - as defined in Section 5.10.3.

 

Guarantors – SEI, Parent, Essex International,
Inc., a Delaware corporation and each other Person who guarantees payment or
performance of any Obligations.

 

Guaranty - each guaranty agreement executed by
a Guarantor in favor of Agent.

 

Hedging Agreement - any transaction that
provides for an interest rate, foreign exchange, currency, commodity, credit or
equity swap, cap, floor, collar, option, forward, cross right or obligation, or
combination thereof, or any transaction of a similar nature, including Interest
Rate Contracts.

 

Included Investment – Investments, loans,
advances, guarantees, capital contributions, sales or transfers of Property,
made directly or indirectly, during any fiscal period in any Person by one or
more Borrowers in connection with the development, construction, and operation
of the Borrowers business in compliance with Section 10.2.15 hereof (other than
the JV Europe Investment and China Investment to the extent that the China
Investment is refinanced with the proceeds of Indebtedness incurred by a
subsidiary of SE Holding which is non-recourse to the Obligors and the net
proceeds of such refinancing is remitted to Agent for application to the
Obligations); provided that if the Average Availability for an
applicable period is greater than or equal to $50,000,000, the amount of such
investments shall be deemed to be $-0-.

 

Indemnitees - Agent Indemnitees, Lender
Indemnitees, Issuing Bank Indemnitees and Bank of America Indemnitees.

 

Insolvency Proceeding - any case or proceeding
commenced by or against a Person under any state, federal or foreign law for,
or any agreement of such Person to, (a) the entry of an order for relief under
the Bankruptcy Code, or any other insolvency, debtor relief or debt adjustment
law; (b) the appointment of a receiver, trustee, liquidator, administrator,
conservator or other custodian for such Person or any part of its Property; or
(c) an assignment or trust mortgage for the benefit of creditors.

 

Instrument - as defined in the UCC.

 

Insurance Assignment – each collateral
assignment of insurance pursuant to which an Obligor assigns to Agent, for the
benefit of Secured Parties, such Obligor’s rights under

 

17

 

business interruption or other insurance policies as Agent deems
appropriate, as security for the Obligations.

 

Intellectual Property - all intellectual and
similar Property of a Person, including inventions, designs, patents, patent
applications, copyrights, trademarks, service marks, trade names, trade
secrets, confidential or proprietary information, customer lists, know-how,
software and databases; all embodiments or fixations thereof and all related
documentation, registrations and franchises; all books and records describing
or used in connection with the foregoing; and all licenses or other rights to
use any of the foregoing.

 

Intellectual Property Claim - any material
claim or assertion (whether in writing, by suit or otherwise) that a Borrower’s
or Subsidiary’s ownership, use, marketing, sale or distribution of any
Inventory, Equipment, Intellectual Property or other Property violates another
Person’s Intellectual Property.

 

Interest Period - as defined in Section 3.1.3.

 

Interest Rate Contract - any interest rate
swap, collar or cap agreement, or other agreement or arrangement by any
Borrower or Subsidiary with a Lender that is designed to protect against
fluctuations in interest rates.

 

Inventory - as defined in the UCC, including
all goods intended for sale, lease, display or demonstration; all work in
process; and all raw materials, and other materials and supplies of any kind
that are or could be used in connection with the manufacture, printing,
packing, shipping, advertising, sale, lease or furnishing of such goods, or
otherwise used or consumed in a Borrower’s business (but excluding Equipment).

 

Inventory
Formula Amount - the lesser of (a) $110,000,000; or (b) the
lesser of 65% of the Value of Eligible Inventory or 85% of the NOLV Percentage
of the Value of Eligible Inventory.

 

Inventory Reserve - reserves established by
Agent in its reasonable Credit Judgment to reflect factors that may negatively
impact the Value of Inventory, including change in salability, obsolescence,
seasonality, theft, shrinkage, imbalance, change in composition or mix,
markdowns and vendor chargebacks.

 

Investment - any acquisition of all or
substantially all assets of a Person; any acquisition of record or beneficial
ownership of any Equity Interests of a Person; or any advance or capital
contribution to or other investment in a Person.

 

Investment Property - as defined in the UCC,
including all Securities (whether certificated or uncertificated), security
entitlements, securities accounts, commodity contracts and commodity accounts.

 

IP Licensing – IP Licensing LLC, a Delaware
limited liability company.

 

Issuing Bank - Bank of America or an Affiliate
of Bank of America.

 

18

 

Issuing Bank Indemnitees - Issuing Bank and
its officers, directors, employees, Affiliates, agents and attorneys.

 

JV Europe – Essex Nexans Europe SAS, a société
par actions simplifée organized under the laws of France.

 

JV Europe Investment – Investments, loans,
advances, guarantees, capital contributions, sales or transfers of Property,
made directly or indirectly, without duplication, in JV Europe (including such
investments through SE Holding) in the aggregate amount of (a) investments made
prior to the Closing Date, plus (b) any purchase price true up or
premium amount that may be due as a result of the EBITDA performance of JV
Europe in accordance with the terms of the Contribution Agreement not to exceed
$5,000,000 plus (c) any put and call obligations required pursuant to
the terms of the Contribution Agreement up to $25,000,000 (excluding from such
limits Investments made at a time when Borrowers satisfied the Availability
Condition and no Event of Default exists).

 

LC Application - an application by Borrower
Agent to Issuing Bank for issuance of a Letter of Credit, in form and substance
satisfactory to Issuing Bank.

 

LC Conditions - the following conditions
necessary for issuance of a Letter of Credit: (a) each of the conditions set
forth in Section 6; (b) after giving effect to
such issuance, total LC Obligations do not exceed $35,000,000, no Overadvance
exists and, if no Revolver Loans are outstanding, the LC Obligations do not
exceed the Borrowing Base (without giving effect to the LC Reserve for purposes
of this calculation); (c) the expiration date of such Letter of Credit is (i)
no more than three hundred sixty-five (365) days from issuance, in the case of
standby Letters of Credit, (ii) no more than one hundred fifty (150) days from
issuance, in the case of documentary Letters of Credit, and (iii) at least ten
(10) Business Days prior to the Revolver Termination Date; (d) the Letter of
Credit and payments thereunder are denominated in Dollars; and (e) the form of
the proposed Letter of Credit is satisfactory to Agent and Issuing Bank in
their discretion.

 

LC Documents - all documents, instruments and
agreements (including LC Requests and LC Applications) delivered by Borrowers
or any other Person to Issuing Bank or Agent in connection with issuance,
amendment or renewal of, or payment under, any Letter of Credit.

 

LC Obligations - the sum (without duplication)
of (a) all amounts owing by Borrowers for any drawings under Letters of Credit;
(b) the aggregate undrawn amount of all outstanding Letters of Credit; and (c)
all fees and other amounts owing with respect to Letters of Credit.

 

LC Request - a Letter of Credit Request from
Borrowers to Issuing Bank in the form of Exhibit D.

 

LC Reserve - the aggregate of all LC
Obligations, other than (a) those that have been Cash Collateralized, and (b)
if no Default or Event of Default exists, those constituting charges owing
solely to the Issuing Bank.

 

19

 

Lender Indemnitees - Lenders and their
officers, directors, employees, Affiliates, agents and attorneys.

 

Lenders - as defined in the preamble to this Agreement,
including Agent in its capacity as a provider of Swingline Loans and any other
Person who hereafter becomes a “Lender” pursuant to an Assignment and
Acceptance.

 

Letter of Credit - any standby or documentary
letter of credit issued by Issuing Bank for the account of a Borrower, or any
indemnity, guarantee, exposure transmittal memorandum or similar form of credit
support issued by Agent or Issuing Bank for the benefit of a Borrower .

 

Letter-of-Credit Right - as defined in the
UCC.

 

LIBOR Loan - each set of LIBOR Revolver Loans
having a common length and commencement of Interest Period.

 

LIBOR Revolver Loan - a Revolver Loan that
bears interest based on Adjusted LIBOR.

 

License - any material license or agreement
under which an Obligor is authorized to use Intellectual Property in connection
with any manufacture, marketing, distribution or disposition of any Eligible
Inventory, any use of Property or any other conduct of its business (excluding,
in any event, any “off the shelf”
Intellectual Property generally available to the public).

 

Licensor - any Person from whom an Obligor
obtains a License.

 

Lien - any Person’s interest in Property
securing an obligation owed to, or a claim by, such Person, whether such
interest is based on common law, statute or contract, including liens, security
interests, pledges, hypothecations, statutory trusts, reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases, and other title exceptions and encumbrances affecting Property but
excluding the interest of the owner of such Property.

 

Lien Waiver - an agreement, in form and
substance reasonably satisfactory to Agent, by which (a) for any material
Collateral located on leased premises, the lessor waives or subordinates any
Lien it may have on the Collateral, and agrees to permit Agent to enter upon
the premises and remove the Collateral or to use the premises to store or
dispose of the Collateral; (b) for any material Collateral held by a
warehouseman or processor, such Person waives or subordinates any Lien it may
have on the Collateral, and permits Agent to enter upon such premises and
remove such Inventory or to use the premises to store or dispose of the
Collateral; and (c) for any material Collateral held by a repairman, mechanic
or bailee, such Person acknowledges Agent’s Lien, waives or subordinates any
Lien it may have on the Collateral, and permit Agent to enter upon such
premises and remove such Collateral or to use the premises to store or dispose
of the Inventory.

 

Liquidity Condition – collectively, (i) the
Availability Condition and (ii) if Availability was less then $50,000,000 at
any time during the ninety (90) consecutive day period

 

20

 

preceding any calculation date and after giving effect to any proposed
transaction in connection with which Availability of Borrowers is being tested,
a Consolidated Fixed Charge Coverage Ratio of the Borrowers for the most
recently completed twelve fiscal month period of not less than 1.10 to 1.00
after giving effect to any proposed transaction in connection with which
Availability of Borrowers is being tested.

 

Loan - a Revolver Loan (and each Base Rate
loan or LIBOR loan comprising such loan).

 

Loan Account - the loan account established by
each Lender on its books pursuant to Section
5.7.

 

Loan Documents - this Agreement, Other
Agreements and Security Documents.

 

Loan Year - each calendar year commencing on
the Closing Date and each anniversary of the Closing Date.

 

Margin Stock - as defined in Regulation U of
the Board of Governors.

 

Material Adverse Effect - the effect of any
event or circumstance that, taken alone or in conjunction with other events or
circumstances, (a) has or could be reasonably expected to have a material
adverse effect on the business, operations, Properties or condition (financial
or otherwise) of any Borrower, individually or all of the Obligors, taken as a
whole, on the value of the Collateral taken as a whole, on the enforceability
of any Loan Documents, or on the validity or priority of Agent’s Liens on the
Collateral taken as a whole; (b) materially impairs the ability of any
Borrower, individually or all of the Obligors to perform any obligations under
the Loan Documents, including repayment of any Obligations; or (c) otherwise
materially impairs the ability of Agent or any Lender to enforce or collect any
Obligations or to realize upon any material Collateral.

 

Material Contract - any agreement or
arrangement to which a Borrower or Subsidiary is party (other than the Loan
Documents) for which breach, termination, nonperformance or failure to renew
could reasonably be expected to have a Material Adverse Effect.

 

Moody’s - Moody’s Investors Services, Inc.

 

Mortgage – those certain mortgages, deeds of
trust or deeds to secure debt delivered by a Borrower to Agent, for the benefit
of Secured Parties, prior to the Closing Date which granted Liens upon the Real
Estate owned by such Borrower, as security for the Obligations located in (i)
Rockford, Illinois, (ii) Ft. Wayne, Franklin, Kendallville and Vincennes,
Indiana, (iii) Hoisington, Kansas, (iv) Tarboro, North Carolina and (v)
Chester, South Carolina.

 

Multiemployer Plan - as defined in Section
4001(a)(3) of ERISA.

 

Net Proceeds - with respect to an Asset
Disposition, proceeds (including, when received, any deferred or escrowed
payments) received by a Borrower or Subsidiary in cash from such disposition,
net of (a) reasonable and customary costs and expenses actually incurred in

 

21

 

connection therewith, including legal fees and sales commissions; (b)
amounts applied to repayment of Debt secured by a Permitted Lien senior to
Agent’s Liens on Collateral sold; (c) all Taxes to the extent payable as a
consequence of such sale, including but not limited to, transfer or similar
taxes; (d) reserves for indemnities, until such reserves are no longer needed;
and (e) in
connection with any sale of Collateral, a reasonable reserve (not to exceed 10%
of the total purchase price) for post-closing adjustments to the purchase
price, provided that upon the expiration of not more than one hundred
twenty (120) days after the sale any remaining reserve balance is remitted to
Agent for application to the Obligations.

 

NOLV Percentage - the net orderly liquidation
value of Inventory, expressed as a percentage, expected to be realized at an
orderly, negotiated sale held within a reasonable period of time, net of all
related commissions, fees and expenses, as determined from the most recent
appraisal of Borrowers’ Inventory performed by an appraiser and on terms
reasonably satisfactory to Agent.

 

Notes - each Revolver Note or other promissory
note executed by a Borrower to evidence any Obligations.

 

Notice of Borrowing - a Notice of Borrowing to
be provided by Borrower Agent to request the funding of a Borrowing of Revolver
Loans, in form satisfactory to Agent.

 

Notice of Conversion/Continuation - a Notice
of Conversion/Continuation to be provided by Borrower Agent to request a
conversion or continuation of any Loans as LIBOR Loans, in form satisfactory to
Agent.

 

Obligations - all (a) principal of and
premium, if any, on the Loans, (b) LC Obligations and other obligations of
Obligors with respect to Letters of Credit, (c) interest, expenses, fees and
other sums payable by Obligors under Loan Documents, (d) obligations of
Obligors under any indemnity for Claims, (e) Extraordinary Expenses, (f) Bank
Product Debt, and (g) other Debts, obligations and liabilities of any kind
owing by Obligors pursuant to the Loan Documents, whether now existing or
hereafter arising, whether evidenced by a note or other writing, whether
allowed in any Insolvency Proceeding, whether arising from an extension of
credit, issuance of a letter of credit, acceptance, loan, guaranty, indemnification
or otherwise, and whether direct or indirect, absolute or contingent, due or to
become due, primary or secondary, or joint or several.

 

Obligor - each Borrower, Guarantor, or other
Person that is liable for payment of any Obligations or that has granted a Lien
in favor of Agent on its assets to secure any Obligations.

 

Ordinary Course of Business - the ordinary
course of business of any Borrower or Subsidiary, undertaken in good faith (and
not for the purpose of evading any provision of a Loan Document).

 

Organic Documents - with respect to any
Person, its charter, certificate or articles of incorporation, bylaws, articles
of organization, limited liability agreement, operating agreement, members
agreement, shareholders agreement, partnership agreement, certificate of
partnership, certificate of formation, voting trust agreement, or similar
agreement or instrument governing the formation or operation of such Person.

 

22

 

OSHA - the Occupational Safety and Hazard Act
of 1970.

 

Other Agreement - each Note; LC Document; Fee
Letter; Lien Waiver; Real Estate Related Document; Borrowing Base Certificate,
Compliance Certificate, financial statement or report delivered hereunder; or
other document, instrument or agreement (other than this Agreement or a
Security Document) now or hereafter delivered by an Obligor or other Person to
Agent or a Lender in connection with any transactions contemplated by the Loan
Documents.

 

Overadvance - as defined in Section 2.1.5.

 

Overadvance Loan - a Base Rate Revolver Loan
made when an Overadvance exists or is caused by the funding thereof.

 

Parent - Superior Essex Holding Corp., a
Delaware corporation.

 

Parent Series A Preferred Stock – 5,000,003
shares of Series A Preferred Stock of Parent having a par value of at least $1
per share and representing equity of at least $5,000,000.

 

Participant - as defined in Section 13.2.

 

Patent Assignment - each patent collateral
assignment agreement pursuant to which an Obligor assigns to Agent, for the
benefit of Secured Parties, such Obligor’s interests in its patents, as
security for the Obligations.

 

Patriot Act - the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001, Pub. L. No. 107-56, 115 Stat. 272 (2001).

 

Payment Account - an account maintained by
Agent, into which all monies from time to time deposited to a Deposit Account
may be swept.

 

Payment Intangible - as defined in the UCC.

 

Payment Item - each check, draft or other item
of payment payable to a Borrower, including those constituting proceeds of any
Collateral.

 

Permitted Asset Disposition - an Asset
Disposition that is (a) a sale of Inventory in the Ordinary Course of Business;
(b) a disposition of Equipment the proceeds of which are re-invested in
Equipment or similar assets or Capital Expenditures within three hundred
sixty-five (365) days of such Asset Deposition or any other disposition of
Equipment in an aggregate amount not to exceed $5,000,000 (on a fair market
basis) in any Fiscal Year; (c) a disposition of Inventory that is obsolete,
unmerchantable or otherwise unsalable in the Ordinary Course of Business; (d)
so long as no Event of Default then exists, termination of a lease of real or
personal Property that is not necessary for the Ordinary Course of Business,
could not reasonably be expected to have a Material Adverse Effect and does not
result from an Obligor’s default; (e) so long as no Event of Default then
exists, a sale or other disposition of
an Obligor’s Real Estate so long as the sale price of any such sale or other
disposition, when combined with all other permitted dispositions of Real
Estate, does not exceed $10,000,000 in the aggregate; (f) a

 

23

 

transfer of Property to a Borrower or a Subsidiary Guarantor by a
Subsidiary or by a Borrower or a Subsidiary Guarantor to a Subsidiary Guarantor
or by a Borrower to another Borrower; (g) non-exclusive licenses of
technology and other Intellectual Property; (h) other dispositions
expressly authorized by other provisions of the Loan Documents; (i) Consigned
Inventory; (j) transfers of Equity Interests in non-Guarantor Subsidiaries;
(k) so long as no Event of Default then exists, Permitted Investments; (l)
dispositions of Property referred to on Schedule
9.2.10; or (m) approved in writing by Agent and Required Lenders.

 

Permitted Consigned Inventory - Consigned Inventory, (i) the Value of which shall not
exceed $60,000,000 in the aggregate at any time, and (ii) which is the
subject of a properly filed financing statement under the UCC or the PPSA, as
applicable, in favor of a Borrower with respect to such Consigned Inventory; provided
that Borrowers may maintain Consigned Inventory, the Value of which shall not
exceed $30,000,000 in the
aggregate at any time, which does not satisfy the requirement specified in
clause (ii) hereof.

 

Permitted Contingent Obligations - Contingent
Obligations (a) arising from endorsements of Payment Items for collection or
deposit in the Ordinary Course of Business; (b) arising from Hedging Agreements permitted
hereunder; (c) existing on the Closing Date, and any extension or
renewal thereof that does not increase the amount of such Contingent Obligation
when extended or renewed; (d) incurred in the Ordinary Course of Business with respect to
surety, appeal or performance bonds, or other similar obligations; (e) arising
from customary indemnification obligations in favor of purchasers in
connection with dispositions of Equipment permitted hereunder; (f) arising
under the Loan Documents; (g) incurred to support Debt permitted pursuant to Section 10.2.1;
(h) arising under indemnity agreements to title insurers to issue to Agent
title insurance policies; (i) arising in connection with guaranties of
performance by an Obligor on behalf of JV Europe or SE Holding or its subsidiaries which
do not constitute guaranties of Debt; or (j) in an aggregate amount of
$25,000,000 or less at any time.

 

Permitted Investments – means, collectively,
(a) the China Investment, (b) the JV Europe Investment and (b) Investments
meeting the requirements of Included Investments without regard to whether such
investments are included in the calculation of the Consolidated Fixed Charge
Coverage Ratio.

 

Permitted Lien - as defined in Section 10.2.2.

 

Permitted Purchase Money Debt - Purchase Money
Debt of Borrowers and Subsidiaries that is unsecured or secured only by a
Purchase Money Lien, as long as the aggregate amount does not exceed
$25,000,000 at any time and its incurrence does not violate Section 10.2.3.

 

Person - any individual, corporation, limited
liability company, partnership, joint venture, joint stock company, land trust,
business trust, unincorporated organization, Governmental Authority or other
entity.

 

Plan - an employee pension benefit plan that
is covered by Title IV of ERISA or subject to the minimum funding standards
under Section 412 of the Internal Revenue Code and that is either (a)
maintained by a Borrower or Subsidiary for employees or (b) maintained pursuant
to a collective bargaining agreement, or other arrangement under which more
than one employer makes contributions and to which a Borrower or Subsidiary is
making or accruing an

 

24

 

obligation to make contributions or has within the preceding five years
made or accrued such contributions.

 

Plan of Reorganization – Debtors’ Amended
Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code dated
October 22, 2003, filed by Debtors with the Bankruptcy Court in the Chapter 11
Case on October 22, 2003.

 

PPSA - the Personal Property Security Act as
in effect from time to time in any Province of Canada (other than the Province
of Quebec), as amended.

 

Pro Rata - with respect to any Lender, a
percentage (expressed as a decimal, rounded to the ninth decimal place)
determined (a) while Revolver Commitments are outstanding, by dividing the
amount of such Lender’s Revolver Commitment by the aggregate amount of all
Revolver Commitments; and (b) at any other time, by dividing the amount of such
Lender’s Loans and LC Obligations by the aggregate amount of all outstanding
Loans and LC Obligations.

 

Properly Contested - with respect to any
obligation of an Obligor, (a) the obligation is subject to a bona fide dispute
regarding amount or the Obligor’s liability to pay; (b) the obligation is being
properly contested in good faith by appropriate proceedings promptly instituted
and diligently pursued; (c) appropriate reserves have been established in
accordance with GAAP; (d) non-payment could not have a Material Adverse Effect,
nor result in forfeiture or sale of any assets of the Obligor; (e) no Lien is
imposed on assets of the Obligor unless such Lien is at all times junior and
subordinate in priority to Liens in favor of Agent (except only with respect to
property taxes that have priority as a matter of applicable state law and
enforcement of such Lien is stayed during the period prior to the financial
resolution or disposition of such dispute); (f) if the obligation results from
entry of a judgment or other order, such judgment or order is stayed pending
appeal or other judicial review; and (g) if such contest is abandoned, settled
or determined adversely (in whole or in part) to such Obligor, such Obligor
forthwith pays such Debt and all penalties, interest and other amounts due in
connection therewith.

 

Property - any interest in any kind of
property or asset, whether real, personal or mixed, or tangible or intangible.

 

Protective Advances - as defined in Section 2.1.6.

 

Purchase
Money Debt - (a) Debt (other than the Obligations) for
payment of any of the purchase price of fixed assets; (b) Debt (other than the
Obligations) incurred within twenty (20) days before or after acquisition of any fixed assets, for the purpose of
financing any of the purchase price thereof; and (c) any renewals, extensions
or refinancings (but not increases in principal amounts) thereof.

 

Purchase Money Lien - a Lien that secures
Purchase Money Debt, encumbering only the fixed assets acquired with such Debt
and constituting a Capital Lease or a purchase money security interest under
the UCC.

 

RCRA - the Resource Conservation and Recovery
Act (42 U.S.C. §§ 6991-6991i).

 

25

 

Real Estate - all right, title and interest
(whether as owner, lessor or lessee) in any real Property or any buildings,
structures, parking areas or other improvements thereon.

 

Refinancing Conditions - the following
conditions for Refinancing Debt:  (a) it
is in an aggregate principal amount that does not exceed the principal amount
of the Debt being extended, renewed or refinanced; (b) it has a final maturity
not sooner than and weighted average life not less than that of the Debt being
extended, renewed or refinanced; (c) it bears interest at a rate that does not
exceed the current market rate (as determined in good faith by a Senior
Officer) for Debt of a similar type and for a similar obligor; (d) it is
subordinated to the Obligations at least to the same extent as the Debt being
extended, renewed or refinanced; (e) the covenants applicable to it are no less
favorable to Borrowers than those applicable to the Debt being extended,
renewed or refinanced; and (f) upon giving effect to it, no Default or Event of
Default exists.

 

Refinancing Debt - Borrowed Money that is the
result of an extension, renewal or refinancing of Debt permitted under Section 10.2.1.

 

Regulation D - Regulation D of the Board of
Governors.

 

Reimbursement Date - as defined in Section 2.3.2.

 

Rent Reserve - a reserve established from time
to time in Agent’s reasonable Credit Judgment in any amount equal to
approximately three months rent and other charges with respect to any
Collateral in the possession of, or at a location owned by, a Person other than
a Borrower or an Affiliate of a Borrower, unless such Person has executed a
Lien Waiver; provided, however, that in no event shall the Rent
Reserve at any leased location exceed the value of the Collateral maintained at
such location.

 

Report - as defined in Section 12.2.3.

 

Reportable Event - any event set forth in
Section 4043(b) of ERISA for which the notice requirements of said section have
not been waived.

 

Required Lenders - at any date of
determination thereof, at least 2 Lenders (each of which holds not less than 5%
of the aggregate Commitments) having Commitments representing at least 51% of
the aggregate Commitments at such time; provided, however, that
if any Lender shall be in breach of any of its obligations hereunder to Borrowers
or Agent, including any breach resulting from its failure to honor its
Commitment in accordance with the terms of this Agreement, then, for so long as
such breach continues, the term “Required Lenders” shall mean at
least 2 Lenders (each of which holds not less than 5% of the aggregate
Commitments), but excluding each Lender that is in breach of its obligations
under the Agreement, having Commitments representing at least 51% of the
aggregate Commitments (excluding the Commitments of each Lender that is in
breach of its obligations under the Agreement) at such time; provided  further,
however, that if the Commitments have been terminated, the term “Required
Lenders” shall mean at least 2 Lenders (each of which holds not less than
5% of the aggregate Commitments), but excluding each Lender that is in breach
of its obligations hereunder holding Loans (including Swingline Loans)
representing at least 51% of the aggregate principal amount of Loans (including
Swingline Loans) outstanding at such time.

 

26

 

Responsible Officer – any Senior Officer,
treasurer, controller, or vice president-finance of any Borrower.

 

Restricted Investment - any Investment by a
Borrower or Subsidiary, other than (a) Investments in Subsidiaries to the
extent existing on the Closing Date; (b) Cash Equivalents that are subject to
Agent’s Lien and control, pursuant to documentation in form and substance
satisfactory to Agent; (c) loans and advances permitted under Section 10.2.7; (d) acquisitions of fixed assets to be used in the
Ordinary Course of Business of such Borrower or any of its Subsidiaries so long as the
acquisition costs thereof constitute Capital Expenditures permitted
hereunder; (e) acquisitions of goods held for sale or lease or to
be used in the manufacture of goods or the provision of services by such
Borrower or any of its Subsidiaries in the Ordinary Course of Business
(including inventory); (f) acquisitions of current assets arising from the
sale or lease of goods or the rendition of services in the Ordinary Course of
Business of such Borrower or any of its Subsidiaries; (g) Investments in any Securities received in
satisfaction or partial satisfaction thereof from financially troubled Account
Debtors; (h) Investments in SE Holding, JV Europe and the China Investment
to the extent existing on the Closing Date; and (i) deposits, prepayments
and other credits to suppliers, lessors and landlords made in the Ordinary
Course of Business.

 

Restrictive Agreement - an agreement (other
than any of the Loan Documents, the Borrowers’ 9% Senior Notes due 2012 and the
Brownwood Lease) that, if and for so long as an Obligor or any Subsidiary of
such Obligor is a party thereto, would prohibit, condition or restrict such
Obligor’s or Subsidiary’s right to (i) incur or repay Debt for money borrowed
(including any of the Obligations); (ii) grant Liens upon any of such Obligor’s
or Subsidiary’s assets (including Liens granted in favor of Agent pursuant to
the Loan Documents); (iii) declare or make Distributions; (iv) amend, modify,
extend or renew any agreement evidencing Debt for money borrowed (including any
of the Loan Documents); or (v) repay any Debt owed to another Obligor.

 

Revolver Commitment - for any Lender, its
obligation to make Revolver Loans and to participate in LC Obligations up to
the maximum principal amount shown on Schedule
1.1, or as specified hereafter in the most recent Assignment and
Acceptance to which it is a party.  “Revolver
Commitments” means the aggregate amount of such commitments of all Lenders.

 

Revolver Loan - a loan made pursuant to Section 2.1, and Overadvance Loan or
Protective Advance.

 

Revolver Note - a promissory note to be
executed by Borrowers in favor of a Lender in the form of Exhibit A, which shall be in the amount of
such Lender’s Revolver Commitment and shall evidence the Revolver Loans made by
such Lender.

 

Revolver Termination Date - April 13, 2011.

 

Royalties - all royalties, fees, expense
reimbursement and other amounts payable by a Borrower under a License.

 

S&P - Standard & Poor’s Ratings Group,
a division of McGraw-Hill, Inc.

 

27

 

SEI - Superior Essex Inc., a Delaware
corporation.

 

SE Holding – means S.E. Holding, C.V., a Dutch
limited partnership.

 

Secured Parties - Agent, Issuing Bank, Lenders
and providers of Bank Products.

 

Security Documents - the Guaranties,
Mortgages, Patent Assignments, Trademark Security Agreements, Insurance
Assignments, Deposit Account Control Agreements, and
all other documents, instruments and agreements now or hereafter securing (or
given with the intent to secure) any Obligations.

 

Senior Officer - the chairman of the board,
president, executive vice-president, chief financial officer or general counsel
of a Borrower or, if the context requires, an Obligor.

 

Settlement Report - a report delivered by
Agent to Lenders summarizing the Revolver Loans and participations in LC
Obligations outstanding as of a given settlement date, allocated to Lenders on
a Pro Rata basis in accordance with their Revolver Commitments.

 

Software - as defined in the UCC.

 

Solvent - as to any Person, such Person (a)
owns Property whose fair salable value is greater than the amount required to
pay all of its debts (including contingent, subordinated, unmatured and
unliquidated liabilities); (b) owns Property whose present fair salable value
(as defined below) is greater than the probable total liabilities (including
contingent, subordinated, unmatured and unliquidated liabilities) of such
Person as they become absolute and matured; (c) is able to pay all of its debts
as they mature; (d) has capital that is not unreasonably small for its business
and is sufficient to carry on its business and transactions and all business
and transactions in which it is about to engage; (e) is not “insolvent” within the meaning of Section
101(32) of the Bankruptcy Code; and (f) has not incurred (by way of assumption
or otherwise) any obligations or liabilities (contingent or otherwise) under
any Loan Documents, or made any conveyance in connection therewith, with actual
intent to hinder, delay or defraud either present or future creditors of such
Person or any of its Affiliates.  “Fair
salable value” means the amount that could be obtained for assets within a
reasonable time, either through collection or through sale under ordinary
selling conditions by a capable and diligent seller to an interested buyer who
is willing (but under no compulsion) to purchase.

 

Statutory Reserves - the percentage (expressed
as a decimal) established by the Board of Governors as the then stated maximum
rate for all reserves (including those imposed by Regulation D, all basic,
emergency, supplemental or other marginal reserve requirements, and any
transitional adjustments or other scheduled changes in reserve requirements)
applicable to any member bank of the Federal Reserve System in respect of
Eurocurrency Liabilities (or any successor category of liabilities under
Regulation D).

 

Subordinated Debt - Debt incurred by a
Borrower or a Subsidiary Guarantor which is subordinated to the Obligations
pursuant to subordination terms and conditions acceptable to the Agent and
Required Lenders.

 

Subsidiary - any entity at least 50% of whose
voting securities or Equity Interests is owned by a Borrower or any combination
of Borrowers (including indirect ownership by a

 

28

 

Borrower through other entities in which such Borrower directly or
indirectly owns 50% of the voting securities or Equity Interests); provided
however, that none of SE Holding, JV Europe, nor any of
their subsidiaries shall be deemed a Subsidiary.

 

Supporting Obligation - as defined in the UCC.

 

Swingline Loan – any Borrowing of Base Rate
Revolver Loans funded with Agent’s funds, until such Borrowing is settled among
Lenders pursuant to Section 4.1.3.

 

Taxes - any taxes, levies, imposts, duties,
fees, assessments, deductions, withholdings or other charges of whatever
nature, including income, receipts, excise, property, sales, use, transfer, license,
payroll, withholding, social security, franchise, intangibles, stamp or
recording taxes imposed by any Governmental Authority, and all interest,
penalties and similar liabilities relating thereto, but excluding, in the case of each Lender, taxes imposed on or
measured by the net income, overall gross receipts or franchise of such
Lender.

 

Toll Copper Inventory - “toll copper”
owned by another Person at any time in the possession of any Borrower for
processing or otherwise.

 

Toll/Price Adjustment Reserve - a reserve equal to Borrowers’ reserve for copper billed for but not shipped or
delivered to a customer plus Borrowers’ reserve for purchase price adjustments.

 

Trademark Security Agreement - each trademark
security agreement pursuant to which an Obligor grants to Agent, for the
benefit of Secured Parties, a Lien on such Obligor’s interests in trademarks,
as security for the Obligations.

 

Transferee - any actual or potential Eligible
Assignee, Participant or other Person acquiring an interest in any Obligations.

 

Type - any type of a Loan (i.e., Base Rate
Loan or LIBOR Loan) that has the same interest option and, in the case of LIBOR
Loans, the same Interest Period.

 

UCC - the Uniform Commercial Code as in effect
in the State of Georgia or, when the laws of any other jurisdiction govern the
perfection or enforcement of any Lien, the Uniform Commercial Code of such
jurisdiction.

 

Upstream Payment - a Distribution by a
Subsidiary of a Borrower to such Borrower.

 

Value - with reference to the value of Eligible
Inventory, value determined by Agent in its reasonable credit judgment on the
basis the lower of cost or market of such Eligible Inventory, with the cost
thereof calculated with respect to Communications, on a first-in, first-out
basis in accordance with GAAP and with respect to all other businesses, on a
last-in, first-out basis in accordance with GAAP; provided that the
Value of Eligible Inventory shall not include the portion of the value of
the Eligible Inventory equal to the profit earned by any Affiliate on the sale
thereof to a Borrower.

 

29

 

1.2.         Accounting Terms

 

Under the Loan
Documents (except as otherwise specified herein), all accounting terms shall be
interpreted, all accounting determinations shall be made, and all financial
statements shall be prepared, in accordance with GAAP applied on a basis
consistent with the most recent audited financial statements of Borrowers
delivered to Agent before the Closing Date and using the same inventory valuation
method as used in such financial statements, except for any change required or
permitted by GAAP if Borrowers’ certified public accountants concur in such
change, the change is disclosed to Agent, and Section
10.3 is amended in a manner satisfactory to Required Lenders to take
into account the effects of the change.

 

1.3.         Certain Matters of Construction

 

The terms “herein,” “hereof,”
“hereunder” and other words of
similar import refer to this Agreement as a whole and not to any particular
section, paragraph or subdivision.  Any
pronoun used shall be deemed to cover all genders.  In the computation of periods of time from a
specified date to a later specified date, “from”
means “from and including,” and “to” and “until”
each mean “to but excluding.”  The terms “including”
and “include” shall mean “including, without limitation” and, for
purposes of each Loan Document, the parties agree that the rule of ejusdem generis shall not be applicable to
limit any provision.  Section titles
appear as a matter of convenience only and shall not affect the interpretation
of any Loan Document.  All references to
(a) laws or statutes include all related rules, regulations, interpretations,
amendments and successor provisions; (b) any document, instrument or agreement
include any amendments, waivers and other modifications, extensions or renewals
(to the extent permitted by the Loan Documents); (c) any section mean, unless
the context otherwise requires, a section of this Agreement; (d) any exhibits
or schedules mean, unless the context otherwise requires, exhibits and
schedules attached hereto, which are hereby incorporated by reference; (e) any
Person include successors and assigns; (f) time of day mean time of day at
Agent’s notice address under Section 14.4.1;
or (g) discretion of Agent, Issuing Bank or any Lender shall mean the sole and
absolute discretion of such Person unless otherwise indicated.  All calculations of Value, fundings of Loans,
issuances of Letters of Credit and payments of Obligations shall be in Dollars
and, unless the context otherwise requires, all determinations (including
calculations of Borrowing Base and financial covenants) made from time to time
under the Loan Documents shall be made in light of the circumstances existing
at such time.  Borrowing Base
calculations shall be made in a manner consistent with historical methods of
valuation and calculation, and otherwise satisfactory to Agent (and not
necessarily in accordance with GAAP). 
Borrowers shall have the burden of establishing any alleged negligence,
misconduct or lack of good faith by Agent, Issuing Bank or any Lender under any
Loan Documents.  No provision of any Loan
Documents shall be construed against any party by reason of such party having,
or being deemed to have, drafted the provision. 
Whenever the phrase “to the best of
Borrowers’ knowledge” or words of similar import are used in any
Loan Documents, such phrase means actual knowledge of a Senior Officer, or knowledge that a Senior Officer would
have obtained if he or she had engaged in good faith and diligent performance
of his or her duties, including reasonably specific inquiries of employees or
agents and a good faith attempt to ascertain the matter to which such phrase
relates.  Whenever in the Agreement and the other Loan
Documents reference is made to attorneys’ fees and expenses that are incurred
by Agent or a Lender and that are to be reimbursed to Agent or a Lender by
Borrowers, such reference shall be understood to mean the reasonable attorneys’
fees and expenses which are incurred by Agent or such Lender for services
actually rendered by attorneys selected by Agent or such Lender on Agent’s or
such Lender’s behalf.  Any Lien referred
to in the Agreement or any of the other Loan Documents as having been created
in

 

30

 

favor
of Agent, any agreement entered into by Agent pursuant to the Agreement or any
of the other Loan Documents, any payment made by or to, or funds received by,
Agent pursuant to or as contemplated by any of the Loan Documents, or any other
act taken or omitted to be taken by Agent shall, unless otherwise expressly
provided, be created, entered into, made or received, or taken or omitted for
the benefit or account of the Agent and the Secured Parties.

 

Section 2.              CREDIT FACILITIES

 

2.1.         Revolver Commitment

 

2.1.1.          Revolver
Loans

 

Each Lender
agrees, severally on a Pro Rata basis up to its Revolver Commitment, on the
terms set forth herein, to make Revolver Loans to Borrowers from time to time
through the Commitment Termination Date. 
The Revolver Loans may be repaid and reborrowed as provided herein.  In no event shall Lenders have any obligation
to honor a request for a Revolver Loan if the unpaid balance of Revolver Loans
outstanding at such time (including the requested Loan) would exceed the
Borrowing Base.

 

2.1.2.          Revolver
Notes

 

The Revolver
Loans made by each Lender and interest accruing thereon shall be evidenced by
the records of Agent and such Lender.  At
the request of any Lender, Borrowers shall deliver a Revolver Note to such
Lender.

 

2.1.3.          Use
of Proceeds

 

The proceeds
of Revolver Loans shall be used by Borrowers solely (a) to satisfy existing
Debt; (b) to pay fees and transaction expenses associated with the closing of
this credit facility; (c) to pay Obligations in accordance with this Agreement;
and (d) for working capital and other lawful corporate purposes of Borrowers.

 

2.1.4.          Voluntary
Reduction or Termination of Revolver Commitments

 

(a)           Borrowers may permanently reduce the
Revolver Commitments, on a Pro Rata basis for each Lender, from time to time
upon written notice to Agent, which notice shall specify the amount of the
reduction, shall be irrevocable once given, shall be given at least five (5)
Business Days prior to the end of a month and shall be effective as of the
first day of the next month.

 

(b)           The
Revolver Commitments shall terminate on the Revolver Termination Date, unless
sooner terminated in accordance with this Agreement.  Upon at least ninety (90) days prior written
notice to Agent, Borrowers may, at their option, terminate the Revolver
Commitments and this credit facility. 
Any notice of termination given by Borrowers shall be irrevocable.  On the termination date, Borrowers shall make
Full Payment of all Obligations.

 

31

 

2.1.5.          Overadvances

 

If the
aggregate Revolver Loans exceed the Borrowing Base (“Overadvance”) or
the aggregate Revolver Commitments at any time, the excess amount shall be
payable by Borrowers on demand by
Agent, but all such Revolver Loans shall nevertheless constitute Obligations
secured by the Collateral and entitled to all benefits of the Loan
Documents.  Unless its authority is
revoked in writing by Required Lenders, Agent may require Lenders to honor
requests for Overadvance Loans and to forbear from requiring Borrowers to cure
an Overadvance in accordance with the provisions of Section
14.1.4.  In no event shall
Overadvance Loans be required that would cause the outstanding Revolver Loans
and LC Obligations to exceed the aggregate Revolver Commitments.  Any funding of an Overadvance Loan or
sufferance of an Overadvance shall not constitute a waiver by Agent or Lenders
of the Event of Default caused thereby. 
In no event shall any Borrower or other Obligor be deemed a beneficiary
of this Section nor authorized to enforce any of its terms.

 

2.1.6.          Protective
Advances

 

Agent shall be
authorized by Borrowers and Lenders, from time to time in Agent’s sole and
absolute discretion, at any time that a Default or Event of Default exists or
any of the conditions precedent set forth in Section 6
hereof have not been satisfied, to make Base Rate Loans (“Protective
Advances”) to Borrowers on behalf of Lenders in an aggregate amount
outstanding at any time not to exceed 5% of
the Borrowing Base, but not in excess of the aggregate of the Commitments minus
the LC Obligations, but only to the extent that Agent deems the funding of such
Base Rate Loans to be necessary or desirable (i) to preserve or protect the
Collateral or any portion thereof, (ii) to enhance the likelihood of or the
amount of repayment of the Obligations or (iii) to pay any other amount
chargeable to Borrowers pursuant to the terms of this Agreement, including
costs, fees and expenses, all of which Base Rate Loans advanced by Agent
shall be deemed part of the Obligations and secured by the Collateral,
shall be treated as Settlement Loans and shall be settled and paid by
Borrowers and Lenders as provided herein for Settlement Loans; provided, however,
that the Required Lenders may at any time revoke Agent’s authorization to make
any such Base Rate Loans by written notice to Agent, which shall become
effective upon and after Agent’s receipt thereof.  The provisions of this Section
2.1.6 shall be in addition to the provisions of Section
14.1.4 hereof.

 

2.2.         Letter of Credit Facility

 

2.2.1.          Issuance
of Letters of Credit

 

Issuing Bank
agrees to issue Letters of Credit from time to time until thirty (30) days
prior to the Revolver Termination Date (or until the Commitment Termination
Date, if earlier), on the terms set forth herein, including the following:

 

(a)           Each
Borrower acknowledges that Issuing Bank’s willingness to issue any Letter of
Credit is conditioned upon Issuing Bank’s receipt of a LC Application with respect
to the requested Letter of Credit, as well as such other instruments and
agreements as Issuing Bank may customarily require for issuance of a letter of
credit of similar type and amount. 
Issuing Bank shall have no obligation to issue any Letter of Credit
unless (i) Issuing Bank receives a LC Request and LC Application at least three
(3) Business Days prior to the requested date of issuance; and (ii) each LC
Condition is satisfied.  If Issuing Bank
receives written notice from a Lender at least one (1) Business Day before
issuance of a Letter of Credit that any LC Condition has not been satisfied,
Issuing Bank shall have no obligation to issue the requested Letter of

 

32

 

Credit (or any other) until such notice is
withdrawn in writing by that Lender or until Required Lenders have waived such
condition in accordance with this Agreement. 
Prior to receipt of any such notice, Issuing Bank shall not be deemed to
have knowledge of any failure of LC Conditions.

 

(b)           Letters
of Credit may be requested by a Borrower only (i) to support obligations of
such Borrower incurred in the Ordinary Course of Business, on a standby basis;
or (ii) for other purposes as Agent and Lenders may approve from time to time
in writing.  The renewal or extension of
any Letter of Credit shall be treated as the issuance of a new Letter of
Credit, except that delivery of a new LC Application shall be required at the
discretion of Issuing Bank.

 

(c)           Borrowers
assume all risks of the acts, omissions or misuses of any Letter of Credit by
the beneficiary.  In connection with
issuance of any Letter of Credit, none of Agent, Issuing Bank or any Lender
shall be responsible for the existence, character, quality, quantity,
condition, packing, value or delivery of any goods purported to be represented
by any Documents; any differences or variation in the character, quality,
quantity, condition, packing, value or delivery of any goods from that
expressed in any Documents; the form, validity, sufficiency, accuracy,
genuineness or legal effect of any Documents or of any endorsements thereon;
the time, place, manner or order in which shipment of goods is made; partial or
incomplete shipment of, or failure to ship, any goods referred to in a Letter
of Credit or Documents; any deviation from instructions, delay, default or
fraud by any shipper or other Person in connection with any goods, shipment or
delivery; any breach of contract between a shipper or vendor and a Borrower;
errors, omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex, telecopy, e-mail, telephone or
otherwise; errors in interpretation of technical terms; the misapplication by a
beneficiary of any Letter of Credit or the proceeds thereof; or any
consequences arising from causes beyond the control of Issuing Bank, Agent or
any Lender, including any act or omission of a Governmental Authority.  The rights and remedies of Issuing Bank under
the Loan Documents shall be cumulative. 
Issuing Bank shall be fully subrogated to the rights and remedies of
each beneficiary whose claims against Borrowers are discharged with proceeds of
any Letter of Credit.

 

(d)           In
connection with its administration of and enforcement of rights or remedies
under any Letters of Credit or LC Documents, Issuing Bank shall be entitled to
act, and shall be fully protected in acting, upon any certification, notice or
other communication in whatever form believed by Issuing Bank, in good faith,
to be genuine and correct and to have been signed, sent or made by a proper
Person.  Issuing Bank may consult with
and employ legal counsel, accountants and other experts to advise it concerning
its obligations, rights and remedies, and shall be entitled to act upon, and
shall be fully protected in any action taken in good faith reliance upon, any
advice given by such experts.  Issuing
Bank may employ agents and attorneys-in-fact in connection with any matter
relating to Letters of Credit or LC Documents, and shall not be liable for the
gross negligence or willful misconduct of any such agents or attorneys-in-fact
selected with reasonable care.

 

33

 

2.2.2.          Reimbursement;
Participations

 

(a)           If
Issuing Bank honors any request for payment under a Letter of Credit, Borrowers
shall pay to Issuing Bank, in Dollars on the same day (“Reimbursement Date”),
the amount paid by Issuing Bank under such Letter of Credit, together with
interest at the interest rate for Base Rate Revolver Loans from the Reimbursement
Date until payment by Borrowers.  The
obligation of Borrowers to reimburse Issuing Bank for any payment made under a
Letter of Credit shall be absolute, unconditional, irrevocable, and joint and
several, and shall be paid without regard to any lack of validity or
enforceability of any Letter of Credit or the existence of any claim, setoff,
defense or other right that Borrowers may have at any time against the
beneficiary.  Whether or not Borrower
Agent submits a Notice of Borrowing, Borrowers shall be deemed to have
requested a Borrowing of Base Rate Revolver Loans in an amount necessary to pay
all amounts due Issuing Bank on any Reimbursement Date and each Lender agrees
to fund its Pro Rata share of such Borrowing whether or not the Commitments
have terminated, an Overadvance exists or is created thereby, or the conditions
in Section 6 are satisfied.

 

(b)           Upon
issuance of a Letter of Credit, each Lender shall be deemed to have irrevocably
and unconditionally purchased from Issuing Bank, without recourse or warranty,
an undivided Pro Rata interest and participation in all LC Obligations relating
to the Letter of Credit.  If Issuing Bank
makes any payment under a Letter of Credit and Borrowers do not reimburse such
payment on the Reimbursement Date, Agent shall promptly notify Lenders and each
Lender shall promptly (within one (1) Business Day) and unconditionally pay to
Agent, for the benefit of Issuing Bank, the Lender’s Pro Rata share of such
payment.  Upon request by a Lender,
Issuing Bank shall furnish copies of any Letters of Credit and LC Documents in
its possession at such time.

 

(c)           The
obligation of each Lender to make payments to Agent for the account of Issuing
Bank in connection with Issuing Bank’s payment under a Letter of Credit shall be
absolute, unconditional and irrevocable, not subject to any counterclaim,
setoff, qualification or exception whatsoever, and shall be made in accordance
with this Agreement under all circumstances, irrespective of any lack of
validity or unenforceability of any Loan Documents; any draft, certificate or
other document presented under a Letter of Credit having been determined to be
forged, fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect; or the existence of any
setoff or defense that any Obligor may have with respect to any
Obligations.  Issuing Bank does not
assume any responsibility for any failure or delay in performance or any breach
by any Borrower or other Person of any obligations under any LC Documents.  Issuing Bank does not make to Lenders any
express or implied warranty, representation or guaranty with respect to the
Collateral, LC Documents or any Obligor. 
Issuing Bank shall not be responsible to any Lender for any recitals, statements,
information, representations or warranties contained in, or for the execution,
validity, genuineness, effectiveness or enforceability of any LC Documents; the
validity, genuineness, enforceability, collectibility, value or sufficiency of
any Collateral or the perfection of any Lien therein; or the assets,
liabilities, financial condition, results of operations, business,
creditworthiness or legal status of any Obligor.

 

(d)           No
Issuing Bank Indemnitee shall be liable to any Lender or other Person for any
action taken or omitted to be taken in connection with any LC Documents except
as a result of its actual gross negligence or willful misconduct.  Issuing Bank shall not have any liability to
any Lender if Issuing Bank refrains from any action under any Letter of Credit
or LC Documents until it receives written instructions from Required Lenders.

 

34

 

2.2.3.          Cash
Collateral

 

If any LC
Obligations, whether or not then due or payable, shall for any reason be
outstanding at any time (a) that an Event of Default exists, (b) that
Availability is less than zero, or (c) after the Commitment Termination Date,
then Borrowers shall, at Issuing Bank’s or Agent’s request, pay to Issuing Bank
the amount of all outstanding LC Obligations and Cash Collateralize all
outstanding Letters of Credit.  If
Borrowers fail to Cash Collateralize outstanding Letters of Credit as required
herein, Lenders may (and shall upon direction of Agent) advance, as Revolver
Loans, the amount of the Cash Collateral required (whether or not the
Commitments have terminated, an Overadvance exists, or the conditions in Section 6 are satisfied).

 

Section 3.              INTEREST, FEES AND CHARGES

 

3.1.         Interest

 

3.1.1.          Rates
and Payment of Interest

 

(a)           The Obligations shall bear interest
(i) if a Base Rate Loan, at the Base Rate in effect from time to time, plus the
Applicable Margin; (ii) if a LIBOR Loan, at the Adjusted LIBOR for the
applicable Interest Period, plus the Applicable Margin; and (iii) if any other
Obligation (including, to the extent permitted by law, interest not paid when
due), at the Base Rate in effect from time to time, plus the Applicable Margin
for Base Rate Revolver Loans.  Interest
shall accrue from the date the Loan is advanced or the Obligation is incurred
or payable, until paid by Borrowers.  If
a Loan is repaid on the same day made, one (1) day’s interest shall
accrue.  The Base Rate on the date hereof is 7.75% per annum and, therefore, the
rate of interest in effect on the date hereof, expressed in simple interest
terms, is 7.75% per annum for Base Rate Revolver Loans.

 

(b)           During
an Insolvency Proceeding with respect to any Borrower, or during any other
Event of Default if Agent or Required Lenders in their discretion so elect,
Obligations shall bear interest at the Default Rate.  Each Borrower acknowledges that the cost and
expense to Agent and each Lender due to an Event of Default are difficult to
ascertain and that the Default Rate is a fair and reasonable estimate to
compensate Agent and Lenders for such added cost and expense.

 

(c)           Interest
accrued on the Loans shall be due and payable in arrears, (i) on the first day
of each month and, for any LIBOR Loan, the last day of its Interest Period;
(ii) on any date of prepayment, with respect to the principal amount of Loans
being prepaid; and (iii) on the Commitment Termination Date.  Interest accrued on any other Obligations
shall be due and payable as provided in the Loan Documents and, if no payment
date is specified, shall be due and payable on
demand.  Notwithstanding the
foregoing, interest accrued at the Default Rate shall be due and payable on demand.

 

3.1.2.          Application
of Adjusted LIBOR to Outstanding Loans

 

(a)           Borrowers
may on any Business Day, subject to delivery of a Notice of
Conversion/Continuation, elect to convert any portion of the Base Rate Loans
to, or to continue any LIBOR Loan at the end of its Interest Period as, a LIBOR
Loan.  During any Default or

 

35

 

Event of Default, Agent may (and shall at the
direction of Required Lenders) declare that no Loan may be made, converted or
continued as a LIBOR Loan.

 

(b)           Whenever
Borrowers desire to convert or continue Loans as LIBOR Loans, Borrower Agent shall give Agent a
Notice of Conversion/Continuation, no later than 11:00 a.m. at least three (3)
Business Days before the requested conversion or continuation date.  Promptly after receiving any such notice,
Agent shall notify each Lender thereof. 
Each Notice of Conversion/Continuation shall be irrevocable, and shall
specify the aggregate principal amount of Loans to be converted or continued,
the conversion or continuation date (which shall be a Business Day), and the
duration of the Interest Period (which shall be deemed to be one month if not
specified).  If, upon the expiration of
any Interest Period in respect of any LIBOR Loans, Borrowers shall have failed
to deliver a Notice of Conversion/Continuation, they shall be deemed to have
elected to convert such Loans into Base Rate Loans.

 

3.1.3.          Interest
Periods

 

In connection
with the making, conversion or continuation of any LIBOR Loans, Borrowers shall
select an interest period (“Interest Period”) to apply, which interest
period shall be one, two, three or six months; provided, however,
that:

 

(a)           the
Interest Period shall commence on the date the Loan is made or continued as, or
converted into, a LIBOR Loan, and shall expire on the numerically corresponding
day in the calendar month at its end;

 

(b)           if
any Interest Period commences on a day for which there is no corresponding day
in the calendar month at its end or if such corresponding day falls after the
last Business Day of such month, then the Interest Period shall expire on the
last Business Day of such month; and if any Interest Period would expire on a
day that is not a Business Day, the period shall expire on the next Business
Day; and

 

(c)           no
Interest Period shall extend beyond the Revolver Termination Date.

 

3.1.4.          Interest
Rate Not Ascertainable

 

If Agent shall
determine in good faith that on any date for determining the Adjusted LIBOR,
due to any circumstance affecting the London interbank market, adequate and
fair means do not exist for ascertaining such rate on the basis provided
herein, then Agent shall immediately notify Borrowers (by telephone confirmed
in writing) of such determination.  Until
Agent notifies Borrowers that such circumstance no longer exists (notice of
which determination shall promptly by delivered to Borrower Agent), the
obligation of Lenders to make LIBOR Loans shall be suspended, and no further
Loans may be converted into or continued as LIBOR Loans.

 

3.2.         Fees

 

3.2.1.          Closing
Fee

 

Borrowers
shall pay to Agent, for the Pro Rata benefit of the Lenders, a closing
fee of $337,500 which shall be paid on the Closing Date.

 

36

 

3.2.2.          Unused
Line Fee

 

Borrowers
shall pay to Agent, for the Pro Rata benefit of Lenders, a fee equal to 0.25%
per annum times the amount by which the Revolver Commitments exceed the average daily
balance of Revolver Loans and stated amount of Letters of Credit during
any
month.  Such fee shall be payable
in arrears, on the first Business Day of each month and on the Commitment
Termination Date.  During an Event of
Default, the fee under this Section (to the extent Revolver Commitments are
still outstanding) shall be increased by 2%.

 

3.2.3.          LC
Facility Fees

 

Borrowers
shall pay (a) to Agent, for the Pro Rata benefit of Lenders, a fee equal to the
Applicable Margin in effect for LIBOR Revolver Loans times the average daily
stated amount of Letters of Credit, which fee shall be payable monthly in
arrears, on the first Business Day of each month; (b) to Agent, for its own
account, a fronting fee equal to 0.125% of the stated amount of each Letter of
Credit, which fee shall be payable upon issuance of the Letter of Credit and on
each anniversary date of such issuance, and shall be payable on any increase in
stated amount made between any such dates; and (c) to Issuing Bank, for its own
account, all customary charges associated with the issuance, amending,
negotiating, payment, processing, transfer and administration of Letters of
Credit, which charges shall be paid as and when incurred.  During an Event of Default, the fee payable
under clause (a) may be increased by 2%.

 

3.2.4.          Agent
Fees

 

In
consideration of Agent’s syndication of the Commitments and service as Agent
hereunder, Borrowers shall pay to Agent, for its own account, the fees
described in the Fee Letter.

 

3.3.         Computation of Interest, Fees, Yield Protection

 

All interest,
as well as fees and other charges calculated on a per annum basis, shall be
computed for the actual days elapsed, based on a year of three hundred sixty
(360) days.  Each determination by Agent
of any interest, fees or interest rate hereunder shall be final, conclusive and binding for all
purposes, absent manifest error. 
All fees shall be fully earned when due and shall not be subject to
rebate or refund, nor subject to proration except as specifically provided
herein.  All fees payable under Section 3.2 are compensation for services
and are not, and shall not be deemed to be, interest or any other charge for
the use, forbearance or detention of money. 
A certificate as to amounts
payable by Borrowers under Section 3.4, 3.6,
3.7,  3.9 or 5.8, submitted to Borrowers by Agent or
the affected Lender, as applicable, shall be final, conclusive and binding for
all purposes, absent manifest error.

 

3.4.         Reimbursement Obligations

 

Borrowers
shall reimburse Agent for all Extraordinary Expenses incurred by it.  Borrowers shall also reimburse Agent for all
reasonable legal, accounting, appraisal, consulting, and other fees, costs and
expenses incurred by it in connection with (a) negotiation and preparation of
any Loan Documents, including any amendment or other modification thereof; (b)
administration of and actions relating to any Collateral, Loan Documents and
transactions contemplated thereby, including any actions taken to perfect or
maintain priority of Agent’s

 

37

 

Liens on any Collateral, to maintain any insurance required hereunder
or to verify Collateral; and (c) subject to the limits of Section 10.1.1(b), each inspection, audit
or appraisal with respect to any Obligor or Collateral, whether prepared by
Agent’s personnel or a third party.  All
amounts reimbursable by Borrowers under this Section shall constitute
Obligations secured by the Collateral and shall be payable on demand.

 

3.5.         Illegality

 

Notwithstanding
anything to the contrary herein, if (a) any change in any law or interpretation
thereof by any Governmental Authority after the Closing Date makes it unlawful
for a Lender to make or maintain a LIBOR Loan or to maintain any Commitment
with respect to LIBOR Loans or (b) a Lender determines that the making or
continuance of a LIBOR Loan has become impracticable as a result of a
circumstance that adversely affects the London interbank market or the position
of such Lender in such market, then such Lender shall give notice thereof to
Agent and Borrowers and may (i) declare that LIBOR Loans will not thereafter be
made by such Lender, whereupon any request for a LIBOR Loan from such Lender
shall be deemed to be a request for a Base Rate Loan unless such Lender’s
declaration has been withdrawn (and it shall be withdrawn promptly upon
cessation of the circumstances described in clause (a) or (b) above); and/or
(ii) require that all outstanding LIBOR Loans made by such Lender be converted
to Base Rate Loans immediately, in which event all outstanding LIBOR Loans of
such Lender shall be immediately converted to Base Rate Loans.

 

3.6.         Increased Costs

 

If, by reason
of (a) the introduction after the Closing Date of or any change (including any
change by way of imposition or increase of Statutory Reserves or other reserve
requirements) in any law or interpretation thereof, or (b) the compliance with
any guideline or request from any Governmental Authority or other Person
exercising control over banks or financial institutions generally (whether or
not having the force of law):

 

(i)            a Lender shall be subject to any Tax with
respect to any LIBOR Loan or Letter of Credit or its obligation to make LIBOR
Loans, issue Letters of Credit or participate in LC Obligations, or a change
shall result in the basis of taxation of any payment to a Lender with respect
to its LIBOR Loans or its obligation to make LIBOR Loans, issue Letters of
Credit or participate in LC Obligations (except for Excluded Taxes); or

 

(ii)           any reserve (including any imposed by the
Board of Governors), special deposits or similar requirement against assets of,
deposits with or for the account of, or credit extended by, a Lender shall be
imposed or deemed applicable, or any other condition affecting a Lender’s LIBOR
Loans or obligation to make LIBOR Loans, issue Letters of Credit or participate
in LC Obligations shall be imposed on such Lender or the London interbank
market;

 

and
as a result there shall be an increase in the cost to such Lender of agreeing
to make or making, funding or maintaining LIBOR Loans, Letters of Credit or
participations in LC Obligations (except to the extent already included in
determination of the Adjusted LIBOR), or there shall be a reduction in the
amount receivable by such Lender, then the Lender shall promptly notify
Borrowers and Agent of such event, and Borrowers shall, within five (5) days

 

38

 

following
demand therefor, pay such Lender the amount of such increased costs or reduced
amounts.

 

If a Lender determines that, because of circumstances described above
or any other circumstances arising hereafter affecting such Lender, the London
interbank market or the Lender’s position in such market, the Adjusted LIBOR or
its Applicable Margin, as applicable, will not adequately and fairly reflect
the cost to such Lender of funding LIBOR Loans, issuing Letters of Credit or
participating in LC Obligations, then (A) the Lender shall promptly notify
Borrowers and Agent of such event; (B) such Lender’s obligation to make LIBOR Loans, issue Letters of
Credit or participate in LC Obligations shall be immediately suspended, until
each condition giving rise to such suspension no longer exists; and (C) such
Lender shall make a Base Rate Loan as part of any requested Borrowing of LIBOR
Loans, which Base Rate Loan shall, for all purposes, be considered part of such
Borrowing.

 

Notwithstanding anything
herein to the contrary, Borrowers shall only be required to compensate any
Lender in respect of any such increased costs or reduction in the amount
received or receivable by such Lender to the extent Borrower has received a
written request for such compensation within ninety (90) days after such Lender
has received actual notice of the occurrence of the relevant circumstance
giving rise to such increased costs or reduction in the amount received or
receivable by such Lender, as the case may be.

 

3.7.         Capital Adequacy

 

If a Lender
determines that after the Closing Date any introduction of or any change in a
Capital Adequacy Regulation, any change in the interpretation or administration
of a Capital Adequacy Regulation by a Governmental Authority charged with
interpretation or administration thereof, or any compliance by such Lender or
any Person controlling such Lender with a Capital Adequacy Regulation,
increases the amount of capital required or expected to be maintained by such
Lender or Person (taking into consideration its capital adequacy policies and
desired return on capital) as a consequence of such Lender’s Commitments,
Loans, participations in LC Obligations or other obligations under the Loan
Documents, then Borrowers shall, within five (5) days following demand
therefor, pay such Lender an amount sufficient to compensate for such increase.  A Lender’s demand for payment shall set forth
the nature of the occurrence giving rise to such compensation and a calculation
of the amount to be paid.  In determining
such amount, the Lender may use any reasonable averaging and attribution
method.

 

Notwithstanding anything herein
to the contrary, Borrowers shall only be required to compensate any Lender in
respect of any such reduction in the return of capital of Lenders to the extent
Borrower has received a written request for such compensation within ninety
(90) days after such Lender has received actual notice of the occurrence
of the relevant circumstance giving rise to such reduction in the return of
capital of such Lender.

 

3.8.         Mitigation

 

Each Lender
agrees that, upon becoming aware that it is subject to Section 3.5,
3.6, 3.7 or 5.8, it
will (i) take reasonable measures to reduce Borrowers’ obligations under such
Sections, including funding or maintaining its Commitments or Loans through
another office, as long as use of such measures would not adversely affect the
Lender’s Commitments, Loans, business or interests, and would not be
inconsistent with any internal policy or applicable legal or regulatory

 

39

 

restriction or
(ii) take such other reasonable measures, if, as a result thereof, the
circumstances which would relieve Borrowers from their obligations to pay such
additional amounts (or reduce the amount of such payments), or such withholding
taxes would be reduced, and if the making, funding or maintaining of such Commitment
or Loans through such other lending office or in accordance with such other
measures, as the case may be, would not otherwise adversely affect such
Commitment or Loans or the interests of such Lender.

 

3.9.         Funding Losses

 

If for any
reason (other than default by a Lender) (a) any Borrowing of, or conversion to
or continuation of, a LIBOR Loan does not occur on the date specified therefor
in a Notice of Borrowing or Notice of Conversion/Continuation (whether or not
withdrawn), (b) any repayment or conversion of a LIBOR Loan occurs on a day
other than the end of its Interest Period, or (c) Borrowers fail to repay a
LIBOR Loan when required hereunder, then Borrowers shall pay to Agent its
customary administrative charge and to each Lender all losses and expenses that
it sustains as a consequence thereof, including any loss or expense arising
from liquidation or redeployment of funds or from fees payable to terminate
deposits of matching funds.  Lenders
shall not be required to purchase Dollar deposits in the London interbank
market or any other offshore Dollar market to fund any LIBOR Loan, but the
provisions hereof shall be deemed to apply as if each Lender had purchased such
deposits to fund its LIBOR Loans.

 

3.10.       Maximum Interest

 

In no event
shall interest, charges or other amounts that are contracted for, charged or
received by Agent and Lenders pursuant to any Loan Documents and that are
deemed interest under Applicable Law (“interest”)
exceed the highest rate permissible under Applicable Law (“maximum rate”).  If, in any month, any interest rate, absent
the foregoing limitation, would have exceeded the maximum rate, then the
interest rate for that month shall be the maximum rate and, if in a future
month, that interest rate would otherwise be less than the maximum rate, then
the rate shall remain at the maximum rate until the amount of interest actually
paid equals the amount of interest which would have accrued if it had not been
limited by the maximum rate.  If, upon
Full Payment of the Obligations, the total amount of interest actually paid
under the Loan Documents is less than the total amount of interest that would,
but for this Section, have accrued under the Loan Documents, then Borrowers
shall, to the extent permitted by Applicable Law, pay to Agent, for the account
of Lenders, (a) the lesser of (i) the amount of interest that would have been
charged if the maximum rate had been in effect at all times, or (ii) the amount
of interest that would have accrued had the interest rate otherwise set forth
in the Loan Documents been in effect, minus (b) the amount of interest
actually paid under the Loan Documents. 
If a court of competent jurisdiction determines that Agent or any Lender
has received interest in excess of the maximum amount allowed under Applicable
Law, such excess shall be deemed received on account of, and shall
automatically be applied to reduce, Obligations other than interest (regardless
of any erroneous application thereof by Agent or any Lender), and upon Full
Payment of the Obligations, any balance shall be refunded to Borrowers.  In determining whether any excess interest
has been charged or received by Agent or any Lender, all interest at any time
charged or received from Borrowers in connection with the Loan Documents shall,
to the extent permitted by Applicable Law, be amortized, prorated, allocated
and spread in equal parts throughout the full term of the Obligations.

 

40

 

Section 4.              LOAN ADMINISTRATION

 

4.1.         Manner of Borrowing and Funding Revolver Loans

 

4.1.1.          Notice of Borrowing

 

(a)           Whenever
Borrowers desire funding of a Borrowing of Revolver Loans, Borrower Agent shall
give Agent a Notice of Borrowing.  Such
notice must be received by Agent no later than 12:00 noon (i) on the
Business Day of the requested funding date, in the case of Base Rate Loans, and
(ii) at least two (2) Business Days prior to the requested funding
date, in the case of LIBOR Loans. 
Notices received after 12:00 noon shall be deemed received on the next
Business Day.  Each Notice of Borrowing
shall be irrevocable and shall specify (A) the principal amount of the
Borrowing, (B) the requested funding date (which must be a Business Day),
(C) whether the Borrowing is to be made as Base Rate Loans or LIBOR Loans,
and (D) in the case of LIBOR Loans, the duration of the applicable
Interest Period (which shall be deemed to be one month if not specified).

 

(b)           Unless
payment is otherwise timely made by Borrowers, the becoming due of any
Obligations (whether principal, interest, fees or other charges, including Extraordinary Expenses, LC
Obligations, Cash Collateral and Bank Product Debt) shall be deemed
irrevocably to be a request (without any requirement for a Notice of Borrowing)
for Base Rate Revolver Loans on the due date, in the amount of such
Obligations.  The proceeds of such
Revolver Loans shall be disbursed as direct payment of the relevant Obligation.

 

(c)           If
Borrowers establish a controlled disbursement account with Agent or any
Affiliate of Agent, then the presentation for payment of any check or other
item of payment drawn on such account at a time when there are insufficient
funds to cover it shall be deemed to be a request (without any requirement for
a Notice of Borrowing) for Base Rate Revolver Loans on the date of such
presentation, in the amount of the check and items presented for payment.  The proceeds of such Revolver Loans may be
disbursed directly to the controlled disbursement account.

 

(d)           Neither
Agent nor any Lender shall have any obligation to Borrowers to honor any deemed
request for a Revolver Loan on or after the Commitment Termination Date, when
an Overadvance exists or would result therefrom, or when any condition in Section 6 is not satisfied, but may do so
in their discretion, without being deemed to have waived any Default or Event
of Default.

 

4.1.2.          Fundings by Lenders

 

Each Lender
shall timely honor its Revolver Commitment by funding its Pro Rata share of
each Borrowing of Revolver Loans that is properly requested hereunder.  Agent shall endeavor to notify Lenders of
each Notice of Borrowing (or deemed request for a Borrowing) by 1:30 p.m. on
the proposed funding date for Base Rate Loans or by 3:00 p.m. at least two (2) Business
Days before any proposed funding of LIBOR Loans.  Each Lender shall fund to Agent such Lender’s
Pro Rata share of the Borrowing to the account specified by Agent in
immediately available funds not later than 3:00 p.m. on the requested funding
date, unless Agent’s notice is received after the times provided above, in
which event Lender shall fund its Pro Rata share by 1:30 p.m. on the next
Business Day.  Subject to its receipt of
such amounts

 

41

 

from Lenders, Agent shall disburse the proceeds of the Revolver Loans
as directed by Borrower Agent.  Unless
Agent shall have received (in sufficient time to act) written notice from a
Lender that it does not intend to fund its Pro Rata share of a Borrowing, Agent
may assume that such Lender has deposited or promptly will deposit its share
with Agent, and Agent may disburse a corresponding amount to Borrowers.  If a Lender’s share of any Borrowing is not
in fact received by Agent, then Borrowers agree to repay to Agent on demand the amount of such share, together with interest
thereon from the date disbursed until repaid, at the rate applicable to such
Borrowing.

 

4.1.3.          Settlement

 

To facilitate
administration of the Revolver Loans, Lenders and Agent agree (which agreement
is solely among them, and not for the benefit of or enforceable by any
Borrower) that settlement among them with respect to Revolver Loans may take
place periodically on a date determined from time to time by Agent, which shall
occur at least once every five (5) Business Days.  On each settlement date, settlement shall be
made with each Lender in accordance with the Settlement Report delivered by
Agent to Lenders.  Between settlement
dates, Agent may in its discretion apply payments on Revolver Loans to
Swingline Loans, regardless of any designation by Borrower or any provision
herein to the contrary.  Each Lender’s
obligation to make settlements with Agent is absolute and unconditional,
without offset, counterclaim or other defense, and whether or not the Commitments have terminated, an Overadvance exists,
or the conditions in Section 6 are
satisfied.  If, due to an
Insolvency Proceeding with respect to a Borrower or otherwise, any Swingline
Loan may not be settled among Lenders hereunder, then each Lender shall be
deemed to have purchased from Agent a Pro Rata participation in each unpaid
Swingline Loan and shall transfer the amount of such participation to Agent, in
immediately available funds, within one (1) Business Day after Agent’s request
therefor.

 

4.1.4.          Notices

 

Each Borrower
authorizes Agent and Lenders to extend, convert or continue Loans, effect
selections of interest rates, and transfer funds to or on behalf of Borrowers
based on telephonic or e-mailed instructions. 
Borrowers shall confirm each such request by prompt delivery to Agent of
a Notice of Borrowing or Notice of Conversion/Continuation, if applicable, but
if it differs in any material respect from the action taken by Agent or
Lenders, the records of Agent and Lenders shall govern.  Neither Agent nor any Lender shall have any
liability for any loss suffered by a Borrower as a result of Agent or any
Lender acting upon its understanding of telephonic or e-mailed instructions
from a person believed in good faith by Agent or any Lender to be a person
authorized to give such instructions on a Borrower’s behalf.

 

4.2.         Defaulting Lender

 

If a Lender
fails to make any payment to Agent that is required hereunder, Agent may (but
shall not be required to), in its discretion, retain payments that would
otherwise be made to such defaulting Lender hereunder, apply the payments to
such Lender’s defaulted obligations or readvance the funds to Borrowers in
accordance with this Agreement.  The
failure of any Lender to fund a Loan or to make a payment in respect of a LC Obligation shall not relieve any other Lender of its
obligations hereunder, and no Lender shall be responsible for default by
another Lender.  Lenders and Agent agree
(which agreement is solely among them, and not for the

 

42

 

benefit of or enforceable by any Borrower) that, solely for purposes of
determining a defaulting Lender’s right to vote on matters relating to the Loan
Documents and to share in payments, fees and Collateral proceeds thereunder, a
defaulting Lender shall not be deemed to be a “Lender” until all its
defaulted obligations have been cured.

 

4.3.         Number
and Amount of LIBOR Loans; Determination of Rate

 

For ease of
administration, all LIBOR Revolver Loans having the same length and beginning
date of their Interest Periods shall be aggregated together, and such Loans
shall be allocated among Lenders on a Pro Rata basis.  No more than 8 aggregated LIBOR Loans may be
outstanding at any time, and each aggregate LIBOR Loan when made, continued or
converted shall be in a minimum amount of $1,000,000, or a multiple of $100,000
in excess thereof.

 

Upon
determining Adjusted LIBOR for any Interest Period requested by Borrowers,
Agent shall promptly notify Borrowers thereof by telephone or electronically
and, if requested by Borrowers, shall confirm any telephonic notice in writing.

 

4.4.         Borrower
Agent

 

Each Borrower
hereby designates Communications (“Borrower Agent”) as its
representative and agent for all purposes under the Loan Documents, including
requests for Loans and Letters of Credit, designation of interest rates,
delivery or receipt of communications with Agent, Issuing Bank or any Lender,
preparation and delivery of Borrowing Base and financial reports, receipt and
payment of Obligations, requests for waivers, amendments or other accommodations,
actions under the Loan Documents (including in respect of compliance with
covenants), and all other dealings with Agent, Issuing Bank or any Lender.  Borrower Agent hereby accepts such
appointment.  Agent and Lenders shall be
entitled to rely upon, and shall be fully protected in relying upon, any notice
or communication (including any notice of borrowing) delivered by Borrower
Agent on behalf of any Borrower.  Agent
and Lenders may give any notice or communication with a Borrower hereunder to
Borrower Agent on behalf of such Borrower. 
Agent shall have the right, in its discretion, to deal exclusively with
Borrower Agent for any or all purposes under the Loan Documents.  Each Borrower agrees that any notice,
election, communication, representation, agreement or undertaking made on its
behalf by Borrower Agent shall be binding upon and enforceable against it.

 

4.5.         One
Obligation

 

The Loans, LC Obligations and other Obligations
shall constitute one general obligation of Borrowers and (unless otherwise
expressly provided in any Loan Document) shall be secured by Agent’s Lien upon
all Collateral; provided, however, that Agent and each Lender
shall be deemed to be a creditor of, and the holder of a separate claim
against, each Borrower to the extent of any Obligations jointly or severally
owed by such Borrower.

 

4.6.         Effect
of Termination

 

On the
effective date of any termination of the Commitments, all Obligations shall be
immediately due and payable, and any Lender may terminate its Bank Products (including, with the
consent of Agent, any Cash Management Services).  All undertakings of Borrowers contained in
the Loan Documents shall survive any termination, and Agent shall retain its
Liens

 

43

 

in the Collateral and all of its rights and remedies under the Loan
Documents until Full Payment of the Obligations.  Notwithstanding Full Payment of the
Obligations, Agent shall not be required to terminate its Liens in any Collateral
unless, with respect to any damages Agent may incur as a result of the dishonor
or return of Payment Items applied to Obligations, Agent receives (a) a written
agreement, executed by Borrowers and any Person whose advances are used in
whole or in part to satisfy the Obligations, indemnifying Agent and Lenders
from any such damages; or (b) such Cash Collateral as Agent, in its discretion,
deems necessary to protect against any such damages.  The provisions of Sections 2.2, 3.4, 3.6, 3.7, 3.9, 5.4,  5.8, 12, 14.2, 14.3 and this Section and the obligation of each Obligor
and Lender with respect to each indemnity given by it in any Loan Document,
shall survive Full Payment of the Obligations and (unless expressly provided)
any release relating to this credit facility.

 

Section 5.              PAYMENTS

 

5.1.         General
Payment Provisions

 

All payments
of Obligations shall be made in Dollars, without offset, counterclaim or
defense of any kind, free of (and without deduction for) any Taxes, and in
immediately available funds, not later than 1:00 p.m. on the due date.  Any payment after such time shall be deemed
made on the next Business Day.  Borrowers
may, at the time of payment, specify to Agent the Obligations to which such
payment is to be applied, but Agent shall in all events retain the right to
apply such payment in such manner as Agent, subject to the provisions hereof,
may determine to be appropriate.  If any
payment under the Loan Documents shall be stated to be due on a day other than
a Business Day, the due date shall be extended to the next Business Day and
such extension of time shall be included in any computation of interest and
fees.  Any payment of a LIBOR Loan prior
to the end of its Interest Period shall be accompanied by all amounts due under
Section 3.9.  Any prepayment of Loans shall be applied
first to Base Rate Loans and then to LIBOR Loans.

 

5.2.         Repayment
of Revolver Loans

 

Revolver Loans
shall be due and payable in full on the Revolver Termination Date, unless
payment is sooner required hereunder. 
Revolver Loans may be prepaid from time to time, without penalty or
premium.  Notwithstanding anything herein
to the contrary, if an Overadvance exists, Borrowers shall, on the sooner of
Agent’s demand or the first Business Day after any Borrower has knowledge
thereof, repay the outstanding Revolver Loans in an amount sufficient to reduce
the principal balance of Revolver Loans to the Borrowing Base.

 

5.3.         Payment
of Other Obligations

 

Obligations
other than Loans, including LC Obligations and Extraordinary Expenses, shall be paid by
Borrowers as provided in the Loan Documents or, if no payment date is
specified, on demand.

 

5.4.         Marshaling;
Payments Set Aside

 

None of Agent
or Lenders shall be under any obligation to marshal any assets in favor of any
Obligor or against any Obligations.  If
any Obligor makes a payment to Agent or Lenders, or if Agent or any Lender
receives payment from the proceeds of Collateral, exercise of setoff or

 

44

 

otherwise, and such payment is subsequently invalidated or required to
be repaid to a trustee, receiver or any other Person, then the Obligations
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 received and any enforcement or setoff had not occurred.

 

5.5.         Post-Default
Allocation of Payments

 

5.5.1.          Allocation

 

Notwithstanding
anything herein to the contrary, during an Event of Default, monies to be
applied to the Obligations, whether arising from payments by Obligors,
realization on Collateral or otherwise, shall be allocated as follows:

 

(a)           first, to all costs and expenses,
including Extraordinary Expenses owing to Agent;

 

(b)           second, to all amounts owing to Agent
on Protective Advances;

 

(c)           third, to all amounts owing to Issuing
Bank on LC Obligations;

 

(d)           fourth, to all Obligations
constituting fees (excluding amounts relating to Bank Products);

 

(e)           fifth, to all Obligations constituting
interest (excluding amounts relating to Bank Products);

 

(f)            sixth, to provide Cash Collateral for
outstanding Letters of Credit;

 

(g)           seventh, to all other Obligations,
other than Bank Product Debt; and

 

(h)           last, to Bank Product Debt.

 

Amounts shall
be applied to each category of Obligations set forth above until Full Payment
thereof and then to the next category. 
If amounts are insufficient to satisfy a category, they shall be applied
on a pro rata basis among the Obligations in the category.  Amounts distributed with respect to any Bank
Product Debt shall be the lesser of the applicable Bank Product Amount last
reported to Agent or the actual Bank Product Debt as calculated by the
methodology reported to Agent for determining the amount due.  Agent shall have no obligation to calculate
the amount to be distributed with respect to any Bank Product Debt, but may
rely upon written notice of the amount (setting forth a reasonably detailed
calculation) from the holder of the Bank Product Debt.  In the absence of such notice, Agent may
assume the amount to be distributed is the Bank Product Amount last reported to
it.  The allocations set forth in this
Section are solely to determine the rights and priorities of Agent and Lenders
as among themselves, and may be changed by agreement among them without the
consent of any Obligor.  This Section is
not for the benefit of or enforceable by any Borrower.

 

5.5.2.          Erroneous Application

 

Agent shall
not be liable for any application of amounts made by it in good faith and, if
any such application is subsequently determined to have been made in error, the
sole

 

45

 

recourse of any Lender or other Person to which such amount should have
been made shall be to recover the amount from the Person that actually received
it (and, if such amount was received by any Lender, such Lender hereby agrees
to return it).

 

5.6.         Application
of Payments

 

The ledger
balance in the main Payment Account as of the end of a Business Day shall be
applied to the Obligations at the beginning of the next Business Day.  Each Borrower irrevocably waives the right to
direct the application of any payments or Collateral proceeds, and agrees that
Agent shall have the continuing, exclusive right to apply and reapply same against
the Obligations, in such manner as Agent deems advisable, notwithstanding any
entry by Agent in its records.  If, as a
result of Agent’s receipt of Payment Items or proceeds of Collateral, a credit
balance exists, the balance shall not accrue interest in favor of Borrowers and
shall be made available to Borrowers as long as no Default or Event of Default
exists.

 

5.7.         Loan
Account; Account Stated

 

5.7.1.          Loan
Account

 

Agent shall
maintain in accordance with its usual and customary practices an account or
accounts (“Loan Account”) evidencing the Debt of Borrowers resulting
from each Loan or issuance of a Letter of Credit from time to time, including
the amount of principal and interest payable and outstanding LC
Obligations.  Any failure of Agent to record
anything in the Loan Account, or any error in doing so, shall not limit or
otherwise affect the obligation of Borrowers to pay any amount owing
hereunder.  Agent may maintain a single
Loan Account in the name of Borrower Agent, and each Borrower confirms that
such arrangement shall have no effect on the joint and several character of its
liability for the Obligations.

 

5.7.2.          Entries
Binding

 

Entries made
in the Loan Account shall constitute rebuttably presumptive evidence of the
information contained therein.  If any
information contained in the Loan Account is provided to or inspected by any
Person, then such information shall be conclusive and binding on such Person
for all purposes absent manifest error, except to the extent such Person
notifies Agent in writing within thirty (30) days after receipt or inspection
that specific information is subject to dispute.

 

5.8.         Gross
Up for Taxes

 

If Borrowers
shall be required by Applicable Law to withhold or deduct any Taxes (except
Excluded Taxes) from or in respect of any sum payable under any Loan Documents,
(a) the sum payable to Agent or such Lender shall be increased as may be
necessary so that, after making all required withholding or deductions, Agent
or such Lender (as the case may be) receives an amount equal to the sum it
would have received had no such withholding or deductions been made; (b)
Borrowers shall make such withholding or deductions; and (c) Borrowers shall
pay the full amount withheld or deducted to the relevant taxing or other
authority in accordance with Applicable Law. 
If Agent or any Lender determines that it has received a refund, credit
or other reduction of taxes in respect of any Taxes paid by Borrowers pursuant
to this Section, such Person
shall, within thirty (30) days from the date of receipt of

 

46

 

such refund or
filing of the tax return giving rise to such credit or other reduction, pay
over the amount of the refund, credit or tax reduction to Borrowers (but only
to the extent of Taxes paid by Borrowers pursuant to this Section), net of all reasonable
out-of-pocket expenses of such Person and without interest (other than interest
paid by the relevant taxing authority with respect to a refund).

 

5.9.         Withholding Tax Exemption

 

At least five
Business Days prior to the first date for payment of interest or fees hereunder
to a Foreign Lender, the Foreign Lender shall deliver to Borrowers and Agent
two duly completed copies of IRS Form W-8BEN or W-8ECI (or any subsequent
replacement or substitute form therefor), certifying that such Lender can
receive payment of Obligations without deduction or withholding of any United
States federal income taxes.  Each
Foreign Lender shall deliver to Borrowers and Agent two additional copies of
such form before the preceding form expires or becomes obsolete or after the occurrence
of any event requiring a change in the form, as well as any amendments,
extensions or renewals thereof as may be reasonably requested by Borrowers or
Agent, in each case, certifying that the Foreign Lender can receive payment of
Obligations without deduction or withholding of any such taxes, unless an event
(including any change in treaty or law) has occurred that renders such forms
inapplicable or prevents the Foreign Lender from certifying that it can receive
payments without deduction or withholding of such taxes.  During any period that a Foreign Lender does
not or is unable to establish that it can receive payments without deduction or
withholding of such taxes, other than by reason of an event (including any
change in treaty or law) that occurs after it becomes a Lender, Agent may
withhold taxes from payments to such Foreign Lender at the applicable statutory
and treaty rates, and Borrowers shall not be required to pay any additional
amounts under this Section as a result of such withholding.

 

5.10.       Nature and Extent of Each
Borrower’s Liability

 

5.10.1.        Joint and Several Liability

 

Each Borrower agrees that it is
jointly and severally liable for, and absolutely and unconditionally guarantees
to Agent and Lenders the prompt payment and performance of, all Obligations and
all agreements under the Loan Documents. 
Each Borrower agrees that its guaranty obligations hereunder constitute
a continuing guaranty of payment and performance and not of collection, that
such obligations shall not be discharged until Full Payment of the Obligations,
and that such obligations are absolute and unconditional, irrespective of (a)
the genuineness, validity, regularity, enforceability, subordination or any
future modification of, or change in, any Obligations or Loan Document, or any
other document, instrument or agreement to which any Obligor is or may become a
party or liable; (b) the absence of any action to enforce this Agreement
(including this Section) or any other Loan Document, or any waiver, consent or
indulgence of any kind by Agent or any Lender with respect thereto; (c) the
existence, value or condition of, or failure to perfect a Lien or to preserve
rights against, any security or guaranty for the Obligations or any action, or
the absence of any action, by Agent or any Lender in respect thereof (including
the release of any security or guaranty); (d) the insolvency of any Obligor;
(e) any election by Agent or any Lender in an Insolvency Proceeding for the
application of Section 1111(b)(2) of the Bankruptcy Code; (f) any borrowing or
grant of a Lien by any other Borrower, as debtor-in-possession under Section
364 of the Bankruptcy Code or otherwise; (g) the

 

47

 

disallowance
of any claims of Agent or any Lender against any Obligor for the repayment of
any Obligations under Section 502 of the Bankruptcy Code or otherwise; or (h)
any other action or circumstances that might otherwise constitute a legal or
equitable discharge or defense of a surety or guarantor, except Full Payment of
all Obligations.

 

5.10.2.        Waivers

 

(a)           Each
Borrower expressly waives all rights that it may have now or in the future
under any statute, at common law, in equity or otherwise, to compel Agent or
Lenders to marshal assets or to proceed against any Obligor, other Person or
security for the payment or performance of any Obligations before, or as a
condition to, proceeding against such Borrower. 
It is agreed among each Borrower, Agent and Lenders that the provisions
of this Section are of the essence of the transaction contemplated by the Loan
Documents and that, but for such provisions, Agent and Lenders would decline to
make Loans and issue Letters of Credit. 
Notwithstanding anything to the contrary in any Loan Document, and except
as set forth in Section 5.10.3,
each Borrower expressly waives all rights at law or in equity to subrogation,
reimbursement, exoneration, contribution, indemnification or set off, as well
as all defenses available to a surety, guarantor or accommodation co-obligor.  Each Borrower acknowledges that its guaranty
pursuant to this Section is necessary to the conduct and promotion of its
business, and can be expected to benefit such business.

 

(b)           Agent
and Lenders may, in their discretion, pursue such rights and remedies as they
deem appropriate, including realization upon Collateral or any Real Estate by
judicial foreclosure or non-judicial sale or enforcement, without affecting any
rights and remedies under this Section 5.10.  If, in the exercise of any rights or
remedies, Agent or any Lender shall forfeit any of its rights or remedies,
including its right to enter a deficiency judgment against any Borrower or any
other Person, whether because of any applicable laws pertaining to “election of remedies” or otherwise, each
Borrower consents to such action by Agent or such Lender and waives any claim
based upon such action, even if the action may result in loss of any rights of
subrogation that any Borrower might otherwise have had but for such action.  Any election of remedies that results in
denial or impairment of the right of Agent or any Lender to seek a deficiency
judgment against any Borrower shall not impair any other Borrower’s obligation
to pay the full amount of the Obligations. 
Each Borrower waives all rights and defenses arising out of an election
of remedies, such as nonjudicial foreclosure with respect to any security for
the Obligations, even though that election of remedies destroys such Borrower’s
rights of subrogation against any other Person. 
If Agent bids at any foreclosure or trustee’s sale or at any private
sale, Agent may bid all or a portion of the Obligations and the amount of such
bid need not be paid by Agent but shall be credited against the
Obligations.  The amount of the
successful bid at any such sale, whether Agent or any other Person 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
5.10, notwithstanding that any present or future law or court
decision 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.

 

48

 

5.10.3.        Extent of Liability; Contribution

 

(a)           Notwithstanding
anything herein to the contrary, each Borrower’s liability under this Section 5.10 shall be limited to the
greater of (i) all amounts for which such Borrower is primarily liable, as
described below, and (ii) such Borrower’s Allocable Amount.

 

(b)           If
any Borrower makes a payment under this Section
5.10 of any Obligations (other than amounts for which such Borrower
is primarily liable) (a “Guarantor Payment”) that, taking into account
all other Guarantor Payments previously or concurrently made by any other
Borrower, exceeds the amount that such Borrower would otherwise have paid if each
Borrower had paid the aggregate Obligations satisfied by such Guarantor
Payments in the same proportion that such Borrower’s Allocable Amount bore to
the total Allocable Amounts of all Borrowers, then such Borrower shall be
entitled to receive contribution and indemnification payments from, and to be
reimbursed by, each other Borrower for the amount of such excess, pro rata
based upon their respective Allocable Amounts in effect immediately prior to
such Guarantor Payment.  The “Allocable
Amount” for any Borrower shall be the maximum amount that could then be
recovered from such Borrower under this Section
5.10 without rendering such payment voidable or avoidable under
Section 548 of the Bankruptcy Code or under any applicable state fraudulent
transfer or conveyance act, or similar statute or common law.

 

(c)           Nothing
contained in this Section 5.10
shall limit the liability of any Borrower to pay Loans made directly or
indirectly to that Borrower (including Loans advanced to any other Borrower and
then re-loaned or otherwise transferred to, or for the benefit of, such
Borrower), LC Obligations relating to Letters of Credit issued to support such
Borrower’s business, and all accrued interest, fees, expenses and other related
Obligations with respect thereto, for which such Borrower shall be primarily
liable for all purposes hereunder.  Agent
and Lenders shall have the right, at any time in their discretion, to condition
Loans and Letters of Credit upon a separate calculation of borrowing
availability for each Borrower and to restrict the disbursement and use of such
Loans and Letters of Credit to such Borrower.

 

5.10.4.        Joint Enterprise

 

Each Borrower has requested that Agent
and Lenders make the credit facility established hereunder available to
Borrowers on a combined basis, in order to finance Borrowers’ business most
efficiently and economically.  Borrowers’
business is a mutual and collective enterprise, and Borrowers believe that
consolidation of their credit facility will enhance the borrowing power of each
Borrower and ease the administration of their relationship with Lenders, all to
the mutual advantage of Borrowers. 
Borrowers acknowledge and agree that Agent’s and Lenders’ willingness to
extend credit to Borrowers and to administer the Collateral on a combined
basis, as set forth herein, is done solely as an accommodation to Borrowers and
at Borrowers’ request.

 

5.10.5.        Subordination

 

Each Borrower hereby
subordinates any claims, including any right of payment, subrogation,
contribution and indemnity, that it may have at any time against any other
Obligor, howsoever arising, to the Full Payment of all Obligations.

 

49

 

Section 6.              CONDITIONS PRECEDENT

 

6.1.         Conditions Precedent to
Initial Loans

 

In addition to
the conditions set forth in Section 6.2,
the Lenders shall not be required to fund any requested Loan, issue any Letter
of Credit, or otherwise extend credit to Borrowers hereunder, until the
date (“Closing Date”) that each of the following conditions has been
satisfied:

 

(a)           Appropriate
Notes shall have been executed by Borrowers and delivered to each Lender that
requests issuance of a Note.  Each other
Loan Document shall have been duly executed and delivered to Agent by each of
the signatories thereto, and each Obligor shall be in compliance with all terms
thereof.

 

(b)           Agent
shall have received acknowledgments of all filings or recordations necessary to
perfect its Liens in the Collateral, as well as UCC and Lien searches and other
evidence satisfactory to Agent that such Liens are the only Liens upon the
Collateral, except Permitted Liens.

 

(c)           Agent
shall have received duly executed Deposit Account Control Agreements for each
Deposit Account of Borrowers and any related lockbox, in form and substance,
and with financial institutions, satisfactory to Agent to the extent required
pursuant to Section 8.2.3.

 

(d)           Agent
shall have received certificates, in form and substance satisfactory to it,
from a knowledgeable Senior Officer of each Borrower certifying that, after
giving effect to the initial Loans and transactions hereunder, (i) such
Borrower is Solvent; (ii) no Default or Event of Default exists; (iii) the
representations and warranties set forth in Section
9 are true and correct; and (iv) such Borrower has complied with all
agreements and conditions to be satisfied by it under the Loan Documents.

 

(e)           Agent
shall have received a certificate of a duly authorized officer of each Obligor,
certifying (i) that attached copies of such Obligor’s Organic Documents are
true and complete, and in full force and effect, without amendment except as
shown, (ii) that an attached copy of resolutions authorizing execution and
delivery of the Loan Documents is true and complete, and that such resolutions
are in full force and effect, were duly adopted, have not been amended,
modified or revoked, and constitute all resolutions adopted with respect to
this credit facility, and (iii) to the title, name and signature of each Person
authorized to sign the Loan Documents.  Agent
may conclusively rely on this certificate until it is otherwise notified by the
applicable Obligor in writing.

 

(f)            Agent
shall have received a written opinion of Kilpatrick Stockton LLP, counsel to
Borrowers, in form and substance satisfactory to Agent.

 

(g)           Agent
shall have received copies of the charter documents of each Obligor, certified
as appropriate by the Secretary of State or another official of such Obligor’s
jurisdiction of organization.  Agent
shall have received good standing certificates for each Obligor, issued by the
Secretary of State or other appropriate official of such Obligor’s

 

50

 

jurisdiction of organization and each
jurisdiction where such Obligor’s conduct of business or ownership of Property
necessitates qualification.

 

(h)           No
material adverse change in the financial condition of either Borrower,
individually or all the Obligors, taken as a whole or in the quality, quantity
or value of the Eligible Accounts and Eligible Inventory taken as a whole shall
have occurred since December 31, 2005.

 

(i)            Borrowers
shall have executed and delivered to Agent a pledge of 65% of the Equity
Interests of Borrowers in SE Holding.

 

(j)            Borrowers
shall have paid all fees and expenses to be paid to Agent and Lenders on the
Closing Date.

 

6.2.         Conditions Precedent to
All Credit Extensions

 

Agent, Issuing
Bank and Lenders shall not be required to fund any Loans, arrange for issuance
of any Letters of Credit or grant any other accommodation to or for the benefit
of Borrowers, unless the following conditions are satisfied or waived:

 

(a)           No
Default or Event of Default shall exist at the time of, or result from, such
funding, issuance or grant;

 

(b)           The
representations and warranties of each Obligor in the Loan Documents shall be
true and correct on the date of, and upon giving effect to, such funding,
issuance or grant (except for representations and warranties that expressly
relate to an earlier date);

 

(c)           All
conditions precedent set forth in any other Loan Document shall have been
satisfied;

 

(d)           No
event shall have occurred or circumstance exist that has or could reasonably be
expected to have a Material Adverse Effect; and

 

(e)           With
respect to issuance of a Letter of Credit, the LC Conditions shall have been
satisfied.

 

Each request
(or deemed request) by Borrowers for funding of a Loan, issuance of a Letter of
Credit or grant of an accommodation shall constitute a representation by
Borrowers that the foregoing conditions are satisfied on the date of such
request and on the date of such funding, issuance or grant.  As an additional condition to any funding,
issuance or grant, Agent shall have received such other information, documents,
instruments and agreements as it deems appropriate in connection therewith.

 

6.3.         Limited Waiver of
Conditions Precedent

 

If Agent,
Issuing Bank or Lenders fund any Loans, arrange for issuance of any Letters of
Credit or grant any other accommodation when any conditions precedent are not
satisfied (regardless of whether the lack of satisfaction was known or unknown
at the time), it shall not

 

51

 

operate as a
waiver of (a) the right of Agent, Issuing Bank and Lenders to insist upon
satisfaction of all conditions precedent with respect to any subsequent
funding, issuance or grant; nor (b) any Default or Event of Default due to such
failure of conditions or otherwise.

 

Section 7.              COLLATERAL

 

7.1.         Grant of Security
Interest

 

To secure the
prompt payment and performance of all Obligations, each Borrower hereby grants
to Agent, for the benefit of Secured Parties, a continuing security interest in
and Lien upon all personal Property of such Borrower, including all of the
following Property, whether now owned or hereafter acquired, and wherever
located:

 

(a)           all
Accounts;

 

(b)           all
Chattel Paper, including electronic chattel paper;

 

(c)           all
Commercial Tort Claims described on Schedule 9.1.17(a)
hereto;

 

(d)           all
Deposit Accounts;

 

(e)           all
Documents;

 

(f)            all
General Intangibles, including Payment Intangibles, Software and Intellectual
Property;

 

(g)           all
Goods, including Inventory, Equipment and fixtures;

 

(h)           all
Instruments;

 

(i)            all
Investment Property;

 

(j)            all
Letter-of-Credit Rights;

 

(k)           all
Supporting Obligations;

 

(l)            all
monies, whether or not in the possession or under the control of Agent, a
Lender, or a bailee or Affiliate of Agent or a Lender, including any Cash Collateral;

 

(m)          all
accessions to, substitutions for, and all replacements, products, and cash and
non-cash proceeds of the foregoing, including proceeds of and unearned premiums
with respect to insurance policies, and claims against any Person for loss,
damage or destruction of any Collateral; and

 

(n)           all
books and records (including customer lists, files, correspondence, tapes,
computer programs, print-outs and computer records) pertaining to the
foregoing.

 

52

 

7.2.         Lien on Deposit Accounts;
Cash Collateral

 

7.2.1.          Deposit Accounts

 

To further secure the prompt
payment and performance of all Obligations, each Borrower hereby grants to
Agent, for the benefit of Secured Parties, a continuing security interest in
and Lien upon all of such Borrower’s right, title and interest in and to each
Deposit Account of such Borrower and any deposits or other sums at any time
credited to any such Deposit Account, including any sums in any blocked or
lockbox accounts or in any accounts into which such sums are swept.  Each Borrower authorizes and directs each
bank or other depository to deliver to Agent upon its written demand therefore,
made at any time that an Event of Default exists or the Availability is less
than $25,000,000 and without notice to such Borrower (such notice being hereby
waived), all balances in each Deposit Account maintained by such Borrower with
such depository for application to the Obligations then outstanding.  Each Borrower irrevocably appoints Agent as
such Borrower’s attorney in fact to collect such balances to the extent any
such delivery is not so made.

 

7.2.2.          Cash Collateral

 

Any Cash Collateral may be
invested, in Agent’s discretion, in Cash Equivalents, but Agent shall have no
duty to do so, regardless of any agreement, understanding or course of dealing
with any Borrower, and shall have no responsibility for any investment or
loss.  Each Borrower hereby grants to
Agent, for the benefit of Secured Parties, a security interest in all Cash
Collateral held from time to time and all proceeds thereof, as security for the
Obligations, whether such Cash Collateral is held in the Cash Collateral
Account or elsewhere.  Agent may apply
Cash Collateral to the payment of any Obligations, in accordance with Section 5
hereof as they become due and payable. 
The Cash Collateral Account and all Cash Collateral shall be under the
sole dominion and control of Agent.  No
Borrower or other Person claiming through or on behalf of any Borrower shall
have any right to any Cash Collateral, until Full Payment of all Obligations.

 

7.3.         Real Estate Collateral

 

7.3.1.          Lien on Real Estate

 

The Obligations shall also be
secured by Mortgages upon all Real Estate owned by Borrowers which is subject
to a Mortgage on the Closing Date.

 

7.3.2.          Collateral Assignment of Leases

 

To further secure the prompt
payment and performance of all Obligations, each Borrower hereby transfers and
assigns to Agent, for the benefit of Secured Parties, all of such Borrower’s
right, title and interest in, to and under all now or hereafter existing leases
of real Property to which such Borrower is a party, whether as lessor or
lessee, and all extensions, renewals and modifications thereof.

 

7.4.         Other Collateral

 

7.4.1.          Commercial Tort Claims

 

Borrowers
shall promptly notify Agent in writing if any Borrower has a Commercial Tort
Claim (other than, as long as no Default or Event of Default exists, a
Commercial Tort Claim for less than $2,000,000) and, upon Agent’s request,
shall promptly execute such documents and

 

53

 

take such
actions as Agent deems appropriate to confer upon Agent (for the benefit of
Secured Parties) a duly perfected, first priority Lien upon such claim.

 

7.4.2.          Certain After-Acquired Collateral

 

Borrowers shall promptly notify
Agent in writing if, after the Closing Date, any Borrower obtains any interest
in any material Collateral
consisting of Deposit Accounts, Chattel Paper, Documents, Instruments,
Intellectual Property, Investment Property or Letter-of-Credit Rights and, upon
Agent’s request, shall promptly execute such documents and take such actions as
Agent deems necessary to effect Agent’s duly perfected, first priority Lien
upon such Collateral, and use its reasonable best efforts to obtain appropriate
possession, control agreements or Lien Waivers. 
If any such after-acquired Collateral is in the possession of a third
party, at Agent’s request, Borrowers shall obtain an acknowledgment that such
third party holds the Collateral for the benefit of Agent.

 

7.5.         No Assumption of
Liability

 

The Lien on
Collateral granted hereunder is given as security only and shall not subject
Agent or any Lender to, or in any way modify, any obligation or liability of
Borrowers relating to any Collateral.

 

7.6.         Further Assurances

 

Promptly upon
request, Borrowers shall deliver such instruments, assignments, title certificates,
or other documents or agreements, and shall take such actions, as Agent deems
appropriate under Applicable Law to evidence or perfect its Lien on any
Collateral, or otherwise to give effect to the intent of this Agreement.  Each Borrower authorizes Agent to file any
financing statement that indicates the Collateral as “all assets” or “all personal property” of such Borrower, or words to similar
effect, and ratifies any action taken by Agent before the Closing Date to
effect or perfect its Lien on any Collateral.

 

7.7.         Foreign Subsidiary Stock

 

Notwithstanding
anything to the contrary in Section 7.1,
Collateral shall include only 65% of the voting stock of any Foreign
Subsidiary, to the extent that such voting stock is included in the Collateral.

 

Section 8.              COLLATERAL
ADMINISTRATION

 

8.1.         Borrowing Base
Certificates

 

On or prior to
the twentieth (20th) day of each calendar month, Borrowers shall
deliver to Agent (and Agent shall promptly deliver same to Lenders) a Borrowing
Base Certificate prepared as of the close of business of the previous calendar
month; provided, however, that if Availability of Borrowers is
less than $30,000,000 or if an Event of Default then exists and is continuing,
Borrowers shall deliver to Agent (and Agent shall upon request from a Lender,
promptly deliver to such Lender) a Borrowing Base Certificate on or before the
fourth (4th) Business Day of each week, prepared as of the close of
business in the last Business Day of the preceding week, until such time as
Availability of Borrowers is equal to or exceeds $30,000,000

 

54

 

or such Event
of Default is cured or waived.  All
calculations of Availability in any Borrowing Base Certificate shall originally
be made by Borrowers and certified by a Responsible Officer; provided
that Agent may from time to time review and adjust any such calculation (a) to
reflect its reasonable estimate of declines in value of any Collateral, due to
collections received in the Deposit Accounts or otherwise; and (b) to the
extent the calculation is not made in accordance with this Agreement or does
not accurately reflect the Availability Reserve.

 

8.2.         Administration of
Eligible Accounts

 

8.2.1.          Records and Schedules of Accounts

 

Each Borrower shall keep
accurate and complete records of its Accounts, including all payments and
collections thereon, and shall submit to Agent, on such periodic basis as Agent
may request, a sales and collections report solely with respect to Accounts, in
form satisfactory to Agent (which form shall be substantially consistent with
forms required by Agent from its other customers in the same or similar
business as Borrowers (other than changes necessary due to Borrowers’ specific
business operations).  Each Borrower
shall also provide to Agent, together with the Borrowing Base Certificate
delivered in accordance with Section 8.1,
a detailed aged trial balance of all Accounts as of the end of the preceding
period, specifying each Account’s Account Debtor name and address, amount,
invoice date and due date, and, to the extent that a Borrower grants any
discount, allowance, credit, authorized return or dispute that is not shown on
the face of the invoice for the Account involved, showing any such discount,
allowance, credit, authorized return or dispute and including such proof of
delivery, copies of invoices and invoice registers, copies of related
documents, repayment histories, status reports and other information as Agent
may reasonably request.  If Accounts in
an aggregate face amount of $2,000,000 or more cease to be Eligible Accounts,
Borrowers shall notify Agent of such occurrence promptly (and in any event
within two (2) Business Days) after any Borrower has knowledge thereof.

 

8.2.2.          Taxes

 

If an Eligible Account of any
Borrower includes a charge for any Taxes, Agent is authorized, in its
discretion from and after the occurrence and during the continuation of an
Event of Default, to pay the amount thereof to the proper taxing authority for
the account of such Borrower and to charge Borrowers therefor; provided, however,
that neither Agent nor Lenders shall be liable for any Taxes that may be due
from Borrowers or with respect to any Collateral.

 

8.2.3.          Account
Verification

 

Whether or not an Event of
Default exists, Agent shall have the right at any time, in the name of Agent,
any designee of Agent or any Borrower to verify the validity, amount or any
other matter relating to any Eligible Accounts of Borrowers by mail, telephone
or otherwise; provided, however, that Agent shall provide prior
written notice to Borrowers of its intent to seek such verification.  Borrowers shall cooperate fully with Agent in
an effort to facilitate and promptly conclude any such verification process.

 

55

 

8.2.4.          Maintenance
of Deposit Account

 

Borrowers shall maintain
Deposit Accounts pursuant to lockbox or other arrangements acceptable to
Agent.  Borrowers shall obtain a Deposit
Account Control Agreement (in form and substance satisfactory to Agent) from
each lockbox servicer and Deposit Account bank, establishing Agent’s control
over and Lien in the lockbox or Deposit Account, requiring immediate deposit of
all remittances received in the lockbox to a Deposit Account or upon the
delivery of a notice by Agent to the applicable Deposit Account bank after the
occurrence and during the continuation of an Event of Default or at any time
that Availability of the Borrowers is less than $25,000,000 immediate transfer
of all funds in the Deposit Account to the Payment Account, as applicable,
until such Event of Default is cured or waived or Availability of the Borrowers
is equal to or greater than $25,000,000 for ninety (90) consecutive days
(whereupon which Agent shall deliver a notice to the applicable Deposit Account
bank canceling such transfer instructions) and waiving offset rights of such
servicer or bank against any funds in the lockbox or Deposit Account, except
offset rights for customary administrative charges.  Neither Agent nor Lenders assume any responsibility
to Borrowers for any lockbox arrangement or Deposit Account, including any
claim of accord and satisfaction or release with respect to any Payment Items
accepted by any bank.  Notwithstanding
anything to the contrary in this Section 8.2.4, for so long as no Event of
Default exists and the Availability of Borrowers is equal to or greater than
$25,000,000, the Deposit Accounts of Borrowers maintained in Canada and Mexico
shall not be subject to this Section 8.2.4.

 

8.2.5.          Proceeds
of Collateral

 

Borrowers shall request in
writing and otherwise take all reasonable steps to ensure that all payments on
Accounts or otherwise relating to Collateral are made directly to a Deposit
Account (or a lockbox relating to a Deposit Account).  If any Borrower or Subsidiary receives cash
or Payment Items with respect to any Collateral, it shall promptly (not later
than the next Business Day) deposit same into a Deposit Account subject to a
Deposit Account Control Agreement.

 

8.3.         Administration of
Inventory

 

8.3.1.          Records
and Reports of Inventory

 

Each Borrower shall keep
accurate and complete records of its Inventory, including costs and daily
withdrawals and additions, and shall submit to Agent inventory reports with
respect to Inventory in form satisfactory to Agent (which reports shall be
substantially consistent with reports required by Agent from its other
customers in the same or similar business as Borrowers (other than changes
necessary due to Borrowers’ specific business operations), on such periodic
basis as Agent may request but in no event more frequently than once per
calendar month if no Default or Event of Default exists.  Each Borrower shall conduct a physical
inventory of Inventory at least once per calendar year (and on a more frequent
basis if requested by Agent when an Event of Default exists) and periodic cycle
counts consistent with historical practices, and shall provide to Agent a
report based on each such inventory and count promptly upon completion thereof,
together with such supporting information as Agent may reasonably request.  Agent may participate in and observe each
inventory or physical count of Inventory, at Borrowers’ expense.

 

56

 

8.3.2.          Returns of Inventory

 

No Borrower shall return any
Inventory to a supplier, vendor or other Person, whether for cash, credit or
otherwise, unless (a) such return is in the Ordinary Course of Business; (b) no
Default, Event of Default or Overadvance exists or would result therefrom; and
(c) any payment received by a Borrower for a return is promptly remitted to
Agent for application to the Obligations to the extent required under Section 8.2.4.

 

8.3.3.          Acquisition, Sale and Maintenance

 

No Borrower shall acquire or
accept Eligible Inventory on consignment or approval unless the Consigned
Inventory Conditions are met, and shall use its best efforts to assure that all
Eligible Inventory is produced in accordance with all material aspects of
Applicable Law, including the FLSA (with respect to Eligible Inventory that is
produced in the United States of America). 
No Borrower shall sell any Eligible Inventory on approval or any other
basis under which the customer may return or require a Borrower to repurchase
such Eligible Inventory (except Consigned Inventory for which the Consigned
Inventory Conditions are met) (it being acknowledged that the foregoing does
not include the discretionary decisions on the part of a Borrower to repurchase
Eligible Inventory and Eligible Inventory sold on consignment).  Borrowers shall use, store and maintain all
Eligible Inventory with reasonable care and caution, in accordance with
applicable standards of any insurance and in conformity with all material
respects of all Applicable Law, and shall make current rent payments (within
applicable grace periods provided for in leases) at all locations where any
Eligible Inventory is located.

 

8.4.         Administration of
Equipment

 

8.4.1.          Records
and Schedules of Equipment

 

Each Borrower shall keep
accurate and complete records of its Equipment which has a fair market value in
excess of $500,000, including kind, quality, quantity, cost, acquisitions and
dispositions thereof.  Promptly upon
request, Borrowers shall deliver to Agent evidence of their ownership or
interests in any Equipment which has a fair market value in excess of $500,000.

 

8.4.2.          Dispositions
of Equipment

 

No Borrower shall sell, lease
or otherwise dispose of any Equipment, without the prior written consent of
Agent, other than (a) a Permitted Asset Disposition; (b) replacement of
Equipment that is worn, damaged or obsolete with Equipment of like function and
value, if the replacement Equipment is acquired substantially contemporaneously
with such disposition and is free of Liens other than Permitted Liens; (c)
dispositions of Equipment by a Borrower to another Borrower or any Subsidiary
Guarantor; and (d) as permitted pursuant to Section
10.2.6.

 

8.4.3.          Condition
of Equipment

 

Each Borrower shall use its
best efforts to ensure that material Equipment is in good operating condition
and repair, and all necessary replacements and repairs have been made,
reasonable wear and tear excepted.  No
Borrower shall permit any material Equipment to

 

57

 

become affixed
to real Property unless any landlord or mortgagee delivers a Lien Waiver or
similar instrument, except with respect to the Belden Equipment Locations.

 

8.5.         Administration of Deposit
Accounts

 

Schedule
8.5 sets
forth all Deposit Accounts maintained by Borrowers.  Subject to Section
8.2.4, Borrowers shall take all actions necessary to establish Agent’s
control of each such Deposit Account (other than an account exclusively used
for payroll, payroll taxes, employee benefits, workers’ compensation claims,
prepaid insurance, or an account containing not more than $50,000 at any
time).  Each Borrower shall be the sole
account holder of each Deposit Account and shall not allow any other Person
(other than Agent) to have control over a Deposit Account or any Property
deposited therein.  Each Borrower shall
promptly notify Agent of any opening or closing of a Deposit Account and, with
the consent of Agent, will amend Schedule 8.5 to
reflect same.

 

8.6.         General Provisions

 

8.6.1.          Location
of Collateral

 

All tangible items of
Collateral, other than Inventory in transit and Consigned Inventory, shall at
all times be kept by Borrowers at the business locations set forth in Schedule 8.6.1, except that Borrowers
may (a) make sales or other dispositions of Collateral in accordance with Section 10.2.6; and (b) move Collateral to
another location in the United States, upon ten (10) Business Days prior
written notice to Agent.

 

8.6.2.          Insurance
of Collateral; Condemnation Proceeds

 

(a)           Each
Borrower shall maintain insurance with respect to the Collateral, covering
casualty, hazard, public liability, theft, malicious mischief, and such other
risks, in such amounts as are usually insured against by companies of a similar
size engaged in similar businesses in the same geographic area, and with such
insurance companies of standing and reputation no less favorable than those
companies reflected on Schedule 8.6.2
or such other insurer as is reasonably satisfactory to Agent.  From time to time upon request, Borrowers
shall deliver the originals or certified copies of its insurance policies to
Agent.  Unless Agent shall agree
otherwise, each policy shall include satisfactory endorsements (i) showing
Agent as lender loss payee or additional insured, as appropriate; (ii) requiring
thirty (30) days prior written notice to Agent in the event of cancellation of
the policy for any reason whatsoever other than non-payment of premiums (in
which case ten (10) days prior written notice shall be required); and (iii)
specifying that the interest of Agent shall not be impaired or invalidated by
any act or neglect of any Borrower or the owner of the Property, nor by the
occupation of the premises for purposes more hazardous than are permitted by
the policy.  If any Borrower fails to
provide and pay for such insurance, Agent may, at its option, but shall not be
required to, procure the insurance and charge Borrowers therefor.  Each Borrower agrees to deliver to Agent,
promptly as rendered, copies of all material reports made in any reporting forms
to insurance companies.  While no Event
of Default exists, Borrowers may settle, adjust or compromise any insurance
claim, as long as the proceeds are delivered to Agent or otherwise reinvested
pursuant to this Agreement.  If an Event
of Default exists, only Agent shall be authorized to settle, adjust and
compromise such claims.

 

58

 

(b)           Any
proceeds of property or casualty insurance and any awards arising from
condemnation of any Collateral shall be paid to Agent or otherwise reinvested
pursuant to this Agreement.  Any such
proceeds or awards that relate to Inventory shall be applied to payment of the
Revolver Loans, and then to any other Obligations outstanding.  Proceeds from any business interruption
insurance may be used by Borrowers in the Ordinary Course of Business.

 

(c)           Borrowers
may use insurance proceeds or condemnation awards relating to any loss or
destruction of Equipment or Real Estate to repair or replace such Equipment or
Real Estate as long as (i) no Default or Event of Default exists; (ii) such
repair or replacement is promptly undertaken and concluded, in accordance with
plans satisfactory to Agent; (iii) replacement buildings are of comparable
size, quality and utility to the destroyed buildings; (iv) the repaired or
replaced Property is free of Liens, other than Permitted Liens that are not
Purchase Money Liens; (v) Borrowers comply with disbursement procedures for
such repair or replacement as Agent may reasonably require; and (vi) the
aggregate amount of such proceeds or awards from any single casualty or
condemnation does not exceed $5,000,000.

 

8.6.3.          Protection
of Collateral

 

All expenses of protecting,
storing, warehousing, insuring, handling, maintaining and shipping any
Collateral, all Taxes payable with respect to any Collateral (including upon
any sale thereof), and all other payments required to be made by Agent to any
Person to realize upon any Collateral, shall be borne and paid by
Borrowers.  Agent shall not be liable or
responsible in any way for the safekeeping of any Collateral, for any loss or
damage thereto (except for reasonable care in its custody while Collateral is
in Agent’s actual possession), for any diminution in the value thereof, or for
any act or default of any warehouseman, carrier, forwarding agency or other
Person whatsoever, but the same shall be at Borrowers’ sole risk.

 

8.6.4.          Defense
of Title to Collateral

 

Each Borrower shall at all
times use commercially reasonable efforts to defend its title to Collateral and
Agent’s Liens therein against all Persons, claims and demands whatsoever,
except Permitted Liens.

 

8.7.         Power of Attorney

 

Each Borrower
hereby irrevocably constitutes and appoints Agent (and all Persons designated
by Agent) as such Borrower’s true and lawful attorney (and agent-in-fact) for
the purposes provided in this Section. 
Agent, or Agent’s designee, may, without notice and in either its or a
Borrower’s name, but at the cost and expense of Borrowers:

 

(a)           Endorse
a Borrower’s name on any Payment Item or other proceeds of Collateral
(including proceeds of insurance) that come into Agent’s possession or control;
and

 

(b)           During
the existence of an Event of Default, (i) notify any Account Debtors of the
assignment of their Accounts, demand and enforce payment of Accounts, by legal
proceedings or otherwise, and generally exercise any rights and remedies with
respect to Accounts; (ii) settle, adjust, modify, compromise, discharge or
release any Accounts or other Collateral, or any legal proceedings brought to
collect Accounts or Collateral; (iii) sell or assign

 

59

 

any Accounts and other Collateral upon such
terms, for such amounts and at such times as Agent deems advisable; (iv) take
control, in any manner, of any proceeds of Collateral; (v) prepare, file and
sign a Borrower’s name to a proof of claim or other document in a bankruptcy of
an Account Debtor, or to any notice, assignment or satisfaction of Lien or
similar document; (vi) receive, open and dispose of mail addressed to a
Borrower, and notify postal authorities to change the address for delivery
thereof to such address as Agent may designate; (vii) endorse any Chattel
Paper, Document, Instrument, invoice, freight bill, bill of lading, or similar
document or agreement relating to any Accounts, Inventory or other Collateral;
(viii) use a Borrower’s stationery and sign its name to verifications of
Accounts and notices to Account Debtors; (ix) use the information recorded on
or contained in any data processing equipment and computer hardware and
software relating to any Collateral; (x) make and adjust claims under policies
of insurance; (xi) take any action as may be necessary or appropriate to obtain
payment under any letter of credit or banker’s acceptance for which a Borrower
is a beneficiary; and (xii) take all other actions as Agent deems appropriate
to fulfill any Borrower’s obligations under the Loan Documents.

 

Section 9.              REPRESENTATIONS AND
WARRANTIES

 

9.1.         General Representations
and Warranties

 

To induce
Agent and Lenders to enter into this Agreement and to make available the
Commitments, Loans and Letters of Credit, each Borrower represents and warrants
that:

 

9.1.1.          Organization
and Qualification

 

Each Borrower and Subsidiary is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization.  Each
Borrower and Subsidiary is duly qualified, authorized to do business and in
good standing as a foreign corporation in each jurisdiction where failure to be
so qualified could reasonably be expected to have a Material Adverse Effect.

 

9.1.2.          Power
and Authority

 

Each Obligor is duly authorized
to execute, deliver and perform its Loan Documents.  The execution, delivery and performance of
the Loan Documents have been duly authorized by all necessary action, and do
not (a) require any consent or approval of any holders of Equity Interests of
any Obligor, other than those already obtained; (b) contravene the Organic
Documents of any Obligor; (c) violate or cause a default under any Applicable Law
or Material Contract; or (d) result in or require the imposition of any Lien
(other than Permitted Liens) on any Property of any Obligor.

 

9.1.3.          Enforceability

 

Each Loan Document is a legal,
valid and binding obligation of each Obligor party thereto, enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors’
rights generally.

 

60

 

9.1.4.          Capital
Structure

 

Schedule 9.1.4
shows, for each Borrower and Subsidiary, its name, its jurisdiction of
organization, its authorized and issued Equity Interests, the holders of its
Equity Interests, and all agreements binding on such holders with respect to
their Equity Interests.  Each Borrower
has good title to its Equity Interests in its Subsidiaries, free of any Lien
(other than Permitted Liens), and all such Equity Interests are duly issued,
fully paid and non-assessable.  There are
no outstanding options to purchase, warrants, subscription rights, agreements
to issue or sell, convertible interests, phantom rights or powers of attorney
relating to any Equity Interests of any Borrower or Subsidiary.

 

9.1.5.          Corporate
Names; Locations

 

During the five years preceding
the Closing Date, except as shown on Schedule 9.1.5,
no Borrower or Subsidiary has been known as or used any corporate, fictitious
or trade names, has been the surviving corporation of a merger or combination,
or has acquired any substantial part of the assets of any Person.  The chief executive offices and other places
of business of Borrowers and Subsidiaries are shown on Schedule 8.6.1.  During the five years preceding the Closing
Date, no Borrower or Subsidiary has had any other office or place of business.

 

9.1.6.          Title
to Properties; Priority of Liens

 

Each Borrower and Subsidiary
has good and marketable title to (or valid leasehold interests in) all of its
material Real Estate, and good title to all of its material personal Property,
including all material Property reflected in any financial statements delivered
to Agent or Lenders, in each case free of Liens except Permitted Liens.  Each Borrower and Subsidiary has paid and
discharged all lawful claims that, if unpaid, could become a Lien on its
Properties, other than Permitted Liens. 
All Liens of Agent in the Collateral are duly perfected, first priority
Liens, subject only to Permitted Liens that are not required to be junior to
Agent’s Liens pursuant to Section 10.2.2.

 

9.1.7.          Accounts

 

Agent may rely, in determining
which Accounts are Eligible Accounts, on all statements and representations
made by Borrowers with respect thereto. 
Borrowers warrant, with respect to each Account at the time it is shown
as an Eligible Account in a Borrowing Base Certificate, that:

 

(a)           it
is genuine and in all respects what it purports to be, and is not evidenced by
a judgment;

 

(b)           it
arises out of a completed, bona fide
sale and delivery of goods in the Ordinary Course of Business, and
substantially in accordance with any purchase order, contract or other document
relating thereto;

 

(c)           it
is for a sum certain, maturing as stated in the invoice covering such sale, a
copy of which has been furnished or is available to Agent on request;

 

61

 

(d)           it
is not subject to any offset, Lien (other than Agent’s Lien), deduction,
defense, dispute, counterclaim or other adverse condition except as arising in
the Ordinary Course of Business and disclosed to Agent; and it is absolutely owing
by the Account Debtor, without contingency in any respect;

 

(e)           no
purchase order, agreement, document or Applicable Law restricts assignment of
the Account to Agent (regardless of whether, under the UCC, the restriction is
ineffective);

 

(f)            no
extension, compromise, settlement, modification, credit, deduction or return
has been authorized with respect to the Account, except discounts or allowances
granted in the Ordinary Course of Business that are reflected on the face of
the invoice related thereto and in the reports submitted to Agent hereunder;
and

 

(g)           to
the best of Borrowers’ knowledge, (i) there are no facts or circumstances that
are reasonably likely to impair the enforceability or collectibility of such
Account; (ii) the Account Debtor had the capacity to contract when the Account
arose, continues to meet the applicable Borrower’s customary credit standards,
is Solvent, is not contemplating or subject to an Insolvency Proceeding (other
than Delphi), and has not failed, or suspended or ceased doing business; and
(iii) there are no proceedings or actions threatened or pending against any
Account Debtor that could reasonably be expected to have a material adverse
effect on the Account Debtor’s financial condition.

 

9.1.8.          Financial
Statements

 

The consolidated and
consolidating balance sheets, and related statements of income, cash flow and
shareholder’s equity, of SEI (including its direct and indirect Subsidiaries
and SE Holding and its subsidiaries) that have been and are from time to time
hereafter delivered to Agent and Lenders, are prepared in accordance with GAAP,
and fairly present the financial positions and results of operations of SEI,
Borrowers and Subsidiaries at the dates and for the periods indicated.  All projections delivered from time to time
to Agent and Lenders based upon estimates and assumptions stated therein, all
of which Borrowers believe to be reasonable and fair in light of current
conditions and current facts known to Borrowers and, as of the date of such
projections, reflect the Borrowers’ good faith and reasonable estimates of the
future financial performance of Borrowers and of the other information
projected therein for the period set forth therein, it being recognized by
Agent and Lenders that projections as to future events are not to be viewed as
facts or factual information and that actual results during the period or
periods covered thereby may differ materially from projected results.  As of the Closing Date, since December 31,
2005, there has been no change in the condition, financial or otherwise, of any
Borrower or Subsidiary that could reasonably be expected to have a Material
Adverse Effect.  No financial statement
delivered to Agent or Lenders at any time contains any untrue statement of a
material fact, nor fails to disclose any material fact necessary to make such
statement not materially misleading. 
Each Borrower is Solvent.

 

9.1.9.          Surety
Obligations

 

No Borrower or Subsidiary is
obligated as surety or indemnitor under any bond or other contract that assures
payment or performance of any obligation of any Person, except as permitted
hereunder.

 

62

 

9.1.10.        Taxes

 

Each Borrower and Subsidiary
has filed all federal, state and material local tax returns and other material
reports that it is required by law to file, and has paid, or made provision for
the payment of, all Taxes upon it, its income and its Properties that are due
and payable, except to the extent being Properly Contested.  The provision for Taxes on the books of each
Borrower and Subsidiary is adequate for all years not closed by applicable
statutes, and for its current Fiscal Year.

 

9.1.11.        Brokers

 

There are no brokerage
commissions, finder’s fees or investment banking fees payable in connection with
any transactions contemplated by the Loan Documents.

 

9.1.12.        Intellectual
Property

 

Each Borrower and Subsidiary
owns or has the lawful right to use all material Intellectual Property
necessary for the conduct of its business, without conflict with any rights of
others.  There is no pending or, to any
Borrower’s knowledge, threatened Intellectual Property Claim with respect to
any Borrower, any Subsidiary or any of their Property (including any material
Intellectual Property).  Except as
disclosed on Schedule 9.1.12, no
Borrower or Subsidiary pays or owes any Royalty or other compensation to any
Person with respect to any material registered Intellectual Property.  All material registered Intellectual Property
owned, used or licensed by, or otherwise subject to any interests of, any
Borrower or Subsidiary is shown on Schedule
9.1.12.

 

9.1.13.        Governmental
Approvals

 

Each Borrower and Subsidiary
has, is in compliance with, and is in good standing with respect to, all
Governmental Approvals necessary to conduct its business and to own, lease and
operate its Properties except where the failure to obtain or maintain such
Governmental Approval could not reasonably be expected to have a Material
Adverse Effect.  All necessary import,
export or other licenses, permits or certificates for the import or handling of
any goods or other Collateral have been procured and are in effect, and
Borrowers and Subsidiaries have complied with all foreign and domestic laws
with respect to the shipment and importation of any goods or Collateral, except
where noncompliance could not reasonably be expected to have a Material Adverse
Effect.

 

9.1.14.        Compliance
with Laws

 

Each Borrower and Subsidiary
has duly complied, and its Properties and business operations are in
compliance, in all material respects with all Applicable Law, except where
noncompliance could not reasonably be expected to have a Material Adverse
Effect.  There have been no citations,
notices or orders of noncompliance issued to any Borrower or Subsidiary under
any Applicable Law which could reasonably be expected to have a Material
Adverse Effect.  To the best knowledge of
the Borrowers, no Eligible Inventory has been produced in violation of the
FLSA.

 

63

 

9.1.15.        Compliance
with Environmental Laws

 

Except as disclosed on Schedule 9.1.15, no Borrower or Subsidiary has received any
Environmental Notice.  No Borrower or
Subsidiary has any material contingent liability with respect to any
Environmental Release, environmental pollution or hazardous material on any
Real Estate now or previously owned, leased or operated by it.

 

9.1.16.        Burdensome
Contracts

 

No Borrower or Subsidiary is a
party or subject to any contract, agreement or charter restriction that could
reasonably be expected to have a Material Adverse Effect.  No Borrower or Subsidiary is party or subject
to any Restrictive Agreement, except as shown on Schedule 9.1.16, none of which prohibit the execution or
delivery of any Loan Documents by an Obligor nor the performance by an Obligor
of any obligations thereunder.

 

9.1.17.        Litigation

 

Except as shown on Schedule 9.1.17, there are no proceedings
or investigations pending or, to any Borrower’s knowledge, threatened against
any Borrower or Subsidiary, or any of their businesses, operations, Properties
or conditions, that (a) relate to any Loan Documents or transactions
contemplated thereby; or (b) could reasonably be expected to have a Material
Adverse Effect if determined adversely to any Borrower or Obligor (after giving
effect to any insurance coverage applicable thereto).  No Borrower or Subsidiary is in default in
any material respect with respect to any order, injunction or judgment of any
Governmental Authority.

 

9.1.18.        No
Defaults

 

No event or circumstance has
occurred or exists that constitutes a Default or Event of Default.  No Borrower or Subsidiary is in default, and
no event or circumstance has occurred or exists that with the passage of time
or giving of notice would constitute a default, under any Material Contract or
in the payment of any Borrowed Money with a principal aggregate amount of
$5,000,000.  There is no basis upon which
any party (other than a Borrower or Subsidiary) could terminate a Material
Contract prior to its scheduled termination date.

 

9.1.19.        ERISA

 

Except as disclosed on Schedule 9.1.19, no Borrower or Subsidiary has any
Multiemployer Plan.  Each Borrower and
Subsidiary is in material compliance with the requirements of all Applicable
Law, including ERISA, relating to each Multiemployer Plan.  No fact or situation exists that could
reasonably be expected to result in a Material Adverse Effect in connection
with any Multiemployer Plan.  No Borrower
or Subsidiary is liable for any withdrawal liability in connection with a
Multiemployer Plan.

 

9.1.20.        Trade
Relations

 

As of the Closing Date, there
exists no actual or, to the knowledge of Borrowers, threatened termination,
limitation or modification of any business relationship between any Borrower or
Subsidiary and any customer or supplier, or any group of customers or
suppliers, who individually or in the aggregate are material to the business of
such Borrower or Subsidiary.

 

64

 

As of the
Closing Date, there exists no condition or circumstance that could reasonably
be expected to materially impair the ability of any Borrower or Subsidiary to
conduct its business at any time hereafter in substantially the same manner as
conducted on the Closing Date.

 

9.1.21.        Labor
Relations

 

Except as described on Schedule 9.1.21, no Borrower or Subsidiary
is on the Closing Date party to or bound by any collective bargaining
agreement.  On the Closing Date, there
are no material grievances, disputes or controversies with any union or other organization
of any Borrower’s or Subsidiary’s employees, or, to any Borrower’s knowledge,
any asserted or threatened strikes, work stoppages or demands for collective
bargaining.

 

9.1.22.        Payable
Practices

 

No Borrower or Subsidiary has
made any material change in its historical accounts payable practices from
those in effect on the Closing Date.

 

9.1.23.        Not
a Regulated Entity

 

No Obligor is (a) an “investment company” or a “person
directly or indirectly controlled by or acting on behalf of an investment
company” within the meaning of the Investment Company Act of 1940;
(b) a “holding company,” a “subsidiary company” of a “holding
company,” or an “affiliate” of
either, within the meaning of the Public Utility Holding Company Act of 1935;
or (c) subject to regulation under the Federal Power Act, the Interstate
Commerce Act, any public utilities code or any other Applicable Law regarding
its authority to incur Debt.

 

9.1.24.        Margin
Stock

 

No Borrower or Subsidiary is
engaged, principally or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying any Margin
Stock.  No Loan proceeds or Letters of
Credit will be used by Borrowers to purchase or carry, or to reduce or
refinance any Debt incurred to purchase or carry, any Margin Stock or for any
related purpose governed by Regulations T, U or X of the Board of Governors.

 

9.1.25.        Plan Assets

 

No Borrower is an entity deemed
to hold “plan assets” within the
meaning of 29 C.F.R. §2510.3-101 of any “employee
benefit plan” (as defined in Section 3(3) of ERISA) that is subject
to Title I of ERISA or any “plan”
(within the meaning of Section 4975 of the Internal Revenue Code), and neither
the execution of this Agreement nor the funding of any Loans gives rise to a
prohibited transaction within the meaning of Section 406 of ERISA or Section
4975 of the Internal Revenue Code.

 

9.2.         Complete Disclosure

 

No Loan
Document contains any untrue statement of a material fact, nor fails to
disclose any material fact necessary to make the statements contained therein
not materially misleading in each case, in light of the facts and circumstances
existing at the time any such statement was

 

65

 

made.  There is no fact or circumstance in existence
on the Closing Date that any Obligor has failed to disclose to Agent in writing
that could reasonably be expected to have a Material Adverse Effect.

 

Section 10.            COVENANTS AND CONTINUING AGREEMENTS

 

10.1.       Affirmative Covenants

 

For so long as
any Commitments or Obligations are outstanding, each Borrower shall, and shall
cause each Subsidiary to:

 

10.1.1.        Inspections;
Appraisals

 

(a)           Permit
Agent from time to time, subject to (except when a Default or Event of Default
exists) reasonable notice and normal business hours, to visit and inspect the
Properties of any Borrower or Subsidiary, inspect, audit and make extracts from
any Borrower’s or Subsidiary’s books and records, and discuss with its
officers, employees, agents, advisors and independent accountants such Borrower’s
or Subsidiary’s business, financial condition, assets, prospects and results of
operations.  Lenders may participate in
any such visit or inspection, at their own expense.  Neither Agent nor any Lender shall have any
duty to any Borrower to make any inspection, nor to share any results of any
inspection, appraisal or report with any Borrower.  To the extent any appraisal or other
information is shared by Agent or a Lender with any Borrower, such Borrower acknowledges
that it was prepared by Agent and Lenders for their purposes and Borrowers
shall not be entitled to rely upon it.

 

(b)           Reimburse
Agent for all charges, costs and expenses of Agent in connection with (i) examinations
of any Obligor’s books and records or any other financial or Collateral matters
as Agent deems appropriate, up to two (2) times per Loan Year; and (ii) appraisals
of Inventory up to one time per Loan Year; provided, however,
that if an examination or appraisal is initiated during an Event of Default,
all charges, costs and expenses therefor shall be reimbursed by Borrowers
without regard to such limits; provided  further, that so long as
no Event of Default exists, with respect to environmental inspections of the
Real Property of Borrowers, representatives of Agent shall only have the right
to inspect once every 12 months, unless Agent has a reasonable basis to
believe a condition exists or an event has occurred which reasonably could give
rise to material liabilities under applicable Environmental Laws.  Subject to the foregoing, Borrowers shall pay
Agent’s standard charges ($850 per day as of the Closing Date or standard
charges as in effect thereafter) for each day that an employee of Agent or its
Affiliates is engaged in any examination activities, and shall pay the standard
charges of Agent’s internal appraisal group. 
This Section shall not be construed to limit Agent’s right to conduct
examinations or to obtain appraisals at any time in its discretion, nor to use
third parties for such purposes.

 

10.1.2.        Financial
and Other Information

 

Keep adequate records and books
of account with respect to its business activities, in which proper entries are
made in accordance with GAAP reflecting all financial transactions; and furnish
to Agent and Lenders:

 

66

 

(a)           as
soon as available, and in any event within ninety (90) days after the close of
each Fiscal Year, audited balance sheets of SEI (including its Subsidiaries and
SE Holding and its subsidiaries) as of the end of such Fiscal Year and the
related statements of income, shareholders’ equity and cash flow, on a
Consolidated and consolidating basis, such consolidated statements to be
audited and accompanied by a report and opinion of an independent certified
public accountant of nationally recognized standing reasonably acceptable to
the Agent, which report and opinion shall be prepared in accordance with
generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or
exception or any qualification or exception as to the scope of such audit, and,
with respect to SEI and its Subsidiaries, setting forth in each case in
comparative form the corresponding Consolidated figures for the preceding
Fiscal Year;

 

(b)           as
soon as available, and in any event within forty-five (45) days after the end
of each Fiscal Quarter hereafter (other than the fourth Fiscal Quarter of any
Fiscal Year), unaudited balance sheets of SEI (including Borrowers, its
Subsidiaries and SE Holding and its Subsidiaries) as of the end of such Fiscal
Quarter and the related unaudited statements of income and cash flow for such
Fiscal Quarter, on a Consolidated and consolidating basis, setting forth in
each case in comparative form the corresponding figures for the preceding Fiscal
Year and certified by the principal financial officer of Borrowers as prepared
in accordance with GAAP and fairly presenting the Consolidated financial
position and results of operations of SEI and its Subsidiaries and SE Holding
and its subsidiaries for such Fiscal Quarter and period subject only to changes
from audit and year end adjustments and except that such statements need not
contain notes;

 

(c)           as
soon as available, and in any event within thirty-five (35) days after the end
of each month (other than the month which is the last month of any Fiscal
Quarter), unaudited balance sheets of SEI, Borrowers and its Subsidiaries as of
the end of such month and the related unaudited statements of income and cash
flow for such month and for the portion of the Fiscal Year then elapsed, on a
Consolidated basis, setting forth in each case in comparative form the
corresponding figures for the preceding Fiscal Year and certified by the
principal financial officer of Borrowers as prepared in accordance with GAAP and
fairly presenting the Consolidated financial position and results of operations
of SEI, Borrowers and their Subsidiaries for such month and period subject only
to changes from audit and year-end adjustments and except that such statements
need not contain notes;

 

(d)           concurrently
with delivery of financial statements under clauses (a) and (b) above, or more
frequently if requested by Agent while an Event of Default exists, a Compliance
Certificate executed by the chief financial officer of Borrower Agent;

 

(e)           concurrently
with delivery of financial statements under clause (a) above, copies of all
management letters and other material reports submitted to SEI or Borrowers by
their accountants in connection with such financial statements;

 

(f)            not
later than January 31 of each Fiscal Year, the budget of Borrowers for the
upcoming Fiscal Year;

 

(g)           while
an Event of Default exists, at Agent’s request, a listing of each Borrower’s
trade payables, specifying the trade creditor and balance due, and a detailed
trade payable aging, all in form satisfactory to Agent;

 

67

 

(h)           promptly
after the sending or filing thereof, copies of any proxy statements, financial
statements or material reports that any Borrower has made generally available
to its shareholders; copies of any regular, periodic and special reports or
registration statements or prospectuses that any Borrower files with the
Securities and Exchange Commission or any other Governmental Authority, or any
securities exchange;

 

(i)            promptly
after the sending or filing thereof, copies of any annual report to be filed in
connection with each Plan; and

 

(j)            such
other reports and information (financial or otherwise) as Agent may request
from time to time in connection with any Collateral or any Borrower’s,
Subsidiary’s or other Obligor’s financial condition or business which, so long
as no Event of Default then exists, shall not be requested by Agent more
frequently than once a year.

 

Documents
required to be delivered pursuant to Section
10.1.2(a), (b) or (h)
(to the extent any such documents are included in materials otherwise filed
with the SEC) may be delivered electronically and if so delivered, shall be
deemed to have been delivered on the date on which SEI posts such documents, or
provides a link thereto on SEI’s website on the internet at the website address
listed on Schedule 10.1.2.

 

10.1.3.        Notices

 

Notify Agent and Lenders in
writing, promptly after a Borrower’s obtaining knowledge thereof, of any of the
following that affects a Borrower or all Obligors:  (a) the threat or commencement of any
proceeding or investigation, whether or not covered by insurance, if an adverse
determination could have a Material Adverse Effect; (b) any pending or
threatened labor dispute, strike or walkout, or the expiration of any material
labor contract which could reasonably be expected to have a Material Adverse
Effect; (c) any default under or termination of a Material Contract; (d) the
existence of any Default or Event of Default; (e) any judgment in an amount
exceeding $1,000,000 (after giving effect to any insurance coverage applicable
thereto); (f) the assertion of any Intellectual Property Claim with respect to
any material Intellectual Property if an adverse resolution could have a
Material Adverse Effect; (g) any violation or asserted violation of any
Applicable Law (including ERISA, OSHA, FLSA, or any Environmental Laws), if an
adverse resolution could have a Material Adverse Effect; (h) any material
Environmental Release by an Obligor or on any Property owned, leased or
occupied by an Obligor; or receipt of any Environmental Notice; or (i) the
discharge of or any withdrawal or resignation by Borrowers’ independent
accountants.

 

10.1.4.        Landlord and Storage Agreements

 

Upon reasonable request,
provide Agent with copies of all agreements between an Obligor and any
landlord, warehouseman or processor that owns any premises at which any
material Collateral may be kept or that otherwise may possess or handle any
material Collateral.

 

10.1.5.        Compliance
with Laws

 

Comply with
all Applicable Laws, including ERISA, Environmental Laws, FLSA, OSHA,
Anti-Terrorism Laws, and laws regarding collection and payment of Taxes, and
maintain all Governmental Approvals necessary to the ownership of its
Properties or conduct of

 

68

 

its business, unless failure to comply (other than failure to comply
with Anti-Terrorism Laws) or maintain could not reasonably be expected to have
a Material Adverse Effect.  Without
limiting the generality of the foregoing, if any Environmental Release occurs
at or on any Properties of any Borrower or Subsidiary, it shall act promptly
and diligently to investigate and to the extent required by any Environmental
Law, report to all appropriate Governmental Authorities the extent of, and to
take appropriate remedial action to respond to such Environmental Release,
whether or not directed to do so by any Governmental Authority.

 

10.1.6.        Taxes

 

Pay and
discharge all Taxes prior to the date on which they become delinquent or
penalties attach, unless such Taxes are being Properly Contested.

 

10.1.7.        Insurance

 

In addition to the insurance
required hereunder with respect to Collateral, maintain with its insurers as of
the Closing Date or with other financially sound and reputable insurers having
a rating no less favorable than the rating in effect on the Closing Date
applicable to its insurers as of the Closing Date, (a) with respect to the
Properties and business of Borrowers and Subsidiaries of such type (including
product liability, workers’ compensation, larceny, embezzlement, or other
criminal misappropriation insurance), in such amounts, and with such coverages
and deductibles as are customary for companies similarly situated, and (b)
business interruption insurance in an amount not less than the amounts
reflected in Schedule 8.6.2.

 

10.1.8.        Licenses

 

Keep each material License
affecting any Eligible Inventory (including the manufacture, distribution or
disposition of Inventory) or any other material Property of Borrowers and
Subsidiaries in full force and effect unless the Obligor determines that such
License or the underlying Intellectual Property is no longer useful or
necessary or that the licensee has defaulted thereunder; promptly notify Agent
of any proposed modification to any such License, or entry into any new
material License, pay all Royalties when due with respect to any material
Licenses unless Properly Contested; and notify Agent of any material default or
breach asserted by any Person to have occurred under any material License.

 

10.1.9.        Future
Subsidiaries

 

Promptly notify Agent upon any
Person becoming a Subsidiary and, if such Person is not a Foreign Subsidiary,
cause it to guaranty the Obligations in a manner satisfactory to Agent, and to
execute and deliver such documents, instruments and agreements and to take such
other actions as Agent shall require to evidence and perfect a Lien in favor of
Agent (for the benefit of Secured Parties) on all assets of such Person,
including delivery of such legal opinions, in
form and substance satisfactory to Agent, as it shall deem appropriate.

 

10.2.       Negative Covenants

 

For so long as
any Commitments or Obligations are outstanding, each Borrower shall not, and
shall cause each Subsidiary not to:

 

69

 

10.2.1.        Permitted
Debt

 

Create, incur, guarantee or
suffer to exist any Debt, except:

 

(a)           the
Obligations;

 

(b)           Debt
existing as of the Closing Date and Borrowers’ 9.0% Senior Notes due 2012;

 

(c)           Bank
Product Debt and Debt arising in connection with Cash Management Services
provided by financial institutions other than a Lender or its Affiliates;

 

(d)           Subordinated
Debt in an amount not to exceed $25,000,000;

 

(e)           accounts
payable owing to trade creditors, in each case incurred and paid in the
Ordinary Course of Business, unless the same are being Properly Contested;

 

(f)            Purchase
Money Debt and Capitalized Lease Obligations (excluding the Brownwood Lease)
which do not exceed in the aggregate $25,000,000 at any time outstanding;

 

(g)           Refinancing
Debt which has a stated maturity no sooner than 6 months after the Term or any
extension of the Term so long as each of the Refinancing Conditions is met;

 

(h)           Debt
for accrued payroll, Taxes and other operating expenses (other than Borrowed
Money) incurred in the Ordinary Course of Business, as long as payment thereof
is not past due or, in the case of Taxes, is being Properly Contested;

 

(i)            Permitted
Contingent Obligations;

 

(j)            Debt
in respect of netting services, overdraft protections and otherwise in
connection with Deposit Accounts;

 

(k)           Debt
in respect of the Brownwood Lease;

 

(l)            Debt
incurred in the Ordinary Course of Business solely to support any Borrower or
any Subsidiary’s insurance or self-insurance obligations in the Ordinary Course
of Business (including to secure worker’s compensation and other similar
insurance coverages);

 

(m)          Debt
of a Borrower or a Subsidiary to a Borrower or of a Borrower or a Subsidiary to
a Subsidiary of a Borrower, including Loans permitted pursuant to Section 10.2.7;

 

(n)           Debt
incurred by a Borrower or Subsidiary in connection with an acquisition
constituting an Investment permitted pursuant to Section 10.2.5 or otherwise hereunder (or Debt assumed at the
time of an Investment permitted pursuant to Section
10.2.5), other than Obligations hereunder, in an amount not to
exceed $25,000,000;

 

(o)           other
Debt, provided that (a) no Event of Default exists as of the date of the
incurrence thereof or would exist by reason of the incurrence of such Debt and
(b) if such Debt (other than Debt secured by a Permitted Lien) is secured, the
Liens of the holder thereof are

 

70

 

junior and subordinate to the Liens of Agent
pursuant to terms and conditions reasonably acceptable to Agent and Lenders
under a written intercreditor agreement entered into with any such holder and
any such secured Debt has a stated maturity no sooner than 6 months after the
Term or any extension of the Term.

 

10.2.2.        Permitted
Liens

 

Create any Lien upon any of its
Property, income or profits or enter into any agreement to do same, at any time
that Borrowers do not satisfy the Liquidity Condition, except the following
(collectively, “Permitted Liens”):

 

(a)           Liens
in favor of Agent;

 

(b)           Liens
for Taxes (excluding any Lien imposed pursuant to any provisions of ERISA) not
yet due or being Properly Contested;

 

(c)           statutory
Liens (excluding any Lien for Taxes, but including any Lien imposed pursuant to
any of the provisions of ERISA and landlords’, carriers’ warehousemen’s,
mechanics’, materialmen’s, repairmen’s or other like Liens) arising in the
Ordinary Course of Business of a Borrower or a Subsidiary, but only if and for
so long as (x) payment in respect of any such Lien is not at the time required
or such Lien is being Properly Contested and (y) such Liens do not materially
impair the conduct of the Ordinary Course of Business;

 

(d)           Purchase
Money Liens securing Purchase Money Debt;

 

(e)           Liens
securing Debt of a Borrower or a Subsidiary to a Borrower or of a Borrower or a
Subsidiary to a Subsidiary of a Borrower;

 

(f)            Liens
arising by virtue of a judgment or judicial order against any Borrower or
Subsidiary, or any Property of a Borrower or Subsidiary, as long as such Liens
are (i) in existence for less than twenty (20) consecutive days or are being
Properly Contested, and (ii) at all times junior to Agent’s Liens;

 

(g)           Liens
incurred or deposits made in the Ordinary Course of Business to secure the performance
of tenders, bids, leases, contracts (other than for the repayment of Money
Borrowed), statutory obligations and other similar obligations or arising as a
result of progress payments under government contracts; provided that,
to the extent any such Liens attach to any of the Collateral, such Liens
are at all times subordinate and junior to the Liens upon the Collateral in
favor of Agent;

 

(h)           easements,
rights-of-way, restrictions, covenants or other agreements of record and other
similar charges or encumbrances on real Property of such Borrower or any of its
Subsidiaries that do not secure any monetary obligation and do not interfere
with the Ordinary Course of Business of such Borrower or such Subsidiary;

 

(i)            normal
and customary rights of setoff upon deposits of cash in favor of banks and
other depository institutions and Liens of a collecting bank arising under the
UCC on Payment Items in the course of collection;

 

71

 

(j)            [Reserved];

 

(k)           such other Liens as appear on Schedule 10.2.2 hereto, to the extent provided therein;

 

(l)            Liens solely on any cash earnest money
deposits made by the Company or any of its Subsidiaries in connection with any
letter of intent or purchase agreement permitted hereunder;

 

(m)          Liens securing Capitalized Lease Obligations
permitted to be incurred under Section 10.2.1
to the extent such Liens do not extend to any Property other than the Property
that is the subject of the underlying lease;

 

(n)           Licenses, sublicenses, leases or subleases
granted to other Persons in the Ordinary Course of Business and not interfering
in any material respect with the business of any Obligor;

 

(o)           Liens
on Property of a Subsidiary of a Borrower (other than an Obligor) securing Debt
of such Subsidiary;

 

(p)           Liens securing Refinancing Debt to the extent
of the Liens securing the Debt refinanced; provided that if the Liens
securing the debt refinanced are subordinate to the Liens of Agent, then the
Liens securing the Refinancing Debt shall be subordinate on the same terms and
to the same extent;

 

(q)           purported Liens evidenced by the filing of
precautionary UCC financing statements relating solely to operating leases of
personal property entered into in the Ordinary Course of Business;

 

(r)            Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of customs duties in
connection with the importation of goods;

 

(s)           Liens on Property acquired by a Borrower or
Subsidiary in connection with an Investment permitted pursuant to Section 10.2.5 to the extent that the Debt secured by such
Liens is permitted under Section
10.2.1(m) hereof; provided
that (i) such Liens are not incurred in connection with, or in anticipation or
contemplation of, such Investment permitted pursuant to Section 10.2.5 and (ii) such Liens attach solely to such
Property acquired;

 

(t)            Liens on Property of Borrowers not
constituting Collateral for so long as the aggregate fair market value of such
Property, and any Debt secured thereby, does not exceed $2,500,000;

 

(u)           Liens
securing Subordinated Debt incurred pursuant to Section
10.2.1(c); and

 

(v)           such other Liens as Agent and Required
Lenders in their sole discretion may hereafter approve in writing.

 

72

 

The foregoing
negative pledge shall not apply to any Margin Stock to the extent such
application would violate or require filings or other actions by any Lender
under Regulation U or any similar law.

 

10.2.3.        Capital
Expenditures

 

Make Capital
Expenditures (excluding any assets acquired pursuant to Section 10.2.5 hereof) in excess of
$30,000,000 in the aggregate during any Fiscal Year at any time that Borrowers
do not satisfy the Availability Condition or an Event of Default exists; provided,
however, that if the amount of Capital Expenditures (excluding any
assets acquired pursuant by to Section 10.2.5
hereof) permitted to be made in any Fiscal Year exceeds the amount
actually made, up to $30,000,000 of such excess may be carried forward to the
next Fiscal Year.

 

10.2.4.        Distributions;
Upstream Payments

 

For so long as
any Commitments or Obligations are outstanding, neither SEI nor Borrowers
shall, and shall not permit any of their Subsidiaries to, declare or make any Distributions,
at any time that Borrowers do not satisfy the Liquidity Condition or an Event
of Default exists, except (a) Upstream Payments and (b) a Distribution that is
a dividend or other Distribution by a Borrower directly or indirectly to
Parent, the proceeds of which are used by Parent to make payment of dividends
with respect to the Parent Preferred Series A Stock.

 

10.2.5.        Restricted Investments

 

Make any
Restricted Investment at any time that Borrowers do not satisfy the Liquidity
Condition or an Event of Default exists; provided that if the Liquidity
Condition is satisfied and no Event of Default exists, Borrowers may make (a) any
acquisition by a Borrower or any of its Subsidiaries of the assets or Equity
Interests of a Person in which each of the following conditions is satisfied:
(i) the business of the Person that is the subject of such acquisition is
related or substantially similar to the business of Borrowers on the Closing
Date; (ii) in connection with such acquisition there will be no Liens on any of
such Borrower’s or such Subsidiary’s assets after the acquisition other than
Permitted Liens; (iii) the aggregate amount of consideration for such
acquisition, when added to the consideration for all other such acquisitions
after the Closing Date under this clause (a) shall not exceed $50,000,000; (iv)
any purchase price amounts payable with respect to earn-outs, notes payable to
the sellers, covenants not to compete, consulting contracts or other affiliated
contracts are and will remain subordinate to the Full Payment of the
Obligations on terms satisfactory to Agent; (v) Agent shall have received, by a
date sufficiently in advance of the closing date of such acquisition to allow
Agent to review the same, executed copies of the final purchase documents,
including all exhibits and schedules thereto, among the parties to such
acquisition, and Agent shall have found the terms thereof reasonably
acceptable; and (vi) Borrowers shall have delivered to Agent, not less than
three (3) Business Days prior to the proposed closing date of any such
acquisition, written evidence of the pro forma satisfaction of the other
conditions set forth above after giving effect to such acquisition; and
(b) Permitted Investments.

 

10.2.6.        Disposition
of Assets

 

Make any Asset
Disposition at any time that Borrowers do not satisfy the Availability
Condition or an Event of Default exists, except (a) a Permitted Asset
Disposition,

 

73

 

(b) a disposition of Equipment under Section
8.4.2 or (c) transfer of Property by a Subsidiary or Obligor to a
Borrower; provided that unless the Availability Conditions are satisfied
and no Event of Default exists as of the date of any such disposition, the Net
Proceeds of any such disposition shall be remitted to Agent for application to
the Obligations.

 

10.2.7.        Loans

 

Make any loans or other advances of money to
any Person at any time that the Borrowers do not satisfy the Liquidity
Condition, except (a) advances to an officer or employee of a Borrower, a
Subsidiary, JV Europe or SE Holding (or any Subsidiary
thereof) for salary, bonus, travel expenses, moving and other relocation
expenses, commissions and similar items in the Ordinary Course of Business; (b)
prepaid expenses and extensions of trade credit made in the Ordinary Course of
Business; (c) deposits with financial institutions permitted hereunder; (d) as
long as no Default or Event of Default exists, intercompany loans by a Borrower
to another Borrower or a Subsidiary Guarantor, or by a Subsidiary Guarantor to
a Borrower or another Subsidiary Guarantor; (e) Debt permitted under Section 10.1.1; and (f) Investments permitted under Section 10.2.5.

 

10.2.8.        Restrictions
on Payment of Borrowers’ 9.0% Senior Notes due 2012; Modifications

 

(a)           Make
any payments (whether voluntary or mandatory, or a prepayment, redemption,
retirement, defeasance or acquisition) with respect to the Borrowers’ 9% Senior
Notes due 2012 at any time that the Borrowers do not satisfy the Liquidity
Condition except (a) a redemption or purchase of such Notes so long as (i) such
redemption or purchase is made pursuant to the terms of, and in an amount no
greater than that amount required to be redeemed by, Section 4.10 of the
Indenture governing such Notes as in effect on the Closing Date,  (iii) no Event of Default shall exist on
the date of and after giving effect to such redemption or purchase, and
(iv) Borrowers shall have delivered to each of Agent and The Bank of New
York, as trustee for the holders of the Borrowers 9.% Senior Notes due 2012 a
certificate certifying that the above conditions have been satisfied and that
the redemption or purchase is otherwise permitted by the terms of the
Agreement.

 

(b)           Enter into or consent to any amendment,
supplement, waiver or other modification of the terms or provisions contained
in, or applicable to the Indenture for the Borrowers’ 9% Senior Notes due 2012
or the Borrowers’ 9% Senior Notes due 2012, to the extent that any such
amendment, supplement, waiver or modification: 
(i) accelerates the dates or increases the amount of any required
repayment, prepayment or redemption of the principal of the Borrowers’ 9%
Senior Notes due 2012, (ii) increases the rate or accelerates the date for
payment of the interest, premium (if any) or fees payable in respect of
Borrowers’ 9% Senior Notes due 2012, (iii) makes the covenants, events of
default or remedies in Borrowers’ 9% Senior Notes due 2012 or the Indenture for
the Borrowers’ 9% Senior Notes due 2012 more restrictive on Borrowers, or (iv)
could reasonably be expected to have a materially adverse effect on  the Borrowers, other Obligors, Agent or
Lenders.

 

10.2.9.        Fundamental
Changes

 

Merge, combine
or consolidate with any Person, or liquidate, wind up its affairs or dissolve
itself, in each case whether in a single transaction or in a series of related

 

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transactions, except for (a) mergers or consolidations of a Subsidiary
with another Subsidiary or a Subsidiary or a Borrower into a Borrower and (b)
transactions otherwise permitted under this Agreement (including but not
limited to transactions permitted pursuant to Sections
10.2.5 and 10.2.6
hereof); change its name or conduct business under any fictitious name; or
change its tax, charter or other organizational identification number, or form
or state of organization.

 

10.2.10.      Subsidiaries

 

Form or
acquire any Subsidiary after the Closing Date, except in accordance with Sections 10.1.8 and 10.2.5; or
permit any existing Subsidiary to issue any additional Equity Interests except
director’s qualifying shares.

 

10.2.11.      Organic Documents

 

Amend, modify
or otherwise change any of its Organic Documents as in effect on the Closing
Date, except for
changes that do not affect in any adverse way such Borrower’s or any of its
Subsidiaries’ rights and obligations to enter into and perform the Loan
Documents to which it is a party and to pay all of the Obligations and that do
not otherwise have a Material Adverse Effect.

 

10.2.12.      Tax Consolidation

 

File or
consent to the filing of any consolidated income tax return with any Person
other than SEI, Parent, Borrowers, Subsidiaries, SE Holding and its
Subsidiaries.

 

10.2.13.      Accounting Changes

 

Make any
material change in accounting treatment or reporting practices, except in
compliance with GAAP; or change its Fiscal Year.

 

10.2.14.      Hedging Agreements

 

Enter into any
Hedging Agreement, except to hedge risks arising in the Ordinary Course of Business to hedge or
mitigate risks to which any Borrower or any Subsidiary is exposed in the
conduct of its business or the management of its liabilities and not for any
speculative purpose.

 

10.2.15.      Conduct of Business

 

Engage in any
business, other than its business as conducted on the Closing Date and any
business or activities which are substantially similar, related or incidental
thereto.

 

10.2.16.      Affiliate Transactions

 

Enter into or
be party to any transaction with an Affiliate, at any time that Borrowers do
not satisfy the Liquidity Condition, except (a) the transactions contemplated by the
Loan Documents; (b) payment of reasonable compensation to officers and
employees for services actually rendered to Borrowers or their respective
Subsidiaries; (c) payment of customary directors’ fees and indemnities
(including payments in respect of directors’ and officers’ liability
insurance); (d) transactions with Affiliates that were consummated on or
prior

 

75

 

to
the Closing Date and have been disclosed to Agent prior to the Closing Date;
(e) transactions with Affiliates pursuant to the reasonable requirements
of such Borrower’s or such Subsidiary’s business and upon fair and reasonable
terms that are fully disclosed to Agent; (f) transactions pursuant to which a
Borrower or a Subsidiary licenses intellectual property to or from SE Holding or JV Europe or any of their respective Affiliates;
(g) guarantees, to the extent constituting Permitted Contingent Obligations, or
Investments, to the extent constituting Permitted Investments, in respect of
the China Investment or the JV Europe Investments; and (h) transactions
pursuant to which a Borrower or a Subsidiary (A) sells, assigns or otherwise
transfers Equipment for its fair market value (1) to SE
Holding or any of its subsidiaries in connection with the China Investment,
which has a book value, together with other China Investments which does not
exceed $30,000,000 in the aggregate (excluding from such
$30,000,000 limit Investments made at a time when Borrowers satisfied the Liquidity
Condition and no Event of Default existed), or (2) to SE Holding or any of its
subsidiaries in connection with the JV Europe Investment, which has a book value, together with other
JV Europe Investment which does not exceed $50,000,000 in the aggregate (excluding
from such $50,000,000 limit Investments made at a time when Borrowers satisfied
the Liquidity Condition and no Event of Default existed), or (B) sells Inventory in the Ordinary Course of Business to SE Holding or any of its subsidiaries.  Nothing herein shall be deemed to override,
modify or waive any requirement for Borrowers to comply at all times with the
provisions of the Sarbanes-Oxley Act.

 

10.2.17.      Plans

 

Become party
to any Multiemployer Plan, other than any in existence on the Closing Date.

 

10.2.18                    Restrictions on Upstream Payments

 

Create or suffer to exist
any encumbrance or restriction on the ability of a Subsidiary to make any
Upstream Payment, except for encumbrances or restrictions (i) pursuant to
the Loan Documents, (ii) existing under Applicable Law, (iii) pursuant to
the Indenture for the Borrowers’ 9% Senior Notes due 2012, (iv) pursuant to the
Brownwood Lease and (v) identified and fully disclosed in Schedule 9.1.16.

 

10.3.       Consolidated Fixed Charge Coverage Ratio.

 

At any time
that, and only for so long as, Availability of Borrowers is less than
$25,000,000, maintain a Consolidated Fixed Charge Coverage Ratio of not less
than 1.10 to 1.00 as of the immediately preceding Fiscal Quarter end for which
financial statements have been (or were required to be) delivered hereunder and
as of each subsequent Fiscal Quarter until such time as Availability of
Borrowers is equal to or greater than $25,000,000 for ninety (90) consecutive
days.

 

Section 11.            EVENTS OF DEFAULT; REMEDIES ON DEFAULT

 

11.1.       Events of Default

 

Each of the
following shall be an “Event of Default” hereunder, if the same shall
occur for any reason whatsoever, whether voluntary or involuntary, by operation
of law or otherwise:

 

76

 

(a)           Any
Borrower fails to pay (i) any
payment of principal when due; (ii) any interest or fees within three (3)
Business Days when due; or (iii) any other Obligations within ten (10) Business
Days when due (in each case, whether at stated maturity, on demand, upon
acceleration or otherwise);

 

(b)           Any
representation, warranty or other written statement of any Obligor made in
connection with any Loan Documents or transactions contemplated thereby is
incorrect or misleading in any material respect when given;

 

(c)           Any Borrower shall
breach or fail to perform any covenant contained in Section 8.1, 8.2.4, 8.2.5, 8.6.2, 10.1.1, 10.1.2,
10.1.6, 10.1.7, 10.2 or 10.3;

 

(d)           Any
Obligor breaches or fails to perform any other covenant contained in any Loan
Documents, and such breach or failure is not cured within forty-five (45) days
after a Senior Officer of such Obligor has knowledge thereof or receives notice
thereof from Agent, whichever is sooner; provided,
however, that such notice and opportunity
to cure shall not apply if the breach or failure to perform is not capable of
being cured within such period.

 

(e)           Any
Guarantor repudiates, revokes or attempts to revoke its Guaranty; any Obligor
denies or contests the validity or enforceability of any Loan Documents or
Obligations, or the perfection or priority of any Lien granted to Agent; or any
Loan Document ceases to be in full force or effect for any reason (other than a
waiver or release by Agent and Lenders);

 

(f)            Any
breach or default of an Obligor occurs under any document, instrument or
agreement to which it is a party or by which it or any of its Properties is
bound, relating to any Debt (other than the Obligations) in excess of $10,000,000,
if the maturity of or any payment with respect to such Debt may be accelerated
or demanded due to such breach;

 

(g)           Any
judgment or order for the payment of money is entered against an Obligor in an
amount that exceeds, individually or cumulatively with all unsatisfied
judgments or orders against all Obligors, $10,000,000 (net of any insurance
coverage therefor acknowledged in writing by the insurer), unless a stay of
enforcement of such judgment or order is in effect, by reason of a pending
appeal or otherwise;

 

(h)           Any
loss, theft, damage or destruction occurs with respect to any Collateral if the
amount not covered by insurance exceeds $10,000,000;

 

(i)            Any
Obligor is enjoined, restrained or in any way prevented by any Governmental
Authority from conducting any material part of its business; any Obligor
suffers the loss, revocation or termination of any material license, permit,
lease or agreement necessary to its business; there is a cessation of any
material part of an Obligor’s business for a material period of time; any material Collateral or Property
of an Obligor is taken or impaired through condemnation; any Obligor agrees to
or commences any liquidation,
dissolution or winding up of its affairs; or any Obligor ceases to be
Solvent;

 

(j)            Any
Insolvency Proceeding is commenced by any Obligor; an Insolvency Proceeding is
commenced against any Obligor and:  such
Obligor consents to the institution of the proceeding against it, the petition
commencing the proceeding is not timely controverted by such Obligor, such
petition is not dismissed within thirty (30) days after its filing, or an order
for

 

77

 

relief is
entered in the proceeding; a trustee (including an interim trustee) is
appointed to take possession of any substantial Property of or to operate any
of the business of any Obligor; or any Obligor makes an offer of settlement,
extension or composition to its unsecured creditors generally;

 

(k)           A Reportable Event occurs that Agent, in its reasonable discretion,
determines constitutes grounds for termination by the Pension Benefit Guaranty
Corporation of any Multiemployer Plan or appointment of a trustee for any
Multiemployer Plan; any Multiemployer Plan is terminated or any such trustee is
requested or appointed and the resulting withdrawal liability, if any, has a Material
Adverse Effect; any Obligor is in “default” (as defined in Section 4219(c)(5) of
ERISA) with respect to payments to a Multiemployer Plan resulting from any
withdrawal therefrom;

 

(l)            Any
Obligor or any of its Senior Officers is criminally indicted or convicted for
(i) a felony committed in the conduct of such Obligor’s business, or (ii) any
state or federal law (including the Controlled Substances Act, Money Laundering
Control Act of 1986 and Illegal Exportation of War Materials Act) that could
reasonably be expected to lead to forfeiture of any material Property or any
Collateral;

 

(m)          A
Change of Control occurs; or

 

(n)           Any
Event of Default shall occur and continue to exist beyond any applicable grace
or any cure period under Borrowers’ 9.0% Senior Notes due 2012 or the Indenture
relating thereto.

 

11.2.       Remedies upon Default

 

If an Event of
Default described in Section 11.1(j)
occurs with respect to any Borrower, then to the extent permitted by Applicable
Law, all Obligations shall become automatically due and payable and all
Commitments shall terminate, without any action by Agent or notice of any
kind.  In addition, or if any other Event
of Default exists, Agent may in its discretion (and shall upon written
direction of Required Lenders) do any one or more of the following from time to
time:

 

(a)           declare
any Obligations immediately due and payable, whereupon they shall be due and
payable without diligence, presentment, demand, protest or notice of any kind,
all of which are hereby waived by Borrowers to the fullest extent permitted by
law;

 

(b)           terminate,
reduce or condition any Commitment, or make any adjustment to the Borrowing
Base;

 

(c)           require
Obligors to Cash Collateralize LC Obligations, and, if Obligors fail promptly
to deposit such Cash Collateral, Lenders may (and shall upon the direction of
Required Lenders) advance the required Cash Collateral as Revolver Loans
(whether or not an Overadvance exists or is created thereby, or the conditions
in Section 6 are satisfied); and

 

(d)           exercise
any other rights or remedies afforded under any agreement, by law, at equity or
otherwise, including the rights and remedies of a secured party under the
UCC.  Such rights and remedies include
the rights to (i) take possession of any Collateral; (ii)
require

 

78

 

Borrowers to assemble Collateral, at Borrowers’
expense, and make it available to Agent at a place designated by Agent; (iii)
enter any premises where Collateral is located and store Collateral on such premises
until sold (and if the premises are owned or leased by a Borrower, Borrowers
agree not to charge for such storage); and (iv) sell or otherwise dispose of
any Collateral in its then condition, or after any further manufacturing or
processing thereof, at public or private sale, with such notice as may be
required by Applicable Law, in lots or in bulk, at such locations, all as
Agent, in its discretion, deems advisable. 
Each Borrower agrees that ten (10) days notice of any proposed sale or
other disposition of Collateral by Agent shall be reasonable.  Agent shall have the right to conduct such
sales on any Obligor’s premises, without charge, and such sales may be
adjourned from time to time in accordance with Applicable Law.  Agent shall have the right to sell, lease or
otherwise dispose of any Collateral for cash, credit or any combination
thereof, and Agent may purchase any Collateral at public or, if permitted by
law, private sale and, in lieu of actual payment of the purchase price, may set
off the amount of such price against the Obligations.

 

11.3.       License

 

Agent is
hereby granted an irrevocable, non-exclusive license or other right to use,
license or sub-license (without additional payment of royalty or other
compensation to any Person) any or all Intellectual Property of Borrowers,
computer hardware and software, trade secrets, brochures, customer lists,
promotional and advertising materials, labels, packaging materials and other
Property, in advertising for sale, marketing, selling, collecting, completing
manufacture of, or otherwise exercising any rights or remedies with respect to,
any Collateral.  Each Borrower’s rights
and interests under Intellectual Property shall inure to Agent’s benefit.

 

11.4.       Setoff

 

Agent, Lenders
and their Affiliates are each authorized by Borrowers at any time during an Event
of Default, without notice to Borrowers
or any other Person, to set off and to appropriate and apply any deposits
(general or special), funds, claims, obligations, liabilities or other Debt at
any time held or owing by Agent, any Lender or any such Affiliate to or for the
account of any Obligor against any Obligations, whether or not demand for
payment of such Obligation has been made, any Obligations have been declared
due and payable, are then due, or are contingent or unmatured, or the
Collateral or any guaranty or other security for the Obligations is adequate.

 

11.5.       Remedies Cumulative; No Waiver

 

11.5.1.        Cumulative Rights

 

All covenants,
conditions, provisions, warranties, guaranties, indemnities and other
undertakings of Borrowers
contained in the Loan Documents are cumulative and not in derogation or
substitution of each other.  In
particular, the rights and remedies of Agent and Lenders are cumulative, may be
exercised at any time and from time to time, concurrently or in any order, and
shall not be exclusive of any other rights or remedies that Agent and Lenders
may have, whether under any agreement, by law, at equity or otherwise.

 

79

 

11.5.2.        Waivers

 

The failure or
delay of Agent or any Lender to require strict performance by Borrowers with any terms of the Loan
Documents, or to exercise any rights or remedies with respect to Collateral or
otherwise, shall not operate as a waiver thereof nor as establishment of a
course of dealing.  All rights and
remedies shall continue in full force and effect until Full Payment of all
Obligations.  No modification of any
terms of any Loan Documents (including any waiver thereof) shall be effective,
unless such modification is specifically provided in a writing directed to
Borrowers and executed by Agent or the requisite Lenders, and such modification
shall be applicable only to the matter specified.  No waiver of any Default or Event of Default
shall constitute a waiver of any other Default or Event of Default that may
exist at such time, unless expressly stated. 
If Agent or any Lender accepts performance by any Obligor under any Loan
Documents in a manner other than that specified therein, or during any Default
or Event of Default, or if Agent or any Lender shall delay or exercise any
right or remedy under any Loan Documents, such acceptance, delay or exercise
shall not operate to waive any Default or Event of Default nor to preclude
exercise of any other right or remedy. 
It is expressly acknowledged by Borrowers that any failure to satisfy a
financial covenant on a measurement date shall not be cured or remedied by
satisfaction of such covenant on a subsequent date.

 

Section 12.            AGENT

 

12.1.       Appointment, Authority and Duties of Agent

 

12.1.1.        Appointment
and Authority

 

Each Lender
appoints and designates Bank of America as Agent hereunder.  Agent may, and each Lender authorizes Agent
to, enter into all Loan Documents to which Agent is intended to be a party and
accept all Security Documents, for Agent’s benefit and the Pro Rata benefit of
Lenders.  Each Lender agrees that any
action taken by Agent or Required Lenders in accordance with the provisions of
the Loan Documents, and the exercise by Agent or Required Lenders of any rights
or remedies set forth therein, together with all other powers reasonably
incidental thereto, shall be authorized and binding upon all Lenders.  Without limiting the generality of the
foregoing, Agent shall have the sole and exclusive authority to (a) act as the
disbursing and collecting agent for Lenders with respect to all payments and
collections arising in connection with the Loan Documents; (b) execute and
deliver as Agent each Loan Document, including any intercreditor or subordination
agreement, and accept delivery of each Loan Document from any Obligor or other
Person; (c) act as collateral agent for Secured Parties for purposes of
perfecting and administering Liens under the Loan Documents, and for all other
purposes stated therein; (d) manage, supervise or otherwise deal with
Collateral; and (e) exercise all rights and remedies given to Agent with
respect to any Collateral under the Loan Documents, Applicable Law or
otherwise.  The duties of Agent shall be
ministerial and administrative in nature, and Agent shall not have a fiduciary
relationship with any Lender, Secured Party, Participant or other Person, by
reason of any Loan Document or any transaction relating thereto.  Agent alone shall be authorized to determine
whether any Accounts or Inventory constitute Eligible Accounts or Eligible
Inventory, or whether to impose or release any reserve, which determinations
and judgments, if exercised in good faith, shall exonerate Agent from liability
to any Lender or other Person for any error in judgment.

 

80

 

12.1.2.        Duties

 

Agent shall
not have any duties except those expressly set forth in the Loan Documents, nor
be required to initiate or conduct any Enforcement Action except to the extent
directed to do so by Required Lenders while an Event of Default exists.  The conferral upon Agent of any right shall
not imply a duty on Agent’s part to exercise such right, unless instructed to
do so by Required Lenders in accordance with this Agreement.

 

12.1.3.        Agent Professionals

 

Agent may
perform its duties through agents and employees.  Agent may consult with and employ Agent
Professionals, and shall be entitled to act upon, and shall be fully protected
in any action taken in good faith reliance upon, any advice given by an Agent
Professional.  Agent shall not be
responsible for the negligence or misconduct of any agents, employees or Agent
Professionals selected by it with reasonable care.

 

12.1.4.        Instructions
of Required Lenders

 

The rights and
remedies conferred upon Agent under the Loan Documents may be exercised without
the necessity of joinder of any other party, unless required by Applicable
Law.  Agent may request instructions from
Required Lenders with respect to any act (including the failure to act) in
connection with any Loan Documents, and may seek assurances to its satisfaction
from Lenders of their indemnification obligations under Section 12.6 against all Claims that could
be incurred by Agent in connection with any act.  Agent shall be entitled to refrain from any
act until it has received such instructions or assurances, and Agent shall not
incur liability to any Person by reason of so refraining.  Instructions of Required Lenders shall be
binding upon all Lenders, and no Lender shall have any right of action
whatsoever against Agent as a result of Agent acting or refraining from acting
in accordance with the instructions of Required Lenders.  Notwithstanding the foregoing, instructions by
and consent of all Lenders shall be required in the circumstances described in Section 14.1.1, and in no event shall
Required Lenders, without the prior written consent of each Lender, direct
Agent to accelerate and demand payment of Loans held by one Lender without
accelerating and demanding payment of all other Loans, nor to terminate the
Commitments of one Lender without terminating the Commitments of all
Lenders.  In no event shall Agent be
required to take any action that, in its opinion, is contrary to Applicable Law
or any Loan Documents or could subject any Agent Indemnitee to personal
liability.

 

12.2.       Agreements Regarding Collateral and Field Examination
Reports

 

12.2.1.        Lien Releases; Care of
Collateral

 

Lenders
authorize Agent to release any Lien with respect to any Collateral (a) upon
Full Payment of the Obligations, (b) that is the subject of an Asset
Disposition which Borrowers certify in writing to Agent is a Permitted Asset
Disposition or a Lien which Borrowers certify is a Permitted Lien entitled to
priority over Agent’s Liens (and Agent may rely conclusively on any such
certificate without further inquiry), (c) that does not constitute a material
part of the Collateral, or (d) with the written consent of all Lenders.  Agent
shall have no obligation whatsoever to any Lenders to assure that any
Collateral exists or is owned by a Borrower, or is cared for, protected,
insured or encumbered, nor to assure that Agent’s Liens have been properly
created, perfected or enforced, or are entitled to any particular priority, nor
to exercise any duty of care with respect to any Collateral.

 

81

 

12.2.2.        Possession of Collateral

 

Agent and
Lenders appoint each other Lender as agent for the purpose of perfecting Liens
(for the benefit of Secured Parties) in any Collateral that, under the UCC or
other Applicable Law, can be perfected by possession.  If any Lender obtains possession of any such
Collateral, it shall notify Agent thereof and, promptly upon Agent’s request,
deliver such Collateral to Agent or otherwise deal with such Collateral in
accordance with Agent’s instructions.

 

12.2.3.        Reports

 

Agent shall
promptly, upon receipt thereof, forward to each Lender copies of the results of
any field audit or other examination or any appraisal prepared by or on behalf
of Agent with respect to any Obligor or Collateral (“Report”).  Each Lender agrees (a) that neither
Bank of America nor Agent makes any representation or warranty as to the
accuracy or completeness of any Report, and shall not be liable for any
information contained in or omitted from any Report; (b) that the Reports are
not intended to be comprehensive audits or examinations, and that Agent or any
other Person performing any audit or examination will inspect only specific
information regarding Obligations or the Collateral and will rely significantly
upon Borrowers’ books and records as well as upon representations of Borrowers’
officers and employees; and (c) to keep all Reports confidential and strictly
for such Lender’s internal use, and not to distribute any Report (or the
contents thereof) to any Person (except to such Lender’s Participants,
attorneys, accountants and other Persons with whom such Lender has a
confidential relationship) or use any Report in any manner other than
administration of the Loans and other Obligations.  Each Lender agrees to indemnify and hold
harmless Agent and any other Person preparing a Report from any action such
Lender may take as a result of or any conclusion it may draw from any Report,
as well as any Claims arising in connection with any third parties that obtain
all or any part of a Report through such Lender.

 

12.3.       Reliance By Agent

 

Agent shall be
entitled to rely, and shall be fully protected in relying, upon any
certification, notice or other communication (including those by telephone,
telex, telegram, telecopy or e-mail) believed by it to be genuine and correct
and to have been signed, sent or made by the proper Person, and upon the advice
and statements of Agent Professionals.

 

12.4.       Action Upon Default

 

Agent shall
not be deemed to have knowledge of any Default or Event of Default unless it
has received written notice from a Lender or Borrower specifying the occurrence
and nature thereof.  If any Lender
acquires knowledge of a Default or Event of Default, it shall promptly notify
Agent and the other Lenders thereof in writing. 
Each Lender agrees that, except as otherwise provided in any Loan
Documents or with the written consent of Agent and Required Lenders, it will
not take any Enforcement Action, accelerate its Obligations, or exercise any
right that it might otherwise have under Applicable Law to credit bid at
foreclosure sales, UCC sales or other similar dispositions of Collateral.  Notwithstanding the foregoing, however, a
Lender may take action to preserve or enforce its rights against an Obligor
where a deadline or limitation period is applicable that would, absent such
action, bar enforcement of Obligations held by such Lender, including the
filing of proofs of claim in an Insolvency Proceeding. Agent shall not be

 

82

 

authorized to
take any action to foreclose on any of the Real Estate without the prior
written consent of GECC (which consent shall not be unreasonably withheld or
delayed), and which consent shall be provided by GECC at such time as GECC
reasonably determines that no material environmental matters affect such Real
Estate (which determination may be made, in GECC’s reasonable credit judgment,
with or without the requirement of an environmental audit or assessment with
respect to such Real Estate.)

 

12.5.       Ratable Sharing

 

If any Lender
shall obtain any payment or reduction of any Obligation.  Whether through set-off or otherwise, in
excess of its share of such Obligation, determined on a Pro Rata basis or in
accordance with Section 5.6.1. as applicable, such
Lender shall forthwith purchase from Agent, Issuing Bank and the other Lenders
such participations in the affected Obligation as are necessary to cause the
purchasing Lender to share the excess payment or reduction, net of costs
incurred in connection therewith, on a Pro Rata basis or in accordance with Section 5.6.1. as applicable.  If any of such payment or reduction is
thereafter recovered from the purchasing Lender, the purchase shall be
rescinded and the purchase price restored to the extent of such recovery or
additional costs, but without interest.

 

12.6.       Indemnification of Agent Indemnitees

 

12.6.1.        Indemnification

 

EACH LENDER
SHALL INDEMNIFY AND HOLD HARMLESS AGENT INDEMNITEES, TO THE EXTENT NOT
REIMBURSED BY OBLIGORS
(BUT WITHOUT LIMITING THE INDEMNIFICATION OBLIGATIONS OF OBLIGORS UNDER
ANY LOAN DOCUMENTS), ON A PRO RATA BASIS, AGAINST ALL CLAIMS THAT MAY BE
INCURRED BY OR ASSERTED AGAINST ANY AGENT INDEMNITEE.  If Agent is sued by any receiver, trustee in
bankruptcy, debtor-in-possession or other Person for any alleged preference
from an Obligor or fraudulent transfer, then any monies paid by Agent in
settlement or satisfaction of such proceeding, together with all interest,
costs and expenses (including attorneys’ fees) incurred in the defense of same,
shall be promptly reimbursed to Agent by Lenders to the extent of each Lender’s
Pro Rata share.

 

12.6.2.        Proceedings

 

Without
limiting the generality of the foregoing, if at any time (whether prior to or
after the Commitment Termination Date) any proceeding is brought against any
Agent Indemnitees by an Obligor, or any Person claiming through an Obligor, to
recover damages for any act taken or omitted by Agent in connection with any
Obligations, Collateral, Loan Documents or matters relating thereto, or
otherwise to obtain any other relief of any kind on account of any transaction
relating to any Loan Documents, each Lender agrees to indemnify and hold
harmless Agent Indemnitees with respect thereto and to pay to Agent Indemnitees
such Lender’s Pro Rata share of any amount that any Agent Indemnitee is
required to pay under any judgment or other order entered in such proceeding or
by reason of any settlement, including all interest, costs and expenses
(including attorneys’ fees) incurred in defending same.  In Agent’s discretion, Agent may reserve for
any such proceeding, and may satisfy any judgment, order or settlement, from
proceeds of Collateral prior to making any distributions of Collateral proceeds
to Lenders.

 

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12.7.       Limitation on Responsibilities of Agent

 

Agent shall
not be liable to Lenders for any action taken or omitted to be taken under the
Loan Documents, except for losses directly and solely caused by Agent’s gross
negligence or willful misconduct.  Agent
does not assume any responsibility for any failure or delay in performance or
any breach by any Obligor or Lender of any obligations under the Loan
Documents.  Agent does not make to
Lenders any express or implied warranty, representation or guarantee with
respect to any Obligations, Collateral, Loan Documents or Obligor.  No Agent Indemnitee shall be responsible to
Lenders for any recitals, statements, information, representations or
warranties contained in any Loan Documents; the execution, validity,
genuineness, effectiveness or enforceability of any Loan Documents; the
genuineness, enforceability, collectibility, value, sufficiency, location or
existence of any Collateral, or the validity, extent, perfection or priority of
any Lien therein; the validity, enforceability or collectibility of any
Obligations; or the assets, liabilities, financial condition, results of
operations, business, creditworthiness or legal status of any Obligor or
Account Debtor.  No Agent Indemnitee
shall have any obligation to any Lender to ascertain or inquire into the
existence of any Default or Event of Default, the observance or performance by
any Obligor of any terms of the Loan Documents, or the satisfaction of any
conditions precedent contained in any Loan Documents.

 

12.8.       Successor Agent and Co-Agents

 

12.8.1.        Resignation; Successor
Agent

 

Subject to the
appointment and acceptance of a successor Agent as provided below, Agent may resign
at any time by giving at least thirty (30) days written notice thereof to
Lenders and Borrowers.  Upon receipt of
such notice, Required Lenders shall have the right to appoint a successor Agent
which shall be (a) a Lender or an Affiliate of a Lender; or (b) a commercial
bank that is organized under the laws of the United States or any state or
district thereof, has a combined capital surplus of at least $200,000,000 and
(provided no Default or Event of Default exists) is reasonably acceptable to
Borrowers.  If no successor agent is
appointed prior to the effective date of the resignation of Agent, then Agent
may appoint a successor agent from among Lenders.  Upon acceptance by a successor Agent of an
appointment to serve as Agent hereunder, such successor Agent shall thereupon
succeed to and become vested with all the powers and duties of the retiring
Agent without further act, and the retiring Agent shall be discharged from its
duties and obligations hereunder but shall continue to enjoy the benefits of
the indemnification set forth in Sections 12.6
and 14.2. 
Notwithstanding any Agent’s resignation, the provisions of this Section 12 shall continue in effect for its
benefit with respect to any actions taken or omitted to be taken by it while
Agent.  Any successor by merger or
acquisition of the stock or assets of Bank of America shall continue to be
Agent hereunder without further act on the part of the parties hereto, unless
such successor resigns as provided above.

 

12.8.2.        Separate
Collateral Agent

 

It is the
intent of the parties that there shall be no violation of any Applicable Law
denying or restricting the right of financial institutions to transact business
in any jurisdiction.  If Agent believes
that it may be limited in the exercise of any rights or remedies under the Loan

 

84

 

Documents due to any Applicable Law, Agent may appoint an additional
Person who is not so limited, as a separate collateral agent or co-collateral
agent.  If Agent so appoints a collateral
agent or co-collateral agent, each right and remedy intended to be available to
Agent under the Loan Documents shall also be vested in such separate
agent.  Every covenant and obligation
necessary to the exercise thereof by such agent shall run to and be enforceable
by it as well as Agent.  Lenders shall
execute and deliver such documents as Agent deems appropriate to vest any
rights or remedies in such agent.  If any
collateral agent or co-collateral agent shall die or dissolve, become incapable
of acting, resign or be removed, then all the rights and remedies of such
agent, to the extent permitted by Applicable Law, shall vest in and be
exercised by Agent until appointment of a new agent.

 

12.9.       Due Diligence and Non-Reliance

 

Each Lender acknowledges
and agrees that it has, independently and without reliance upon Agent or any
other Lenders, and based upon such documents, information and analyses as it
has deemed appropriate, made its own credit analysis of each Obligor and its
own decision to enter into this Agreement and to fund Loans and participate in
LC Obligations hereunder.  Each Lender
has made such inquiries concerning the Loan Documents, the Collateral and each
Obligor as such Lender feels necessary. 
Each Lender further acknowledges and agrees that the other Lenders and
Agent have made no representations or warranties concerning any Obligor, any
Collateral or the legality, validity, sufficiency or enforceability of any Loan
Documents or Obligations.  Each Lender
will, independently and without reliance upon the other Lenders or Agent, and
based upon such financial statements, documents and information as it deems
appropriate at the time, continue to make and rely upon its own credit
decisions in making Loans and participating in LC Obligations, and in taking or
refraining from any action under any Loan Documents.  Except for notices, reports and other
information expressly requested by a Lender, Agent shall have no duty or
responsibility to provide any Lender with any notices, reports or certificates
furnished to Agent by any Obligor or any credit or other information concerning
the affairs, financial condition, business or Properties of any Obligor (or any
of its Affiliates) which may come into possession of Agent or any of Agent’s Affiliates.

 

12.10.     Replacement of Certain Lenders

 

If any Lender
(a) fails to fund its Pro Rata share of any Loan or LC Obligation hereunder,
and such failure is not cured within two (2) Business Days, (b) defaults in
performing any of its obligations under the Loan Documents, or (c) fails to
give its consent to any amendment, waiver or action for which consent of all
Lenders was required and Required Lenders consented, then, in addition to any
other rights and remedies that any Person may have, Agent may, by notice to
such Lender within one hundred twenty (120) days, require such Lender to assign
all of its rights and obligations under the Loan Documents to Eligible
Assignee(s) specified by Agent, pursuant to appropriate Assignment and
Acceptance(s) and within twenty (20) days after Agent’s notice.  Agent is irrevocably appointed as
attorney-in-fact to execute any such Assignment and Acceptance if the Lender
fails to execute same.  Such Lender shall
be entitled to receive, in cash, concurrently with such assignment, all amounts
owed to it under the Loan Documents, including all principal, interest and fees
through the date of assignment (but excluding any prepayment charge).

 

85

 

12.11.     Remittance of Payments and Collections

 

12.11.1.      Remittances
Generally

 

All payments by any Lender to Agent shall be made by the time and on
the day set forth in this Agreement, in immediately available funds.  If no time for payment is specified or if
payment is due on demand by Agent
and request for payment is made by Agent by 11:00 a.m. on a Business Day,
payment shall be made by Lender not later than 2:00 p.m. on such day, and if
request is made after 11:00 a.m., then payment shall be made by 11:00 a.m. on
the next Business Day.  Payment by Agent
to any Lender shall be made by wire transfer, in the type of funds received by
Agent.  Any such payment shall be subject
to Agent’s right of offset for any amounts due from such Lender under the Loan
Documents.

 

12.11.2.      Failure to Pay

 

If any Lender
fails to pay any amount when due by it to Agent pursuant to the terms hereof,
such amount shall bear interest from the due date until paid at the rate
determined by Agent as customary in the banking industry for interbank
compensation.  In no event shall Borrowers be entitled to receive
credit for any interest paid by a Lender to Agent.

 

12.11.3.      Recovery of
Payments

 

If Agent pays
any amount to a Lender in the expectation that a related payment will be
received by Agent from an Obligor and such related payment is not received,
then Agent may recover such amount from each Lender that received it.  If Agent determines at any time that an
amount received under any Loan Document must be returned to an Obligor or paid
to any other Person pursuant to Applicable Law or otherwise, then,
notwithstanding any other term of any Loan Document, Agent shall not be
required to distribute such amount to any Lender.  If
any amounts received and applied by Agent to any Obligations are later required
to be returned by Agent pursuant to Applicable Law, Lenders shall pay to Agent,
on demand, such Lender’s Pro Rata share
of the amounts required to be returned.

 

12.12.     Agent in its Individual Capacity

 

As a Lender,
Bank of America shall have the same rights and remedies under the other Loan
Documents as any other Lender, and the terms “Lenders,” “Required
Lenders” or any similar term shall include Bank of America in its capacity
as a Lender.  Each of Bank of America and
its Affiliates may accept deposits from, maintain deposits or credit balances
for, invest in, lend money to, provide Bank Products to, act as trustee under
indentures of, serve as financial or other advisor to, and generally engage in
any kind of business with, Obligors and their Affiliates, as if Bank of America
were any other bank, without any duty to account therefor (including any fees
or other consideration received in connection therewith) to the other
Lenders.  In their individual capacity,
Bank of America and its Affiliates may receive information regarding Obligors,
their Affiliates and their Account Debtors (including information subject to
confidentiality obligations), and each Lender agrees that Bank of America and
its Affiliates shall be under no obligation to provide such information to Lenders,
if acquired in such individual capacity and not as Agent hereunder.

 

86

 

12.13.     Syndication Agent

 

The Lender
designated on the cover page of this Agreement as the “Syndication Agent”
shall not have any right, power, responsibility or duty under any Loan
Documents other than those applicable to all Lenders, and shall in no event be
deemed to have any fiduciary relationship with any other Lender.

 

12.14.     No Third Party Beneficiaries

 

This Section 12 is an agreement solely among
Lenders and Agent, and does not confer any rights or benefits upon Borrowers or any other Person.  As between Borrowers and Agent, any action
that Agent may take under any Loan Documents shall be conclusively presumed to
have been authorized and directed by Lenders as herein provided.

 

Section 13.            BENEFIT OF AGREEMENT; ASSIGNMENTS AND PARTICIPATIONS

 

13.1.       Successors and Assigns

 

This Agreement
shall be binding upon and inure to the benefit of Borrowers, Agent and Lenders and their
respective successors and assigns, except that (a) no Borrower shall have the
right to assign its rights or delegate its obligations under any Loan
Documents, and (b) any assignment by a Lender must be made in compliance with Section 13.3.  Agent may treat the Person which made any
Loan as the owner thereof for all purposes until such Person makes an
assignment in accordance with Section 13.3.  Any authorization or consent of a Lender
shall be conclusive and binding on any subsequent transferee or assignee of such
Lender.

 

13.2.       Participations

 

13.2.1.        Permitted Participants;
Effect

 

Any Lender
may, in the ordinary course of its business and in accordance with Applicable
Law, at any time sell to a financial institution (“Participant”) a
participating interest in the rights and obligations of such Lender under any
Loan Documents.  Despite any sale by a
Lender of participating interests to a Participant, such Lender’s obligations
under the Loan Documents shall remain unchanged, such Lender shall remain
solely responsible to the other parties hereto for performance of such
obligations, such Lender shall remain the holder of its Loans and Commitments
for all purposes, all amounts payable by Borrowers shall be determined as if
such Lender had not sold such participating interests, and Borrowers and Agent
shall continue to deal solely and directly with such Lender in connection with
the Loan Documents.  Each Lender shall be
solely responsible for notifying its Participants of any matters under the Loan
Documents, and Agent and the other Lenders shall not have any obligation or
liability to any such Participant.  A
Participant that would be a Foreign Lender if it were a Lender shall not be
entitled to the benefits of Section 5.8
unless Borrowers agree otherwise in writing.

 

13.2.2.        Voting Rights

 

Each Lender
shall retain the sole right to approve, without the consent of any Participant,
any amendment, waiver or other modification of any Loan Documents other than
that which forgives principal, interest or fees, reduces the stated interest
rate or fees payable with respect to any Loan or Commitment in which such
Participant has an interest, postpones the Commitment Termination Date or any
date fixed for any regularly scheduled payment of

 

87

 

principal, interest or fees on such Loan or Commitment, or releases any
Borrower, Guarantor or substantial portion of the Collateral.

 

13.2.3.        Benefit of Set-Off

 

Borrowers
agree that each Participant shall have a right of set-off in respect of its
participating interest to the same extent as if such interest were owing
directly to a Lender, and each Lender shall also retain the right of set-off
with respect to any participating interests sold by it.  By exercising any right of set-off, a Participant
agrees to share with Lenders all amounts received through its set-off, in
accordance with Section 12.5 as if
such Participant were a Lender.

 

13.3.       Assignments

 

13.3.1.        Permitted Assignments

 

A Lender may
assign to any Eligible Assignee any of its rights and obligations under the
Loan Documents, as long as (a) each assignment is of a constant, and not a
varying, percentage of the transferor Lender’s rights and obligations under the
Loan Documents and, in the case of a partial assignment, is in a minimum
principal amount of $5,000,000 (unless otherwise agreed by Agent in its
discretion) and integral multiples of $5,000,000 in excess of that amount; (b)
except in the case of an assignment in whole of a Lender’s rights and
obligations, the aggregate amount of the Commitments retained by the transferor
Lender be at least $15,000,000 (unless otherwise agreed by Agent in its
discretion); and (c) the parties to each such assignment shall execute and
deliver to Agent, for its acceptance and recording, an Assignment and
Acceptance.  Nothing herein shall limit
the right of a Lender to pledge or assign any rights under the Loan Documents
to (i) any Federal Reserve Bank or the United States Treasury as collateral
security pursuant to Regulation A of the Board of Governors and any Operating
Circular issued by such Federal Reserve Bank, or (ii) counterparties to swap
agreements relating to any Loans; provided, however, that any
payment by Borrowers
to the assigning Lender in respect of any Obligations assigned as described in
this sentence shall satisfy Borrowers’ obligations hereunder to the extent of
such payment, and no such assignment shall release the assigning Lender from
its obligations hereunder.

 

13.3.2.        Effect; Effective Date

 

Upon delivery
to Agent of an assignment notice in the form of Exhibit G,
such assignment shall become effective as specified in the notice, if it
complies with this Section 13.3.  From the effective date of such assignment,
the Eligible Assignee shall for all purposes be a Lender under the Loan
Documents, and shall have all rights and obligations of a Lender
thereunder.  Upon consummation of an
assignment, the transferor Lender, Agent and Borrowers shall make appropriate
arrangements for issuance of replacement and/or new Notes, as appropriate.

 

13.4.       Tax Treatment

 

If any
interest in a Loan Document is transferred to a Transferee that is organized
under the laws of any jurisdiction other than the United States or any state or
district thereof, the

 

88

 

transferor
Lender shall cause such Transferee, concurrently with the effectiveness of such
transfer, to comply with the provisions of Section
5.9.

 

13.5.       Representation of Lenders

 

Each Lender
represents and warrants to each Borrower, Agent and other Lenders that none of
the consideration used by it to fund its Loans or to participate in any other
transactions under this Agreement constitutes for any purpose of ERISA or
Section 4975 of the Internal Revenue Code assets of any “plan” as defined in Section 3(3) of ERISA
or Section 4975 of the Internal Revenue Code and the interests of such Lender
in and under the Loan Documents shall not constitute plan assets under ERISA.

 

Section 14.            MISCELLANEOUS

 

14.1.       Consents, Amendments and Waivers

 

14.1.1.        Amendment

 

No
modification of any Loan Document, including any extension or amendment of a
Loan Document or any waiver of a Default or Event of Default, shall be
effective without the prior written agreement of Agent, with the consent of
Required Lenders, and each Obligor party to such Loan Document; provided,
however, that:

 

(a)           without
the prior written consent of Agent, no modification shall be effective with
respect to any provision in a Loan Document that relates to any rights, duties
or discretion of Agent;

 

(b)           without
the prior written consent of Issuing Bank, no modification shall be effective
with respect to any LC Obligations or Section
2.2;

 

(c)           without
the prior written consent of each affected Lender, no modification shall be
effective that would (i) increase any Commitment of such Lender; or (ii) reduce
the amount of, or waive or delay payment of, any principal, interest or fees
payable to such Lender; and

 

(d)           without
the prior written consent of all Lenders (except a defaulting Lender as provided
in Section 4.2), no modification shall be effective that would (i) extend the
Revolver Termination Date; (ii) alter Section 5.5, 7.1 (except to add
Collateral) or 14.1.1; (iii) amend the definitions of Borrowing Base (and the
defined terms used in such definition), Pro Rata or Required Lenders; (iv)
increase any advance rate; (v) release a material portion of Collateral, except
as currently contemplated by the Loan Documents; (vi) alter the time or
amount of repayment of any of the Loans (except a moratorium or deferral
of payment pursuant to a forbearance agreement entered into by Agent and the
Required Lenders with Borrowers at any time an Event of Default exists) or
waive any Event of Default resulting from nonpayment of the Loans on the due
date thereof (or within any applicable period of grace), (vii) forgive any
of the Obligations, except any portion of the Obligations held by a Lender who
consents in writing to such forgiveness, or (viii) release any Obligor from
liability for any Obligations, if such Obligor is Solvent at the time of the
release.

 

89

 

14.1.2.        Limitations

 

The agreement
of Borrowers shall not be necessary to the effectiveness of any modification of
a Loan Document that deals solely with the rights and duties of Lenders, Agent
and/or Issuing Bank as among themselves. 
Only the consent of the parties to the Fee Letter or any agreement
relating to a Bank Product shall be required for any modification of such
agreement, and no Affiliate of a Lender that is party to a Bank Product
agreement shall have any other right to consent to or participate in any manner
in modification of any other Loan Document. 
The making of any Loans during the existence of a Default or Event of
Default shall not be deemed to constitute a waiver of such Default or Event of
Default, nor to establish a course of dealing. 
Any waiver or consent granted by Lenders hereunder shall be effective
only if in writing, and then only in the specific instance and for the specific
purpose for which it is given.

 

14.1.3.        Payment for Consents

 

No Borrower
will, directly or indirectly, pay any remuneration or other thing of value,
whether by way of additional interest, fee or otherwise, to any Lender (in its
capacity as a Lender hereunder) as consideration for agreement by such Lender with any modification of
any Loan Documents, unless such remuneration or value is concurrently paid, on
the same terms, on a Pro Rata basis to all Lenders providing their consent.

 

14.1.4        Overadvances

 

Unless otherwise directed in
writing by the Required Lenders, Agent may require Lenders to honor requests by
Borrowers for Overadvance Loans (in which event, and notwithstanding anything
to the contrary set forth in Section 2.1 or
elsewhere in this Agreement, Lenders shall continue to make Revolver Loans up
to their Pro Rata share of the Commitments) and to forbear from requiring
Borrowers to cure an Overadvance, (1) when no Event of Default exists (or if an
Event of Default exists, when the existence of such Event of Default is not
known by Agent), if and for so long as (i) such Overadvance does not
continue for a period of more than thirty (30) consecutive days, following
which no Overadvance exists for at least thirty (30) consecutive days
before another Overadvance exists, (ii) the amount of the Revolver Loans
outstanding at any time does not exceed the aggregate of the Commitments at
such time, and (iii) the Overadvance is not known by Agent at the time in
question to exceed $11,000,000; and (2) regardless of whether or not an Event
of Default exists, if Agent discovers the existence of an Overadvance not
previously known by it to exist, Lenders shall be obligated to continue
making such Revolver Loans as directed by Agent only (A) if the amount of the
Overadvance is not increased by more than $7,000,000 above the amount
determined by Agent to exist on the date of discovery thereof and (B) for a
period not to exceed fifteen (15) Business Days; provided, however,
that without the consent of all Lenders, the aggregate amount of the
Overadvance permitted under this Section 14.1.4
may not exceed $15,000,000 at any time. 
If any Overadvance shall continue to exist at any time after the
expiration of the periods set forth in clauses (1) or (2) above, Agent may (and
shall at the request of the Required Lenders) demand payment thereof.  In no event shall any Borrower or any
other Obligor be deemed to be a beneficiary of this Section
14.1.4 or authorized to enforce any of the provisions of this Section 14.1.4.  The
provisions of this Section 14.1.4
shall be in addition to the provisions of Section 2.1.6
hereof.

 

90

 

14.2.       General Indemnity

 

EACH BORROWER
SHALL INDEMNIFY AND HOLD HARMLESS THE INDEMNITEES AGAINST ANY CLAIMS THAT MAY
BE INCURRED BY OR ASSERTED AGAINST ANY INDEMNITEES, INCLUDING CLAIMS ARISING
FROM THE NEGLIGENCE OF AN INDEMNITEE.  If any Taxes (other than Excluded Taxes) shall
be payable by any party due to the execution, delivery, issuance or recording
of any Loan Documents, or the creation or repayment of any Obligations,
Borrowers shall pay (and shall promptly reimburse Agent and Lenders for their
payment of) all such Taxes, including any interest and penalties thereon, and
will indemnify and hold harmless Indemnitees against all liability in
connection therewith.

 

14.3.       Limitations of Indemnities

 

IN NO EVENT
SHALL ANY PARTY TO A LOAN DOCUMENT HAVE ANY OBLIGATION THEREUNDER TO INDEMNIFY
AN INDEMNITEE WITH RESPECT TO A CLAIM THAT IS DETERMINED IN A FINAL, NON-APPEALABLE
JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO RESULT FROM THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNITEE.  The obligation of each Obligor and Lender
with respect to each indemnity given by it in any Loan Documents shall survive
Full Payment of the Obligations.

 

14.4.       Notices and Communications

 

14.4.1.        Notice Address

 

Subject to Section 4.1.4, all notices, requests and other
communications by or to a party hereto shall be in writing and shall be given
to any Borrower, at Borrower Agent’s address shown on the signature pages
hereof, and to any other Person at its address shown on the signature pages
hereof (or, in the case of a Person who becomes a Lender after the Closing
Date, at the address shown on its Assignment and Acceptance), or at such other
address as a party may hereafter specify by notice in accordance with this Section 14.4.  Each
such notice, request or other communication shall be effective only (a) if
given by facsimile transmission, when transmitted to the applicable facsimile
number, if confirmation of receipt is received; (b) if given by mail, three (3)
Business Days after deposit in the U.S. mail, with first-class postage
pre-paid, addressed to the applicable address; or (c) if given by personal
delivery, when duly delivered to the notice address with receipt
acknowledged.  Notwithstanding the
foregoing, no notice to Agent pursuant to Section
2.1.4, 2.2, 3.1.2 or 4.1.1 shall
be effective until actually received by the individual to whose attention at
Agent such notice is required to be sent. 
Any written notice, request or other communication that is not sent in
conformity with the foregoing provisions shall nevertheless be effective on the
date actually received by the noticed party. 
Any notice received by Borrower Agent shall be deemed received by all
Borrowers.

 

14.4.2.        Electronic
Communications; Voice Mail

 

Electronic
mail and internet websites may be used only for routine communications, such as
financial statements, Borrowing Base Certificates and other information
required by Section 10.1.2, administrative
matters, and distribution of Loan Documents for execution and matters permitted
under Section 4.1.4.  Agent and Lenders make

 

91

 

no assurances as to the privacy and security of electronic
communications.  Electronic and voice
mail may not be used as effective notice under the Loan Documents.

 

14.4.3.        Non-Conforming
Communications

 

Agent and
Lenders may rely upon any notices (including telephonic communications)
purportedly given by or on behalf of any Borrower even if such notices were not
made in a manner specified herein, were incomplete or were not confirmed, or if
the terms thereof, as understood by the recipient, varied from a later
confirmation.  Each Borrower shall
indemnify and hold harmless each Indemnitee from any liabilities, losses, costs
and expenses arising from any telephonic communication purportedly given by or
on behalf of a Borrower.

 

14.5.       Performance of Borrowers’ Obligations

 

Agent may, in
its discretion at any time and from time to time, at Borrowers’ expense, pay
any amount or do any act required of a Borrower under any Loan Documents or
otherwise lawfully requested by Agent to (a) enforce any Loan Documents or
collect any Obligations; (b) protect, insure, maintain or realize upon any
Collateral; or (c) defend or maintain the validity or priority of Agent’s Liens
in any Collateral; including any payment of a judgment, insurance premium,
warehouse charge, finishing or processing charge, or landlord claim, or any
discharge of a Lien.  All payments, costs
and expenses (including Extraordinary Expenses) of Agent under this Section
shall be reimbursed to Agent by Borrowers, on demand, with
interest from the date incurred to the date of payment thereof at the Default
Rate applicable to Base Rate Revolver Loans. 
Any payment made or action taken by Agent under this Section shall be
without prejudice to any right to assert an Event of Default or to exercise any
other rights or remedies under the Loan Documents.

 

14.6.       Credit Inquiries

 

Each Borrower
hereby authorizes Agent and Lenders (but they shall have no obligation) to
respond to usual and customary credit inquiries from third parties concerning
any Borrower or Subsidiary.

 

14.7.       Severability

 

Wherever
possible, each provision of the Loan Documents shall be interpreted in such
manner as to be valid under Applicable Law. 
If any provision is found to be invalid under Applicable Law, it shall
be ineffective only to the extent of such invalidity and the remaining
provisions of the Loan Documents shall remain in full force and effect.

 

14.8.       Cumulative Effect; Conflict of Terms

 

The provisions
of the Loan Documents are cumulative. 
The parties acknowledge that the Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters, and
they agree that these are cumulative and that each must be performed as
provided.  Except as otherwise
specifically provided in another Loan Document (by specific reference to the
applicable provision of this Agreement), if any provision contained herein is
in direct conflict with any provision in another Loan Document, the provision
herein shall govern and control.

 

92

 

14.9.       Counterparts; Facsimile Signatures

 

Any Loan
Document may be executed in counterparts, each of which taken together shall
constitute one instrument.  Loan
Documents may be executed and delivered by facsimile, and they shall have the
same force and effect as manually signed originals.  Agent may require confirmation by a
manually-signed original, but failure to request or deliver same shall not
limit the effectiveness of any facsimile signature.

 

14.10.     Entire Agreement

 

Time is of the
essence of the Loan Documents.  The Loan
Documents embody the entire understanding of the parties with respect to the
subject matter thereof and supersede all prior understandings regarding the
same subject matter.

 

14.11.     Obligations of Lenders

 

The
obligations of each Lender hereunder are several, and no Lender shall be
responsible for the obligations or Commitments of any other Lender.  Amounts payable hereunder to each Lender
shall be a separate and independent debt, and each Lender shall be entitled, to
the extent not otherwise restricted hereunder, to protect and enforce its
rights arising out of the Loan Documents. 
It shall not be necessary for Agent or any other Lender to be joined as
an additional party in any proceeding for such purposes.  Nothing in this Agreement and no action of
Agent or Lenders pursuant to the Loan Documents shall be deemed to constitute
Agent and Lenders to be a partnership, association, joint venture or any other
kind of entity, nor to constitute control of any Borrower.  Each Borrower acknowledges and agrees that in
connection with all aspects of any transaction contemplated by the Loan
Documents, Borrowers, Agent, Issuing Bank and Lenders have an arms-length
business relationship that creates no fiduciary duty on the part of Agent,
Issuing Bank or any Lender, and each Borrower, Agent, Issuing Bank and Lender
expressly disclaims any fiduciary relationship.

 

14.12.     Confidentiality

 

During the
term of this Agreement and for 24 months thereafter, Agent and Lenders agree to
take reasonable precautions to maintain the confidentiality of any information
that Borrowers deliver to Agent and Lenders and identify as confidential at the
time of delivery, except that Agent and any Lender may disclose such
information (a) to their respective officers, directors, employees, Affiliates
and agents, including legal counsel, auditors and other professional advisors;
(b) to any party to the Loan Documents from time to time; (c) pursuant to the
order of any court or administrative agency; (d) upon the request of any Governmental
Authority exercising regulatory authority over Agent or such Lender; (e) which
ceases to be confidential, other than by an act or omission of Agent or any
Lender, or which becomes available to Agent or any Lender on a non-confidential
basis; (f) to the extent reasonably required in connection with any litigation
relating to any Loan Documents or transactions contemplated thereby, or
otherwise as required by Applicable Law; (g) to the extent reasonably required
for the exercise of any rights or remedies under the Loan Documents; (h) to any
actual or proposed party to a Bank Product or to any Transferee, as long as
such Person agrees to be bound by the provisions of this Section; (i) to the
National Association of Insurance Commissioners or any similar organization, or
to any nationally recognized rating agency that requires access to information
about a Lender’s portfolio in connection with ratings issued with

 

93

 

respect to
such Lender; (j) to any investor or potential investor in an Approved Fund that
is a Lender or Transferee, but solely for use by such investor to evaluate an
investment in such Approved Fund, or to any manager, servicer or other Person
in connection with its administration of any such Approved Fund; or (k) with
the consent of Borrowers. 
Notwithstanding the foregoing, Agent and Lenders may with the prior
written consent of Borrowers, issue and disseminate to the public general
information describing this credit facility, including the names and addresses
of Borrowers and a general description of Borrowers’ businesses, and may use
Borrowers’ names in advertising and other promotional materials.

 

14.13.     Certifications
Regarding IndenturesBorrowers certify to Agent and Lenders that
neither the execution or performance of the Loan Documents nor the incurrence
of any Obligations by Borrowers violates the Indenture, including Section 4.9
thereof.  Borrowers further certify that
the Commitments and Obligations constitute a “Permitted Indebtedness”
under the Indenture.  Agent may condition
Borrowings, Letters of Credit and other credit accommodations under the Loan
Documents from time to time upon Agent’s receipt of evidence that the
Commitments and Obligations continue to constitute a “Permitted Indebtedness”
at such time.

 

14.14.     Governing Law

 

THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS, UNLESS OTHERWISE SPECIFIED, SHALL BE GOVERNED BY
THE LAWS OF THE STATE OF GEORGIA WITHOUT GIVING EFFECT TO ANY CONFLICT OF LAW
PRINCIPLES (BUT GIVING EFFECT TO FEDERAL LAWS RELATING TO NATIONAL BANKS).

 

14.15.     Consent to Forum

 

14.15.1.      Forum

 

EACH BORROWER
HEREBY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF ANY FEDERAL OR STATE COURT
SITTING IN OR WITH JURISDICTION OVER THE NORTHERN DISTRICT OF GEORGIA, IN ANY
PROCEEDING OR DISPUTE RELATING IN ANY WAY TO ANY LOAN DOCUMENTS, AND AGREES
THAT ANY SUCH PROCEEDING SHALL BE BROUGHT BY IT SOLELY IN ANY SUCH COURT.  EACH BORROWER IRREVOCABLY WAIVES ALL CLAIMS,
OBJECTIONS AND DEFENSES THAT IT MAY HAVE REGARDING SUCH COURT’S PERSONAL OR
SUBJECT MATTER JURISDICTION, VENUE OR INCONVENIENT FORUM.  Nothing herein shall limit the right of Agent
or any Lender to bring proceedings against any Obligor in any other court.  Nothing in this Agreement shall be deemed to
preclude enforcement by Agent of any judgment or order obtained in any forum or
jurisdiction.

 

14.16.     Waivers by Borrowers

 

To the fullest
extent permitted by Applicable Law, each Borrower waives (a) the right to trial
by jury (which Agent and each Lender hereby also waives) in any proceeding,
claim or counterclaim of any kind relating in any way to any Loan Documents,
Obligations or Collateral; (b) presentment, demand, protest, notice of
presentment, default, non-payment, maturity, release, compromise, settlement, extension
or renewal of any commercial paper, accounts, contract rights, documents,
instruments, chattel paper and guaranties at any time held by Agent on which

 

94

 

a Borrower may
in any way be liable, and hereby ratifies anything Agent may do in this regard;
(c) notice prior to taking possession or control of any Collateral; (d) any
bond or security that might be required by a court prior to allowing Agent to
exercise any rights or remedies; (e) the benefit of all valuation, appraisement
and exemption laws; (f) any claim against Agent or any Lender, on any theory of
liability, for special, indirect, consequential, exemplary or punitive damages
(as opposed to direct or actual damages) in any way relating to any Enforcement
Action, Obligations, Loan Documents or transactions relating thereto; and (g)
notice of acceptance hereof.  Each Borrower acknowledges that the foregoing
waivers are a material inducement to Agent and Lenders entering into this
Agreement and that Agent and Lenders are relying upon the foregoing in their
dealings with Borrowers.  Each Borrower
has reviewed the foregoing waivers with its legal counsel and has knowingly and
voluntarily waived its jury trial and other rights following consultation with
legal counsel.  In the event of
litigation, this Agreement may be filed as a written consent to a trial by the
court.

 

14.17.     Patriot Act Notice

 

Agent and
Lenders hereby notify Borrowers that pursuant to the requirements of the
Patriot Act, Agent and Lenders are required to obtain, verify and record
information that identifies each Borrower, including its legal name, address,
tax ID number and other information that will allow Agent and Lenders to
identify it in accordance with the Patriot Act. 
Agent and Lenders will also require information regarding each personal
guarantor, if any, and may require information regarding Borrowers’ management
and owners, such as legal name, address, social security number and date of
birth.

 

14.18.     JV Europe

 

Nothing in
this Agreement shall be deemed to cause JV Europe or its subsidiaries to become
a guarantor of or pledge its assets to secure the Obligations, nor shall this
Agreement prohibit JV Europe or its subsidiaries from paying dividends, making
payments under its indebtedness to Nexans or its secured lending arrangements
or to prohibit SEI from issuing new shares of its common stock in payment of
the put price which may be payable to Nexans with respect to JV Europe.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURES
BEGIN ON FOLLOWING PAGE]

 

95

 

IN
WITNESS WHEREOF, this Agreement has been executed and
delivered as of the date set forth above.

 

	
   

  	
  BORROWERS:

  
	
   

  	
   

  
	
   

  	
  SUPERIOR ESSEX COMMUNICATIONS LP

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
   

  	
   

  
	
   

  	
  David S. Aldridge, Chief Financial
  Officer,

  Vice President and
  Treasurer

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
  150 Interstate North Parkway, Suite 300

  Atlanta, Georgia 30339

  Attention: Chief Financial Officer

  Telecopier No.: (770) 303-8892

  

 

 

	
   

  	
  ESSEX
  GROUP, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  David S. Aldridge, Vice President
  and Treasurer

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
  c/o Superior Essex Communications LP

  150
  Interstate North Parkway, Suite 300

  Atlanta, Georgia 30339

  Attention: Chief Financial Officer

  Telecopier No.: (770) 303-8892

  

 

 

	
   

  	
  AGENT:

  
	
   

  	
   

  
	
   

  	
  BANK OF AMERICA, N.A.

  
	
   

  	
  As Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  300
  Galleria Parkway, Suite 800

  Atlanta,
  Georgia 30339

  Attention:
  Loan Administration Manager

  Telecopier
  No.: (770) 839-2483

  
					

 

 

	
   

  	
  LENDERS:

  
	
   

  	
   

  
	
   

  	
  BANK OF AMERICA, N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
  300 Galleria Parkway, Suite 800

  
	
   

  	
  Atlanta, Georgia 30339

  
	
   

  	
   

  
	
   

  	
  LIBOR
  Lending Office:

  
	
   

  	
   

  
	
   

  	
  300 Galleria Parkway, Suite 800

  Atlanta, Georgia 30339

  Attention: Loan Administration Manager

  Telecopier No.: (770) 839-2483

  
					

 

 

	
   

  	
  GENERAL
  ELECTRIC CAPITAL

  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
  GE Corporate Financial Services

  
	
   

  	
  201 Merritt 7, PO Box 5201

  
	
   

  	
  Norwalk, Connecticut 06856

  
	
   

  	
   

  
	
   

  	
  LIBOR Lending Office:

  
	
   

  	
   

  
	
   

  	
  GE Corporate Financial Services

  
	
   

  	
  201 Merritt 7, PO Box 5201

  
	
   

  	
  Norwalk, Connecticut 06856

  
	
   

  	
  Attention: Jessica Hutson, Superior Essex contact

  
	
   

  	
  Telecopier No.: (203) 229-5791

  
					

 

 

	
   

  	
  WACHOVIA
  BANK, NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
  171 17th Street, NW

  
	
   

  	
  Atlanta, Georgia 30363

  
	
   

  	
   

  
	
   

  	
  LIBOR
  Lending Office:

  
	
   

  	
   

  
	
   

  	
  171 17th Street, NW

  
	
   

  	
  Atlanta, Georgia 30363

  
	
   

  	
  Attention: Dan Denton

  
	
   

  	
  Telecopier No.: (404) 214-3964

  
					

 

 

EXHIBIT A

 

FORM OF

SECOND
AMENDED AND RESTATED REVOLVER NOTE

 

	
   

  	
   

  	
  April      , 2006

  
	
  U.S.
  $                              

  	
   

  	
  Atlanta, Georgia

  

 

FOR VALUE RECEIVED, the undersigned, SUPERIOR ESSEX
COMMUNICATIONS LP (hereinafter referred to as “Superior” and “Borrower
Agent”), a Delaware limited partnership, with its chief executive office and
principal place of business at 150 Interstate North Parkway, Suite 300,
Atlanta, Georgia 30339, and ESSEX GROUP, INC.,
a Michigan corporation (“Essex”), with its chief executive office and principal
place of business at 1601 Wall Street, Fort Wayne, Indiana  46802 (Superior and Essex collectively
referred to herein as “Borrowers” and individually as a “Borrower”), hereby
unconditionally, and jointly and severally, promise to pay to the order of                                          
(herein, together with any permitted subsequent holder hereof, called the “Holder”)
the principal sum of                               
MILLION AND NO/100 DOLLARS ($
                          
) or such lesser sum as may constitute Holder’s Pro Rata share of the
outstanding principal amount of all Revolver Loans pursuant to the terms of the
Loan Agreement (as defined below) on the date on which such outstanding
principal amounts become due and payable pursuant to Section 5.2 of the Loan Agreement, in strict accordance with
the terms thereof.  Borrowers likewise
unconditionally, and jointly and severally, promise to pay to Holder interest
from and after the date hereof on Holder’s Pro Rata share of the outstanding
principal amount of Revolver Loans at such interest rates, payable at such
times, and computed in such manner as are specified in Section 3.1 of the Loan Agreement, in
strict accordance with the terms thereof.

 

This Second Amended and Restated Revolver
Note (“Note”) is issued pursuant to, and is one of the “Revolver Notes”
referred to in, the Amended and Restated Loan and Security Agreement dated the
date hereof (as the same may be amended, restated or otherwise modified from
time to time, the “Loan Agreement”), among Borrowers, Bank of America, N.A., as
collateral and administrative agent (together with its successors and assigns
in such capacity, “Administrative Agent”) for itself and the financial
institutions from time to time parties thereto as lenders (“Lenders”), such
Lenders and the other parties named therein, and Holder is and shall be
entitled to all benefits thereof and of all Loan Documents executed and
delivered in connection therewith.  This
Note is subject to certain restrictions on transfer or assignment as provided
in the Loan Agreement.  All capitalized
terms used herein, unless otherwise defined herein, shall have the meanings
ascribed to such terms in the Loan Agreement.

 

The repayment of the principal balance of
this Note is subject to the provisions of Section
5.2 of the Loan Agreement. 
The entire unpaid principal balance and all accrued interest on this
Note shall be due and payable immediately upon the termination of the
Commitments as set forth in Section 4.6
of the Loan Agreement.

 

All payments of principal and interest shall
be made in Dollars in immediately available funds as specified in the Loan
Agreement.

 

Upon or after the occurrence of an Event of
Default and for so long as such Event of Default exists, the principal balance
and all accrued interest of this Note may be declared (or shall become) due and
payable in the manner and with the effect provided in the Loan Agreement, and
the unpaid principal balance hereof shall bear interest at the Default Rate as and
when provided in Section
3.1.1 of the Loan Agreement. 
Borrowers jointly and severally agree to pay, and save Holder harmless
against, any liability for the payment of, all costs and expenses, including,
but not limited to, reasonable attorneys’ fees, if this Note is collected by or
through an attorney-at-law.

 

 

All principal amounts of Revolver Loans made
by Holder to Borrowers pursuant to the Loan Agreement, and all accrued and
unpaid interest thereon, shall be deemed outstanding under this Note and shall
continue to be owing by Borrowers until paid in accordance with the terms of
this Note and the Loan Agreement.

 

In no contingency or event whatsoever,
whether by reason of advancement of the proceeds hereof or otherwise, shall the
amount paid or agreed to be paid to Holder for the use, forbearance  or detention of money advanced hereunder
exceed the highest lawful rate permissible under any law which a court of
competent jurisdiction may deem applicable hereto; and, in the event of any
such payment inadvertently paid by Borrowers or inadvertently received by
Holder, such excess sum shall be, at Borrowers’ option, returned to Borrowers
forthwith or credited as a payment of principal, but shall not be applied to
the payment of interest.  It is the
intent hereof that Borrowers not pay or contract to pay, and that Holder not
receive or contract to receive, directly or indirectly in any manner
whatsoever, interest in excess of that which may be paid by Borrowers under
Applicable Law.

 

Time is of the essence of this Note.  To the fullest extent permitted by Applicable
Law, each Borrower, for itself and its legal representatives, successors and
assigns, expressly waives presentment, demand, protest, notice of dishonor, notice
of non-payment, notice of maturity, notice of protest, presentment for the
purpose of accelerating maturity, diligence in collection, and the benefit of
any exemption or insolvency laws.

 

Wherever possible each provision of this Note
shall be interpreted in such a manner as to be effective and valid under
Applicable Law, but if any provision of this Note shall be prohibited or
invalid under Applicable Law, such provision shall be ineffective to the extent
of such prohibition or invalidity without invalidating the remainder of such
provision or remaining provisions of this Note. 
No delay or failure on the part of Holder in the exercise of any right
or remedy hereunder shall operate as a waiver thereof, nor as an acquiescence
in any default, nor shall any single or partial exercise by Holder of any right
or remedy preclude any other right or remedy. 
Holder, at its option, may enforce its rights against any Collateral
securing this Note without Administrative Agent or Holder enforcing its rights
against any Borrower, any Guarantor of the indebtedness evidenced hereby or any
other property or indebtedness due or to become due to any Borrower.  Each Borrower agrees that, without releasing
or impairing any Borrower’s liability hereunder, Holder or Administrative Agent
may at any time release, surrender, substitute or exchange any Collateral
securing this Note and may at any time release any party primarily or
secondarily liable for the indebtedness evidenced by this Note.

 

This Note amends and restates that certain
Amended and Restated Revolver Note dated                         
, 2004, from Borrowers to Holder in the original principal amount of $                       (the “Prior
Note”).  Nothing contained herein or in
the Prior Note shall constitute a novation or an accord and satisfaction.

 

The rights of Holder and obligations of
Borrowers hereunder shall be construed in accordance with and governed by the
laws (without giving effect to the conflict of law principles thereof) of the
State of Georgia.  This Note is intended
to take effect as an instrument under seal under Georgia law.

 

[Remainder of page intentionally left blank;
signatures on the following page]

 

 

IN WITNESS WHEREOF, each Borrower has caused
this Note to be executed under seal and delivered by its duly authorized
officers on the date first above written.

 

 

	
   

  	
  BORROWERS:

  
	
   

  	
   

  
	
   

  	
  SUPERIOR ESSEX
  COMMUNICATIONS LP 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ESSEX GROUP, INC. 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  

 

 

EXHIBIT B

 

[Reserved]

 

 

EXHIBIT C

 

COMPLIANCE CERTIFICATE

 

[Letterhead of Borrower Agent]

 

                       ,
20     

 

 

Bank of America, N.A., as Agent

300 Galleria Parkway, N.W.

Suite 800

Atlanta, Georgia  30339

 

The undersigned, the chief financial officer
of Superior Essex Communications LP, a
Delaware limited partnership (“Borrower Agent”), as Borrower Agent, on behalf
of itself and the other Borrowers, gives this certificate to Bank of America, N.A. (“Agent”) in
accordance with the requirements of Section
10.1.2 of that certain Amended and Restated Loan and Security
Agreement dated April 14, 2006, among Borrowers, Agent, as collateral and
administrative agent (in such for itself and the financial institutions from
time to time parties thereto as lenders (“Lenders”), such Lenders and the other
parties named therein (as at any time amended, the “Loan Agreement”).  Capitalized terms used in this Certificate,
unless otherwise defined herein, shall have the meanings ascribed to them in
the Loan Agreement.

 

1.             Based upon my review of the balance sheets
and statements of income of Borrowers and their Subsidiaries for the [Fiscal Year]  [quarterly
period] ending                                      
, 20    , copies of which are attached hereto, I hereby
certify that:

 

(a)       Consolidated Fixed Charge Coverage Ratio was
        to 1.0; provided that Borrowers’
obligation to maintain a minimum Consolidated Fixed Charge Coverage Ratio at
any time or times shall be governed by the Loan Agreement;

 

(b)      Average Availability during the period was $
              ;

 

(c)      Capital Expenditures for Borrowers during the
period was $                 ;
and

 

(d)      JV Europe Investments during the period was $
                     
and China Investments during the period was $                   .

 

2.             No Default exists on the date hereof, other
than:                                       
                                                                                         
[if none, so state]; and

 

3.             No Event of Default exists on the date
hereof, other than                                                            
                                                                                                  
[if none, so state].

 

4.             As of the date hereof, each Borrower is
current in its payment of all accrued rent and other charges to Persons who own
or lease any premises where any of the Collateral is located, and there are no
pending disputes or claims regarding any Borrower’s failure to pay or delay in
payment of any such rent or other charges.

 

 

 

5.             Attached hereto is a schedule showing the
calculations that support Borrowers’ compliance [non-compliance] with the financial covenants, as shown
above.

 

	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
  SUPERIOR
  ESSEX COMMUNICATIONS LP,

  
	
   

  	
  as
  Borrower Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Chief
  Financial Officer

  

 

 

EXHIBIT D

 

LETTER OF CREDIT PROCUREMENT REQUEST

 

 

Bank of America, N.A., as Agent

Suite 800

300 Galleria Parkway

Atlanta, Georgia 30339

Attention:

 

 

This Letter of Credit
Procurement Request is delivered to you pursuant to the Amended and Restated
Loan and Security Agreement, dated April 14, 2006, among SUPERIOR
ESSEX COMMUNICATIONS LP (hereinafter referred to as “Superior” or “Borrower
Agent”), a Delaware limited partnership, ESSEX GROUP, INC.,
a Michigan corporation (hereinafter referred to as “Essex”; Superior and Essex
being referred to collectively as “Borrowers,” and individually as a “Borrower”),
BANK OF AMERICA, N.A. (“Bank”), as
collateral and administrative agent (in such capacity, “Agent”) for itself and
the financial institutions from time to time parties thereto as lenders (“Lenders”),
such Lenders and the other parties named therein (as the same may be amended,
supplemented, restated or otherwise modified from time to time, the “Amended
and Restated Loan and Security Agreement”). 
Unless otherwise defined herein, terms used herein have the meanings
assigned to them in the Amended and Restated Loan and Security Agreement.

 

Borrowers hereby request Bank to issue a
Letter of Credit, as follows:

 

	
  (1)

  	
   

  	
  Borrower’s/Account
  Party’s Name

  	
   

  	
   

  
	
  (2)

  	
   

  	
  Amount
  of Letter of Credit:

  	
   

  	
  $

  
	
  (3)

  	
   

  	
  Issuance
  Date:

  	
   

  	
   

  
	
  (4)

  	
   

  	
  Beneficiary’s
  Name:

  	
   

  	
   

  
	
  (5)

  	
   

  	
  Beneficiary’s
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (6)

  	
   

  	
  Expiry
  Date:

  	
   

  	
   

  
	
  (7)

  	
   

  	
  Draw
  Conditions:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (8)

  	
   

  	
  Single
  draw : or Multiple draw :

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (9)

  	
   

  	
  Purpose
  of Letter of Credit:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

Attached hereto is the Bank’s form of LC
Application, completed with the details of the Letter of Credit requested
herein.

 

 

 

Borrower Agent hereby certifies that each of
the LC Conditions is now, and will on the date of issuance of the Letter of
Credit, be  satisfied in all respects and
that no Default or Event of Default exists. 
Borrower Agent hereby ratifies and reaffirms all of the Loan Documents
and Obligations arising thereunder.

 

IN WITNESS WHEREOF, Borrower Agent has caused
this Letter of Credit Procurement Request to be executed and delivered by its
duly authorized officer, this      day of                                  
, 20    .

 

	
   

  	
  SUPERIOR
  ESSEX COMMUNICATIONS LP

  
	
   

  	
  (“Borrower Agent”)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   Title:

  	
   

  	
   

  
					

 

 

EXHIBIT E

 

[RESERVED]

 

 

EXHIBIT F

 

FORM OF ASSIGNMENT AND ACCEPTANCE

 

Dated
as of       , 20    

 

 

Reference is made to the Amended and Restated
Loan and Security Agreement dated April 14, 2006 (at any time amended, the “Amended
and Restated Loan and Security Agreement”), among SUPERIOR ESSEX COMMUNICATIONS LP, a Delaware
limited partnership (hereinafter
referred to as “Superior” and “Borrower Agent”), ESSEX GROUP,
INC., a Michigan corporation (hereinafter referred to as “Essex”;
Superior and Essex being referred to collectively as “Borrowers,” and
individually as a “Borrower”), BANK OF AMERICA, N.A.,
as collateral and administrative agent (together with its successors in such
capacity, “Agent”) for itself and the financial institutions from time to time
parties thereto as lenders (“Lenders”), and such Lenders.  Capitalized terms used herein and not
otherwise defined shall have the meanings assigned to such terms in the Amended
and Restated Loan and Security Agreement.

 

                                                                         
(the “Assignor”) and                                                               
(the “Assignee”) agree as follows:

 

1.             Assignor hereby
assigns to Assignee and Assignee hereby purchases and assumes from Assignor (i)
a principal amount of $              
of the outstanding Revolver Loans held by Assignor [and $                           
of participations of Assignor in LC Outstandings] (which amount[s],
according to the records of Agent, represent[s]                 %
of the total principal amount of outstanding Revolver Loans [and LC Outstandings]) and (ii) a principal amount of $                     
of Assignor’s Revolver Commitment (which amount includes Assignor’s outstanding
Revolver Loans being assigned to Assignee pursuant to clause (i) above and
which, according to the records of Agent, represents (          %)
of the total Revolver Commitments of Lenders under the Amended and Restated
Loan and Security Agreement (]the
“Assigned Interest”), together with an interest in the Loan Documents
corresponding to the Assigned Interest. 
This Agreement shall be effective from the date (the “Assignment
Effective Date”) on which Assignor receives both (x) the principal amount of
the Assigned Interest in the Loans on the Assignment Effective Date, if any,
and (y) a copy of this Agreement duly executed by Assignee.  From and after the Assignment Effective Date,
Assignee hereby expressly assumes, and undertakes to perform, all of Assignor’s
obligations in respect of Assignor’s Commitments to the extent, and only to the
extent, of Assignee’s Assigned Interest, and all principal, interest, fees and
other amounts which would otherwise be payable to or for Assignor’s account in
respect of the Assigned Interest shall be payable to or for Assignee’s account,
to the extent such amounts have accrued subsequent to the Assignment Effective
Date.

 

2.                             Assignor (i) represents that as of the date
hereof, the aggregate of its Commitments under the Amended and Restated Loan
and Security Agreement (without giving effect to assignments thereof, which
have not yet become effective) is $                   ,
and the outstanding balance of its Loans [and
participations in LC Outstandings]
(unreduced by any assignments thereof, which have not yet become effective) is
$                      ;
(ii) makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with the Amended and Restated Loan and Security Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Amended and Restated Loan and Security Agreement or any other
instrument or document furnished pursuant thereto, other than that Assignor is

 

 

the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any adverse claim; [and] (iii) makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of Borrowers, the performance or observance by Borrowers of any of their
obligations under the Amended and Restated Loan and Security Agreement or any
of the Loan Documents[; and (iv) attaches the Notes held by it and requests
that Agent exchange such Notes for new Notes payable to Assignee and the
Assignor in the principal amounts set forth on Schedule A hereto].

 

3.                             Assignee (i) represents and warrants that it
is legally authorized to enter into this Assignment and Acceptance; (ii)
confirms that it has received a copy of the Amended and Restated Loan and
Security Agreement, together with copies of the most recent financial
statements delivered pursuant to Section 10.1.2
thereof, and copies of such other Loan Documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (iii) agrees that it shall, independently and
without reliance upon the Assignor and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under the Amended and Restated Loan
and Security Agreement; (iv) confirms that it is eligible to become an
Assignee; (v)  appoints and authorizes Agent
to take such action as agent on its behalf and to exercise such powers under
the Amended and Restated Loan and Security Agreement as are delegated to Agent
by the terms thereof, together with such powers as are incidental thereto; (vi)
agrees that it will strictly observe and perform all the obligations that are
required to be performed by it as a “Lender” under the terms of the Amended and
Restated Loan and Security Agreement and the other Loan Documents; and (vii)
agrees that it will keep confidential all information with respect to Borrowers
furnished to it by Borrowers or the Assignor to the extent provided in the Amended
and Restated Loan and Security Agreement.

 

4.             Assignor
acknowledges and agrees that it will not sell or otherwise dispose of the
Assigned Interest or any portion thereof, or grant any participation therein,
in a manner which, or take any action in connection therewith which, would
violate the terms of any of the Loan Documents.

 

5.             This Agreement
and all rights and obligations shall be interpreted in accordance with and
governed by the laws of the State of Georgia. 
If any provision hereof would be invalid under Applicable Law, then such
provision shall be deemed to be modified to the extent necessary to render it
valid while most nearly preserving its original intent; no provision hereof
shall be affected by another provision’s being held invalid.

 

6.             Each notice or
other communication hereunder shall be in writing, shall be sent by messenger,
by telecopy or facsimile transmission or by first-class mail, shall be deemed
given when sent and shall be sent as follows:

 

	
  (a)

  	
   

  	
  If
  to Assignee, to the following address (or to such other address as Assignee
  may designate from time to time):

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  If
  to Assignor, to the following address (or to such other address as Assignor
  may designate from time to time):

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

 

Payments hereunder shall be made by wire
transfer of immediately available Dollars as follows:

 

If to Assignee, to the following account (or
to such other account as Assignee may designate from time to time):

 

 

ABA
No. 

 

Account
No.

Reference:

 

If to Assignor, to the following account (or
to such other account as Assignor may designate from time to time):

 

 

 

ABA
No. 

For
Account of:

Reference:

 

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

 

	
   

  	
   

  	
   

  
	
   

  	
  (“Assignor”)

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (“Assignee”)

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
					

 

 

SCHEDULE A TO ASSIGNMENT AND ACCEPTANCE

 

 

EXHIBIT G

 

FORM OF NOTICE

 

Reference is made to (i) the Amended and
Restated Loan and Security Agreement dated April 14, 2006 (as at any time
amended, the “Amended and Restated Loan and Security Agreement”) among SUPERIOR ESSEX
COMMUNICATIONS LP, a Delaware limited partnership (hereinafter
referred to as “Superior” and “Borrower Agent”), ESSEX GROUP,
INC., a Michigan corporation (hereinafter referred to as “Essex”;
Superior and Essex being referred to collectively as “Borrowers,” and
individually as a “Borrower”), BANK OF AMERICA, N.A.,
as collateral and administrative agent (together with its successors in such
capacity, “Agent”) for itself and the financial institutions from time to time
parties thereto as lenders (“Lenders”), such Lenders and the other parties
named therein, and (ii) the Assignment and Acceptance dated as of                       ,
20     (the ”Assignment Agreement”) between                                     
(the “Assignor”) and                                        
(the “Assignee”).  Except as otherwise
defined herein, capitalized terms used herein which are defined in the Amended
and Restated Loan and Security Agreement are used herein with the respective
meanings specified therein.

 

The Assignor hereby notifies Borrowers and Agent
of Assignor’s intent to assign to Assignee pursuant to the Assignment Agreement
a principal amount of (i) $                  
of the outstanding Revolver Loans and
participations in LC Outstandings held by Assignor, and (ii) $                         
of Assignor’s Revolver Commitment (which amount includes the Assignor’s
outstanding Revolver Loans being assigned to Assignee pursuant to clause (i)
above), together with an interest in the Loan Documents corresponding to the interest
in the Loans and Commitment so assigned. 
Pursuant to the Assignment Agreement, Assignee has expressly assumed
all of Assignor’s obligations under the Amended and Restated Loan and
Security Agreement to the extent of the Assigned Interest (as defined in
the Assignment Agreement).

 

For purposes of the Amended and Restated Loan
and Security Agreement, Agent shall deem Assignor’s share of the Revolver
Commitment to be reduced by $                     
[and $                         ,
respectively], and Assignee’s share of the Revolver Commitment to be
increased by $                     
[and $                        ,
respectively].

 

The address of the Assignee to which notices,
information and payments are to be sent under the terms of the Amended and
Restated Loan and Security Agreement is:

 

 

 

 

Assignee’s
LIBOR Lending Office address is as follows:

 

 

 

 

 

This Notice is being delivered to Borrowers
and Agent pursuant to Section 13.3
of the Amended and Restated Loan and Security Agreement.  Please acknowledge your receipt of this
Notice by executing and returning to Assignee and Assignor a copy of this
Notice.

 

IN WITNESS WHEREOF, the undersigned have
caused the execution of this Notice, as of                                    ,
20    .

 

	
   

  	
   

  	
   

  
	
   

  	
  (“Assignor”)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (“Assignee”)

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
					

 

 

ACKNOWLEDGED AND AGREED TO

AS OF THE DATE SET FORTH ABOVE:

 

BORROWER AGENT:

 

SUPERIOR
ESSEX COMMUNICATIONS LP,

as
Borrower Agent

 

 

	
  By:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
				

 

 

*
No signature required by Borrower Agent when an Event of Default exists.

 

 

BANK OF
AMERICA, N.A.,

as Agent

 

 

	
  By:

  	
   

  	
   

  
	
  Title:Exhibit 10.1

 

STOCK PURCHASE AGREEMENT

 

BY AND AMONG

 

FEDERAL SERVICES ACQUISITION CORPORATION,

 

ADVANCED TECHNOLOGY SYSTEMS, INC.,

 

AND

 

SHAREHOLDERS OF ADVANCED TECHNOLOGY SYSTEMS, INC.

 

 

Effective April 19, 2006

 

 

TABLE OF CONTENTS

 

This Table of Contents is
for convenience of reference only and is not intended to define, limit or
describe the scope, intent or meaning of any provision of this Agreement.

 

	
  ARTICLE I

  	
  Definitions and Rules of
  Construction

  	
  1

  
	
  1.1

  	
  Definitions

  	
  1

  
	
  1.2

  	
  Rules of Construction

  	
  14

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  Closing; Purchase Price;
  Adjustments; Escrow

  	
  15

  
	
  2.1

  	
  Closing

  	
  15

  
	
  2.2

  	
  Purchase Consideration

  	
  15

  
	
  2.3

  	
  Cash Consideration and Net
  Working Capital Adjustments

  	
  24

  
	
  2.4

  	
  Financial Issue Resolution
  Process

  	
  26

  
	
  2.5

  	
  Shareholders’
  Representative

  	
  26

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  Representations and
  Warranties of the Shareholders and ATS

  	
  27

  
	
  3.1

  	
  Organization and Power

  	
  28

  
	
  3.2

  	
  Authorization and
  Enforceability

  	
  28

  
	
  3.3

  	
  No Violation

  	
  29

  
	
  3.4

  	
  Consents

  	
  29

  
	
  3.5

  	
  Financial Statements

  	
  30

  
	
  3.6

  	
  Relationships with
  Affiliates

  	
  31

  
	
  3.7

  	
  Indebtedness to/from
  Officers, Directors, Shareholders and Employees

  	
  31

  
	
  3.8

  	
  No Adverse Change

  	
  32

  
	
  3.9

  	
  Conduct of the Business

  	
  32

  
	
  3.10

  	
  Corporate and Capital
  Structure

  	
  32

  
	
  3.11

  	
  Title to Shares

  	
  33

  
	
  3.12

  	
  Charter, Bylaws and
  Corporate Records

  	
  34

  
	
  3.13

  	
  Assets – In General

  	
  34

  
	
  3.14

  	
  Real Property Interests

  	
  34

  
	
  3.15

  	
  Personal Property

  	
  34

  
	
  3.16

  	
  Intellectual Property
  Rights

  	
  35

  
	
  3.17

  	
  Scheduled Contracts and
  Proposals

  	
  36

  
	
  3.18

  	
  Government Contracting

  	
  39

  
	
  3.19

  	
  Clients

  	
  46

  
	
  3.20

  	
  Backlog

  	
  46

  
	
  3.21

  	
  Compliance with Laws

  	
  46

  
	
  3.22

  	
  Environmental Matters

  	
  47

  
	
  3.23

  	
  Licenses and Permits

  	
  47

  
	
  3.24

  	
  Absence of Certain
  Business Practices

  	
  47

  
	
  3.25

  	
  Litigation

  	
  48

  
	
  3.26

  	
  Personnel Matters

  	
  49

  
	
  3.27

  	
  Labor Matters

  	
  50

  
	
  3.28

  	
  ERISA

  	
  51

  
	
  3.29

  	
  Tax Matters

  	
  54

  
	
  3.30

  	
  Insurance

  	
  57

  

 

 

	
  3.31

  	
  Bank Accounts

  	
  57

  
	
  3.32

  	
  Powers of Attorney

  	
  57

  
	
  3.33

  	
  No Broker

  	
  57

  
	
  3.34

  	
  Security Clearances

  	
  58

  
	
  3.35

  	
  No Unusual Transactions

  	
  58

  
	
  3.36

  	
  Full Disclosure

  	
  60

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  Representations and
  Warranties of FSAC

  	
  60

  
	
  4.1

  	
  Organization and Power

  	
  60

  
	
  4.2

  	
  Authorization and Enforceability

  	
  61

  
	
  4.3

  	
  No Violation

  	
  61

  
	
  4.4

  	
  Consents

  	
  61

  
	
  4.5

  	
  Authorization of Stock
  Consideration

  	
  62

  
	
  4.6

  	
  Capitalization

  	
  62

  
	
  4.7

  	
  Public Disclosure
  Documents

  	
  62

  
	
  4.8

  	
  Litigation

  	
  63

  
	
  4.9

  	
  Brokers

  	
  63

  
	
  4.10

  	
  Financial Ability

  	
  63

  
	
  4.11

  	
  No Questionable Payments

  	
  63

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  Covenants

  	
  63

  
	
  5.1

  	
  Conduct of ATS

  	
  63

  
	
  5.2

  	
  Access to Information
  Prior to the Closing; Confidentiality

  	
  64

  
	
  5.3

  	
  Best Efforts

  	
  64

  
	
  5.4

  	
  Consents

  	
  64

  
	
  5.5

  	
  Access to Books and
  Records Following the Closing

  	
  65

  
	
  5.6

  	
  Founders’ Post-Closing
  Confidentiality Obligation

  	
  65

  
	
  5.7

  	
  Expenses

  	
  66

  
	
  5.8

  	
  Certain Closing Payments

  	
  66

  
	
  5.9

  	
  No Solicitation of
  Competitive Transactions

  	
  66

  
	
  5.10

  	
  Personnel

  	
  67

  
	
  5.11

  	
  Certain Tax Matters

  	
  68

  
	
  5.12

  	
  Public Announcements

  	
  70

  
	
  5.13

  	
  Communications with
  Customers and Suppliers

  	
  70

  
	
  5.14

  	
  Stifel Agreement

  	
  71

  
	
  5.15

  	
  Notification of Certain
  Matters; Update of Disclosure Schedules

  	
  71

  
	
  5.16

  	
  Discontinued Business Line
  and Certain Other Matters

  	
  71

  
	
  5.17

  	
  Certain Transfers at
  Closing

  	
  73

  
	
  5.18

  	
  Certain Post Closing
  Covenants of FSAC

  	
  73

  
	
  5.19

  	
  Cooperation in Connection
  with Proxy Materials

  	
  75

  
	
  5.20

  	
  Delivery of Financial
  Statements

  	
  75

  
	
  5.21

  	
  Insurance Coverage for
  Founders and their Spouses

  	
  75

  
	
  5.22

  	
  Collection Efforts and
  Assignment of Receivables

  	
  76

  
	
  5.23

  	
  Accounting Method Taxes

  	
  76

  
	
  5.24

  	
  E-Mail Access Through ATS

  	
  77

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  Deliveries by All Parties
  at Closing

  	
  77

  

 

 

	
  6.1

  	
  Conditions to All Parties
  Obligations

  	
  77

  
	
  6.2

  	
  Conditions to the
  Shareholders Obligations

  	
  77

  
	
  6.3

  	
  Conditions to FSAC’s
  Obligations

  	
  78

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  Deliveries by Shareholders
  and ATS at Closing

  	
  80

  
	
  7.1

  	
  Founders’ and ATS’ Closing
  Certificate

  	
  80

  
	
  7.2

  	
  Certificate of Shares

  	
  81

  
	
  7.3

  	
  Consents

  	
  81

  
	
  7.4

  	
  Estimated Closing Balance
  Sheet

  	
  81

  
	
  7.5

  	
  Resignations of Directors
  and Officers

  	
  81

  
	
  7.6

  	
  Termination of Credit
  Facility/Facilities

  	
  81

  
	
  7.7

  	
  Release of Liens

  	
  81

  
	
  7.8

  	
  Certificate as to Certain
  Tax Matters (FIRPTA)

  	
  81

  
	
  7.9

  	
  Stock Consideration
  Election; Acquisition Agreement; and Registration Rights Agreement

  	
  82

  
	
  7.10

  	
  Option Holder Releases

  	
  82

  
	
  7.11

  	
  Change In Control Releases

  	
  82

  
	
  7.12

  	
  Comfort Letters

  	
  82

  
	
  7.13

  	
  City of Statesville
  Release

  	
  82

  
	
  7.14

  	
  Stifel Release

  	
  82

  
	
  7.16

  	
  Further Instruments

  	
  82

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  Deliveries by FSAC at
  Closing

  	
  83

  
	
  8.1

  	
  Officer’s Certificate

  	
  83

  
	
  8.2

  	
  Closing Consideration and
  Escrow Deposits

  	
  83

  
	
  8.3

  	
  Registration Rights
  Agreement

  	
  83

  
	
  8.4

  	
  Key Employee Employment
  Agreements

  	
  83

  
	
  8.5

  	
  Certain Transfers

  	
  83

  
	
  8.6

  	
  Further Instruments

  	
  84

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  Survival and
  Indemnification

  	
  84

  
	
  9.1

  	
  Survival of
  Representations and Warranties

  	
  84

  
	
  9.2

  	
  Indemnification

  	
  85

  
	
  9.3

  	
  General Indemnity Escrow
  Account

  	
  89

  
	
  9.4

  	
  Right of Set Off

  	
  90

  
	
  9.5

  	
  Effect of Investigation

  	
  90

  
	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  Termination

  	
  91

  
	
  10.1

  	
  Termination

  	
  91

  
	
  10.2

  	
  Procedure and Effect of
  Termination

  	
  91

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  Miscellaneous

  	
  92

  
	
  11.1

  	
  Further Assurances

  	
  92

  
	
  11.2

  	
  Notices

  	
  92

  
	
  11.3

  	
  Governing Law

  	
  93

  
	
  11.4

  	
  Entire Agreement

  	
  93

  
	
  11.5

  	
  Severability

  	
  93

  

 

 

	
  11.6

  	
  Amendment

  	
  94

  
	
  11.7

  	
  Effect of Waiver or
  Consent

  	
  94

  
	
  11.8

  	
  Rights and Remedies
  Cumulative

  	
  94

  
	
  11.9

  	
  Parties in Interest;
  Limitation on Rights of Others

  	
  94

  
	
  11.10

  	
  Assignability

  	
  95

  
	
  11.11

  	
  Dispute Resolution and
  Arbitration

  	
  95

  
	
  11.12

  	
  Jurisdiction; Court
  Proceedings; Waiver of Jury Trial

  	
  96

  
	
  11.13

  	
  No Other Duties

  	
  97

  
	
  11.14

  	
  Reliance on Counsel and
  Other Advisors

  	
  97

  
	
  11.15

  	
  Waiver of Rights Against
  Company’s Trust Fund

  	
  97

  
	
  11.16

  	
  Counterparts

  	
  97

  

 

 

SCHEDULES

 

	
  Schedule

  	
   

  	
  Title

  
	
   

  	
   

  	
   

  
	
  3.1(b)

  	
   

  	
  Jurisdictions
  where ATS is qualified or licensed to do business; good standing

  
	
   

  	
   

  	
   

  
	
  3.1(c)

  	
   

  	
  Acquired
  Subsidiaries; Jurisdictions where Acquired Subsidiaries are qualified as
  licensed to do business; Good Standing

  
	
   

  	
   

  	
   

  
	
  3.3(a)

  	
   

  	
  No Violation

  
	
   

  	
   

  	
   

  
	
  3.4(a)

  	
   

  	
  Consents - ATS

  
	
   

  	
   

  	
   

  
	
  3.4(b)

  	
   

  	
  Consents -
  Shareholders

  
	
   

  	
   

  	
   

  
	
  3.5(c)

  	
   

  	
  Undisclosed
  Liabilities

  
	
   

  	
   

  	
   

  
	
  3.5(e)

  	
   

  	
  Letters of
  Credit and Guarantees

  
	
   

  	
   

  	
   

  
	
  3.5(f)

  	
   

  	
  Contingent or
  Deferred Acquisition Expenses or Payments

  
	
   

  	
   

  	
   

  
	
  3.6

  	
   

  	
  Interest of
  Affiliates and Shareholders in Property or Contracts of ATS

  
	
   

  	
   

  	
   

  
	
  3.9(a)

  	
   

  	
  Cooperative
  Business Arrangements

  
	
   

  	
   

  	
   

  
	
  3.9(b)

  	
   

  	
  Letters of
  Intent and Non-Competition Agreements

  
	
   

  	
   

  	
   

  
	
  3.9(c)

  	
   

  	
  Non-Disclosure
  Arrangements

  
	
   

  	
   

  	
   

  
	
  3.10(a)

  	
   

  	
  Owners of
  Capital Stock of the Companies

  
	
   

  	
   

  	
   

  
	
  3.10(b)

  	
   

  	
  Holders of
  Options to Purchase Capital Stock of ATS

  
	
   

  	
   

  	
   

  
	
  3.10(c)

  	
   

  	
  Owners of
  Capital Stock of Affiliates of the Company

  
	
   

  	
   

  	
   

  
	
  3.13

  	
   

  	
  Assets-In
  General

  
	
   

  	
   

  	
   

  
	
  3.14

  	
   

  	
  Real Property
  Interests

  
	
   

  	
   

  	
   

  
	
  3.15(a)

  	
   

  	
  Personal
  Property, owned or leased

  
	
   

  	
   

  	
   

  
	
  3.15(b)

  	
   

  	
  UCC Financing
  Statements

  
	
   

  	
   

  	
   

  
	
  3.16(a)

  	
   

  	
  Commercial
  Software and Intellectual Property Rights

  
	
   

  	
   

  	
   

  
	
  3.16(b)

  	
   

  	
  Intellectual
  Property Rights used by, but not owned by ATS

  
	
   

  	
   

  	
   

  
	
  3.16(c)

  	
   

  	
  Rights of other
  Persons to Intellectual Property Rights or Intellectual Property

  
	
   

  	
   

  	
   

  
	
  3.16(d)

  	
   

  	
  No Infringement

  

 

 

	
  3.16(f)

  	
   

  	
  Government Data
  and Software Rights

  
	
   

  	
   

  	
   

  
	
  3.17(a)

  	
   

  	
  List of
  Scheduled Contracts

  
	
   

  	
   

  	
   

  
	
  3.17(b)

  	
   

  	
  Status of
  Scheduled Contracts

  
	
   

  	
   

  	
   

  
	
  3.17(c)

  	
   

  	
  List and Status
  of Bids, Proposals or Quotations

  
	
   

  	
   

  	
   

  
	
  3.18(b)

  	
   

  	
  List of ATS
  Government Contracts and ATS Government Subcontracts

  
	
   

  	
   

  	
   

  
	
  3.18(c)

  	
   

  	
  List of ATS Bids

  
	
   

  	
   

  	
   

  
	
  3.18(d)

  	
   

  	
  List of Teaming
  Agreements

  
	
   

  	
   

  	
   

  
	
  3.18(e)

  	
   

  	
  List of ATS
  Subcontracts

  
	
   

  	
   

  	
   

  
	
  3.18(f)

  	
   

  	
  List of
  Marketing Agreements

  
	
   

  	
   

  	
   

  
	
  3.18(g)

  	
   

  	
  Status of
  Government Contracts, Subcontracts and Bids

  
	
   

  	
   

  	
   

  
	
  3.18(i)

  	
   

  	
  Audits

  
	
   

  	
   

  	
   

  
	
  3.18(j)

  	
   

  	
  Financing
  Arrangements

  
	
   

  	
   

  	
   

  
	
  3.18(k)

  	
   

  	
  Protests

  
	
   

  	
   

  	
   

  
	
  3.18(l)

  	
   

  	
  Claims

  
	
   

  	
   

  	
   

  
	
  3.18(m)

  	
   

  	
  Multiple Award
  Schedules

  
	
   

  	
   

  	
   

  
	
  3.18(n)

  	
   

  	
  Government
  Furnished Property

  
	
   

  	
   

  	
   

  
	
  3.18(o)

  	
   

  	
  Former
  Government Officials

  
	
   

  	
   

  	
   

  
	
  3.18(p)

  	
   

  	
  Ethics Policy

  
	
   

  	
   

  	
   

  
	
  3.18(q)

  	
   

  	
  Timekeeping
  Policy

  
	
   

  	
   

  	
   

  
	
  3.20

  	
   

  	
  Backlog

  
	
   

  	
   

  	
   

  
	
  3.23(a)

  	
   

  	
  Permits

  
	
   

  	
   

  	
   

  
	
  3.25(a)

  	
   

  	
  Litigation
  Pending or Threatened

  
	
   

  	
   

  	
   

  
	
  3.25(b)

  	
   

  	
  Claims

  
	
   

  	
   

  	
   

  
	
  3.25(c)

  	
   

  	
  Indemnification
  Obligations

  
	
   

  	
   

  	
   

  
	
  3.26(a)

  	
   

  	
  List and
  Positions of Personnel

  

 

 

	
  3.26(b)

  	
   

  	
  Employee Bonuses

  
	
   

  	
   

  	
   

  
	
  3.26(d)

  	
   

  	
  Personnel
  Policies and Manuals

  
	
   

  	
   

  	
   

  
	
  3.26(e)

  	
   

  	
  Personnel
  Agreements

  
	
   

  	
   

  	
   

  
	
  3.26(f)

  	
   

  	
  Discontinuation
  of Employment

  
	
   

  	
   

  	
   

  
	
  3.26(h)

  	
   

  	
  Leased
  Employees/Independent Contractors

  
	
   

  	
   

  	
   

  
	
  3.28(b)

  	
   

  	
  List of Plans

  
	
   

  	
   

  	
   

  
	
  3.28(g)

  	
   

  	
  Filings Not
  Timely Made

  
	
   

  	
   

  	
   

  
	
  3.28(j)

  	
   

  	
  Time of Vesting
  or Payment

  
	
   

  	
   

  	
   

  
	
  3.28(m)

  	
   

  	
  Self Insured
  Plans

  
	
   

  	
   

  	
   

  
	
  3.29

  	
   

  	
  Tax Matters

  
	
   

  	
   

  	
   

  
	
  3.30(a)

  	
   

  	
  Insurance
  Policies

  
	
   

  	
   

  	
   

  
	
  3.30(b)

  	
   

  	
  Insurance Claims

  
	
   

  	
   

  	
   

  
	
  3.31

  	
   

  	
  Bank Accounts

  
	
   

  	
   

  	
   

  
	
  3.34

  	
   

  	
  Facility
  Clearances

  
	
   

  	
   

  	
   

  
	
  3.35

  	
   

  	
  No Unusual
  Transactions

  

 

 

EXHIBITS

 

	
  A

  	
   

  	
  Financial
  Statements

  
	
  B-1

  	
   

  	
  Balance Sheet
  Escrow Agreement

  
	
  B-2

  	
   

  	
  General
  Indemnity Escrow Agreement

  
	
  B-3

  	
   

  	
  Expense Escrow
  Agreement

  
	
  B-4

  	
   

  	
  Accounting
  Method Tax Escrow Agreement

  
	
  C

  	
   

  	
  Stockholders
  Electing to Receive Stock Consideration

  
	
  D

  	
   

  	
  Acquisition
  Agreement

  
	
  E

  	
   

  	
  Registration
  Rights Agreement

  
	
  F

  	
   

  	
  Promissory Note

  
	
  G

  	
   

  	
  Reserved

  
	
  H

  	
   

  	
  Reserved

  
	
  I

  	
   

  	
  Option Holder
  Release

  
	
  J

  	
   

  	
  Change In
  Control Release

  
	
  K

  	
   

  	
  Shareholders/ATS Closing Certificate

  
	
  L

  	
   

  	
  Tax Certificate

  
	
  M

  	
   

  	
  FSAC Closing
  Certificate

  

 

 

STOCK PURCHASE AGREEMENT

 

STOCK
PURCHASE AGREEMENT (“Agreement”), dated April 19, 2006 (the “Effective
Date”), by and among (i) Federal Services Acquisition Corporation, a
Delaware corporation (“FSAC”); (ii) Advanced Technology Systems, Inc.,
a Virginia corporation (“ATS”); (iii) the holders of all of the
outstanding shares of stock of ATS, which are listed on Schedule 3.10(a) of
the Disclosure Schedules (each a “Shareholder” and collectively, the “Shareholders”);
and (iv) Claude Rumsey in his capacity as the Shareholders’ Representative
(as defined in Section 2.5(a)).

 

RECITALS:

 

R-1. The
Shareholders are the holders and owners of all of the issued and outstanding
shares of “Capital Stock” (as hereinafter defined) of ATS (the “Shares”).

 

R-2.                            FSAC
desires to acquire all of the outstanding Shares and the Shareholders and ATS
desire the same, upon the terms and subject to the conditions of this
Agreement.

 

R-3. Immediately
following the closing of the transactions contemplated by this Agreement, all
of the issued and outstanding options to purchase Capital Stock of ATS (the “Options”)
will be deemed exercised or cancelled so that, following the closing of the
transactions contemplated by this Agreement, FSAC will own, directly or
indirectly, all of the issued and outstanding Capital Stock of ATS and no
rights to obtain Capital Stock of ATS will be outstanding.

 

NOW
THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained in this Agreement, and intending
to be legally bound hereby, the parties agree as follows:

 

ARTICLE I

Definitions and Rules of Construction

 

1.1                                 Definitions.

 

As
used in this Agreement, the following terms shall have the meanings set forth:

 

“2007/2008
Additional Earn Out” has the meaning referred to in Section 2.2(c).

 

“2008
Additional Earn Out” has the meaning referred to in Section 2.2(c).

 

“2008
Additional Earn Out Payment” has the meaning referred to in Section 2.2(c).

 

“2008
Additional Earn Out Period EBITDA” has the meaning referred to in Section 2.2(c).

 

1

 

“2008
Additional Earn Out Threshold” has the meaning referred to in Section 2.2(c).

 

“Accounting
Method Tax” has the meaning set forth in Section 5.23.

 

“Accounting
Method Tax Escrow Deposit” has the meaning set forth in Section 2.2(a).

 

“Accounting
Method Tax Distribution” has the meaning set forth in Section 5.23.

 

“Accounting
Method Tax Escrow Account” has the meaning set forth in Section 2.2(a).

 

“Accounting
Method Tax Escrow Agreement” has the meaning set forth in Section 2.2(a).

 

“Accounting
Method Tax Escrow Funds” has the meaning set forth in Section 2.2(a).

 

“Acquired
Business” means the collective operations and business activities of ATS
and the Acquired Subsidiaries as conducted and existing as of the Closing Date.

 

“Acquired
Subsidiaries” means and refers to all of ATS’ wholly owned subsidiaries (a
list of which is shown on Schedule 3.1(c) of the Disclosure
Schedules) and “Acquired Subsidiary” means and refers to any one of the
Acquired Subsidiaries.

 

“Acquisition
Agreement” has the meaning set forth in Section 2.2(b)(vi).

 

“Acquisition
Proposal” has the meaning set forth in Section 5.9(a).

 

“Affiliate”
means, as to any Person, any other Person that, directly or indirectly, is in
control of, is controlled by, or is under common control with, such Person. For
purposes of this definition, “control” of a Person means the power, directly or
indirectly, either to (a) vote 10% or more of the securities having ordinary
voting power for the election of directors of such Person or (b) direct or
cause the direction of the management and policies of such Person, whether by
contract or otherwise.

 

“Agreement”
has the meaning referred to in the Preamble.

 

“April 2007
Additional Earn Out Payment” has the meaning referred to in Section 2.2(c).

 

“April 2007
Additional Earn Out Period EBITDA” has the meaning referred to in Section 2.2(c).

 

“April 2007
Additional Earn Out Threshold” has the meaning referred to in Section 2.2(c).

 

2

 

“April 2007
Base Earn Out Payment” has the meaning referred to in Section 2.2(c).

 

“April 2007
Base Earn Out Period EBITDA” has the meaning referred to in Section 2.2(c).

 

“April 2007
Earn Out Notice” has the meaning referred to in Section 2.2(c).

 

“April 2008
Additional Earn Out Payment” has the meaning referred to in Section 2.2(c).

 

“April 2008
Additional Earn Out Period EBITDA” has the meaning referred to in Section 2.2(c).

 

“April 2008
Additional Earn Out Threshold” has the meaning referred to in Section 2.2(c).

 

“April 2008
Earn Out Notice” has the meaning referred to in Section 2.2(c).

 

“ATS”
has the meaning referred to in the Preamble.

 

“ATS
Accounting Practices” has the meaning set forth in Section 2.3(b).

 

“ATS
Indemnitees” has the meaning set forth in Section 9.2(b)(i).

 

“Audited
Financial Statements” means collectively the audited consolidated balance
sheets and statements of income, changes in stockholders’ equity, and cash flow
together with accompanying notes of ATS and the Acquired Subsidiaries as of October 31,
2000, October 31, 2001, October 31, 2002, October 31, 2003 and October 31,
2004 together with the October 2005 Financial Statements.

 

“Auditor”
has the meaning referred to in Section 2.4.

 

“Average
Share Value” shall mean the average closing price of a share of FSAC common
stock on the Nasdaq OTC market for the ten (10) consecutive trading days
ending on and including the trading date that is three (3) trading days
prior to public announcement by FSAC of the contemplated purchase of the Shares
pursuant to this Agreement.

 

“Balance
Sheet Escrow Account” has the meaning referred to in Section 2.2(a)(ii).

 

“Balance
Sheet Escrow Agreement” has the meaning referred to in Section 2.2(a)(ii).

 

“Balance
Sheet Escrow Deposit” has the meaning referred to in Section 2.2(a) (ii).

 

“Balance
Sheet Escrow Funds” has the meaning referred to in Section 2.2(a)(ii).

 

“Base
Earn Out” has the meaning referred to in Section 2.2(c).

 

3

 

“Base
Earn Out Threshold” has the meaning referred to in Section 2.2(c).

 

“Base
Net Working Capital” means $12,800,000.

 

“Benefit
Arrangement” has the meaning referred to in Section 3.28(a).

 

“Bid”
has the meaning set forth in Section 3.18(a)(ii).

 

“Bonus
Pool” has the meaning referred to in Section 3.26(b).

 

“Business
Day” shall mean any day other than a Saturday, Sunday, or any Federal
holiday. If any period expires on a day that is not a Business Day or any event
or condition is required by the terms of this Agreement to occur or be
fulfilled on a day that is not a Business Day, such period shall expire or such
event or condition shall occur or be fulfilled, as the case may be, on the
next succeeding Business Day.

 

“Capital
Stock” of any Person means any and all shares, rights to purchase, warrants
or options (whether or not currently exercisable), participations or other
equivalents of or interests in (however designated) the equity (including
without limitation common stock, preferred stock and limited liability company,
partnership and joint venture interests) of such Person.

 

“Cash
Consideration” has the meaning set forth in Section 2.3(a).

 

“Change
in Control Agreement Release” and “Change in Control Agreement Releases”
shall have the meanings set forth in Section 6.3(h).

 

“Change
in Control Agreements” has the meaning referred to in Section 3.26(b).

 

“Change
in Control Payments” has the meaning referred to in Section 3.26(b).

 

“City
of Statesville Release” has the meaning referred to in Section 6.3(n).

 

“Claimant”
has the meaning set forth in Section 11.11(a).

 

“Claims”
means jointly all Third-Party Claims and Direct Claims.

 

“Closing”
has the meaning set forth in Section 2.1.

 

“Closing
Balance Sheet” has the meaning referred to in Section 2.3(d).

 

“Closing
Consideration” has the meaning set forth in Section 2.2.

 

“Closing
Date” has the meaning set forth in Section 2.1.

 

“Closing
Net Working Capital” has the meaning referred to in Section 2.3(b).

 

“COC”
has the meaning set forth in Section 3.18(m)(ii).

 

4

 

“Code”
means the Internal Revenue Code of 1986, as amended from time to time, or
corresponding provisions of subsequent superseding federal revenue Laws.

 

“Commercial
Software” means commercially available Software licensed pursuant to a
standard license agreement.

 

“Companies”
means ATS and the Acquired Subsidiaries together.

 

“Consultant”
means all persons who (i) are or have been engaged as consultants by ATS
or any of the Acquired Subsidiaries or (ii) otherwise provide services to
ATS or any Acquired Subsidiary under a contractual arrangement.

 

“Contemplated
Transactions” means the transactions contemplated by this Agreement and the
other Transaction Documents.

 

“Copyrights”
means all United States and foreign copyright registrations and applications
therefor.

 

“Cornell”
has the meaning set forth in Section 5.9(b).

 

“Damages”
has the meaning set forth in Section 2.5(b).

 

“D &
O Indemnification Claims” has the meaning set forth in Section 3.25(a).

 

“Direct
Claim” and “Direct Claims” mean any claim or claims (other than
Third Party Claims) by an Indemnified Party against an Indemnifying Party for
which the Indemnified Party may seek indemnification under this Agreement.

 

“Direct
Claim Notice” has the meaning set forth in Section 9.2(d).

 

“Direct
Claim Notice Period” has the meaning set forth in Section 9.2(d).

 

“Disclosure
Schedule Update Losses” means Losses that may be sustained,
suffered or incurred by FSAC Indemnitees and that are related to facts and
circumstances reflected in the Updated Disclosure Schedules, but not in the
Disclosure Schedules dated as of the date of this Agreement, but only to the
extent that such Losses (a) are not reasonably expected to be reflected in
either the (i) October 2006 Base Earn Out Period EBITDA, April 2007
Base Earn Out Period EBITDA, April 2007 Additional Earn Out Period EBITDA,
April 2008 Additional Earn Out Period EBITDA or 2008 Additional Earn Out
Period EBITDA or (ii) Closing Net Working Capital and (b) exceed
$300,000 in the aggregate.

 

“Disclosure
Schedules” has the meaning set forth in the definition of “Schedule.”

 

“Discontinued
Business Line” has the meaning set forth in Section 5.16(a).

 

“Discontinued
Products” has the meaning set forth in Section 5.16(a).

 

“Dispute
Notice” has the meaning set forth in Section 11.11(a).

 

5

 

“Earn
Out” has the meaning referred to in Section 2.2(c).

 

“EBITDA”
has the meaning set forth in Section 2.2(c)(i)(C).

 

“Effective
Date” has the meaning set forth in the Preamble.

 

“Employee
Bonuses” has the meaning set forth in Section 3.26(b).

 

“Entity”
means any general partnership, limited partnership, limited liability
partnership, limited liability company, corporation, joint venture, trust,
business trust, cooperative, association, foreign trust or foreign business
organization.

 

“Environmental
Laws” means any and all Federal, state, local and foreign statutes, laws
(including case or common law), regulations, ordinances, rules, judgments,
orders, decrees, codes, injunctions, permits, concessions, grants, franchises,
licenses, or agreements relating to human health, the environment or omissions,
discharges or releases of pollutants, contaminants, Hazardous Substances or
wastes into the environment including, without limitation, ambient air, surface
water, ground water, facilities, structures, or land, or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, Hazardous Substances or
wastes or the investigation, clean-up or other remediation thereof. Without
limiting the generality of the foregoing, “Environmental Laws” include: (a) the
Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et  seq.,
as amended; (b) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 26 U.S.C. § 4611 and 42 U.S.C. § 9601 et
seq., as amended; (c) the Superfund Amendment and Reauthorization Act
of 1984, as amended; (d) the Clean Air Act, 42 U.S.C. § 7401 et
seq., as amended; (e) the Clean Water Act, 33 U.S.C. 5 1251 et
seq.; (f) the Safe Drinking Water Act, 42 U.S.C. § 300f et
seq.; and (g) the Occupational Safety and Health Act of 1976, 29
U.S.C.A. § 651, as amended, and all rules and regulations promulgated
thereunder.

 

“Environmental
Liabilities” means all liabilities, whether vested or unvested, fixed or
unfixed, actual or potential, that arise under or relate to Environmental Laws,
as applied to the facilities and business of ATS or any of the Acquired
Subsidiaries, including, without limitation: (i) the investigation,
clean-up or remediation of contamination or environmental degradation or damage
caused by or arising from the generation, use handling, treatment, storage,
transportation, disposal, discharge, release or emission of Hazardous
Substances; (ii) personal injury, wrongful death or property damage
claims; or (iii) claims for natural resource damages.

 

“ERISA”
has the meaning set forth in Section 3.28(a).

 

“ERISA
Affiliate” has the meaning set forth in Section 3.28(a).

 

“Escrow
Account” and “Escrow Accounts” have the meanings referred to in Section 2.2(a)(ii).

 

“Escrow
Agent” means and refers to Citibank, N.A.

 

“Escrow
Agreements” has the meaning referred to in Section 2.2(a)(ii).

 

6

 

“Escrow
Deposits” has the meaning referred to in Section 2.2(a)(ii).

 

“Escrowed
Funds” has the meaning referred to in Section 2.2(a)(ii).

 

“Estimated
Closing Balance Sheet” has the meaning referred to in Section 2.3(b).

 

“Estimated
Closing Cash Purchase Price” has the meaning referred to in Section 2.3(a).

 

“Expense
Escrow Account” has the meaning referred to in Section 2.2(a)(ii).

 

“Expense
Escrow Agreement” has the meaning referred to in Section 2.2(a)(ii).

 

“Expense
Escrow Deposit” has the meaning referred to in Section 2.2(a)(ii).

 

“Expense
Escrow Funds” has the meaning referred to in Section 2.2(a)(ii).

 

“Exchange
Act” means the Securities Exchange Act of 1934, as amended and the rules and
regulations promulgated thereunder.

 

“Financial
Statements” means collectively (i) the Audited Financial Statements
and (ii) the Interim Financial Statements, copies of all of which are
attached hereto as Exhibit A.

 

“Financing
Statements” has the meaning set forth in Section 3.15(b).

 

“Form 5500”
means the Internal Revenue Service Form 5500 Annual Return/ Report of
Employee Benefit Plan.

 

“Founders”
means Delmar Lewis and Claude Rumsey.

 

“Founders’
Proportionate Interests” means each of the Founders’ proportionate interest
in ATS relative to the other Founder, as determined by the number of Shares
held by each Founder on the Closing Date over the total number of Shares held
by the Founders as of the Closing Date.

 

“Founders’
Transaction Costs” has the meaning set forth in Section 5.7.

 

“FSAC”
has the meaning referred to in the Preamble.

 

“FSAC Indemnitees” has the meaning set forth in
Section 9.2(b)(i).

 

“FSAC Securities” has the meaning set forth in Section 4.6.

 

“Fully Diluted Common Stock” means the sum of
the number of shares of common stock of ATS outstanding immediately prior to
the Closing plus the number of shares of common stock of ATS into which Options
outstanding immediately prior to the Closing are exercisable, assuming such Options
are fully vested and exercisable.

 

7

 

“GAAP”
means generally accepted accounting principles as 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 or in such other statements by such other Person as may be
approved by a significant segment of the accounting profession in the United
States, consistently applied by ATS in the preparation of the Audited Financial
Statements.

 

“General
Indemnity Escrow” means the escrow established under the General Indemnity
Escrow Agreement to hold the General Indemnity Escrow Funds.

 

“General
Indemnity Escrow Account” has the meaning referred to in Section 2.2(a)(ii).

 

“General
Indemnity Escrow Funds” has the meaning referred to in Section 2.2(a)(ii).

 

“General
Indemnity Escrow Agreement” has the meaning referred to in Section 2.2(a)(ii).

 

“General
Indemnity Escrow Deposit” has the meaning referred to in Section 2.2(a)(ii).

 

“Governmental
Authority” means any nation or government, any foreign or domestic Federal,
state, county, municipal or other political instrumentality or subdivision
thereof and any foreign or domestic entity or body exercising executive,
legislative, judicial, regulatory, administrative or taxing functions of or
pertaining to government.

 

“Government
Contract” has the meaning set forth in Section 3.18(a)(iii).

 

“Government
Contractor” means a prime contractor or subcontractor to a contract or
subcontract, at any tier, as applicable, issued by a Governmental Authority.”

 

“Government
Furnished Property” has the meaning set forth in Section 3.18(n).

 

“Government
Subcontract” has the meaning set forth in Section 3.18(a)(iv).

 

“Hazardous
Substances” means any substance that is toxic, ignitable, reactive,
corrosive, radioactive, caustic, or regulated as a hazardous substance,
contaminant, toxic substance, toxic pollutant, hazardous waste, special waste, or
pollutant, including, without limitation, petroleum, its derivatives,
by-products and other hydrocarbons, poly-chlorinated bi-phenyls and asbestos
regulated under, or that is the subject of, applicable Environmental Laws.

 

“Hawaiian
Office” has the meaning set forth in Section 5.16(d).

 

“Hawaiian
Proposal” has the meaning set forth in Section 2.2(c)(ii).

 

“Indebtedness”
means (a) indebtedness of any of the Companies for borrowed money
(including, without limitation, any pre-payment penalties and costs associated
with pre-

 

8

 

payment of such
indebtedness), (b) obligations of any of the Companies evidenced by bonds
(excluding performance bonds with respect to any Government Contract,
Government Subcontract or any other contract of the Companies (all of which
performance bonds are shown on Schedule 1.1A of the Disclosure
Schedules)), notes, debentures, bankers acceptances or similar instruments, (c) obligations
of any of the Companies under installment sales, conditional sale, title
retention or similar agreements or arrangements creating an obligation with
respect to the deferred purchase price of property or services (other than
customary trade credit), (d) obligations of any of the Companies secured
by a Lien on any property, (e) guarantees by any of the Companies in
respect of Indebtedness and (f) Accounting Method Excess Tax.

 

“Indemnified
Party” means and refers to a party that has the right under Article IX
to seek indemnification from an Indemnifying Party.

 

“Indemnifying
Party” means and refers to a party that has the obligation under Article IX
to indemnify an Indemnified Party.

 

“Intellectual
Property” means Software and Technology.

 

“Intellectual
Property Rights” means rights that exist under Laws respecting
Copyrights, Patents, Trademarks and Trade Secrets.

 

“Interim
Financial Statements” means the internally prepared unaudited consolidated
interim balance sheets and related interim consolidated statements of
operations, changes in shareholders equity and cash flows of ATS and the
Acquired Subsidiaries for the period November 1, 2005 through January 31,
2006, a copy of which is included as part of the Financial Statements
attached as Exhibit A hereto.

 

“IRS”
means and refers to the Internal Revenue Service.

 

“Knowledge
of ATS” means the actual knowledge of the Founders, Leon C. Perry, Harry
Katrivanos, John Cherundolo, Eric Moe, Joe Mignogna, Doug Manning, Stan
Weathers or Shannon Brown.

 

“Knowledge
of FSAC” means the actual knowledge of Joel R. Jacks, Peter M. Schulte and
Edward H. Bersoff.

 

“Laws”
means (a) all constitutions, treaties, laws, statutes, codes, regulations,
ordinances, orders, decrees, rules, or other requirements with similar effect
of any Governmental Authority, (b) all judgments, orders, writs,
injunctions, decisions, rulings, decrees and awards of any Governmental
Authority, and (c) all provisions of the foregoing, in each case binding
on or affecting the Person referred to in the context in which such word is
used; “Law” means any one of them and the words “Laws” and “Law” include
Environmental Laws.

 

“Lien”
means any lien, statutory or otherwise, security interest, mortgage, deed of
trust, priority, pledge, charge, conditional sale, title retention agreement,
financing lease or other encumbrance or similar right of others, or any
agreement to give any of the foregoing.

 

“Losses”
has the meaning set forth in Section 9.2(a)(i).

 

9

 

“Material
Negotiations” has the meaning set forth in Section 5.9(b).

 

“Maximus
Subcontract” has the meaning set forth in Section 5.16(b).

 

“Net
Option Payment” means, with respect to an Option Holder’s Options, a cash
amount equal to the excess, if any, of (i) the product of the Per Share
Option Purchase Price times the number of shares of ATS common stock that may be
purchased pursuant to such Options, over (ii) the aggregate exercise price
of such Options.

 

“NOLs”
means the aggregate net operating losses of the Companies.

 

“NOL
Reduction” has the meaning set forth in Section 5.23.

 

“Non-Key
Employees” has the meaning set forth in Section 5.10(a).

 

“Non-Threshold
Indemnifications” has the meaning referred to in Section 9.2(f).

 

“October 2005
Balance Sheet” means the audited consolidated balance sheets of ATS and the
Acquired Subsidiaries as of October 31, 2005 included in the October 2005
Financial Statements.

 

“October 2005
Financial Statements” means the audited consolidated balance sheets and
statements of income, changes in stockholders’ equity, and cash flow together
with accompanying notes of ATS and the Acquired Subsidiaries as of October 31,
2005, a copy of which is included in the Financial Statements attached as Exhibit A.

 

“October 2006
Base Earn Out Payment” has the meaning referred to in Section 2.2(c).

 

“October 2006
Base Earn Out Period EBITDA” has the meaning referred to in Section 2.2(c).

 

“October 2006
Base Earn Out Notice” has the meaning referred to in Section 2.2(c).

 

“October 2006
Base Earn Out Threshold” has the meaning referred to in Section 2.2(c).

 

“Option Holders” means the Persons
identified on Schedule 3.10(b) of the Disclosure Schedules as holding
Options.

 

“Option
Holders Release” and “Option Holder Releases” have the meanings set
forth in Section 3.10(c).

 

“Options” means the options to purchase ATS
Capital Stock as set forth on Schedule 3.10(b) of the Disclosure
Schedules.

 

10

 

“Patents”
means issued patents, including United States and foreign patents and
applications therefor; divisions, reissues, continuations,
continuations-in-part, reexaminations, renewals and extensions of any of the
foregoing; and utility models and utility model applications.

 

“Pension
Plan” has the meaning set forth in Section 3.28(a).

 

“Permits”
has the meaning set forth in Section 3.23(a).

 

“Per
Share Option Purchase Price” means the quotient obtained by dividing (a) the
sum of Eighty-Five Million Dollars ($85,000,000) plus the Total Exercise
Price, by (b) the Fully Diluted Common Stock.

 

“Person”
means any individual, person, Entity, or Governmental Authority, and the heirs,
executors, administrators, legal representatives, successors and assigns of the
“Person” when the context so permits.

 

“Personal
Property” has the meaning set forth in Section 3.15(a).

 

“Personnel”
has the meaning set forth in Section 3.26(a).

 

“Plan”
has the meaning set forth in Section 3.28(a).

 

“Post-Closing
Tax Period” has the meaning set forth in Section 5.11(b)(ii)(1).

 

“Pre-Closing
Tax Period” has the meaning set forth in Section 5.11(b)(i).

 

“Prior
Period Returns” has the meaning set forth in Section 5.11(a).

 

“Proposals”
has the meaning referred to in Section 3.17(c).

 

“Proposed
Transaction” has the meaning set forth in Section 5.9(b).

 

“Proxy
Materials” has the meaning set forth in Section 5.19.

 

“Public Disclosure Documents”
has the meaning set forth in Section 4.7(a).

 

“Purchase Consideration”
has the meaning set forth in Section 2.2(a).

 

“Real
Property Interests” has the meaning set forth in Section 3.14.

 

“Registration
Right Agreement” has the meaning set forth in Section 2.2(b)(vi).

 

“Respondent”
has the meaning set forth in Section 11.11(a).

 

“Representative”
has the meaning set forth in Section 5.9(a).

 

“Schedule”
as used in this Agreement together with a numerical designation, means a schedule contained
in the Disclosure Schedules of even date herewith delivered by ATS 

 

11

 

and/or the Shareholders
in connection with the execution and delivery of this Agreement (the “Disclosure
Schedules”).

 

“Scheduled
Contract” has the meaning set forth in Section 3.17(a).

 

“SEC”
means the United States Securities and Exchange Commission.

 

“Securities
Act” means the Securities Act of 1933, as amended, and the rules promulgated
thereunder.

 

“Self
Insured Plan” and “Self Insured Plans” have the meaning set forth in
Section 3.28(m).

 

“Shareholders”
means individually and collectively the Persons identified on Schedule 3.10(a) of
the Disclosure Schedules as holding Shares.

 

“Shareholders
Indemnitees” has the meaning set forth in Section 9.2(a).

 

“Shareholders’
Proportionate Interests” shall mean each of the Shareholders’ proportionate
interest in ATS as determined by the number of Shares held by each Shareholder
on the Closing Date over the total number of issued and outstanding Shares as
of the Closing Date (after giving effect to the exercise or cancellation of the
Options) and as shown on Schedule 3.10(a) of the Disclosure
Schedules.

 

“Shareholders’
Representative” has the meaning set forth in Section 2.5.

 

“Shares”
means all of the issued and outstanding shares of Capital Stock of ATS.

 

“Software”
means the manifestation, in tangible or physical form, including, but not
limited to, in magnetic media, firmware, and documentation, of computer
programs and databases, such computer programs and databases to include, but
not limited to, management information systems, and personal computer programs.
The tangible manifestation of such programs may be in the form of,
among other things, source code, flow diagrams, listings, object code, and
microcode. Software does not include any Technology.

 

“Standard
Employee Documents” has the meaning set forth in Section 5.10(c).

 

“Stifel”
refers to Stifel, Nicolaus & Company, Incorporated.

 

“Stifel
Agreement” has the meaning set forth in Section 3.33.

 

“Stifel
Fees” has the meaning set forth in Section 5.14.

 

“Stifel
Release” has the meaning set forth in Section 5.14.

 

“Stock
Consideration” has the meaning set forth in Section 2.2(b).

 

“Stock
Consideration Amount” has the meaning set forth in Section 2.2(b).

 

12

 

“Straddle
Period” and “Straddle Periods” have the meanings set forth in Section 5.11(b)(i).

 

“Subcontract”
has the meaning set forth in Section 3.18(a)(iv).

 

“Subsidiary”
means and refers to any corporation, association or other business entity of
which more than fifty (50) percent of the issued and outstanding shares of
capital stock or equity interests is owned or controlled, directly or
indirectly, by ATS, or FSAC, as the case may be, and in which ATS or FSAC,
as the case may be, has the power, directly or indirectly, to elect a
majority of the directors.

 

“Survival
Date” has the meaning set forth in Section 9.1.

 

“Surviving
Representations” has the meaning set forth in Section 9.1.

 

“Tax”
or “Taxes” means any Federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental, stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, ad valorem, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, custom, tariff, impost, levy, duty or other like assessment or charge.

 

“Taxpayer”
and “Taxpayers” shall have the meaning set forth in Section 3.29.

 

“Tax
Return” means any return, report, form or similar statement or
document (including, without limitation, any related or supporting information
or schedule attached thereto and any information return, claim for refund,
amended return and declaration of estimated tax) that has been or is required
to be filed with any Taxing Authority or that has been or is required to be
furnished to any Taxing Authority in connection with the determination,
assessment or collection of any Taxes or the administration of any Laws or
administrative requirements relating to any Taxes.

 

“Taxing
Authority” means any government or any subdivision, agency, commission or
authority thereof, or any quasi-governmental or private body having
jurisdiction over the assessment, determination, collection or other imposition
of Taxes.

 

“Teaming
Agreement” has the meaning set forth in Section 3.18(a)(vii).

 

“Technology”
means all types of technical information and data, whether or not reduced to
tangible or physical form, including, but not limited to:  know-how; product definitions and designs;
research and development, engineering, manufacturing, process, test, quality
control, procurement, and service specifications, procedures, standards, and
reports; blueprints; drawings; materials specifications, procedures, standards,
and lists; catalogs; technical information and data relating to marketing and
sales activity; and formulae. Technology does not include any Software.

 

13

 

“Third-Party
Claims” means a claim made by an Indemnified Party against an Indemnifying
Party in connection with any third party litigation, arbitration, action, suit,
proceeding, claim or demand made upon the Indemnified Party for which the
Indemnified Party may seek indemnification from the Indemnifying Party
under the terms of this Agreement.

 

“Total
Exercise Price” means the sum of the aggregate exercise price of Options
outstanding immediately prior to the Closing.

 

“Trademarks”
means all United States and foreign trademark and service mark registrations
and applications therefor and unregistered trademarks and service marks.

 

“Trade
Secrets” means information in any form that is considered to be
proprietary information by the owner, is maintained on a confidential or secret
basis by the owner, and is not generally known to other parties.

 

“Transaction
Documents” has the meaning set forth in Section 3.2.

 

“Updated
Disclosure Schedules” has the meaning set forth in Section 5.15(b).

 

“VEBA”
has the meaning referred to in Section 3.28(d).

 

“Welfare
Plan” has the meaning set forth in Section 3.28(a).

 

1.2                                 Rules of
Construction.

 

Unless
the context otherwise requires:

 

(a)                                     A
capitalized term has the meaning assigned to it;

 

(b)                                    An
accounting term not otherwise defined has the meaning assigned to it in
accordance with GAAP;

 

(c)                                     References
in the singular or to “him,” “her,” “it,” “itself,” or other like references,
and references in the plural or the feminine or masculine reference, as the
case may be, shall also, when the context so requires, be deemed to
include the plural or singular, or the masculine or feminine reference, as the
case may be;

 

(d)                                    References
to Articles, Sections and Exhibits shall refer to articles, sections and
exhibits of this Agreement, unless otherwise specified;

 

(e)                                     The
headings in this Agreement are for convenience and identification only and are
not intended to describe, interpret, define or limit the scope, extent, or
intent of this Agreement or any provision thereof;

 

(f)                                       This
Agreement shall be construed without regard to any presumption or other rule requiring
construction against the party that drafted and caused this Agreement to be
drafted;

 

14

 

(g)                                    References
to “best efforts” in this Agreement shall require commercially reasonable best
efforts, and not commercially unreasonable expenditures of money, time or other
resources; and

 

(h)                                    A monetary figure given in United States
dollars shall be deemed to
refer to the equivalent amount of foreign currency when used in a context that
refers to or includes operations conducted principally outside of the United
States.

 

ARTICLE II

Closing; Purchase Price; Adjustments; Escrow

 

2.1                                 Closing.

 

The
closing (the “Closing”) of the Contemplated Transactions shall take
place at the offices of Squire, Sanders & Dempsey L.L.P., 8000 Towers
Crescent Drive, Tysons Corner, Virginia 22182-2700, at 10:00 A.M. local
time on the third (3rd) Business Day after the conditions and
deliveries referred to in Articles VI, VII and VIII have been satisfied, or at
such other time, date and place that shall be mutually agreed upon by the
parties hereto (the “Closing Date”). At the Closing, each of the
Shareholders shall sell, transfer, convey or assign and deliver to FSAC, and
FSAC shall purchase, acquire and accept from the Shareholders, the Shares, free
and clear of any and all Liens or rights of any third party (and each of the
Shareholders shall thereafter cease to have any as a shareholder in ATS other
than any rights granted to the Shareholders pursuant to the terms of this
Agreement and the other Transaction Documents) and FSAC shall deliver to the
Shareholders’ Representative on behalf of the Shareholders the Stock
Consideration and an amount equal to the Cash Consideration, and deliver to the
Escrow Agent the Escrow Deposits pursuant to Section 2.2.

 

2.2                                 Purchase Consideration.

 

As
payment in full for all of the Shares and termination of all of the Options,
FSAC shall pay to the Shareholders’ Representative (a) at Closing the “Closing
Consideration” that shall consist of (i) the “Cash Consideration” (as
defined and calculated pursuant to Section 2.3(a) below) and (ii) the
“Stock Consideration” (as defined in Section 2.2(b) below (to the
extent the Shareholders exercise their rights pursuant to Section 2.2(b) to
receive Stock Consideration)); and (b) after Closing the Earn Out to the
extent that the Earn Out is earned pursuant to Section 2.2(c) below
(clauses (a) and (b) of this paragraph collectively the “Purchase
Consideration”).

 

(a)                                  Cash Consideration
and Escrows. At the Closing FSAC shall make the following payments to the
Shareholders’ Representative and to the Escrow Agent:

 

(i)                                     Cash
Consideration. At the Closing cash in the amount of the Cash Consideration
shall be paid by wire transfer of immediately available funds to an account or
accounts designated by the Shareholders’ Representative. If, but only if, the
Shareholders exercise their right under Section 2.2(b) to receive
Stock Consideration as part of the Purchase Consideration, then Cash
Consideration shall be reduced, dollar for dollar, for the “Stock 

 

15

 

Consideration
Amount” (defined below). The Shareholders’ Representative
shall be responsible for directing the distribution of the Cash Consideration
first, to pay in full each Option Holders’ Net Option Payment as shown on Schedule 3.10(b) and
then to the Shareholders (pro-rata in proportion to the Shareholders’
Proportionate Interests, as adjusted to reflect that the General Indemnity
Escrow Deposit, the Expense Escrow Deposit and the Accounting Method Tax Escrow
Deposit shall be made only from the Cash Consideration that would otherwise be
payable at Closing to the Founders) and FSAC shall be entitled to fully rely on
such directions.

 

(ii)                                  Escrows.
At the Closing, FSAC shall deposit with the Escrow Agent the following amounts
(collectively the “Escrow Deposits”): 
(1) $500,000 (the “Balance Sheet Escrow Deposit”) to be held
by the Escrow Agent in an escrow account (the “Balance Sheet Escrow Account”)
pursuant to the terms of an escrow agreement substantially in the form of Exhibit B-1
(the “Balance Sheet Escrow Agreement”); (2) $5,000,000 (the “General
Indemnity Escrow Deposit”) to be held by the Escrow Agent in an escrow
account (the “General Indemnity Escrow Account”) pursuant to the terms
of an escrow agreement substantially in the form of Exhibit B-2
(the “General Indemnity Escrow Agreement”); (3) $150,000 (the “Expense
Escrow Deposit”) to be held in an escrow account (the “Expense Escrow
Account”) by the Escrow Agent pursuant to the terms of an escrow agreement
substantially in the form of Exhibit B-3 (the “Expense
Escrow Agreement”) and (4) $5,400,000 (the “Accounting Method Tax
Escrow Deposit”) to be held by the Escrow Agent in an escrow account (the “Accounting
Method Tax Escrow Account”) pursuant to the terms of an Escrow Agreement in
the form attached hereto as Exhibit B-4 (the “Accounting
Method Tax Escrow Agreement” and together with the Balance Sheet Escrow
Agreement, the General Indemnity Escrow Agreement, and the Expense Escrow
Agreement collectively referred to as the “Escrow Agreements”). The
escrow accounts set up by the Escrow Agent with respect to each of the Escrow
Agreements are hereinafter individually referred to as an “Escrow Account”
and collectively as the “Escrow Accounts.”  The aggregate amount held in the Escrow
Accounts by the Escrow Agent at any time and from time to time, together with
any interest or appreciation thereon, shall be referred to as the “Escrowed
Funds” with that portion of the Escrowed Funds held from time to time in
the Balance Sheet Escrow Account being hereinafter sometimes referred to as the
“Balance Sheet Escrow Funds”; that portion of the Escrowed Funds held
from time to time in the General Indemnity Escrow Account being hereinafter
sometimes referred to as the “General Indemnity Escrow Funds;” that
portion of the Escrowed Funds held from time to time in the Expense Escrow Fund
being hereinafter sometimes referred to as the “Expense Escrow Funds”
and that portion of the Escrowed Funds held from time to time in the Accounting
Method Tax Escrow Account being hereinafter sometimes referred to as the “Accounting
Method Tax Escrow Funds.”

 

(A)                              The
Balance Sheet Escrow Funds shall be released and delivered to FSAC or the
Shareholders’ Representative, as applicable, pursuant to Section 2.3(e).

 

(B)                                The
General Indemnity Escrow Funds shall be released and delivered to FSAC or the
Shareholders’ Representative, as applicable, pursuant to Section 9.3.

 

(C)                                The
Expense Escrow Funds shall be released and delivered to the Founders pursuant
to the terms of the Expense Escrow Agreement.

 

16

 

(D)                               The
Accounting Method Tax Escrow Funds shall be released and delivered to FSAC or
the Shareholders’ Representative, as applicable, pursuant to Section 5.3.

 

(b)                                 Stock Consideration.

 

(i)                                     The
Founders have elected to receive in the aggregate $1,000,000 of their share of
the Shareholders’ Proportionate Interest of the Closing Consideration in the form of
FSAC’s common stock (“Stock Consideration”) rather than in the form of
Cash Consideration. The amount of the Closing Consideration that each such
Founder has elected to receive in Stock Consideration is set forth opposite his
name on Exhibit C (the “Stock Consideration Amount”), and
the amount of the Cash Consideration otherwise payable to him pursuant to Section 2.2(a) shall
be reduced by his Stock Consideration Amount.

 

(ii)                                  FSAC
Shares Constituting Stock Consideration. The number of FSAC shares of
common stock to be issued as Stock Consideration shall be determined for each
Founder on the Closing Date by dividing the Stock Consideration Amount for each
Founder by the Average Share Value.

 

(iii)                               Fractional
Shares. If the calculation of the number of shares of FSAC common stock to
be received as Stock Consideration pursuant to Section 2.2(b)(ii) would
result in the issuance of fractional shares, then the number of shares of FSAC
common stock that the Founder would otherwise receive as Stock Consideration
shall be rounded down to the nearest whole number of shares (which shall be the
Stock Consideration payable to that Shareholder) and the Founder shall receive
as Cash Consideration the amount attributable to the fractional interest.

 

(iv)                              Delivery
of Stock Certificates. At the Closing, FSAC shall deliver, or shall cause
to be delivered to the Shareholders’ Representative stock certificates for the
Stock Consideration payable to each Founder.

 

(v)                                 Restricted
Shares. The shares of FSAC’s common stock to be issued pursuant to this
Agreement as Stock Consideration (A) have not been, and will not be on or
prior to Closing, registered under the Securities Act, and will be issued in a
transaction that is exempt from the registration requirements of the Securities
Act and (B) will be “restricted securities” under the federal securities
laws and cannot be offered or resold except pursuant to registration under the
Securities Act or an available exemption from registration. All certificates
evidencing the Stock Consideration shall bear, in addition to any other legends
required under applicable securities laws, the following legend:

 

“THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE
TRANSFERRED EXCEPT PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION.”

 

17

 

(vi)                              Acquisition
Agreement; Registration Rights Agreement. At the Closing, each Founder and
FSAC will execute and deliver (A) an Acquisition Agreement in the forms
attached hereto as Exhibit D-1 and D-2 (each an “Acquisition
Agreement”) and (B) the Registration Rights Agreement in the form attached
hereto as Exhibit E (the “Registration Rights Agreement”).

 

(c)                                  Contingent
Payments. Pursuant to the terms and conditions described below in this Section 2.2(c),
the Shareholders shall be entitled to the earn out compensation (collectively
the “Earn Out”) described in this Section 2.2(c).

 

(i)                                     Base
Earn Out. Depending on the “EBITDA” (as that term is defined below) of ATS
and the Acquired Subsidiaries (excluding the Discontinued Business Line for all
purposes under this Section 2.2(c)) for the period from November 1,
2005 through April 30, 2007, the Shareholders shall be entitled to an earn
out (the “Base Earn Out”) of up to Fifteen Million Dollars
($15,000,000), consisting of the “October 2006 Base Earn Out Payment” and
the “April 2007 Base Earn Out Payment” (as hereinafter defined),
contingent upon the extent to which the terms and conditions of this Section 2.2(c)(i) are
satisfied.

 

(A)                              October 2006
Base Earn Out Period. If during the period from November 1, 2005
through October 31, 2006, ATS and the Acquired Subsidiaries generate
EBITDA (the “October 2006 Base Earn Out Period EBITDA”) in excess
of Nine Million Dollars ($9,000,000) (the “Base Earn Out Threshold”);
then the Shareholders shall be entitled to receive a payment (the “October 2006
Base Earn Out Payment”) in an amount equal Three and Three Thousand Three Hundred
and Thirty-Three Ten Thousandths Dollars ($3.3333) for each dollar by which the
October 2006 Base Earn Out Period EBITDA exceeds the Base Earn Out
Threshold. Notwithstanding the foregoing, in no event shall the October 2006
Base Earn Out Payment exceed Five Million Dollars ($5,000,000).

 

(B)                                April 2007
Earn Out Period. If during the period from May 1, 2006 through April 30,
2007, ATS and the Acquired Subsidiaries generate EBITDA in excess of the Base
Earn Out Threshold (the “April 2007 Base Earn Out Period EBITDA”);
then the Shareholders shall be entitled to receive a payment (the “April 2007
Base Earn Out Payment”) calculated as follows:

 

(1)                                  If
the April 2007 Base Earn Out Period EBITDA is greater than the Base Earn
Out Threshold but does not exceed Ten Million Five Hundred Thousand Dollars
($10,500,000), then the Shareholders shall be entitled to receive as an April 2007
Base Earn Out Payment an amount equal to Four Dollars ($4.00) for each dollar
by which the April 2007 Earn Out Period EBITDA exceeds the Earn Out
Threshold; or

 

(2)                                  If
the April 2007 Earn Out Period EBITDA is greater than Ten Million Five
Hundred Thousand Dollars ($10,500,000); then the Shareholders shall be entitled
to receive as the April 2007 Base Earn Out Payment an amount equal to (y)
Six Million Dollars plus (z) One and Twenty-Five One Hundredths Dollars ($1.25)
for each dollar by which the April 2007 Base Earn Out Period EBITDA
exceeds Ten Million Five Hundred Thousand Dollars ($10,500,000); provided,
however that in no event shall the April 2007 Earn 

 

18

 

Out Earn Out Payment
calculated under this Section 2.2(c)(i)(B)(2) exceed Ten Million
Dollars ($10,000,000).

 

(ii)                                  Additional
Earn Out. ATS has submitted a proposal (the “Hawaiian Proposal” to
the United States Air Force Pacific Rim Engineering Technical Service. If ATS
is awarded the contract related to the Hawaiian Proposal on or before October 31,
2006 then the Shareholders shall be entitled to the “2007/2008 Additional Earn Out”
(as hereinafter defined). If ATS is awarded the contract related to the
Hawaiian Proposal after October 31, 2006, but prior to April 30,
2008, then ATS may be entitled to the “2008 Additional Earn Out” described
below. If ATS is awarded the contract related to the Hawaiian Proposal after April 30,
2008, then ATS shall not be entitled to any additional earn out. In no event
shall the aggregate 2007/2008 Additional Earn Out or the 2008 Additional Earn
Out exceed Twenty Four Million Dollars ($24,000,000).

 

(A)                              2007/2008
Additional Earn Out. If ATS is awarded the contract related to the Hawaiian
Proposal on or before October 31, 2006 then the Shareholders shall be
entitled to receive an additional earn out for the period ending April 30,
2008 (the “2007/2008 Additional Earn Out”) calculated as follows:

 

(1)                                  If
during the period from May 1, 2006 through April 30, 2007, ATS and
the Acquired Subsidiaries generate EBITDA (the “April 2007 Additional
Earn Out Period EBITDA”) in excess of Thirteen Million Seven Hundred
Thousand Dollars ($13,700,000) (the “April 2007 Additional Earn Out
Threshold”); then the Shareholders shall be entitled to receive a payment
(the “April 2007 Additional Earn Out Payment”) in an amount equal
to Six Dollars ($6.00) for each dollar by which the April 2007 Additional
Earn Out Period EBITDA exceeds the April 2007 Additional Earn Out
Threshold. Notwithstanding the foregoing, in no event shall the April 2007
Additional Earn Out Payment exceed Twelve Million Dollars ($12,000,000); and

 

(2)                                  If
during the period from May 1, 2007 through April 30, 2008, ATS and
the Acquired Subsidiaries generate EBITDA (the “April 2008 Additional
Earn Out Period EBITDA”) in excess of Fourteen Million Dollars
($14,000,000) (the “April 2008 Additional Earn Out Threshold”);
then the Shareholders shall be entitled to receive a payment (the “April 2008
Additional Earn Out Payment”) in an amount equal to Six Dollars ($3.00) for
each dollar by which the April 2008 Additional Earn Out Period EBITDA
exceeds the April 2008 Additional Earn Out Threshold. Notwithstanding the
foregoing, in no event shall the April 2008 Additional Earn Out Payment
exceed Twelve Million Dollars ($12,000,000);

 

(B)                                2008
Additional Earn Out. If (i) ATS is awarded the contract related to the
Hawaiian Proposal after October 31, 2006, but prior to April 30, 2008
and (ii) during the period from May 1, 2007  through April 30, 2008, ATS and the
Acquired Subsidiaries generate EBITDA (the “2008 Additional Earn Out Period
EBITDA”) in excess of Fourteen Million Dollars ($14,000,000) (the “2008
Additional Earn Out Threshold”); then the Shareholders shall be entitled to
receive a payment (the “2008 Additional Earn Out Payment”) in an amount
equal to Six Dollars ($6.00) for each dollar by which the 2008 Additional Earn
Out Period EBITDA exceeds the 2008 Additional Earn Out Threshold (the “2008
Additional Earn 

 

19

 

Out”).
Notwithstanding the foregoing, in no event shall the 2008 Additional Earn Out
Payment exceed Twenty Four Million Dollars ($24,000,000).

 

(iii)                               Calculation of EBITDA. For purposes of this Section 2.2(c) ”EBITDA”
of ATS with respect to any fiscal year, or period, shall be obtained from the
Companies’ consolidated annual audited income statements (so long as ATS
prepares annual audited income statements or, if ATS does not prepare such
statements and for other relevant periods, from ATS’ consolidated reviewed
quarterly income statements or other regularly prepared income statements as
approved by its Board of Directors being prepared consistent with previous
audited financial statements and in accordance with GAAP) and shall be defined,
plus or minus the following items, without duplication, to the extent they were
used in calculating consolidated net income from operations with respect to the
specified fiscal year, or period, as follows:

 

(a)                                  Consolidated net income (or loss), as
determined in accordance with GAAP;

 

(b)                                 minus extraordinary and non-operating income
and gains, plus extraordinary and non-operating expenses and losses, including,
without limitation, any prepayment penalties resulting from the retirement of
Indebtedness before its scheduled repayment date;

 

(c)                                  minus gains, plus losses from discontinued
operations;

 

(d)                                 plus income taxes, minus income tax credits;

 

(e)                                  minus gains, plus losses from the sale of
assets other than write-offs in the ordinary course of business;

 

(f)                                    plus interest expense;

 

(g)                                 minus interest and dividend income;

 

(h)                                 plus depreciation, amortization and other
non-cash charges;

 

(i)                                     plus fees and expenses of accountants and
attorneys associated with the acquisition of ATS and other transaction costs
associated with the acquisition of ATS and other non-ordinary course mergers
and acquisitions;

 

(j)                                     minus gains, plus losses from income on other
investments and other miscellaneous income, below the operating income line;

 

(k)                                  minus gains, plus
losses resulting solely from adjustments to the Cash Consideration pursuant to Section 2.3
to the extent such adjustments to the Cash Consideration were reflected in
consolidated net income (or loss) rather than purchase accounting adjustments;
and

 

20

 

In
addition to the above, without duplication, to the extent such expenses have not been added back above, and for periods prior to the Closing
Date (where such expenses were recorded within such applicable period):

 

(l)                                     plus any salary, benefits or other
compensation or expenses payable to the Founders or on their behalf, including:

 

(i)                           all costs captured under Service Center G of
the internally prepared financial statements, exclusive of allocations for
Benefits Pool, Facilities Pool, HR/Payroll and rent;

 

(ii)                        all additional compensation of the Founders
recorded as unallowable expenses;

 

(iii)                     key man insurance premiums;

 

(iv)                    other direct discretionary expenses of the
Founders;

 

(m)                               plus $10,000 for one-time expenses in November 2005
related to the space formerly occupied by ATSI;

 

(n)                                 plus any payments or charges related to the
Appix phantom stock plan, including cash payments to buy participants out of
the plan;

 

(o)                                 plus
fees and expenses (exclusive of allocations for HR/Payroll Pool, Facilities
Pool, Group B Pool (accounting), Benefits Pool and general &
administrative) of ATS Hawaii, net of any associated revenues;

 

(p)                                 plus
fees and expenses (exclusive of allocations for HR/Payroll Pool, Facilities
Pool, Group B Pool (accounting), Benefits Pool and general &
administrative) of ATS Public Safety (comprised of both Pyramid and Voyager
(but in the case of Voyager for only the first six months of fiscal year 2006),
to the extent not included in discontinued operations), net of any associated;

 

(q)                                 plus
fees and expenses (exclusive of allocations for HR/Payroll Pool, Facilities
Pool, Group B Pool (accounting), Benefits Pool and general &
administrative) of ATS Ventures, net of any associated revenues;

 

(r)                                    plus
all costs related to discretionary trade shows for ATSI, ATS Hawaii, or ATS
Public Safety, otherwise not included in discontinued operations, in 2006, of
$17,433 for the fiscal year ending October 31, 2006; and

 

In
addition to the above, without duplication, to the extent such expenses
have not been added back above, and for
periods following the Closing Date (where such expenses were recorded
within such applicable period):

 

(s)                                  plus any expenses or losses to the extent
indemnified by the Founders, pursuant to Section 5.16 of this Agreement.

 

21

 

For further clarity, the
following table represents a calculation of EBITDA for the fiscal year ended October 2005:

 

	
   

  	
   

  	
   

  	
   

  	
  Section

  	
   

  	
   

  	
   

  
	
  ($ in thousands)

  	
   

  	
  2.2(c)(iii)

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (=)

  	
   

  	
  Consolidated
  net loss

  	
   

  	
  (a)

  	
   

  	
  $

  	
  (1,041.2

  	
  )

  
	
  (-/+)

  	
   

  	
  Extraordinary non-operating
  income / losses

  	
   

  	
  (b)

  	
   

  	
  —

  	
   

  
	
  (+)

  	
   

  	
  Plus loss from discontinued
  operations

  	
   

  	
  (c)

  	
   

  	
  1,065.0

  	
   

  
	
  (+)

  	
   

  	
  Income taxes

  	
   

  	
  (d)

  	
   

  	
  10.4

  	
   

  
	
  (+)

  	
   

  	
  Losses from the sale of assets

  	
   

  	
  (e)

  	
   

  	
  13.0

  	
   

  
	
  (+)

  	
   

  	
  Interest expense

  	
   

  	
  (f)

  	
   

  	
  285.5

  	
   

  
	
  (-)

  	
   

  	
  Interest and dividend income

  	
   

  	
  (g)

  	
   

  	
  (11.9)

  	
   

  
	
  (+)

  	
   

  	
  Depreciation and amortization

  	
   

  	
  (h)

  	
   

  	
  1,201.3

  	
   

  
	
  (+)

  	
   

  	
  ATS transaction costs

  	
   

  	
  (i)

  	
   

  	
  27.0

  	
   

  
	
  (-)

  	
   

  	
  Other income below the
  operating income line

  	
   

  	
  (j)

  	
   

  	
  (100.8)

  	
   

  
	
  (-/+)

  	
   

  	
  Purchase accounting income /
  losses related to Closing Net Working Capital payments, if any

  	
   

  	
  (k)

  	
   

  	
  —

  	
   

  
	
  (+)

  	
   

  	
  Founders’ compensation and
  expenses, net of allocated expenses

  	
   

  	
  (l)

  	
   

  	
  3,044.1

  	
   

  
	
  (+)

  	
   

  	
  Pro forma facilities savings
  from space related to ATSI

  	
   

  	
  (m)

  	
   

  	
  120.0

  	
   

  
	
  (+)

  	
   

  	
  Payments or charges related to
  the Appix Phantom Stock Plan

  	
   

  	
  (n)

  	
   

  	
  113.5

  	
   

  
	
  (+)

  	
   

  	
  Fees and expenses of ATS
  Hawaii, net of revenue and expense allocations

  	
   

  	
  (o)

  	
   

  	
  997.6

  	
   

  
	
  (+)

  	
   

  	
  Fees and expenses of ATS Public
  Safety, net of revenue and expense allocations

  	
   

  	
  (p)

  	
   

  	
  2,465.8

  	
   

  
	
  (+)

  	
   

  	
  Fees and expenses of ATS
  Ventures, net of revenue and expense allocations

  	
   

  	
  (q)

  	
   

  	
  36.7

  	
   

  
	
  (+)

  	
   

  	
  Costs related to discretionary
  trade shows for ATSI, ATS Public Safety or ATS Hawaii

  	
   

  	
  (r)

  	
   

  	
  139.1

  	
   

  
	
  (=)

  	
   

  	
  Subtotal

  	
   

  	
   

  	
   

  	
  8,365.1

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Adjustments for Fiscal Year
  Ended October 2005 Only

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (not
  applicable to periods after October 2005)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (-)

  	
   

  	
  Allocations to ATSI that will
  remain with ATS after the sale

  	
   

  	
  n/a

  	
   

  	
  (48.0)

  	
   

  
	
  (+)

  	
   

  	
  Pro forma facilities savings
  from space related to Pyramid

  	
   

  	
  n/a

  	
   

  	
  22.9

  	
   

  
	
  (+)

  	
   

  	
  Severance payments related to
  reorganization of marketing function

  	
   

  	
  n/a

  	
   

  	
  55.0

  	
   

  
	
  (+)

  	
   

  	
  New marketing collateral and
  branding campaign materials

  	
   

  	
  n/a

  	
   

  	
  144.7

  	
   

  
	
  (+)

  	
   

  	
  Bonuses paid in fiscal year
  2005 but related to fiscal year 2004

  	
   

  	
  n/a

  	
   

  	
  166.0

  	
   

  
	
  (+)

  	
   

  	
  Late fees and other
  non-recurring expense items

  	
   

  	
  n/a

  	
   

  	
  34.3

  	
   

  
	
  (=)

  	
   

  	
  Subtotal

  	
   

  	
   

  	
   

  	
  374.9

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (=)

  	
   

  	
  Fiscal Year
  2005 EBITDA

  	
   

  	
   

  	
   

  	
  $

  	
  8,740.0

  	
   

  

 

	
  n/a = not applicable

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

22

 

(iv)                              Calculation
and Payment of Earn Out.

 

(A)                              Calculation.

 

(1)                                  October 2006
Earn Out Payment. The amount of October 2006 Earn Out Payment, if any,
due the Shareholders under this Section 2.2(c) shall be calculated by
FSAC and such calculation, together with reasonably detailed support (the “October 2006
Earn Out Notice”) shall be delivered to the Shareholders’ Representative
within twenty (20) days after receipt by FSAC of its review for the October 2006
Earn Out Period.

 

(2)                                  April 2007
and April 2007 Additional Earn Out Payments. The amounts of the April 2007
and April 2007 Additional Earn Out Payments, if any, due the Shareholders
under this Section 2.2(c) shall be calculated by FSAC and such
calculation, together with reasonably detailed support (the “April 2007
Earn Out Notice”) shall be delivered to the Shareholders’ Representative
within fifteen (15) days after filing of FSAC’s Form 10-Q with the SEC for
the second quarter of 2007.

 

(3)                                  April 2008
Additional and 2008 Additional Earn Out Payments. The amount of the April 2008
Additional Earn Out Payment or 2008 Additional Earn Out Payment, if any, due
the Shareholders under this Section 2.2(c) shall be calculated by
FSAC and such calculation, together with reasonably detailed support (the “April 2008
Earn Out Notice”) shall be delivered to the Shareholders’ Representative
within fifteen (15) days after filing of FSAC’s Form 10-Q with the SEC for
the second quarter of 2008.

 

(B)                                Cash
Payment. If within twenty (20) days following delivery of the October 2006,
April 2007 or April 2008  Earn
Out Notice, as applicable, the Shareholders’ Representative has not given FSAC
notice of his objection to the computation (which notice must contain a
statement in reasonable detail of the basis of any such objection), then such
computation shall be final. If the Shareholders’ Representative gives notice of
an objection, the parties shall use their respective best efforts to resolve
any dispute by negotiation. If such dispute cannot be settled by negotiation
within fifteen (15) days after the Shareholders’ Representative’s notice, the
dispute shall be resolved in accordance with the Financial Issue Resolution
Process set forth in Section 2.4. As calculations of all or portions of
the October 2006 Earn Out Payment, April 2007 Earn Out Payment, April 2007
Additional Earn Out Payment, April 2008 Additional Earn Out Payment and
2008 Additional Earn Out Payment, as applicable, become finalized (fifteen (15)
days following delivery of the October 2006, April 2007 or April 2008
Earn Out Notice, as applicable, if there is no dispute, or following resolution
of the dispute pursuant to the preceding sentence), payments of the October 2006,
April 2007, April 2007 Additional, April 2008 Additional and
2008 Additional Earn Out Payments, as applicable, supported by those final
calculations shall be made by FSAC to the Shareholders Representative within
five (5) Business Days of the date those calculations are finalized. Notwithstanding
anything to the contrary, payments of the October 2006, April 2007, April 2007
Additional, April 2008 Additional and 2008 Additional Earn Out Payments
otherwise payable under this Section 2.2(c)(iv) are subject to FSAC’s
offset rights as set forth in Section 9.2(g). All sums payable by FSAC to
the Shareholders’ Representative under this Section 2.2(c)(iv) shall
be paid by FSAC to an account or accounts designated by the Shareholders’
Representative. The Shareholders’ Representative shall be responsible for
directing the distribution of the Earn Out to 

 

23

 

the Shareholders
(pro-rata in proportion to the Shareholders’ Proportionate Interests) and FSAC
shall be entitled to fully rely on such directions.

 

(C)                                Promissory
Note Option for April 2007 and April 2008 Additional Earn Out
Payments. Notwithstanding anything to the contrary contained in Section 2.2(c) above,
FSAC, at its option may elect to pay up to twenty five percent (25%) of
either the April 2007 Additional or April 2008 Additional Earn Out
Payments by delivery of a Promissory Note payable to the Shareholders’
Representative in the form attached hereto as Exhibit F. The Shareholders’ Representative shall be
responsible for directing the distribution of any and all payments on any such
Promissory Note to the Shareholders (pro rata in proportion to the Shareholders’
Proportionate Interests) and FSAC shall be entitled to fully rely on such
directions.

 

2.3                                 Cash Consideration
and Net Working Capital Adjustments.

 

(a)                                  Cash Consideration.
The “Cash Consideration” shall be an amount equal to Eighty Five Million
Dollars ($85,000,000) (the “Estimated Closing Cash Purchase Price”) as
adjusted upward or downward pursuant to Sections 2.3(b) and (c) below
a portion of which shall be deposited into the Escrow Accounts in accordance
with Section 2.2(a)(ii).

 

(b)                                 Estimated Closing
Balance Sheet. Not less than two (2) Business Days prior to the Closing
Date, ATS shall deliver to FSAC an estimated, unaudited, consolidated balance
sheet of ATS and the Acquired Subsidiaries (the “Estimated Closing Balance
Sheet”) as of the Closing Date, together with all supporting documentation.
The Estimated Closing Balance Sheet shall be prepared by ATS, in accordance
with GAAP and in accordance with ATS’ accounting principles, policies,
practices, classifications and methodologies as reflected in the preparation of
the October 2005 Balance Sheet (“ATS Accounting Practices”); provided,
however, that to the extent that any ATS Accounting Practices are not in
compliance with GAAP, GAAP shall control for purposes of preparing the
Estimated Closing Balance Sheet. The Estimated Closing Balance Sheet shall also
include a calculation of the Closing Net Working Capital (hereinafter defined).

 

For
purposes of this Agreement, “Closing Net Working Capital” shall mean the
amount, as of the Closing Date and as shown by the Closing Balance Sheet, by
which ATS’ current assets (which shall exclude cash and include accounts
receivable, notes receivable, prepaid expense, inventories and other current
assets) exceed its current liabilities (which for purposes of this definition
shall exclude Indebtedness to the extent reflected in current liabilities). For
the avoidance of doubt, current liabilities shall include any of the Founders’
Transaction Costs not paid or reimbursed by the Founders at or prior to the
Closing pursuant to Section 5.8; provided that the Founders shall
in no event bear more than 100% of the Founders’ Transaction Costs. Closing Net
Working Capital shall be calculated (A) on a consolidated basis for ATS
and the Acquired Subsidiaries using the accrual method of accounting and (B) in
accordance with ATS Accounting Practices; provided, however, that to the
extent that any ATS Accounting Practices are not in compliance with GAAP, GAAP
shall control for purposes of preparing the Estimated Closing Balance Sheet.

 

(c)                                  Adjustments to
Estimated Closing Cash Purchase Price. The Estimated Closing Cash Purchase
Price will be adjusted (i) downwards on a dollar-for-dollar basis to the 

 

24

 

extent that the Closing
Net Working Capital, as shown on the Estimated Closing Balance Sheet, is below
the Base Net Working Capital and (ii) upwards on a dollar-for-dollar basis
to the extent that the Closing Net Working Capital is above the Base Net
Working Capital.

 

(d)                                 Closing Balance
Sheet and Closing Net Working Capital. Promptly following the Closing, FSAC
will cause RSM McGladrey (or an equivalent firm selected by FSAC) to review the Estimated Closing Balance Sheet, including
the Closing Net Working Capital, the Closing Net Working Capital as reflected
thereon. Based on such review, FSAC will deliver a proposed Closing Balance
Sheet, prepared in a manner consistent with Section 2.3(b) above
together with all related work papers, to the Shareholders’ Representative
within thirty (30) Business Days after the later of (i) the Closing Date,
or (ii) the date of receipt by FSAC of all information sufficient for FSAC
to complete its review of all aspects of the Estimated Closing Balance Sheet
(the “Proposed Closing Balance Sheet”). If within fifteen (15) Business Days following delivery of the Proposed Closing
Balance Sheet, the Shareholders’ Representative has not given FSAC notice of
his objection to the Proposed Closing Balance Sheet (which notice must contain
a statement in reasonable detail of the basis of any such objection), then such
Proposed Closing Balance Sheet shall constitute the “Closing Balance Sheet,”
and the Closing Net Working Capital amount included therein shall constitute
the “Closing Net Working Capital.”  If
the Shareholders’ Representative gives notice of an objection, the parties shall
use their respective best efforts to resolve any dispute by negotiation. If
such dispute cannot be settled by negotiation within thirty (30) days after receipt by FSAC of the Shareholders’
Representative’s notice, the dispute shall be resolved in accordance with the
Financial Issue Resolution Process set forth in Section 2.4.

 

(e)                                  Final Adjustment
to the Estimated Closing Cash Purchase Price. If the Closing Net Working
Capital is such that Sections 2.3(d) and/or 2.4 do not require an
adjustment to the Estimated Closing Cash Purchase Price, then the Escrow Agent
shall disburse to the Shareholders’ Representative the Balance Sheet Escrow
within five (5) days after the finalization of the Closing Balance Sheet
pursuant to Sections 2.3(d) and/or 2.4. If the Closing Net Working Capital
is such that Sections 2.3(d) or 2.4 require an adjustment to the Estimated
Closing Cash Purchase Price, any amount due to the Shareholders by FSAC in
excess of the Balance Sheet Escrow shall be paid by FSAC to the Shareholders’ Representative,
and any amount due to FSAC from the Shareholders shall be paid to FSAC by the
Escrow Agent from the Escrow and, if the amount due FSAC is in excess of the
Balance Sheet Escrow Funds, then such excess shall be paid to FSAC by the
Shareholders within five (5) days after the finalization of the Closing
Balance Sheet pursuant to Sections 2.3(d) and/or 2.4. In the event that
the Shareholders for any reason fail to make the payment contemplated in the
previous sentence, then FSAC may bring an indemnification claim under ARTICLE IX
and the Founders shall be liable for that payment in accordance with ARTICLE IX.
Any earnings on the Balance Sheet Escrow Funds, net of escrow expenses and
taxes, shall be paid, pro rata, to the parties receiving distributions from the
Balance Sheet Escrow Account. All sums payable by the Escrow Agent to the
Shareholders’ Representative under this Section 2.3(e) shall be paid
by the Escrow Agent to an account or accounts designated by the Shareholders’
Representative. The Shareholders’ Representative shall be responsible for
directing the distribution of the Balance Sheet Escrow (pro-rata in proportion
to the Shareholders’ Proportionate Interests) and the Escrow Agent shall be
entitled to fully rely on such directions.

 

25

 

2.4                                 Financial Issue
Resolution Process.

 

Disputes
between FSAC and the Shareholders’ Representative, that cannot be resolved by
negotiation within thirty (30) days after receipt by FSAC of the Shareholders’ Representative’s
notice in accordance with Sections 2.2(c) or 2.3(d) shall be referred
no later than such 30th day for decision to a nationally-recognized independent
public accounting firm mutually selected by the Shareholders’ Representative
and FSAC (which firm shall not be either (a) RSM McGladrey or (b) Grant
Thornton LLP, and provided that each party discloses to the other parties any
pre-existing relationships with any accounting firms prior to the mutual
selection of an accounting firm) (the “Auditor”) who shall act as
arbitrator and determine, based solely on presentations by the Shareholders’
Representative and FSAC and only with respect to the remaining differences so
submitted. If such accounting firm cannot be identified within ten (10) business
days after the identification of the need for dispute resolution, the dispute
shall be resolved in accordance with Section 11.11. The Auditor shall
deliver its written determination to FSAC and the Shareholders’ Representative
no later than the 30th day after the remaining differences underlying the
dispute are referred to the Auditor, or such longer period of time as the
Auditor determines is necessary. The Auditor’s determination shall be
conclusive and binding upon the parties. The fees and disbursements of the
Auditor shall be allocated equally between FSAC and the Shareholders’
Representative. FSAC and the Shareholders shall make readily available to the
Auditor all relevant information, books and records and any work papers
relating to the dispute and all other items reasonably requested by the Auditor.
In no event may the Auditor’s resolution of any difference be for an
amount that is outside the range of FSAC’s and the Shareholders’ Representative’s
disagreement.

 

2.5                                 Shareholders’
Representative.

 

(a)                                  Claude Rumsey is
hereby appointed as the Shareholders’ true and lawful representative, proxy,
agent and attorney-in-fact (the “Shareholders’ Representative”) for a
term that shall be continuing and indefinite and without a termination date
except as otherwise provided herein, to act for and on behalf of the
Shareholders in connection with or relating to the Transaction Documents and
the Contemplated Transactions, including, without limitation, to give and
receive notices and communications, to receive and accept service of legal
process in connection with any proceeding arising under the Transaction
Documents or in connection with the Contemplated Transactions, receive and
deliver amounts comprising the Purchase Consideration, to authorize delivery of
cash from each of the Escrow Accounts, to object to or accept any claims
against or on behalf of the Shareholders pursuant to Article IX, to agree
to, negotiate, enter into settlements and compromises of, and demand
arbitration and comply with orders of courts and awards of arbitrators with
respect to such amounts or claims, and to take all actions necessary or
appropriate in the sole opinion of the Shareholders’ Representative for the
accomplishment of the foregoing. Such agency may be changed at any time
and from time to time by the action of Shareholders holding more than fifty
percent (50%) of the issued and outstanding Shares just prior to the Closing,
and shall become effective upon not less than thirty (30) days prior written
notice to FSAC. Any change in the Shareholders’ Representative shall become
effective only upon delivery of written notice of such change to FSAC. The
Shareholders’ Representative shall not receive compensation for his or her
services. Notices, deliveries or communications to or from the Shareholders’
Representative by or to any of the 

 

26

 

parties to the
Transaction Documents shall constitute notices, deliveries or communications to
or from the Shareholders.

 

(b)                                 The Shareholders’ Representative
shall not be liable for any act done or omitted hereunder in his capacity as
Shareholders’ Representative in the absence of gross negligence or willful
misconduct on his or her part. The Founders shall jointly and severally
indemnify the Shareholders’ Representative and hold the Shareholders’
Representative harmless from and against any and all damages, actions,
proceedings, demands, liabilities, losses, taxes (excluding any taxes payable by the Shareholders’
Representative in respect of payments to him in connection with his acting as
Shareholders’ Representative), fines, penalties, costs,
claims and expenses (including, without limitation, reasonable fees of counsel)
of any kind or nature whatsoever (whether or not arising out of third-party claims
and including all amounts paid in investigation, defense or settlement of the
foregoing) (“Damages”) that may be sustained or suffered by the
Shareholders’ Representative in connection with the administration of its
duties hereunder, except where such Damages arise from or are the result of the
Shareholders’ Representative’s gross negligence or willful misconduct.

 

(c)                                  Any decision, act,
consent or instruction taken or given by the Shareholders’ Representative
pursuant to this Agreement shall be and constitute a decision, act, consent or
instruction of the Shareholders and shall be final, binding and conclusive upon
the Shareholders. The Escrow Agent and FSAC may rely upon any such
decision, act, consent or instruction of the Shareholders’ Representative as
being the decision, act, consent or instruction of the Shareholders and shall
have no duty to inquire as to the acts and omissions of the Shareholders’
Representative. The Escrow Agent and FSAC are hereby relieved from any
liability to any Person for any acts done by them in accordance with such
decision, act, consent or instruction of the Shareholders’ Representative.

 

(d)                                 Notices given to the
Shareholders’ Representative in accordance with Section 11.2 shall
constitute notice to the Shareholders for all purposes under this Agreement.

 

(e)                                  This Section 2.5
shall survive the termination or expiration of the Agreement or any one or more
of the Escrow Agreements.

 

ARTICLE III

Representations and Warranties of the Shareholders and ATS

 

Except as set forth in the Disclosure Schedules, the
Founders and ATS jointly and severally represent and warrant to FSAC that
each of the statements contained in this ARTICLE III is true and correct as of
the date of this Agreement (or, if made as of a specified date, as of such
date), and will be true and correct as of the Closing Date as though made on
the Closing Date (or, if made as of a specified date, as of such date); provided,
however, that where such
representations and warranties are indicated to be made by the Shareholders in
their several and not joint capacity, in which case the Founders and ATS shall
be deemed not to make such representations and warranties:

 

27

 

3.1                                 Organization and
Power.

 

(a)                              Shareholders.
Each of the Shareholders severally and not jointly represents and warrants to
FSAC that such Shareholder has the full power and authority to execute, deliver
and perform this Agreement and the other Transaction Documents to which it
is a party and to consummate the Contemplated Transactions.

 

(b)                             ATS.
ATS (i) is a corporation duly incorporated, validly existing and in good
standing under the laws of the Commonwealth of Virginia, (ii) has full
power and authority to execute, deliver and perform this Agreement, (iii) has
all requisite corporate power and authority to own or lease and to operate its
properties and carry out the businesses in which it is engaged, and (iv) is
duly qualified or licensed to do business as a foreign corporation in good
standing in every jurisdiction where its ownership of property, or the conduct
of its business, requires such qualification, other than jurisdictions in which
the failure to so qualify, individually or in the aggregate, would not have a
material adverse effect on ATS. Schedule 3.1(b) of the Disclosure
Schedules lists each of the jurisdictions in which ATS is qualified or licensed
to do business as a foreign corporation. ATS is in good standing in each
jurisdiction listed on Schedule 3.1(b) of the Disclosure Schedules.

 

(c)                              Acquired
Subsidiaries. Schedule 3.1(c) of the Disclosure Schedules sets
forth the name and jurisdiction of formation of each of the Acquired
Subsidiaries. Other than as set forth on Schedule 3.1(c) of the
Disclosure Schedules, ATS does not own, directly or indirectly, any Capital
Stock of any corporation or have any direct or indirect equity or ownership
interest in any business other than publicly traded securities constituting
less than 5% of the outstanding equity of the issuing entity. Except as set
forth on Schedule 3.1(c) of the Disclosure Schedules, each of the
Acquired Subsidiaries (i) is a corporation, partnership, limited liability
company or other entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization, (ii) has
all requisite corporate or other power and authority to own, lease and operate
its properties and to carry on the businesses in which it is engaged and (iii) is
duly qualified or licensed to do business as a foreign corporation in good
standing in every jurisdiction where its ownership of property or, the conduct
of its business, requires such qualification, other than jurisdictions in which
the failure to qualify would not, individually or in the aggregate, have a material
adverse effect on ATS and the Acquired Subsidiaries.

 

3.2                                 Authorization and
Enforceability.

 

(a)                              This
Agreement has been, and each of the other documents, agreements and instruments
to be executed and delivered at Closing (collectively with this Agreement, the “Transaction
Documents”) to be executed by ATS will be, duly authorized, executed and
delivered by ATS and constitutes, or in the case of each Transaction Document
other than this Agreement, as of the Closing Date will constitute a valid and
legally binding agreement of ATS, enforceable in accordance with its terms,
subject to bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors’ rights and to general equity
principles. The Contemplated Transactions have been duly authorized by the
Board of Directors of ATS in accordance with all applicable Law and the
Articles of Incorporation and Bylaws of ATS.

 

28

 

(b)                             Each of the Shareholders severally and not
jointly represents and warrants to FSAC that this Agreement has been, and each
of the other Transaction Documents to be executed and delivered at Closing by
such Shareholder will be, duly authorized, executed and delivered by such
Shareholder and constitutes, or in the case of each Transaction Document
other than this Agreement, as of the
Closing Date will constitute, a valid and legally binding agreement of such
Shareholder enforceable in accordance with its terms, subject to bankruptcy,
insolvency, reorganization and other laws of general applicability relating to
or affecting creditors’ rights and to general equity principles.

 

3.3                                 No Violation.

 

(a)                              Except
as set forth on Schedule 3.3(a) of the Disclosure Schedules, neither
the execution, delivery or performance of this Agreement or any of the other
Transaction Documents by ATS nor the consummation of the Contemplated
Transactions will:

 

(i)                                     conflict
with or violate any provision of the certificate or articles of incorporation,
any bylaw or any corporate charter or document of ATS or the Acquired
Subsidiaries;

 

(ii)                                  result
in the creation of, or require the creation of, any Lien upon any (i) Shares
or (ii) property of ATS or any of the Acquired Subsidiaries;

 

(iii)                               result
in (A) the termination, cancellation, modification, amendment, violation,
or renegotiation of any contract, agreement, indenture, instrument, or
commitment pertaining to the business of ATS or any of the Acquired
Subsidiaries, or (B) the acceleration or forfeiture of any term of payment
pertaining to the business of ATS or any of the Acquired Subsidiaries;

 

(iv)                              give
any Person the right to (A) terminate, cancel, modify, amend, vary, or
renegotiate any contract, agreement, indenture, instrument, or commitment
pertaining to the business of ATS or any of the Acquired Subsidiaries, or (B) to
accelerate or forfeit any term of payment pertaining to the business of ATS or
any of the Acquired Subsidiaries; or

 

(v)                                 violate
any Law applicable to ATS or any of the Acquired Subsidiaries or by which their
properties are bound or affected.

 

(b)                             Each
of the Shareholders severally and not jointly represents and warrants to FSAC
that neither the execution, delivery or performance of this Agreement or any of
the other Transaction Documents by such Shareholder nor the consummation of the
Contemplated Transactions will result in the creation of, or require the
creation of, any Lien upon the Shares purported to be owned by such
Shareholder.

 

3.4                                 Consents.

 

(a)                              Except
as set forth on Schedule 3.4(a) of the Disclosure Schedules, neither
the execution, delivery or performance of this Agreement by ATS, nor the
consummation of the Contemplated Transactions or compliance with the terms of
the Transaction Documents, will require (i) the consent or approval under any
agreement or instrument or (ii) ATS, or any of the 

 

29

 

Acquired
Subsidiaries to obtain the approval or consent of, or make any declaration,
filing (other than administrative
filings with Taxing Authorities, foreign companies registries and the like) or
registration with, any Governmental Authority and all such consents or
approvals have been obtained or waived.

 

(b)                             Each
of the Shareholders severally and not jointly represents and warrants to FSAC
that, except as set forth on Schedule 3.4(b) of the Disclosure
Schedules, neither the execution or delivery of this Agreement by such
Shareholder, nor the consummation of the Contemplated Transactions or
compliance with the terms of the Transaction Documents, will require such
Shareholder to obtain the approval or consent of, or make any declaration,
filing (other than administrative filings with Taxing Authorities, foreign
companies registries and the like) or registration with, any Governmental
Authority and all such consents or approvals have been obtained or waived.

 

3.5                                 Financial
Statements.

 

(a)                              In
General. The Audited Financial Statements were prepared in accordance with
GAAP and the Interim Financial Statements and the Estimated Closing Balance
Sheet were internally prepared by ATS in a manner consistent with past
practices for such internally prepared unaudited financial statements. Throughout
the periods involved, the Financial Statements fairly and accurately present,
in all material respects, the consolidated financial position of ATS and the
Acquired Subsidiaries, as of the dates thereof, and the consolidated statements
of operations, changes in shareholders’ equity, and cash flows for the periods
then ended.

 

(b)                             Financial
Books and Records. The financial books and records of ATS and the Acquired
Subsidiaries fairly and accurately reflect, in all material respects, and on a
basis consistent with past periods and throughout the periods involved, (i) the
financial position of ATS and the Acquired Subsidiaries and (ii) all
transactions of ATS and the Acquired Subsidiaries. Neither ATS nor any of the
Acquired Subsidiaries has received any advice or notification from its
independent certified public accountants that ATS or any of the Acquired
Subsidiaries has used any improper accounting practice that would have the
effect of not reflecting or incorrectly reflecting in the books and records of
ATS or any of the Acquired Subsidiaries any properties, assets, liabilities,
revenues, or expenses.

 

(c)                              No
Undisclosed Liabilities; Etc. Except as set forth on Schedule 3.5(c) of
the Disclosure Schedules, neither ATS nor any of the Acquired Subsidiaries has
any liabilities or obligations of any nature (whether known or unknown and
whether absolute, accrued, contingent, or otherwise), except for (i) amounts
of liabilities or obligations reflected or reserved against in the Financial
Statements, (ii) executory contract obligations under the Scheduled
Contracts, Government Contracts and Government Subcontracts and (iii) liabilities
or obligations arising in the ordinary course of business after the Effective
Date.

 

(d)                             Accounts
Receivable. All receivables (including intercompany and unbilled
receivables) reflected in the Financial Statements or recorded on the books of
ATS and each of the Acquired Subsidiaries resulted from the ordinary course of
business, have been properly recorded in the ordinary course of business and
subject to the reserves reflected in the 

 

30

 

Financial
Statements, which reserves are adequate and determined in accordance with GAAP
applied on a basis consistent with prior periods and throughout the periods
involved, and are good and collectible in full without any discount, setoff or
valid counterclaim (net of recovery from vendors or subcontractors), in amounts
equal to not less than the aggregate face amounts thereof.

 

(e)                              No
Letters of Credit or Guarantees. Except as reflected in the Financial
Statements or as set forth on Schedule 3.5(e) of the Disclosure
Schedules, neither ATS nor any of the Acquired Subsidiaries (i) has any
letters of credit outstanding as to which ATS or the Acquired Subsidiaries has
any actual or contingent reimbursement obligations; (ii) is a party to or
bound, either absolutely or on a contingent basis, by any agreement of
guarantee, indemnification or any similar commitment with respect to the
liabilities or obligations of any other Person (whether accrued, absolute, or
contingent); or (iii) is a party to any swap, hedge, derivative, or
similar instrument.

 

(f)                                Contingent
or Deferred Acquisition Expenses or Payments. Except as otherwise disclosed
on Schedule 3.5(f) of the Disclosure Schedules, neither ATS, nor any
of the Acquired Subsidiaries are obligated, or otherwise liable for the payment
of any contingent or deferred acquisition payments relating to the direct or
indirect acquisition of any business, enterprise, or combination.

 

3.6                                 Relationships with
Affiliates.

 

Except
as set forth on Schedule 3.6 of the Disclosure Schedules, no Shareholder
or any Affiliate of any Shareholder, ATS or any of the Acquired Subsidiaries
has, or has had, any interest in any property (real, personal, or mixed and
whether tangible or intangible), used in or pertaining to the business of ATS
or any of the Acquired Subsidiaries. No Shareholder or any Affiliate of any
Shareholder, ATS or any of the Acquired Subsidiaries is, or has owned (of
record or as a beneficial owner) an equity interest or any other financial or a
profit interest in, a Person that has (a) had business dealings or a
material financial interest in any transaction with ATS or any Acquired
Subsidiary or (b) engaged in competition with ATS or any Acquired
Subsidiary with respect to any line of the products or services of ATS or any
Acquired Subsidiary in any market presently served by ATS or any of the
Acquired Subsidiaries. Except as set forth on Schedule 3.6 of the
Disclosure Schedules, and except for employment, consulting and other similar
agreements, and the Change in Control Bonus Agreements, Change in Control
Retention Agreements, Phantom Stock Unit Award Agreements, stock option
agreements and confidentiality agreements, in each case reflected in the
Disclosure Schedules, no Shareholder or any Affiliate of any Shareholder, ATS
or any of the Acquired Subsidiaries is a party to any contract or agreement
with ATS or any of the Acquired Subsidiaries.

 

3.7                                 Indebtedness
to/from Officers, Directors, Shareholders and Employees.

 

Neither
ATS nor any of the Acquired Subsidiaries is indebted, directly or indirectly,
to any Person who immediately prior to the Closing was a Shareholder, officer
or director of either ATS or any of the Acquired Subsidiaries in any amount
whatsoever, other than for salaries for services rendered or reimbursable business
expenses. No Shareholder, officer, director, or employee is indebted to either
ATS or any of the Acquired Subsidiaries except for 

 

31

 

advances made to
employees of either ATS or any of the Acquired Subsidiaries in the ordinary
course of business to meet reimbursable business expenses anticipated to be
incurred by such obligor.

 

3.8                                 No Adverse Change.

 

Since October 31,
2005, there has not been any material adverse change in the businesses,
operations, properties or condition, financial or otherwise of either ATS or
any of the Acquired Subsidiaries, nor has any event, condition or contingency
occurred that is reasonably likely to result in such an adverse change.

 

3.9                                 Conduct of the
Business.

 

(a)                              Cooperative
Business Arrangements. Schedule 3.9(a) of the Disclosure
Schedules sets forth, as of the Effective Date (or March 31, 2006 in the
case of items in clause (i)), the business of ATS or the Acquired Subsidiaries
that, since October 31, 2005, has been conducted through any (i) joint
venture, teaming agreement or relationship, partnership or other entity, or (ii) any
subcontract, agreement or other arrangement pursuant to which a third party
manufactures or processes products for ATS or the Acquired Subsidiaries, or
performs services for customers of ATS or the Acquired Subsidiaries. Neither
ATS nor any of the Acquired Subsidiaries nor any other party to such agreements
is in material breach of any term of any such agreement.

 

(b)                             Letters
of Intent and Non-Competition Agreements. Except as set forth in Schedule 3.9(b) of
the Disclosure Schedules, neither ATS, nor any of the Acquired Subsidiaries, is
a party to any letters of intent, memoranda of understanding, non-competition
arrangements, or confidentiality agreements that remain in effect, other than
as a provision in, or clause to, the agreements listed in Schedule 3.9(a) of
the Disclosure Schedules.

 

(c)                              Non-Disclosure
Agreements. Except as set forth in Schedule 3.9(c) of the
Disclosure Schedules, or as included as a provision in, or clause to, the
agreements listed in Schedule 3.9(a) of the Disclosure Schedules,
there are no non-disclosure agreements entered into by ATS or any of the
Acquired Subsidiaries other than non-disclosure agreements that either (i) are
on the ATS form of non-disclosure agreement attached to Schedule 3.9(c) or
(ii) otherwise contain non-disclosure provisions that (A) are
customary and in the ordinary course and (B) do not materially restrict
ATS’ or the Acquired Subsidiaries’ ability to conduct their respective
businesses in the ordinary course.

 

3.10                           Corporate and Capital
Structure.

 

(a)                              Capital
Structure. The capitalization and record owners of all of the Capital Stock
of the Companies (other than Options) are as set forth on Schedule 3.10(a) of
the Disclosure Schedules. The holders of all issued and outstanding options to
purchase Capital Stock of ATS and the Acquired Subsidiaries are as set forth on
Schedule 3.10(b) of the Disclosure Schedules (the “Options”).
The capitalization and record owners of all the Capital Stock of Schedules 3.10(a) and 3.10(b) of
the Disclosure Schedules accurately list the names of each of the Shareholders
and the Option Holders, respectively, their principal addresses, and the 

 

32

 

number of Shares owned, and Options held, by each
and in the case of Schedule 3.10(b) the exercise price of each
Option, the exercise price per share of each Option, and Net Option Payment due
each Option Holder (which when paid shall be net of applicable withholding, if
any). The capitalization and record ownership of the Capital Stock of each of
the Acquired Subsidiaries are set forth on Schedule 3.10(c) of
the Disclosure Schedules. Schedules 3.10(a), 3.10(b) and 3.10(c) shall
be updated as of immediately prior to Closing to reflect the exercise,
termination or cancellation of any Options and the repurchase of any shares of
ATS common stock by ATS.

 

(b)                             All
Capital Stock of ATS and the Acquired Subsidiaries previously issued and now
cancelled was duly authorized and issued in compliance with the applicable
Virginia law, the Securities Act of 1933, as amended, and any applicable state “Blue
Sky” laws or exemptions therefrom and canceled in compliance with applicable
Virginia law. All outstanding Capital Stock of ATS and the Acquired
Subsidiaries is duly authorized has been validly issued and is fully paid and
non-assessable, owned beneficially and of record by the Shareholders or ATS as
the case may be, free and clear of any Lien, and was issued in compliance
with the Securities Act of 1933, as amended, and any applicable state “Blue Sky”
laws or exemptions therefrom and cancelled in compliance with applicable
Virginia law. ATS has good and valid title to all of the issued and outstanding
shares of Capital Stock of the Acquired Subsidiaries registered in its name, in
each case free and clear of any Lien. Except as set forth on Schedule 3.10(a) of
the Disclosure Schedules, the holders of ATS’ Capital Stock have no preemptive
rights with respect to securities of ATS. None of the holders of ATS’ Capital
Stock has granted any proxy, or entered into any voting trust, voting agreement
or similar arrangement, with respect to his or her Shares. Except for the
Options or as otherwise set forth on Schedules 3.10(a), 3.10(b) or 3.10(c) of
the Disclosure Schedules, neither ATS, nor any of the Acquired Subsidiaries (i) has
any outstanding securities convertible into or exchangeable or exercisable for
any shares of their Capital Stock or (ii) has outstanding any rights to
subscribe for or to purchase, or any agreements providing for the issuance
(contingent or otherwise), of, or any calls against, commitments by or claims
against it of any character relating to, any shares of its Capital Stock or any
securities convertible into or exchangeable or exercisable for any shares of
its Capital Stock.

 

3.11                           Title to Shares.

 

(a)                                     Each of the Shareholders severally and not
jointly represents and warrants to FSAC that (i) such Shareholder owns the
Shares of record and beneficially in the Share amounts set forth on Schedule 3.10(a),
free and clear of any Liens, and that (ii) upon completion of the Closing,
FSAC will own all of such Shares free and clear of any Liens.

 

(b)                                    Upon completion of the Closing (i) FSAC
will own all of the issued and outstanding Capital Stock of ATS, free and clear
of any Liens, (ii) there will be no Options outstanding, and (iii) ATS
will own all of the issued and outstanding Capital Stock of the Acquired
Subsidiaries as set forth in Section 3.10(c) of the Disclosure
Schedules, free and clear of any Liens.

 

33

 

3.12                           Charter, Bylaws and
Corporate Records.

 

Copies
of the minute books and stock record books of ATS and the Acquired Subsidiaries
(i) have been provided or made available to FSAC prior to the execution of
this Agreement, and (ii) are complete and correct in all material respects.
Such minute books contain a true and complete record of all actions taken at
all meetings and by all written consents in lieu of meetings of the directors,
stockholders and committees of the boards of directors of the ATS and the
Acquired Subsidiaries from their respective dates of incorporation through the
date hereof. ATS and the Acquired Subsidiaries have, prior to the execution of
this Agreement, made available to FSAC true and complete copies of the
certificate or articles of incorporation and bylaws (or similar organizational
documents) of ATS and the Acquired Subsidiaries, as amended through the date
hereof. Neither ATS, nor any of the Acquired Subsidiaries are in violation of
any provisions of their respective certificates or articles of incorporation or
bylaws.

 

3.13                           Assets – In General.

 

Except
as set forth on Schedule 3.13 of the Disclosure Schedules, the assets and
rights of ATS and the Acquired Subsidiaries include (a) all of the assets
and rights of ATS and the Acquired Subsidiaries that were used in the conduct
of their businesses as of October 31, 2005, subject to such changes as
have occurred in the ordinary course of business since October 31, 2005,
and (b) all assets reflected in the October 2005 Financial
Statements, subject to such changes as have occurred in the ordinary course of
business since October 31, 2005. Except as set forth on Schedule 3.13
of the Disclosure Schedules, ATS and each of the Acquired Subsidiaries, has
good and marketable title to all of their respective assets, free and clear of
any Lien. Except as set forth on Schedule 3.13 of the Disclosure
Schedules, all assets necessary for the conduct of the business of ATS and the
Acquired Subsidiaries in accordance with past practice are (i) in good
operating condition and repair, ordinary wear and tear excepted, (ii) not
in need of maintenance or repair, except for ordinary routine maintenance or
repairs that are not material in nature or cost, and (iii) adequate and
sufficient for the continuing conduct of the businesses of ATS and the Acquired
Subsidiaries as conducted prior to the date hereof.

 

3.14                           Real Property Interests.

 

Except
as set forth on Schedule 3.14 of the Disclosure Schedules, neither ATS nor
any of the Acquired Subsidiaries now owns, or has ever owned, any real property.
Schedule 3.14 of the Disclosure Schedules sets forth a list and summary
description of all leases, subleases, or other occupancies used by ATS or any
of the Acquired Subsidiaries or to which any of them is a party (the “Real
Property Interests”). Except as set forth on Schedule 3.14 of the
Disclosure Schedules, each of the Real Property Interests listed and described
on Schedule 3.14 of the Disclosure Schedules is in full force and effect,
and there is no default by ATS or any of the Acquired Subsidiaries under any
such Real Property Interests.

 

3.15                           Personal Property.

 

(a)                              Set
forth on Schedule 3.15(a) of the Disclosure Schedules is a list of
all material equipment, machinery, motor vehicles, and other material tangible
personal property owned or leased by ATS and the Acquired Subsidiaries (the “Personal
Property”) as of the 

 

34

 

Effective
Date. ATS and each of the Acquired Subsidiaries has good title to all of their
respective Personal Property, free and clear of any Lien.

 

(b)                             Schedule 3.15(b) of
the Disclosure Schedules is a true and correct list of all of the Uniform Commercial
Code Financing Statements filed and in force in the indicated jurisdictions
with respect to ATS and the Acquired Subsidiaries (the “Financing Statements”).
Except for those Financing Statements indicated on Schedule 3.15(b) that
are with respect to Indebtedness that shall be repaid at Closing (and are to be
terminated upon the repayment of that Indebtedness) the Financing Statements
relate only to leased property. The only Financing Statements in force with
respect to ATS and the Acquired Subsidiaries relate to leased property.

 

3.16                           Intellectual Property
Rights.

 

(a)                              Schedule 3.16(a) of the Disclosure
Schedules includes a true and complete list of all Commercial Software, having
a suggested retail value in excess of $5,000 per copy, used by or in connection
with the businesses of ATS and each of the Acquired Subsidiaries as of the
Effective Date. Schedule 3.16(a) of the Disclosure Schedules also
includes a true and complete list of (i) all registered or issued
Copyrights, Patents and Trademarks of ATS and the Acquired Subsidiaries (other
than those comprising or reflected in Commercial Software) directed to works of
authorship, inventions, or marks used by or in connection with the businesses
of ATS and each of the Acquired Subsidiaries and (ii) all pending
applications for Copyrights, Patents and Trademarks filed by or on behalf of
ATS or the Acquired Subsidiaries and used by or in connection with the
businesses of ATS or the Acquired Subsidiaries as presently conducted. None of
such rights is or has been the subject of an opposition proceeding or held
unenforceable. Each of the aforesaid Intellectual Property Rights (other than
those comprising or reflected in Commercial Software) is valid, subsisting and
enforceable. Each of the registered or issued Intellectual Property Rights
(other than those comprising or reflected in Commercial Software) is assigned
to ATS or an Acquired Subsidiary, as appropriate, and such assignments have
been duly recorded with the appropriate office or assignment branch to reflect
such ownership.

 

(b)                             Except
as set forth on Schedule 3.16(b) of the Disclosure Schedules, the
business of ATS and the Acquired Subsidiaries as presently conducted does not
require or use any Intellectual Property Rights not owned by or licensed to ATS
or the Acquired Subsidiaries. ATS and the Acquired Subsidiaries are the owners
or have the right to use the Intellectual Property Rights listed on Schedule 3.16(a) of
the Disclosure Schedules without making any payment to others or granting
rights to others in exchange therefor, except as set forth on Schedule 3.16(b) of
the Disclosure Schedules.

 

(c)                              Except
as set forth on Schedule 3.16(c) of the Disclosure Schedules, (i) no
Person (other than ATS or the Acquired Subsidiaries) has any right to use any
Intellectual Property Rights owned by ATS or the Acquired Subsidiaries and (ii) no
shareholder, director, officer or employee of, or Consultant to, ATS or the
Acquired Subsidiaries has any right to use, other than in connection with the
business activities of ATS or the Acquired Subsidiaries as presently conducted,
any of the Intellectual Property or Intellectual Property Rights.

 

35

 

(d)                             The
operation of (i) the business of ATS and each of the Acquired Subsidiaries
in the normal course of business prior to the Effective Date does not, to the
Knowledge of ATS, infringe, and (ii) the Discontinued Business Line and
Discontinued Products prior to the Effective Date did not infringe, in any
respect upon the Intellectual Property Rights of any Person, and no Person who
does not have the right to use the Intellectual Property Rights has claimed or
asserted the right to use any Intellectual Property Rights or to deny the right
of ATS or any of the Acquired Subsidiaries the right to use same. Except as set
forth in Schedule 3.16(d) of the Disclosure Schedules, no proceeding
alleging infringement of the Intellectual Property Rights of any Person is
pending or, to the Knowledge of ATS, threatened against ATS or any of the
Acquired Subsidiaries.

 

(e)                              With
respect to each Trade Secret of ATS or of an Acquired Subsidiary, the
documentation describing such Trade Secret is current, accurate and in
sufficient detail and content to identify and explain it and allow its full and
proper use without reliance on the knowledge or memory of any individual. ATS
and the Acquired Subsidiaries have taken commercially reasonable precautions to
protect the secrecy, confidentiality, and value of their respective Trade
Secrets. To the Knowledge of ATS, such Trade Secrets are not part of the
public knowledge or literature, and have not been used, divulged, or
appropriated either for the benefit of any Person (other than ATS and the
Acquired Subsidiaries) or to the detriment of ATS or the Acquired Subsidiaries.

 

(f)                                Schedule 3.16(f) of
the Disclosure Schedules includes a true and complete list of any rights (e.g. unlimited, limited,
restrictive, government purpose license rights, and march-in) that any
Governmental Authority has as of the Effective Date in any copyrights, patents,
trademarks, Technology, or Software (other than Commercial Software) that ATS
or any of the Acquired Subsidiaries use in their respective businesses. Except as set forth in Schedule 3.16(f) of
the Disclosure Schedules, neither ATS
nor any of the Acquired Subsidiaries has developed any item, component, process
or software as a requirement of any Government Contract, or for which any
Governmental Authority paid some or all of the cost of development.

 

3.17                           Scheduled Contracts and
Proposals.

 

(a)                              Scheduled
Contracts. Schedule 3.17(a) of the Disclosure Schedules is a true
and complete description of all “Scheduled Contracts” (as hereinafter defined)
to which either ATS or an Acquired Subsidiary is a party, by which it is bound,
or which otherwise pertain to the businesses of ATS and the Acquired
Subsidiaries, in each case as of the Effective Date. For the purposes of this Section 3.17(a),
the term “Scheduled Contracts” shall mean the following written or oral
contracts, agreements, indentures, instruments, commitments and amendments
thereof with suppliers, customers, producers, consumers, lenders of ATS and the
Acquired Subsidiaries and other third parties that are currently in effect but
excluding any agreement, contract or other document listed or required to be
listed in any of Sections 3.18(b) through (f) of the Disclosure
Schedules:

 

(i)                                         loan
and credit agreements, revolving credit agreements, security agreements,
guarantees, notes, agreements evidencing any lien, conditional sales
agreements, factoring agreements, leasing agreements, sale and leaseback and
synthetic lease agreements, or title retention agreements;

 

36

 

(ii)                                      hedging
and similar agreements;

 

(iii)                                   sales
orders and other contracts and commitments for the future sale by ATS or the
Acquired Subsidiaries of goods, materials, supplies, services or equipment
(other than Government Contracts) providing for annual payments greater than
$25,000;

 

(iv)                                  purchase
orders and other contracts and commitments providing for annual payments
greater than $25,000 for the future purchase of materials, supplies, services
or equipment by ATS or any of the Acquired Subsidiaries in excess of the
requirements for normal operating inventories or for business now booked;

 

(v)                                     agreements
(other than shrink wrap licenses) relating to Intellectual Property Rights
listed on Schedule 3.16(a) of the Disclosure Schedules;

 

(vi)                                  contracts,
agreements, indentures, instruments or commitments by and between ATS or any of
the Acquired Subsidiaries and Persons with whom ATS or any of the Acquired
Subsidiaries is not dealing at arm’s length;

 

(vii)                               agreements
listed on Schedule 3.9(a) of the Disclosure Schedules;

 

(viii)                            franchise,
distribution, license or consignment contracts or agreements;

 

(ix)                                    sales,
agency or advertising contracts, agreements, or commitments providing for
annual payments greater than $25,000;

 

(x)                                       leases
under which ATS or any Acquired Subsidiary is the lessor or lessee other than
operating leases that require future payments by ATS or any Acquired Subsidiary
of less than $25,000 per annum;

 

(xi)                                    management
or service contracts or agreements, and contracts (other than agreements with
Consultants and agreements with independent contractors and sub-contractors)
and commitments providing for annual payments greater than $25,000;

 

(xii)                                 contracts
or agreements with Consultants to the extent not otherwise disclosed on Schedule 3.26(e) of
the Disclosure Schedules;

 

(xiii)                              agreements
of any kind with any Affiliate of ATS or any of the Acquired Subsidiaries;

 

(xiv)                             agreements
of any kind relating to the business of ATS or any of the Acquired Subsidiaries
to which employees of ATS or any Acquired Subsidiary, or entities controlled by
them, are parties; and

 

(xv)                                discount
policies and practices, if any.

 

(b)                             Status
of Scheduled Contracts. Except as otherwise disclosed on Schedule 3.17(b) of
the Disclosure Schedules, as of the Effective Date, (x) each of the Scheduled 

 

37

 

Contracts
is in full force and effect; (y) a true and complete copy of each written
Scheduled Contract (and all amendments thereto) and a true and accurate summary
of all provisions of each oral Scheduled Contract has been delivered or made
available to FSAC; and (z) there are no oral modifications or amendments to any
of the Scheduled Contracts. In addition:

 

(i)                                         All
of the Scheduled Contracts have been legally awarded and are binding on the
parties thereto, and ATS or the applicable Acquired Subsidiary, as the case may be,
is in material compliance with all terms and conditions in such Scheduled
Contracts;

 

(ii)                                      Neither
ATS nor any of the Acquired Subsidiaries has received any written notice of
deficient performance or administrative deficiencies relating to any Scheduled
Contract;

 

(iii)                                   Neither
ATS nor any of the Acquired Subsidiaries has received any notice of any stop
work orders, terminations, cure notices, show cause notices or notices of
default or breach under any of the Scheduled Contracts, nor, to the Knowledge
of ATS, has any such action been threatened or asserted;

 

(iv)                                  Each
Scheduled Contract was entered into in the ordinary course of business and,
based upon assumptions that ATS’ or the applicable Acquired Subsidiaries’
management believes to be reasonable and subject to such assumptions being
fulfilled, should be capable of being performed in accordance with its terms
and conditions without a loss. There is no Scheduled Contract for which the
most recent estimated total costs of completing, including any unexercised
options, as estimated in good faith by ATS or the applicable Acquired
Subsidiaries, indicates that such Scheduled Contract will be completed at a
loss;

 

(v)                                     There
are no Scheduled Contracts for the provision of goods or services by ATS or any
of the Acquired Subsidiaries that include a liquidated damages clause or
unlimited liability by ATS or any of the Acquired Subsidiaries, or liability
for consequential damages;

 

(vi)                                  There
are no Scheduled Contracts for the provision of goods or services by ATS or any
of the Acquired Subsidiaries that require ATS or the applicable Acquired
Subsidiaries to post a surety, performance or other bond or to be an account
party to a letter of credit or bank guarantee;

 

(vii)                               There
are no written claims of any type, or requests for equitable adjustments
outstanding or, to the Knowledge of ATS threatened under any Scheduled
Contracts in process and no money presently due to ATS or to any Acquired
Subsidiary on any Scheduled Contract has been withheld or set off or subject to
attempts to withhold or setoff; and

 

(viii)                            No
party to a Scheduled Contract has notified either ATS, or any of the Acquired
Subsidiaries that ATS or any of the Acquired Subsidiaries has breached or violated
any Law or any certification, representation, clause, provision or requirement
of any Scheduled Contract.

 

38

 

(c)                              Proposals.
Schedule 3.17(c) of the Disclosure Schedules sets forth a true and
accurate summary of all bids, proposals, offers, or quotations (other than a “Bid”
as defined in Section 3.18(a)) made by ATS or any of the Acquired
Subsidiaries that were outstanding as of the date of this Agreement
(collectively the “Proposals”), true and complete copies of which have
been made available to FSAC. Schedule 3.17(c) of the Disclosure
Schedules identifies each Proposal by the party to whom such bid, proposal, or
quotation was made, the subject matter of such bid, proposal, or quotation and
the proposed price. Except as set forth on Schedule 3.17(c) of the
Disclosure Schedules, none of the Proposals requires ATS or the applicable
Acquired Subsidiaries to post a surety, performance or other bond or to be an
account party to a letter of credit or bank guarantee.

 

3.18                           Government Contracting.

 

(a)                                  Definitions.
The following capitalized terms, when used in this Section 3.18, shall
have the respective meanings set forth below:

 

(i)                                     “Active”,
whether or not capitalized, when used to modify any Government Contract,
Government Subcontract or Subcontract, means that final payment has not been
made on such Government Contract, Government Subcontract or Subcontract, and
when used to modify any Teaming Agreement, “active” means that such Teaming
Agreement has not terminated or expired.

 

(ii)                                  “ATS
Subcontract” means any subcontract, basic ordering agreement, letter
subcontract, purchase order, task order, delivery order, consulting agreement
or other written agreement issued by ATS or entered into between ATS and any Person
in support of ATS’ performance of a Government Contract or Government
Subcontract.

 

(iii)                               “Bid” means any
bid, proposal, offer or quotation made by ATS or by a contractor team or joint
venture, in which ATS is participating, that, if accepted, would result in the
award of a Government Contract or a Government Subcontract.

 

(iv)                              “Government
Contract” means any prime contract, multiple award schedule contract,
basic ordering agreement, letter contract, and otherwise to include any
purchase order, task order or delivery order issued thereunder or other written
agreement between ATS and either the U.S. Government or a State Government.

 

(v)                                 “Government
Subcontract” means any subcontract issued to ATS by any prime contractor to
either the U.S. Government or a State Government or any subcontractor with
respect to a Government Contract, including any basic ordering agreement,
letter subcontract, and otherwise any purchase order, task order or delivery
order, or other written agreement between ATS.

 

(vi)                              “State
Government” means any state, territory or possession of the United States
or any department or agency of any of the above with statewide jurisdiction and
responsibility.

 

39

 

(vii)                           “Teaming Agreement”
has the same meaning as the term, “Contractor team arrangement,” as defined in
Federal Acquisition Regulation (“FAR”) 9.601.

 

(viii)                        “U.S. Government” means
the United States Government or any department, agency or instrumentality
thereof.

 

(b)                                 Government
Contracts and Subcontracts. Schedule 3.18(b) of the Disclosure
Schedules separately lists and identifies, in each case as of the Effective
Date:

 

(i)                                     Each
active Government Contract and Government Subcontract, identified by contract
number, customer and date of award (true and complete copies of which,
including all modifications and amendments thereto, have been provided to
FSAC);

 

(ii)                                  Each
active Government Contract and Government Subcontract that was negotiated (or
modification thereto was negotiated) based on cost and pricing data that ATS
certified as being current, complete and accurate pursuant to the Truth in
Negotiations Act (10 U.S.C. § 2306a; 41 U.S.C. § 256b).

 

(c)                                  Bids.
Schedule 3.18(c) of the Disclosure Schedules separately lists and
identifies as of March 31, 2006 each outstanding Bid, identified by the
Person to whom such Bid was made, the date submitted, the subject matter of
such Bid, and, to the Knowledge of ATS, the anticipated award date and whether
any such Bid is dependent, in whole or in part, on the “small business” or
other status of ATS under Applicable Law (true and complete copies of which,
including all modifications and amendments thereto, have been provided to or
otherwise made available to FSAC).

 

(d)                                 Teaming
Agreements. Schedule 3.18(d) of the Disclosure Schedules
separately lists and identifies each active Teaming Agreement as of March 31,
2006 entered into since October 31, 2005 to which ATS is a party (true and
complete copies of which, including all modifications and amendments thereto,
have been provided to or otherwise made available FSAC).

 

(e)                                  ATS
Subcontracts. Schedule 3.18(e) of the Disclosure Schedules
separately lists and identifies each active ATS Subcontract as of the Effective
Date (true and complete copies of which, including all modifications and
amendments thereto, have been provided to or otherwise made available to FSAC).

 

(f)                                    Marketing
Agreements. Schedule 3.18(f) of the Disclosure Schedules
separately lists and identifies as of the Effective Date each sales representation,
consulting and other agreement regarding marketing and selling ATS’ products
and services to the U.S. Government, any State Government or any foreign
government (or department, agency or instrumentality thereof), to which ATS is
(or has been at any time since October 31, 2003) a party (true and
complete copies of which, including all modifications and amendments thereto,
have been provided to or otherwise made available to FSAC).

 

(g)                                 Status.
Except as set forth on Schedule 3.18(g) of the Disclosure Schedules,
as of the Effective Date:

 

40

 

(i)                                     To
the Knowledge of ATS, each active Government Contract, Government Subcontract
and ATS Subcontract is in full force and effect, has been legally awarded and
is binding on ATS and the other party thereto.

 

(ii)                                  To
the Knowledge of ATS, each active Teaming Agreement is in full force and effect
and is binding on ATS and the other party thereto and no active Teaming
Agreement is subject to any oral modifications or amendments.

 

(iii)                               ATS has substantially
complied with all material terms and conditions of each active Government
Contract, Government Subcontract, ATS Subcontract and Teaming Agreement,
including all clauses, provisions and requirements incorporated therein
expressly, by reference or by operation of Applicable Law.

 

(iv)                              All
representations and certifications executed, acknowledged or set forth in or
pertaining to any Bid submitted by ATS or to any Government Contract or
Government Subcontract awarded to ATS, in each case since October 31,
2003, were current, accurate and complete in all material respects as of their
respective effective dates, and ATS has complied in all material respects with
all such representations and certifications.

 

(v)                                 Neither
the U.S. Government, any State Government nor any prime contractor,
subcontractor or other Person has notified ATS that ATS has breached or
violated any Applicable Law or any certification or representation pertaining
to any Bid, Government Contract or Government Subcontract.

 

(vi)                              To
the Knowledge of ATS, no active Government Contract was awarded to ATS pursuant
to the Small Business Innovative Research (“SBIR”) program or any
set-aside program (small business, small disadvantaged business, 8(a), woman
owned business, etc.) or as a result of ATS’ “small business” or other status
under Applicable Law.

 

(vii)                           No Government Contract or
Government Subcontract (or any modification thereto) with a contract value in
excess of $100,000 and on which final payment was received after October 31,
2003 was negotiated by ATS based on certified cost and pricing data that was
not current, complete and accurate at the time the certification was made as
required by the Truth in Negotiations Act (10 U.S.C. § 2306a; 41 U.S.C. § 256b).

 

(viii)                        [Intentionally Omitted]

 

(ix)                                No
active Government Contract or Government Subcontract or outstanding Bid
includes a liquidated damages clause or any requirement to post a surety,
performance or other bond or to be an account party to a letter of credit or
bank guarantee.

 

(x)                                   The
cost accounting practices that ATS is using (and has used since October 31,
2003) to estimate and record costs in connection with the submission of Bids
and performance of Government Contracts and Government Subcontracts are (and
have been) in substantial compliance with Applicable Law, including but not
limited to, the FAR Cost Principles (48 C.F.R. Part 31) and Cost
Accounting Standards (48 C.F.R. Chap. 99), and have been properly disclosed to
the U.S. Government (if required to be disclosed by Applicable Law).

 

41

 

(xi)                                To
the Knowledge of ATS, neither ATS, nor any of its directors, officers or
employees is (or has been at any time since October 31, 2003) suspended or
debarred from doing business with the U.S. Government or any State Government,
or is (or has been at any time since November 1, 2003) deemed
nonresponsible or ineligible for U.S. Government or State Government
contracting; and to the Knowledge of ATS, there are no circumstances that would
warrant in the future the institution of suspension or debarment proceedings,
criminal or civil fraud or other criminal or civil proceedings or a
determination of nonresponsibility or ineligibility against ATS or any of its
directors, officers or employees.

 

(xii)                             Since October 31,
2003, no Government Contract or Government Subcontract has been terminated for
convenience or default, no stop work order, cure notice, show cause notice or
other notice threatening termination or alleging noncompliance with any
material term has been issued to ATS with respect to any Government Contract or
Government Subcontract, and to the Knowledge of ATS, no event, condition or
omission has occurred or exists that would constitute grounds for any such
action with respect to any active Government Contract or Government
Subcontract.

 

(xiii)                          No money presently due to ATS
on any active Government Contract or Government Subcontract has been, or to the
Knowledge of ATS threatened or likely to be, withheld or set off or subject to
attempts to withhold or setoff.

 

(xiv)                         ATS is not performing “at risk”
under any anticipated Government Contract or Government Subcontract or any
anticipated option exercise or modification thereof prior to award, option exercise
or modification, or has made any expenditures or incurred costs or obligations
in excess of any applicable limitation of government liability, limitation of
cost, limitation of funds or other similar clause(s) limiting the U.S.
Government’s liability on any active Government Contract or Government
Subcontract.

 

(xv)                            ATS
and its respective employees hold such security clearances as are required to
perform Government Contracts and Government Subcontracts of the type
performed prior to the date of this Agreement by ATS; to the Knowledge of ATS,
there are no facts or circumstances that could reasonably be expected to result
in the suspension or termination of such clearances or that could reasonably be
expected to render ATS ineligible for such security clearances in the future;
and ATS has complied in all respects with all security measures required by the
Government Contracts, Government Subcontracts or Applicable Law.

 

(xvi)                         Each active Government
Contract and Government Subcontract was entered into in the ordinary course of
business and, based upon assumptions that ATS’ management believes to be
reasonable and subject to such assumptions being fulfilled, should be capable
of being performed in accordance with its terms and conditions without a loss. There
is no active Government Contract or Government Subcontract, for which the most
recent estimated total costs of completing, including any unexercised options,
as estimated in good faith by ATS, indicates that such Government Contract or
Government Subcontract will be completed at a loss.

 

(xvii)                      As estimated in good faith by ATS
(and based upon assumptions that ATS’ management believes to be reasonable and
subject to such assumptions being fulfilled), 

 

42

 

each outstanding Bid can be performed in accordance with its terms and
conditions without a loss.

 

(h)                                 Investigations.

 

(i)                                     To
the Knowledge of ATS, neither ATS nor any of its directors, officers or
employees or any of its agents or consultants is (or has been since October 31,
2003) under administrative, civil (including, but not limited to, claims made
under the False Claims Act, 18 U.S.C.§ 287) or criminal investigation,
indictment or information, audit or internal investigation with respect to any
alleged irregularity, misstatement, act or omission arising under or relating
to any Government Contract or Government Subcontract;

 

(ii)                                  ATS
has not made a voluntary disclosure to the U.S. Government or any State
Government with respect to any alleged irregularity, misstatement or omission
arising under or relating to a Government Contract or Government Subcontract;
and

 

(iii)                               There is no
irregularity, misstatement, act or omission arising under or relating to any
Government Contract or Government Subcontract that has led or could reasonably
be expected to lead, either before or after the Closing Date, to any of the
consequences set forth in (i)-(ii) above, or to any other damage, penalty
assessment, recoupment of payment, or disallowance of cost.

 

(i)                                     Audits.

 

(i)                                  Schedule 3.18(i) of
the Disclosure Schedules lists and identifies as of the Effective Date each
audit report, including without limitation reports issued by the Defense
Contract Audit Agency and any inspector general, and each notice of cost
disallowance received by ATS since January 1, 2000 relating to any Bid,
Government Contract or Government Subcontract (true and complete copies of
which have been provided to FSAC).

 

(ii)                                  Since
October 31, 2003, no cost in excess of $25,000 or group, type or class of
cost in excess of $50,000 in the aggregate and which was incurred or invoiced
by ATS on any active Government Contract or Government Subcontract has been
disallowed or is otherwise the subject of a formal dispute (excluding requests
for clarification or back-up documentation, or correction of good faith invoice
errors).

 

(iii)                               ATS has not incurred any
material costs on any active cost-reimbursable Government Contract or
Government Subcontract that are not “allowable” costs pursuant to FAR § 31.201-2
(48 CFR § 31.201-2) and any other applicable law or regulation and that
have not been properly recorded as such in ATS’ cost accounting books and
records.

 

(iv)                           The
reserves established by ATS with respect to possible adjustments to the
indirect and direct costs incurred by ATS on any active Government Contract or
Government Subcontract are reasonable and are adequate to cover any potential
adjustments resulting from audits of any such Government Contract or Government
Subcontract.

 

43

 

(j)                                     Financing
Arrangements. Except as set forth on Schedule 3.18(j) of the
Disclosure Schedules, there exist no financing arrangements (e.g., an
assignment of moneys due or to become due) with respect to any active
Government Contract or Government Subcontract.

 

(k)                                  Protests.
No outstanding Bid or active Government Contract or Government Subcontract as
of the Effective Date is subject to any protest to a procuring agency, the
United States Government Accountability Office, the United States Small
Business Administration or any other agency or court (whether ATS is the
protestor, an interested party or neither), and to the Knowledge of ATS, no
outstanding Bid or active Government Contract or Government Subcontract will
become subject to such a protest.

 

(l)                                     Claims.
Except as set forth on Schedule 3.18(l) of the Disclosure Schedules, as of
the Effective Date:

 

(i)                                     ATS
has no interest in any pending or potential claim or request for equitable
adjustment against the U.S. Government, any State Government or any prime
contractor, subcontractor or vendor arising under or relating to any Government
Contract, Government Subcontract, Bid or Teaming Agreement;

 

(ii)                                  There
are no outstanding claims against ATS, either by the U.S. Government, any State
Government or any prime contractor, subcontractor, vendor or other third party,
arising out of or relating to any Government Contract, Government Subcontract,
ATS Subcontract, Bid or Teaming Agreement, and to the Knowledge of ATS, there
are no facts that might give rise to or result in such a claim; and

 

(iii)                               There exist no disputes
between ATS and the U.S. Government, any State Government, or any prime
contractor, subcontractor, vendor or other third party, arising out of or
relating to any active Government Contract, Government Subcontract, ATS
Subcontract or Teaming Agreement or outstanding Bid, and to the Knowledge of
ATS, there are no facts that might give rise to or result in such a dispute.

 

(iv)          With
respect to any active Government Contract or Government Subcontract which
contains a cap on allowable costs, or fees, neither ATS, nor any of the
Acquired Subsidiaries has submitted an invoice for, or received payment on an
invoice containing costs in excess of the applicable cap other than invoices and
payments on invoices where the applicable cap has been waived in writing by the
applicable Governmental Authority for which a Governmental Authority could
assert a claim for reimbursement.

 

(m)                               Multiple
Award Schedules.

 

(i)                                     With
respect to each active multiple award schedule Government Contract as of
the Effective Date, ATS (1) provided to the U.S. Government all
information required by the applicable solicitation or otherwise requested by
the Government; (2) submitted information that was current, accurate, and
complete within the meaning of applicable Law and regulation; and (3) made
all required disclosures of any changes in ATS’ commercial pricelist(s),
discounts or discounting policies prior to the completion of negotiations with
the U.S. Government.

 

44

 

(ii)                                  With
respect to each active multiple award schedule Government Contract as of
the Effective Date, Schedule 3.18(m) of the Disclosure Schedules
identifies the basis of award, customer (or category of customer(s) (“COC”))
and the Government’s price or discount relationship to the identified COC as
agreed to by GSA and ATS at time of award of such multiple award schedule Government
Contract.

 

(iii)                               ATS has complied with
the notice and pricing requirements of the Price Reduction clause in each
active multiple award schedule Government Contract, and, to the Knowledge
of ATS, there are no facts or circumstances that could reasonably be expected
to result in a demand by the U.S. Government for a refund based upon ATS’
failure to comply with the Price Reductions clause.

 

(iv)                              ATS
has filed all reports related to and paid all industrial funding fees required
to be paid by ATS under any active multiple award schedule Government
Contract.

 

(v)                                 ATS
has not received notice nor otherwise has reason to believe that any active
orders issued to ATS pursuant to each active multiple award schedule Government
Contract are outside the scope of such Government Contract.

 

(n)                                 Government
Furnished Property. Schedule 3.18(n) of the Disclosure Schedules
identifies as of the Effective Date all personal property, equipment and
fixtures loaned, bailed or otherwise furnished to ATS by or on behalf of the
U.S. Government for use in the performance of an active Government Contract or
Government Subcontract (“Government-Furnished Property”) and the active
Government Contracts or Government Subcontracts to which each item of
Government-Furnished Property relates. To the Knowledge of ATS, ATS has
complied in all material respects with all of its obligations relating to the
Government-Furnished Property.

 

(o)                                 Former
Government Employees. To the Knowledge of ATS, no former “Government
Employee” (as that term is defined in 5 C.F.R. § 2617.102 (2006)) who
currently is employed by ATS in a key management position is in violation of
any applicable post-government employment conflict of interest restriction or
other prohibition in any statute or regulation solely as a result of his or her
employment in, or performance of the duties incident to, such position for ATS.

 

(p)                                 Ethics
Policy. Attached hereto at Schedule 3.18(p) of the Disclosure
Schedules is ATS’ Employee Policies and Procedures Manual regarding how its
employees are required to conduct themselves and perform work including
work under Government Contracts and Government Subcontracts. Each of ATS’
employees has been provided a copy of that manual and instructed to comply with
it. To the Knowledge of ATS, each of its employees has conducted himself or
herself in accordance with that policy.

 

(q)                                 Timekeeping.
ATS’ Employee Policies and Procedures Manual includes ATS’ policies regarding
how its employees are to record their time and complete their time cards at C
206.4. To the best of the Knowledge of ATS, each of its employees has recorded
his or her time and completed his or her time cards in accordance with C 206.4.

 

45

 

3.19                           Clients.

 

Neither
ATS nor any of the Acquired Subsidiaries has received any notice that any
supplier, producer, consumer, financial institution or other party to any
Scheduled Contract (and to the Knowledge of ATS there is no supplier, producer,
consumer, financial institution or other party to any Scheduled Contract that)
will not do business with ATS or any of the Acquired Subsidiaries on
substantially the same terms and conditions subsequent to the Closing Date as
before such date.

 

3.20                           Backlog.

 

For
informational purposes only, Schedule 3.20 of the Disclosure Schedules
sets forth the following information for each “active” (as defined in Section 3.18)
Government Contract and Government Subcontract of the Companies as of March 31,
2006 which information, to the Knowledge of ATS, is true and correct in all
material respects:

 

(a)                                     the
ATS Deltek tracking number;

 

(b)                                    the
name of the Governmental Authority or Government Contractor which has awarded
the Government Contract or Government Subcontract;

 

(c)                                     an
identification of the funding type (i.e., firm- fixed-price, time and
materials, or cost-reimbursement);

 

(d)                                    the
award date;

 

(e)                                     the
scheduled contract expiration date (assuming all options are exercised);

 

(f)                                       the
ceiling amount as awarded or as modified;

 

(g)                                    the
funded amount; and

 

(h)                                    work
billed.

 

FSAC acknowledges that
with respect to any Government Contract or Government Subcontractor listed in Schedule 3.20
of the Disclosure Schedules, the Governmental Authority or Government
Contractor which awarded such contract may, at any time, modify or terminate
such contract.

 

3.21                           Compliance with Laws.

 

ATS
and each of the Acquired Subsidiaries has been and is in compliance with each
Law that is or was applicable to it or the conduct or operation of its business
or the ownership or use of any of its assets, except where any such failure to
be in compliance with such Law would not reasonably be expected to have a
material adverse effect on ATS or any of the Acquired Subsidiaries. No event
has occurred or circumstance exists that (with or without 

 

46

 

notice or lapse of time) (a) would
constitute or result in a material violation by ATS or any of the Acquired
Subsidiaries of (or failure on the part of ATS or any of the Acquired
Subsidiaries to comply in all material respects with) any such applicable Law,
or (b) would give rise to any obligation on the part of ATS or any of
the Acquired Subsidiaries to undertake, or to bear all or any portion of the
cost of, any material remedial action of any nature under any such applicable
Law. Neither ATS nor any of the Acquired Subsidiaries has received, at any time
during the past three years, any notice or other communication (whether oral or
written) from any Governmental Authority regarding (a) any actual,
alleged, or potential violation of, or failure to comply with, any such
applicable Law, or (b) any actual, alleged, or potential obligation on the
part of ATS or any of the Acquired Subsidiaries to undertake, or to bear
all or any portion of the cost of, any remedial action of any nature under any
such applicable Law.

 

3.22                           Environmental Matters.

 

ATS
and each of the Acquired Subsidiaries has complied in all material respects
with, and is in material compliance with, all applicable Environmental Laws and
has no Environmental Liabilities.

 

3.23                           Licenses and Permits.

 

(a)                              ATS
and each of the Acquired Subsidiaries has all licenses, permits and other
authorizations from Governmental Authorities necessary for the conduct of their
respective business as conducted in the normal course of business prior to and
as of the date hereof (collectively “Permits”), except for where the
failure to obtain such Permits would not have a material adverse effect on them.
Schedule 3.23(a) of the Disclosure Schedules sets forth a list of all
Permits held by ATS and each of the Acquired Subsidiaries.

 

(b)                             Except
as set forth on Schedule 3.23(a) of the Disclosure Schedules, (i) each
of the Permits is in full force and effect, (ii) ATS and each of the
Acquired Subsidiaries is in full compliance with the terms, provisions and
conditions thereof, (iii) there are no outstanding violations, notices of
noncompliance, judgments, consent decrees, orders or judicial or administrative
actions, investigations or proceedings adversely affecting any of said Permits,
and (iv) no condition (including, without limitation, this Agreement and
the Contemplated Transactions) exists and no event has occurred that (whether
with or without notice, lapse of time or the occurrence of any other event)
would reasonably be expected to result in the suspension or revocation of any
of said Permits other than by expiration of the term set forth therein, except
in each case where such a suspension or revocation would not reasonably be
expected to have a material adverse effect on ATS or any of the Acquired
Subsidiaries.

 

3.24                           Absence of Certain
Business Practices.

 

None
of ATS or the Acquired Subsidiaries, any officer, employee or agent of ATS or
the Acquired Subsidiaries, or any other Person acting on their behalf has,
directly or indirectly, since the formation of ATS and the Acquired
Subsidiaries, given, offered, solicited or agreed to give, offer or solicit any
contribution, gift, bribe, rebate, payoff, influence payment, kickback or other
payment, regardless of form and whether in money, property or services, to
any customer, supplier, governmental employee or other Person who is or may be
in a position to help or hinder 

 

47

 

ATS or any of the
Acquired Subsidiaries in connection with the design, development, manufacture,
distribution, marketing, use, sale, acceptance, maintenance or repair of their
respective products and services (or assist ATS or any of the Acquired
Subsidiaries in connection with any actual or proposed transaction relating to
the products and services of ATS or any of the Acquired Subsidiaries) (a) that
subjected or might have subjected ATS or any of the Acquired Subsidiaries to
any damage or penalty in any civil, criminal or governmental litigation or
proceeding, (b) that, if not given in the past, might have had a material
adverse effect on the business of ATS or any of the Acquired Subsidiaries as it
relates to the products and services of ATS or any of the Acquired
Subsidiaries, (c) that, if not continued in the future, might have a
material adverse effect on ATS or any of the Acquired Subsidiaries, or subject
ATS or any of the Acquired Subsidiaries to suit or penalty in any private or
governmental litigation or proceeding, (d) for any purposes described in Section 162(c) of
the Code, or (e) for the purpose of establishing or maintaining any
concealed fund or concealed bank account.

 

3.25                           Litigation.

 

(a)                              Except
as set forth on Schedule 3.25(a) of the Disclosure Schedules, there
are no:

 

(i)                                     actions,
suits, claims, trials, written demands, investigations, arbitrations, or other
proceedings (whether or not purportedly on behalf of the businesses of ATS or
any of the Acquired Subsidiaries, but in all events including actions, suits,
claims, trials, written demands, arbitrations, proceedings and actions relating
to indemnification by ATS of any one or more of its officers or directors under
the indemnification provisions of ATS’ Articles of Incorporation or otherwise
(collectively, the “D & O Indemnification Claims”) pending or,
to the Knowledge of ATS, threatened against or with respect to ATS or any of
the Acquired Subsidiaries, or their respective properties or businesses;

 

(ii)                                  outstanding
judgments, orders, decrees, writs, injunctions, decisions, rulings or awards
against or with respect to ATS or any of the Acquired Subsidiaries, or their
respective properties or businesses; or

 

(iii)                               grounds
or basis for any D & O Indemnification Claims.

 

(b)                             Neither
ATS nor any of the Acquired Subsidiaries (nor the businesses of any of them)
are in default with respect to any judgment, order, writ, injunction, decision,
ruling, decree or award of any Governmental Authority. To the Knowledge of ATS,
except as set forth on Schedule 3.25(b) of the Disclosure Schedules,
there is no reasonable basis for a claim against ATS or any of the Acquired
Subsidiaries relating to defective design, material, or performance.

 

(c)                              Except
as otherwise described on Schedule 3.25(c)A of the Disclosure Schedules
(which description shall include a description in reasonable detail of any such
obligation for which the indemnitee has given notice of a claim or in
connection with which, to the Knowledge of ATS, there exists any facts that
would reasonably cause it to believe an indemnification claim will be made),
none of the Companies has any indemnification obligations other than
indemnification obligations made in the ordinary course of the 

 

48

 

Companies’
respective businesses (which obligations include, but are not limited to those
indemnification obligations described on Schedule 3.25(c)B of the
Disclosure Schedules.

 

3.26                           Personnel Matters.

 

(a)                              True,
accurate, and complete lists of all of the directors, officers, and employees
of ATS and each of the Acquired Subsidiaries, as of March 17, 2006
(collectively, “Personnel”) and their positions are included on Schedule 3.26(a) of
the Disclosure Schedules. True and complete information concerning the
respective salaries, wages, and other compensation paid by ATS, or the
applicable Acquired Subsidiary, as the case may be, during 2004 and 2005
as well as dates of employment, and date and amount of last salary increase, of
such Personnel has been provided previously to FSAC.

 

(b)                             All
bonuses and other compensation owed by the Companies to their respective
employees and consultants for periods prior to October 31, 2005, have been
paid in full and all compensation owed and due by the Companies to their
respective employees and consultants for periods after October 31, 2005 is
paid and current (other than bonuses and “Change in Control Payments”
(hereinafter defined)). A bonus pool (the “Bonus Pool”) for fiscal year
2006 has been established (which is shown and accrued on the Interim
Financials) from which bonuses are to be paid to certain employees of ATS if
and when such bonuses are determined by ATS’ management at the end of the ATS’
2006 fiscal year. The Companies have entered into Change in Control Retention
Agreements and Change in Control Bonus Agreements (collectively the “Change
in Control Agreements”) with certain employees and consultants as shown on Schedule 3.26(b) of
the Disclosure Schedules, under the terms of which payments (as shown on Schedule 3.26(b))
are due upon the consummation of the Contemplated Transactions (the “Change
in Control Payments”). Certain employees of the Acquired Subsidiaries are
entitled to bonuses under the Appix bonus plan as described on Schedule 3.26(b) of
the Disclosure Schedules and payments under the Appix Phantom Stock Plan as
described on Schedule 3.10(b) of the Disclosure Schedules. The
Estimated Closing Balance Sheet shall accurately reflect the reserves for the
Bonus Pool.

 

(c)                              There
are no disputes, grievances, or disciplinary actions pending, or, to the
Knowledge of ATS, threatened, by or between ATS or any of the Acquired
Subsidiaries and any Personnel.

 

(d)                             All
personnel policies and manuals of ATS and the Acquired Subsidiaries are listed
on Schedule 3.26(d) of the Disclosure Schedules, and true, accurate,
and complete copies of all such written personnel policies and manuals have
been provided to FSAC.

 

(e)                              Except
for the Employee Bonuses or as otherwise listed on Schedule 3.26(e) of
the Disclosure Schedules, neither ATS nor any of the Acquired Subsidiaries is a
party to any:

 

(i)                                         management,
employment, consulting, or other agreement with any Personnel or other person
providing for employment or payments over a period of time or for termination
or severance benefits, whether or not conditioned upon a change in control of
ATS or any of the Acquired Subsidiaries;

 

49

 

(ii)                                      bonus,
incentive, deferred compensation, severance pay, profit-sharing, stock
purchase, stock option, benefit, or similar plan, agreement, or arrangement,
whether written or unwritten;

 

(iii)                                   collective
bargaining agreement or other agreement with any labor union or other Personnel
organization (and no such agreement is currently being requested by, or is
under discussion by management with, any Personnel or others); or

 

(iv)                                  other
employment contracts, non-competition agreement, or other compensation
agreement or arrangement affecting or relating to Personnel or former Personnel
of ATS or any of the Acquired Subsidiaries, whether written or unwritten.

 

(f)                                To
the Knowledge of ATS and except as otherwise disclosed on Schedule 3.26(f) of
the Disclosure Schedules, there do not exist any facts that would give
reasonable cause to believe that there will occur a discontinuation after the
Closing Date of any currently existing employment situation of any executive
and managerial Personnel with respect to either ATS or any of the Acquired
Subsidiaries on the currently existing terms.

 

(g)                             No
officer, director, agent or employee of, or Consultant to, ATS or any of the
Acquired Subsidiaries is bound by any contract or agreement that purports to
limit the ability of such officer, director, agent, employee, or Consultant to (i) engage
in or continue in any conduct, activity, or practice relating to the business
of ATS or any of the Acquired Subsidiaries or (ii) assign to ATS or the
appropriate Acquired Subsidiary or to any other Person any rights to any
Intellectual Property or any Intellectual Property Right.

 

(h)                             Except
as set forth on Schedule 3.26(h) of the Disclosure Schedules, no
leased employee, as defined in Code Section 414(n), or independent
contractor performs service for ATS or any Acquired Subsidiary.

 

3.27                           Labor Matters.

 

(a)                              Neither
ATS nor any of the Acquired Subsidiaries is obligated by, or subject to, any
order of the National Labor Relations Board or other labor board or administration,
or any unfair labor practice decision.

 

(b)                             Neither
ATS nor any of the Acquired Subsidiaries is a party or subject to any pending
or, to the Knowledge of ATS, threatened labor or civil rights dispute,
controversy or grievance or any unfair labor practice proceeding with respect
to claims of, or obligations of, any employee or group of employees. Neither
ATS nor any of the Acquired Subsidiaries has received any notice that any labor
representation request is pending or is threatened with respect to any
employees of ATS or any of the Acquired Subsidiaries.

 

(c)                              ATS
and each of the Acquired Subsidiaries is in compliance in all material respects
with all applicable Laws and affirmative action programs respecting employment
and employment practices, terms and conditions of employment and wages and
hours, including but not limited to Executive Order 11246, as amended, the
Workers’ Adjustment Retraining 

 

50

 

Notification
Act and the Service Contract Act. This Section 3.27 does not extend to “ERISA”
as defined in Section 3.28.

 

(d)                             No
present or former employee of ATS or any of the Acquired Subsidiaries has made,
or, to the Knowledge of ATS, threatened, any claim against ATS or any of the
Acquired Subsidiaries (whether under Federal or state law, pursuant to any
employment agreement, or otherwise) on account of, or for: (i) overtime
pay, other than for the current payroll period; (ii) wages or salary
(excluding bonuses and amounts accruing under any pension or profit-sharing
plan, including but not limited to any Pension Plan or Welfare Plan (as such
terms are defined in Section 3.28)) for a period other than the current
payroll period; (iii) vacation, time off or pay in lieu of vacation or
time off, other than vacation or time off (or pay in lieu thereof) earned in
respect of the current or past fiscal year or accrued on the most recent
balance sheet for ATS and the Acquired Subsidiaries, or (iv) payment under
any applicable workers’ compensation law.

 

3.28                           ERISA.

 

(a)                              Capitalized
terms used in this Section 3.28 that are not otherwise defined in this
Agreement shall have the meanings set forth below:

 

(i)                                         “Benefit
Arrangement” means any compensation or employment program (other than a
Pension Plan or Welfare Plan), including but not limited to, any fringe
benefit, incentive compensation, bonus, severance, deferred compensation and
supplemental executive compensation plan that ATS or any ERISA Affiliate
maintains or to which ATS or any ERISA Affiliate contributes or has any
obligation to contribute, or with respect to which ATS or any ERISA Affiliate
has any liability.

 

(ii)                                      “ERISA”
means the Employee Retirement Income Security Act of 1974, as the same may be
amended from time to time, as well as any rules and regulations
promulgated thereunder by any Governmental Authority, as from time to time in
effect.

 

(iii)                                   “ERISA
Affiliate” means a corporation that is a member of a controlled group of
corporations with ATS within the meaning of Code Section 414(b), a trade
or business that is under common control with ATS within the meaning of Code Section 414(c),
or a member of an affiliated service group with ATS within the meaning of Code
Sections 414(m) or (o), including any such Entity that was an ERISA Affiliate
at any time.

 

(iv)                                  “Pension
Plan” means any employee pension benefit plan (as defined in ERISA Section 3(2))
ATS or an ERISA Affiliate maintains or to which ATS or an ERISA Affiliate
contributes or has any obligation to contribute, or with respect to which ATS
or an ERISA Affiliate has any liability.

 

(v)                                     “Plan”
means any Pension Plan, any Welfare Plan, and any Benefit Arrangement.

 

(vi)                                  “Welfare
Plan” means any employee welfare benefit plan (as defined in ERISA Section 3(1))
that ATS or an ERISA Affiliate maintains or to which ATS or an

 

51

 

ERISA Affiliate
contributes or has any obligation to contribute, or with respect to which ATS
or an ERISA Affiliate has any liability.

 

(b)                             Schedule 3.28(b) of
the Disclosure Schedules sets forth a list of: (i) each Pension Plan; (ii) each
Welfare Plan; and (iii) each Benefit Arrangement.

 

(c)                              ATS
and the Acquired Subsidiaries have delivered to FSAC true, accurate and
complete copies of (i) the documents comprising each Plan (or, with
respect to any Plan that is unwritten, a detailed written description of
eligibility, participation, benefits, funding arrangements, assets and any
other matters that relate to the obligations of ATS or any ERISA Affiliate); (ii) all
trust agreements, insurance contracts or any other funding instruments related
to the Plans; (iii) all rulings, determination letters, no-action letters
or advisory opinions from the IRS, the U.S. Department of Labor, the PBGC or
any other Governmental Authority that pertain to each Plan and any open
requests therefor; (iv) the most recent actuarial and financial reports
(audited and/or unaudited) and the annual reports filed with any Governmental
Authority with respect to the Plans during the most recent three years; and (v) all
summary plan descriptions, summaries of material modifications, and employee
handbooks regarding the Plans.

 

(d)                             Neither
ATS nor any ERISA Affiliate has, at any time within six (6) years prior to
the Effective Date, sponsored, maintained or contributed to a Pension Plan
subject to Title IV of ERISA, a multiemployer plan (as defined in ERISA Section 3(37)),
or a voluntary employees’ beneficiary association, as defined in Code Section 501(c)(9) (a
“VEBA”).

 

(e)                              Full
payment has been made of all amounts that are required under the terms of each
Plan to be paid as contributions with respect to all periods prior to the
Effective Date and any such amounts that are not required to be so paid under
any Welfare Plan, including any vacation pay plan, have been accrued on the
Financial Statements.

 

(f)                                No
prohibited transaction within the meaning of ERISA Section 406 or Code Section 4975
has occurred with respect to any Pension Plan as of the date of this Agreement,
other than a transaction to which a statutory or administrative exemption has
been granted.

 

(g)                             The form of
each Pension Plan and Welfare Plan is in compliance in all material respects
with the applicable terms of ERISA, the Code, and any other applicable laws,
including, but not limited to, the Americans with Disabilities Act of 1990, the
Family Medical Leave Act of 1993, the Health Insurance Portability and
Accountability Act of 1996, the Uruguay Round Agreements Act, the Small
Business Job Protection Act of 1996, the Uniformed Services Employment and
Reemployment Rights Act of 1994, the Taxpayer Relief Act of 1997, the Internal
Revenue Service Restructuring and Reform Act of 1998, the Community
Renewal Tax Relief Act of 2000, and the Economic Growth and Tax Relief
Reconciliation Act of 2001, and except as set forth on Schedule 3.28(g) of
the Disclosure Schedules, such plans have been operated in compliance in all
material respects with such laws and the written Plan documents. Neither ATS
nor any of the Acquired Subsidiaries, nor, to the Knowledge of ATS, any
fiduciary of a Pension Plan has violated the requirements of Section 404
of ERISA. Except as set forth on Schedule 3.28(g) of the Disclosure
Schedules, all required reports and descriptions of the Plans (including
Internal Revenue Service Form 5500 Annual Reports, Summary Annual Reports
and 

 

52

 

Summary Plan Descriptions
and Summaries of Material Modifications) have been (when required) timely filed
with the IRS, the U.S. Department of Labor or other Governmental Authority and
distributed as required, and all notices required by ERISA or the Code or any
other Laws with respect to the Pension Plans and Welfare Plans have been
appropriately given.

 

(h)                             Each
Pension Plan that is intended to be qualified under Section 401(a) of
the Code has received a favorable determination letter from the IRS, and to the
Knowledge of ATS there are no circumstances that will or could reasonably be
expected to result in revocation of any such favorable determination letter.
Each trust created under any Pension Plan has been determined to be exempt from
taxation under Section 501(a) of the Code, and, to the Knowledge of
ATS, there is no circumstance that will or could reasonably be expected to
result in a revocation of such exemption.

 

(i)                                 No
charge, complaint, action, suit, proceeding, hearing, investigation, claim or
demand with respect to a Plan or to the administration or the investment of the
assets of any Plan that ATS or any ERISA Affiliate maintains or has maintained,
or to which ATS or any ERISA Affiliate contributes or has contributed, for the
benefit of any current or former employee (other than routine claims for
benefits) is pending or, to the Knowledge of ATS, threatened that could
reasonably be expected to result in a material liability to ATS or any ERISA
Affiliate or to such Plan or a fiduciary of such Plan.

 

(j)                                 Except
as required by the Code or as otherwise set forth on Schedule 3.28(j) of
the Disclosure Schedules, the consummation of the transactions contemplated by
this Agreement will not accelerate the time of vesting or the time of payment,
or increase the amount of compensation due to any director, employee, officer,
former employee or former officer of ATS or an ERISA Affiliate.

 

(k)                              No
written or oral representations have been made to any employee, former
employee, or director of ATS or any ERISA Affiliate at any time promising or
guaranteeing any employer payment or funding for the continuation of medical,
dental, life or disability coverage for any period of time (except to the
extent of coverage required under COBRA or other applicable Law).

 

(l)                                 All
nonqualified deferred compensation plans maintained by ATS or any of the
Acquired Subsidiaries, to the extent such plans are maintained for the benefit
of individuals that are subject to United States Taxes, satisfy the requirements
of Section 409A of the Code.

 

(m)                           Schedule 3.28(m)
of the Disclosure Schedules identifies (i) all Welfare Plans that ATS or
the Acquired Subsidiaries self insure (each a “Self Insured Plan” and
collectively the “Self Insured Plans”); (ii) the administrator of
each of the Self Insured Plans, (iii) the limits for each of the Self
Insured Plans and (iv) the plan year for each of the Self Insured Plans.

 

(i)                                         Each
of the Self Insured Plans has been maintained in compliance, in all material
respects, with its terms.

 

53

 

(ii)                                      There
are no actions, suits, or claims (other than routine claims for benefits in the
ordinary course) pending or, to the Knowledge of ATS, threatened, and to the
Knowledge of ATS, there are no facts that reasonably could be expected to give
rise to any such claims.

 

(iii)                                   To
the Knowledge of ATS, there are no benefit claims that either individually or
in the aggregate are significantly greater than what ATS and the Acquired
Subsidiaries generally experienced in the past.

 

(n)                             No
act or omission has occurred, with respect to any Plan that would result in any
penalty, tax or liability of any kind imposed upon ATS under applicable Law,
and to the Knowledge of ATS, no condition exists that reasonably could be
expected to give rise to any such penalty, tax or liability.

 

3.29                           Tax Matters.

 

Except as set forth Schedule 3.29 of the
Disclosure Schedules:

 

(a)                              ATS
is not the successor by merger or consolidation to any other entity;

 

(b)                             ATS
and the Acquired Subsidiaries, and every member of an affiliated group (as
defined in Section 1504 of the Code) (and any comparable group for state,
local or foreign Tax purposes) that has included ATS or any of the Acquired
Subsidiaries (for taxable periods in which ATS or any of the Acquired
Subsidiaries was included in such group) (each such corporation, including ATS
and each of the Acquired Subsidiaries, a “Taxpayer,” and collectively,
the “Taxpayers”), have timely filed all Tax Returns required to have
been filed by them, and have paid all Taxes shown to be due on those Tax
Returns that were required to have been paid by them on or prior to the date
hereof. Each of the Tax Returns filed with respect to the Taxpayers are true,
correct and complete in all material respects;

 

(c)                              None
of such Tax Returns contains a disclosure statement with respect to ATS or any
of the Acquired Subsidiaries under Section 6662 of the Code (or any
predecessor statute) or any similar provision of state, local or foreign law;

 

(d)                             No Taxpayer
has received notice that the IRS or any other Taxing Authority has asserted
against a Taxpayer any deficiency or claim for Taxes, and no issue has been
raised by any Taxing Authority in any audit that would result in a proposed
deficiency of any Taxpayer for any period not so examined. No claim has ever
been made by a Taxing Authority with which any Taxpayer does not file Tax
Returns that such Taxpayer is or may be subject to taxation by that Taxing
Authority, nor, to the Knowledge of ATS, is there any factual basis or legal
basis for such claim;

 

(e)                              All
Tax deficiencies asserted or assessed against the Taxpayers have been paid or
finally settled with no remaining amounts owed;

 

(f)                                There
is no pending or, to the Knowledge of ATS, threatened action, audit,
proceeding, or investigation with respect to the Taxpayers
involving:  (i) the assessment or 

 

54

 

collection of Taxes, or (ii) a
claim for refund made by a Taxpayer with respect to Taxes previously paid;

 

(g)                             All
amounts that are required to be collected or withheld by a Taxpayer, have been
duly collected or withheld, and all such amounts that are required to be
remitted to any Taxing Authority have been duly remitted;

 

(h)                             Neither
ATS nor any of the Acquired Subsidiaries (i) has been included in an
affiliated group (as defined in Section 1504 of the Code) with a Person
other than ATS or an Acquired Subsidiary and (ii) has any liability for
the Taxes of any Person (other than members of ATS’ affiliated group as defined
in Section 1504 of the Code) under Treasury Regulation Section 1.1502-6
(or any similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise;

 

(i)                                 There
are no outstanding waivers of any statute of limitations with respect to the
assessment of any Tax;

 

(j)                                 Accruals
or reserves for current taxes and deferred tax liabilities as stated in the
Audited Financial Statements, and the Interim Financial Statements are all in
accordance with GAAP and fairly reflect current and deferred liabilities for
Taxes as of their respective dates;

 

(k)                              Except
for Liens for Taxes not yet due and payable, there are no Liens for Taxes due
and payable upon the assets of any Taxpayer;

 

(l)                                 No
Taxpayer has participated in, or cooperated with, an international boycott
within the meaning of Section 999 of the Code;

 

(m)                           None of
the Taxpayers has made nor become obligated to make, nor will any of the
Taxpayers, as a result of any event connected with any transaction contemplated
herein and/or any termination of employment related to such transaction, make
or become obligated to make, any “excess parachute payment,” as defined in Section 280G
of the Code (without regard to subsection (b)(4) thereof);

 

(n)                             There
are no outstanding balances of deferred gain or loss accounts related to
deferred intercompany transactions as described in Treasury Regulation Section 1.1502-13
(or predecessor regulations) or excess loss accounts described in Treasury
Regulation Sections 1.1502-32 or 1.1502-19 (or predecessor regulations) or
similar items, among any of the Taxpayers that will be recognized or otherwise
taken into account as a result of the Contemplated Transactions;

 

(o)                             There
are no outstanding requests for extensions of time within which to file returns
and reports in respect of any Taxes owed by any Taxpayers;

 

(p)                             There
are no elections, consents, or agreements as to Taxes in effect with respect to
ATS or any of the Acquired Subsidiaries that will remain in effect following
the Closing Date and that have had a material effect on the taxable income of
ATS or any of the Acquired Subsidiaries prior to the Closing Date;

 

55

 

(q)                             Neither
ATS nor any of the Acquired Subsidiaries is a party to any tax-sharing
agreement, or similar arrangement (whether express or implied), including any
terminated agreement as to which it could have any continuing liabilities;

 

(r)                                No
Taxpayer has applied for a ruling relating to Taxes from any Taxing Authority or
entered into any closing agreement with any Taxing Authority;

 

(s)                              None
of the assets of ATS or any of the Acquired Subsidiaries is or will be required
to be treated as (i) owned by another person pursuant to the safe harbor
leasing provisions of the Code or (ii) property subject to Section 168(f) or
(g) of the Code;

 

(t)                                Neither
ATS nor any of the Acquired Subsidiaries is or has ever been a “United States
real property holding corporation” within the meaning of Section 897 of
the Code;

 

(u)                             ATS
has delivered to FSAC correct and complete copies of Federal income Tax Returns
and has made available to FSAC state income Tax Returns filed on behalf of ATS
and the Acquired Subsidiaries for the three previous taxable years;

 

(v)                             No
Person has been treated as an independent contractor of ATS or any of the
Acquired Subsidiaries for Tax purposes who should have been treated as an
employee for such purposes;

 

(w)                           Neither
ATS nor any of the Acquired Subsidiaries is or has been an “S” corporation
within the meaning of Section 1361 of the Code;

 

(x)                               None
of the Capital Stock of ATS or of the Acquired Subsidiaries is subject to a “substantial
risk of forfeiture” within the meaning of Section 83 of the Code;

 

(y)                             The
Contemplated Transactions, either by themselves or in conjunction with any
other transaction that any of the Taxpayers may have entered into or
agreed to, will not give rise to any federal income tax liability under Section 355(e) of
the Code for which any of the Taxpayers may in any way be held liable;

 

(z)                               None
of the Taxpayers is a party to any “Gain Recognition Agreements” as such term
is used in the Treasury Regulations promulgated under Section 367 of the
Code;

 

(aa)                        There are
no joint ventures, partnerships, limited liability companies, or other arrangements
or contracts to which any of the Taxpayers is a party and that could be treated
as a partnership for federal income tax purposes;

 

(bb)                      None of the
Taxpayers has, nor has any of them ever had, a “permanent establishment” in any
foreign country, as such term is defined in any applicable Tax treaty or
convention between the United States and such foreign country, nor has any of
them otherwise taken steps that have exposed, or will expose, it to the taxing
jurisdiction of a foreign country; and

 

56

 

(cc)                        Neither
ATS, nor any Acquired Subsidiary has agreed, nor is required, to make any
adjustment under Section 481 of the Code by reason of a change in
accounting method, or otherwise, that will affect the liability of ATS or any
Acquired Subsidiary for Taxes for any taxable period after the Closing Date.

 

3.30                           Insurance.

 

(a)                              ATS
and the Acquired Subsidiaries maintain the types of insurance shown on Schedule 3.30(a) of
the Disclosure Schedules. A list of all claims as of the Effective Date against
such insurance since January 1, 2001 that individually exceed $5,000 in
amount and the outcomes or status of such claims is set forth on Schedule 3.30
of the Disclosure Schedules.

 

(b)                             ATS
maintains life insurance on those persons in the amounts as indicated on Schedule 3.30(b) of
the Disclosure Schedules. With respect to each of the foregoing life insurance
policies (i) ATS is the designated beneficiary and (ii) all premiums
are current as of the date hereof and there are no premiums due and unpaid as
of the date hereof.

 

3.31                           Bank Accounts.

 

Schedule 3.31
of the Disclosure Schedules sets forth (i) the name of each Person with
whom ATS or any Acquired Subsidiary maintains an account or safety deposit box,
(ii) the address where each such account or safety deposit box is
maintained, and (iii) the names of all Persons authorized to draw thereon
or to have access thereto.

 

3.32                           Powers of Attorney.

 

(a)                              Neither
ATS, nor any of the Acquired Subsidiaries has given any irrevocable power of
attorney (other than pursuant to Section 2.5 hereof or other than such
powers of attorney given in the ordinary course of business with respect to
routine matters or as may be necessary or desirable in connection with the
consummation of the Contemplated Transactions) to any Person for any purpose
whatsoever with respect to ATS or any of the Acquired Subsidiaries.

 

(b)                             Each
of the Shareholders severally and not jointly represents and warrants to FSAC
that such Shareholder has not given any irrevocable power of attorney (other
than pursuant to Section 2.5 hereof or other than such powers of attorney
given in the ordinary course of business with respect to routine matters or as may be
necessary or desirable in connection with the consummation of the Contemplated
Transactions) to any Person for any purpose whatsoever with respect to ATS or
any of the Acquired Subsidiaries.

 

3.33                           No Broker.

 

(a)                              Except
for Stifel, which was retained by ATS under a fee agreement dated July 7,
2005 (the “Stifel Agreement”), neither the Shareholders, ATS, nor any of
the Acquired Subsidiaries (or any of their respective directors, officers,
employees or agents) has employed or incurred any liability to any broker,
finder or agent for any brokerage fees, finder’s fees, commissions or other
amounts with respect to this Agreement or the Contemplated Transactions.

 

57

 

(b)                             Each
of the Shareholders severally and not jointly represents and warrants to FSAC
that such Shareholder has not employed or incurred any liability to any broker,
finder or agent for any brokerage fees, finder’s fees, commissions or other
amounts with respect to this Agreement or the Contemplated Transactions.

 

3.34                           Security Clearances.

 

To the
Knowledge of ATS, ATS and each of the Acquired Subsidiaries have the proper
procedures to conduct business of a classified nature up to the level of their
current clearances. The levels and locations of facility clearances are set
forth on Schedule 3.34 of the Disclosure Schedules. Schedule 3.34 of
the Disclosure Schedules identifies as of the Effective Date any employees
whose security clearance, to the Knowledge of ATS, has been lost or downgraded
in the last twenty-four (24) months. ATS and each of the Acquired Subsidiaries
is in compliance in all material respects with applicable agency security
requirements, as appropriate, and has in place proper procedures, practices and
records to maintain security clearances necessary to perform their current
contracts.

 

3.35                           No Unusual Transactions.

 

Except
as expressly contemplated by this Agreement, or as set forth in Schedule 3.35
of the Disclosure Schedules, since October 31, 2005, ATS and each of the
Acquired Subsidiaries has conducted its business in the ordinary course and in
a manner consistent with past practice and, without limiting the generality of
the foregoing, neither ATS, nor any of the Acquired Subsidiaries has:

 

(a)                              incurred
or discharged any secured or any unsecured liability or obligation (whether
accrued, absolute or contingent) other than liabilities and obligations
disclosed in the October 2005 Balance Sheet or the Estimated Closing
Balance Sheet and liabilities and obligations incurred since October 31,
2005 in the ordinary course of business and in a manner consistent with past
practices;

 

(b)                             waived
or cancelled any claim, account receivable or trade account involving amounts
in excess of $50,000 in the aggregate;

 

(c)                              made
any capital expenditures in excess of $50,000 in the aggregate;

 

(d)                             sold
or otherwise disposed of or lost any capital asset or used any of its assets
other than, in each case, for proper corporate purposes and in the ordinary
course of business and in a manner consistent with past practices;

 

(e)                              issued
any options to purchase any shares of its Capital Stock, or sold or otherwise
disposed of any shares of its Capital Stock or any warrants, rights, bonds,
debentures, notes or other corporate security;

 

(f)                                entered
into any transaction, contract, agreement, indenture, instrument or commitment
involving amounts in excess of $25,000 in the
aggregate other than in the ordinary course of business and in a manner
consistent with past practices or in connection with the Contemplated
Transactions;

 

58

 

(g)                             suffered
any extraordinary losses whether or not covered by insurance;

 

(h)                             modified
its charter, bylaws or capital structure;

 

(i)                                 reserved,
declared, made or paid any dividend or redeemed, retired, repurchased,
purchased, or otherwise acquired shares of its Capital Stock, options to
purchase such stock, or any of its other corporate securities;

 

(j)                                 suffered
any material shortage or any material cessation or interruption of inventory
shipments, supplies or ordinary services;

 

(k)                              entered
into an employment agreement or made (i) (A) any increase in the rate
or change in the form of compensation or remuneration payable to or to
become payable to any of its directors or officers, or (B) any increase in
the rate or change in the form of compensation or remuneration payable to
or to become payable to any of its employees, licensors, licensees,
franchisors, franchisees, distributors, agents, or suppliers, other than such
increases or changes in the ordinary course of business and consistent with
past practices, or (ii) any bonus or other incentive payments or
arrangements with any of its, directors, officers, employees, licensors,
licensees, franchisors, franchisees, distributors, agents, suppliers, or
customers;

 

(l)                                 removed
any director or terminated any officer except those directors and officers who
will resign in accordance with Section 7.8;

 

(m)                           entered
into, terminated, cancelled, amended or modified any material contract, other
than in the ordinary course of business or in connection with the Contemplated Transactions;

 

(n)                             made
any change in its accounting policies, practices and calculations as utilized
in the preparation of the October 2005 Financial Statements;

 

(o)                             voluntarily
permitted any Person to subject the Shares or the properties of ATS to any additional
Lien;

 

(p)                             (i) made
any loan or advance to, or (ii) assumed, guaranteed, endorsed or otherwise
become liable with respect to the liabilities or obligations of, any Person;

 

(q)                             purchased
or otherwise acquired any corporate security or other equity interest in any
Person;

 

(r)                                changed
its pricing, credit, or payment policies;

 

(s)                              incurred
any Indebtedness other than to trade creditors and financial institutions in
the ordinary course of business and in a manner consistent with past practices;

 

(t)                                except
as otherwise required by Law, entered into, amended, modified, varied, altered,
or otherwise changed any of the Plans;

 

59

 

(u)                             changed
its banking arrangements and signatories or granted any powers of attorney;

 

(v)                             purchased,
sold, leased, or otherwise disposed of any of its properties or any right,
title or interest therein other than in the ordinary course of business;

 

(w)                           failed
to maintain its books in a manner that fairly and accurately reflects its
income, expenses and liabilities in accordance with applicable accounting
standards, including, without limitation, GAAP, and using accounting policies,
practices and calculations applied on a basis consistent with past periods and
throughout the periods involved;

 

(x)                               failed
to maintain in full force and effect insurance policies on all of its
properties providing coverage and amounts of coverage comparable to the
coverage and amounts of coverage provided under its policies of insurance in
effect on October 31, 2005;

 

(y)                             failed
to perform duly and punctually in all material respects all of its
contractual obligations in accordance with the terms thereof, except where the
failure to do so would not have a material adverse effect on ATS;

 

(z)                               failed
to maintain and keep its properties in good condition and working order, except
for ordinary wear and tear;

 

(aa)                        materially
modified or changed its business organization or materially and adversely
modified or changed its relationship with its suppliers, customers and others
having business relations with it; or

 

(bb)                      authorized,
agreed or otherwise committed to any of the foregoing.

 

3.36                           Full Disclosure.

 

No
representation or warranty in this ARTICLE III or in the related Schedules
in the Disclosure Schedules, and no statement in the certificate contemplated
by Section 7.1, contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements contained
herein or therein, in light of the circumstances under which such statements
were made.

 

ARTICLE IV

Representations and Warranties of FSAC

 

FSAC
represents and warrants to ATS and the Shareholders:

 

4.1                                 Organization and
Power.

 

(a)                                  FSAC is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware and has full corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
Contemplated Transactions.

 

60

 

(b)                                 FSAC has all requisite
corporate power to own or lease and operate its properties.

 

4.2                                 Authorization and
Enforceability.

 

FSAC’s
Board of Directors has duly authorized and approved the execution and delivery
of this Agreement and, subject to the approval of FSAC’s stockholders, the
execution and delivery of the other Transaction Documents and the consummation
of the Contemplated Transactions. As of the Closing Date (a) FSAC will
have duly authorized the execution and delivery of and the performance of its
obligations under the Transaction Documents and (b) the Transaction
Documents will constitute the legal, valid and binding obligation of FSAC and
shall be enforceable against FSAC in accordance with its and their terms,
respectively, subject to bankruptcy, insolvency, reorganization and other laws
of general applicability relating to or affecting creditors’ rights and to
general equity principles.

 

4.3                                 No Violation.

 

None
of the execution, delivery or performance of this Agreement or any of the other
Transaction Documents by FSAC and the consummation of the Contemplated
Transactions will:

 

(a)                              conflict
with or violate any provision of the certificate of incorporation, any bylaw or
any corporate charter or document of FSAC;

 

(b)                             result
in the creation of, or require the creation of, any Lien upon any (i) shares
of shares of stock of FSAC or (ii) property of FSAC;

 

(c)                              result
in (i) the termination, cancellation, modification, amendment, violation,
or renegotiation of any contract, agreement, indenture, instrument, or
commitment pertaining to the business of FSAC, or (ii) the acceleration or
forfeiture of any term of payment;

 

(d)                             give
any Person the right to (i) terminate, cancel, modify, amend, vary, or
renegotiate any contract, agreement, indenture, instrument, or commitment
pertaining to the business of FSAC, or (ii) to accelerate or forfeit any
term of payment; or

 

(e)                              violate
any Law applicable to FSAC or by which its properties are bound or affected.

 

4.4                                 Consents.

 

None
of the execution, delivery or performance of this Agreement by FSAC, nor
consummation of the Contemplated Transactions or compliance with the terms of
the Transaction Documents will require (a) the consent or approval under
any agreement or instrument or (b) FSAC to obtain the approval or consent
of, or make any declaration, filing (other than administrative filings with
Taxing Authorities, foreign companies registries and the like) or registration
with, any Governmental Authority.

 

61

 

4.5                                 Authorization of
Stock Consideration.

 

If,
pursuant to Section 2.2(b), one or more Shareholders elect to receive
Stock Consideration as part of the Purchase Consideration then the shares
of FSAC common stock to be issued to such electing Shareholders as Stock Consideration,
when issued sold and delivered at Closing in accordance with the terms of this
Agreement, will (a) be duly authorized, validly issued, fully paid and
nonassessable, (b) not be subject to preemptive rights created by statute,
FSAC’s certificate of incorporation or bylaws or any agreement to which FSAC is
a party or by which FSAC is bound and (c) be free of restrictions on
transfer or Liens, other than restrictions on transfer under applicable state
and federal securities laws or restrictions or Liens imposed thereon by the
Shareholders after the Closing.

 

4.6                                 Capitalization.

 

The
authorized capital stock of FSAC consists, and as of Closing will consist, of
100,000,000 shares of common stock and 1,000,000 shares of preferred stock, par
value $0.0001 per share, of which, (a) 26,250,000 shares of FSAC’s common
stock were issued and outstanding, all of which were duly authorized, validly
issued, fully paid and nonassessable, (b) no shares of FSAC common stock
were held in the treasury of FSAC, and (c) no shares of FSAC’s preferred
stock were outstanding. As of the Effective Date hereof, and as of Closing,
except as described in this Section or on Schedule 4.6, (a) there
are no outstanding (i) shares of capital stock or other voting securities
of FSAC, (ii) securities of FSAC convertible into or exchangeable for
shares of capital stock or voting securities of FSAC, (iii) options or
other rights to acquire from FSAC, or obligations of FSAC to issue, any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or voting securities of FSAC, and (iv) equity equivalents,
interests in the ownership or earnings of FSAC or other similar rights
(collectively “FSAC Securities”), and (b) there are no outstanding
obligations of FSAC to repurchase, redeem or otherwise acquire any FSAC
Securities.

 

4.7                                 Public Disclosure
Documents.

 

(a)                                  FSAC has filed with,
or furnished to, the SEC each form, proxy statement or report required to be
filed with, or furnished to, the SEC by FSAC pursuant to the Exchange Act
(collectively, with FSAC’s prospectus filed with the SEC on October 20,
2005, as amended to date, the “Public Disclosure Documents”). The Public
Disclosure Documents, as amended prior to the date hereof, complied, as of the
date of their filing with the SEC, as to form in all material respects
with the requirements of the Exchange Act and Securities Act, as applicable.
The information contained or incorporated by reference in the Public Disclosure
Documents was true, complete and correct in all material respects as of the
respective dates of the filing thereof with the SEC; and, as of such respective
dates, the Public Disclosure Documents did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, except to the extent updated or
superseded by any Public Disclosure Document subsequently filed by FSAC with the
SEC prior to the date hereof.

 

(b)                                 The financial
statements of FSAC included in the Public Disclosure Documents have been
prepared in accordance with the published rules and regulations of the 

 

62

 

SEC and in conformity
with GAAP applied on a consistent basis throughout the periods indicated
therein, except as may be indicated therein or in the notes thereto, and
presented fairly, in all material respects, the consolidated financial position
of FSAC as of the dates indicated, and the consolidated results of the
operations and cash flows of FSAC for the periods therein specified (except in
the case of quarterly financial statements for the absence of footnote
disclosure and subject, in the case of interim periods, to normal year-end
adjustments).

 

4.8                                 Litigation.

 

Except
as set forth in the Public Disclosure Documents, there is no action, suit,
proceeding, arbitration, claim, investigation or inquiry pending or, to FSAC’s
Knowledge, threatened by or before any governmental body or other forum against
the FSAC that (i) would reasonably be expected to have a material adverse
effect on FSAC, (ii) that questions the validity of this Agreement or (iii) that
seeks to prohibit, enjoin or otherwise challenge the Contemplated Transactions.

 

4.9                                 Brokers.

 

FSAC
has not entered into any contract or other understanding with any Person, which
may result in the obligation of FSAC to pay any finder’s fee, commission
or other like payment in connection with this Agreement and the Contemplated
Transactions.

 

4.10                           Financial Ability.

 

To the
Knowledge of FSAC, no condition of FSAC exists, other than the approval by FSAC’s
stockholders, and the related failure of public FSAC stockholders owning 20% or
more of the FSCA public shares to both vote against the Contemplated
Transactions and exercise their conversion or “put” rights, that could
reasonably be expected to prevent FSAC from acquiring the funds necessary to
finance the Contemplated Transactions.

 

4.11                           No Questionable Payments.

 

Neither
FSAC nor any director, officer, agent, employee, or other person associated
with or acting on behalf of FSAC has, directly or indirectly: used any
corporate funds for unlawful contributions, gifts, entertainment, or other
unlawful expenses relating to political activity; made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns from corporate funds; violated any provision of
the Foreign Corrupt Practices Act of 1977, as amended; or made any bribe,
rebate, payoff, influence payment, kickback, or other unlawful payment.

 

ARTICLE V

Covenants

 

5.1                                 Conduct of ATS.

 

Except
as contemplated by this Agreement, during the period from the Effective Date to
the Closing Date, the Founders will cause ATS and the Acquired Subsidiaries to
conduct 

 

63

 

their business and
operations in the ordinary course and, to the extent consistent therewith, to
use reasonable efforts to preserve their respective current relationships with
customers, employees, suppliers and others having business dealings with them.
Accordingly, and without limiting the generality of the foregoing, during the
period from the date of this Agreement to the Closing Date, without the prior
written consent of FSAC, ATS and the Founders will not take, and the Founders
will not permit ATS to take, any action that would cause the representations
set forth in Section 3.35 not to be true as of the Closing Date, except as
expressly contemplated by this Agreement.

 

5.2                                 Access to
Information Prior to the Closing; Confidentiality.

 

(a)                                  During the period
from the Effective Date through the Closing Date, the Founders will cause ATS
to give FSAC and its authorized representatives reasonable access during
regular business hours to all offices, facilities, books and records of ATS and
the Acquired Subsidiaries as FSAC may reasonably request; provided,
however, that (i) FSAC and its representatives shall take such action
as is deemed necessary in the reasonable judgment of ATS to schedule such
access and visits through a designated officer of ATS and in such a way as to
avoid disrupting the normal business of ATS, (ii) ATS shall not be
required to take any action that would constitute a waiver of the
attorney-client or other privilege and (iii) ATS need not supply FSAC with
any information that, in the reasonable judgment of ATS is under a contractual
or legal obligation not to supply, including, without limitation, as a result
of any governmental or defense industrial security clearance requirement or
program requirements of any Governmental Authority prohibiting certain persons
from sharing information; provided, however, ATS will use its reasonable
efforts to enable FSAC to receive such information.

 

(b)                                 FSAC will hold and
will cause its employees, agents, affiliates, consultants, representatives and
advisors to hold any information that it or they receive in connection with the
activities and transactions contemplated by this Agreement in strict confidence
in accordance with and subject to the terms of the Confidentiality Agreement
dated as of December 7, 2005 between FSAC and ATS (the “Confidentiality
Agreement”).

 

5.3                                 Best Efforts.

 

Subject
to the terms and conditions of this Agreement, each of the parties hereto will
use its best efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate the transactions contemplated by this Agreement
at the earliest practicable date. Without limiting the generality of the
foregoing, FSAC hereby covenants and agrees (i) to cause FSAC’s
accountants to review the October 2006 Earn Out Period promptly after the
end of the October 2006 Earn Out Period and to (ii) to timely file
FSAC’s Form 10-Q with the SEC for the second quarter of 2007.

 

5.4                                 Consents.

 

Without
limiting the generality of Section 5.3 hereof, each of the parties hereto
(other than Harry Katrivanos) will use its best efforts to obtain all licenses,
permits, authorizations, consents and approvals of all third parties and
governmental authorities necessary 

 

64

 

in connection with the
consummation of the transactions contemplated by this Agreement prior to the
Closing. Each of the parties hereto (other than Harry Katrivanos) will make or
cause to be made all filings and submissions under laws and regulations
applicable to it as may be required for the consummation of the
transactions contemplated by this Agreement. FSAC, the Shareholders and ATS
will coordinate and cooperate with each other in exchanging such information
and assistance as any of the parties hereto may reasonably request in
connection with the foregoing.

 

5.5                                 Access to Books and
Records Following the Closing.

 

Following
the Closing, FSAC shall permit the Shareholders and their authorized
representatives, during normal business hours and upon reasonable notice, to
have reasonable access to, and examine and make copies of, all books and
records of ATS, the Acquired Subsidiaries and/or FSAC that relate to
transactions or events occurring prior to the Closing or transactions or events
occurring subsequent to the Closing that are related to or arise out of
transactions or events occurring prior to the Closing; provided, however,
(a) that the Shareholders and their representatives shall take such action
as is deemed necessary in the reasonable judgment of FSAC and ATS to schedule such
access and visits through a designated officer of ATS and in such a way as to
avoid disrupting the normal business of FSAC and/or ATS, (b) neither FSAC
nor ATS shall be required to take any action that would constitute a waiver of
the attorney-client or other privilege and (c) neither FSAC nor ATS need
supply the Shareholders, or their representatives, with any information which,
in the reasonable judgment of FSAC or ATS, FSAC or ATS (as the case may be)
is under a contractual or legal obligation not to supply, including, without
limitation, as a result of any governmental or defense industrial security
clearance requirement or program requirements of any Governmental Authority
prohibiting certain persons from sharing information. FSAC agrees that it shall
retain and shall cause ATS to retain all such books and records for a period of
seven years following the Closing, or for such longer period following the
Closing as may be required by applicable Law.

 

5.6                                 Founders’
Post-Closing Confidentiality Obligation.

 

Following
the Closing, except as otherwise expressly provided in this Agreement or in
other agreements delivered in connection herewith, the Founders shall, and
shall cause their respective Affiliates, officers agents and representatives,
as applicable to, (a) maintain the confidentiality of, (b) not use,
and (c) not divulge, to any Person all confidential or proprietary
information of ATS, except with the prior written consent of FSAC or to the
extent that such information is required to be divulged by legal process,
except as may reasonably be necessary in connection with the performance
of any indemnification obligations under this Agreement or except as may be
required by Law; provided, however, that the foregoing limitations shall
not apply to information that (i) otherwise becomes lawfully available to
the Founders, or their respective Affiliates, officers agents and
representatives after the Closing Date on a nonconfidential basis from a third
party who is not under an obligation of confidentiality to FSAC or ATS or (ii) is
or becomes generally available to the public without breach of this Agreement
by the Founders, or their respective Affiliates, officers agents and
representatives.

 

65

 

5.7                                 Expenses.

 

(a)                                  Except as otherwise
provided in this Section 5.7, each of the parties shall bear its own
expenses related to the Contemplated Transactions. Notwithstanding the
foregoing, all compensation due Stifel and other third-party costs of the
Shareholders, ATS and the Acquired Subsidiaries with respect to the Contemplated
Transactions including all payments to be made in connection with the Change In
Control Releases and other the amounts referred to on Schedule 5.7 of the
Disclosure Schedules (collectively, the “Founders’ Transaction Costs”)
shall be the responsibility of the Founders and, to the extent payable at
Closing, and not otherwise paid by the Founders, shall be paid at Closing in
accordance with Section 5.8(a).

 

(b)                                 Notwithstanding the
foregoing, the obligation to pay Taxes shall be allocated pursuant to Section 5.11
rather than this Section 5.7.

 

5.8                                 Certain Closing
Payments.

 

(a)                                  The Founders shall be
obligated to repay all Indebtedness of ATS and the Acquired Subsidiaries as of
the Closing. In connection with the Closing, FSAC shall repay out of the Cash
Consideration, on behalf of the Founders, (i) all Indebtedness of the ATS
and the Acquired Subsidiaries remaining outstanding (other than intercompany
indebtedness (if any)), and (ii) all Founders’ Transaction Costs. To the
extent the amount of any such payment can be determined, and paid, at or prior
to the Closing, then a downward adjustment shall be made in the Cash
Consideration paid at Closing equal to such amount. In the event any such
payment cannot be determined or paid at or prior to Closing, then (i) the
parties to the Escrow Agreements shall instruct the Escrow Agent to pay any
such amount (from the Balance Sheet Escrow to the extent of any Balance Sheet
Escrow Funds and then from the General Indemnity Escrow) to FSAC within three (3) Business
Days of determination (which may be through delivery of an invoice) and (ii) the
Founders hereby agree and covenant that they shall be jointly and severally
responsible for and shall immediately deposit in the General Indemnity Escrow
cash in the amount of the distributions made from the Escrowed Funds to cover
costs the Founders are responsible for under this Section 5.8.

 

(b)                                 It is the intent of
the parties that all Shareholders shall be deemed to have repaid any and all
loans outstanding and owing by any of the Shareholders to ATS or any of the
Acquired Subsidiaries as of the Closing Date. Notwithstanding anything in this
Agreement to the contrary, the Shareholders’ Representative shall be permitted
to make, or direct, non-pro rata distributions of the Cash Consideration to the
Shareholders in order to account for any such deemed repayments.

 

5.9                                 No Solicitation of
Competitive Transactions.

 

(a)                                  From
the date of this Agreement until the Closing, or, if earlier, the termination
of this Agreement in accordance with its terms, ATS and each of the Founders
agree that they will not, directly or indirectly, through any officer,
director, employee, representative or agent or any of their affiliates, (i) solicit,
initiate, entertain or encourage any inquiries or proposals that constitute, or
could lead to, a proposal or offer for a merger, consolidation, business
combination, recapitalization, sale of substantial assets, sale of a
substantial percentage 

 

66

 

of shares of capital
stock (including, without limitation, by way of a public offering or private
placement), joint venture (other than teaming agreement or similar arrangements
in the ordinary course of business) or similar transactions involving ATS or
any of its subsidiaries, other than a transaction with FSAC and/or its
affiliates (any of the foregoing inquiries or proposals being referred to
herein as an “Acquisition Proposal”), (ii) engage in negotiations
or discussions concerning, or provide any non-public information to any person
or entity relating to, any Acquisition Proposal, or (iii) agree to,
approve or recommend any Acquisition Proposal. ATS will notify FSAC immediately
(and not later than twenty-four (24) hours) after receipt of any Acquisition
Proposal or any request for non-public information in connection with an
Acquisition Proposal or for access to the properties, books or records of ATS
by any person or entity that informs ATS that it is considering making or has
made an Acquisition Proposal. Such notice shall be made orally (and shall be
confirmed in writing) and, subject to existing confidentiality, nondisclosure
or other similar agreements, shall indicate the identity of the party making
the proposal and the material terms and conditions of such proposal, inquiry or
contract. ATS will prevent any of its directors, officers, affiliates,
representatives or agents (each a “Representative”) from taking any
action prohibited hereby if taken by ATS. If ATS learns of any such action
taken by a Representative, ATS will immediately advise FSAC and provide the
information specified herein.

 

(b)                                 From
the date of this Agreement until the Closing, or, if earlier, the termination
of this Agreement in accordance with its terms, FSAC, its affiliates or its
Representatives engages in “Material Negotiations” (as hereinafter
defined) concerning a merger, consolidation, business combination,
recapitalization, purchase of substantial assets, purchase of shares of capital
stock, joint venture or similar transactions involving a party other than ATS
or any of its subsidiaries (each a “Proposed Transaction,” but not
including Proposed Transactions initiated prior to the date of this letter)),
FSAC shall promptly notify the Shareholders’ Representative or ATS’ representative,
Daniel M. Cornell (“Cornell”), of the same. For purposes of this letter,
the term “Material Negotiations” shall mean the delivery by FSAC to a third
party of a term sheet or a letter of intent. Any notice of a Proposed
Transaction (i) shall be made orally (and shall be confirmed in writing), (ii) shall
identify the parties to, and the terms of the Proposed Transaction, and (iii) shall
be subject to existing confidentiality, nondisclosure and other similar
agreements. The Shareholders’ Representative and Cornell each agree, as a
condition to receiving notices with respect to any Proposed Transaction, to
execute and deliver to FSAC such additional non-disclosure, confidentiality or
similar agreement as may be required by FSAC.

 

5.10                           Personnel.

 

FSAC
intends that all Personnel employed by any of the Companies as of the Closing
Date shall have the opportunity to continue as an employee of the respective
Companies following the Closing Date. This Section 5.10 shall not create
any rights to continued employment.

 

67

 

5.11                           Certain Tax Matters.

 

(a)          Tax Periods Ending on
or Before the Closing Date.

 

FSAC
shall prepare, or cause to be prepared, and file, or cause to be filed, on a
timely basis (in each case, at its sole cost and expense) and on a basis
reasonably consistent with past practice (unless FSAC is advised otherwise by
its outside tax consultants), all Tax Returns with respect to ATS and the
Acquired Subsidiaries for taxable periods ending on or prior to the Closing
Date and required to be filed thereafter (the “Prior Period Returns”).
FSAC shall provide a draft copy of such Prior Period Returns to the
Shareholders’ Representative for its review at least fifteen (15) Business Days
prior to the due date thereof. The Shareholders’ Representative shall provide
its comments to FSAC at least five Business Days prior to the due date of such
returns and FSAC shall make all changes requested by ATS in good faith (unless
FSAC is advised in writing by its independent outside accountants or attorneys
that such changes (i) are contrary to applicable Law, or (ii) will,
or are likely to, have a material adverse effect on FSAC or any of its
Affiliates (provided that FSAC agrees to make any such changes notwithstanding
the application of this clause (ii) if the changes are consistent with
applicable Law and past practices of the Companies)). Except as provided in Section 5.11(c),
and only to the extent such Taxes have not been accrued or otherwise
reserved for on the Closing Balance Sheets (and specifically reflected in
Closing Net Working Capital), the Founders shall pay, or cause to be paid, all
Taxes with respect to ATS and the Acquired Subsidiaries shown to be due on such
Prior Period Returns. In the event that the Founders for any reason fail to
make the payment contemplated in the previous sentence, then FSAC may bring
an indemnification claim under ARTICLE IX.

 

(b)         Tax Periods Beginning
Before and Ending After the Closing Date.

 

(i)                                         FSAC
shall prepare or cause to be prepared and file or cause to be filed, on a basis
reasonably consistent with past practice, any Tax Returns of ATS and the
Acquired Subsidiaries for Tax periods that begin before the Closing Date and
end after the Closing Date (collectively, the “Straddle Periods” and
each a “Straddle Period”). FSAC shall permit the Shareholders’
Representative to review and comment on each such Tax Return described in the
preceding sentence prior to filing, and FSAC shall make all changes reasonably
requested by ATS in good faith (unless FSAC is (1) advised in writing by
its independent outside accountants or attorneys that such changes are contrary
to applicable Law or (2) will, or are likely to, have a material adverse
effect on FSAC or any of its Affiliates (provided that FSAC agrees to make any
such changes notwithstanding the application of this clause (2) if the
changes are consistent with applicable Law and past practices of the
Companies)). Within fifteen (15) days after the date on which FSAC pays any
Taxes of ATS and the Acquired Subsidiaries with respect to any Straddle Period,
the Founders shall, to the extent such Taxes have not been accrued or otherwise
reserved for on the Closing Balance Sheets (and specifically reflected in the
Closing Net Working Capital), pay to FSAC the amount of such Taxes that relates
to the portion of such Straddle Period ending on the Closing Date (the “Pre-Closing
Tax Period”). In the event that the Founders for any reason fail to make
the payment contemplated in the previous sentence, then FSAC may bring an
indemnification claim under Article IX.

 

(ii)                                      For
purposes of this Agreement:

 

68

 

(1)                                  In
the case of any gross receipts, income, or similar Taxes that are payable with
respect to a Straddle Period, the portion of such Taxes allocable to (A) the
Pre-Closing Tax Period and (B) the portion of the Straddle Period
beginning on the day next succeeding the Closing Date (the “Post-Closing Tax
Period”) shall be determined on the basis of a deemed closing at the end of
the Closing Date of the books and records of ATS.

 

(2)                                  In
the case of any Taxes (other than gross receipts, income, or similar Taxes)
that are payable with respect to a Straddle Period, the portion of such Taxes
allocable to the portion of the Straddle Period prior to the Closing Date shall
be equal to the product of all such Taxes multiplied by a fraction the
numerator of which is the number of days in the Straddle Period from the
commencement of the Straddle Period through and including the Closing Date and
the denominator of which is the number of days in the entire Straddle Period; provided,
however, that appropriate adjustments shall be made to reflect specific
events that can be identified and specifically allocated as occurring on or
prior to the Closing Date (in which case the Founders shall be responsible for
any Taxes related thereto) or occurring after the Closing Date (in which case,
FSAC shall be responsible for any Taxes related thereto).

 

(iii)                                   FSAC
shall be responsible for (A) any and all Taxes with respect to the
Pre-Closing Tax Period of any applicable Straddle Period to (but only to) the
extent such Taxes have been accrued or otherwise reserved for on the Closing
Balance Sheet and (B) any Taxes with respect to the Post-Closing Tax
Period of the Straddle Periods.

 

(c)          Cooperation on Tax
Matters.

 

(i)                                     FSAC
and the Founders shall cooperate fully, as and to the extent reasonably
requested by any party, in connection with the filing of Tax Returns pursuant
to this Section and any audit, litigation, or other proceeding with
respect to Taxes. Such cooperation shall include the retention and (upon the
other party’s request) the provision of records and information reasonably
relevant to any such audit, litigation, or other proceeding and making their
respective employees, outside consultants and advisors available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. FSAC and the Founders agree (A) to retain all
books and records with respect to Tax matters pertinent to ATS and the Acquired
Subsidiaries relating to any taxable period beginning before the Closing Date
until the expiration of the statute of limitations (and, to the extent notified
by FSAC or the Shareholders’ Representative, any extensions thereof) of the
respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (B) to give the other
reasonable written notice prior to transferring, destroying or discarding any
such books and records and, if the other so requests, FSAC or the Founders, as
the case may be, shall allow one of the others to take possession of such
books and records.

 

(ii)                                  FSAC
and the Founders further agree, upon request, to use their best efforts to
obtain any certificate or other document from any Governmental Authority or any
other Person as may be necessary to mitigate, reduce or eliminate any Tax
that could be imposed (including, but not limited to, with respect to the
transactions contemplated hereby).

 

69

 

(iii)                               FSAC
and the Founders further agree, upon request, to provide the other party with
all information that either party may be required to report pursuant to Section 6043
of the Code and all Treasury Department Regulations promulgated thereunder.

 

(iv)                              The
Shareholders shall provide to FSAC for its review and approval all material
related to the securing of shareholder approval under section 280G of the
Code for the parachute payments identified on Schedule 3.29. Such material
shall be provided to FSAC at least five business days prior to the obtaining of
such shareholder approval. The Shareholders and FSAC agree that all documents
related to such shareholder approval must be mutually agreed to by the
Shareholders Representative and FSAC.

 

(d)                                 Certain Taxes.
All transfer, documentary, sales, use, stamp, registration and other such Taxes
and fees (including any penalties and interest) incurred in connection with the
Contemplated Transactions (including any transfer or similar tax imposed by any
governmental authority) shall be shared equally between FSAC on the one hand
and the Founders on the other, and each shall be responsible for one-half of
such Taxes. The party required by Law to do so will file all necessary Tax
Returns and other documentation with respect to all such transfer, documentary,
sales, use, stamp, registration and other Taxes and fees, and, if required by
applicable Law, the other parties will join in the execution of any such Tax
Returns and other documentation.

 

(e)                                  Indemnification
and Tax Contests. FSAC’s and the Founders’ indemnification obligations with
respect to the covenants in this Section 5.11 together with the procedures
to be observed in connection with any Tax Contest shall be governed by Article IX.

 

5.12                           Public Announcements.

 

None
of FSAC, ATS, any of the Acquired Subsidiaries or the Shareholders, will issue
any press release or make any public statement with respect to this Agreement
or the Contemplated Transactions, or disclose the existence of this Agreement
to any Person or entity, prior to the Closing and, after the Closing, will not
issue any such press release or make any such public statement without the
prior consent of the other parties (which consent shall not be unreasonably
withheld or delayed), subject to any applicable disclosure obligations pursuant
to Applicable Law provided that if FSAC proposes to issue any press release or
similar public announcement or communication in compliance with any such
disclosure obligations and related to the Contemplated Transactions, FSAC shall
use commercially reasonable efforts to consult in good faith with the
Shareholders’ Representative before doing so.

 

5.13                           Communications with
Customers and Suppliers.

 

The
Shareholders Representative and FSAC will mutually agree upon all
communications with suppliers and customers of ATS relating to this Agreement
and the Contemplated Transactions prior to the Closing Date.

 

70

 

5.14                            Stifel Agreement.

 

All
compensation due Stifel with respect to the Contemplated Transactions
(collectively, the “Stifel Fees”), whether under the Stifel Agreement or
otherwise, is the Founders’ responsibility. The Founders’ shall deliver to FSAC
at the Closing a release signed by Stifel and in form reasonably
satisfactory to FSAC (the “Stifel Release”) confirming that the Stifel
Fees have been paid in full and releasing ATS, the Acquired Subsidiaries and
FSAC from all liability with respect to the Stifel Agreement (other than
indemnification claims that may be brought by Stifel against ATS or the
Acquired Subsidiaries under the terms of the Stifel Agreement and other than
with respect to 2.5% of any payments of the 2007/2008 or the 2008 Additional
Earn Outs which shall be due and payable to Stifel). The Founders hereby agree
to indemnify and hold FSAC harmless from and against any indemnification claims
brought by Stifel (or any person or entity bringing an indemnification claim
through Stifel) under or with respect to the Stifel Agreement.

 

5.15                            Notification of Certain
Matters; Update of Disclosure Schedules.

 

(a)                                     Notification
of Certain Matters. The Founders (and Harry Katrivanos to the extent of his
individual representations and warranties made in this Agreement) and ATS shall
give prompt notice to FSAC and FSAC shall give prompt notice to the
Shareholders and ATS, of (i) the occurrence or non-occurrence of any event
the occurrence or non-occurrence of which would cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at or prior to the Closing Date, and (ii) any material failure of ATS, the
Acquired Subsidiaries, the Shareholders, or FSAC, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided, however, subject to Sections 5.15(b) and
9.2(f), that the delivery of any notice pursuant to this Section 5.15(a) shall
not limit or otherwise affect the remedies available hereunder to the party
receiving such notice.

 

(b)                                    Update
of Disclosure Schedules. The Shareholders and ATS may, at their option, but
no later than three (3) Business Days prior to the Closing, deliver to
FSAC the Disclosure Schedules updated to the date of Closing (the “Updated
Disclosure Schedules”), except where the disclosures or information therein
are as of a specified date which disclosures and information shall remain as of
such date. Any Updated Disclosure Schedules shall be prepared in a manner such that
the Updated Disclosure Schedules clearly indicates differences between the
Disclosure Schedules as delivered on this date of this Agreement and the
Updated Disclosure Schedules. If Updated Disclosure Schedules are delivered by
ATS, such Updated Disclosure Schedules shall not alter the representations and
warranties of the Shareholders and ATS as set forth in this Agreement and the
Disclosure Schedules, provided, however, that liabilities under Section 9.2(b) in
respect of representations and warranties that are affected by the Updated
Disclosure Schedules shall be limited as set forth in Section 9.2(f).

 

5.16                            Discontinued Business
Line and Certain Other Matters

 

(a)                                   Discontinued
Operations. ATS has discontinued its ATSI business line (the “Discontinued
Business Line”, and the products and services of the Discontinued Business
Line, the “Discontinued Products”). The ATSI business lines is treated
as discontinued 

 

71

 

operations in the Interim
Financial Statements, in accordance with GAAP. The Founders and ATS jointly and
severally represent and warrant to FSAC that the accounting for the
Discontinued Business Line as discontinued operations, as reflected in the
Interim Financial Statement, reflects, to the Knowledge of ATS, adequate
reserves in relation to such operations (including all obligations under the
Stock Purchase Agreement dated November 30, 2005 pursuant to which ATS
sold its former subsidiary, ATSI, to NTMI Acquisition Co., and the
indemnification obligations related to the warranty claim brought by the City
of Statesville, North Carolina against ATSI), including, without limitation,
appropriate estimates of expenses to be incurred in connection with the
operations of such discontinued operations after the respective dates of
treatment as discontinued operations through the respective dates of cessation
of operations, in accordance with GAAP. The Estimated Closing Balance Sheet
will also reflect such reserves, including such adjustments as may be
required as of the Closing Date as a result of changes in circumstances and
estimates since the date of the Interim Financial Statements.

 

(b)                                 Maximus
Subcontract. ATS has entered into a time and material price subcontract
with Maximus, Inc. to provide certain software and services in support of
Maximus’ prime contract with the State of Connecticut (the “Maximus
Subcontract”). ATS’ performance of the Maximus Subcontract to date has been
at a loss. The Founders and ATS jointly and severally represent and warrant to
FSAC that the Interim Financial Statements reflect ATS’ good faith estimate to
complete work under the Maximus Subcontract, and reserves in accordance with
GAAP, such that, apart from the reserves reflected in the January 2006
Interim Financial Statements, ATS does not reasonably expect to incur
additional losses under the Maximus Subcontract. The Estimated Closing Balance
Sheet will also reflect such reserves, including such adjustments as may be
required as of the Closing Date as a result of changes in circumstances and
estimates since the date of the Interim Financial Statements. If the Maximus
Subcontract is terminated prior to Closing upon terms and conditions reasonably
acceptable to FSAC, this Agreement shall be amended to omit this Section 5.15(b).

 

(c)                                  Self
Insured Plans. The Estimated Closing Balance Sheet will reflect a reserve,
estimated on the basis of past experience and experience through the Closing
Date, which will reflect the estimated cost of ATS’ self-insurance under the
Self Insured Plans through the Closing Date. ATS will fully disclose to FSAC
the basis of the computation of the reserves for the Self Insured Plans
reflected in the Estimated Closing Balance Sheet. ATS is in the process of
replacing the Self Insured Plans with fully insured plans. In connection with
this replacement, ATS will be required to purchase an insurance “tail” for
run-off liability. The Founders shall jointly and severally indemnify FSAC,
subject to the limitations set forth in ARTICLE IX on the indemnification
obligations of the Founders, for the amount of medical claims and related
administrative costs arising in respect of the run-off period to the extent
they exceed accrued reserves therefor as of the Closing Date and are not
covered by the “tail” or “stop loss” insurance. To the extent that medical
claims and related administrative costs arising in respect of the run-off
period that are not covered by the applicable insurance are less than the
reserve therefor reflected on the Closing Balance Sheet, the excess shall be
refunded to the Shareholders, pro rata in accordance with the Shareholders’
Proportionate Interests.

 

(d)                                 Hawaiian
Proposal. In connection with the submission of the Hawaiian Proposal, ATS
has established an office in Honolulu, Hawaii (the “Hawaiian Office”).
The Hawaiian Proposal was submitted on or about November 8, 2005. ATS
intends to close the 

 

72

 

Hawaiian Office if the
Hawaiian Proposal is not selected by the United States Air Force as the winning
proposal. If the Hawaiian Proposal is not selected by the United States Air
Force as the winning proposal, subject to the limitations set forth in ARTICLE IX
on the indemnification obligations of the Founders, the Founders shall jointly
and severally indemnify FSAC for all costs of closing the Hawaiian Office
including, but not limited to all (i) rent and other expenses due during
the balance of the term of the lease (expiring November 30, 2007) for the
Hawaiian Office and (ii) reasonable actual costs of closing the Hawaiian
Office.

 

5.17                            Certain Transfers at
Closing.

 

(a)                                  ATS currently leases
certain automobiles for use by the Founders in connection with ATS’ business.
As of the Closing, ATS shall transfer the leases of the automobiles to the
Founders currently using the automobiles, and such Founder shall assume and be
responsible for all payments and obligations under such lease from and after
Closing.

 

(b)                                 ATS currently
subscribes to season tickets for the Washington Redskins. After Closing ATS no
longer will need such tickets for business purposes, and if Delmar Lewis wishes
to use the tickets from and after Closing, FSAC agrees to cooperate with him to
cause ATS to transfer or make available the tickets to him through the current
term of the subscription; provided that he assumes and pays all costs
associated with the tickets.

 

(c)                                  ATS currently
maintains split-dollar life insurance policies on the lives of the respective
Founders, as disclosed on Schedule 3.30(a) of the Disclosure
Schedules. As of the Closing, ATS shall transfer such policies to the
respective Founders upon whose lives the insurance is based, and each such
Founder shall assume and be responsible for all payments and obligations under
his respective insurance policy from and after Closing.

 

5.18                            Certain Post Closing
Covenants of FSAC.

 

(a)                              Subject to the remainder
of this Section 5.18, FSAC hereby covenants and agrees that during the
various Earn Out periods set forth in Section 2.2(c) FSAC shall use
reasonable efforts to continue the business and operations of ATS and the
Acquired Subsidiaries in the ordinary course and, to the extent consistent
therewith, to maintain ATS’ and the Acquired Subsidiaries’ respective
relationships with customers, employees, suppliers, and others having business
dealings with ATS and the Acquired Subsidiaries. Without limiting the
generality of the preceding sentence, FSAC shall, during the various Earn Out
periods set forth in Section 2.2(c), except as may otherwise be
agreed upon in writing by the Shareholders’ Representative:

 

(i)                                         use
commercially reasonable efforts to cause the Companies to enter into contracts
in connection with their sales pipelines as of the Closing;

 

(ii)                                      make
available to the Companies capital sufficient, consistent with past practice,
for working capital purposes and other business needs;

 

(iii)                                   not
take or permit to be taken any action that would result in it not being
possible to account for the operations of the Companies in a manner consistent
with paragraph (c) below;

 

73

 

(iv)                                  not
permit any or all of the Companies to be merged or otherwise combined with any
other entity (except for one or more of the other Companies);

 

(v)                                     not
take any action to terminate or reduce the base compensation of Leon Perry,
Doug Manning or Martin Gillepsie, it being recognized that FSAC intends to make
such persons participants in an ATS key employee protection plan that will be
put in effect immediately after the Closing; and

 

(vi)                                  not,
except on behalf of any of the Companies, solicit business of the type in which
any of the Companies are engaged from any specific contracting unit of a Person
that is or at any time during the preceding twelve (12) months was a customer
of any of the Companies.

 

(b)                             FSAC agrees and
acknowledges that the Earn Out payments will be calculated in accordance with
the methodology and procedures set forth in Section 2.2(c). In furtherance
of such methodology and procedures, FSAC agrees that, except as may otherwise
be agreed upon in writing by the Shareholders’ Representative, during the
various Earn Out periods set forth in Section 2.2(c):

 

(i)                                         the
Companies will not be charged with any FSAC corporate overhead (except to the
extent FSAC provides, or otherwise bears the cost of, services to the
Companies) or any incremental costs not consistent with historical norms or
past practices of the Companies prior to the Closing Date, provided that
this clause (i) shall not be interpreted to (w) prohibit the replacement
of personnel who do not remain with the Companies following the Closing or
other actions reasonably designed to increase or maintain EBITDA levels, (x)
prevent the recognition of increased costs due to changes in general cost
levels related to the conduct of the Companies’ business, (y) prevent the
recognition of uncontrollable increased costs that arise out of the conduct of
the Companies’ business after the Closing, or (z) prohibit the incurrence of
costs that may be passed on to customers or otherwise do not have a
material effect on EBITDA;

 

(ii)                                      prior
to the use by a business unit of FSAC or any of its Affiliates (other than any
of the Companies) (each a “Business Unit”) of any employee of any of the
Companies (other than incidental use that does not interfere with the
performance of the employee’s normal duties) on a bid, proposal or other
business development activity or a project of a Business Unit where the revenue
therefrom would not otherwise be included in the calculation of EBITDA pursuant
to Section 2.2(c), FSAC and the Shareholders’ Representative shall
negotiate in good faith and agree as to the costs of such employee(s) of any of
the Companies that will be reimbursed to the Companies, or the portion of
revenue generated by the utilization of such employee(s) of any of the
Companies (less applicable direct costs) on such Business Unit’s project would
be attributable to the Companies, as the case may be, for purposes of the
calculation of EBITDA pursuant to Section 2.2(c); and

 

(iii)                                   if
any opportunity arises that is not covered by clause (ii) of this
paragraph (b) and that could reasonably be allocated either to a Business
Unit or any of the Companies, FSAC will give due consideration to the interests
of the Companies and the Shareholders and will allocate the opportunity in a
manner that is reasonable and fair to all parties.

 

74

 

(c)                              FSAC recognizes that, in
order to compute the amounts that may be due to the Shareholders as the October 2006
Earn Out Payment and the April 2007 Earn Out Payment, it will be necessary
for FSAC to maintain accounting records with respect to the operations
previously conducted by ATS and the Acquired Subsidiaries (other than the
Discontinued Business Line) in a manner that permits FSAC to compute fairly the
October 2006 Earn Out Payment and the April 2007 Earn Out Payment.

 

(d)                             Subject to compliance with
the covenants set forth herein, this Section 5.18 shall not be interpreted
to prevent FSAC from making operational changes with respect to ATS and the
Acquired Subsidiaries.

 

5.19                            Cooperation in
Connection with Proxy Materials.

 

ATS
and the Founders will, and will cause their respective Representatives to,
fully cooperate with FSAC in connection with the preparation of proxy
materials, to be filed with the SEC and mailed to the stockholders of FSAC
seeking approval of the Contemplated Transactions by the FSAC stockholders
(such proxy materials, in the form mailed to the FSAC stockholders, the “Proxy
Materials”). Without limiting the generality of the foregoing, ATS and the
Founders and their respective Representatives shall review and provide
information to FSAC for inclusion in the Proxy Materials describing the
business and affairs of ATS and the Acquired Subsidiaries, including financial
statements of ATS, and the Acquired Subsidiaries. Further, ATS will cause Grant
Thornton, LLP to deliver to FSAC, as of the date of the Proxy Materials and at
the expense of FSAC, letters, addressed to FSAC, in form and substance satisfactory
to FSAC and consistent with SAS No. 72, containing statements and
information of the type customarily included in auditors’ “comfort letters”
with respect to the audited financial statements, unaudited interim financial
statements, unaudited pro forma financial information and other financial
information of ATS included in the Proxy Materials.

 

5.20                            Delivery of Financial
Statements.

 

From
and after the Closing and until the earlier of the payment of the April 2007
Earn Out Payment and the final determination that no such payment is due, FSAC
will provide to the Shareholders’ Representative, on behalf of the
Shareholders, such unaudited financial statements as FSAC prepares, with
respect to the operations conducted by ATS and the Acquired Subsidiaries (other
than the Discontinued Product Line), prior to the Closing Date, in the ordinary
course of business. The monthly financial information referenced in the
previous sentence (i) will be prepared internally, (ii) may, or may not
be prepared in accordance with, or otherwise be in conformity with GAAP, (iii) if
not prepared in accordance with GAAP then will not be adjusted for GAAP and (iv) shall
be made delivered to the Shareholders’ Representative within six (6) days
after they are prepared.

 

5.21                            Insurance Coverage for
Founders and their Spouses.

 

From
and after the Closing and until the fifth anniversary of the Closing Date, the
Founders and their spouses shall be permitted to maintain coverage under the
medical, dental, vision and other health insurance of ATS provided that (a) ATS
enters into a health insurance plan permitting the same prior to the Closing
Date and (b) all premiums and costs of every kind 

 

75

 

and nature are the
responsibility of the Founder(s) electing to obtain this medical coverage,
provided such aggregate premiums and costs shall not exceed the cost of such
coverage if it were provided pursuant to Federal COBRA benefits.

 

5.22                            Collection Efforts and
Assignment of Receivables.

 

FSAC covenants
and agrees with the Shareholders to use, or to cause ATS to use, best efforts
to collect all receivables of ATS and each of the Acquired Subsidiaries. If and
to the extent any one or more of the FSAC Indemnities makes a claim for
indemnification pursuant to Section 9.2(b) with respect to such a
receivable, FSAC shall, or shall cause ATS to, as applicable, assign to the
Founders pro rata in accordance with the Founders’ Proportionate Interests) all
right, title and interest (including all causes of action with respect thereto)
in and to such receivable. In the event that any receivables are assigned by
ATS to the Founders pursuant to this Section 5.22, the Founders agree to
use reasonable efforts to coordinate any collection efforts with respect to collection
of those receivables.

 

5.23                            Accounting Method Taxes.

 

Effective
as of November 1, 2004 the Companies changed their method of accounting
from cash to accrual resulting in an associated tax liability of approximately
Seven Million One Hundred Fifty Thousand Dollars ($7,150,000) payable in four
installments of approximately One Million Seven Hundred Eighty-Seven Thousand
Dollars ($1,787,000) each payable over the Companies’ tax years commencing in
2004, 2005, 2006 and 2007 (the “Accounting Method Tax”) of which approximately
One Million Seven Hundred Eighty-Seven Thousand Dollars ($1,787,000) has been
paid in connection with Companies’ Tax returns for the Tax year commencing in
2004 and of which approximately Five Million Three Hundred Sixty-Two Thousand
Dollars ($5,362,000) remains outstanding. Pursuant to Section 2.2(a) the
Accounting Method Tax Escrow has been established to pay the Accounting Method
Tax. As and when installments of the Accounting Method Tax are due (which with
respect to any such installment shall mean the date that is 2 1⁄2 months after
the fiscal year end with respect to which such installment is payable), FSAC
and the Shareholders’ Representative shall cause to be distributed from the
Accounting Method Tax Escrow to FSAC an amount (each distribution being
hereinafter referred to as an “Accounting Method Tax Distribution”) equal to
the Accounting Method Tax installment then payable for the current tax period
as reduced, on a dollar for dollar basis, by the NOLs used by the Companies in
the then current tax period (the amount by which Accounting Method Taxes are
reduced by NOLs in any applicable tax period is hereinafter referred to as the “NOL
Reduction”). As and when FSAC and the Shareholders’ Representative cause an
Accounting Method Distribution to be made they shall also instruct the Escrow
Agent to distribute from the Accounting Method Tax Escrow to the Shareholders’
Representative an amount equal to the applicable NOL reduction, if any, used to
calculate the applicable Accounting Method Tax Distribution. Upon final payment
of the Accounting Method Tax, the remaining balance in the Accounting Method
Tax Escrow, if any shall be distributed to the account(s) designated by the
Shareholders’ Representative in accordance with the Accounting Method Tax
Escrow Agreement. The Shareholders’ Representative shall be responsible for
directing the distribution of any Accounting Method Tax Distribution (pro-rata
in proportion to the Founders’ Proportionate Interests) and the Escrow Agent
shall be entitled to fully rely on such directions. Any earnings on the
Accounting Method Tax Escrow Funds, net of 

 

76

 

escrow expenses and
taxes, shall be paid, pro rata to the Founders in accordance with their respective
Founders’ Proportionate Interests. For the avoidance of doubt, notwithstanding
anything in ARTICLE IX to the contrary, any Accounting Method Tax payable
pursuant to this Section 5.23 shall first be paid from the Accounting
Method Tax Escrow.

 

5.24                           E-Mail
Access Through ATS.

 

For a
period of six (6) months following the Closing FSAC will cause ATS to make
available to Rumsey the use of his existing e-mail account through the ATS
network.

 

ARTICLE VI

Deliveries by All Parties at Closing

 

6.1                                 Conditions to All Parties Obligations.

 

The obligations of the parties to consummate the
Contemplated Transactions are subject to the fulfillment prior to or at the
Closing of each of the following conditions (any or all of which may be
waived by the parties):

 

(a)                                  Injunctions.
There shall be no order or injunction of a foreign or United States federal or
state court or other Governmental Authority of competent jurisdiction in effect
precluding, restraining, enjoining or prohibiting consummation of the
Contemplated Transactions or otherwise materially limiting or restricting
ownership or the operation of the Acquired Business;

 

(b)                                 Statutes;
Consents. No statute, rule, order, decree or regulation shall have been
enacted or promulgated after the date hereof by any Governmental Authority of
competent jurisdiction which prohibits the consummation of the Contemplated
Transactions or otherwise materially limits or restricts ownership or operation
of the business of ATS or the Acquired Subsidiaries and all foreign or domestic
governmental consents, orders and approvals required for the consummation of
the Contemplated Transactions as set forth on Schedule 6.1(b) of the
Disclosure Schedules, shall have been obtained and shall be in effect at the
Closing and shall not materially limit or restrict ownership or the operation
of the business of ATS and the Acquired Subsidiaries;

 

(c)                                  Escrow Agreements. Each of the parties hereto, together with
the Escrow Agent, shall have entered into the Escrow Agreements;

 

(d)                                 Litigation. No litigation regarding this Agreement or the Contemplated
Transactions shall have commenced or be pending or threatened; and

 

(e)                                  Hart-Scott-Rodino. All
applicable waiting periods (and any extensions thereof) under the
Hart-Scott-Rodino Act shall have expired or otherwise been terminated.

 

6.2                                 Conditions to the Shareholders Obligations.

 

The obligations of the Shareholders to consummate
the Contemplated Transactions are subject to the fulfillment at or prior to the
Closing of each of the following 

 

77

 

conditions
(any or all of which may be waived in whole or in part by the
Shareholders’ Representative):

 

(a)                                  Representations and Warranties. The representations and warranties of FSAC
in this Agreement shall be true and correct in all material respects as of the
date when made and at and as of the Closing Date as though such representations
and warranties were made at and as of the Closing Date, except for changes
permitted under or contemplated by this Agreement.

 

(b)                                 Performance. FSAC shall have performed and complied
with all agreements, obligations, covenants and conditions required by this
Agreement to be so performed or complied with by FSAC at or prior to the
Closing.

 

(c)                                  Deliveries. The Shareholders shall have received the deliveries contemplated by Article VIII.

 

(d)                                 Certain
Transfers. The transfers contemplated by Section 5.17(c) shall
have been completed.

 

6.3                                 Conditions to FSAC’s Obligations.

 

The obligations of FSAC to consummate the
Contemplated Transactions are subject to the fulfillment at or prior to the
Closing of each of the following conditions (any or all of which may be
waived in whole or in part by FSAC):

 

(a)                                  Representations and Warranties. The representations and warranties of the
Shareholders and ATS in this Agreement shall be true and correct in all
material respects as of the date when made and at and as of the Closing Date as
though such representations and warranties were made at and as of the Closing
Date, except for those representations and warranties which address matters
only as of a particular date (which will be true and correct in all material
respects only as of such date), and except for changes permitted under or
contemplated by this Agreement.

 

(b)                                 Performance. The Shareholders and ATS shall have
performed and complied with all agreements, obligations, covenants and
conditions required by this Agreement to be so performed or complied with by
the Shareholders and ATS at or prior to the Closing.

 

(c)                                  No Material Adverse Change. From October 31, 2005 until the
Closing Date, there shall have been no material adverse change, or the
occurrence of an event that has resulted or can reasonably be expected to
result in such a change, in the business, operations, properties, contracts,
customer relations or condition, financial or otherwise, of ATS, other than
changes expressly permitted under or contemplated by this Agreement.

 

(d)                                 Deliveries. FSAC shall have received the deliveries contemplated by Article VII.

 

78

 

(e)                                  Matters Referred to in Disclosure Schedules. All matters, if any, referred to in the
Disclosure Schedules as being taken, in process, or intended to be taken shall
have been completed to the reasonable satisfaction of FSAC.

 

(f)                                    Approval by FSAC Shareholders. Approval of the Contemplated Transactions
by the FSAC Shareholders.

 

(g)                                 No Outstanding Options, Warrants etc. All of the outstanding Options shall be
deemed exercised or cancelled immediately following the Closing and shall be of
no further force or effect and each of the Option Holders shall have executed
and delivered to FSAC an Option Holder Release in the form attached hereto
as Exhibit I (each an “Option Holder Release” and
collectively the “Option Holder Releases”). There shall be no
outstanding subscriptions, options, warrants, conversion rights or other
rights, securities, agreements or commitments relating to, or obligating ATS or
any of the Acquired Subsidiaries to issue, sell or otherwise dispose of, shares
of the Capital Stock of ATS or any of the Acquired Subsidiaries, or any
securities or obligations convertible into, or exercisable or exchangeable for,
any shares of the Capital Stock of ATS or any of the Acquired Subsidiaries.

 

(h)                                 Change in Control Releases. All of the Change In Control Agreements
are terminated and Change In Control Release in the forms attached as Exhibits
J–1 through J-3 (each a “Change In Control Release” and
collectively the “Change In Control Releases” shall have been executed
and delivered to FSAC.

 

(i)                                     Certain Indebtedness. All Indebtedness of the Companies and
their Subsidiaries (including, but not limited to, Indebtedness owed by any one
or more of the Companies to officers and directors of the Companies), and all
Indebtedness owed by any officers and directors to the Companies, shall be paid
in full.

 

(j)                                     Founders’ Transaction Costs. Pursuant to Section 5.8, the Founders’
Transaction Costs shall be paid in full.

 

(k)                                  Comfort
Letters. FSAC shall have received “comfort letters,” in customary form,
from Grant Thornton, LLP dated the date of the Proxy Materials and the Closing
Date (or such other date or dates reasonably acceptable to FSAC) with respect
to certain financial statements and other financial information included in the
Proxy Statement as contemplated by Section 5.19.

 

(l)                                     City
of Statesville Litigation. A release in form reasonably satisfactory
to FSAC to the effect that the litigation (the “City of Statesville
Litigation”) brought by the City of Statesville, North Carolina against
Advanced Technology Systems International, Inc., formerly a subsidiary of
ATS, has been resolved (the “City of Statesville Release”) and the City
of Statesville Litigation is dismissed with prejudice.

 

(m)                               Stifel
Release. The execution and delivery to FSAC of the signed Stifel Release.

 

79

 

 

(n)                                 Letters
of Credit of ATS and ATSI. Terminations of the two letters of credit issued
each in the amount of $158,208.00 in September of 2005 by United Bank for
the account of Advanced Technology Systems International, Inc., a former
wholly-owned subsidiary of ATS that was sold to NMTI in November of 2005,
in a form reasonably satisfactory to FSAC.

 

(o)                                 ATSI
GSA Schedule Contract. ATS shall use its best efforts to cause ATSI to
update the listing of ATSI’s Contract No. GS-25F-0078M in the General
Services Administration Schedules e-Library website to reflect ATSI’s new
address and not the address of ATS, and provide evidence of such update in a form reasonably
satisfactory to FSAC.

 

(p)                                 Medical
Insurance Claims. Subject to applicable privacy requirements and to the
extent such information is reasonably available, ATS shall provide a reasonably
detailed description of its claims experience in respect of medical insurance
since January 1, 2004.

 

ARTICLE VII
Deliveries by Shareholders and ATS at Closing

 

On the
Closing Date, the Founders (and where specified, Harry Katrivanos) and/or ATS
shall deliver or cause to be delivered to FSAC:

 

7.1                                 Founders’ and ATS’
Closing Certificate.

 

A
certificate in the form attached hereto as Exhibit K, dated as
of the Closing Date, signed by the Founders and ATS certifying that:

 

(i)                                     the
Shareholders, ATS, and the all of the Acquired Subsidiaries respectively have
performed and complied with all agreements, obligations, covenants and
conditions required by this Agreement to be so performed or complied with by
each of them, as applicable at or prior to the Closing;

 

(ii)                                  from
the Effective Date until the Closing Date, there has been no material adverse
change, or the occurrence of an event that has resulted or can reasonably be
expected to result in such a change, in the business, operations, properties,
contracts, customer relations or condition, financial or otherwise, or
prospects of ATS and each of the Acquired Subsidiaries, other than changes
expressly permitted under or contemplated by this Agreement;

 

(iii)                               no
suit, action, investigation or other proceeding is pending or threatened before
any Governmental Authority that seeks to restrain, prohibit or obtain damages
or other relief in connection with this Agreement or consummation of the
Contemplated Transactions or that questions the validity or legality of such
transactions;

 

(iv)                              this
Agreement, the execution and delivery of all of the Transaction Documents and
the consummation of the Contemplated Transactions have been approved by all
necessary shareholders and corporate actions on the part of ATS (with
copies of 

 

80

 

all resolutions to be
attached to the certificate and to be certified as true and correct in the
certificate); and

 

(v)                                 the
representations and warranties of ATS and the Shareholders set forth in this
Agreement are true and correct as of the Closing Date (unless the
representation or warranty by its terms is made as of a specific date).

 

7.2                                 Certificate of Shares.

 

Certificates representing all of the outstanding
Shares duly endorsed in blank or accompanied by blank stock powers, by the
Founders and Harry Katrivanos.

 

7.3                                 Consents.

 

Copies or other evidence reasonably satisfactory to
Buyer of the consents and approvals referred to in Section 6.1(b).

 

7.4                                 Estimated Closing Balance Sheet.

 

The
Estimated Closing Balance Sheet not less than two (2) Business Days prior
to the Closing Date pursuant to Section 2.3(b).

 

7.5                                 Resignations of
Directors and Officers.

 

Written
resignations, dated as of the Effective Date, of all directors and officers of
ATS and each of the Acquired Subsidiaries.

 

7.6                                 Termination of
Credit Facility/Facilities.

 

Evidence
satisfactory to FSAC that all amounts outstanding under any credit or loan
agreements between United Bank and related agreements and notes have been paid
in full or will be paid in full from proceeds of the Contemplated Transaction
and that documentation providing for the release of all Liens on the assets of
ATS and the Acquired Subsidiaries is available for filing immediately after the
Closing.

 

7.7                                 Release of Liens.

 

Except
as otherwise contemplated by Section 7.9, evidence satisfactory to FSAC
that all Liens on ATS’ and each of the Acquired Subsidiaries’ assets have been
released or terminated, as the case may be.

 

7.8                                 Certificate as to Certain Tax Matters
(FIRPTA).

 

With respect to ATS and each of the Acquired
Subsidiaries, statements, substantially in the form attached hereto as Exhibit L,
that meet the requirements of Sections 1.1445-2(c)(3) and 1.897-2(h) of
the Treasury Regulations and certify that such corporation is not and has not
been a United States real property holding corporation (as defined in Section 

 

81

 

897(c)(2) of
the Code) during the applicable period specified in Section 897(c)(1)(A)(ii) of
the Code.

 

7.9                                 Stock Consideration
Election; Acquisition Agreement; and Registration Rights Agreement.

 

If
either or both of the Founders elect to receive Stock Consideration then (a) an
Acquisition Agreement executed and delivered by each such Founder receiving
Stock Consideration and (b) the Registration Rights Agreement executed and
delivered by each of the such Founder receiving Stock Consideration.

 

7.10                           Option Holder Releases.

 

Delivery
of the fully executed Option Holder Releases.

 

7.11                           Change In Control
Releases.

 

Delivery
of the fully executed Change In Control Releases.

 

7.12                           Comfort Letters.

 

Delivery
of “Comfort letters” in customary form, from Grant Thornton, LLP dated the date
of the Proxy Materials and the Closing Date (or such other date, or dates
reasonably acceptable to FSAC) with respect to certain financial statements and
other financial information included in the Proxy Statement as contemplated by Section 5.19.

 

7.13                           City of Statesville
Release.

 

Delivery
of the fully executed City of Statesville Release.

 

7.14                           Stifel Release.

 

Delivery
of the fully executed Stifel Release.

 

7.15                           Updated Disclosure
Schedules.

 

At the
option of the Shareholders, delivery of the Updated Disclosure Schedules
pursuant to Section 5.15(b).

 

7.16                           Further Instruments.

 

Such
further instruments of assignments, conveyance or transfer or other documents
of further assurance as FSAC may reasonably request.

 

82

 

ARTICLE VIII

Deliveries by FSAC at Closing

 

On the
Closing Date, FSAC shall deliver or cause to be delivered to the Shareholders,
or to the Escrow Agent, as applicable:

 

8.1                                 Officer’s
Certificate.

 

A
certificate in the form attached hereto as Exhibit M, dated as
of the Closing Date, signed by a senior officer of FSAC certifying that:

 

(a)                                     FSAC
has performed its obligations and complied to the extent applicable with all
agreements, obligations, covenants and conditions required by this Agreement to
be so performed or complied with by FSAC at or prior to the Closing;

 

(b)                                    no
suit, action, investigation or other proceeding is pending or threatened before
any Governmental Authority that seeks to restrain, prohibit or obtain damages
or other relief in connection with this Agreement or consummation of the
Contemplated Transactions or that questions the validity or legality of such
transactions;

 

(c)                                     this
Agreement, the execution and delivery of all of the Transaction Documents and
the consummation of the Contemplated Transactions have been approved by FSAC’s
board of directors (with copies of all resolutions to be attached to the
certificate and to be certified as true and correct in the certificate); and

 

(d)                                    the
representations and warranties of FSAC set forth in this Agreement are true and
correct as of the Closing Date (unless the representation or warranty is made
as of a specific date).

 

8.2                                 Closing
Consideration and Escrow Deposits.

 

Pursuant
to Section 2.2, the Closing Consideration shall be delivered to the
Shareholders’ Representative and the Escrow Deposits shall be delivered to the
Escrow Agent.

 

8.3                                 Registration Rights
Agreement.

 

If
some or all of the Shareholders elect to receive Stock Consideration, then the
Registration Rights Agreement executed and delivered by FSAC.

 

8.4                                 Key Employee
Employment Agreements.

 

Execution
and delivery by FSAC of the Key Employee Employment Agreements.

 

8.5                                 Certain Transfers.

 

The
transfers contemplated by Section 5.17(c) shall have been completed.

 

83

 

8.6                                 Further Instruments.

 

Such
documents of further assurance as the Shareholders may reasonably request.

 

ARTICLE IX

Survival and Indemnification

 

9.1                                 Survival of
Representations and Warranties.

 

(a)                                  Except for the
Surviving Representations, the representations and warranties of the
Shareholders and Founders, as applicable and ATS on the one hand, and FSAC, on
the other hand, in this Agreement or in any certificate or document delivered
on or before the Closing Date, and subsections (a), (b) and (c) of Section 5.16,
shall survive any due diligence investigation by or on behalf of the parties
hereto and the Closing and shall remain effective until April 30, 2008
(the “Survival Date”). After the expiration of such period, the
representations and warranties shall expire and be of no further force and
effect except to the extent that a claim or claims shall have been asserted by
FSAC or the Shareholders, as the case may be, with respect thereto on or
before the expiration of such period, provided however that the following
representations and warranties (collectively the “Surviving Representations”)
shall survive the Survival Date until the date specified below.

 

(i)                                     Claims
for indemnification based on breaches of representations and warranties of the
several Shareholders in Section 3.11(a) (Title to Shares) shall
survive the Survival Date and claims for indemnification based on breaches of
such representations and warranties may be made at any time following the
Closing.

 

(ii)                                  Claims
for indemnification based on breaches of representations and warranties of the
Founders and ATS in Sections 3.21 (Compliance with Laws), 3.22 (Environmental
Matters), 3.24 (Absence of Certain Business Practices), 3.28 (ERISA) and 3.29
(Tax Matters) shall survive the Survival Date and claims for indemnification
based on breaches of such representations and warranties may be made up to
the date that is three (3) months after the expiration of the applicable
statute of limitations.

 

(iii)                               Claims
for indemnification based on breaches of representations and warranties of the
Founders and ATS in Section 3.18 (Federal and State Government Contracts)
with respect to cost reimbursable Government Contracts shall survive the
Survival Date and claims based on breaches of such representations and
warranties may be made up to the date thirty (30) days after the
applicable Governmental Authority has agreed on final indirect cost rates for
any fiscal year that began prior to the Closing Date.

 

(b)                                 The undersigned
acknowledge and agree that the covenants contained in this Agreement,
including, but not limited to the covenants contained in ARTICLE V above
shall survive Closing and are unaffected by this Section 9.1.

 

(c)                                  Any claim for
indemnification under Sections 9.2(a)(i)(A) or 9.2(b)(i)(A) after the
expiration of the applicable survival period above, shall be null and void.

 

84

 

9.2                                 Indemnification.

 

(a)                                  By FSAC.

 

(i)                                         Subject
to Section 9.2(g), FSAC shall protect, defend, indemnify and hold harmless
the Shareholders and their respective agents, representatives, successors and
assigns, estates and heirs (“Shareholders Indemnitees”) from and against
any losses, damages and expenses (including, without limitation, except as
provided in Section 9.2(d), reasonable counsel fees, costs and expenses
incurred in investigating and defending against the assertion of such
liabilities (collectively “Losses”)) that may be sustained,
suffered or incurred by the Shareholders Indemnities, and that are related to (A) any
breach by FSAC of its representations and warranties in this Agreement, (B) any
breach by FSAC of its covenants, agreements or obligations in, or under, this
Agreement (including, without limitation, payment of the Purchase
Consideration), (C) Taxes as provided in paragraph (ii) of this Section 9.2(a) or
(D) any liabilities of ATS or the Acquired Subsidiaries following the
Closing other than those liabilities for which the Shareholders have agreed to
indemnify FSAC pursuant to Section 9.2(b) of this Agreement.

 

(ii)                                      The
obligations of FSAC under paragraph (i) of this Section 9.2(a) shall
extend to (A) all Taxes with respect to taxable periods beginning after
the Closing Date (including any Taxes with respect to transactions properly
treated as occurring on the day after the Closing Date pursuant to Treasury
Regulations Section 1.1502-76(b)(1)(ii)(B) or any similar provision
of state, local or foreign law) and (B) all Taxes (other than federal
income Taxes) with respect to Straddle Periods.

 

(b)                                 By the Founders and
Shareholders.

 

(i)                                         Subject
to Sections 9.2(e), 9.2(f), 9.2(h), 9.2(i) and 9.3 the Founders jointly
and severally shall protect, defend, indemnify and hold harmless FSAC, ATS, the
Acquired Subsidiaries and their respective Affiliates, and their officers,
directors, employees, agents, representatives, successors and assigns (“FSAC
Indemnitees”) from and against any Losses that may be sustained,
suffered or incurred by FSAC Indemnitees and that are related to (A) any
breach by the Founders or ATS of their respective representations and
warranties in this Agreement, (B) any breach by the Founders or ATS of
covenants and obligations in or under this Agreement, including, but not
limited to the Founders obligations to make payments to FSAC pursuant to Section 2.3(e) and the Founders’ or ATS’
obligations pursuant to Article V (including but not limited to Founders’
obligations under Sections 5.7, 5.8, 5.11(a), 5.11(b) and 5.14) (C) Taxes
as provided in paragraph (ii) of this Section 9.2(b), to the extent
such Taxes have not been accrued or otherwise reserved for on the Closing
Balance Sheet (it being the intent of the parties that all of the provisions of
this Agreement shall be interpreted to avoid requiring the Shareholders to pay
(or receive a reduction in the Purchase Consideration) twice for the same Tax).

 

(ii)                                      The
obligations of the Founders under paragraph (i) of this Section 9.2(b) shall
extend to (A) all Taxes with respect to taxable periods ending on or prior
to the Closing Date and (B) all Taxes with respect to Straddle Periods to
the extent that such Taxes (1) are allocable to the period prior to
Closing pursuant to Section 5.11(b)(ii) and (2) have not been 

 

85

 

accrued or otherwise
reserved for on the Closing Balance Sheet. The obligations of the Founders
under paragraph (i) of this Section 9.2(b) shall also extend to
any Accounting Method Tax, reduced on a dollar for dollar basis by the NOLs
used by the Companies in the Tax period with respect to which such Accounting
Method Tax is to be paid, in excess of the Accounting Method Tax Escrow Funds
regardless of whether such Taxes are imposed for a taxable year beginning
before, on, or after the Closing Date. Any FSAC Indemnitee upon which such
Excess Accounting Method Tax is imposed shall be permitted, solely to the
extent Accounting Method Tax Escrow Funds are no longer available, to recover
such Taxes directly from the General Indemnity Escrow Account. Such obligations
shall be without regard to whether there was any breach of any representation
or warranty under Article III with respect to such Tax or any disclosures
that may have been made with respect to Article III or otherwise. The
indemnification obligations under this paragraph (ii) shall apply even if
the additional Tax liability results from the filing of a return or amended
return with respect to a pre-Closing Date transaction or period (or portion of
a period) by FSAC. FSAC shall not cause or permit ATS or any Acquired
Subsidiary to file an amended Tax Return with respect to any taxable period
ending on or prior to the Closing Date or any Straddle Period unless
(y) the Shareholders’ Representative consents in its sole discretion or
(z) FSAC obtains a legal opinion (in form and content reasonably
acceptable to the Shareholders’ Representative) from counsel reasonably
acceptable to the Shareholders’ Representative that such amendment is legally
required to be filed (provided, further, that such legal opinion may not
assume any facts that are disputed in good faith by the Shareholders’
Representative). In the event of any conflict between the provisions of this Section 9.2(b)(ii) and
any other provision of this Agreement, the provisions of this Section shall
control.

 

(iii)                                   Subject
to Sections 9.2(e), 9.2(f), 9.2(h), 9.2(i) and 9.3, each of the
Shareholders severally and not jointly shall protect, defend, indemnify and
hold harmless the FSAC Indemnitees from and against any Losses, that may be
sustained, suffered or incurred by FSAC Indemnitees and that are related to any
breach by such Shareholder of his or her representations and warranties in the
following Sections of this Agreement: 3.1(a), 3.2(b), 3.3(b), 3.4(b), 3.11(a),
3.32(b) and 3.33(b).

 

(c)                                  Procedure for
Third-Party Claims.

 

(i)                                         If
any Third-Party Claims shall be commenced, or any claim or demand shall be
asserted (other than audits or contests with Taxing Authorities relating to
Taxes), in respect of which the Indemnified Party proposes to demand
indemnification by Indemnifying Party under Sections 9.2(a) or 9.2(b), the
Indemnified Party shall notify the Indemnifying Party in writing of such demand
and the Indemnifying Party shall have the right to assume the entire control of
the defense, compromise or settlement thereof (including the selection of
counsel), subject to the right of the Indemnified Party to participate (with
counsel of its choice), but the fees and expenses of such additional counsel
shall be at the expense of the Indemnified Party. The Indemnifying Party will
not compromise or settle any such action, suit, proceeding, claim or demand
(other than, after consultation with Indemnified Party, an action, suit,
proceeding, claim or demand to be settled by the payment of money damages and/or
the granting of releases, provided that no such settlement or release
shall acknowledge the Indemnified Party’s liability or obligate FSAC with
respect to activities of ATS) without the prior written consent of the
Indemnified Party, which consent shall not be unreasonably withheld, or
delayed.

 

86

 

(ii)                                      Notwithstanding
anything to the contrary contained in this Section 9.2(c), FSAC at its
expense shall have the sole right to control and make all decisions regarding
interests in any Tax audit or administrative or court proceeding relating to
Taxes, including selection of counsel and selection of a forum for such
contest, provided, however, that in the event such audit or proceeding
relates to Taxes for which the Founders are responsible and have agreed to
indemnify FSAC, (A) FSAC, ATS, and the Shareholders shall cooperate in the
conduct of any audit or proceeding relating to such period, (B) the
Founders, acting through the Shareholders’ Representative, shall have the right
(but not the obligation) to participate in all facets of such audit or
proceeding at the Founders’ expense (including, but not limited to, the right
to be present at all meetings and on all telephone conversations and to receive
copies of all correspondence, emails and other forms of nonverbal
communications related to the Taxes in question), (C) FSAC shall not enter
into any agreement with the relevant taxing authority pertaining to such Taxes
without the written consent of the Shareholders’ Representative, which consent
shall not unreasonably be withheld, and (D) FSAC may, without the written
consent of the Founders, enter into such an agreement provided that FSAC shall
have agreed in writing to accept responsibility and liability for the payment
of such Taxes and to forego any indemnification under this Agreement with
respect to such Taxes.

 

(iii)                                   The
parties will keep each other informed as to matters related to any audit or
judicial or administrative proceedings involving Taxes for which
indemnification may be sought hereunder, including, without limitation,
any settlement negotiations. Refunds of Tax relating to periods ending prior to
the Closing Date (or to that portion of a Straddle Period that is prior to
Closing under the principles of Section 5.11(b)(ii)) shall be the property
of the Shareholders, but only to the extent that such refunds are not
attributable to (A) net operating loss or other carrybacks from periods
ending after the Closing Date, or (B) refund claims that are initiated by
FSAC (provided that FSAC gives the Shareholders’ Representative prior
notice of such possible claim and the Shareholders decline to pursue such
refund at its or their own expense); provided, however, that FSAC shall
in no event have an obligation to file or cause to be filed a claim for refund
with respect to any Taxes relating to any period.

 

(iv)                                  Any
indemnity payment or payment of Tax by the Founders or its or their Affiliates
as a result of any audit or contest shall be reduced by the present value of
the correlative amount, if any, by which any Tax of FSAC or its Affiliates is
or will be reduced for periods ending after the Closing Date as a result
thereof.

 

(v)                                     The
Indemnified Party shall cooperate fully in all respects with the Indemnifying Party
in any defense, compromise or settlement, subject to this Section 9.2(c) including,
without limitation, by making available all pertinent books, records and other
information and personnel under its control to the Indemnifying Party.

 

(d)                                 Procedure for
Direct Claims.

 

(i)                                         Any
Direct Claim shall be asserted by written notice given by the Indemnified Party
to the Indemnifying Party (each a “Direct Claim Notice”). The
Indemnifying Party shall have a period of twenty (20) Business Days from the
date of receipt (the “Direct Claim Notice Period”) within which to
respond to a Direct Claim Notice. If the Indemnifying Party does not respond in
writing within the Direct Claim Notice Period, then the Indemnifying 

 

87

 

Party shall be deemed to
have accepted responsibility for the claimed indemnification and shall have no
further right to contest the validity of that claim. If the Indemnifying Party
does respond in writing within the Direct Claim Notice Period, and rejects the
claim in whole or in part, the Indemnified Party shall be free to pursue all
remedies under Section 11.11. To the extent that any FSAC Indemnitees
prevail in a Direct Claim (or the Shareholders’ Representative concedes (on
behalf of the Shareholders), or otherwise does not timely respond to a Direct
Claim Notice made by FSAC) then the Direct Claim shall be satisfied from the
General Indemnity Escrow (and the Escrow Agent shall pay to FSAC from the
General Indemnity Escrow the amount of the Direct Claim) with no further action
required by the Shareholders, or the Shareholders’ Representative. In the event
that a Direct Claim is in excess of the General Indemnity Escrow, the Founders
shall be and remain jointly and severally liable for any or all of such excess,
subject to the limitations of this ARTICLE IX, including without
limitation, Sections 9.2(e) and 9.2(f).

 

(ii)                                      Costs
Related to Direct Claims. Notwithstanding anything in this Section 9.2
to the contrary, except as otherwise may be ordered by a court of
competent jurisdiction, the Shareholders Indemnitees and FSAC Indemnitees shall
each bear their own costs, including counsel fees and expenses, incurred in
connection with Direct Claims against FSAC and the Shareholders, respectively
hereunder that are not based upon claims asserted by third parties.

 

(e)                                  Calculation of
Amount of Claims and Losses. The amount of any claims or losses subject to
indemnification under Section 9.2(b) shall be calculated net of any
amounts recovered by FSAC or its Affiliates (including ATS after the Closing)
under applicable insurance policies held by FSAC or its Affiliates, and FSAC
agrees to make or cause to be made all reasonable claims for insurance under
such policies that may be applicable to the matter giving rise to the
indemnification claim hereunder. The amount of any claims or losses subject to
indemnification under Section 9.2(b) shall be calculated net of the
present value of any Tax benefits to FSAC or its Affiliates (including ATS and
the Acquired Subsidiaries after the Closing) resulting from the matter giving
rise to the indemnification claim hereunder (computed at the highest effective
marginal tax rates at which FSAC is then paying Taxes and limited to the extent
that the Tax Benefits can be utilized by FSAC).

 

(f)                                    Limitations on
Rights of FSAC Indemnitees. Rights of FSAC Indemnitees to indemnification
by the Founders and the several Shareholders for breaches of representations
and warranties hereunder shall be subject to the limitations that (i) FSAC
Indemnitees shall not be entitled to indemnification with respect to a claim or
claims of breach of representation and warranty by the Founders or Shareholders
unless the aggregate amount of all such claims made thereunder exceed $375,000,
in which event the indemnity provided for in this Section 9.2 shall be
effective with respect to the total amount of such damages in excess of
$375,000, and (ii) the Shareholders’ aggregate maximum liability to FSAC
Indemnitees under this Article IX shall not exceed Eleven Million Five
Hundred Thousand Dollars $11,500,000; provided, however, that
rights of FSAC Indemnitees to indemnification by the Founders and the several
Shareholders, as applicable, for breaches of representations and warranties
based on facts and circumstances reflected in the Updated Disclosure Schedules,
if any, but not in the Disclosure Schedules dated as of the date of this
Agreement, shall be effective only to the extent such Losses constitute
Disclosure Schedule Update Losses, and such Disclosure Schedule Update
Losses shall be subject to the limitations set forth in clauses (i) and (ii) of
this sentence.

 

88

 

The aforementioned
limitations shall not apply to the “Non-Threshold Indemnifications” as hereinafter
defined. For purposes of this Agreement, the term “Non-Threshold
Indemnifications” shall mean and refer collectively to indemnification
liabilities of the Shareholders pursuant to claims based (i) on the breach
of Sections 2.3(e), 5.7, 5.8, 5.11(a), 5.11(b), 5.14, or 5.16(d) (provided
that claims based on a breach of Section 5.16(d) shall be subject to
the $11,500,000 limitation set forth above); or (ii) the representations
and warranties of the Shareholders and ATS pursuant to Section 3.11
(Title), Section 3.28 (ERISA), Section 3.29 (Taxes), D & O
Indemnification Claims pursuant to Section 3.25 or clauses (B), or (C) of
Section 9.2(b)(i); or (iii) claims based on fraud, intentional
misrepresentation or criminal acts on the part of the Shareholders, ATS,
the Acquired Subsidiaries and their respective officers, directors, agents,
representative and trustees.

 

(g)                                 Limitations on
Rights of Shareholders Indemnitees. The rights of Shareholders Indemnitees
to indemnification by FSAC for breaches of representations and warranties
hereunder shall be subject to the limitation that Shareholders Indemnitees
shall not be entitled to indemnification with respect to a claim or claims for
a breach of representation and warranty by FSAC unless the aggregate of damages
with respect to all such claims exceeds $100,000, in which event the indemnity
provided for in this Section 9.2 shall be effective with respect to the
amount of such damages. The aforementioned limitations shall not apply to the
indemnification liabilities of FSAC with respect to claims based on fraud,
intentional misrepresentation, or criminal acts on the part of FSAC.

 

(h)                                 Limitation on
Rights of Shareholders. Notwithstanding anything to the contrary, the
Shareholders each acknowledge and agree that that they shall have no right to
make a claim against ATS or any Acquired Subsidiaries pursuant to any indemnity
provision or agreement or otherwise in respect of Claims of FSAC Indemnitees
pursuant to Section 9.2(b).

 

(i)                                     Limitations on
Remedies. No party hereto shall be liable to the other for indirect,
special, incidental, consequential or punitive damages claimed by such other
party resulting from such first party’s breach of its obligations, agreements,
representations or warranties hereunder, provided that nothing hereunder shall
preclude any recovery by an Indemnitee against an Indemnitor for third party
claims.

 

9.3                                 General Indemnity
Escrow Account.

 

(a)                                  Pursuant
to Section 2 and the General Indemnity Escrow Agreement, at the Closing,
FSAC shall deliver to the Escrow Agent the General Indemnity Escrow Deposit and
the Escrow Agent shall set up an escrow account pursuant to the terms of the
General Indemnity Escrow Agreement to secure the Founders’ indemnification
obligations under this Article IX. Within thirty (30) day following the
first (1st) anniversary of the Closing Date (the “Initial Escrow
Distribution Date”), the parties to the Escrow Agreement shall instruct the
Escrow Agent, pursuant to the terms of the Escrow Agreement, to deliver to the
accounts designated by the Shareholders’ Representative an amount equal to the
Initial Escrow Distribution (as hereinafter defined), if any. For purposes of
this Agreement, the term “Initial Escrow Distribution” shall mean the
General Indemnity Escrow Deposit (including any undistributed earnings received
thereon) less the sum of:  (i) Two
Million Dollars ($2,000,000), (ii) any disbursements previously made from
the General Indemnity Escrow to FSAC or the Escrow Agent, and (iii) an 

 

89

 

amount equal to the total
of all then outstanding claims by FSAC Indemnitees. The remaining balance of
the General Indemnity Escrow, if any, less the sum of the total of all then
outstanding indemnity claims by FSAC Indemnitees (including amounts offset
pursuant to Section 9.4 that have not been resolved), shall be delivered
by the Escrow Agent to the Shareholders’ Representative on April 30, 2008
to the accounts designated by the Shareholders’ Representative in accordance
with the terms of the General Indemnity Escrow Agreement. The Shareholders’
Representative shall be responsible for directing the distribution of the
General Indemnity Escrow (pro-rata in proportion to the Founders’ Proportionate
Interests) and the Escrow Agent shall be entitled to fully rely on such
directions. Each of the parties hereto agrees that they shall promptly sign
joint instructions (i) authorizing the Escrow Agent to release the
appropriate funds on the Initial Escrow Distribution Date and April 30,
2008 and (ii) authorizing the Escrow Agent to release funds subject to
outstanding claims (including funds held as a result of offsets under Section 9.4)
as those claims are resolved pursuant to Section 11.11.

 

(b)                                 Any
earnings on the General Indemnity Escrow Funds, net of escrow expenses and
taxes, shall be paid, pro rata, to the parties receiving distributions from
General Indemnity Escrow Account.

 

9.4                                 Right of Set Off.

 

In
addition to its rights against the General Indemnity Escrow, if prior to the
Survival Date, FSAC makes one or more claims under Section 9.2(b) that
are in excess of the then balance of the General Indemnity Escrow and there
remain funds due under the Earn Out then, payments of the Earn Out otherwise
due the Founders can be withheld until those claims are resolved pursuant to Section 11.11
and if resolved in favor of FSAC can be set off against and satisfied from
payment of the Earn Out that have been held pursuant to this Section 9.4
that are to be subsequently paid. Any portion of the Earn Out that is withheld
by FSAC under this Section 9.4 shall be deposited by FSAC with Escrow
Agent and held by Escrow Agent in the General Indemnity Escrow until the claims
giving rise to the offset are resolved pursuant to Section 11.11.

 

9.5                                 Effect of Investigation.

 

The
right to indemnification or other remedies based on any representation,
warranty, covenant or obligation of the Shareholders or ATS contained in or
made pursuant to this Agreement or the Transaction Documents shall not be
affected by any investigation conducted with respect to, or any knowledge
acquired (or capable of being acquired) at any time, whether before or after
the execution and delivery of this Agreement or the Closing Date occurs, with
respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant or obligation. The waiver of any condition
to the obligation of FSAC to consummate the Contemplated Transactions, where
such condition is based on the accuracy of any representation or warranty, or on
the performance of or compliance with any covenant or obligation, shall not
affect the right to indemnification or other remedies based on such
representation, warranty, covenant or obligation.

 

90

 

ARTICLE X

Termination

 

10.1                           Termination.

 

This
Agreement may be terminated and the transactions contemplated hereby may be
abandoned:

 

(a)                                  at any time, by
mutual written agreement of the Shareholders and FSAC;

 

(b)                                 at any time after September 30,
2006, by either the Shareholders or FSAC upon five business days’ prior written
notice to the other party, if the Closing shall not have occurred for any
reason other than a breach of this Agreement by the terminating party;

 

(c)                                  by FSAC, if there has
been a material violation or breach by the Shareholders of any agreement,
representation or warranty contained in the Agreement, that has rendered the
satisfaction of any condition to the obligations of FSAC impossible and such
violation or breach has not been waived by FSAC;

 

(d)                                 by the Shareholders,
if there has been a material violation or breach by FSAC of any agreement,
representation or warranty contained in the Agreement, that has rendered the
satisfaction of any condition to the obligations of the Shareholders impossible
and such violation or breach has not been waived by the Shareholders; or

 

(e)                                  by either FSAC or the
Shareholders if a court of competent jurisdiction shall have issued an order
permanently restraining or prohibiting the transactions contemplated by the
Agreement, and such order shall have become final and nonappealable.

 

10.2                           Procedure and Effect of
Termination.

 

In the
event of the termination of this Agreement and the abandonment of the
transactions contemplated hereby, written notice thereof shall be given by a
terminating party to the other parties and this Agreement shall terminate and
the transactions contemplated hereby shall be abandoned without further action
by the Shareholders or FSAC. If this Agreement is terminated pursuant to Section 10.1:

 

(a)                                  FSAC shall upon
written request from the Shareholders return all documents, work papers and
other materials (and all copies thereof) obtained from the Shareholders or ATS
relating to the transactions contemplated hereby, whether so obtained before or
after the execution hereof, to the party furnishing the same, and all
confidential information received by FSAC with respect to ATS shall be treated
in accordance with Section 5.2 and the Confidentiality Agreement referred
to in such Section;

 

(b)                                 At the option of the
Shareholders, all filings, applications and other submissions made pursuant to
Sections 5.3 and 5.4 shall, to the extent practicable, be withdrawn from the
agency or other Person to which made;

 

91

 

(c)                                  The obligations
provided for in this Section 10.2, Sections 5.2 and 5.7, and in the
Confidentiality Agreement shall survive any such termination of this Agreement;
and

 

(d)                                 Notwithstanding
anything in this Agreement to the contrary, the termination of this Agreement
shall not relieve any party from liability for willful breach of this
Agreement.

 

ARTICLE XI

Miscellaneous

 

11.1                           Further Assurances.

 

At any
time and from time to time after the Closing Date, the Shareholders, the
Shareholders’ Representative, ATS and any or all of the Acquired Subsidiaries
will, upon the request of FSAC, and FSAC will, upon the request of the
Shareholders or the Shareholders’ Representative perform, execute, acknowledge
and deliver all such further acts, deeds, assignments, transfers, conveyances,
powers of attorney and assurances as may be reasonably required by any of
them, to effect or evidence the Contemplated Transactions.

 

11.2                           Notices.

 

All
necessary notices, demands and requests required or permitted to be given hereunder
shall be in writing and addressed as follows:

 

	
   

  	
  If to
  Shareholder’s

  	
   

  
	
   

  	
  Representative

  	
  Claude Rumsey

  
	
   

  	
   

  	
  2021 George
  Washington Road

  
	
   

  	
   

  	
  Vienna, Virginia
  22182

  
	
   

  	
   

  	
  Fax: None

  
	
   

  	
   

  	
   

  
	
   

  	
  With a copy to:

  	
  Jeffrey R.
  Houle, Esquire

  
	
   

  	
   

  	
  Greenberg
  Traurig, LLP

  
	
   

  	
   

  	
  1750 Tysons
  Boulevard

  
	
   

  	
   

  	
  McLean, Virginia
  22102

  
	
   

  	
   

  	
  Fax: (703)
  714-8336

  
	
   

  	
   

  	
   

  
	
   

  	
  If to FSAC:

  	
  Federal Services
  Acquisition Corporation

  
	
   

  	
   

  	
  900 Third
  Avenue, 33rd Floor

  
	
   

  	
   

  	
  New York, New
  York 10022

  
	
   

  	
   

  	
  Attn: Peter M. Schulte

  
	
   

  	
   

  	
  Fax: (212) 829-0553

  

 

92

 

	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  James J. Maiwurm

  
	
   

  	
   

  	
  Squire, Sanders &
  Dempsey L.L.P.

  
	
   

  	
   

  	
  8000 Towers
  Crescent Drive, Suite 1400

  
	
   

  	
   

  	
  Tysons Corner,
  VA 22182-2700

  
	
   

  	
   

  	
  Fax: (703)
  720-7801

  

 

Notices shall be
delivered by a recognized courier service or by facsimile transmission and
shall be effective upon receipt, provided that notices shall be presumed to
have been received:

 

(a)                                  if given by courier
service, on the second Business Day following delivery of the notice to a
recognized courier service before the deadline
for delivery on or before the second Business Day following delivery to such
service, delivery costs prepaid, addressed as aforesaid; and

 

(b)                                 if given by facsimile
transmission, on the next Business Day, provided that the facsimile
transmission is confirmed by answer back, written evidence of electronic
confirmation of delivery, or oral or written acknowledgment of receipt thereof
by the addressee.

 

From time to time, either
party may designate a new address or facsimile number for the purpose of
notice hereunder by notice to the other party in accordance with the provisions
of this Section 11.2.

 

11.3                           Governing Law.

 

This
Agreement shall in all respects be governed by, and construed in accordance
with, the laws (excluding conflict of laws rules and principles) of the
Commonwealth of Virginia applicable to agreements made and to be performed
entirely within the Commonwealth of Virginia, including all matters of
construction, validity and performance.

 

11.4                           Entire Agreement.

 

This
Agreement, together with the Exhibits and Schedules hereto and the other
Transaction Documents, constitutes the entire agreement of the parties relating
to the subject matter hereof and supersedes all prior contracts or agreements,
whether oral or written. There are no representations, agreements, arrangements
or understandings, oral or written, between or among the parties relating to
the subject matter of this Agreement that are not fully expressed in this
Agreement.

 

11.5                           Severability.

 

Should
any provision of this Agreement or the application thereof to any person or
circumstance be held invalid or unenforceable to any extent: (a) such
provision shall be ineffective to the extent, and only to the extent, of such
unenforceability or prohibition and shall be enforced to the greatest extent
permitted by Law; (b) such unenforceability or prohibition in any
jurisdiction shall not invalidate or render unenforceable such provision as
applied (i) to other 

 

93

 

persons or circumstances
or (ii) in any other jurisdiction; and (c) such unenforceability or
prohibition shall not affect or invalidate any other provision of this
Agreement.

 

11.6                           Amendment.

 

Neither
this Agreement nor any of the terms hereof may be terminated, amended,
supplemented or modified orally, but only by an instrument in writing signed by
the party against which the enforcement of the termination, amendment,
supplement, or modification shall be sought.

 

11.7                           Effect of Waiver or
Consent.

 

No
waiver or consent, express or implied, by any person to or of any breach or
default by any party in the performance by such party of its obligations
hereunder shall be deemed or construed to be a consent or waiver to or of any
other breach or default in the performance by such party of the same or any
other obligations of such party hereunder. No single or partial exercise of any
right or power, or any abandonment or discontinuance of steps to enforce any
right or power, shall preclude any other or further exercise thereof or the
exercise of any other right or power. Failure on the part of a party to
complain of any act of any party or to declare any party in default,
irrespective of how long such failure continues, shall not constitute a waiver
by such person of its rights hereunder until the applicable statute of
limitation period has run.

 

11.8                           Rights and Remedies
Cumulative.

 

(a)                                  Except where other
remedies are expressly provided herein, indemnifications under ARTICLE IX
shall constitute the sole remedy for Losses identifiable pursuant to Sections
9.2(a)(i), 9.2(b)(i), or 9.2(b)(iii) except with respect to fraud or
intentional misconduct by a party. To the extent this Agreement provides for
other remedies in addition to the indemnifications under ARTICLE IX, then
such other remedies together with indemnifications under ARTICLE IX shall
be cumulative, and the use of any one such right or remedy by any party shall
not preclude or waive the right to use any or all other such remedies.

 

(b)                                 Notwithstanding
anything in this Agreement to the contrary, for the avoidance of doubt, and in
addition to any other limitations on liability in this Agreement, in no event
shall Harry Katrivanos have any liability under or pursuant to this Agreement
except with respect to his individual representations and warranties under
Sections 3.1(a) (Organization and Power), 3.2(b) (Authorization and
Enforceability), 3.3(b) (No Violation), 3.4(b) (Consents), 3.11(a) (Title
to Shares), 3.32(b) (Powers of Attorney) and 3.33(b) (No Broker), and
his covenants and obligations set forth in Sections 5.3 (Best Efforts), 5.12
(Public Announcements) and 5.15(a) (Notification of Certain Matters).

 

11.9                           Parties in Interest;
Limitation on Rights of Others.

 

The
terms of this Agreement shall be binding upon, and inure to the benefit of, the
parties hereto and their respective legal representatives, successors and
assigns. Nothing in this Agreement, whether express or implied, shall be
construed to give any person (other than the 

 

94

 

parties hereto and their
respective legal representatives, successors and assigns and as expressly
provided herein and to the extent provided in ARTICLE IX, the Indemnified
Parties) any legal or equitable right, remedy or claim under or in respect of
this Agreement or any covenants, conditions or provisions contained herein, as
a third party beneficiary or otherwise.

 

11.10                     Assignability.

 

This
Agreement shall not be assigned by any party hereto without the prior written
consent of the other party hereto, provided, however, that the prior
written consent of the Shareholders’ Representative shall not be required with
respect to (a) any assignment by FSAC of its rights and obligations under
this Agreement to an Affiliate of FSAC so long as such assignment does not
relieve FSAC of its obligations hereunder; or (b) any collateral
assignment of FSAC’s rights and remedies under this Agreement to any lender
under credit and collateral agreements, as such agreements may be amended,
modified or replaced from time to time, so long as such lender does not have
the right to exercise any of FSAC’s rights and remedies under this Agreement in
the absence a default by FSAC under the applicable credit and collateral
documents. Each of the Shareholders hereby agrees to execute and deliver (and
authorize the Shareholders’ Representative to execute and deliver) such
documents, instruments and agreements as such lender may reasonably
require to confirm, reaffirm or perfect such collateral assignment. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.

 

11.11                     Dispute Resolution and
Arbitration.

 

In the
event that any dispute arises among the parties pertaining to the subject
matter of this Agreement, and the parties, through the senior management of
FSAC and the Shareholders’ Representative, are unable to resolve such dispute
within a reasonable time through negotiations and mediation efforts, such
dispute shall be resolved as set forth in this Section 11.11.

 

(a)                                  The procedures of
this Section 11.11 may be initiated by a written notice (“Dispute
Notice”) given by one party (“Claimant”) to the other, but not
before thirty (30) days have passed during which the parties have been unable
to reach a resolution as described (unless any party would be materially
prejudiced by such delay). The Dispute Notice shall be accompanied by (i) a
statement of the Claimant describing the dispute in reasonable detail and (ii) documentation,
if any, supporting the Claimant’s position on the dispute. Within twenty (20)
days after the other party’s (“Respondent”) receipt of the Dispute
Notice and accompanying materials, the parties shall submit the dispute to
mediation in the Washington, D.C. area under the rules of the American
Arbitration Association. All negotiations and mediation procedures pursuant to
this paragraph (a) shall be confidential and treated as compromise and
settlement negotiations and shall not be admissible in any arbitration or other
proceeding.

 

(b)                                 If the dispute is not
resolved as provided in paragraph (a) within sixty (60) days after the
Respondent’s receipt of the Dispute Notice, the dispute shall be resolved by
binding arbitration. Within the sixty-day period referred to in the immediately
preceding sentence, the parties shall agree on a single arbitrator to resolve
the dispute. If the parties fail to agree on the designation of an arbitrator
within said sixty-day period, the American Arbitration 

 

95

 

Association in the
Washington, D.C. area shall be requested to designate the single arbitrator. If
the arbitrator becomes disabled, resigns or is otherwise unable to discharge
the arbitrator’s duties, the arbitrator’s successor shall be appointed in the
same manner as the arbitrator was appointed.

 

(c)                                  Except as otherwise
provided in this Section 11.11, the arbitration shall be conducted in
accordance with the Commercial Rules of the American Arbitration
Association, which shall be governed by the United States Arbitration Act.

 

(d)                                 Any resolution reached
through mediation and any award arising out of arbitration (i) shall be
binding and conclusive upon the parties; (ii) shall be limited to a
holding for or against a party, and affording such monetary remedy as is deemed
equitable, just and within the scope of this Agreement; (iii) may not
include special, incidental, consequential or punitive damages; (iv) may in
appropriate circumstances include injunctive relief; and (v) may be
entered in court in accordance with the United States Arbitration Act.

 

(e)                                  Arbitration shall not
be deemed a waiver of any right of termination under this Agreement, and the
arbitrator is not empowered to act or make any award other than based solely on
the rights and obligations of the parties prior to termination in accordance
with this Agreement.

 

(f)                                    The arbitrator may not
limit, expand, or otherwise modify the terms of this Agreement.

 

(g)                                 The laws of the
Commonwealth of Virginia shall apply to any mediation, arbitration, or
litigation arising under this Agreement.

 

(h)                                 Each party shall bear
its own expenses incurred in any mediation, arbitration or litigation, but any
expenses related to the compensation and the costs of any mediator or
arbitrator shall be borne equally by the parties to the dispute.

 

(i)                                     A request by a
party to a court for interim measures necessary to preserve a party’s rights
and remedies for resolution pursuant to this Section 11.11 shall not be
deemed a waiver of the obligation to mediate or of the agreement to arbitrate.

 

(j)                                     The parties, their
representatives, other participants and the mediator or arbitrator shall hold
the existence, content and result of mediation or arbitration in confidence.

 

11.12                     Jurisdiction; Court Proceedings;
Waiver of Jury Trial.

 

Subject
to the provisions of Section 11.11, any suit, action or proceeding against
any party to this Agreement arising out of or relating to this Agreement shall
be brought in any Federal or state court located in the Commonwealth of
Virginia and each of the parties hereby submits to the exclusive jurisdiction
of such courts for the purpose of any such suit, action or proceeding. A final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by Law. To the extent that service of process by mail is permitted by
applicable Law, each party irrevocably consents to the service of process in
any such suit, action or proceeding in such courts by the mailing of such
process by registered or certified mail, postage prepaid, at its 

 

96

 

address for notices
provided for herein. Each party irrevocably agrees not to assert (a) any
objection that it may ever have to the laying of venue of any such suit,
action or proceeding in any Federal or state court located in the Commonwealth
of Virginia and (b) any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum. Each party
waives any right to a trial by jury, to the extent lawful.

 

11.13                     No Other Duties.

 

The
only duties and obligations of the parties are as specifically set forth in
this Agreement, and no other duties or obligations shall be implied in fact,
law or equity, or under any principle of fiduciary obligation.

 

11.14                     Reliance on Counsel and Other
Advisors.

 

Each
party has consulted such legal, financial, technical or other expert as it
deems necessary or desirable before entering into this Agreement. Each party
represents and warrants that it has read, knows, understands and agrees with
the terms and conditions of this Agreement.

 

11.15                     Waiver of Rights Against
Company’s Trust Fund.

 

ATS
and each of the Shareholders acknowledges that they have read FSAC’s Final
Prospectus, dated October 19, 2005 (“Prospectus”) and understands that
FSAC has established a trust fund, initially in an amount of $117,180,000, for
the benefit of FSAC’s public stockholders and that FSAC may disburse
monies from the trust fund only (a) to FSAC’s public stockholders in the
event such stockholders elect to convert their shares, (b) to FSAC’s
public stockholders upon its liquidation if FSAC fails to consummate a business
combination or (c) after or concurrently with the consummation of a
business combination. ATS and each of the Shareholders (i) hereby agrees
that from the period commencing from the Effective Date through the Closing he,
she or it do not have any right, title, interest or claim of any kind in or to
any monies in the trust fund for so long as they have not been distributed or
required to be distributed and (ii) will not seek recourse against monies
in the trust fund consistent with clause (i) of this sentence. This Section shall
survive the termination of this Agreement but shall terminate and be of no
further force and effect upon Closing.

 

11.16                     Counterparts.

 

This
Agreement may be executed in several counterparts, all of which taken
together shall be deemed one and constitute a single instrument. Any manual
signature upon this Agreement that is faxed, scanned or photocopied shall for
all purposes have the same validity effect and admissibility in evidence as an
original signature and the parties hereby waive any objection to the contrary.

 

[Signatures on Following Page]

 

97

 

IN
WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
duly executed and delivered in its name and on its behalf, all as of the day
and year first above written.

 

	
   

  	
   

  	
  FEDERAL
  SERVICES

  
	
   

  	
   

  	
  ACQUISITION
  CORPORATION,

  
	
   

  	
   

  	
  a Delaware
  corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
    /s/
  Joel R. Jacks

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Joel R. Jacks

  	
   

  
	
   

  	
   

  	
  Title:

  	
    Chairman
  and CEO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ADVANCED
  TECHNOLOGY

  
	
   

  	
   

  	
  SYSTEMS, INC.,

  
	
   

  	
   

  	
  a Virginia
  corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
    /s/
  Claude Rumsey

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Claude Rumsey

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice-Chairman

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SHAREHOLDERS:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
    /s/
  Delmar Lewis

  	
   

  
	
   

  	
   

  	
  Delmar Lewis

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
    /s/
  Claude Rumsey

  	
   

  
	
   

  	
   

  	
  Claude Rumsey

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
    /s/
  Harry Katrivanos

  	
   

  
	
   

  	
   

  	
  Harry Katrivanos

  
							

 

 

	
   

  	
   

  	
  SHAREHOLDERS’
  REPRESENTATIVE:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
    /s/
  Claude Rumsey

  	
   

  
	
   

  	
   

  	
  Claude Rumsey

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