Document:

Exhibit
10.4

 

LOAN AND SECURITY
AGREEMENT

by and among

THE FINANCIAL
INSTITUTIONS NAMED HEREIN,

as Lenders,

CONGRESS FINANCIAL
CORPORATION,

as Administrative
and Collateral Agent,

CONGRESS FINANCIAL
CORPORATION

and GOLDMAN SACHS CREDIT PARTNERS, L.P.,

as Co-Lead
Arrangers and Co-Syndication Agents,

BANK OF AMERICA,
N.A. 

and WELLS FARGO FOOTHILL, LLC,

as Documentation
Agents,

and

BLUELINX
CORPORATION,

as Borrower

Dated:  May 7, 2004

 

 

 

	
   

  	
   

  	
  Page

  
	
  SECTION 1.

  	
  DEFINITIONS

  	
  1

  
	
  SECTION 2.

  	
  CREDIT
  FACILITIES

  	
  30

  
	
   

  	
  2.1

  	
  Revolving Loans

  	
  30

  
	
   

  	
  2.2

  	
  Letter of Credit
  Accommodations

  	
  31

  
	
   

  	
  2.3

  	
  Commitments

  	
  34

  
	
   

  	
  2.4

  	
  Bank Products

  	
  34

  
	
  SECTION 3.

  	
  INTEREST AND
  FEES

  	
  35

  
	
   

  	
   

  	
  Interest

  	
  35

  
	
   

  	
   

  	
  Changes in
  Laws and Increased Costs of Loans

  	
  37

  
	
   

  	
   

  	
  Fees

  	
  39

  
	
  SECTION 4.

  	
  CONDITIONS PRECEDENT
  AND SUBSEQUENT

  	
  40

  
	
   

  	
  4.1

  	
  Conditions
  Precedent to Initial Revolving Loans and Letter of Credit Accommodations

  	
  40

  
	
   

  	
  4.2

  	
  Conditions
  Precedent to All Revolving Loans and Letter of Credit Accommodations

  	
  44

  
	
  SECTION 5.

  	
  GRANT AND
  PERFECTION OF SECURITY INTEREST

  	
  44

  
	
   

  	
  5.1

  	
  Grant of Security Interest

  	
  44

  
	
   

  	
  5.2

  	
  Perfection of Security
  Interests

  	
  46

  
	
  SECTION 6.

  	
  COLLECTION AND
  ADMINISTRATION

  	
  50

  
	
   

  	
  6.1

  	
  Borrower’s
  Loan Account

  	
  50

  
	
   

  	
  6.2

  	
  Statements

  	
  51

  
	
   

  	
  6.3

  	
  Collection
  of Accounts

  	
  51

  
	
   

  	
  6.4

  	
  Payments

  	
  52

  
	
   

  	
  6.5

  	
  Taxes

  	
  55

  
	
   

  	
  6.6

  	
  Authorization to Make Loans

  	
  58

  
	
   

  	
  6.7

  	
  Use of Proceeds

  	
  58

  
	
   

  	
  6.8

  	
  Pro Rata
  Treatment

  	
  58

  
	
   

  	
  6.9

  	
  Sharing
  of Payments, Etc

  	
  59

  
	
   

  	
  6.10

  	
  Settlement
  Procedures

  	
  60

  
	
   

  	
  6.11

  	
  Obligations
  Several; Independent Nature of Lenders’ Rights.

  	
  62

  
	
  SECTION
  7.

  	
  COLLATERAL
  REPORTING AND COLLATERAL COVENANTS

  	
  62

  
					

 

-i-

 

	
   

  	
  7.1

  	
  Collateral
  Reporting

  	
  62

  
	
   

  	
  7.2

  	
  Accounts
  Covenants

  	
  63

  
	
   

  	
  7.3

  	
  Inventory
  Covenants

  	
  64

  
	
   

  	
  7.4

  	
  Equipment and
  Real Property Covenants

  	
  65

  
	
   

  	
  7.5

  	
  Power of
  Attorney

  	
  65

  
	
   

  	
  7.6

  	
  Right to Cure

  	
  66

  
	
   

  	
  7.7

  	
  Access to
  Premises

  	
  67

  
	
  SECTION 8.

  	
  REPRESENTATIONS AND
  WARRANTIES

  	
  67

  
	
   

  	
  8.1

  	
  Corporate
  Existence; Power and Authority

  	
  67

  
	
   

  	
  8.2

  	
  Name; State of Organization; Chief Executive
  Office; Collateral Locations

  	
  68

  
	
   

  	
  8.3

  	
  Financial
  Statements

  	
  68

  
	
   

  	
  8.4

  	
  Priority of
  Liens; Title to Properties

  	
  68

  
	
   

  	
  8.5

  	
  Tax Returns

  	
  68

  
	
   

  	
  8.6

  	
  Litigation

  	
  69

  
	
   

  	
  8.7

  	
  Compliance
  with Other Agreements and Applicable Laws

  	
  69

  
	
   

  	
  8.8

  	
  Environmental
  Compliance

  	
  69

  
	
   

  	
  8.9

  	
  Employee
  Benefits

  	
  70

  
	
   

  	
  8.10

  	
  Bank Accounts

  	
  71

  
	
   

  	
  8.11

  	
  Intellectual
  Property

  	
  71

  
	
   

  	
  8.12

  	
  Subsidiaries;
  Affiliates; Capitalization; Solvency

  	
  71

  
	
   

  	
  8.13

  	
  Labor Disputes

  	
  72

  
	
   

  	
  8.14

  	
  Restrictions on
  Subsidiaries

  	
  72

  
	
   

  	
  8.15

  	
  Material
  Contracts

  	
  72

  
	
   

  	
  8.16

  	
  Payable
  Practices

  	
  73

  
	
   

  	
  8.17

  	
  Acquisition of
  Purchased Assets

  	
  73

  
	
   

  	
  8.18

  	
  Accuracy and
  Completeness of Information

  	
  73

  
	
   

  	
  8.19

  	
  Survival
  of Warranties; Cumulative

  	
  74

  
	
  SECTION 9.

  	
  AFFIRMATIVE AND
  NEGATIVE COVENANTS

  	
  74

  
	
   

  	
  9.1

  	
  Maintenance
  of Existence

  	
  74

  
	
   

  	
  9.2

  	
  New
  Collateral Locations

  	
  74

  
					

 

-ii-

 

	
   

  	
  9.3

  	
  Compliance
  with Laws, Regulations, Etc

  	
  75

  
	
   

  	
  9.4

  	
  Payment of Taxes and Claims

  	
  76

  
	
   

  	
  9.5

  	
  Insurance

  	
  76

  
	
   

  	
  9.6

  	
  Financial
  Statements and Other Information

  	
  77

  
	
   

  	
  9.7

  	
  Sale of Assets,
  Consolidation, Merger, Dissolution, Etc

  	
  79

  
	
   

  	
  9.8

  	
  Encumbrances

  	
  80

  
	
   

  	
  9.9

  	
  Indebtedness

  	
  82

  
	
   

  	
  9.10

  	
  Loans, Investments, Etc

  	
  85

  
	
   

  	
  9.11

  	
  Dividends and Redemptions

  	
  86

  
	
   

  	
  9.12

  	
  Transactions with
  Affiliates

  	
  87

  
	
   

  	
  9.13

  	
  Compliance
  with ERISA

  	
  88

  
	
   

  	
  9.14

  	
  End
  of Fiscal Years and Fiscal Quarters; Changes in Accounting Practices

  	
  88

  
	
   

  	
  9.15

  	
  Change in
  Business

  	
  88

  
	
   

  	
  9.16

  	
  Limitation
  of Restrictions Affecting Subsidiaries

  	
  88

  
	
   

  	
  9.17

  	
  Financial
  Covenants

  	
  89

  
	
   

  	
  9.18

  	
  License
  Agreements

  	
  89

  
	
   

  	
  9.19

  	
  After Acquired Real
  Property

  	
  90

  
	
   

  	
  9.20

  	
  Costs and
  Expenses

  	
  90

  
	
   

  	
  9.21

  	
  Further
  Assurances

  	
  91

  
	
  SECTION 10.

  	
  EVENTS OF DEFAULT AND
  REMEDIES

  	
  92

  
	
   

  	
  10.1

  	
  Events of
  Default

  	
  92

  
	
   

  	
  10.2

  	
  Remedies

  	
  94

  
	
  SECTION 11.

  	
  JURY TRIAL
  WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW

  	
  97

  
	
   

  	
  11.1

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

  	
  97

  
	
   

  	
  11.2

  	
  Waiver of
  Notices

  	
  98

  
	
   

  	
  11.3

  	
  Amendments
  and Waivers

  	
  99

  
	
   

  	
  11.4

  	
  Confidentiality

  	
  101

  
	
   

  	
  11.5

  	
  Other Waivers

  	
  102

  
	
   

  	
  11.6

  	
  Indemnification

  	
  102

  
					

 

-iii-

 

	
  SECTION 12.

  	
  THE
  ADMINISTRATIVE AND COLLATERAL AGENT

  	
  102

  
	
   

  	
  12.1

  	
  Appointment; Powers and
  Immunities

  	
  102

  
	
   

  	
  12.2

  	
  Reliance
  By Administrative and Collateral Agent

  	
  104

  
	
   

  	
  12.3

  	
  Events of Default

  	
  104

  
	
   

  	
  12.4

  	
  Congress in its
  Individual Capacity

  	
  105

  
	
   

  	
  12.5

  	
  Indemnification

  	
  105

  
	
   

  	
  12.6

  	
  Non-Reliance
  on Agents and Other Lenders

  	
  105

  
	
   

  	
  12.7

  	
  Failure to Act

  	
  106

  
	
   

  	
  12.8

  	
  Additional Revolving Loans

  	
  106

  
	
   

  	
  12.9

  	
  Concerning
  the Collateral and the Related Financing Agreements

  	
  106

  
	
   

  	
  12.10

  	
  Field Audits;
  Examination Reports and other Information; Disclaimer by Lenders

  	
  107

  
	
   

  	
  12.11

  	
  Collateral
  Matters

  	
  107

  
	
   

  	
  12.12

  	
  Agency
  for Perfection

  	
  109

  
	
   

  	
  12.13

  	
  Failure to Respond
  Deemed Consent

  	
  109

  
	
   

  	
  12.14

  	
  Legal Representation of
  Agents

  	
  109

  
	
  SECTION 13.

  	
  TERM OF
  AGREEMENT; MISCELLANEOUS

  	
  109

  
	
   

  	
  13.1

  	
  Term

  	
  109

  
	
   

  	
  13.2

  	
  Interpretive
  Provisions

  	
  110

  
	
   

  	
  13.3

  	
  Notices

  	
  112

  
	
   

  	
  13.4

  	
  Partial
  Invalidity

  	
  113

  
	
   

  	
  13.5

  	
  Successors

  	
  113

  
	
   

  	
  13.6

  	
  Assignments;
  Participations

  	
  113

  
	
   

  	
  13.7

  	
  Participant’s Security
  Interests

  	
  117

  
	
   

  	
  13.8

  	
  ERISA
  Representation

  	
  117

  
	
   

  	
  13.9

  	
  Entire
  Agreement

  	
  117

  
	
   

  	
  13.10

  	
  Counterparts, Etc.

  	
  117

  
					

 

-iv-

 

INDEX TO

EXHIBITS AND SCHEDULES

	
  Exhibit A

  	
   

  	
  Form of Assignment and
  Acceptance

  
	
  Exhibit B

  	
   

  	
  Information Certificate

  
	
  Exhibit C

  	
   

  	
  Form of Compliance
  Certificate

  
	
  Schedule 1.4

  	
   

  	
  Adjusted EBITDA

  
	
  Schedule 1.28

  	
   

  	
  Collection Accounts

  
	
  Schedule 5.2(b)

  	
   

  	
  Chattel Paper and
  Instruments

  
	
  Schedule 5.2(f)

  	
   

  	
  Letters of Credit, etc.

  
	
  Schedule 5.2(g)

  	
   

  	
  Commercial Tort Claims

  
	
  Schedule 8.4

  	
   

  	
  Liens

  
	
  Schedule 8.8

  	
   

  	
  Environmental
  Disclosures

  
	
  Schedule 8.13

  	
   

  	
  Labor Relations

  
	
  Schedule 8.15

  	
   

  	
  Material Contracts

  
	
  Schedule 9.9

  	
   

  	
  Indebtedness

  
	
  Schedule 9.10

  	
   

  	
  Loans and Advances

  
	
  Schedule 9.14

  	
   

  	
  Fiscal Year, Quarter
  and Month Ending Dates

  

 

 

LOAN AND SECURITY
AGREEMENT

This Loan and Security
Agreement (this “Agreement”), dated May 7, 2004, is entered into by and
among the financial institutions from time to time parties hereto, whether by
execution of an Assignment and Acceptance Agreement (as defined below) or this
Agreement (each a “Lender” and collectively the “Lenders”),
Congress Financial Corporation, a Delaware corporation (“Congress”), as
administrative and collateral agent for the Lenders and for the Bank Product
Providers (as defined below) (in such capacity, “Administrative and
Collateral Agent”) and Congress and Goldman Sachs Credit Partners, L.P., a
Bermuda limited partnership (“GSCP”), as co-lead arrangers for the
credit facility (in such capacities, each a “Co-Lead Arranger” and
collectively the “Co-Lead Arrangers”) and as co-syndication agents for
the credit facility (in such capacities, each a “Co-Syndication Agent”
and collectively, “Co-Syndication Agents”), Bank of America, N.A. and
Wells Fargo Foothill, LLC, as documentation agents (each a “Documentation Agent”
and collectively, “Documentation Agents”) and BlueLinx Corporation, a
Georgia corporation (“Borrower”).

W I T N E S S E T H:

WHEREAS, Borrower has
requested that Congress and GSCP, in their respective capacities as
Administrative and Collateral Agent, Co-Lead Arrangers and Co-Syndication
Agents (in such capacities, each an “Agent” and collectively, “Agents”)
and Lenders enter into financing arrangements with Borrower pursuant to which
Lenders may make loans and provide other financial accommodations to Borrower;

WHEREAS, each Revolving Loan
Lender (as defined below) is willing to agree (severally and not jointly) to
make such loans and provide such financial accommodations to Borrower on a pro
rata basis according to its commitment provided for herein on the terms and
conditions set forth herein; and

WHEREAS, Congress is willing
to act as administrative agent and collateral agent for Lenders on the terms
and conditions set forth herein and in the other Financing Agreements (as
defined below) and Congress and GSCP are willing to act as co-lead arrangers
and co-syndication agents for the credit facility on the terms and conditions
set forth herein and in the other Financing Agreements.

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

SECTION
1.                                DEFINITIONS

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

1.1           “ACH Transactions” shall mean
any overdrafts, cash management or related services, including the automatic
clearing house transfer of funds by Administrative and Collateral Agent or any
of its Affiliates for the account of Borrower or its Subsidiaries, in each case
pursuant to agreements entered into with Borrower or any of its Subsidiaries.

 

 

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

1.3           “Adjusted Eurodollar Rate”
shall mean, with respect to each Interest Period for any Eurodollar Rate Loan,
the rate per annum (rounded upwards, if necessary, to the next one-sixteenth
(1/16) of one percent (1%)) determined by dividing (a) the Eurodollar Rate for
such Interest Period by (b) a percentage equal to:  (i) one (1) minus (ii) the Reserve Percentage, if any.  For purposes hereof, “Reserve Percentage”
shall mean the reserve percentage, expressed as a decimal, prescribed by any
United States or foreign banking authority for determining the reserve
requirement which is or would be applicable to deposits of United States
dollars in a non-United States or an international banking office of the
Reference Bank used to fund a Eurodollar Rate Loan or any Eurodollar Rate Loan
made with the proceeds of such deposit, whether or not the Reference Bank
actually holds or has made any such deposits or loans.  The Adjusted Eurodollar Rate shall be
adjusted on and as of the effective day of any change in the Reserve
Percentage.

1.4           “Adjusted EBITDA” shall mean,
as of any date of determination, the EBITDA set forth on Schedule 1.4 hereto
for such date of determination.

1.5           “Adjusted Excess Availability”
shall mean the amount, as determined by Administrative and Collateral Agent,
calculated at any time, equal to:  (a)
Excess Availability minus (b) the sum of:  (i) the aggregate amount of outstanding and unpaid trade payables
and other obligations of Borrower which are more than thirty (30) days past due
as of the end of the month most recently ended, plus (ii) the amount of checks
issued by Borrower to pay trade payables and other obligations which are more
than thirty (30) days past due as of the end of the month most recently ended,
but not yet sent (but without duplication of clause (b)(i) above) plus (iii)
the book overdraft of Borrower as of the end of the month most recently ended.

1.6           “Affiliate” shall mean, with
respect to a specified Person, any other Person which directly or indirectly
through one or more intermediaries controls, or is controlled by, or is under
common control with such Person, and without limiting the generality of the
foregoing, includes (a) any Person which beneficially owns or holds twenty
percent (20%) or more of any class of Voting Stock of such Person or other
equity interests in such Person, and (b) any director or executive officer of
such Person.  For purposes of this
definition, the term “control” (including, with correlative meanings, the terms
“controlled by” and “under common control with”), as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of Voting Stock, by agreement or otherwise.

1.7           “Affiliate Leases” shall have
the meaning set forth in Section 4.1(t) hereof.

1.8           “Agents” shall have the
meaning set forth in the recitals hereto.

 

2

 

1.9           “Assignment and Acceptance”
shall mean an Assignment and Acceptance substantially in the form of Exhibit
A attached hereto delivered to Administrative and Collateral Agent in
connection with an assignment of a Lender’s interest hereunder in accordance
with the provisions of Section 13.6 hereof.

1.10         “Bank Products” shall mean any
one or more of the following types of services or facilities extended to
Borrower or its Subsidiaries by a Bank Product Provider: (a) credit cards, (b)
ACH Transactions, (c) Hedging Transactions, and (d) foreign exchange contracts.

1.11         “Bank Product Providers” shall
mean Congress and any of its Affiliates that may, from time to time, provide
any Bank Products to Borrower or its Subsidiaries.

1.12         “Bank Product Reserve” shall
mean any and all reserves that Administrative and Collateral Agent may
establish from time to time, in its reasonable discretion, for the Bank
Products provided by any Bank Product Provider which are then outstanding.

1.13         “Blocked Accounts” shall have
the meaning set forth in Section 6.3(a) hereof.

1.14         “Blocked Account Activation Period”
shall have the meaning given in Section 6.3(a) hereof.

1.15         “Borrowing Base” shall mean, at
any time, the amount equal to:

(a)           85% of the Net Amount of Eligible
Accounts; provided, however, such percentage shall be reduced by
one percentage point for each percentage point (or fraction thereof) by which
Dilution exceeds 5%, plus

(b)           the lesser of: (i) 70% (or 75% during
the Seasonal Period) of the sum of (A) the Value of Eligible Inventory, (B) the
Value of Eligible Domestic In-Transit Inventory, (C) the Value of Eligible
International In-Transit Inventory and (D) the Value of Eligible Re-Load
Inventory or (ii) 85% of the sum of the Net Orderly Liquidation Value; provided,
however, Revolving Loans outstanding with respect to Eligible Domestic
In-Transit Inventory, Eligible International In-Transit Inventory and Eligible
Re-Load Inventory shall not exceed, in the aggregate at any one time
outstanding, the lesser of (x) $65,000,000 or (y) 10% of the then effective
Revolving Loan Limit, minus

(c)           the sum of all Reserves.

1.16         “Business Day” shall mean any
day other than a Saturday, Sunday, or other day on which commercial banks are
authorized or required to close under the laws of the State of New York or the
State of North Carolina, and a day on which the Reference Bank, Administrative
and Collateral Agent and each Lender are open for the transaction of business,
except that if a determination of a Business Day shall relate to any Eurodollar
Rate Loans, the term Business Day shall also exclude any day on which banks are
closed for dealings in dollar deposits in the London interbank market or other
applicable Eurodollar Rate market.

1.17         “Canadian Priority Payables”
shall mean, as of any date of determination, the full amount of the liabilities
of Borrower as of such date of determination which (a) have a trust

 

3

 

imposed to provide
for payment or a security interest, pledge, lien, hypothec or charge ranking or
capable of ranking senior to or pari passu with security interests, liens or
charges securing the Obligations on any of the Accounts or Inventory of
Borrower under Canadian federal, Provincial, state, county, district, municipal
or local law, or (b) have a right imposed to provide for payment ranking or
capable of ranking senior to or pari passu with the Obligations under local or
national Canadian laws, regulations or directives, including, but not limited
to, claims for unremitted and/or accelerated rents, taxes, wages, withholding
taxes, VAT and other amounts payable to an insolvency administrator, employee
withholdings or deductions and vacation pay, workers’ compensation obligations,
government royalties or pension fund obligations, in each case to the extent
such trust or security interest, lien or charge has been or may be imposed,
including, without limitation, Inventory upon which the Borrowing Base is
calculated which is subject to a right of a supplier to repossess goods
pursuant to Section 81.1 of the Bankruptcy and Insolvency Act (Canada) or any
applicable laws granting revendication or similar rights to unpaid suppliers or
any similar laws of Canada or any other applicable jurisdiction.

1.18         “Capital Expenditures” shall
mean, for any period, any expenditure of money for the purchase or other
acquisition of any capital asset or for the purchase or construction of assets,
or for improvements or additions thereto, which are capitalized on a Person’s
balance sheet in accordance with GAAP, including the principal amount of
capital expenditures financed with Capital Leases.

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

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

1.21         “Cash Equivalents” shall mean,
at any time, (a) any evidence of Indebtedness with a maturity date of one
hundred eighty (180) days or less issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality
thereof; provided, that, the full faith and credit of the United States of
America is pledged in support thereof; (b) certificates of deposit or bankers’
acceptances with a maturity of one hundred eighty (180) days or less of any
financial institution that is a member of the Federal Reserve System having
combined capital and unimpaired surplus of not less than Five Hundred Million
Dollars ($500,000,000); (c) commercial paper (including variable rate demand
notes) with a maturity of one hundred eighty (180) days or less issued by a
corporation (except an Affiliate of Borrower) organized under the laws of any
State of the United States of America or the District of Columbia and rated at
least A-2 by Standard & Poor’s Ratings Service, a division of The McGraw-Hill
Companies, Inc. or at least P-2 by Moody’s Investors Service, Inc.; (d)
repurchase obligations with a term of not more than thirty (30) days for
underlying securities of the types described in clause (a) above entered into
with any financial institution having combined capital

 

4

 

and unimpaired
surplus of not less than Five Hundred Million Dollars ($500,000,000); (e)
repurchase agreements and reverse repurchase agreements relating to marketable
direct obligations issued or unconditionally guaranteed by the United States of
America or issued by any governmental agency thereof and backed by the full
faith and credit of the United States of America, in each case maturing within
one hundred eighty (180) days or less from the date of acquisition; provided,
that, the terms of such agreements comply with the guidelines set forth in the
Federal Financial Agreements of Depository Institutions with Securities Dealers
and Others, as adopted by the Comptroller of the Currency on October 31, 1985;
and (f) investments in money market funds and mutual funds that are registered
under the Investment Company Act of 1940, as amended, which invest
substantially all of their assets in securities of the types described in clauses
(a) through (e) above.

1.22         “CFC” shall mean a Person that
is organized under the laws of a jurisdiction other than the District of
Columbia or any State within the United States of America that is a “controlled
foreign corporation” as that term is defined in Section 957(a) of the Code.

1.23         “Change of Control” shall mean
(a) the liquidation or dissolution of Borrower or the adoption of a plan by the
stockholders of Borrower relating to the dissolution or liquidation of
Borrower; (b) the failure of the Permitted Holders to, directly or indirectly,
own and control at least fifty-one percent (51%) of both the Voting Stock and
the Capital Stock of Borrower; or (c) the failure of Borrower to own one
hundred percent (100%) of the Capital Stock of each of its Subsidiaries that is
an Obligor or is otherwise party to any of the Financing Agreements.

1.24         “Closing Date” shall mean the
date of the first to occur of the making of the initial Loan or the issuance of
the initial Letter of Credit Accommodation.

1.25         “Code” shall mean the Internal
Revenue Code of 1986, as amended.

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

1.27         “Collateral Access Agreement”
shall mean an agreement in writing, in form and substance reasonably
satisfactory to Administrative and Collateral Agent, by a lessor of premises to
Borrower, or any other Person to whom any Collateral (including Inventory,
Equipment, bills of lading or other documents of title) is consigned or who has
custody, control or possession of any such Collateral or is otherwise the owner
or operator of any premises on which any of such Collateral is located,
pursuant to which such lessor, consignee or other Person, inter alia,
acknowledges the first priority security interest of Administrative and Collateral
Agent, for itself and the ratable benefit of the Lenders and the Bank Product
Providers, in such Collateral, agrees to waive or subordinate any and all
claims such lessor, consignee or other person may, at any time, have against
such Collateral, whether for processing, storage or otherwise, and agrees to
permit Administrative and Collateral Agent access to, and the right to remain
on, the premises of such lessor, consignee or other Person so as to exercise
Administrative and Collateral Agent’s rights and remedies and otherwise deal
with such Collateral and, in the case of any consignee or other person who at
any time has custody, control or possession of any Collateral, acknowledges
that it holds and will hold possession of the Collateral for the benefit of
Administrative and Collateral Agent and agrees to follow all reasonable
instructions of Administrative and Collateral Agent with respect thereto.

 

5

 

1.28         “Collection Account” shall mean
any of the deposit accounts set forth on Schedule 1.28 hereto so long as such
deposit account is subject to a Deposit Account Control Agreement.

1.29         “Compliance Period” shall mean
the period commencing on (a) any date on which Excess Availability has been
less than $40,000,000 for the third (3rd) consecutive Business Day
and ending on (b) a subsequent date on which Adjusted Excess Availability has
been equal to or greater than $40,000,000 for the sixtieth (60th)
consecutive day.

1.30         “Debt” shall mean, for any Person,
all items of indebtedness or liability which in accordance with GAAP would be
included in determining total liabilities as shown on the liabilities side of a
balance sheet of such Person as at the date as of which Debt is to be
determined and the aggregate payments required to be made by such Person at any
time under any Capital Lease.

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

1.32         “Defaulting Lender” shall have
the meaning set forth in Section 6.10(d) hereof.

1.33         “Deposit Account Control Agreement”
shall mean an agreement in writing, in form and substance reasonably
satisfactory to Administrative and Collateral Agent, by and among
Administrative and Collateral Agent, Borrower, any bank at which any deposit
account of Borrower is at any time maintained and, so long as the Term Loan
Intercreditor Agreement is in effect, Term Loan Agent, which provides that such
bank will comply with instructions originated by Administrative and Collateral
Agent (or, so long as the Term Loan Intercreditor Agreement is in effect, Term
Loan Agent) directing disposition of the funds in the deposit account without
further consent by Borrower and such other terms and conditions as Administrative
and Collateral Agent may reasonably require, including, pursuant to Section 6.3
hereof, as to any such agreement with respect to any Blocked Account, providing
that all items received or deposited in the Blocked Accounts are the property
of Administrative and Collateral Agent, for itself and the ratable benefit of
the Lenders and the Bank Product Providers, that the bank has no lien upon, or
right to setoff against, the Blocked Accounts, the items received for deposit
therein, or the funds from time to time on deposit therein, other than as may
be agreed to by Administrative and Collateral Agent for usual and customary
charges associated with the maintenance of such deposit account or charges for
returned items, and that, at the direction of Administrative and Collateral
Agent (or, so long as the Term Loan Intercreditor Agreement is in effect, Term
Loan Agent), the bank will wire, or otherwise transfer, in immediately
available funds, on a daily basis to the Payment Account all funds received or
deposited into the Blocked Accounts.

1.34         “Dilution” shall mean, as
determined by Administrative and Collateral Agent for any period as of any
date, the ratio, expressed as a percentage, of the aggregate amount of non-cash
reductions in Accounts for such period to the aggregate dollar amount of the
sales of Borrower for such period.

 

6

 

1.35         “EBITDA” shall mean, as of any
date of determination, for a specified period ending on such date of
determination, an amount equal to: (a) Net Income, plus (b)
depreciation, amortization and other non-cash charges (including, but not
limited to, imputed interest and deferred compensation) of Borrower and its
Subsidiaries for such period (to the extent deducted in the computation of Net
Income), all in accordance with GAAP, plus (c) Interest Expense of
Borrower and its Subsidiaries for such period (to the extent deducted in the
computation of Net Income), plus (d) charges for Federal, State, local
and foreign income taxes for such period (to the extent deducted in the
computation of Net Income).

1.36         “Eligible Accounts” shall mean
Accounts created by Borrower which are and continue to be acceptable to
Administrative and Collateral Agent, acting in good faith and in its reasonable
credit judgment, based on the criteria set forth below.  In general, Accounts shall be Eligible
Accounts if:

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

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

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

(d)           such Accounts do not arise from sales
of goods owned by Persons other than Borrower but held by Borrower on
consignment, guaranteed sales, sales and returns, sales on approval, or other
terms under which payment by the account debtor may be conditional or
contingent;

(e)           the chief executive office of the
account debtor owing such Accounts is located in the United States of America
or Canada or, at Administrative and Collateral Agent’s option, if the chief
executive office and principal place of business of the account debtor with
respect to such Accounts is located other than in the United States of America
or Canada, then if either:  (i) the
account debtor has delivered to the Borrower an irrevocable letter of credit
issued or confirmed by a bank that would constitute an Eligible Transferee or
is otherwise satisfactory to Administrative and Collateral Agent and payable
only in the United States of America and in U.S. Dollars, sufficient to cover
the amount of such Account, in form and substance reasonably satisfactory to
Administrative and Collateral Agent and if required by Administrative and
Collateral Agent, the original of such letter of credit has been delivered to
Administrative and Collateral Agent or Administrative and Collateral Agent’s
agent and the Borrower has complied with the terms of Section 5.2(f) hereof
with respect to the assignment of the proceeds of such letter of credit to
Administrative and Collateral Agent, for itself and the

 

7

 

ratable benefit of the
Lenders and the Bank Product Providers, or naming Administrative and Collateral
Agent, for itself and the ratable benefit of the Lenders and the Bank Product
Providers, as transferee beneficiary thereunder, as Administrative and
Collateral Agent may specify, or (ii) such Account is subject to credit insurance
payable to Administrative and Collateral Agent, for itself and the ratable
benefit of the Lenders and the Bank Product Providers, issued by an insurer and
on terms and in an amount reasonably acceptable to Administrative and
Collateral Agent, or (iii) such Account is otherwise acceptable in all respects
to Administrative and Collateral Agent (subject to such lending formula with
respect thereto as Administrative and Collateral Agent may determine);

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

(g)           the account debtor with respect to
such Accounts has not asserted a counterclaim, defense or dispute and does not
have, and neither it nor its Affiliates engage in transactions with Borrower
which may give rise to any legal right of setoff or recoupment against such
Accounts (but the portion of the Accounts of such account debtor in excess of
the amount at any time and from time to time owed by Borrower to such account
debtor or claimed owed by such account debtor may be deemed Eligible Accounts
subject to the other criteria set forth herein);

(h)           none of the following events has
occurred with respect to the account debtor owing such Accounts: (i) the death or judicial declaration of incompetency of
such account debtor if it is an individual; (ii) the
filing by or against such account debtor of a request or petition for
liquidation, reorganization, arrangement, readjustment of debts, dissolution,
adjudication as a bankrupt, winding-up, moratorium, administration,
receivership, arrangement or other relief under the bankruptcy, insolvency, or
similar laws of the United States of America, any State or territory thereof,
or under the bankruptcy or insolvency laws of Canada (including the Bankruptcy
and Insolvency Act (Canada) and the Companies’ Creditors Arrangement Act
(Canada)), or any similar law now or hereafter in effect in any jurisdiction
(provided, that, Administrative and Collateral Agent may determine, in its reasonable
credit judgment, to include Accounts of an account debtor subject to a Chapter
11 case under the U.S. Bankruptcy Code, subject to such terms, conditions and
limitations, as Administrative and Collateral Agent may establish with respect
thereto); (iii) the making of any general assignment
by such account debtor for the benefit of creditors; (iv)
the appointment of a receiver or trustee for such account debtor or for any of
the assets of such account debtor, including, without limitation, the appointment
of or taking possession by a “custodian,” as defined in the U.S. Bankruptcy
Code; (v) the commencement by or against such
account debtor of any other type of insolvency proceeding (under the bankruptcy
laws of the United States of America or under the bankruptcy or insolvency laws
of Canada (including the Bankruptcy and Insolvency Act (Canada) and the
Companies’ Creditors Arrangement Act (Canada)), or any similar law now or
hereafter in effect in any jurisdiction) or of any formal or informal proceeding
for the dissolution or liquidation of, settlement of claims against, or winding
up of affairs of, such account debtor; (vi) the
sale, assignment, or transfer of all or substantially all of the assets of such
account debtor; (vii) the

 

8

 

nonpayment generally by
such account debtor of its debts as they become due; or
(viii) the failure, suspension or cessation of the business of such
account debtor as a going concern;

(i)            such Accounts are subject to the
first priority, valid and perfected security interest of Administrative and
Collateral Agent and any goods giving rise thereto are not, and were not at the
time of the sale thereof, subject to any liens except those permitted in this
Agreement;

(j)            neither the account debtor nor any
officer of the account debtor with respect to such Accounts is an Affiliate
(other than a Sponsor Portfolio Company) of Borrower;

(k)           the account debtors with respect to
such Accounts are not any foreign government, the United States of America,
Canada, any State, political subdivision, department, agency or instrumentality
thereof, unless, (i) if the account debtor is the United States of America, any
State, political subdivision, department, agency or instrumentality thereof,
upon Administrative and Collateral Agent’s request, the Federal Assignment of
Claims Act of 1940, as amended or any similar State or local law, if
applicable, has been complied with in a manner reasonably satisfactory to
Administrative and Collateral Agent or (ii) if the account debtor is Her
Majesty in right of Canada or any Provincial or local Governmental Authority,
or any Ministry thereof, Borrower has assigned its rights to payment of such
Account to Administrative and Collateral Agent pursuant to, and in accordance
with, the Financial Administration Act, R.S.C. 185, C.F.-11, as amended, or any
similar applicable Provincial or local law regulation or requirement has been
complied with in a manner reasonably satisfactory to Administrative and
Collateral Agent;

(l)            such Accounts of a single account
debtor and its Affiliates do not constitute more than fifteen percent (15%) of
all otherwise Eligible Accounts (but the portion of the Accounts not in excess
of such percentage may, subject to the other criteria set forth herein, be
deemed Eligible Accounts);

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

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

(o)           Agent does not believe, in good faith
and its reasonable credit judgment, that the prospect of collection of such
Account is impaired or that the Account may not be paid by reason of the
account debtor’s financial inability to pay.

The criteria for Eligible Accounts set forth above may
only be changed and any new criteria for Eligible Accounts may only be
established by Administrative and Collateral Agent in good faith

 

9

 

and its reasonable credit judgment based on
either:  (x) an event, condition or
other circumstance arising after the date hereof, or (y) an event, condition or
other circumstance existing on the date hereof to the extent Administrative and
Collateral Agent has no written notice thereof from Borrower or other actual
knowledge prior to the date hereof, in either case under clause (x) or (y)
which adversely affects or could reasonably be expected to adversely affect the
Accounts in the good faith and reasonable credit determination of
Administrative and Collateral Agent. 
Any Accounts which are not Eligible Accounts shall nevertheless be part
of the Collateral.

1.37         “Eligible Domestic In-Transit
Inventory” shall mean any Inventory (other than Eligible International
In-Transit Inventory or Eligible Re-Load Inventory) which is not located at
premises operated by Borrower but which:

(a)           otherwise would constitute Eligible
Inventory;

(b)           is either (i) in-transit between
Borrower’s domestic facilities or (ii) in transit to Borrower from a domestic
or Canadian vendor; and

(c)           either (i) has been paid for by
Borrower, (ii) has been vouchered for payment on Borrower’s accounts payable
systems and is in fact paid for within 4 days thereafter, or (iii) the vendor
thereof has delivered a waiver, in form and substance reasonably satisfactory
to Administrative and Collateral Agent, of its reclamation and other rights
with respect to such Inventory.

The criteria for Eligible Domestic In-Transit
Inventory set forth above may only be changed and any new criteria for Eligible
Domestic In-Transit Inventory may only be established by Administrative and
Collateral Agent in good faith based on either:  (x) an event, condition or other circumstance arising after the
date hereof, or (y) an event, condition or other circumstance existing on the
date hereof to the extent Administrative and Collateral Agent has no written
notice thereof from Borrower or other actual knowledge prior to the date
hereof, in either case under clause (x) or (y) which adversely affects or could
reasonably be expected to adversely affect the Eligible Domestic In-Transit
Inventory in the good faith and reasonable credit determination of Administrative
and Collateral Agent.  Any Inventory
which is not Eligible Domestic In-Transit Inventory shall nevertheless be part
of the Collateral.

1.38         “Eligible International In-Transit
Inventory” shall mean any Inventory (other than Eligible Domestic In-Transit
Inventory or Eligible Re-Load Inventory) which is not located at premises
operated by Borrower and/or is not located within the United States of America
or Canada but which:

(a)           otherwise would constitute Eligible
Inventory;

(b)           either (i) has been paid for by
Borrower or (ii) has been vouchered for payment on Borrower’s accounts payable
systems and is in fact paid for within 4 days thereafter;

(c)           is in transit to Borrower from an
international (other than Canadian) vendor; and

(d)           is in the possession or under the
control of a Qualified Bailee.

 

10

 

The criteria for Eligible International In-Transit
Inventory set forth above may only be changed and any new criteria for Eligible
International In-Transit Inventory may only be established by Administrative
and Collateral Agent in good faith based on either:  (x) an event, condition or other circumstance arising after the
date hereof, or (y) an event, condition or other circumstance existing on the
date hereof to the extent Administrative and Collateral Agent has no written
notice thereof from Borrower or other actual knowledge prior to the date
hereof, in either case under clause (x) or (y) which adversely affects or could
reasonably be expected to adversely affect the Eligible International
In-Transit Inventory in the good faith and reasonable credit determination of
Administrative and Collateral Agent. 
Any Inventory which is not Eligible International In-Transit Inventory
shall nevertheless be part of the Collateral.

1.39         “Eligible Inventory” shall mean
Inventory consisting of finished goods held for resale in the ordinary course
of the business of Borrower, in each case which are acceptable to
Administrative and Collateral Agent, in good faith and its reasonable credit
judgment, based on the criteria set forth below.  In general, Eligible Inventory shall not include:

(a)           raw materials unless held for sale as
finished goods in the ordinary course of Borrower’s business;

(b)           work-in process unless held for sale
as finished goods in the ordinary course of Borrower’s business;

(c)           components which are not part of
finished goods (unless sold as such by Borrower in the ordinary course of its
business);

(d)           spare parts for equipment (unless
sold as such by Borrower in the ordinary course of its business);

(e)           packaging and shipping materials;

(f)            supplies used or consumed in
Borrower’s business (unless also sold as such by Borrower in the ordinary
course of its business);

(g)           Inventory at premises other than those
controlled by Borrower and with respect to which a Collateral Access Agreement
has been delivered to Administrative and Collateral Agent (or Administrative
and Collateral Agent has established any applicable Reserves for rent payable
with respect to such location);

(h)           Inventory subject to a security
interest or lien in favor of any person other than Administrative and
Collateral Agent except those security interests or liens permitted in this
Agreement;

(i)            bill and hold goods;

(j)            Inventory which is not fit for sale
in the ordinary course of Borrower’s business or which is obsolete or slow
moving;

 

11

 

(k)           Inventory which is not subject to the
first priority, valid and perfected security interest of Administrative and
Collateral Agent, for itself and the ratable benefit of the Lenders and the
Bank Product Providers;

(l)            returned, damaged and/or defective
Inventory;

(m)          Inventory purchased or sold on
consignment; provided, however, Inventory owned by Borrower and
held by Lowe’s or Home Depot on consignment may, subject to the other criteria
set forth in this Agreement, be deemed Eligible Inventory so long as (i) such
Person continues to be deemed creditworthy by Administrative and Collateral
Agent in good faith, (ii) such consigned Inventory is subject to an effective
consignment agreement, pursuant to which, among other things, such Person
acknowledges Borrower’s ownership of such Inventory, acknowledges
Administrative and Collateral Agent’s liens on such Inventory, authorizes the
filing of UCC financing statements naming such Person as consignee, Borrower as
consignor, and Administrative and Collateral Agent as Borrower’s assignee,
Administrative and Collateral Agent is permitted to access such Person’s premises
for the purpose of removing, auditing or otherwise accessing such consigned
Inventory, and which is otherwise in form and substance satisfactory to
Administrative and Collateral Agent, (iii) Administrative and Collateral Agent
has received evidence, in form and substance satisfactory to it, that a UCC
financing statement regarding the consignment arrangement between such Person
and Borrower has been filed in the appropriate jurisdiction, and (iv)
Administrative and Collateral Agent has received UCC searches with respect to
such Person from each jurisdiction in which such consigned Inventory is located
and from the jurisdiction under whose laws such Person is organized; and

(n)           Inventory located outside the United
States of America or Canada.

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

1.40         “Eligible Re-Load Inventory”
shall mean Inventory (other than Eligible Domestic In-Transit Inventory or
Eligible International In-Transit Inventory) which is located at a domestic
warehouse owned and operated by a Person who is not an Affiliate of Borrower
pursuant to a contract for storage and/or handling between Borrower and such
Person and with respect to which:

(a)           such Inventory would constitute
Eligible Inventory but for the fact that such Inventory is not located at a
domestic facility operated by Borrower; and

(b)           the Person owning and operating the
facility at which such Inventory is located is a Qualified Bailee; provided,
however, Inventory which would otherwise constitute

 

12

 

Eligible Re-Load
Inventory but for the fact that it is not located at a facility owned and
operated by a Qualified Bailee may, subject to all other applicable eligibility
criteria contained in this Agreement, constitute Eligible Re-Load Inventory if
at least 2/3 of the total value of Eligible Re-Load Inventory is located at a
facility owned and operated by a Qualified Bailee.

The criteria for Eligible Re-Load Inventory set forth
above may only be changed and any new criteria for Eligible Re-Load Inventory
may only be established by Administrative and Collateral Agent in good faith
based on either:  (x) an event,
condition or other circumstance arising after the date hereof, or (y) an event,
condition or other circumstance existing on the date hereof to the extent
Administrative and Collateral Agent has no written notice thereof from Borrower
or other actual knowledge prior to the date hereof, in either case under clause
(x) or (y) which adversely affects or could reasonably be expected to adversely
affect the Eligible Re-Load Inventory in the good faith and reasonable credit
determination of Administrative and Collateral Agent.  Any Inventory which is not Eligible Re-Load Inventory shall nevertheless
be part of the Collateral.

1.41         “Eligible Transferee” shall mean
(a) any Lender; (b) any Affiliate of a Lender; and (c) any other commercial
bank, financial institution or “accredited investor” (as defined in Regulation
D under the Securities Exchange Act) approved by Administrative and Collateral
Agent and, unless an Event of Default has occurred and is continuing at the
time any assignment is effected hereunder, Borrower, such approval not to be
unreasonably withheld, conditioned or delayed by Borrower, and such approval to
be deemed given by Borrower if no objection from Borrower is received by the
assigning Lender and Administrative and Collateral Agent within five (5)
Business Days after notice of such proposed assignment has been provided by the
assigning Lender or Administrative and Collateral Agent to Borrower; provided,
that, none of Borrower, any Obligor, or any of their respective
Affiliates (other than Sponsor Affiliated Lenders) shall qualify as an Eligible
Transferee.

1.42         “Environmental Laws” shall mean
all foreign (including, without limitation, Canadian), Federal, State and local
laws (including common law), legislation, rules, codes, licenses, permits
(including any conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between Borrower and any
Governmental Authority, (a) relating to the environment (including air, water
vapor, surface water, ground water, drinking water, drinking water supply,
surface land, subsurface land, plant and animal life or any other natural resource),
(b) relating to the exposure to, or the use, storage, recycling, treatment,
generation, transportation, handling, labeling, release or disposal, or
threatened release, of Hazardous Materials, or (c) relating to all laws with
regard to recordkeeping, notification, disclosure and reporting requirements
respecting Hazardous Materials.  The
term “Environmental Laws” includes (i) the Federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Federal Superfund
Amendments and Reauthorization Act, the Federal Water Pollution Control Act of
1972, the Federal Clean Water Act, the Federal Clean Air Act, the Federal
Resource Conservation and Recovery Act of 1976 (including the Hazardous and
Solid Waste Amendments thereto), the Federal Solid Waste Disposal and the
Federal Toxic Substances Control Act, the Federal Insecticide, Fungicide and
Rodenticide Act, and the Federal Safe Drinking Water Act of 1974, (ii)
applicable state or Provincial counterparts to such laws, and (iii) any common
law or equitable doctrine that may impose liability or obligations for injuries
or damages due to, or threatened as a result of, the presence of or exposure to
any Hazardous Materials.

 

13

 

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

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

1.45         “ERISA Affiliate” shall mean any
person required to be aggregated with Borrower or Borrower’s Subsidiary under
Sections 414(b), 414(c), 414(m) or 414(o) of the Code.

1.46         “ERISA Event” shall mean (a) any
“reportable event”, as defined in Section 4043(c) of ERISA or the regulations
issued thereunder (other than an event not subject to the provision for 30 days
notice to the Pension Benefit Guaranty Corporation under such regulations, with
respect to a Plan; (b) the adoption of any amendment to a Plan that would
require the provision of security pursuant to Section 401(a)(29) of the Code or
Section 307 of ERISA; (c) the existence with respect to any Plan of an
“accumulated funding deficiency” (as defined in Section 412 of the Code or
Section 302 of ERISA), whether or not waived; (d) the filing pursuant to
Section 412 of the Code or Section 303(d) of ERISA of an application for a
waiver of the minimum funding standard with respect to any Plan; (e) the
occurrence of a “prohibited transaction” (not subject to a statutory, class or
individual exemption) with respect to which Borrower or any of its Subsidiaries
is a “disqualified person” (within the meaning of Section 4975 of the Code) or
with respect to which Borrower or any of its Subsidiaries could otherwise be
liable; (f) a complete or partial withdrawal by Borrower or any ERISA Affiliate
from a Multiemployer Plan or a cessation of operations which is treated as such
a withdrawal or notification that a Multiemployer Plan is in reorganization;
(g) the filing of a notice of intent to terminate, the treatment of a Plan
amendment as a termination under Section 4041 or 4041A of ERISA, or the
commencement of proceedings by the Pension Benefit Guaranty Corporation to
terminate a Plan; (h) an event or condition which might reasonably be expected
to constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any Plan; (i) the imposition of any
liability under Title IV of ERISA, other than the Pension Benefit Guaranty
Corporation premiums due but not delinquent under Section 4007 of ERISA, upon
Borrower or any ERISA Affiliate, and other than contributions to a Plan to be
made timely under the Code and ERISA, in excess of Five Million Dollars
($5,000,000); and (j) any other event or condition with respect to a Plan
subject to Title IV of ERISA maintained, or contributed to, by any ERISA
Affiliate that could reasonably be expected to result in material liability of
Borrower.

1.47         “Eurodollar Rate” shall mean
with respect to the Interest Period for a Eurodollar Rate Loan, the interest
rate per annum equal to the arithmetic average of the rates of interest per annum
(rounded upwards, if necessary, to the next one-sixteenth (1/16) of one percent
(1%)) at which Reference Bank is offered deposits of United States dollars in
the London interbank market (or other Eurodollar Rate market selected by
Borrower and approved by Lender) on or about 11:00 a.m.  (New York time) two (2) Business Days prior
to the commencement of such Interest Period in amounts substantially equal to
the principal amount of the Eurodollar Rate

 

14

 

Loans requested by and
available to Borrower in accordance with this Agreement, with a maturity of
comparable duration to the Interest Period selected by Borrower.

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

1.49         “Event of Default” shall have
the meaning set forth in Section 10.1 hereof.

1.50         “Excess” shall have the meaning
set forth in Section 3.1(e) hereof.

1.51         “Excess Availability” shall mean
the amount, as determined by Administrative and Collateral Agent, calculated at
any time, equal to:  (a) the lesser
of:  (i) the Borrowing Base (when
calculated after giving effect to any Reserves other than Reserves in respect
of Letter of Credit Accommodations) and (ii) the Revolving Loan Limit, plus
(b) the then available amount of all Qualified Cash minus (c) the sum
of:  (i) the amount of all then
outstanding and unpaid Obligations, plus (ii) the amount of all Reserves then
established in respect of Letter of Credit Accommodations.

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

1.53         “Excluded Taxes” shall have the
meaning set forth in Section 6.5(a) hereof.

1.54         “Fee Letter” shall mean the
letter agreement, dated on or about the date hereof, by and among Borrower,
Administrative and Collateral Agent and the Lenders, setting forth certain fees
payable by Borrower to Administrative and Collateral Agent for the benefit of
itself and the Lenders, as the same now exists or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.

1.55         “Final Maturity Date” shall mean
May 7, 2009.

1.56         “Financing Agreements” shall
mean, collectively, this Agreement, the Fee Letter and all notes, guaranties,
security agreements, Deposit Account Control Agreements, Investment Property
Control Agreements, Collateral Access Agreements, intercreditor agreements, and
all other agreements, documents and instruments now or at any time hereafter
executed and/or delivered by Borrower or any Obligor in connection with this
Agreement.

1.57         “Fixed Charge Coverage Ratio”
shall mean the ratio, as of any date of determination, calculated either for
the trailing twelve-month period ending on such date of determination (or, if
such date of determination occurs prior to the first anniversary of the Closing
Date, on an annualized basis in the case of clause (b) below), of (a) EBITDA (or
Adjusted EBITDA if such date of determination occurs prior to the first
anniversary of the Closing Date) to (b) the sum of cash payments for income
taxes, Interest Expense, cash dividends or stock redemptions, principal
payments on Debt (other than with respect to a revolving line of credit) and
Capital Expenditures.

1.58         “Funding Bank” shall have the
meaning set forth in Section 3.2(a) hereof.

 

15

 

1.59         “GAAP” shall mean generally
accepted accounting principles in the United States of America as in effect
from time to time as set forth in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified Public
Accountants and the statements and pronouncements of the Financial Accounting
Standards Board which are applicable to the circumstances as of the date of
determination consistently applied, except that, for purposes of Section 9.17
hereof, GAAP shall be determined on the basis of such principles in effect on the
date hereof and consistent with those used in the preparation of the most
recent audited financial statements delivered to Administrative and Collateral
Agent prior to the date hereof.

1.60         “Governmental Authority” shall
mean any nation or government, any state, province, or other political
subdivision thereof, any central bank (or similar monetary or regulatory
authority) thereof, any entity exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or capital
ownership or otherwise, by any of the foregoing.

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

1.62         “Hedging Transactions” shall
mean (a) any and all rate swap transactions, basis swaps, forward rate
transactions, commodity swaps, commodity options, forward commodity contracts,
equity or equity index swaps or options, bond or bond price or bond index swaps
or options, forward bond or forward bond price or forward bond index
transactions, interest rate options, forward foreign exchange transactions, cap
transactions, floor transactions, collar transactions, currency swap
transactions, cross-currency rate swap transaction, currency options or any
other similar transactions or any combination of any of the foregoing
(including any options to enter into any of the foregoing), whether or not any
such transaction is governed by or subject to any master agreement, or (b) any
and all transactions of any kind, and the related confirmations, that are
subject to the terms or conditions of, or governed by, any form of master
agreement published by the International Swaps and Derivatives Association,
Inc., or any other master agreement, as amended, restated, extended,
supplemented or otherwise modified in writing from time to time, including but
not limited to, any such obligations or liabilities under any such agreement.

1.63         “Home Depot” shall mean Home
Depot U.S.A., Inc., a Delaware corporation and its Affiliates.

1.64         “Indebtedness” shall mean, with
respect to any Person, any liability, whether or not contingent, (a) in respect
of borrowed money (whether or not the recourse of the lender is to the whole of
the assets of such Person or only to a portion thereof) or evidenced by bonds,
notes, debentures or similar instruments; (b) representing the balance deferred
and unpaid of the

 

16

 

purchase price of any
property or services (except any such balance that constitutes an account
payable to a trade creditor (whether or not an Affiliate) created, incurred,
assumed or guaranteed by such Person in the ordinary course of business of such
Person in connection with obtaining goods, materials or services that is not
overdue by more than ninety (90) days, unless the trade payable is being
contested in good faith); (c) all obligations as lessee under leases which have
been, or should be, in accordance with GAAP recorded as Capital Leases; (d) any
contractual obligation, contingent or otherwise, of such Person to pay or be
liable for the payment of any indebtedness described in this definition of
another Person, including, without limitation, any such indebtedness, directly
or indirectly guaranteed (other than guaranties of a such Person’s Subsidiary’s
operating leases made in the ordinary course of such Person’s business), or any
agreement to purchase, repurchase, or otherwise acquire such indebtedness,
obligation or liability or any security therefor, or to provide funds for the
payment or discharge thereof, or to maintain solvency, assets, level of income,
or other financial condition; (e) all obligations with respect to redeemable
stock and redemption or repurchase obligations under any Capital Stock or other
equity securities issued by such Person; (f) all reimbursement obligations and
other liabilities of such Person with respect to surety bonds (whether bid,
performance or otherwise), letters of credit, banker’s acceptances, drafts or
similar documents or instruments issued for such Person’s account; (g) all
indebtedness of such Person in respect of indebtedness of another Person for
borrowed money or indebtedness of another Person otherwise described in this
definition which is secured by any consensual lien, security interest,
collateral assignment, conditional sale, mortgage, deed of trust, or other
encumbrance on any asset of such Person, whether or not such obligations,
liabilities or indebtedness are assumed by or are a personal liability of such
Person, all as of such time; (h) all obligations, liabilities and indebtedness
of such Person (marked to market) arising under swap agreements, cap agreements
and collar agreements and other agreements or arrangements designed to protect
such Person against fluctuations in interest rates or currency or commodity
values; and (i) all obligations owed by such Person under License Agreements with
respect to non-refundable, advance or minimum guaranty royalty payments.

1.65         “Information Certificate” means
the Information Certificate of Borrower constituting Exhibit B hereto
containing material information with respect to Borrower, its business and
assets provided by or on behalf of Borrower to Lender in connection with the
preparation of this Agreement and the other Financing Agreements and the
financing arrangements provided for herein.

1.66         “Intellectual Property” shall
mean all of Borrower’s now owned and hereafter arising or acquired:  patents, patent rights, patent applications,
copyrights, works which are the subject matter of copyrights, copyright
registrations, trademarks, service marks, trade names, trade styles, trademark
and service mark applications, and licenses and rights to use any of the
foregoing; all extensions, renewals, reissues, divisions, continuations, and
continuations-in-part of any of the foregoing; all rights to sue for past,
present and future infringement of any of the foregoing; inventions, trade
secrets, formulae, processes, compounds, drawings, designs, blueprints,
surveys, reports, manuals, and operating standards; goodwill (including any
goodwill associated with any trademark or the license of any trademark); customer
and other lists in whatever form maintained; and trade secret rights, copyright
rights, rights in works of authorship, domain names and domain name
registrations; software and contract rights relating to software, in whatever
form created or maintained.

 

17

 

1.67         “Interest Expense” shall mean,
for any period, as to any Person and its Subsidiaries, all of the following as
determined in accordance with GAAP, total interest expense, whether paid or
accrued (including the interest component of Capital Leases for such period),
including, without limitation, all bank fees, commissions, discounts and other
fees and charges owed with respect to letters of credit, banker’s acceptances
or similar instruments and all amounts paid or accrued in connection with
Hedging Transactions, but excluding (a) amortization of discount and
amortization of deferred financing fees and closing costs paid in cash in
connection with the transactions contemplated hereby, (b) interest paid in
property other than cash, (c) any other interest expense not payable in cash
and (d) any amounts received in connection with Hedging Transactions.

1.68         “Interest Period” shall mean for
any Eurodollar Rate Loan, a period of approximately fourteen (14) days or one
(1), two (2), three (3) or six (6) months duration, as Borrower may elect, the
exact duration to be determined in accordance with the customary practice in
the applicable Eurodollar Rate market; provided, that, Borrower may not elect
an Interest Period which will end after the last day of the then-current term
of this Agreement.

1.69         “Interest Rate”
shall mean,

(a)           Subject to
subsections (b) and (c) of this Section 1.69:

(i)            as to Prime Rate Loans, a per annum
rate equal to the Prime Rate plus three-quarters of one (0.75) percentage
point; and

(ii)           as to Eurodollar Rate Loans, a per
annum rate equal to the Adjusted Eurodollar Rate (based on the Eurodollar Rate
applicable for the Interest Period selected by Borrower as in effect three (3)
Business Days after the date of receipt by Administrative and Collateral Agent
of the request of Borrower for such Eurodollar Rate Loans in accordance with
the terms hereof, whether such rate is higher or lower than any rate previously
quoted to Borrower) plus two and one-quarter (2.25) percentage points.

(b)           So long as no Event of Default has
occurred and is continuing, beginning with the first Interest Period commencing
after Administrative and Collateral Agent’s timely receipt of Borrower’s
financial statements required to be delivered pursuant to this Agreement for
the second full fiscal quarter elapsing after the date of this Agreement, and
for each Interest Period commencing after delivery of Borrower’s financial
statements required to be delivered pursuant to this Agreement for each fiscal
quarter thereafter, effective on the first day of such Interest Period, the
Interest Rate will be adjusted to be: (i) as to Prime Rate Loans, a per annum
rate equal to the Prime Rate plus the “Applicable Prime Rate Margin” set forth
below based on either (A) Borrower’s Adjusted EBITDA as of the end of such
fiscal quarter when determined as of a fiscal quarter ending prior to the date
that is 12 fiscal months after the Closing Date or (B) Borrower’s EBITDA as of
the end of such fiscal quarter when determined as of a fiscal quarter ending
after the date that is 12 fiscal months after the Closing Date; and (ii) as to
Eurodollar Rate Loans, a per annum rate equal to the Adjusted Eurodollar Rate
(based on the Eurodollar Rate applicable for the Interest Period selected by
Borrower as in effect three (3) Business Days after the date of receipt by
Administrative and Collateral Agent of the request of Borrower for such
Eurodollar Rate Loans in accordance with the terms hereof, whether such rate is
higher or lower

 

18

 

than any rate previously
quoted to Borrower) plus the “Applicable Eurodollar Rate Margin” set forth
below based on either (A) Borrower’s Adjusted EBITDA as of the end of such
fiscal quarter if determined as of a fiscal quarter ending prior to the date
that is 12 fiscal months after the Closing Date or (B) Borrower’s EBITDA as of
the end of such fiscal quarter for the prior 12 month period then ended if
determined as of a fiscal quarter ending after the date that is 12 fiscal
months after the Closing Date; provided, however, in each case,
if the Borrower has not delivered the financial statements required to be
delivered to Administrative and Collateral Agent hereunder within the time
frames specified herein, without limiting any other provision of this
Agreement, until such financial statements are delivered to Administrative and
Collateral Agent in accordance with this Agreement, the Interest Rate shall be
calculated using the highest Applicable Prime Rate Margin or the highest
Applicable Eurodollar Rate Margin, as applicable, set forth below:

	
  EBITDA

  	
   

  	
  Applicable 

  Prime Rate Margin

  	
   

  	
  Applicable

  Eurodollar Rate Margin

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  $100,000,000 or more

  	
   

  	
  0.75

  	
   

  	
  2.25

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Less than $100,000,000 and more than $70,000,000

  	
   

  	
  1.00

  	
   

  	
  2.50

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  $70,000,000 or less

  	
   

  	
  1.25

  	
   

  	
  2.75

  

 

(c)           Notwithstanding anything to the
contrary contained herein, at Administrative and Collateral Agent’s option,
without notice, (i) for the period on and after the date of termination or
non-renewal hereof until such time as all Obligations are paid and satisfied in
full in immediately available funds, and (ii) for the period from and after the
date of the occurrence of any Event of Default, and for so long as such Event of
Default is continuing as determined by Administrative and Collateral Agent, a
per annum rate equal to the Interest Rate which would otherwise be in effect
plus two (2) percentage points.

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

1.71         “Investment Property Control
Agreement” shall mean an agreement in writing, in form and substance
reasonably satisfactory to Administrative and Collateral Agent, by and among
Administrative and Collateral Agent, Borrower, any securities intermediary,
commodity intermediary or other Person who has custody, control or possession
of any investment property of Borrower and, so long as the Term Loan Intercreditor
Agreement is in effect, Term Loan Agent, agreeing and acknowledging that, inter
alia, such Person has custody, control or possession of such investment
property on behalf of Administrative and Collateral Agent (and, so long as the
Term Loan Intercreditor Agreement is in effect, Term Loan Agent), that such

 

19

 

Person comply with
entitlement orders originated by Administrative and Collateral Agent (or, so
long as the Term Loan Intercreditor Agreement is in effect, Term Loan Agent)
with respect to such investment property, or other instructions of
Administrative and Collateral Agent (or, so long as the Term Loan Intercreditor
Agreement is in effect, Term Loan Agent), and such Person will apply any value
distributed on account of any commodity contract as directed by Administrative
and Collateral Agent (or, so long as the Term Loan Intercreditor Agreement is
in effect, Term Loan Agent), in each case, without the further consent of
Borrower, and including such other terms and conditions as Administrative and
Collateral Agent may reasonably require.

1.72         “Letter of Credit Accommodations”
shall mean, collectively, the letters of credit, merchandise purchase or other
guaranties which are from time to time either (a) issued or opened by
Administrative and Collateral Agent or any Revolving Loan Lender for the
account of Borrower or any Obligor or (b) with respect to which Administrative
and Collateral Agent on behalf of the Revolving Loan Lenders has agreed to
indemnify the issuer or guaranteed to the issuer the performance by Borrower of
its obligations to such issuer; sometimes being referred to herein individually
as a “Letter of Credit Accommodation.”

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

1.74         “Licensor Agreement” shall mean
an agreement, in form and substance reasonably satisfactory to Administrative
and Collateral Agent, pursuant to which a licensor of Intellectual Property
that is affixed to any Inventory agrees to allow Administrative and Collateral
Agent to sell or otherwise dispose of such Inventory in connection with the
exercise of its rights and remedies under this Agreement.

1.75         “Loans” shall mean the Revolving
Loans, Special Agent Advances and Letter of Credit Accommodations.

1.76         “Lowe’s” shall mean Lowe’s
Companies, Inc., a North Carolina corporation, and its Affiliates.

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

1.78         “Material Adverse Effect” shall
mean a material and adverse effect on the business, assets, properties,
operations, financial condition or results of operations of the Borrower or the
Purchased Business taken as a whole; provided, however, that the
following shall not be taken into account in determining whether there has been
or would be a “Material Adverse Effect”: (i) any adverse changes or
developments resulting from conditions affecting the

 

20

 

United States of America
or any foreign economy generally; (ii) any adverse changes or developments that
are primarily caused by conditions affecting the building products and the
building products distribution industries generally unless such changes or
developments disproportionately affect the Borrower or the Purchased Business;
(iii) any adverse changes or developments in the laws, regulations, rules or
orders of any governmental authority; (iv) any adverse changes or
developments that are attributable to seasonal fluctuations in the building
products and the building products distribution industries; (v) any acts of
war, insurrection, sabotage or terrorism unless such changes or developments
disproportionately affect the Borrower or the Purchased Business; and
(vi) any adverse changes or developments arising primarily out of, or
resulting primarily from, actions taken by any party to the Purchase Agreements
in connection with (but not in breach of) the Purchase Agreements and the
transactions contemplated thereunder, or which are primarily attributable to
the announcement of the entering into of the Purchase Agreements and the
transactions contemplated thereby or the identity of the Borrower (including,
to the extent so attributable, any litigation, employee attrition, any loss or
postponement of business resulting from the termination or modification of any
vendor, customer or other business relationships, any delay of customer orders
or otherwise, as well as any corresponding change in the margins, profitability
or financial condition of such person); provided, further, that
the failure by either Seller or its Affiliates to meet their respective
internal revenue or earnings predictions or expectations with respect to the
Purchased Business for any period ending or for which earnings are released on
or after the date of the Purchase Agreements shall not in and of itself be
deemed to constitute a Material Adverse Effect.

1.79         “Material Contract” shall mean
(a) any written contract or other executed agreement of Borrower involving
monetary liability of or to any Person in an amount in excess of Twenty-Five
Million Dollars ($25,000,000) in any fiscal year other than (i) the Financing
Agreements, (ii) purchase orders issued in the ordinary course of Borrower’s
business, (iii) contracts which by their terms may be terminated by either
party thereto, without penalty, obligation or other such adverse consequences,
on less than 60 days’ prior notice (or 90 days’ prior notice in the case of
exclusive supply contracts) or (iv) supply contracts (by Borrower as supplier)
which do not provide for committed purchases in excess of Fifty Million Dollars
($50,000,000) in any fiscal year, and (b) any other written contract or other
executed agreement (other than the Financing Agreements) to which Borrower is a
party as to which the breach, nonperformance, cancellation or failure to renew
by any party thereto would constitute a Material Adverse Change.

1.80         “Maximum Interest Rate” shall mean
the maximum non-usurious rate of interest under applicable Federal or State law
as in effect from time to time that may be contracted for, taken, reserved,
charged or received in respect of the Obligations.

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

1.82         “Net Amount of Eligible Accounts”
shall mean, the gross amount of Eligible Accounts less (to the extent Reserves
therefor have not been established or a reduction in the advance rate for
Eligible Accounts due to an increase in Dilution as a result thereof has not
been

 

21

 

made), returns,
discounts, claims, credits and allowances of any nature at any time issued,
owing, granted, outstanding, available or claimed with respect thereto.

1.83         “Net Income” shall mean, as of
any date of determination, as determined in accordance with GAAP, when
calculated for a specified period ending on such date of determination, the
aggregate of the net income (loss) of Borrower and its Subsidiaries, on a
consolidated basis, for such period (but excluding to the extent included
therein any extraordinary or one-time gains or losses or non-recurring events,
including, but not limited to, restructuring charges, unusual severance
charges, casualty losses and acquisitions or divestiture related charges), provided,
that, (a) the net income of any Person that is not a wholly-owned
Subsidiary or that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid or
payable to Borrower or a wholly-owned Subsidiary of Borrower; (b) the effect of
any change in accounting principles adopted by Borrower or its Subsidiaries
after the date hereof shall be excluded; and (c) the net income (if positive)
of any wholly-owned Subsidiary to the extent that the declaration or payment of
dividends or similar distributions by such wholly-owned Subsidiary to Borrower
or to any other wholly-owned Subsidiary of Borrower is not at the time
permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule of government regulation
applicable to such wholly-owned Subsidiary shall be excluded.  For the purpose of this definition, net
income excludes any gain or loss, together with any related Provision for Taxes
for such gain or loss realized upon the sale or other disposition of any assets
that are not sold in the ordinary course of business (including, without
limitation, dispositions pursuant to sale and leaseback transactions), or of
any Capital Stock of Borrower or a Subsidiary of Borrower and any net income
realized as a result of changes in accounting principles or the application
thereof to Borrower.

1.84         “Net Orderly Liquidation Value”
shall mean, as of any date of determination, the net orderly liquidation
percentage set forth in the most recent appraisal of the Borrower’s Inventory
provided to Administrative and Collateral Agent pursuant to the terms hereof
times the Value of Borrower’s Inventory.

1.85         “New Lending Office” shall have
the meaning set forth in Section 6.5(e) hereof.

1.86         “Non-Consenting Lenders” shall
have the meaning set forth in Section 11.3(d) hereof.

1.87         “Non-U.S. Lender” shall have the
meaning set forth in Section 6.5(e) hereof.

1.88         “Obligations” shall mean any and
all Loans and all other obligations, liabilities and indebtedness of every
kind, nature and description owing by Borrower to any Agent or any Lender
and/or any of their respective Affiliates, including all obligations arising
under or in connection with Bank Products to the extent the same have been
reserved for as part of the Bank Product Reserve or would not cause the total
amount of the Obligations to exceed the value of the Collateral; in each case,
whether consisting of principal, interest, charges, fees, costs and expenses,
however evidenced, whether as principal, surety, endorser, guarantor or
otherwise, whether arising under this Agreement or otherwise, whether now
existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of this Agreement or after

 

22

 

the commencement of any
case with respect to Borrower under the United States Bankruptcy Code or any
similar statute (including the payment of interest and other amounts which
would accrue and become due but for the commencement of such case, whether or
not such amounts are allowed or allowable in whole or in part in such case),
whether direct or indirect, absolute or contingent, joint or several, due or
not due, primary or secondary, liquidated or unliquidated, secured or
unsecured, and however acquired by any such Agent, Lender or Affiliate.

1.89         “Obligor” shall mean any
guarantor, endorser, acceptor, surety or other person liable on or with respect
to the Obligations or who is the owner of any property which is security for
the Obligations, other than Borrower.

1.90         “Other Taxes” shall mean any
present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies which arise from any payment made hereunder or
from the execution, delivery or registration of, or otherwise with respect to,
this Agreement or any of the other Financing Agreements.

1.91         “Parent” shall mean ABP
Distribution Holdings Inc., a Georgia corporation.

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

1.93         “Payment Account” shall mean
account no. 5000000030321 of Administrative and Collateral Agent at Wachovia
Bank, National Association, or such other account of Administrative and
Collateral Agent as Administrative and Collateral Agent may from time to time
designate to Borrower as the Payment Account for purposes of this Agreement.

1.94         “Permitted Holders” shall mean
Sponsor and any of its affiliated funds or managed accounts which are managed
or advised by Sponsor or an Affiliate of Sponsor.

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

1.96         “Plan” means an employee benefit
plan (as defined in Section 3(3) of ERISA) which Borrower or any ERISA
Affiliate sponsors, maintains, or to which it makes, is making, or is obligated
to make contributions other than a Multiemployer Plan.

1.97         “PPSA” shall mean the Personal
Property Security Act of any province of Canada in which any of the Collateral
is located and any other applicable Canadian or Provincial personal property
security legislation (including, without limitation, the Civil Code of Quebec)
as all such legislation now exists or may from time to time hereafter be
amended, modified, recodified, supplemented or replaced, together with all rules,
regulations and interpretations thereunder or related thereto.

 

23

 

1.98         “Prime Rate” shall mean the rate
from time to time publicly announced by the Reference Bank as its prime rate,
whether or not such announced rate is the best rate available at such bank.

1.99         “Prime Rate Loans” shall mean
any Loans or portion thereof on which interest is payable based on the Prime
Rate in accordance with the terms thereof.

1.100       “Pro Rata Share”
shall mean the fraction (expressed as a percentage) the numerator of which is
such Lender’s Revolving Loan Commitment and the denominator of which is the
aggregate amount of all of the Revolving Loan Commitments of all Revolving Loan
Lenders.

1.101       “Provision for
Taxes” shall mean, as of any date of determination, calculated for the
twelve month period ending on such date of determination, an amount equal to
all taxes imposed on or measured by net income, whether Federal, State or
local, and whether foreign or domestic, that are paid or payable by Borrower
and its Subsidiaries in respect of such period on a consolidated basis in
accordance with GAAP.

1.102       “PTCE 95-60” shall have the
meaning set forth in Section 13.6(a) hereof.

1.103       “Purchase Agreements” shall mean,
individually and collectively, the Asset
Purchase Agreement, dated March 12, 2004, between Borrower and Seller, together with bills of sale,
quitclaim deeds, assignment and assumption agreements and such other
instruments of transfer as are referred to therein and all side letters with
respect thereto, and all agreements, documents and instruments executed and/or
delivered in connection therewith, including, without limitation, a Human
Resources Agreement, a Transition Services Agreement, an IT Support Services
Agreement, an Agreement Concerning Private Label Agreements and a Master
Purchase, Supply and Distribution Agreement, as the foregoing now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced; provided, that, the term “Purchase Agreements” as used
herein shall not include any of the “Financing Agreements” as such term is
defined herein or the Real Property Purchase Agreement.

1.104       “Purchased Assets” shall mean all
of the assets and properties acquired by Borrower from Seller pursuant to the
Purchase Agreements.

1.105       “Purchased Business” shall mean
the building products distribution business conducted by Seller through its
building products distribution operating segment immediately prior to the
consummation of the transactions contemplated by the Purchase Agreements.

1.106       “Purchased Real Property” shall
have the meaning set forth in Section 4.1(t) hereof.

1.107       “Qualified Bailee” shall mean a
bailee, carrier, processor or other such Person from time to time in possession
or control of Borrower’s Inventory or documents of title related thereto who
has executed a Collateral Access Agreement in favor of Administrative and
Collateral Agent.

 

24

 

1.108       “Qualified Cash” shall mean, as of
any date of determination, the amount of cash carried by Borrower on its
balance sheet (a) which is in a savings account or investment account subject
to Administrative and Collateral Agent’s first priority perfected security
interest pursuant to a Deposit Account Control Agreement or Investment Property
Control Agreement, as the case may be, (b) with respect to which Administrative
and Collateral Agent has received statements of the available balances thereof
from the bank or other financial institution at which such account is
maintained which confirm such amounts and (c) which is not pledged or deposited
to secure any obligations of Borrower other than the Obligations and, on a
second priority basis, the Indebtedness of Borrower under the Term Loan
Agreement.

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

1.110       “Real Property Purchase Agreement”
shall mean that certain Real Property Purchase and Sale Agreement, dated March
12, 2004, by and between Parent and Seller, and all documents, agreements and
instruments executed, delivered or entered into in connection therewith.

1.111       “Receivables” shall mean all of
the following now owned or hereafter arising or acquired property of
Borrower:  (a) all Accounts; (b) all
interest, fees, late charges, penalties, collection fees and other amounts due
or to become due or otherwise payable in connection with any Account; and (c)
all payment intangibles of Borrower and other contract rights, chattel paper,
instruments, notes, and other forms of obligations owing to Borrower, whether
from the sale and lease of goods or other property, licensing of any property
(including Intellectual Property or other general intangibles), rendition of
services or from loans or advances by Borrower or to or for the benefit of any
third person (including loans or advances to any Affiliates or Subsidiaries of
Borrower) or otherwise associated with any Accounts, Inventory or general
intangibles of Borrower (including, without limitation, choses in action,
causes of action, tax refunds, tax refund claims, any funds which may become
payable to Borrower in connection with the termination of any Plan or other
employee benefit plan and any other amounts payable to Borrower from any Plan
or other employee benefit plan, rights and claims against carriers and
shippers, rights to indemnification, business interruption insurance and
proceeds thereof, casualty or any similar types of insurance and any proceeds
thereof and proceeds of insurance covering the lives of employees on which
Borrower is a beneficiary).

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

1.113       “Reference Bank” shall mean
Wachovia Bank, National Association, its successor or such other bank as
Administrative and Collateral Agent may from time to time designate.

 

25

 

1.114       “Register” shall have the meaning
set forth in Section 13.6(b) hereof.

1.115       “Report” and “Reports”
shall have the meaning set forth in Section 12.10(a) hereof.

1.116       “Required Lenders” shall mean, at
any time, those Revolving Loan Lenders, other than Sponsor Affiliate Lenders,
whose Pro Rata Shares aggregate fifty-one percent (51%) or more of the
aggregate of the Revolving Loan Commitments of all Revolving Loan Lenders other
than Sponsor Affiliate Lenders.

1.117       “Required Super-Majority Lenders”
shall mean, at any time, those Revolving Loan Lenders, other than Sponsor
Affiliate Lenders, whose Pro Rata Shares aggregate eighty percent (80%) or more
of the aggregate of the Revolving Loan Commitments of all Revolving Loan
Lenders other than Sponsor Affiliate Lenders.

1.118       “Reserves” shall mean as of any
date of determination, such amounts as Administrative and Collateral Agent may
from time to time establish and revise in good faith and in its reasonable
credit judgment reducing the amount of Revolving Loans and Letter of Credit
Accommodations which would otherwise be available to Borrower under the lending
formula(s) provided for herein:  (a) to
reflect events, conditions, contingencies or risks which, as determined by
Administrative and Collateral Agent in good faith and its reasonable credit
judgment, adversely affect, or could reasonably be expected to adversely
affect, either (i) any of the Collateral or its value or (ii) the security
interests and other rights of Administrative and Collateral Agent in the
Collateral (including the enforceability, perfection and priority thereof) or
(b) to reflect Administrative and Collateral Agent’s good faith belief that any
collateral report or financial information furnished by or on behalf of
Borrower or any Obligor to any Agent is or may have been incomplete, inaccurate
or misleading in any material respect or (c) to reflect outstanding Letter of
Credit Accommodations as provided in Section 2.2 hereof or (d) with respect to
any Default or Event of Default.  To the
extent Administrative and Collateral Agent may revise the lending formulas used
to determine the Borrowing Base or establish new criteria or revise existing
criteria for Eligible Accounts, Eligible Inventory, Eligible Domestic
In-Transit Inventory, Eligible International In-Transit Inventory or Eligible
Re-Load Inventory so as to address any circumstances, condition, event or
contingency in a manner satisfactory to Administrative and Collateral Agent,
Administrative and Collateral Agent shall not establish a Reserve for the same
purpose.  The amount of any Reserve
established by Administrative and Collateral Agent shall have a reasonable
relationship to the event, condition or other matter which is the basis for
such reserve as determined by Administrative and Collateral Agent in good faith
and its reasonable credit judgment. 
Without limiting the generality of the foregoing, and without
duplication, Reserves shall be established, at Administrative and Collateral
Agent’s option, (q) in the amount of any proceeds of Term Loan Priority
Collateral which Administrative and Collateral Agent reasonably determines have
or may have been applied to the Obligations, which proceeds Administrative and
Collateral Agent was not entitled to retain pursuant to the terms of the Term
Loan Intercreditor Agreement, (r) in the amount of the Bank Product Reserve,
(s) for the amount of the Canadian Priority Payables then outstanding, (t) for
three (3) month’s rental payments with regard to any leased location of
Borrower (i) for which Administrative and Collateral Agent has not received a
Collateral Access Agreement, (ii) subject to an Affiliate Lease until such time
as Administrative and Collateral Agent has received an updated appraisal

 

26

 

of the Inventory which
accounts for such rental payments as part of liquidation expenses or (iii)
which was owned by Parent as of the date hereof but which has ceased to be
owned by Parent or an Affiliate of Borrower, (u) for reductions in the amount
of Eligible Accounts due to currency conversion rates, (v) for freight,
shipping, storage, warehousing or other such handling costs associated with
Eligible Domestic In-Transit Inventory, Eligible International In-Transit
Inventory or Eligible Re-Load Inventory or any other amounts Administrative and
Collateral Agent determines in good faith and its reasonable credit judgment
must be paid in order to allow Administrative and Collateral Agent to take
possession of such Inventory, (w) to reflect that returns, discounts, claims,
credits and allowances of any nature that are not paid pursuant to the
reduction of Accounts, (x) for sales, excise or similar taxes included in the
amount of any Accounts reported to Administrative and Collateral Agent, (y) to
reflect, since the date of the most recent appraisal, that a change in the
turnover, age or mix of the categories of Inventory that adversely affects the
aggregate value of all Inventory or (z) to reflect, since the date of the most
recent appraisal, that the liquidation value of Inventory, has decreased.  In the event that, based on the calculation
of the Borrowing Base by Administrative and Collateral Agent, the establishment
of a Reserve of a type not previously established will result in there being
Excess Availability of less than $40,000,000, Administrative and Collateral
Agent shall give Borrower three (3) Business Days’ notice prior to establishing
such a Reserve; provided, that, Administrative and Collateral
Agent shall not be required to provide any such notice with regard to (1) any
further Reserves established or increased while Excess Availability remains
less than $40,000,000 or (2) with regard to any Reserve established or
increased in connection with an event which either constitutes an Event of
Default or could reasonably be expected to materially impair Administrative and
Collateral Agent’s liens on the Collateral or its ability to realize upon the
Collateral.

1.119       “Revolving Loan Commitment” shall
mean, as to any Lender: (a) at any time prior to the termination of the
Revolving Loan Commitments, the amount of such Lender’s revolving loan
commitment as set forth on the signature pages hereto or on Schedule 1 to the
Assignment and Acceptance Agreement pursuant to which such Lender became a
Lender under this Agreement, as such amount may be adjusted from time to time
in accordance with the provisions of Section 13.6 hereof, and (b) after the
termination of the Revolving Loan Commitments, the unpaid amount of Revolving
Loans and Special Agent Advances made by such Lender and such Lender’s interest
in the outstanding Letter of Credit Accommodations, in each case as the same
may be required to be adjusted from time to time in accordance with the terms
hereof.

1.120       “Revolving Loan Credit Facility”
shall mean the Revolving Loans and Letter of Credit Accommodations provided to
or for the benefit of Borrowers pursuant to the terms of this Agreement.

1.121       “Revolving Loan Lender” shall mean
any Lender having a Revolving Loan Commitment.

1.122       “Revolving Loan Limit” shall mean
Seven Hundred Million Dollars ($700,000,000) unless Borrower shall have
exercised its right to reduce such amount pursuant to Section 2.1(c) hereof, in
which event Revolving Loan Limit shall mean such reduced amount.

 

27

 

1.123       “Revolving Loans” shall mean the
loans now or hereafter made by or on behalf of any Revolving Loan Lender or by
Administrative and Collateral Agent for the ratable account of any Revolving
Loan Lender, to or for the benefit of Borrower on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.

1.124       “Seasonal Period” shall mean the
period beginning on March 1 and ending on June 30 of each year.

1.125       “Seller” shall mean
Georgia-Pacific Corporation, a Georgia corporation, and Georgia-Pacific
Building Materials Sales, Ltd., a company organized under the laws of New
Brunswick, and their respective successors and assigns.

1.126       “Settlement Period” shall have the
meaning set forth in Section 6.10(b) hereof.

1.127       “Solvent” shall mean, at any time
with respect to any Person, that at such time such Person (a) is able to pay
its debts as they mature and has (and has a reasonable basis to believe it will
continue to have) sufficient capital (and not unreasonably small capital) to
carry on its business as currently conducted or proposed to be conducted as
previously disclosed to Administrative and Collateral Agent in writing prior to
the date hereof or in accordance with Section 9.6, and (b) the assets and
properties of such Person at a fair valuation (and including as assets for this
purpose at a fair valuation all rights of subrogation, contribution or
indemnification arising pursuant to any guaranties given by such Person) are
greater than the Indebtedness of such Person, and including subordinated and
contingent liabilities computed at the amount which, such person has a
reasonable basis to believe, represents an amount which can reasonably be
expected to become an actual or matured liability (and including as to
contingent liabilities arising pursuant to any guaranty the face amount of such
liability as reduced to reflect the probability of it becoming a matured
liability).

1.128       “Special Agent Advances” shall
have the meaning set forth in Section 12.11(a) hereof.

1.129       “Sponsor” shall mean Cerberus
Capital Management, L.P., a Delaware limited partnership.

1.130       “Sponsor Affiliated Lenders” shall
mean Ableco Finance LLC, a Delaware limited liability company, Madeleine
L.L.C., a New York limited liability company, and funds and managed accounts
which are managed or advised by such Person, Sponsor or an Affiliate of such
Person or Sponsor.

1.131       “Sponsor Portfolio Company” shall
mean any Person that is an Affiliate of Borrower solely due to the fact that
such Person is controlled, directly or indirectly, by Sponsor and which is not
otherwise involved in Borrower’s business in any capacity.

1.132       “Subsidiary” or “subsidiary”
shall mean, with respect to any Person, any corporation, limited liability
company, limited liability partnership or other limited or general partnership,
trust, association or other business entity of which an aggregate of at least a
majority of the outstanding Capital Stock or other interests entitled to vote
in the election of the board of directors of such corporation (irrespective of
whether, at the time, Capital Stock of any other

 

28

 

class or classes of such
corporation shall have or might have voting power by reason of the happening of
any contingency), managers, trustees or other controlling persons, or an
equivalent controlling interest therein, of such Person is, at the time,
directly or indirectly, owned by such Person and/or one or more subsidiaries of
such Person.

1.133       “Taxes” shall mean any and all
present or future taxes, levies, imposts, deductions, charges or withholdings,
and all liabilities with respect thereto, other than Excluded Taxes.

1.134       “Term Loan Agent” means GSCP, in
its capacity as agent for the lenders party to the Term Loan Agreement, and any
successor agent for any lenders providing refinancing of the obligations of
Borrower under the Term Loan Agreement.

1.135       “Term Loan Agreement” shall mean
that certain Financing Agreement, dated the date hereof, by and among Borrower,
the lenders from time to time party thereto and Term Loan Agent, as the same
may be amended, restated, modified or replaced pursuant to a refinancing
permitted under the terms of this Agreement.

1.136       “Term Loan Intercreditor Agreement”
shall mean that certain Intercreditor Agreement, dated the date hereof, by and
between Term Loan Agent and Administrative and Collateral Agent with regard to
the Term Loan Agreement, as the same may be amended, restated, modified or
replaced in connection with a refinancing of the obligations owed by Borrower
under the Term Loan Agreement which is permitted under the terms of this
Agreement

1.137       “Term Loan Priority Collateral”
means any Collateral other than Revolving Loan Priority Collateral (as defined
in the Term Loan Intercreditor Agreement).

1.138       “Transferee” shall have the
meaning set forth in Section 6.5(a) hereof.

1.139       “UCC” shall mean the Uniform
Commercial Code as in effect in the State of New York, and any successor
statute, as in effect from time to time (except that terms used herein which
are defined in the Uniform Commercial Code as in effect in the State of New
York on the date hereof shall continue to have the same meaning notwithstanding
any replacement or amendment of such statute except as Lender may otherwise
determine; provided, that, if, with respect to any financing
statement or by reason of any provisions of law, the perfection or the effect
of perfection or non-perfection of the security interests granted to the
Administrative and Collateral Agent pursuant to the applicable Financing
Agreement is governed by the Uniform Commercial Code as in effect in a
jurisdiction of the United States other than the State of New York, then UCC
means the Uniform Commercial Code as in effect from time to time in such other
jurisdiction for purposes of the provisions of each Financing Agreement and any
financing statement relating to such perfection or effect of perfection or non-perfection.

1.140       “Value” shall mean, as determined
by Administrative and Collateral Agent in good faith, with respect to
Inventory, the lower of (a) cost computed on either a first-in-first-out or
rolling average cost basis, in each case in accordance with GAAP or (b) market
value; provided, that, for purposes of the calculation of the
Borrowing Base, (i) the Value of the Inventory shall not include:  (A) the portion of the value of Inventory
equal to the profit earned by any Affiliate (other than a Sponsor Portfolio
Company) on the sale thereof to Borrower or (B)

 

29

 

write-ups or write-downs
in value with respect to currency exchange rates and (ii) notwithstanding
anything to the contrary contained herein, the cost of the Inventory shall be
computed in the same manner and consistent with the most recent appraisal of
the Inventory received and accepted by Administrative and Collateral Agent.

1.141       “VAT” shall mean Value Added Tax
imposed in Canada or any other jurisdiction and any equivalent tax applicable
in any jurisdiction (including Goods and Services Tax, Harmonized Sales Tax and
Quebec Sales Tax).

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

SECTION
2.                                CREDIT
FACILITIES

2.1           Revolving Loans.

(a)           Subject to and upon the terms and
conditions contained herein, each Revolving Loan Lender severally (and not
jointly) agrees to fund its Pro Rata Share of Revolving Loans to Borrower from
time to time in amounts requested by Borrower up to the amount equal to the
lesser of:  (i) the Borrowing Base or
(ii) the Revolving Loan Limit.

(b)           Except in Administrative and
Collateral Agent’s discretion, with the consent of all Lenders other than the
Sponsor Affiliated Lenders, (i) the aggregate principal amount of the Revolving
Loans and the Letter of Credit Accommodations outstanding at any time shall not
exceed the Revolving Loan Limit.  In the
event that the aggregate principal amount of the outstanding Revolving Loans
and Letter of Credit Accommodations exceed the amounts available pursuant to
the Borrowing Base (prior to giving effect to Reserves established at the
issuance of such Letter of Credit Accommodations), the Revolving Loan Limit or
the sublimits for Letter of Credit Accommodations set forth in Section 2.2(e),
as applicable, such event shall not limit, waive or otherwise affect any rights
of any Agent or any Lender in that circumstance or on any future occasions and
Borrower shall, upon demand by Administrative and Collateral Agent, which may
be made at any time or from time to time, immediately repay to Administrative
and Collateral Agent, for the ratable benefit of the Revolving Loan Lenders,
the entire amount of any such excess(es) for which payment is demanded, or, if
no Revolving Loans are then outstanding, provide cash collateral with respect
to any Letter of Credit Accommodations outstanding in excess of the Borrowing
Base or sublimit for Letter of Credit Accommodations set forth in Section
2.2(e) in an amount equal to one hundred five percent (105%) of the amount of
such excess plus the amount of any fees and expenses payable in connection
therewith through the end of the expiration of such Letter of Credit
Accommodations.

(c)           At Borrower’s option, upon not less than
five (5) Business Days prior written notice to Administrative and Collateral
Agent, Borrower may permanently reduce the

 

30

 

Revolving Loan Limit; provided,
however, (i) no more than twenty (20) such reductions may be made during
the term of this Agreement; (ii) such reductions are requested in increments of
$10,000,000 and (iii) the Revolving Loan Limit may not be reduced to an amount
that is less than $250,000,000 unless reduced to zero in connection with the
termination of the Agreement in accordance with the provisions of Section
13.1(a) hereof.

2.2           Letter of Credit Accommodations.

(a)           Subject to and upon the terms and
conditions contained herein, at the request of Borrower, Administrative and
Collateral Agent agrees, for the ratable risk of each Revolving Loan Lender
according to its Pro Rata Share, to provide or arrange for Letter of Credit
Accommodations for the account of Borrower containing terms and conditions
acceptable to Administrative and Collateral Agent and the issuer thereof.  Any payments made by Administrative and
Collateral Agent or any Lender to any issuer thereof and/or related parties in
connection with the Letter of Credit Accommodations shall constitute additional
Revolving Loans to Borrower pursuant to this Section 2.

(b)           In addition to any charges, fees or
expenses charged by any bank or issuer in connection with the Letter of Credit
Accommodations, Borrower shall pay to Administrative and Collateral Agent: (i)
for its own account, a letter of credit fee at a rate equal to one-eighth
percent (0.125%) per annum on the daily outstanding balance of the Letter of
Credit Accommodations for the immediately preceding month (or part thereof),
payable in arrears as of the first day of each succeeding month; and (ii) for
the ratable benefit of Revolving Loan Lenders, a letter of credit fee at a per
annum rate equal to the “Applicable Eurodollar Rate Margin” then in effect
pursuant to Section 1.69 hereof, on the daily outstanding balance of the Letter
of Credit Accommodations for the immediately preceding month (or part thereof),
payable in arrears as of the first day of each succeeding month; provided,
however, Administrative and Collateral Agent may, and upon the written
direction of the Required Lenders shall, require Borrower to pay such letter of
credit fees, at a rates that are two (2.0) percentage points higher than the
rates set forth above:  (A) during the
period from and after the date of termination or non-renewal hereof until
Administrative and Collateral Agent, for the ratable benefit of Revolving Loan
Lenders, has received full and final payment of all Obligations
(notwithstanding entry of a judgment against Borrower); (B) during the period
from and after the date of the occurrence of an Event of Default for so long as
such Event of Default is continuing as determined by Administrative and
Collateral Agent; and (C) with respect to any Letter of Credit Accommodations
issued in excess of the sublimit set forth in Section 2.2(e) below.  Such letter of credit fees shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed and the obligation of Borrower to pay such fees shall survive the
termination or non-renewal of this Agreement.

(c)           Borrower shall give Administrative
and Collateral Agent two (2) Business Days’ prior written notice of their
request for the issuance of a Letter of Credit Accommodation.  Such notice shall be irrevocable and shall
specify the original face amount of the Letter of Credit Accommodation
requested, the effective date (which date shall be a Business Day) of issuance
of such requested Letter of Credit Accommodation, whether such Letter of Credit
Accommodations may be drawn in a single or in partial draws, the date on which
such requested Letter of Credit Accommodation is to expire (which date shall be
a Business Day), the purpose for which such

 

31

 

Letter of Credit
Accommodation is to be issued, and the beneficiary of the requested Letter of
Credit Accommodation.  Borrower shall
attach to such notice the proposed terms of the Letter of Credit Accommodation.

(d)           In addition to being subject to the
satisfaction of the applicable conditions precedent contained in Section 4
hereof and the other terms and conditions contained herein, no Letter of Credit
Accommodations shall be available unless each of the following conditions
precedent have been satisfied in a manner reasonably satisfactory to
Administrative and Collateral Agent in its reasonable credit judgment:  (i) Borrower shall have delivered to the
proposed issuer of such Letter of Credit Accommodation at such times and in
such manner as such proposed issuer may require, an application in form and
substance satisfactory to such proposed issuer and Administrative and
Collateral Agent for the issuance of the Letter of Credit Accommodation and
such other documents as may be required pursuant to the terms thereof, and the
form and terms of the proposed Letter of Credit Accommodation shall be
satisfactory to Administrative and Collateral Agent and such proposed issuer,
(ii) as of the date of issuance, no order of any court, arbitrator or other
Governmental Authority shall purport by its terms to enjoin or restrain money
center banks generally from issuing letters of credit of the type and in the
amount of the proposed Letter of Credit Accommodation, and no law, rule or
regulation applicable to money center banks generally and no request or
directive (whether or not having the force of law) from any Governmental
Authority with jurisdiction over money center banks generally shall prohibit,
or request that the proposed issuer of such Letter of Credit Accommodation
refrain from, the issuance of letters of credit generally or the issuance of such
Letters of Credit Accommodation; and (iii) Excess Availability, prior to giving
effect to any Reserves with respect to such Letter of Credit Accommodations, on
the date of the proposed issuance of any Letter of Credit Accommodations, shall
be equal to or greater than an amount equal to the sum of (A) one hundred
percent (100%) of the face amount thereof plus (B) the amount of all other
commitments and obligations made or incurred by Administrative and Collateral
Agent and Lenders with respect to charges, fees or expenses charged by any bank
or issuer in connection with such Letter of Credit Accommodation.  Effective on the issuance of each Letter of
Credit Accommodation, a Reserve shall be established in the amount set forth in
Section 2.2(d)(iii) above.

(e)           Except in Administrative and
Collateral Agent’s discretion, with the consent of the Required Lenders, the
amount of all outstanding Letter of Credit Accommodations and all other
commitments and obligations made or incurred by Administrative and Collateral
Agent or any Lender in connection therewith shall not at any time exceed Thirty
Million Dollars ($30,000,000).

(f)            Borrower shall indemnify and hold
Administrative and Collateral Agent and Lenders harmless from and against any
and all losses, claims, damages, liabilities, costs and expenses which
Administrative and Collateral Agent or any Lender may suffer or incur, other
than as a result of the gross negligence or willful misconduct of such Person
seeking indemnification, in connection with any Letter of Credit Accommodations
and any documents, drafts or acceptances relating thereto, including any
losses, claims, damages, liabilities, costs and expenses due to any action
taken by any issuer or correspondent with respect to any Letter of Credit
Accommodation.  Borrower assumes all
risks with respect to the acts or omissions of the drawer under or beneficiary
of any Letter of Credit Accommodation and for such purposes the

 

32

 

drawer or beneficiary
shall be deemed Borrower’s agent. 
Borrower assumes all risks for, and agrees to pay (if any), all foreign,
Federal, State and local taxes, duties and levies relating to any goods subject
to any Letter of Credit Accommodations or any documents, drafts or acceptances
thereunder.  Borrower hereby releases
and holds Administrative and Collateral Agent and each Lender harmless from and
against any acts, waivers, errors, delays or omissions, whether caused by
Borrower, by any issuer or correspondent or otherwise with respect to or
relating to any Letter of Credit Accommodation, except for the gross negligence
or willful misconduct of Administrative and Collateral Agent or such Lender as
determined pursuant to a final, non-appealable order of a court of competent
jurisdiction.  The provisions of this
Section 2.2(f) shall survive the payment of Obligations and the termination or
non-renewal of this Agreement.

(g)           In connection with Inventory
purchased pursuant to Letter of Credit Accommodations, Borrower shall, at
Administrative and Collateral Agent’s request, instruct all suppliers,
carriers, forwarders, customs brokers, warehouses or others receiving or
holding cash, checks, Inventory, documents or instruments in which
Administrative and Collateral Agent, for itself and the ratable benefit of the
Lenders and the Bank Product Providers, holds a security interest to deliver
them to Administrative and Collateral Agent and/or subject to Administrative
and Collateral Agent’s order, and if they shall come into Borrower’s possession,
to deliver them, upon Administrative and Collateral Agent’s request, to
Administrative and Collateral Agent. 
Borrower shall also, at Administrative and Collateral Agent’s request,
designate Administrative and Collateral Agent as the consignee on all bills of
lading and other negotiable and non-negotiable documents.

(h)           Borrower hereby irrevocably
authorizes and directs any issuer of a Letter of Credit Accommodation to name
Borrower as the account party therein and to deliver to Administrative and
Collateral Agent all instruments, documents and other writings and property
received by issuer pursuant to the Letter of Credit Accommodations and to
accept and rely upon Administrative and Collateral Agent’s instructions and
agreements with respect to all matters arising in connection with the Letter of
Credit Accommodations or the applications therefor.  Nothing contained herein shall be deemed or construed to grant
Borrower any right or authority to pledge the credit of any Agent or any Lender
in any manner.  Neither Administrative
and Collateral Agent nor any Lender shall have any liability of any kind with
respect to any Letter of Credit Accommodation provided by an issuer other than
Administrative and Collateral Agent or such Lender unless Administrative and Collateral
Agent has duly executed and delivered to such issuer the application or a
guaranty or indemnification in writing with respect to such Letter of Credit
Accommodation.  Borrower shall be bound
by any interpretation made in good faith by Administrative and Collateral
Agent, or any other issuer or correspondent under or in connection with any
Letter of Credit Accommodation or any documents, drafts or acceptances
thereunder, notwithstanding that such interpretation may be inconsistent with
any instructions of Borrower.

(i)            So long as no Event of Default
exists, with respect to any Letter of Credit Accommodation, the Borrower may,
after notice to Administrative and Collateral Agent, (i) approve or resolve any
questions of non-compliance of documents, (ii) give any instructions as to
acceptance or rejection of any documents or goods, (iii) execute any and
all applications for steamship or airway guaranties, indemnities or delivery
orders, and (iv) with Administrative and Collateral Agent’s consent, grant any
extensions of the maturity of, time of payment for, or time of presentation of,
any drafts, acceptances, or documents, and agree to any amendments,

 

33

 

renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of
any of the applications, Letter of Credit Accommodations, or documents, drafts
or acceptances thereunder or any letters of credit included in the Collateral.

(j)            At any time an Event of Default
exists or has occurred and is continuing, Administrative and Collateral Agent
shall have the right and authority to, and Borrower shall not, without the
prior written consent of Administrative and Collateral Agent, (i) approve or
resolve any questions of non-compliance of documents, (ii) give any
instructions as to acceptance or rejection of any documents or goods,
(iii) execute any and all applications for steamship or airway guaranties,
indemnities or delivery orders, (iv) grant any extensions of the maturity
of, time of payments for, or time of presentation of, any drafts, acceptances,
or documents, and (v) agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of
any of the applications, Letter of Credit Accommodations, or documents, drafts
or acceptances thereunder or any letters of credit included in the
Collateral.  Administrative and
Collateral Agent may take such actions either in its own name or in Borrower’s
name.

(k)           Any rights, remedies, duties or
obligations granted or undertaken by Borrower to any issuer or correspondent in
any application for any Letter of Credit Accommodation, or any other agreement
in favor of any issuer or correspondent relating to any Letter of Credit
Accommodation, shall be deemed to have been granted or undertaken by Borrower
to Administrative and Collateral Agent for the ratable benefit of Revolving
Loan Lenders.  Any duties or obligations
undertaken by Administrative and Collateral Agent or any Revolving Loan Lender
to any issuer or correspondent in any application for any Letter of Credit
Accommodation, or any other agreement by Administrative and Collateral Agent or
any Revolving Loan Lender in favor of any issuer or correspondent relating to
any Letter of Credit Accommodation, shall be deemed to have been undertaken by
Borrower to Administrative and Collateral Agent or such Revolving Loan Lender
and to apply in all respects to Borrower.

2.3           Commitments.  The aggregate amount of each Revolving Loan
Lender’s Pro Rata Share of the Revolving Loans and Letter of Credit
Accommodations shall not exceed the amount of such Lender’s Revolving Loan
Commitment, as the same may from time to time be amended in accordance with the
terms of this Agreement.

2.4           Bank Products.  Borrower or any of its Subsidiaries may (but
no such Person is required to) request that the Administrative and Collateral
Agent provide or arrange for such Person to obtain Bank Products from
Administrative and Collateral Agent or its Affiliates, and Administrative and
Collateral Agent may, in its sole discretion, provide or arrange for such
Person to obtain the requested Bank Products. 
Borrower or any of its Subsidiaries that obtains Bank Products shall
indemnify and hold Administrative and Collateral Agent, each Lender and their
respective Affiliates harmless from any and all obligations now or hereafter
owing to any other Person by Administrative and Collateral Agent or its
Affiliates in connection with any Bank Products other than for gross negligence
or willful misconduct on the part of any such indemnified Person.  Borrower and its Subsidiaries acknowledge
and agree that the obtaining of Bank Products from the Administrative and
Collateral Agent and its Affiliates (a) is in the sole discretion of the
Administrative and Collateral Agent or such Affiliate, as the case may be, and
(b) is subject to all rules and regulations of the Person that provides the
Bank Product.

 

34

 

SECTION
3.                                INTEREST AND
FEES

3.1           Interest.

(a)           Borrower shall pay to Administrative
and Collateral Agent, for the ratable benefit of Lenders, interest on the
outstanding principal amount of the Loans (other than the Letter of Credit
Accommodations) at the Interest Rate. 
All interest accruing hereunder during the existence of any Event of
Default or after the date of any termination or non-renewal hereof shall be
payable on demand.

(b)           Borrower may from time to time
request Eurodollar Rate Loans or may request that Prime Rate Loans be converted
to Eurodollar Rate Loans or that any existing Eurodollar Rate Loans continue
for an additional Interest Period.  Such
request from Borrower shall specify the amount of the Eurodollar Rate Loans or
the amount of the Prime Rate Loans to be converted to Eurodollar Rate Loans or
the amount of the Eurodollar Rate Loans to be continued (subject to the limits
set forth below) and the Interest Period to be applicable to such Eurodollar
Rate Loans.  Subject to the terms and
conditions contained herein, three (3) Business Days after receipt by
Administrative and Collateral Agent of such a request from Borrower, such
Eurodollar Rate Loans shall be made, such Prime Rate Loans shall be converted
to Eurodollar Rate Loans or such Eurodollar Rate Loans shall continue, as the case
may be, provided, that, (i) no Default or Event of Default shall exist or have
occurred and be continuing, (ii) no party hereto shall have sent any notice of
termination or, if applicable, non-renewal of this Agreement, (iii) Borrower
shall have complied with such customary procedures as are established by
Administrative and Collateral Agent and specified by Administrative and
Collateral Agent to Borrower from time to time for requests by Borrower for
Eurodollar Rate Loans, (iv) no more than six (6) Interest Periods may be in
effect at any one time and no more than two (2) Interest Periods that are
fourteen (14) day Interests Periods may be in effect at any one time, (v) the
aggregate amount of all Eurodollar Rate Loans outstanding must be in an amount not
less than Ten Million Dollars ($10,000,000) or an integral multiple of One
Million Dollars ($1,000,000) in excess thereof and (vi) Administrative and
Collateral Agent and Revolving Loan Lenders shall have determined that the
Interest Period or Adjusted Eurodollar Rate is available to such Lender and can
be readily determined as of the date of the request for such Eurodollar Rate
Loan by Borrower.  Any request by
Borrower for Eurodollar Rate Loans or to convert Prime Rate Loans to Eurodollar
Rate Loans or to continue any existing Eurodollar Rate Loans shall be
irrevocable.  Notwithstanding anything
to the contrary contained herein, Administrative and Collateral Agent,
Revolving Loan Lenders and Reference Bank shall not be required to purchase
United States Dollar deposits in the London interbank market or other
applicable Eurodollar Rate market to fund any Eurodollar Rate Loans, but the
provisions hereof shall be deemed to apply as if Administrative and Collateral
Agent, Revolving Loan Lenders and Reference Bank had purchased such deposits to
fund the Eurodollar Rate Loans.

(c)           Any Eurodollar Rate Loans shall
automatically convert to Prime Rate Loans upon the last day of the applicable
Interest Period, unless Administrative and Collateral Agent has received and
approved a request to continue such Eurodollar Rate Loan at least three (3)
Business Days prior to such last day in accordance with the terms hereof.  Any Eurodollar Rate Loans shall, at
Administrative and Collateral Agent’s option, upon notice by Administrative and
Collateral Agent to Borrower, convert to Prime Rate Loans in the event that
this Agreement

 

35

 

shall terminate or, if
applicable, not be renewed.  Borrower
shall pay to Administrative and Collateral Agent, for the benefit of Lenders,
upon demand by Administrative and Collateral Agent (or Administrative and
Collateral Agent may, at its option, charge any loan account of Borrower) any
amounts required to compensate any Lender, the Reference Bank or any
Participant with any Lender for any loss (including loss of anticipated
profits), cost or expense incurred by such Person, as a result of the
conversion of Eurodollar Rate Loans to Prime Rate Loans pursuant to any of the
foregoing, provided that such demand is made within 180 days of the incurrence
of such loss, costs or expenses.  At the
request of Borrower, Administrative and Collateral Agent shall provide to
Borrower all available supporting documentation with respect to such loss, cost
or expense.

(d)           Interest shall be payable by Borrower
to Administrative and Collateral Agent, for the benefit of Lenders monthly in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed.  The interest rate on
non-contingent Obligations (other than Eurodollar Rate Loans) shall increase or
decrease by an amount equal to each increase or decrease in the Prime Rate
effective on the first day of the month after any change in such Prime Rate is
announced based on the Prime Rate in effect on the last day of the month in
which any such change occurs.

(e)           No agreements, conditions, provisions
or stipulations contained in this Agreement or any of the other Financing Agreements
or any Event of Default, or the exercise by Administrative and Collateral Agent
or any Lender of the right to accelerate the payment or the maturity of all or
any portion of the Obligations, or the exercise by Administrative and
Collateral Agent or any Lender of any option whatsoever contained in this
Agreement or any of the other Financing Agreements, or the prepayment by
Borrower of any of the Obligations, or the occurrence of any event or
contingency whatsoever, shall entitle Administrative and Collateral Agent and
Lenders to contract for, charge or receive, in any event, interest exceeding
the Maximum Interest Rate.  In no event
shall Borrower be obligated to pay interest exceeding such Maximum Interest Rate.  All agreements, conditions or stipulations,
if any, which may in any event or contingency whatsoever operate to bind,
obligate or compel Borrower to pay a rate of interest exceeding the Maximum
Interest Rate shall be without binding force or effect, at law or in equity, to
the extent of the excess of interest over such Maximum Interest Rate.  In the event any interest is contracted for,
charged or received in excess of the Maximum Interest Rate (“Excess”),
Borrower acknowledges and stipulates that any such contract, charge or receipt
shall be the result of an accident and bona  fide error, and that
any Excess received by Administrative and Collateral Agent or any Lender shall
be applied, first, to the payment of the then outstanding and unpaid principal
hereunder; second, to the payment of the other Obligations then outstanding and
unpaid; and third, returned to Borrower, it being the intent of the parties
hereto not to enter at any time into a usurious or otherwise illegal
relationship.  Borrower recognizes that,
with fluctuations in the rate of interest set forth in this Section 3.1 of this
Agreement and the Maximum Interest Rate, such an unintentional result could
inadvertently occur.  By the execution
of this Agreement, Borrower agrees that (i) the credit or return of any Excess
shall constitute the acceptance by Borrower of such Excess, and (ii) Borrower
shall not seek or pursue any other remedy, legal or equitable, against any
Agent or any Lender, based in whole or in part upon contracting for, charging
or receiving of any interest in excess of the Maximum Interest Rate.  For the purpose of determining whether or
not any Excess has been contracted for, charged or received by any Agent or any
Lender, all interest at any time contracted for, charged 

 

36

 

or received by any Agent
or any Lender in connection with this Agreement or any of the other Financing
Agreements shall be amortized, prorated, allocated and spread during the entire
term of this Agreement in accordance with the amounts outstanding from time to
time hereunder and the Maximum Interest Rate from time to time in effect in
order to lawfully charge the maximum amount of interest permitted under
applicable law.

3.2           Changes in Laws and Increased Costs
of Loans.

(a)           If after the date hereof, either (i)
any change in, or in the interpretation of, any law or regulation is
introduced, including, without limitation, with respect to reserve
requirements, applicable to any Agent, any Lender or any banking or financial
institution from whom any Agent or any Lender borrows funds or obtains credit
(a “Funding Bank”) other than any change in, or in the interpretation of
any Tax and any Excluded Taxes, or (ii) a Funding Bank, any Agent or any Lender
complies with any future guideline or request from any central bank or other
Governmental Authority or (iii) a Funding Bank, any Agent or any Lender
determines that the adoption of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any Governmental Authority, central
bank or comparable agency charged with the interpretation or administration
thereof has or would have the effect described below, or a Funding Bank, any
Agent or any Lender complies with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, and in the case of any event set forth in
this clause (iii), such adoption, change or compliance has or would have the
direct or indirect effect of reducing the rate of return on such Agent’s or
such Lender’s capital as a consequence of its obligations hereunder to a level
below that which such Agent or such Lender could have achieved but for such
adoption, change or compliance (taking into consideration the Funding Bank’s,
such Agent’s or such Lender’s policies with respect to capital adequacy) by an
amount deemed by such Agent or such Lender to be material, and the result of
any of the foregoing events described in clauses (i), (ii) or (iii) is or
results in an increase in the cost to any Agent or any Lender of funding or
maintaining the Loans, then Borrower shall from time to time upon demand by
Administrative and Collateral Agent, for itself or the applicable Lender, pay
to Administrative and Collateral Agent, for itself or the applicable Lender,
additional amounts sufficient to indemnify Agents or the applicable Lender
against such increased cost on an after-tax basis (after taking into account
applicable deductions and credits in respect of the amount indemnified),
provided that such demand is made within 180 days of the incurrence of such
loss, costs or expenses.  A certificate
as to the amount of such increased cost shall be submitted to Borrower by
Administrative and Collateral Agent and shall be conclusive, absent manifest
error.

(b)           If prior to the first day of any
Interest Period, (i) Administrative and Collateral Agent shall have determined
in good faith (which determination shall be conclusive and binding upon
Borrower) that, by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining the Eurodollar Rate
for such Interest Period, (ii) Administrative and Collateral Agent determines
that the Eurodollar Rate determined or to be determined for such Interest
Period will not adequately and fairly reflect the cost to Administrative and
Collateral Agent and/or the Lenders of making or maintaining Eurodollar Rate
Loans during such Interest Period, or (iii) Dollar deposits in the principal
amounts of the Eurodollar Rate Loans to which such Interest Period is to be
applicable are not generally

 

37

 

available in the London
interbank market, Administrative and Collateral Agent shall give telecopy or
telephonic notice thereof to Borrower as soon as practicable thereafter, and
will also give prompt written notice to Borrower when such conditions no longer
exist.  If such notice is given (A) any
Eurodollar Rate Loans requested to be made on the first day of such Interest
Period shall be made as Prime Rate Loans, (B) any Loans that were to have been
converted on the first day of such Interest Period to or continued as
Eurodollar Rate Loans shall be converted to or continued as Prime Rate Loans
and (C) each outstanding Eurodollar Rate Loan shall be converted, on the last
day of the then-current Interest Period thereof, to Prime Rate Loans.  Until such notice has been withdrawn by Administrative
and Collateral Agent, no further Eurodollar Rate Loans shall be made or
continued as such, nor shall Borrower have the right to convert Prime Rate
Loans to Eurodollar Rate Loans.

(c)           Notwithstanding any other provision
herein, if the adoption of or any change in any law, treaty, rule or regulation
or final, non-appealable determination of an arbitrator or a court or other
Governmental Authority or in the interpretation or application thereof
occurring after the date hereof shall make it unlawful for Administrative and
Collateral Agent or any Lender to make or maintain Eurodollar Rate Loans as
contemplated by this Agreement, (i) Administrative and Collateral Agent shall
promptly give written notice of such circumstances to Borrower (which notice
shall be withdrawn whenever such circumstances no longer exist), (ii) the
commitment of such Lender hereunder to make Eurodollar Rate Loans, continue
Eurodollar Rate Loans as such and convert Prime Rate Loans to Eurodollar Rate
Loans shall forthwith be canceled and, until such time as it shall no longer be
unlawful for Administrative and Collateral Agent and/or such Lender to make or
maintain Eurodollar Rate Loans, such Lender shall then have a commitment only
to make a Prime Rate Loan when a Eurodollar Rate Loan is requested and (iii)
Loans of such Lender then outstanding as Eurodollar Rate Loans, if any, shall
be converted automatically to Prime Rate Loans on the respective last days of
the then current Interest Periods with respect to such Loans or within such
earlier period as required by law.  If
any such conversion of a Eurodollar Rate Loan occurs on a day which is not the
last day of the then current Interest Period with respect thereto, Borrower
shall pay to Administrative and Collateral Agent, for the benefit of the
Lenders, such amounts, if any, as may be required pursuant to Section 6.3(c)
below.

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

 

38

 

reasonably determined by
Administrative and Collateral Agent) which would have accrued to Lenders on
such amount by placing such amount on deposit for a comparable period with
leading banks in the interbank Eurodollar market.  This covenant shall survive the termination or non-renewal of
this Agreement and the payment of the Obligations.

(e)           If Borrower is required to pay
additional amounts to any Lender pursuant to Section 3.2(a) hereof that
increase the effective lending rate of such Lender with respect to its share of
the Loans to greater than one-eighth (1/8%) percent in excess of the percentage
of the effective lending rate of the other Lenders, then such Lender shall use
reasonable efforts (consistent with legal and regulatory restrictions) to
change the jurisdiction of its lending office with respect to making Eurodollar
Rate Loans so as to eliminate any such additional payment by Borrower which may
thereafter accrue, if such change in the judgment of such Lender is not
otherwise disadvantageous to such Lender. 
In the event that any one or more Lenders, pursuant to Section 3.2(a)
hereof, incur any increased costs (other than increased costs to the extent
such increased costs are not a recurring cost) for which any such Lender
demands compensation pursuant to Section 3.2(a) hereof which increases the
effective lending rate of such Lender with respect to its share of the Loans to
greater than one-eighth (1/8%) percent in excess of the percentage of the
effective lending rate of the other Lenders and such Lender has not mitigated such
costs within sixty (60) days after receipt by such Lender from Borrower of a
written notice that such Lender’s effective lending rate has so exceeded the
effective lending rate of the other Lenders, then and in any such event,
Borrower may substitute another financial institution which is an Eligible
Transferee acceptable to Administrative and Collateral Agent for such Lender to
assume the Revolving Loan Commitment of such Lender and to purchase the Loans
of such Lender, without recourse to or warranty by, or expense to, such Lender
for a purchase price equal to the outstanding principal amount of the Loans
owing to such Lender plus any accrued but unpaid interest on such Loans and
accrued but unpaid fees and other amounts in respect of such Lender’s Revolving
Loan Commitment and share of the Loans (other than any prepayment penalty or
other premiums).  Upon such purchase
such Lender shall no longer be a party hereto or have any rights or benefits
hereunder (except for rights or benefits that such Lender would retain
hereunder and under the other Financing Agreements upon payment in full of all
of the Obligations) and the replacement Lender shall succeed to the rights and
benefits, and shall assume the obligations, of such replaced Lender hereunder
and thereunder.  Administrative and
Collateral Agent and Lenders shall cooperate with Borrower to amend the
Financing Agreements to reflect such substitution.  In no event may Borrower replace a Lender that is also an Agent
or an issuer of a Letter of Credit Accommodation.

3.3           Fees.  In addition to any other fees provided for
herein or in any other Financing Agreement, Borrower agrees to pay to
Administrative and Collateral Agent:

(a)           for the benefit of the parties
specified therein, the fees and other amounts set forth in the Fee Letter in
the amounts and at the times specified therein; and

(b)           for the ratable benefit of the
Revolving Loan Lenders, payable on the first day of each month in arrears while
this Agreement is in effect and for so long thereafter as any of the
Obligations are outstanding, an unused line fee at a rate equal to either (i)
three-eighths of one percent (0.375%) per annum calculated upon the amount by
which the Revolving Loan Limit exceeds the average daily principal balance of
the outstanding Revolving Loans and Letter

 

39

 

of Credit Accommodations
during the immediately preceding month, or part thereof (such amount referred
to as the “Unused Facility Amount”), or (ii) if during any month of calculation
the Unused Facility Amount exceeds fifty percent (50%) of the then effective
Revolving Loan Limit, one half of one percent (0.50%) calculated upon the
Unused Facility Amount.

SECTION
4.                                CONDITIONS
PRECEDENT AND SUBSEQUENT

4.1           Conditions Precedent to Initial
Revolving Loans and Letter of Credit Accommodations.  Each of the following is a condition
precedent to Lenders (or Administrative and Collateral Agent on behalf of
Lenders) making the initial Revolving Loans and providing the initial Letter of
Credit Accommodations hereunder:

(a)           Agents shall have received, in form
and substance reasonably satisfactory to them, evidence that the Purchase
Agreements and the Real Property Purchase Agreement have been duly executed and
delivered by and to the appropriate parties thereto and the transactions
contemplated under the terms thereof have been consummated prior to or
contemporaneously with the execution of this Agreement;

(b)           Agents shall have received, in form
and substance reasonably satisfactory to them, all releases, terminations and
such other documents as they may request to evidence and effectuate the
termination of all existing liens and security interests (other than those of
Administrative and Collateral Agent or any other liens permitted under Section
9.8 hereof) with respect to the Purchased Assets and with respect to the assets
of Borrower and any Obligors, including, but not limited to, (i) UCC and PPSA
partial release statements for all such UCC and PPSA financing statements
covering the Purchased Assets which name Seller as debtor, (ii) UCC and PPSA
termination statements for all such UCC and PPSA financing statements
previously filed by any Person with respect to Borrower or any Obligor and
(iii) satisfactions and discharges of any security agreements, mortgages, deeds
of trust or deeds with respect to the Purchased Assets, Borrower or any
Obligor, in form acceptable for recording with the appropriate Governmental
Authority;

(c)           Agents shall have received all UCC
financing statements and PPSA filings reasonably required by them, each duly
authorized or executed (as applicable) by the Borrower, and the Agents shall
have received searches reflecting the filing of all such UCC financing
statements and PPSA filings, indicating that a valid, perfected, first-priority
(under both the UCC and PPSA) lien on the Collateral has been granted to
Administrative and Collateral Agent, for itself and the ratable benefit of the
Lenders and the Bank Product Providers, subject to the liens of the Term Loan
Agent (it being understood, however, that the results of statutory lien
searches in Canada may not be available on the Closing Date);

(d)           all requisite corporate action and
proceedings in connection with this Agreement and the other Financing
Agreements shall be reasonably satisfactory in form and substance to Agents,
and Agents shall have received all information and copies of all documents,
including records of requisite corporate action and proceedings which Agents
may have reasonably requested in connection therewith, such documents where
requested by Agents or their respective counsel to be certified by appropriate
corporate officers or Governmental Authority (and including a copy of the
certificate of incorporation of Borrower certified by the

 

40

 

Secretary of State (or
equivalent Governmental Authority) which shall set forth the same complete
corporate name of Borrower as is set forth herein and such document as shall
set forth the organizational identification number of Borrower, if one is
issued in its jurisdiction of incorporation);

(e)           Administrative and Collateral Agent
shall have completed a field review of the Records and such other information
with respect to the Collateral as Administrative and Collateral Agent may
require to determine the amount of Revolving Loans available to Borrower
(including, without limitation, current perpetual inventory records and/or
roll-forwards of Accounts and Inventory through the Closing Date and test
counts of the Inventory in a manner satisfactory to Administrative and
Collateral Agent, together with such supporting documentation as may be
necessary or appropriate, and other documents and information that will enable
Administrative and Collateral Agent to accurately identify and verify the
Collateral), the results of which in each case shall be satisfactory to Agents,
not more than ten (10) Business Days prior to the date hereof;

(f)            Agents shall have received, in form
and substance reasonably satisfactory to Agents, all consents, waivers,
acknowledgments and other agreements from third persons which Agents may deem
necessary or desirable in order to permit, protect and perfect Administrative
and Collateral Agent’s security interests in and liens upon the Collateral or
to effectuate the provisions or purposes of this Agreement and the other
Financing Agreements, including, without limitation, Collateral Access
Agreements by owners and lessors of leased premises of Borrower and mortgagees
of any such premises owned by Parent (which provide no less than a 90-day
occupancy period for Administrative and Collateral Agent to access the
Collateral located thereon), by warehouses at which any Collateral is located
and from bailees or other third parties who may from time to time be in
possession or control of any portion of the Collateral; provided, however,
with regard to Collateral Access Agreements from parties in possession or
control of Eligible Domestic In-Transit Inventory, Eligible International
In-Transit Inventory or Eligible Re-Load Inventory, the delivery of such
agreements is required to the extent necessary to enable Borrower to fulfill
the condition set forth in Section 4.1(g) hereof;

(g)           Adjusted Excess Availability as
determined by Administrative and Collateral Agent, as of the date hereof, shall
be not less than One Hundred Million Dollars ($100,000,000) after giving effect
to the initial Revolving Loans made or to be made and Letter of Credit
Accommodations issued or to be issued in connection with the initial transactions
hereunder;

(h)           Agents shall have received, in form
and substance reasonably satisfactory to Agents, Deposit Account Control
Agreements by and among Administrative and Collateral Agent, Borrower and each
bank where Borrower has a deposit account (including, without limitation, the
Blocked Accounts), in each case, duly authorized, executed and delivered by
such bank and Borrower (or Administrative and Collateral Agent shall be the
bank’s customer with respect to such deposit account as Administrative and
Collateral Agent may specify);

(i)            Agents shall have received evidence,
in form and substance satisfactory to Agents, that Administrative and
Collateral Agent, for itself and the ratable benefit of the Lenders and the
Bank Product Providers, has valid perfected and first priority security
interests in and

 

41

 

liens upon the Collateral
and any other property which is intended to be security for the Obligations or
the liability of any Obligor in respect thereof, subject only to the security
interests and liens permitted herein or in the other Financing Agreements;

(j)            Agents shall have received and
reviewed lien and judgment search results for the jurisdiction of incorporation
or organization of Borrower, the jurisdiction of the chief executive office of
Borrower and all U.S. and Canadian jurisdictions in which assets of Borrower
are located (other than Canadian statutory lien searches which may be
unavailable as of the Closing Date), which search results shall be in form and
substance satisfactory to Agents;

(k)           Agents shall have received, in form
and substance reasonably satisfactory to them, patent and trademark security
agreements executed by Borrower in favor of Administrative and Collateral Agent
with regard to all patents, trademarks and rights related thereto held by
Borrower;

(l)            Agents shall have received, in form
and substance reasonably satisfactory to them, an intercompany subordination
agreement duly executed by Borrower and its Subsidiaries;

(m)          Agents shall have received evidence of
insurance and loss payee endorsements required hereunder and under the other
Financing Agreements, in form and substance reasonably satisfactory to Agents,
and certificates of such required insurance policies and/or endorsements naming
Administrative and Collateral Agent as loss payee and/or additional insured, as
applicable, under such required insurance policies;

(n)           Agents shall have received, in form
and substance satisfactory to them, the opinion letter of counsel to Borrower
with respect to the Purchase Agreements, the Financing Agreements and the
security interests and liens of Administrative and Collateral Agent with
respect to the Collateral and such other matters as Agents may request;

(o)           Agents shall have received, in form
and substance satisfactory to them (i) audited financial statements of the
Business for the fiscal year ended December 31, 2002, (ii) un-audited financial
statements of the Business for the fiscal year ended December 31, 2003, (iii)
Borrower’s and its Subsidiaries projections (including balance sheets and
statements of operations, stockholders’ equity and cash flows and Borrowing
Base projections) for each fiscal year up to and including 2009, (iv)
un-audited financial statements of the Business for the fiscal month ending  March, 2004 (v) all other financial
information, projections, budgets, business plans, cash flows and such other
information as the Agents may reasonably request, including, without
limitation, (A) monthly borrowing base and financial projections for the
12-month period following the closing date, quarterly borrowing base and
financial projections for the succeeding 12-month period after that and annual
financial projections for each year after that through 2009 and (B) current
agings of accounts receivable, current perpetual inventory records and/or
rollforwards of accounts receivable and inventory through a date not earlier
than 10 days prior to the Closing Date, together with supporting documentation,
and other documents and information that will enable the Agents to accurately
identify and verify the Borrowing Base during the 10 days prior to closing in a
manner satisfactory to the Agents in their reasonable credit judgment;

 

42

 

(p)           Agents shall have received, in form
and substance reasonably satisfactory to them (i) a pro-forma balance sheet of
Borrower as of January 3, 2004 reflecting the initial transactions
contemplated hereunder, including, but not limited to, (A) the consummation of
the acquisition of the Purchased Assets by Borrower from Seller and the other
transactions contemplated by the Purchase Agreements and (B) the initial Loans
provided by Lenders to Borrower on the date hereof and the use of the proceeds
of the initial Loans as provided herein, (ii) a certificate, dated of even date
herewith, of the chief financial officer of Borrower, stating that, among other
things, such pro-forma balance sheet represents the reasonable, good faith
opinion of such officer or Person, as the case may be, as to the subject matter
thereof as of the date of such certificate and that in the opinion of such
officer or Person, as the case may be, the Borrower is and will be Solvent
after giving effect to all such transactions;

(q)           Agents shall have received evidence,
in form and substance reasonably satisfactory to them, that (i) Parent shall
have received an equity capital contribution and a loan from Sponsor or its
Affiliates and management and (ii) Parent shall have used a portion of the
proceeds thereof to make an equity capital contribution of no less than
$100,000,000 to Borrower on terms reasonably satisfactory to the Agents;

(r)            Agents shall have (i) received
evidence, in form and substance reasonably satisfactory to them, that Borrower
has consummated the transactions contemplated by the Term Loan Agreement and
received cash proceeds therefrom of not less than $97,500,000, (ii) received
and been satisfied with its review of the Term Loan Agreement and all
documentation related thereto, and (c) received the Term Loan Intercreditor
Agreement, in form and substance reasonably satisfactory to them, duly executed
by Term Loan Agent;

(s)           Agents shall have received, in form
and substance satisfactory to them, an agreement executed by Seller and any of
its applicable Affiliates, pursuant to which, among other things, Seller agrees
to allow Administrative or Collateral Agent to sell or otherwise dispose of
Inventory with respect to which Intellectual Property licensed to Borrower by
Seller is affixed thereto;

(t)            Agents shall have received (i)
evidence, in form and substance satisfactory to them (which may be in the form
of a certificate of an officer of Borrower or Parent), that Parent has
purchased from G-P Gypsum Corporation and certain of its Affiliates
substantially all of the real property associated with the Purchased Business
(the “Purchased Real Property”) and (ii) copies of the executed Real
Property Purchase Agreement and executed operating leases between Parent (or
its Affiliates) and Borrower with regard to such real property (the “Affiliate
Leases”), certified to be true, correct and complete copies by an officer
of Borrower or Parent;

(u)           Agents and their respective counsel
shall have reviewed and been satisfied with any changes to the terms of the
Purchase Agreements and the structure of the transactions contemplated by the
Purchase Agreements from those set forth in the forms provided to Agents as of
March 26, 2004;

(v)           Since January 3, 2004, no Material
Adverse Effect shall have occurred;

 

43

 

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

(x)            the conditions set forth in this
Section 4 shall have been satisfied and the transactions contemplated by this
Agreement shall have been consummated on or before July 3, 2004.

4.2           Conditions Precedent to All
Revolving Loans and Letter of Credit Accommodations.  Each of the following is an additional
condition precedent to Lenders (or Administrative and Collateral Agent on
behalf of Lenders) making Revolving Loans and/or providing Letter of Credit
Accommodations to Borrower, including the initial Revolving Loans and Letter of
Credit Accommodations and any future Revolving Loans and Letter of Credit
Accommodations:

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

(b)           no law, regulation, order, judgment
or decree of any Governmental Authority shall exist, and no action, suit,
investigation, litigation or proceeding shall be pending or threatened in any
court or before any arbitrator or Governmental Authority, which purports to
enjoin, prohibit, restrain or otherwise adversely condition (i) the making of
the Revolving Loans or providing the Letter of Credit Accommodations, or (ii)
the consummation of the transactions contemplated pursuant to the terms hereof
or the other Financing Agreements;

(c)           no Material Adverse Change shall have
occurred; and

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

SECTION
5.                                GRANT AND PERFECTION OF SECURITY INTEREST

5.1           Grant
of Security Interest.  To secure
payment and performance of all Obligations, Borrower hereby grants to
Administrative and Collateral Agent, for itself and the ratable benefit of the
Lenders and the Bank Product Providers, a continuing security interest in, a
lien upon, and a right of set off against, and hereby collaterally assigns to
Administrative and Collateral Agent, for itself and the ratable benefit of the
Lenders and the Bank Product Providers, as security, all personal property and
trade fixtures and interests in personal property and trade fixtures of
Borrower, whether now owned or hereafter acquired or existing, and wherever
located (together with all other collateral security for the Obligations at any
time granted to or held or acquired by Agent or any Lender, collectively, the “Collateral”),
including:

 

44

 

(a)           all Accounts;

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

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

(d)           all trade fixtures;

(e)           all chattel paper (including all
tangible and electronic chattel paper);

(f)            all instruments (including all
promissory notes);

(g)           all documents;

(h)           all deposit accounts;

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

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

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

(l)            all commercial tort claims,
including, without limitation, those identified on Schedule 5.2(g)
hereto;

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

(n)           all Records; and

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

 

45

 

Notwithstanding anything to the contrary set forth in
Section 5.1 hereof, the types or items of Collateral shall not include (x) any
rights or interest in any contract, license or license agreement covering
personal property of Borrower, so long as under the terms of such contract,
license or license agreement, or applicable law with respect thereto, the grant
of a security interest or lien therein to Administrative and Collateral Agent
is prohibited and such prohibition has not been waived or the consent of the other
party to such contract, license or license agreement has not been obtained or a
lawful waiver of such prohibition under applicable law has not been obtained; provided,
that, the foregoing exclusion shall in no way be construed to apply if
(i) any such prohibition is unenforceable under Sections 9-406, 9-407 or 9-408
of the UCC or other applicable law or (ii) any such property constitutes or
relates to a portion of the Borrowing Base at any time reported by Borrower to
Administrative and Collateral Agent; (y) stock of a CFC or any assets of a CFC
except to the extent such stock does not exceed 65% of the Voting Stock of a
CFC which is a direct Subsidiary of Borrower; (z) any application to register
any trademark, service mark or other mark (i) prior to the filing under
applicable law of a verified statement of use (or the equivalent) for such
trademark or service mark or (ii) the granting of a security interest in which
would be prohibited by applicable law.

5.2           Perfection of Security Interests.

(a)           Borrower irrevocably and
unconditionally authorizes Administrative and Collateral Agent (or its agent)
to file at any time and from time to time such financing statements with
respect to the Collateral naming Administrative and Collateral Agent or its
designee as the secured party and Borrower as debtor, as Administrative and
Collateral Agent may require, and including any other information with respect
to Borrower or otherwise required by part 5 of Article 9 of the Uniform
Commercial Code of such jurisdiction as Administrative and Collateral Agent may
determine or under the PPSA, together with any amendment and continuations with
respect thereto, which authorization shall apply to all financing statements
filed on, prior to or after the date hereof. 
Borrower hereby ratifies and approves all financing statements naming
Administrative and Collateral Agent or its designee as secured party and
Borrower as debtor with respect to the Collateral (and any amendments with
respect to such financing statements) filed by or on behalf of Administrative
and Collateral Agent prior to the date hereof and ratifies and confirms the
authorization of Administrative and Collateral Agent to file such financing
statements (and amendments, if any). 
Borrower hereby authorizes Administrative and Collateral Agent to adopt
on behalf of Borrower any symbol required for authenticating any electronic
filing.  In the event that the
description of the collateral in any financing statement naming Administrative
and Collateral Agent or its designee as the secured party and Borrower as
debtor includes assets and properties of Borrower that do not at any time
constitute Collateral, whether hereunder, under any of the other Financing
Agreements or otherwise, the filing of such financing statement shall
nonetheless be deemed authorized by Borrower to the extent of the Collateral
included in such description and it shall not render the financing statement
ineffective as to any of the Collateral or otherwise affect the financing
statement as it applies to any of the Collateral.  In no event shall Borrower at any time file, or permit or cause
to be filed, any correction statement or termination statement with respect to
any financing statement (or amendment or continuation with respect thereto)
naming Administrative and Collateral Agent or its designee as secured party and
Borrower as debtor.  Upon request,
Administrative and Collateral Agent shall provide Borrower with copies of all
financing statements filed by Administrative and Collateral Agent hereunder.

 

46

 

(b)           Borrower has no chattel paper
(whether tangible or electronic) or instruments as of the date hereof in excess
of $2,500,000 in any one case or $5,000,000 in the aggregate, except as set
forth on Schedule 5.2(b) hereto. 
In the event that Borrower shall be entitled to or shall receive any
chattel paper or instruments in excess of $2,500,000 in any one case or
$5,000,000 in the aggregate or after the date hereof, or, if an Event of
Default shall then exist, if Borrower shall be entitled to or shall receive
chattel paper or instruments in any amount which has not previously been
delivered to Administrative and Collateral Agent, Borrower shall promptly
notify Administrative and Collateral Agent thereof in writing.  Promptly upon the receipt thereof by or on
behalf of Borrower (including by any agent or representative), Borrower shall
deliver, or cause to be delivered to Administrative and Collateral Agent, all
such tangible chattel paper and instruments, accompanied by such instruments of
transfer or assignment duly executed in blank as Administrative and Collateral
Agent may from time to time specify, in each case except as Administrative and
Collateral Agent may otherwise agree. 
At Administrative and Collateral Agent’s option, Borrower shall, or
Administrative and Collateral Agent may at any time on behalf of Borrower,
cause the original of any such instrument or chattel paper to be conspicuously
marked in a form and manner acceptable to Administrative and Collateral Agent
with the following legend referring to chattel paper or instruments as
applicable:  “This [chattel paper] [instrument] is
subject to the security interest of Congress Financial Corporation, as
Administrative and Collateral Agent, and any sale, transfer, assignment or
encumbrance of this [chattel paper] [instrument] violates the rights of such
secured party.”

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

(d)           Borrower has no deposit accounts as
of the date hereof, except as set forth in the Information Certificate.  Borrower shall not, directly or indirectly,
after the date hereof open, establish or maintain any deposit account unless
each of the following conditions is satisfied: 
(i) Administrative and Collateral Agent shall have received not less
than five (5) Business Days prior written notice of the opening or establishing
of such account which notice shall specify, in reasonable detail and
specificity acceptable to Administrative and Collateral, Agent the name of the
account, the owner of the account, the name and address of the bank at which
such account is to be opened or established, the individual at such bank with
whom Borrower is dealing and the purpose of the account, (ii) the bank where
such account is opened or maintained shall constitute an Eligible Transferee or
otherwise be reasonably acceptable to Administrative and Collateral Agent, and
(iii) on or before the opening of such deposit account, Borrower shall, as
Administrative and Collateral Agent may specify, either (A) deliver to
Administrative and Collateral Agent a Deposit Account Control Agreement with respect
to such deposit account duly authorized, executed and delivered by Borrower and
the bank at which such

 

47

 

deposit account is opened
and maintained or (B) arrange for Administrative and Collateral Agent, for
itself and the ratable benefit of the Lenders and the Bank Product Providers,
to become the customer of the bank with respect to the deposit account on terms
and conditions acceptable to Administrative and Collateral Agent.  The terms of this Section 5.2(d) shall not
apply to deposit accounts specifically and exclusively used for payroll,
payroll taxes and other employee wage and benefit payments to or for the
benefit of Borrower’s or its Subsidiaries’ salaried employees.

(e)           Borrower does not own or hold,
directly or indirectly, beneficially or as record owner or both, any investment
property, as of the date hereof, or have any investment account, securities
account, commodity account or other similar account with any bank or other
financial institution or other securities intermediary or commodity
intermediary as of the date hereof, in each case except as set forth in the
Information Certificate.

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

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

 

48

 

benefit of the Lenders
and the Bank Product Providers, to become the entitlement holder with respect
to such investment property on terms and conditions acceptable to
Administrative and Collateral Agent.

(f)            Borrower is not the beneficiary of
or otherwise entitled to any right to payment under any letter of credit,
banker’s acceptance or similar instrument as of the date hereof, except as set
forth on Schedule 5.2(f) hereto. 
In the event that Borrower shall be entitled to or shall receive any
right to payment under any letter of credit, banker’s acceptance or any similar
instrument, whether as beneficiary thereof or otherwise after the date hereof,
Borrower shall promptly notify Administrative and Collateral Agent thereof in
writing.  Borrower shall, if requested
by Administrative and Collateral Agent, either (i) deliver, or cause to be
delivered to Administrative and Collateral Agent, with respect to any such
letter of credit, banker’s acceptance or similar instrument, the written
agreement of the issuer and any other nominated person obligated to make any
payment in respect thereof (including any confirming or negotiating bank), in
form and substance reasonably satisfactory to Administrative and Collateral
Agent, consenting to the assignment of the proceeds of the letter of credit by
Borrower to Administrative and Collateral Agent, for itself and the ratable
benefit of the Lenders and the Bank Product Providers, and agreeing to make all
payments thereon directly to Administrative and Collateral Agent, for itself
and the ratable benefit of the Lenders and the Bank Product Providers, or as
Administrative and Collateral Agent may otherwise direct or (ii) cause
Administrative and Collateral Agent, for itself and the ratable benefit of the
Lenders and the Bank Product Providers, to become, at Borrower’s expense, the
transferee beneficiary of the letter of credit, banker’s acceptance or similar
instrument (as the case may be).

(g)           Borrower has no commercial tort
claims as of the date hereof, except as set forth on Schedule 5.2(g)
hereto.  In the event that Borrower
shall at any time after the date hereof have any commercial tort claims for an
amount in excess of $3,500,000 in any one case or in the aggregate, or, if an
Event of Default exists and Borrower has any commercial tort claims not
previously reported to Administrative and Collateral Agent, Borrower shall
promptly notify Administrative and Collateral Agent thereof in writing, which
notice shall (i) set forth in reasonable detail the basis for and nature of such
commercial tort claim and (ii) include the express grant by Borrower to
Administrative and Collateral Agent, for itself and the ratable benefit of the
Lenders and the Bank Product Providers, of a security interest in such
commercial tort claim (and the proceeds thereof).  In the event that such notice does not include such grant of a
security interest, the sending thereof by Borrower to Administrative and
Collateral Agent shall be deemed to constitute a grant of security interest
therein to Administrative and Collateral Agent, for itself and the ratable
benefit of the Lenders and the Bank Product Providers.  Upon the sending of such notice, any
commercial tort claim described therein shall constitute part of the Collateral
and shall be deemed included therein. 
Without limiting the authorization of Administrative and Collateral
Agent provided in Section 5.2(a) hereof or otherwise arising by the execution
by Borrower of this Agreement or any of the other Financing Agreements,
Administrative and Collateral Agent is hereby irrevocably authorized from time
to time and at any time to file such financing statements naming Administrative
and Collateral Agent or its designee as secured party and Borrower as debtor,
or any amendments to any financing statements, covering any such commercial
tort claim as Collateral.  In addition,
Borrower shall promptly upon Administrative and Collateral Agent’s request,
execute and deliver, or cause to be executed and delivered, to Administrative
and Collateral Agent such other agreements,

 

49

 

documents and instruments
as Administrative and Collateral Agent may reasonably require in connection
with such commercial tort claim.

(h)           Borrower has no goods, documents of
title or other Collateral in the custody, control or possession of a third
party as of the date hereof, except as set forth in the Information
Certificate.  In the event that any
goods, documents of title or other Collateral of Borrower are at any time after
the date hereof in the custody, control or possession of any other person not
referred to in an Information Certificate or otherwise disclosed to
Administrative and Collateral Agent in writing pursuant to the terms of this
Agreement, Borrower shall promptly notify Administrative and Collateral Agent
thereof in writing.  During the
existence of an Event of Default, promptly upon Administrative and Collateral
Agent’s request, Borrower shall deliver to Administrative and Collateral Agent
a Collateral Access Agreement duly authorized, executed and delivered by such
person and Borrower, and with respect to any Inventory on consignment with any
Person, if requested by Administrative and Collateral Agent, Borrower shall
take all actions reasonably requested by Administrative and Collateral Agent to
protect Borrower’s and Administrative and Collateral Agent’s interests in such
Inventory, including filing UCC-1 or PPSA Financing Statements as to such
consignment (with such UCC-1 or PPSA Financing Statements listing
Administrative and Collateral Agent as the assignee) and sending notices of
such consignment to such consignee’s creditors.

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

SECTION
6.                                COLLECTION
AND ADMINISTRATION

6.1           Borrower’s
Loan Account.  Administrative
and Collateral Agent shall maintain one or more loan accounts on its books in
which shall be recorded (a) all Loans, other Obligations and the Collateral,
(b) all payments made by or on behalf of Borrower and (c) all other appropriate
debits and credits as provided in this Agreement, including fees, charges,
costs,

 

50

 

expenses and
interest.  All entries in such loan
accounts shall be made in accordance with Administrative and Collateral Agent’s
customary practices as in effect from time to time.

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

6.3           Collection of Accounts.

(a)           Borrower shall establish and
maintain, at its expense, blocked accounts or lockboxes and related blocked
accounts (in either case, “Blocked Accounts”), as Administrative and
Collateral Agent may specify, with such banks as are reasonably acceptable to
Administrative and Collateral Agent into which Borrower shall promptly deposit
and direct its account debtors to directly remit all payments on Receivables
and all payments constituting proceeds of Inventory or other Collateral in the
identical form in which such payments are made, whether by cash, check or other
manner.  Borrower shall deliver, or cause
to be delivered to Administrative and Collateral Agent, a Deposit Account
Control Agreement duly authorized, executed and delivered by each bank where a
Blocked Account is maintained as provided in Section 5.2 hereof or at any time
and from time to time Administrative and Collateral Agent, for itself and the
ratable benefit of the Lenders and the Bank Product Providers, may become
bank’s customer with respect to the Blocked Accounts and promptly upon
Administrative and Collateral Agent’s request, Borrower shall execute and
deliver such agreements or documents as Administrative and Collateral Agent may
require in connection therewith. 
Notwithstanding anything to the contrary contained herein or in any
Deposit Account Control Agreement relating to a Blocked Account, Administrative
and Collateral Agent shall not issue to any bank at which a Blocked Account is
maintained a notice of sole control or other such instruction providing that
the funds in such deposit accounts are to be automatically on each Business Day
be remitted directly to the Payment Account and that Borrower is not permitted
to access or otherwise direct such funds unless either (i) an Event of Default
or a Default with respect to non-payment of the Obligations has occurred or
(ii) Excess Availability is less than $40,000,000; provided, that,
if either (x) such Event of Default is subsequently waived in accordance with
the terms of this Agreement or such Default did not mature into an Event of
Default or (y) Adjusted Excess Availability is greater than $40,000,000 at all
times thereafter for a period of 60 consecutive days and no Event of Default or
Default with respect to non-payment of the Obligations has occurred,
Administrative and Collateral Agent shall promptly rescind such notice of sole
control or other such instructions (any such period during which the Blocked
Accounts are subject to the sole control of Administrative and Collateral Agent
and Borrower is not permitted to access the Blocked Accounts is referred to
herein is a “Blocked Account Activation Period”).  Unless a

 

51

 

Blocked Account
Activation Period shall exist, Borrower shall be permitted to access and direct
the transfer of funds in the Blocked Accounts. 
Borrower agrees that, during any Blocked Account Activation Period, all
payments made to such Blocked Accounts or other funds received and collected by
Administrative and Collateral Agent or any Lender, whether in respect of the
Receivables, as proceeds of Inventory or other Collateral or otherwise shall be
treated as payments to Administrative and Collateral Agent and Lenders in
respect of the Obligations and therefore shall constitute the property of
Administrative and Collateral Agent and Lenders to the extent of the then
outstanding Obligations.

(b)           For purposes of calculating the
amount of the Loans available to Borrower, payments will be applied
(conditional upon final collection) to the Obligations on the Business Day of
receipt by Administrative and Collateral Agent of immediately available funds
in the Payment Account provided such payments and notice thereof are received
in accordance with Administrative and Collateral Agent’s usual and customary
practices as in effect from time to time and within sufficient time to credit
Borrower’s loan account on such day, and if not, then on the next Business
Day.  For the purposes of calculating
interest on the Obligations, during any Blocked Account Activation Period, such
payments or other funds received from the Blocked Account will be applied
(conditional upon final collection) to the Obligations on the date of receipt
of immediately available funds by Administrative and Collateral Agent in the
Payment Account provided such payments or other funds and notice thereof are
received in accordance with Administrative and Collateral Agent’s usual and
customary practices as in effect from time to time and within sufficient time
to credit Borrower’s loan account on such day, and if not, then on the next
Business Day.

(c)           If, during any Blocked Account
Activation Period, Borrower receives possession of or otherwise has control of
any monies, checks, notes, drafts or any other payment relating to and/or
proceeds of Accounts or other Collateral, such Person shall hold such items as
trustee for Administrative and Collateral Agent and Lenders and shall
immediately upon receipt thereof, deposit or cause the same to be deposited in
the Blocked Accounts, or remit the same or cause the same to be remitted, in
kind, to Administrative and Collateral Agent. 
In no event shall the same be commingled with Borrower’s own funds
during any Blocked Account Activation Period. 
Borrower agrees to reimburse Administrative and Collateral Agent and the
Lenders on demand for any amounts owed or paid to any bank or other financial
institution at which a Blocked Account, other deposit account or investment
account is established or any other bank, financial institution or other Person
involved in the transfer of funds to or from the Blocked Accounts, any other
deposit account or any investment account arising out of Administrative and
Collateral Agent’s or any Lender’s payments to or indemnification of such bank,
financial institution or other Person. 
The obligation of Borrower to reimburse Administrative and Collateral
Agent and Lenders for such amounts pursuant to this Section 6.3 shall survive
the termination or non-renewal of this Agreement.

6.4           Payments.

(a)           Borrower shall pay all Obligations
when due.  Payments on Obligations shall
be made by Borrower remitting funds to the Payment Account or, at any time when
a Blocked Account Activation Period exists, by payments and proceeds of
Collateral being directly remitted to the Payment Account as provided in
Section 6.3 or such other place within the United

 

52

 

States of America as
Administrative and Collateral Agent may designate from time to time.  Administrative and Collateral Agent shall
apply payments received or collected from Borrower or Obligors or for the
account of Borrower or Obligors (including the monetary proceeds of collections
or of realization upon any Collateral) to the specific Obligation designated by
Borrower in connection with such payment so long as no Event of Default exists,
and otherwise all such payments shall be applied as follows:

(i)            So long as no Event of Default shall
then exist or result from the application of such payment:

(A)          first, to pay in full all indemnities
or expense reimbursements then due to Administrative and Collateral Agent from
Borrower and the Obligors (other than fees);

(B)           second, ratably to pay in full
indemnities or expense reimbursements then due to any other Agent or Lenders
from Borrower and Obligors (other than fees);

(C)           third, ratably to pay in full all
fees payable by Borrower under the Financing Agreements then due;

(D)          fourth, ratably to pay in full
interest due in respect of the Loans;

(E)           fifth, to pay or prepay principal in
respect of Special Agent Advances;

(F)           sixth, to pay principal in respect of
the Revolving Loans then outstanding (whether or not then due) until paid in
full;

(G)           seventh, to cash collateralize any
outstanding Letter of Credit Accommodations if required under the terms of this
Agreement;

(H)          eighth, to pay any Obligations due in
respect of the Bank Products; and

(I)            ninth, to pay any other Obligations
then due, in such order and manner as Administrative and Collateral Agent
determines; or

(ii)           If an Event of Default shall then
exist or will result from the application of such payment:

(A)          first, to pay in full the expenses of
Administrative and Collateral Agent for the collection and enforcement of the
Obligations and for the protection, preservation or sale, disposition or other
realization upon the Collateral, including all expenses, liabilities and
advances (including Special Agent Advances) incurred or made by or on behalf of
Administrative and Collateral Agent, in connection therewith (including
reasonable attorneys’ fees and legal expenses and other expenses of
Administrative and Collateral Agent);

 

53

 

(B)           second, to pay all Obligations, other
than any Obligations related to the Bank Products, until paid in full, in cash
or other immediately available funds, in such order and manner as
Administrative and Collateral Agent shall elect in its discretion (including
cash collateral for any outstanding Letter of Credit Accommodations in
accordance with the terms of this Agreement);

(C)           third, to pay all Obligations related
to the Bank Products, or provide cash collateral therefor up to the amount of
the Bank Products Reserve,

(D)          fourth, to pay all remaining
Obligations related to the Bank Products, and

(E)           fifth, ratably to pay in full all
other Obligations.

(b)           Notwithstanding anything to the
contrary contained in this Agreement:

(i)            should any payment or distribution
on security or instrument or proceeds thereof be received by a Lender other
than in accordance with this Section 6.4, such Lender shall receive and hold
the same in trust, for the benefit of Administrative and Collateral Agent, the
Lenders and the Bank Product Providers, and shall forthwith deliver the same to
Administrative and Collateral Agent (together with any endorsement or
assignment of such Lender where necessary), for application by Administrative
and Collateral Agent to the Obligations in accordance with the terms of this
Section 6.4;

(ii)           unless so directed by Borrower,
Administrative and Collateral Agent shall not apply any payments which it
receives to any Revolving Loans that are Eurodollar Rate Loans except on the
expiration date of the Interest Period applicable to any such Revolving Loans
that are Eurodollar Rate Loans and if payments are received or collected from
Borrower that otherwise would be applied to Eurodollar Rate Loans, provided no
Event of Default or Blocked Account Activation Period exists, Borrower may
instruct Administrative and Collateral Agent to remit such funds to Borrower,
otherwise, such payments shall be held by Administrative and Collateral Agent
and shall bear interest at the Federal Funds Rate per annum commencing on the
second Business Day following the date such payments are received or collected
from Borrower and continuing through the date such payments are applied to the
Obligations, which shall be upon the expiration of the first Interest Period
after receipt or collection of such payments, to the extent of the principal
amount of the applicable Eurodollar Rate Loan or otherwise, in Administrative
and Collateral Agent’s sole discretion, remitted to Borrower; and

(iii)          to the extent Borrower uses any
proceeds of the Loans to acquire rights in or the use of any Collateral or to
repay any Indebtedness used to acquire rights in or the use of any Collateral,
payments in respect of the Obligations shall be deemed applied first to the Obligations
arising from Loans that were not used for such purposes and second to the
Obligations arising from Loans the proceeds of which were used to acquire
rights in or the use of any Collateral in the chronological order in which
Borrower acquired such rights or use.

(c)           At Administrative and Collateral
Agent’s option, all principal, interest, fees, costs, expenses and other
charges provided for in this Agreement or the other Financing

 

54

 

Agreements may be charged
directly to the loan account of Borrower. 
Borrower shall make all payments to Administrative and Collateral Agent
and the Lenders on the Obligations free and clear of, and without deduction or
withholding for or on account of, any setoff, counterclaim, defense, duties,
taxes (subject to the limitations provided for in Section 6.5 hereof), levies,
imposts, fees, deductions, withholding, restrictions or conditions of any
kind.  If after receipt of any payment of,
or proceeds of Collateral applied to the payment of, any of the Obligations,
Administrative and Collateral Agent or any Lender is required to surrender or
return such payment or proceeds to any Person for any reason, then the
Obligations intended to be satisfied by such payment or proceeds shall be
reinstated and continue and this Agreement shall continue in full force and
effect as if such payment or proceeds had not been received by such
Person.  Borrower shall be liable to pay
to Administrative and Collateral Agent and Lenders, and each does hereby
indemnify and hold Administrative and Collateral Agent and each Lender harmless
for the amount of any payments or proceeds surrendered or returned, to the
extent such payments were required to be made under the terms of this
Agreement.  This Section 6.4 shall
remain effective notwithstanding any contrary action which may be taken by
Administrative and Collateral Agent or any Lender in reliance upon such payment
or proceeds.  This Section 6.4 shall
survive the payment of the Obligations and the termination or non-renewal of
this Agreement.

(d)           Except as otherwise provided with
respect to Defaulting Lenders, aggregate principal payments and interest
payments shall be apportioned ratably among the Lenders (according to their
applicable Pro Rata Shares) and payments of the fees (other than fees
designated for Administrative and Collateral Agent’s sole and separate account
and fees otherwise payable in accordance with the Fee Letter) shall, as
applicable, be apportioned ratably among the Lenders.

(e)           Borrower represents and warrants
that, to the best of its knowledge, no proceeds of Term Loan Priority
Collateral which, pursuant to the terms of the Term Loan Intercreditor
Agreement, Administrative and Collateral Agent is not entitled to receive and
retain, have been remitted to any Blocked Account or otherwise remitted as
payment on the Obligations.  Borrower
shall not remit any proceeds of Term Loan Priority Collateral which, pursuant
to the terms of the Term Loan Intercreditor Agreement, Administrative and
Collateral Agent is not entitled to receive and retain, to any Blocked Account
or otherwise to Administrative and Collateral Agent as payment on the
Obligations.  If Administrative and
Collateral Agent receives, whether as payment of the Obligations or otherwise,
or reasonably believes that it has received proceeds of Term Loan Priority
Collateral which, pursuant to the terms of the Term Loan Intercreditor
Agreement it is not entitled to receive and retain, Administrative and
Collateral Agent may hold such proceeds and shall not be obligated to apply
them to the Obligations until its rights with respect thereto have been
determined to its satisfaction.

6.5           Taxes.

(a)           Any and all payments by or on behalf
of Borrower or any Obligor hereunder and under any other Financing Agreement
shall be made in accordance with Section 6.4 and free and clear of and without
deduction or withholding for or on account of any and all Taxes, excluding: (i)
income taxes imposed on the net income of any Lender (or any transferee

 

55

 

or assignee of such
Lender, including any Participant, any such transferee or assignee being
referred to as a “Transferee”), (ii) franchise or similar taxes imposed
on or determined by reference to the net income of any Lender (or Transferee or
Participant), in each case by the United States of America or by the
jurisdiction under the laws of which such Lender (or Transferee or Participant)
(A) is organized or any political subdivision thereof or (B) has its applicable
lending office located and (iii) to the extent that such tax results from a
change in the circumstances of the Lender (or any Transferee or Participant),
including a change in the residence, place of organization, or principal place
of business of the Lender (or any Transferee or Participant), or change in the
branch or lending office of the Lender (or Transferee or Participant)
(collectively, “Excluded Taxes”). 
In addition, Borrower agrees to pay to the relevant Governmental
Authority, in accordance with applicable law, any Other Taxes.

(b)           If Borrower or any Obligor shall be
required by law to deduct or withhold in respect of any Taxes or Other Taxes
from or in respect of any sum payable hereunder to any Agent or any Lender,
then:

(i)            the sum payable shall be increased
as necessary so that after making all required deductions and withholdings
(including deductions and withholdings applicable to additional sums payable
under this Section) such Lender (or Administrative and Collateral Agent on behalf
of such Lender) receives an amount equal to the sum it would have received had
no such deductions or withholdings been made;

(ii)           Borrower or such Obligor shall make
such deductions and withholdings; and

(iii)          Borrower or such Obligor shall pay the
full amount deducted or withheld to the relevant taxing authority or other
authority in accordance with applicable law.

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

(d)           Borrower will indemnify
Administrative and Collateral Agent and each Lender (or Transferee) for the
full amount of Taxes and Other Taxes paid by Administrative and Collateral
Agent or such Lender (or Transferee, as the case may be).  If Administrative and Collateral Agent or
such Lender (or Transferee) receives a refund in respect of any Taxes or Other
Taxes for which Lender (or Transferee) has received payment from Borrower or
any Obligor hereunder, so long as no Default or Event of Default shall exist or
have occurred and be continuing, Administrative and Collateral Agent or such
Lender (as the case may be) shall credit to the loan account of Borrower the
amount of such refund plus any interest received (but only to the extent of
indemnity payments made, or additional amounts paid, by Borrower or any Obligor
under this Section 6.5 with respect to the Taxes or Other Taxes giving rise to
such refund).  If a Lender (or any
Transferee) claims a tax credit in respect of any Taxes for which it has been
indemnified by Borrower or any Obligor pursuant to this Section 6.5, such
Lender will apply the amount of the actual dollar benefit received by such
Lender as a result thereof, as reasonably calculated by Lender and net of all
expenses related thereto, to the Loans. 
If Taxes or Other

 

56

 

Taxes were not correctly
or legally asserted, Administrative and Collateral Agent or such Lender shall,
upon Borrower’s request and at Borrower’s expense, provide such documents to
Borrower as Borrower may reasonably request, to enable Borrower to contest such
Taxes or Other Taxes pursuant to appropriate proceedings then available to
Borrower (so long as providing such documents shall not, in the good faith
determination of Administrative and Collateral Agent, have a reasonable likelihood
of resulting in any liability of Administrative and Collateral Agent or any
Lender).

(e)           In the event any Lender or Transferee
is organized under the laws of a jurisdiction other than the United States, any
State thereof or the District of Columbia (a “Non-U.S. Lender”) such
Non-U.S. Lender shall deliver to Borrower two (2) accurate, complete and signed
copies of (i) either United States Internal Revenue Service Form W-8ECI or
successor form or Form W-8BEN or successor form, or (ii) in the case of a
Non-U.S. Lender claiming exemption from U.S. Federal withholding tax under
Section 871(h) or 881(c) of the Code with respect to payments of “portfolio
interest”, a Form W-8BEN, or any subsequent versions thereof or successors
thereto (and, if such Non-U.S. Lender delivers a Form W-8BEN, a certificate
representing that such Non-U.S. Lender is not a bank for purposes of Section
881(c) of the Code, is not a ten (10%) percent shareholder (within the meaning
of Section 881(c)(3)(B) of the Code) of Borrower or any Obligor and is not a
controlled foreign corporation described in Section 881(c)(3)(C) of the Code),
properly completed and duly executed by such Non-U.S. Lender claiming complete
exemption from U.S. Federal withholding tax on payments by Borrower or any
Obligor under this Agreement and the other Financing Agreements.  Such forms shall be delivered by any
Non-U.S. Lender on or before the date it becomes a party to this Agreement (or,
in the case of a Transferee that is a Participant, on or before the date such
Participant becomes a Transferee hereunder) and on or before the date, if any,
such Non-U.S. Lender changes its applicable lending office by designating a
different lending office (a “New Lending Office”).  In addition, a Non-U.S. Lender shall promptly
deliver such new forms as are required by the Code or the regulations issued
thereunder to claim exemption from, or reduction in the rate of, U.S. Federal
withholding tax upon the obsolescence or invalidity of any form previously
delivered by such Non-U.S. Lender. 
Notwithstanding any other provision of this Section 6.5(e), a Non-U.S.
Lender shall not be required to deliver any form pursuant to this Section
6.5(e) that such Non-U.S. Lender is not legally able to deliver.  Each Lender (or Transferee) that is a
“United States person,” as that term is defined under Section 7701(a)(30) of
the Code, other than a Lender (or Transferee) that may be treated as an exempt
recipient based on the indicators described in Treasury Regulation Section
1.6049-4(c)(1)(ii), agrees that it will, no later than the date it becomes a
party to this Agreement, deliver to Borrower and Administrative and Collateral
Agent two (2) accurate, complete and signed copies of United States Internal
Revenue Service Form W-9 or successor form stating that it is entitled to an
exemption from United States backup withholding tax.  Notwithstanding the foregoing, any failure by any Lender to
deliver any tax form set forth above shall not excuse or otherwise affect
Borrower’s performance of its obligations under this Agreement except as set
forth in Section 6.5(f)(ii) below.

(f)            Borrower and Obligors shall not be
required to indemnify any Lender or to pay any additional amounts to any
Lender, in respect of United States Federal withholding tax pursuant to
subsections (a) or (d) above to the extent that (i) the obligation to withhold
amounts with respect to United States Federal withholding tax was applicable on
the date such Non-U.S. Lender became a party to this Agreement (or, in the case
of a Transferee, on the date such Person

 

57

 

became a Transferee
hereunder) or, with respect to payments to a New Lending Office, the date such
Non-U.S. Lender designated such New Lending Office with respect to a Loan; provided,
that, this subsection (f) shall not apply (A) to any Transferee or New
Lending Office that becomes a Transferee or New Lending Office as a result of
an assignment, participation, transfer or designation made at the request of
Borrower or any Obligor and (B) to the extent the indemnity payment or
additional amounts any Transferee, acting through a New Lending Office, would
be entitled to receive (without regard to this subsection (f)) do not exceed
the indemnity payment or additional amounts that the person making the
assignment, participation or transfer to such Transferee making the designation
of such New Lending Office, would have been entitled to receive in the absence
of such assignment, participation, transfer or designation or (ii) the obligation
to pay such additional amounts would not have arisen but for a failure by such
Lender to comply with the provisions of subsection (e) above.

6.6           Authorization
to Make Loans.  Administrative
and Collateral Agent and each Lender is authorized to provide Loans based upon
telephonic or other instructions received from anyone purporting to be an
officer of Borrower or other authorized person or, at the discretion of
Administrative and Collateral Agent or any Lender, if such Loans are necessary
to satisfy any Obligations.  All
requests for Loans hereunder shall specify the date on which the requested Loan
is to be made (or in the case of Letter of Credit Accommodations, established),
which day shall be a Business Day, and the amount of the requested Loan.  Requests received after 12:00 noon New York
time on any day shall be deemed to have been made as of the opening of business
on the immediately following Business Day. 
Subject to all applicable provisions of the Agreement regarding the
conditions to providing Loans, requests for Loans received prior to 12:00 noon
New York time on a Business Day shall be made by the close of business on such
Business Day.  All Loans under this
Agreement shall be conclusively presumed to have been made to, and at the request
of and for the benefit of, Borrower when deposited to the credit of Borrower or
otherwise disbursed or established in accordance with the instructions of
Borrower or in accordance with the terms and conditions of this Agreement.

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

6.8           Pro Rata
Treatment.  Except to the extent
otherwise provided in this Agreement:  (a)
the making and conversion of Revolving Loans shall be made among the Revolving
Loan Lenders based on their respective Pro Rate Shares thereof; and (b) each
payment on account of any Obligations to or for the account of one or more of
Lenders in respect of any Obligations due

 

58

 

on a particular
day shall be allocated among the Lenders entitled to such payments based on
their respective Pro Rata Shares and shall be distributed accordingly.

6.9           Sharing of Payments, Etc.

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

(b)           If any Lender (including
Administrative and Collateral Agent) shall obtain from Borrower payment of any
principal of or interest on any Loan owing to it or payment of any other amount
under this Agreement or any other Financing Agreement through the exercise (in
accordance with the terms hereof) of any right of setoff, banker’s lien or
counterclaim or similar right or otherwise (other than from Administrative and
Collateral Agent as provided herein), and, as a result of such payment, such
Lender shall have received more than its Pro Rata Share of the principal of the
Loans or more than its share of such other amounts then due hereunder or
thereunder by Borrower to such Lender than the percentage thereof received by
any other Lender, it shall promptly pay to Administrative and Collateral Agent,
for the benefit of Lenders, the amount of such excess and simultaneously
purchase from such other Lenders a participation in the Loans or such other
amounts, respectively, owing to such other Lenders (or such interest due
thereon, as the case may be) in such amounts, and make such other adjustments
from time to time as shall be equitable, to the end that all Lenders shall
share the benefit of such excess payment (net of any expenses that may be
incurred by such Lender in obtaining or preserving such excess payment) in
accordance with their respective Pro Rata Shares or as otherwise agreed by
Lenders.  To such end all Lenders shall
make appropriate adjustments among themselves (by the resale of participation
sold or otherwise) if such payment is rescinded or must otherwise be restored.

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

(d)           Nothing contained herein shall
require any Lender to exercise any such right or shall affect the right of any
Lender to exercise, and retain the benefits of exercising, any such right with
respect to any other Indebtedness or obligation of Borrower.  If, under any applicable bankruptcy,
insolvency or other similar law, any Lender receives a secured claim in lieu of
a setoff to which this Section applies, such Lender shall, to the extent
practicable, assign such rights to Administrative and Collateral Agent, for
itself and the ratable benefit of the Lenders and the Bank Product Providers,
and, in any event, exercise its rights in respect of such

 

59

 

secured claim in a manner
consistent with the rights of Lenders entitled under this Section to share in
the benefits of any recovery on such secured claim.

6.10         Settlement Procedures.

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

(b)           With respect to all Revolving Loans
made by Administrative and Collateral Agent on behalf of Revolving Loan Lenders
as provided in this Section, the amount of each Revolving Loan Lender’s Pro
Rata Share of the outstanding Revolving Loans shall be computed weekly, and
shall be adjusted upward or downward on the basis of the amount of the
outstanding Revolving Loans as of 5:00 p.m. New York time on the Business Day
immediately preceding the date of each settlement computation; provided,
that, Administrative and Collateral Agent retains the absolute right at
any time or from time to time to make the above described adjustments at
intervals more frequent than weekly, but in no event more than twice in any
week.  Administrative and Collateral
Agent shall deliver to each of the Revolving Loan Lenders after the end of each
week, or at such lesser period or periods as Administrative and Collateral
Agent shall determine, a summary statement of the amount of outstanding
Revolving Loans for such period (such week or lesser period or periods being
hereinafter referred to as a “Settlement Period”).  If the summary statement is sent by
Administrative and Collateral Agent and received by a Revolving Loan Lender
prior to 2:00 p.m. New York time, then such Revolving Loan Lender shall make
the settlement transfer described in this Section by no later than 2:00 p.m.
New York time on the next Business Day following the date of receipt.  If, as of the end of any Settlement Period,
the amount of a Lender’s Pro Rata Share of the outstanding Revolving Loans is
more than such Lender’s Pro Rata Share of the outstanding Revolving Loans as of
the end of the previous Settlement Period, then such Lender shall forthwith
(but in no event later than the time set forth in the preceding sentence)
transfer to Administrative and Collateral Agent by wire transfer in immediately
available funds the amount of the increase. 
Alternatively, if the amount of a Lender’s Pro Rata Share of the
outstanding Revolving Loans in any Settlement Period is less than the amount of
such Lender’s Pro Rata Share of the outstanding Revolving Loans for the
previous Settlement Period, Administrative and Collateral Agent shall forthwith
transfer to such Lender by wire transfer in immediately available funds the
amount of the decrease.  The obligation
of each of the Revolving Loan Lenders to transfer such funds and effect such
settlement shall be irrevocable and unconditional and without recourse to or
warranty by Administrative and Collateral Agent.  Each of Administrative and Collateral Agent and Revolving Loan
Lenders agrees to mark its books and records at the end of each Settlement
Period to show at all times the dollar amount of its Pro Rate Share of the
outstanding Revolving Loans and Letter of Credit Accommodations.  Each Revolving Loan Lender shall only be
entitled to receive interest on its Pro Rata Share of the Loans to the extent
such Loans have been funded by such Lender. 
Because the Administrative and Collateral Agent on behalf of Revolving
Loan Lenders may be advancing and/or may be repaid Revolving Loans prior to the
time when Lenders will actually advance and/or be repaid such Revolving Loans,
interest with

 

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respect to Revolving
Loans shall be allocated by Administrative and Collateral Agent in accordance
with the amount of Revolving Loans actually advanced by and repaid to each
Revolving Loan Lender and the Administrative and Collateral Agent and shall
accrue from and including the date such Revolving Loans are so advanced to but
excluding the date such Revolving Loans are either repaid by Borrower or actually
settled with the applicable Lender as described in this Section.

(c)           To the extent that Administrative and
Collateral Agent has made any such amounts available and the settlement
described above shall not yet have occurred, upon repayment of any Loans by
Borrower, Administrative and Collateral Agent may apply such amounts repaid
directly to any amounts made available by any Administrative and Collateral
Agent pursuant to this Section.  In lieu
of weekly or more frequent settlements, Administrative and Collateral Agent may
at any time require each Lender to provide Administrative and Collateral Agent
with immediately available funds representing its Pro Rata Share of each Loan,
prior to Administrative and Collateral Agent’s disbursement of such Loan to Borrower.  In such event, all Loans under this
Agreement shall be made by the Lenders simultaneously and proportionately to
their Pro Rata Shares.  No Lender shall
be responsible for any default by any other Lender in the other Lender’s
obligation to make a Loan requested hereunder nor shall the Revolving Loan
Commitment of any Revolving Loan Lender be increased or decreased as a result
of the default by any other Lender in the other Lender’s obligation to make a
Loan hereunder.

(d)           If Administrative and Collateral
Agent is not funding a particular Loan to Borrower pursuant to this Section on
any day, Administrative and Collateral Agent may assume that each Lender will
make available to Administrative and Collateral Agent such Lender’s Pro Rata
Share of the Revolving Loan requested or otherwise made on such day and
Administrative and Collateral Agent may, in its discretion, but shall not be
obligated to, cause a corresponding amount to be made available to Borrower on
such day.  If Administrative and
Collateral Agent makes such corresponding amount available to Borrower and such
corresponding amount is not in fact made available to Administrative and
Collateral Agent by such Lender, Administrative and Collateral Agent shall be
entitled to recover such corresponding amount on demand from such Lender
together with interest thereon for each day from the date such payment was due
until the date such amount is paid to Administrative and Collateral Agent at
the interest rate provided for in Section 3.1 hereof.  During the period in which such Lender has not paid such
corresponding amount to Administrative and Collateral Agent, notwithstanding
anything to the contrary contained in this Agreement or any of the other
Financing Agreements, the amount so advanced by Administrative and Collateral
Agent to Borrower shall, for all purposes hereof, be a Loan made by
Administrative and Collateral Agent for its own account.  Upon any such failure by a Lender to pay
Administrative and Collateral Agent, Administrative and Collateral Agent shall
promptly thereafter notify Borrower of such failure and Borrower shall
immediately pay such corresponding amount to Administrative and Collateral
Agent for its own account.  A Lender who
fails to pay Administrative and Collateral Agent its Pro Rata Share of any
Loans made available by the Administrative and Collateral Agent on such
Lender’s behalf, or any Lender who fails to pay any other amount owing to
Administrative and Collateral Agent, is a “Defaulting Lender”.  Administrative and Collateral Agent shall
not be obligated to transfer to a Defaulting Lender any payments made by or on
behalf of Borrower or any Obligor to Administrative and Collateral Agent for
the Defaulting Lender’s benefit, nor shall a Defaulting

 

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Lender be entitled to the
sharing of any payments hereunder. 
Amounts payable to a Defaulting Lender shall instead be paid to or
retained by Administrative and Collateral Agent.  Administrative and Collateral Agent may hold and, in its
discretion, re-lend to Borrower the amount of all such payments received or
retained by it for the account of such Defaulting Lender.  For purposes of voting or consenting to
matters with respect to this Agreement and the other Financing Agreements and determining
Pro Rata Shares, such Defaulting Lender shall be deemed not to be a Lender and
such Defaulting Lender’s Revolving Loan Commitment shall be deemed to be zero
(0).  This Section shall remain
effective with respect to a Defaulting Lender until such default is cured.  The operation of this Section shall not be
construed to increase or otherwise affect the Revolving Loan Commitment of any
Lender, or relieve or excuse the performance by Borrower or any Obligor of
their duties and obligations hereunder.

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

6.11         Obligations
Several; Independent Nature of Lenders’ Rights.  The obligation of each Lender hereunder is
several, and no Lender shall be responsible for the obligation or commitment of
any other Lender hereunder.  Nothing
contained in this Agreement or any of the other Financing Agreements and no
action taken by the Lenders pursuant hereto or thereto shall be deemed to
constitute the Lenders to be a partnership, an association, a joint venture or
any other kind of entity.  The amounts
payable at any time hereunder to each Lender shall be a separate and independent
debt, and subject to Section 12 hereof, each Lender shall be entitled to
protect and enforce its rights arising out of this Agreement and it shall not
be necessary for any other Lender to be joined as an additional party in any
proceeding for such purpose.

SECTION
7.                                COLLATERAL REPORTING AND COLLATERAL COVENANTS

7.1           Collateral Reporting.

(a)           Borrower shall provide Administrative
and Collateral Agent with the following documents in a form satisfactory to
Administrative and Collateral Agent:

(i)            on a monthly basis, a schedule of
sales made, credits issued and cash received;

(ii)           as soon as possible after the end of
each month (but in any event within ten (10) days after the end thereof), on a
monthly basis, (A) perpetual inventory reports, (B) inventory reports by
location and category (including identifying Inventory at locations owned and
operated by third parties, inventory held by Borrower on consignment and
Inventory of Borrower held by third Persons on consignment), (C) agings of
accounts payable (and including information indicating the status of payments
to owners and lessors of the leased premises of Borrower) and (D) agings of
accounts receivable (together with a reconciliation to the previous month’s
aging and general ledger);

 

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(iii)          weekly, a detailed calculation of the
Borrowing Base; provided, however, if at any time Excess
Availability is less then $70,000,000 and until such time as Excess
Availability has thereafter been $70,000,000 or more for 5 consecutive Business
Days, Borrower shall provide Administrative and Collateral Agent with a
detailed calculation of the Borrowing Base on a daily basis.

(iv)          upon Administrative and Collateral
Agent’s reasonable request, (A) copies of customer statements, purchase orders,
sales invoices and credit memos, remittance advices and reports, and copies of
deposit slips and bank statements, (B) copies of shipping and delivery
documents and (C) copies of purchase orders, invoices and delivery documents
for Inventory and Equipment acquired by Borrower; and

(v)           such additional, interim or other
reports, schedules and calculations (and backup documentation therefor) with
regard to the Collateral as Administrative and 
Collateral Agent may reasonably request from time to time.

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

7.2           Accounts Covenants.

(a)           Borrower shall notify Administrative
and Collateral Agent promptly of:  (i)
any material delay in Borrower’s performance of any of its material obligations
to any account debtor or the assertion of any claims, offsets, defenses or
counterclaims by any account debtor, or any disputes with account debtors, or
any settlement, adjustment or compromise thereof in excess of $1,500,000 in any
one case or $2,500,000 in the aggregate at any one time; (ii) all material adverse
information relating to the financial condition of any account debtor known to
Borrower; and (iii) any event or circumstance which, to Borrower’s knowledge
would cause Administrative and Collateral Agent to consider any then existing
Accounts reported as part of the Borrowing Base as no longer constituting
Eligible Accounts.  No credit, discount,
allowance or extension or agreement for any of the foregoing shall be granted
by Borrower to any account debtor without Administrative and Collateral Agent’s
consent, except as generally consistent with the past practices of the
Purchased Business or as set forth in the schedules delivered to Administrative
and Collateral Agent pursuant to Section 7.1(a) above.  So long as no Event of Default exists or has
occurred and is continuing, Borrower shall have the exclusive right to settle,
adjust or compromise any claim, offset, counterclaim or dispute with any
account debtor.  At any time that an
Event of Default exists, Administrative and Collateral Agent shall, at its
option, notify Borrower that it intends to, and thereafter shall, have the
exclusive right to settle, adjust or compromise any claim, offset, counterclaim
or dispute with account debtors or grant any credits, discounts or allowances.

(b)           With respect to each Account:  (i) the amounts shown on any invoice
delivered to Administrative

 

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and Collateral Agent or
schedule thereof delivered to Administrative and Collateral Agent shall be true
and complete, (ii) no payments shall be made thereon except payments
immediately deposited or remitted to a Collection Account or otherwise
delivered to Administrative and Collateral Agent pursuant to the terms of this
Agreement, (iii) in the case of Eligible Accounts there shall be no setoffs,
deductions, contras, defenses, counterclaims or disputes existing or asserted
with respect thereto except those generally consistent with the past practices
of the Purchased Business or as reported to Administrative and Collateral Agent
in accordance with the terms of this Agreement, and (iv) none of the
transactions giving rise thereto will violate any applicable foreign, Federal,
State, Provincial or local laws or regulations, all documentation relating
thereto will be legally sufficient under such laws and regulations and all such
documentation will be legally enforceable in accordance with its terms, except
as enforceability thereof may be limited by insolvency laws affecting the
rights of creditors generally.

(c)           Administrative and Collateral Agent
shall have the right at any time or times (but, so long as no Default or Event
of Default shall exist, subject to reasonable intervals consistent with
Administrative and Collateral Agent’s customary practices), in the name of a
nominee of Administrative and Collateral Agent, or if Administrative and
Collateral Agent shall otherwise determine that it is necessary or desirable to
do so, then in the name of Administrative and Collateral Agent, to verify the
validity, amount or any other matter relating to any Account or other
Collateral, by mail, telephone, facsimile transmission or otherwise.

7.3           Inventory
Covenants.  With respect to the
Inventory:  (a) Borrower shall at all
times maintain inventory records reasonably satisfactory to Administrative and
Collateral Agent, keeping correct and accurate records itemizing and describing
the kind, type, quality and quantity of Inventory, Borrower’s cost therefor and
daily withdrawals therefrom and additions thereto; (b) Borrower shall conduct a
physical count of the Inventory at least once each year (which may be done by
way of a cycle count), but at any time or times as Administrative and
Collateral Agent may reasonably request during the existence of an Event of
Default, and promptly following such physical inventory shall supply
Administrative and Collateral Agent with a report in the form and with such
specificity as may be reasonably satisfactory to Administrative and Collateral
Agent concerning such physical count; (c) Borrower shall not remove any
Inventory from the locations set forth or permitted herein, without the prior
written consent of Administrative and Collateral Agent, except for sales of
Inventory in the ordinary course of Borrower’s business and except to move
Inventory directly from one location set forth or permitted herein to another
such location and except for Inventory shipped from the manufacturer thereof to
Borrower which is in transit to the locations set forth or permitted herein;
(d) upon Administrative and Collateral Agent’s request, Borrower shall, at its
expense, no more than once in any twelve (12) month period, but at any time or
times as Administrative and Collateral Agent may request on or after an Event
of Default, deliver or cause to be delivered to Administrative and Collateral
Agent a full written appraisal as to the Inventory in form, scope and
methodology reasonably acceptable to Administrative and Collateral Agent and by
an appraiser acceptable to Administrative and Collateral Agent, addressed to
Administrative and Collateral Agent and Lenders and upon which Administrative
and Collateral Agent and Lenders are expressly permitted to rely; (e) Borrower
shall produce, use, store and maintain the Inventory with all reasonable care
and caution and in accordance with applicable standards of any insurance and in
conformity with applicable laws (including the requirements of the Federal Fair
Labor Standards Act of 1938, as amended and all rules, regulations and orders
related thereto);

 

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(f) none of the
Inventory or other Collateral constitutes farm products or the proceeds
thereof; (g) Borrower will hold Agents and each Lender harmless from and
indemnify each of them with respect to all liability arising from or relating
to the production, use, sale or other disposition of the Inventory unless such
liability arises from the gross negligence or willful misconduct of such Agent
or Lender; (h) except as disclosed to Administrative and Collateral Agent in
writing or to the extent accounted for in the determination of the Net Orderly
Liquidation Value, Borrower shall not sell Inventory to any customer on
approval, or any other basis which entitles the customer to return or may
obligate Borrower to repurchase such Inventory (excluding customary warranty
terms and returns accepted by Borrower in the ordinary course of business); (i)
Borrower shall keep the Eligible Inventory in good and marketable condition;
and (j) Borrower shall not, without prior written notice to Administrative and
Collateral Agent or the specific identification of such Inventory with respect
thereto provided by Borrower to Administrative and Collateral Agent pursuant to
Section 7.1(a) hereof, acquire or accept any Inventory on consignment or
approval.

7.4           Equipment and Real Property Covenants.  With respect to the Equipment and/or Real
Property:  (a) upon Administrative and
Collateral Agent’s request after an Event of Default, deliver or cause to be
delivered to Administrative and Collateral Agent written appraisals as to the
Equipment in form, scope and methodology acceptable to Administrative and
Collateral Agent and by an appraiser acceptable to Administrative and
Collateral Agent, addressed to Administrative and Collateral Agent and Lenders
and upon which Administrative and Collateral Agent and Lenders are expressly
permitted to rely; (b) except where failure to do so could not reasonably be
expected to cause a Material Adverse Change, Borrower shall keep the Equipment
in good order, repair, running and marketable condition (ordinary wear and tear
excepted); (c) Borrower shall use the Equipment and Real Property with all
commercially reasonable care and caution and in accordance with applicable
standards of any insurance of Borrower and in conformity with all applicable
laws; (d) the Equipment is and shall be used in Borrower’s business and not for
personal, family, household or farming use; (e) Borrower shall not remove any
Equipment from the locations set forth or permitted herein, except to the
extent necessary to have any Equipment repaired or maintained in the ordinary
course of the business of Borrower or to move Equipment directly from one
location set forth or permitted herein to another such location and except for
the movement of motor vehicles used by or for the benefit of Borrower in the
ordinary course of business; (f) the Equipment is now and shall remain personal
property and Borrower shall not permit any of the Equipment to be or become a
part of or affixed to real property; and (g) Borrower assumes all
responsibility and liability arising from the use of the Equipment and Real
Property.

7.5           Power of
Attorney.  Borrower hereby
irrevocably designates and appoints Administrative and Collateral Agent (and
all Persons designated by Administrative and Collateral Agent) as Borrower’s
true and lawful attorney-in-fact, and authorizes Administrative and Collateral
Agent, in Borrower’s or Administrative and Collateral Agent’s name, to:  (a) at any time an Event of Default exists
or has occurred and is continuing (i) demand payment on Receivables or other
Collateral, (ii) enforce payment of Receivables by legal proceedings or
otherwise, (iii) exercise all of Borrower’s rights and remedies to collect any
Receivable or other Collateral, (iv) sell or assign any Receivable upon such
terms, for such amount and at such time or times as Administrative and
Collateral Agent deems advisable, (v) settle, adjust, compromise, extend or
renew an Account, (vi) discharge and release any Receivable, (vii) prepare,
file and

 

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sign Borrower’s
name on any proof of claim in bankruptcy or other similar document against an
account debtor or other obligor in respect of any Receivables or other
Collateral, (viii) notify the post office authorities to change the address for
delivery of remittances from account debtors or other obligors in respect of
Receivables or other proceeds of Collateral to an address designated by
Administrative and Collateral Agent, and open and dispose of all mail addressed
to Borrower and handle and store all mail relating to the Collateral; and (ix)
do all acts and things which are necessary, in Administrative and Collateral
Agent’s determination, to fulfill Borrower’s obligations under this Agreement
and the other Financing Agreements and (b) at any time during a Blocked Account
Activation Period or during the existence of an Event of Default, to (i) take
control in any manner of any item of payment in respect of Receivables or
constituting Collateral or otherwise received in or for deposit in the Blocked
Accounts or otherwise received by Administrative and Collateral Agent or any
Lender, (ii) have access to any lockbox or postal box into which remittances
from account debtors or other obligors in respect of Receivables or other
proceeds of Collateral are sent or received, (iii) endorse Borrower’s name upon
any items of payment in respect of Receivables or constituting Collateral or
otherwise received by or on behalf of Administrative and Collateral Agent or any
Lender and deposit the same in Administrative and Collateral Agent’s or a
Lender’s account for application to the Obligations, (iv) endorse Borrower’s
name upon any chattel paper, document, instrument, invoice, or similar document
or agreement relating to any Receivable or any goods pertaining thereto or any
other Collateral, including any warehouse or other receipts, or bills of lading
and other negotiable or non-negotiable documents, (v) clear Inventory the
purchase of which was financed with Letter of Credit Accommodations through
U.S. Customs or foreign export control authorities in Borrower’s name,
Administrative and Collateral Agent’s name or the name of Administrative and
Collateral Agent’s designee, and to sign and deliver to customs officials powers
of attorney in Borrower’s name for such purpose, and to complete in Borrower’s
or Administrative and Collateral Agent’s name, any order, sale or transaction,
obtain the necessary documents in connection therewith and collect the proceeds
thereof, (vi) sign Borrower’s name on any verification of Receivables and
notices thereof to account debtors or any secondary obligors or other obligors
in respect thereof.  Borrower hereby
releases Administrative and Collateral Agent and each Lender and its officers,
employees and designees from any liabilities arising from any act or acts under
this power of attorney and in furtherance thereof, whether of omission or
commission, except as a result of Administrative and Collateral Agent’s or such
Lender’s own gross negligence or willful misconduct as determined pursuant to a
final non-appealable order of a court of competent jurisdiction.

7.6           Right to Cure.  Administrative and Collateral Agent may, at
its option, (a) upon reasonable prior notice to Borrower, cure any default by
Borrower under any material agreement with a third party that affects the
Collateral, its value or the ability of Administrative and Collateral Agent or
any Lender to collect, sell or otherwise dispose of the Collateral or the
rights and remedies of Administrative and Collateral Agent or any Lender
therein or the ability of Borrower to perform its obligations hereunder or
under the other Financing Agreements, (b) upon reasonable prior notice to
Borrower, pay or bond on appeal any judgment entered against Borrower, (c)
after failure by Borrower to do so pursuant to the terms of this Agreement,
discharge taxes, liens, security interests or other encumbrances at any time
levied on or existing with respect to the Collateral and (d) upon reasonable
prior notice to Borrower, pay any amount, incur any expense or perform any act
which, in Administrative and Collateral Agent’s judgment, is necessary or
appropriate to preserve, protect, insure or maintain the Collateral and the
rights of

 

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Administrative and
Collateral Agent and Lenders with respect thereto.  Administrative and Collateral Agent and Lenders may add any
amounts so expended to the Obligations and charge Borrower’s account therefor,
such amounts to be repayable by Borrower on demand.  Administrative and Collateral Agent and Lenders shall be under no
obligation to effect such cure, payment or bonding and shall not, by doing so,
be deemed to have assumed any obligation or liability of Borrower.  Any payment made or other action taken by
Administrative and Collateral Agent or any Lender under this Section shall be
without prejudice to any right to assert an Event of Default hereunder and to
proceed accordingly.

7.7           Access to
Premises.  From time to time as
reasonably requested by Administrative and Collateral Agent, at the cost and
expense of Borrower (subject to applicable limitations thereon set forth in
this Agreement, including Section 9.20 hereof), (a) Administrative and
Collateral Agent or its designee shall have complete access to all of
Borrower’s premises during normal business hours and after not less than 2
Business Days’ notice to Borrower, or at any time and without notice to
Borrower if an Event of Default exists or has occurred and is continuing, for
the purposes of inspecting, verifying and auditing the Collateral and all of
Borrower’s books and records, including the Records, and (b) Borrower shall
promptly furnish to Administrative and Collateral Agent such copies of such
books and records or extracts therefrom as Administrative and Collateral Agent
may reasonably request, and (c) Administrative and Collateral Agent or its
designee may use during normal business hours such of Borrower’s personnel,
equipment, supplies and premises as may be reasonably necessary for the
foregoing and if an Event of Default exists or has occurred and is continuing
for the collection of Receivables and realization of other Collateral.

SECTION
8.                                REPRESENTATIONS
AND WARRANTIES

Borrower hereby represents
and warrants to Agents and Lenders the following (which shall survive the
execution and delivery of this Agreement), the truth and accuracy of which are
a continuing condition to providing Loans to Borrower:

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

 

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bankruptcy,
insolvency, moratorium or similar laws limiting creditors’ rights generally or
by general equitable principles.

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

(a)           The exact legal name of Borrower is
as set forth on the signature pages of this Agreement and in the Information
Certificate.  Borrower has not, during
the five years immediately prior to the date of this Agreement, been known by
or used any other corporate or fictitious name or been a party to any merger or
consolidation, or acquired all or substantially all of the assets of any
Person, or acquired any of its property or assets out of the ordinary course of
business, except as set forth in the Information Certificate.

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

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

8.3           Financial
Statements.  All financial
statements relating to Borrower which have been or may hereafter be delivered
by Borrower to Agents or any Lender have been prepared in accordance with GAAP
(except as to any interim financial statements, to the extent such statements
are subject to normal year-end adjustments and do not include any notes) and
fairly present the financial condition and the results of operation of Borrower
as at the dates and for the periods set forth therein.

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

8.5           Tax Returns.  Except where failure to do so would not
cause a Material Adverse Change, Borrower has filed, or caused to be filed, in
a timely manner all tax returns, reports and

 

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

8.6           Litigation.  Except as set forth in the Information
Certificate, there is no present investigation by any Governmental Authority
pending, or to the best of Borrower’s knowledge threatened, against or
affecting Borrower, its assets or business and there is no action, suit,
proceeding or claim by any Person pending, or to the best of Borrower’s
knowledge threatened, against Borrower or its assets or goodwill, or against or
affecting any transactions contemplated by this Agreement, which if adversely
determined against Borrower would cause a Material Adverse Change.

8.7           Compliance with Other Agreements
and Applicable Laws.  Borrower
is not in default under, or in violation of any of the terms of, any agreement,
contract, instrument, lease or other commitment to which it is a party or by
which it or any of its assets are bound where such default or violation could
reasonably be expected to cause a Material Adverse Change, and, except where
failure to do so would not cause a Material Adverse Change, Borrower is in
compliance with all applicable provisions of laws, rules, regulations,
licenses, permits, approvals and orders of any foreign, Federal, State,
Provincial or local Governmental Authority.

8.8           Environmental Compliance.

(a)           Except as set forth on Schedule
8.8 hereto, to the best of Borrower’s knowledge, neither Borrower nor any
of its Subsidiaries has generated, used, stored, treated, transported, handled,
disposed of or arranged for the disposal of any Hazardous Materials, on or off
its premises (whether or not owned by it) in any manner which at any time
violates any applicable Environmental Law or any license, permit, certificate,
approval or similar authorization thereunder and the operations of Borrower and
Borrower’s Subsidiaries complies in all respects with all Environmental Laws
and all licenses, permits, certificates, approvals and similar authorizations
thereunder except, in each case, where such violation or non-compliance could
not reasonably be expected to cause a Material Adverse Change.

(b)           Except as set forth on Schedule
8.8 hereto, there has been no investigation, proceeding, complaint, order,
directive, claim, citation or written notice by any Governmental Authority or
any other person nor is any pending or to the best of Borrower’s knowledge
threatened, with respect to any material violation of the requirements of any
Environmental Law by Borrower or any Subsidiary of Borrower or the release,
spill or discharge, threatened or actual, of any Hazardous Material or the
generation, use, storage, treatment, transportation, handling or disposal of
any Hazardous Materials in material violation of any Environmental Law or any
other environmental matter, which has caused or could reasonably be expected to
cause a Material Adverse Change.

 

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(c)           To the best of Borrower’s knowledge,
neither Borrower nor any of its Subsidiaries has any material liability
(contingent or otherwise) in connection with a release, spill or discharge,
threatened or actual, of any Hazardous Materials or the generation, use,
storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials in material violation of any Environmental
Law which has caused or could reasonably be expected to cause a Material
Adverse Change.

(d)           Borrower and its Subsidiaries have
all licenses, permits, certificates, approvals or similar authorizations
required to be obtained or filed in connection with the operations of Borrower
under any Environmental Law where failure to obtain such permits has caused or
could reasonably be expected to cause a Material Adverse Change and all of such
licenses, permits, certificates, approvals or similar authorizations are valid
and in full force and effect where failure to have such permits has caused or
could reasonably be expected to cause a Material Adverse Change.

8.9           Employee Benefits.

(a)           Each Plan is in substantial
compliance with the applicable provisions of ERISA, the Code and other Federal
or State law.  Each Plan which is
intended to qualify under Section 401(a) of the Code has received or Borrower
will file an application to receive a favorable determination letter from the
Internal Revenue Service within the remedial amendment period prescribed by
Section 401(b) of the Code and to the best of Borrower’s knowledge, nothing has
occurred which would cause the loss of such qualification.  Borrower and its ERISA Affiliates have made
all required contributions to any Plan subject to Section 412 of the Code, and
no application for a funding waiver or an extension of any amortization period
pursuant to Section 412 of the Code has been made with respect to any
Plan.  As of December 31, 2003, the
liabilities of all Plans subject to Title IV of ERISA did not exceed the assets
of all such Plans by more than $17,500,000 (determined in accordance with the
assumptions used for Plan termination by the Pension Benefit Guaranty
Corporation).

(b)           There are no pending, or to the best
of Borrower’s knowledge, threatened, claims, actions or lawsuits, or action by
any Governmental Authority, with respect to any Plan.  There has been no prohibited transaction or violation of the
fiduciary responsibility rules with respect to any Plan.

(c)           (i)            No
ERISA Event has occurred or is reasonably expected to occur; (ii) neither
Borrower nor any of its ERISA Affiliates have incurred or reasonably expect to
incur, any material liability under Title IV of ERISA with respect to any Plan
(other than premiums due and not delinquent under Section 4007 of ERISA and any
contributions to be made timely under the Code and ERISA); (iii) neither
Borrower nor any of its ERISA Affiliates have incurred or reasonably expect to
incur, any liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such liability) under
Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan; and (iv)
neither Borrower nor any of its ERISA Affiliates have engaged in a transaction
that could be subject to Section 4069 or 4212(c) of ERISA.

 

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

8.11         Intellectual
Property.  To the best of
Borrower’s knowledge, Borrower owns or licenses or otherwise has the right to
use all Intellectual Property necessary for the operation of its business as
presently conducted or proposed to be conducted.  As of the date hereof, Borrower has no Intellectual Property registered,
or subject to pending applications, in the United States Patent and Trademark
Office or any similar office or agency in the United States, any State thereof,
any political subdivision thereof or in any other country, other than those
described in the Information Certificate and has not granted any material
written licenses with respect thereto other than as set forth in such
Information Certificate.  To the best of
Borrower’s knowledge, no event has occurred which permits or would permit after
notice or passage of time or both, the revocation, suspension or termination of
such rights.  To the best of Borrower’s
knowledge, no slogan or other advertising device, product, process, method,
substance or other Intellectual Property or goods bearing or using any
Intellectual Property presently contemplated to be sold by or employed by
Borrower infringes any patent, trademark, servicemark, tradename, copyright,
license or other Intellectual Property owned by any other Person presently and
no claim or litigation is pending or threatened in writing against or affecting
Borrower contesting its right to sell or use any such Intellectual
Property.  The Information Certificate
sets forth all Material Contracts of Borrower pursuant to which Borrower has a
license or other right to use any trademarks, logos, designs, representations
or other Intellectual Property owned by another person as in effect on the date
hereof and the dates of the expiration of such agreements or other arrangements
of Borrower as in effect on the date hereof (collectively, together with such
agreements or other arrangements as may be entered into by Borrower after the
date hereof, collectively, the “License Agreements” and individually, a
“License Agreement”).  No
trademark, servicemark or other Intellectual Property currently used by
Borrower which is owned by another person, or owned by Borrower subject to any
security interest, lien, collateral assignment, pledge or other encumbrance in
favor of any person other than Administrative and Collateral Agent, for itself
and the ratable benefit of the Lenders and the Bank Product Providers, or any
other lien or security interest permitted under this Agreement, is affixed to
any Eligible Inventory, except to the extent Administrative and Collateral Agent
has received Licensor Agreement with respect thereto or would otherwise be
permitted to sell or dispose of such Inventory under applicable laws.

8.12         Subsidiaries; Affiliates; Capitalization;
Solvency.

(a)           Borrower has no direct or indirect
Subsidiaries or Affiliates (other than Sponsor Portfolio Companies) and is not
engaged in any joint venture or partnership except as set forth in the
Information Certificate, subject to the right of Borrower to form or acquire
Subsidiaries in accordance with Section 9.10 hereof.

(b)           Borrower is the record and beneficial
owner of all of the issued and outstanding shares of Capital Stock of each of
the Subsidiaries listed in the Information Certificate as being owned by
Borrower and there are no proxies, irrevocable or otherwise, with respect to
such shares and no equity securities of any of such Subsidiaries are or may
become

 

71

 

required to be issued by
reason of any options, warrants, rights to subscribe to, calls or commitments
of any kind or nature and there are no contracts, commitments, understandings
or arrangements by which any such Subsidiary is or may become bound to issue
additional shares of it Capital Stock or securities convertible into or
exchangeable for such shares.

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

(d)           Borrower is Solvent and will continue
to be Solvent after the creation of the Obligations, the security interests of
Administrative and Collateral Agent, for itself and the ratable benefit of the
Lenders and the Bank Product Providers, and the other transaction contemplated
hereunder.

8.13         Labor Disputes.

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

(b)           There is (i) no significant unfair
labor practice complaint pending against Borrower or, to the best of Borrower’s
knowledge, threatened against it, before the National Labor Relations Board,
and no significant grievance or significant arbitration proceeding arising out
of or under any collective bargaining agreement is pending on the date hereof
against Borrower or, to best of Borrower’s knowledge, threatened against it,
and (ii) no significant strike, labor dispute, slowdown or stoppage is pending
against Borrower or, to the best of Borrower’s knowledge, threatened against
Borrower.

8.14         Restrictions
on Subsidiaries.  Except for
restrictions contained in this Agreement or any other agreement with respect to
Indebtedness of Borrower permitted hereunder as in effect on the date hereof,
there are no contractual or consensual restrictions in any Material Contract or
charter document of Borrower or any of its Subsidiaries which prohibit or
otherwise restrict (a) the transfer of cash or other assets (i) between
Borrower and any of its Subsidiaries or (ii) between any Subsidiaries of
Borrower or (b) the ability of Borrower or any of its Subsidiaries to incur
Indebtedness or grant security interests to Administrative and Collateral
Agent, for itself and the ratable benefit of the Lenders and the Bank Product
Providers, in the Collateral.

8.15         Material
Contracts.  Schedule 8.15
hereto sets forth all Material Contracts to which Borrower is a party or is
bound as of the date hereof.  Borrower
has delivered true, correct and complete copies of such Material Contracts to
Agents on or before the date hereof. 
Borrower is not in breach of or in default under any Material Contract
and has not received any notice of the intention of any other party thereto to
terminate any Material Contract (except where such breach, default or
termination would not cause a Material Adverse Change).

 

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8.16         Payable
Practices.  Except as disclosed
to Administrative and Collateral Agent in writing, Borrower has not made any
material change in the historical accounts payable practices of the Purchased
Business from those generally in effect immediately prior to the date hereof.

8.17         Acquisition
of Purchased Assets.

(a)           The Purchase Agreements and the
transactions contemplated thereunder have been duly executed, delivered and
performed by the Borrower (or its Affiliates or Subsidiaries) and, to its
knowledge, the Seller, in accordance with their terms in all material respects,
including the fulfillment (not merely the waiver, except as may be disclosed to
Agents) of all conditions precedent set forth therein and giving effect to the
terms of the Purchase Agreements and the assignments to be executed and
delivered by Seller (or any of its Affiliates or Subsidiaries) thereunder,
Borrower acquired and has good and marketable title to the Purchased Assets,
free and clear of all claims, liens, pledges and encumbrances of any kind,
except as permitted hereunder.

(b)           All actions and proceedings (other
than obtaining any consents thereto where failure to do so would not cause a
Material Adverse Effect), required by the Purchase Agreements, applicable law
or regulation (including, but not limited to, compliance with the
Hart-Scott-Rodino Anti-Trust Improvements Act of 1976, as amended, and any
similar laws of Canada regarding sales of assets or combinations of business
entities) have been taken and the transactions required thereunder have been
duly and validly taken and consummated.

(c)           No court of competent jurisdiction
has issued any injunction, restraining order or other order which prohibits
consummation of the transactions described in the Purchase Agreements and no
governmental or other action or proceeding has, to Borrower’s knowledge, been
threatened or commenced, seeking any injunction, restraining order or other
order which seeks to void or otherwise modify the transactions described in the
Purchase Agreements, all consents thereto from all applicable Governmental
Authorities and other third parties, except where failure to obtain would not
cause a Material Adverse Change, have been obtained and all waiting periods
imposed by applicable law with regard thereto have expired.

(d)           Borrower has delivered, or caused to
be delivered, to Agents, true, correct and complete copies of the Purchase
Agreements.  The Purchase Agreements
have not been amended, supplemented, waived or otherwise modified in any
material respect without, in the case of the Purchase Agreements, the prior
written consent of Agents if such amendment, supplement, waiver or other
modification would, as determined by the Agents in their reasonable discretion,
cause a Material Adverse Change.  No
material default exists under any Purchase Agreement by Borrower or, to Borrower’s
knowledge, Seller.

8.18         Accuracy and Completeness of
Information.  All information
furnished by or on behalf of Borrower in writing to any Agent or any Lender in
connection with this Agreement or any of the other Financing Agreements or any
transaction contemplated hereby or thereby, including all information on the
Information Certificate, is true and correct in all material respects on the
date as of which such information is dated or certified and does not, taken as
a whole, omit any material fact necessary in order to make such information not
misleading.  To the extent Borrower
furnishes any projections of the financial position and results of operations

 

73

 

of Borrower and
its Subsidiaries for, or as at the end of, certain future periods, such
projections were believed at the time furnished to be reasonable, have been or
will have been prepared on a reasonable basis and in good faith by Borrower and
have been or will be based on assumptions believed by Borrower to be reasonable
at the time made and upon the best information then reasonably available to
Borrower.

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

SECTION
9.                                AFFIRMATIVE
AND NEGATIVE COVENANTS

9.1           Maintenance of Existence.

(a)           Except as otherwise permitted under
the terms of this Agreement, Borrower shall at all times preserve, renew and
keep in full, force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases
and contracts necessary to carry on the business as presently or proposed to be
conducted.

(b)           Borrower shall not change its name
unless each of the following conditions is satisfied:  (i) Administrative and Collateral Agent shall have received not
less than thirty (30) days prior written notice from Borrower of such proposed
change in its corporate name, which notice shall accurately set forth the new
name; and (ii) Administrative and Collateral Agent shall have received a copy
of the amendment to the Certificate of Incorporation of Borrower providing for
the name change certified by the Secretary of State of the jurisdiction of
incorporation or organization of Borrower as soon as it is available.

(c)           Borrower shall not change its chief
executive office or its mailing address or organizational identification number
(or if it does not have one, shall not acquire one) unless Administrative and
Collateral Agent shall have received not less than thirty (30) days’ prior
written notice from Borrower of such proposed change, which notice shall set
forth such information with respect thereto as Administrative and Collateral
Agent may require and Administrative and Collateral Agent shall have received
such agreements as Administrative and Collateral Agent may reasonably require
in connection therewith.  Borrower shall
not change its type of organization, jurisdiction of organization or other
legal structure without the prior written consent of Administrative and
Collateral Agent, such consent not to be unreasonably withheld, conditioned or
delayed.

9.2           New
Collateral Locations.  Borrower
may only establish new locations of its business or Collateral so long as such
new location is within the United States of America and

 

74

 

provided Borrower
(a) gives Administrative and Collateral Agent thirty (30) days prior written
notice from Borrower of the intended opening of any such new location and (b)
executes and delivers, or causes to be executed and delivered, to
Administrative and Collateral Agent such agreements, documents, and instruments
as Administrative and Collateral Agent may deem necessary or desirable to
protect its interests in the Collateral at such location; provided, however,
Borrower shall not be required to comply with the provisions of this Section
9.2 to the extent (x) such new location of Collateral is within the United
States of America, (y) such new location of Collateral is not leased or
otherwise controlled by Borrower and (z) if such new and un-reported location(s)
contain(s) Collateral having a value in excess of $3,750,000 for any one
location or $7,500,000 in the aggregate for all such locations, Borrower has
provided Administrative and Collateral Agent with five (5) days prior written
notice of the intended opening of a such new location.

9.3           Compliance with Laws, Regulations, Etc.

(a)           Borrower shall, and shall cause each
of its Subsidiaries to, at all times, comply with all laws, rules, regulations,
licenses, permits, approvals and orders applicable to it and duly observe all
requirements of any foreign, Federal, State or local Governmental Authority
except where failure to do so could not reasonably be expected to cause a
Material Adverse Change.

(b)           Borrower shall give written notice to
Administrative and Collateral Agent promptly upon Borrower’s receipt of any
notice of, or Borrower’s otherwise obtaining knowledge of, (i) the occurrence
of any event involving the release, spill or discharge, threatened or actual,
of any Hazardous Material in material violation of any Environmental Law which
is required by law to be reported to the Governmental Authority having
jurisdiction over such event or (ii) any investigation, proceeding, complaint,
order, directive, claims, citation or written notice with respect to:  (A) any material violation of any applicable
Environmental Law by Borrower or (B) the release, spill or discharge,
threatened or actual, of any Hazardous Material other than in the ordinary
course of business and other than as permitted under any applicable Environmental
Law.  Copies of all material
environmental surveys, audits, assessments, feasibility studies and results of
remedial investigations conducted by or on behalf of Borrower shall be promptly
furnished, or caused to be furnished, by Borrower to Administrative and
Collateral Agent.  Borrower shall take
all reasonably prompt and appropriate action to respond to any non-compliance
with any of the Environmental Laws and shall regularly report to Administrative
and Collateral Agent on material activities or events composing such response.

(c)           Without limiting the generality of
the foregoing, whenever Administrative and Collateral Agent reasonably
determines that there is material violation, or any condition which requires
any action by or on behalf of Borrower in order to avoid any violation, of any
Environmental Law which could reasonably be expected to cause a Material
Adverse Change, Borrower shall, at Administrative and Collateral Agent’s
request and Borrower’s expense:  (i)
cause an independent environmental engineer acceptable to Administrative and
Collateral Agent to conduct such tests or studies of the site where Borrower’s
material violation or alleged material violation of such Environmental Laws has
occurred as may be appropriate and as to such material violation, prepare and
deliver to Administrative and Collateral Agent a report setting forth the
results of such tests or studies, a proposed plan for responding to any

 

75

 

environmental problems described
therein, and an estimate of the costs thereof and (ii) provide to
Administrative and Collateral Agent a supplemental report of such engineer
whenever the scope of such material violation, or Borrower’s response thereto
or the estimated costs thereof, shall change in any material respect.

(d)           Borrower shall indemnify and hold
harmless Agents, Lenders and their respective directors, officers, employees,
agents, invitees, representatives, successors and assigns, from and against any
and all losses, claims, damages, liabilities, costs, and expenses (including
attorneys’ fees and legal expenses) directly or indirectly arising out of or
attributable to the use, generation, manufacture, reproduction, storage,
release, threatened release, spill, discharge, disposal or presence of a
Hazardous Material, including the costs of any required or necessary repair,
cleanup or other remedial work with respect to any property of Borrower and the
preparation and implementation of any closure, remedial or other required plans;
provided, however, Borrower need not indemnity any such Person for losses,
claims, damages, liabilities costs or expenses arising from such Person’s gross
negligence or willful misconduct.  All
representations, warranties, covenants and indemnifications in this Section 9.3
shall survive the payment of the Obligations and the termination or non-renewal
of this Agreement.

9.4           Payment
of Taxes and Claims.  Borrower
shall, and shall cause each of its Subsidiaries to, duly pay and discharge all
taxes, assessments, contributions and governmental charges upon or against it
or its properties or assets, except (i) for taxes the validity of which are
being contested in good faith by appropriate proceedings diligently pursued and
available to Borrower or such Subsidiary, as the case may be and with respect
to which adequate reserves have been set aside on its books in accordance with
GAAP and (ii) as could not reasonably be expected to cause a Material Adverse
Change.

9.5           Insurance.  Borrower shall, and shall cause each Obligor
to, at all times, maintain with financially sound and reputable insurers
insurance with respect to the Collateral against loss or damage and all other
insurance of the kinds and in the amounts customarily insured against or
carried by corporations of established reputation engaged in the same or
similar businesses and similarly situated. 
Said policies of insurance shall be reasonably satisfactory to
Administrative and Collateral Agent as to form, amount and insurer.  Borrower shall furnish certificates,
policies or endorsements to Administrative and Collateral Agent as
Administrative and Collateral Agent shall require as proof of such insurance,
and, if Borrower fails to do so, Administrative and Collateral Agent is
authorized, but not required, to obtain such insurance at the expense of
Borrower.  All such policies shall
provide for at least 10 days prior written notice to Administrative and
Collateral Agent of any cancellation or reduction of coverage due to
non-payment of premiums and at least 30 days prior written notice to
Administrative and Collateral Agent of any other cancellation or reduction of
coverage and that Administrative and Collateral Agent may act as attorney for
Borrower in obtaining, and at any time an Event of Default exists or has
occurred and is continuing, adjusting, settling, amending and canceling such
insurance.  Borrower shall cause
Administrative and Collateral Agent to be named as a loss payee for property
and casualty insurance and an additional insured for liability insurance (but
without any liability for any premiums) under such insurance policies of
Borrower and Obligors and Borrower shall obtain non-contributory lender’s loss
payable endorsements to all such insurance policies in form and substance
satisfactory to Administrative and Collateral Agent.  Such lender’s loss payable endorsements shall specify that the
proceeds of such insurance shall be

 

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payable to
Administrative and Collateral Agent, for itself and the ratable benefit of the
Lenders and the Bank Product Providers, as its interests may appear and further
specify that Administrative and Collateral Agent shall be paid regardless of
any act or omission by any relevant Person. 
At its option, Administrative and Collateral Agent may (a) apply any
insurance proceeds received by Administrative and Collateral Agent with respect
to Accounts, Inventory or, to the extent permitted under the terms of the Term
Loan Intercreditor Agreement, any other assets or events, at any time to the
cost of repairs or replacement of Collateral and/or to payment of the
Obligations, whether or not then due, in any order and in such manner as
Administrative and Collateral Agent may determine or hold such proceeds as cash
collateral for the Obligations or (b) if an Event of Default then exists, apply
any insurance proceeds permitted to be received by Administrative and
Collateral Agent under the terms of the Term Loan Intercreditor Agreement to
the cost of repairs or replacement of Collateral and/or to payment of the
Obligations, whether or not then due, in any order and in such manner as
Administrative and Collateral Agent may determine or hold such proceeds as cash
collateral for the Obligations.  Upon
application of such proceeds to the Obligations, Loans may be available subject
and pursuant to the terms hereof to be used for the costs of repair or
replacement of the Collateral lost or damages resulting in the payment of such
insurance proceeds.  So long as no Event
of Default exists, all other insurance proceeds may be collected by Borrower.

9.6           Financial Statements and Other
Information.

(a)           Borrower shall, and shall cause each
of its Subsidiaries to, keep proper books and records in which true and
complete entries shall be made of all dealings or transactions of or in
relation to the Collateral and the business of Borrower and its Subsidiaries in
accordance with GAAP.  Borrower shall
promptly furnish to Administrative and Collateral Agent any and all financial
or other information as Administrative and Collateral Agent may reasonably
request relating to the Collateral and the assets, business and operations of
Borrower, and to notify the auditors and accountants of Borrower that
Administrative and Collateral Agent is authorized to obtain such information
directly from them.  Without limiting
the foregoing, Borrower shall furnish or cause to be furnished to
Administrative and Collateral Agent, the following:  (i) within thirty (30) days after the end of each fiscal month
(or within forty-five (45) days if such fiscal month end is also a fiscal
quarter end), unaudited consolidated financial statements (including in each
case balance sheets, statements of income and loss, statements of cash flow,
and statements of shareholders’ equity), all in reasonable detail, fairly
presenting the financial position and the results of the operations of Borrower
and its Subsidiaries  as of the end
of and through such fiscal month (or quarter), certified to be correct by the
chief financial officer of Borrower, subject to normal year-end adjustments and
lack of footnotes and, if a Compliance Period is then in effect, accompanied by
a compliance certificate substantially in the form of Exhibit C hereto,
along with a schedule in form reasonably satisfactory to Administrative and
Collateral Agent of the calculations used in determining, as of the end of such
month (or quarter), whether Borrower was  in
compliance with the covenants set forth in Section 9.17 of this Agreement for
such month (or quarter); and (ii) within ninety (90) days after the Closing
Date for fiscal year 2003 and within ninety (90) days after the end of such
fiscal year for each fiscal year thereafter, audited consolidated financial
statements of Borrower and its Subsidiaries (including in each case balance
sheets, statements of income and loss, statements of cash flow and statements
of shareholders’ equity), and the accompanying notes thereto, all in reasonable
detail, fairly presenting the financial position and the results of the operations
of Borrower and

 

77

 

its Subsidiaries as of
the end of and for such fiscal year, together with (A) the unqualified opinion
of independent certified public accountants, which accountants shall be an
independent accounting firm selected by Borrower and reasonably acceptable to
Administrative and Collateral Agent, that such financial statements have been
prepared in accordance with GAAP, and present fairly the results of operations
and financial condition of Borrower and its Subsidiaries as of the end of and
for the fiscal year then ended and (B) any management letters that may be
issued with regard to the Borrower.

(b)           Borrower shall promptly notify
Administrative and Collateral Agent in writing of the details of (i) any loss,
damage, investigation, action, suit, proceeding or claim relating to the
Collateral, or any other property which is security for the Obligations, which
constitutes a Material Adverse Change, (ii) any Material Contract of Borrower
being terminated (where such termination would cause a Material Adverse Change)
or amended (in any way that would materially and adversely alter Borrower’s
rights or obligations thereunder, in which event Borrower shall provide
Administrative and Collateral Agent a copy of such amendment) or any new
Material Contract being entered into (in which event Borrower shall provide
Administrative and Collateral Agent with a copy of such new Material Contract
or amendment), (iii) any order, judgment or decree in excess of Five Million
Dollars ($5,000,000) having been entered against Borrower or any of its
properties or assets, (iv) any notification of the violation of any laws or
regulation received by Borrower where such violation could reasonably be
expected to cause a Material Adverse Change, (v) any ERISA Event, (vi) the
occurrence of any Default or Event of Default and (vii) any notice of a
material default or of termination received by Borrower with respect to any
Purchase Agreement or Affiliate Lease.

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

(d)           Borrower shall furnish or cause to be
furnished to Administrative and Collateral Agent such information with respect
to the Collateral and the business of Borrower, as Administrative and
Collateral Agent may reasonably request, including, without limitation, at
least 30 days before the beginning of Borrower’s fiscal year, updated
projections for such fiscal year (including balance sheets and statements of
operations, stockholders’ equity and cash flows and Borrowing Base and Excess
Availability projections on a month-by-month basis).  Agents and Lenders are hereby authorized to deliver a copy of any
financial statement or any other information relating to Borrower to any court
or other Governmental Authority, Affiliate of any Agent or any Lender or to any
Participant or assignee or prospective Participant or assignee.  Borrower hereby irrevocably authorizes and
directs all accountants or auditors to deliver to Administrative and Collateral
Agent, at Borrower’s expense, copies of the financial statements of Borrower
and any reports or management letters prepared by such accountants or auditors
on behalf of Borrower and to disclose to Administrative and Collateral Agent
such information as they may have regarding the business of Borrower.  Any documents, schedules, invoices or other
papers delivered to Agents may be destroyed or otherwise disposed of by Agents
one (1) year after the same are delivered to Agents, except as otherwise
designated by Borrower to Agents in writing.

 

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(e)           In addition to any financial
information required to be delivered under the foregoing, within ninety (90)
days from the Closing Date, Borrower shall deliver, or cause to be delivered,
to Administrative and Collateral Agent an opening balance sheet of Borrower
after giving effect to the transactions contemplated by this Agreement and the
Purchase Agreements, together with, if available, any procedures letter
delivered by Ernst & Young LLC to Borrower in connection with the
preparation of such balance sheet.

9.7           Sale of
Assets, Consolidation, Merger, Dissolution, Etc.  Borrower shall not, nor shall it permit any
of its Subsidiaries to (and Agents and Lenders do not authorize Borrower or any
of its Subsidiaries to), directly or indirectly:

(a)           merge into or with, consolidate or
amalgamate with any other Person or permit any other Person to merge into or
with or consolidate with it; provided, that, (i) any Subsidiary
of Borrower that is not an Obligor may merge with or into or consolidate with
any other Subsidiary of Borrower that is not an Obligor, and (ii) upon the
prior written consent of Administrative and Collateral Agent, such consent not
to be unreasonably withheld, a domestic Subsidiary of Borrower may merge with
and into Borrower with Borrower being the surviving entity; or

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

(i)            sales of Inventory in the ordinary
course of business,

(ii)           the disposition of worn-out or
obsolete Equipment so long as (A) any proceeds are deposited to the Blocked
Account or, so long as the Term Loan Intercreditor Agreement is in effect, a
deposit or investment account that constitutes Term Loan Priority Collateral,
and (B) such sales do not involve Equipment having an aggregate fair market
value in excess of Ten Million Dollars ($10,000,000) for all such Equipment
disposed of in any fiscal year of Borrower; provided, however, if such sales of
Equipment in any fiscal year involve Equipment having an aggregate fair market
value of less than $10,000,000 (such difference referred to herein as an “Unused
Equipment Sale Allowance”), up to $5,000,000 of such Unused Equipment Sale
Allowance may be sold in the succeeding fiscal year;

(iii)          the disposition of assets other than
Accounts, Inventory or worn-out or obsolete Equipment so long as (A) any
proceeds are deposited to the Blocked Account or, so long as the Term Loan
Intercreditor Agreement is in effect, a deposit or investment account that
constitutes Term Loan Priority Collateral, and (B) such sales do not involve
assets having an aggregate fair market value in excess of Ten Million Dollars
($10,000,000) for all such assets disposed of in any fiscal year of Borrower;
and

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

 

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and the net cash proceeds
which it is anticipated will be received by Borrower from such sale, (B)
Borrower shall not be required to pay any cash dividends or repurchase or
redeem such Capital Stock or make any other payments in respect thereof, (C)
the terms of such Capital Stock, and the terms and conditions of the purchase
and sale thereof, shall not include any terms that include any limitation on
the right of Borrower to request or receive Loans or the right of Borrower to
amend or modify any of the terms and conditions of this Agreement or any of the
other Financing Agreements or otherwise in any way relate to or affect the
arrangements of Borrower with Agents and Lenders or are more restrictive or
burdensome to Borrower than the terms of any Capital Stock in effect on the
date hereof, (D) no Event of Default would occur as a result of such sale or
issuance, and (E) except as Administrative and Collateral Agent and the Lenders
may otherwise agree in writing, if an Event of Default exists on the date of
such issuance and sale or after giving effect thereto, all of the proceeds of
such sale and issuance shall be paid to Administrative and Collateral Agent for
application to the Obligations in accordance with the terms of Section 6.4(a)
hereof;

(c)           wind up, liquidate or dissolve except
in the case of Subsidiaries of Borrower that are not Obligors; or

(d)           agree to do any of the foregoing; provided,
however, Borrower or any of its Subsidiaries may enter into agreements
to effectuate any transaction otherwise prohibited by this Section 9.7 so long
as (i) concurrently with or promptly after entering into any such agreement,
Borrower or such Subsidiary gives Administrative and Collateral Agent written
notice thereof to the extent not prohibited by any confidentiality provisions
relating thereto and binding on Borrower or such Subsidiary, and (ii) the
consummation of transactions contemplated by any such agreement is conditioned
upon obtaining the consent of Administrative and Collateral Agent and such
Lenders as may be required pursuant to Section 11.3 hereof or repaying the
Obligations in full and terminating this Agreement in accordance with its
terms.

To the extent Administrative and Collateral Agent and
any Lenders whose consent is required pursuant to Section 11.3 hereof waive the
provisions of this Section 9.7 with respect to the sale of any Collateral, or
any Collateral is sold to a Person as permitted by this Section 9.7, to the
extent the proceeds of any such sale are remitted to Administrative and
Collateral Agent pursuant to all applicable terms of this Agreement, such
Collateral shall be sold free and clear of the liens created by the Financing
Agreements (and, in the event that such Collateral consists of all of the
capital stock of a Person that is an Obligor, such Person, and the assets of
such Person, shall be released from the Financing Agreements to which it is a
party), and Administrative and Collateral Agent shall be authorized to take any
actions deemed appropriate in order to effect the foregoing.

9.8           Encumbrances.  Borrower shall not, nor permit any of its
Subsidiaries to, create, incur, assume, suffer or permit to exist any security
interest, mortgage, pledge, lien, charge or other encumbrance of any nature
whatsoever on any of its assets or properties, including the Collateral or file
or permit the filing of, or permit to remain in effect, any financing statement
or other similar notice of any security interest or lien with respect to such
assets or properties, except:

 

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(a)           the security interests and liens of
Administrative and Collateral Agent, for itself and the ratable benefit of the
Lenders and Bank Product Providers;

(b)           liens securing the payment of taxes,
either not yet overdue or the validity of which are being contested in good
faith by appropriate proceedings diligently pursued and available to Borrower
or such Subsidiary, as the case may be and with respect to which adequate
reserves have been set aside on its books;

(c)           statutory liens (other than liens
securing the payment of taxes) arising in the ordinary course of Borrower’s or
such Subsidiary’s business to the extent: 
(i) such liens secure Indebtedness which is not overdue or (ii) such
liens secure Indebtedness relating to claims or liabilities which are fully
insured or bonded and being defended at the sole cost and expense and at the
sole risk of the insurer or being contested in good faith by appropriate
proceedings diligently pursued and available to Borrower or such Subsidiary, in
each case prior to the commencement of foreclosure or other similar proceedings
and with respect to which adequate reserves have been set aside on its books;

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

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

(f)            to the extent subject to the Term
Loan Intercreditor Agreement, the liens and security interests of Term Loan
Agent, securing the obligations of Borrower under the Term Loan Agreement;

(g)           the security interests and liens set
forth on Schedule 8.4 hereto;

(h)           renewals and extensions of any of the
foregoing security interests and liens so long as the aggregate principal
amount of the Indebtedness (plus any accrued and unpaid fees and interest), if
any, secured thereby is not increased and such renewal or extension does not
encumber additional assets of Borrower or such Subsidiary;

(i)            leases or subleases granted to third
Persons that do not materially interfere with the conduct of the business of
Borrower or such Subsidiary;

(j)            security interests in and liens on
property or assets acquired pursuant to an acquisition permitted by Section
9.10 hereof, or on property or assets of a Person in existence at the time such
Person is acquired pursuant to an acquisition permitted by Section 9.10 hereof
so long as: (i) any Indebtedness that is secured by such security interests and
liens is otherwise permitted under Section 9.9 hereof and (ii) such security
interests and liens are not incurred in connection with, or in contemplation
of, such acquisition and do not attach to any other asset of Borrower or such
acquired Person or otherwise violate any of the provisions of this Agreement;

 

81

 

(k)           pledges and deposits of cash by
Borrower after the date hereof in the ordinary course of business and
commercially reasonable in connection with workers’ compensation, unemployment
insurance and other types of social security benefits or in connection with
obligations under Hedging Transactions;

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

(m)          liens on assets other than Accounts,
collections on Accounts or Inventory to the extent such liens do not secure
obligations in excess of $10,000,000 in the aggregate at any one time
outstanding.

9.9           Indebtedness.  Borrower shall not, nor permit any of its
Subsidiaries to, incur, create, assume, become or be liable in any manner with
respect to, suffer or permit to exist, any Indebtedness or guarantee, assume,
endorse, or otherwise become responsible for (directly or indirectly) the
performance, dividends or other obligations of any Person, except:

(a)           the Obligations;

(b)           purchase money Indebtedness (including
Capital Leases) arising after the date hereof to the extent secured by purchase
money security interests in Equipment (including Capital Leases) not to exceed
Ten Million Dollars ($10,000,000) in the aggregate at any time outstanding so
long as such security interests do not apply to any property of Borrower or any
Subsidiary of Borrower other than the Equipment so acquired, and the
Indebtedness secured thereby does not exceed the cost of the Equipment so
acquired;

(c)           purchase money mortgages on Real
Property not to exceed Twenty-Five Million Dollars ($25,000,000) in the
aggregate at any time outstanding so long as such mortgages do not apply to any
property of Borrower or any Subsidiary of Borrower other than the Real Property
so acquired, and the Indebtedness secured thereby does not exceed the cost of
the Real Property so acquired;

(d)           guaranties by any Subsidiaries of
Borrower of the Obligations in favor of Administrative and Collateral Agent,
for itself and the ratable benefit of the Lenders and the Bank Product
Providers;

(e)           Indebtedness with respect to any
Hedging Transactions; provided, that, such arrangements are: (i)
with any Bank Product Provider, any Person that constitutes an Eligible
Transferee or any other bank or other financial institution that has combined
capital and unimpaired surplus of not less than Five Hundred Million Dollars
($500,000,000), (ii) were entered into for the purpose of protecting Borrower
or such Subsidiary against fluctuations in interest rates and not for speculative
purposes and (iii) except with respect to Indebtedness owed to Bank Product
Providers or secured by pledges or deposits of cash pursuant to
Section 9.8(k), Indebtedness arising thereunder or in connection therewith
is unsecured;

 

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(f)            The issuance by Borrower, and
guaranties thereof by its Subsidiaries, of no more than $400,000,000 in senior
unsecured notes on terms and conditions reasonably satisfactory to
Administrative and Collateral Agent so long as:  (i) no Default or Event of Default exists at the time such notes
are issued or would occur as a result thereof; (ii) the net cash proceeds of
such notes are used first to repay the obligations of Borrower under the Term
Loan Agreement, and any remaining proceeds are remitted to Administrative and
Collateral Agent for application to the Obligations as set forth in Section
6.4(a) hereof; (iii) prior to its incurrence, Administrative and Collateral
Agent shall have received such information with regard to such notes as it may
reasonably request, including, without limitation, true, correct and complete
copies of all agreements, documents and instruments evidencing or otherwise
related to such Indebtedness; (iv) Borrower does not, directly or indirectly, (A)
without the prior written consent of Administrative and Collateral Agent,
amend, modify, alter or change the terms of such notes or any agreement,
document or instrument related thereto in a manner materially more adverse to
the Lenders or so as to make the terms thereof materially more burdensome or
restrictive to Borrower, in each case, than the terms thereof in effect prior
to such amendment, modification, alteration or change, or (B) redeem,
retire, defease, purchase or otherwise acquire such notes (except pursuant to
regularly scheduled payments permitted under the terms of this Agreement and
any subordination agreement related to such notes), or set aside or otherwise
deposit or invest any sums for such purpose, and (v) Borrower shall furnish to
Administrative and Collateral Agent all material notices or demands in
connection with such Indebtedness either received by Borrower or on its behalf
promptly after the receipt thereof, or sent by Borrower or on its behalf
concurrently with the sending thereof, as the case may be;

(g)           the Indebtedness of Borrower under
the Term Loan Agreement or any refinancing thereof so long as: (i) the
principal amount thereof does not exceed $105,000,000, (ii) any refinancing of
such obligations is on terms and conditions not materially more adverse to the
Borrower than currently exist, (iii) unless such refinancing is unsecured, any
person providing or otherwise party to any refinancing thereof executed and
deliver to Administrative and Collateral Agent an intercreditor agreement on
the same terms as the Term Loan Intercreditor Agreement, (iv) any proceeds of
such refinancing which are not used to repay the obligations of Borrower under
the Term Loan Agreement are remitted to Administrative and Collateral Agent for
application to the Obligations pursuant to Section 6.4(a) hereof, (v) prior to
any such refinancing, Administrative and Collateral Agent shall have received
such information with regard to such Indebtedness as it may reasonably request,
including, without limitation, true, correct and complete copies of all
agreements, documents and instruments evidencing or otherwise related to such
Indebtedness, (vi) Borrower does not, directly or indirectly, amend, modify,
alter or change the terms of such Indebtedness, the Term Loan Agreement or any
other agreement, document or instrument related thereto (A) without the prior
written consent of Administrative and Collateral Agent if such amendment,
modification, alteration or change would make the terms thereof materially more
adverse to Borrower and/or the Lenders and (B) unless a copy of such amendment,
modification, alteration or change is provided to Administrative and Collateral
Agent promptly upon its execution, (vii) Borrower furnishes to Administrative
and Collateral Agent all notices or demands in connection with such
Indebtedness either received by Borrower or on its behalf promptly after the
receipt thereof, or sent by Borrower or on its behalf concurrently with the
sending thereof, as the case may be, (viii) Borrower does not make any
scheduled principal payments or deferred scheduled principal payments with
respect thereto unless both before and after giving effect to such payment no

 

83

 

Event of Default exists
and (ix) Borrower does not make any prepayments with respect thereto (A)
unless, with regard to optional prepayments, (1) such payments do not exceed,
in the aggregate together with dividends made pursuant to Section 9.11(e)
hereof, 50% of Borrower’s cumulative Net Income earned since the Closing Date,
(2) no Default or Event of Default exists at the time of such payment or would
occur after giving effect thereto, (3) at all times during the 90 day period
prior to the date of such payment, Excess Availability was $70,000,000 or more,
(4) during the 90 day period after the date of, and after giving effect to,
such payment, Excess Availability is projected to be $70,000,000 or more at all
times and (5) prior to making such payment, Administrative and Collateral Agent
shall have received Borrower’s financial statements for the most recent fiscal
period then ended (which may be unaudited) accompanied by a certificate of
Borrower’s chief financial officer as to Borrower’s compliance with the terms
of this Section 9.9(g) together with such supporting documentation therefore as
Administrative and Collateral Agent may reasonably request, (B) unless such
payments are made out of proceeds of Term Loan Priority Collateral or (C) such
payments are made with the proceeds of Indebtedness incurred pursuant to and in
conformity with, Section 9.9(f);

(h)           the Indebtedness set forth on Schedule
9.9 hereto; provided, that, (i) Borrower may only make regularly scheduled
payments of principal and interest in respect of such Indebtedness in accordance
with the terms of the agreement or instrument evidencing or giving rise to such
Indebtedness as in effect on the date hereof, (ii) Borrower shall not, directly
or indirectly, (A) without the prior written consent of Administrative and
Collateral Agent, amend, modify, alter or change the terms of such Indebtedness
in a manner materially more adverse to the Lenders or so as to make the terms
thereof materially more burdensome or restrictive to Borrower, in each case,
than the terms thereof in effect prior to such amendment, modification,
alteration or change, or (B) redeem, retire, defease, purchase or otherwise
acquire such Indebtedness, or set aside or otherwise deposit or invest any sums
for such purpose, (iii) Borrower shall furnish to Administrative and Collateral
Agent all notices or demands in connection with such Indebtedness either
received by Borrower or on its behalf, promptly after the receipt thereof, or
sent by Borrower or on its behalf, concurrently with the sending thereof, as
the case may be and (iv) with respect to Indebtedness arising in connection
with the letters of credit listed on Schedule 9.9 hereto: (A) in no
event may such Indebtedness be secured or cash-collateralized and (B) such
Indebtedness may not be renewed, extended, replaced or otherwise continue to be
outstanding beyond the maturity dates of such letters of credit set forth on Schedule
9.9 hereto;

(i)            so long as the aggregate amount
thereof does not exceed $5,000,000 at any time, Indebtedness with respect to
surety bonds, appeal bonds or like instruments acquired in the ordinary course
of business or in connection with the enforcement of rights or claims of
Borrower or any of its Subsidiaries or in connection with judgments that do not
result in a Default or an Event of Default;

(j)            to the extent subject to the
intercompany subordination agreement described in Section 4.1(l) and otherwise
permitted under Section 9.10 hereof (i) Indebtedness of Borrower or its
Subsidiaries to any other Subsidiary or Borrower or (ii) Indebtedness of a
Subsidiary of Borrower to Borrower;

 

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(k)           unsecured guaranties by Borrower of
Indebtedness or other obligations of its Subsidiaries that are permitted to be
incurred hereunder;

(l)            Indebtedness of a Subsidiary of
Borrower acquired pursuant to the terms of Section 9.10 hereof, or assumed by
Borrower in connection with the acquisition of an asset pursuant to the terms
of Section 9.10 hereof, so long as such Indebtedness was not incurred in connection
with, or in contemplation of, such acquisition or such investment and otherwise
does not violate any provision of this Agreement;

(m)          Indebtedness owing in connection with
the liens permitted under Sections 9.8(b), 9.8(c), 9.8(k) or 9.8(m);

(n)           up to $5,000,000, in the aggregate at
any one time outstanding, of Indebtedness representing the unpaid balance of
the purchase price of any property or services that constitutes an account
payable to a trade creditor (whether or not an Affiliate) which (i) was
created, incurred, assumed or guaranteed by Borrower in the ordinary course of
business of Borrower in connection with obtaining goods, materials or services,
(ii) is overdue by more than ninety (90) days and (iii) is not being contested
by Borrower in good faith; and

(o)           unsecured Indebtedness of Borrower to
any third person arising after the date hereof in an amount at any one time
outstanding not to exceed $1,000,000 in the aggregate for all such Indebtedness
to all such third persons; provided, that, (i) Borrower may only
make regularly scheduled payments of principal and interest in respect of such
Indebtedness in accordance with the terms of the agreement or instrument
evidencing or giving rise to such Indebtedness, (ii) Borrower shall not,
directly or indirectly, (A) without the prior written consent of Administrative
and Collateral Agent, amend, modify, alter or change the terms of such
Indebtedness in a manner materially more adverse to the Lenders or so as to
make the terms thereof materially more burdensome or restrictive to Borrower,
in each case, than the terms thereof in effect prior to such amendment,
modification, alteration or change, or (B) redeem, retire, defease, purchase or
otherwise acquire such Indebtedness, or set aside or otherwise deposit or
invest any sums for such purpose, and (iii) Borrower shall furnish to
Administrative and Collateral Agent all material notices or demands in
connection with such Indebtedness either received by Borrower or on its behalf,
promptly after the receipt thereof, or sent by Borrower or on its behalf,
concurrently with the sending thereof, as the case may be.

9.10         Loans,
Investments, Etc.  Borrower shall
not, nor permit any of its Subsidiaries to, directly or indirectly, make, or
suffer or permit to exist, any loans or advance money or property to any
Person, or any investment in (by capital contribution, dividend or otherwise)
or purchase or repurchase the Capital Stock or Indebtedness or all or a
substantial part of the assets or property of any Person, or form or acquire
any Subsidiaries, or agree to do any of the foregoing, except:

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

(b)           investments in cash or Cash
Equivalents so long as the terms and conditions of Section 5.2 hereof shall
have been satisfied with respect to the deposit account or

 

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investment account in
which such cash or Cash Equivalents are held; provided, however,
such cash or Cash Equivalents must be held in a savings or investment account
which is subject to Administrative and Collateral Agent’s first priority
perfected security interest if (i) any Revolving Loans are then outstanding,
(ii) the Term Loan Intercreditor Agreement is then in effect, and (iii) such
cash or Cash Equivalents constitute Revolving Priority Collateral (as defined
in the Term Loan Intercreditor Agreement) or proceeds thereof;

(c)           the existing equity investments of
Borrower as of the date hereof in its Subsidiaries, provided, that, Borrower
shall have no obligation to make any other investment in, or loans to, or other
payments in respect of, any such Subsidiaries that are not Obligors;

(d)           stock or obligations issued to
Borrower by any Person (or the representative of such Person) in respect of
Indebtedness of such Person owing to Borrower in connection with the
insolvency, bankruptcy, receivership or reorganization of such Person or a
composition or readjustment of the debts of such Person; provided, that, the
original of any such stock or instrument having a principal amount in excess of
$1,000,000 evidencing such obligations shall be promptly delivered to
Administrative and Collateral Agent, upon Administrative and Collateral Agent’s
request, together with such stock power, assignment or endorsement by Borrower
as Administrative and Collateral Agent may request;

(e)           obligations of account debtors to
Borrower arising from Accounts which are past due evidenced by a promissory
note made by such account debtor payable to Borrower; provided, that, promptly
upon the receipt of the original of any such promissory note by Borrower having
a principal amount in excess of $1,000,000, such promissory note shall be
endorsed to the order of Administrative and Collateral Agent by Borrower and
promptly delivered to Administrative and Collateral Agent as so endorsed;

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

(g)           loans and advances to Borrower’s
officers and employees made in the ordinary course of Borrower’s business and
with respect to activities arising from such persons employment by Borrower;
and

(h)           loans and advances to BlueLinx
Building Products Canada Ltd., a company organized under the laws of British
Columbia, not to exceed $10,000,000 in the aggregate at any one time
outstanding.

9.11         Dividends
and Redemptions.  Borrower shall
not, nor shall any Subsidiary of Borrower, directly or indirectly, declare or
pay any dividends on account of any shares of any class of Capital Stock of
Borrower or such Subsidiary, as the case may be, now or hereafter outstanding,
or set aside or otherwise deposit or invest any sums for such purpose, or
redeem,

 

86

 

retire, defease,
purchase or otherwise acquire any shares of any class of Capital Stock (or set
aside or otherwise deposit or invest any sums for such purpose) for any
consideration or apply or set apart any sum, or make any other distribution (by
reduction of capital or otherwise) in respect of any such shares or agree to do
any of the foregoing, except:

(a)           in any case, dividends may be made in
the form of shares of Capital Stock consisting of common stock;

(b)           any Subsidiary of Borrower may pay
dividends to Borrower;

(c)           Borrower may pay in kind dividends to
Parent upon any issuance of Capital Stock permitted under the terms of this
Agreement;

(d)           Borrower may pay dividends to Parent
(i) in an amount equal to the sum of the federal, state and local income tax
liability of Parent that is attributable to Borrower and its Subsidiaries and
(ii) for general administrative expenses of Parent and/or general operating
expenses incurred by Parent on behalf of Borrower and its Subsidiaries in an
amount not to exceed $2,500,000 in any fiscal year; and

(e)           commencing at the conclusion of
Borrower’s fiscal year ending 2005, Borrower may pay dividends to Parent in an
aggregate amount not to exceed, in the aggregate and together with any optional
prepayments made with respect to the Indebtedness under the Term Loan which are
permitted under Section 9.9(g)(ix)(A) hereof, 50% of Borrower’s cumulative Net
Income earned since the Closing Date, so long as: (i) no Default or Event of
Default exists at the time of such dividend or would occur after giving effect
thereto; (ii) at all times during the 90 day period prior to the date of such
proposed dividend Excess Availability was $100,000,000 or more; (iii) during
the 90 days period after the date of, and after giving effect to, such proposed
dividend, Excess Availability is projected to be $100,000,000 or more at all
times; and (iv) prior to the making of such dividend, Administrative and
Collateral Agent shall have received Borrower’s audited financial statements
for the fiscal year then ended accompanied by a certificate of Borrower’s chief
financial officer as to Borrower’s compliance with the terms of this Section
9.11(e) together with such supporting documentation therefore as Administrative
and Collateral Agent may reasonably request.

9.12         Transactions
with Affiliates.  Borrower shall
not, directly or indirectly, (a) purchase, acquire or lease any property from,
or sell, transfer or lease any property to, any Affiliate or agent of Borrower,
except in the ordinary course of and pursuant to the reasonable requirements of
Borrower’s business and upon fair and reasonable terms no less favorable to
Borrower than Borrower would obtain in a comparable arm’s length transaction
with a Person that is not an Affiliate or agent of Borrower or (b) make any
payments of management, consulting or other fees for management or similar
services, or of any Indebtedness owing to any officer, employee, shareholder,
director or other Affiliate of Borrower except (i) reasonable compensation to
officers, employees and directors for services rendered to Borrower in the
ordinary course of business; (ii) so long as Sponsor owns Capital Stock of
Parent, management fees of no more than $1,000,000 per fiscal year to Sponsor;
(iii) payments required to be made under the Affiliate Leases to the extent the
Affiliate Leases comply with the provisions of Section 9.12(a) hereof; (iv)
amounts payable to any Sponsor Affiliated Lender pursuant to this

 

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Agreement; (iv)
amounts payable to any Sponsor Affiliated Lender pursuant to the Term Loan
Agreement, to the extent permitted under Section 9.9(g) hereof and (v) any
amounts permitted to be paid pursuant to Section 9.11.

9.13         Compliance
with ERISA.  Borrower shall and
shall cause each of its ERISA Affiliates to: 
(a) maintain each Plan (other than a Multiemployer Plan) in compliance
in all material respects with the applicable provisions of ERISA, the Code and
other Federal and State law; (b) cause each Plan which is qualified under
Section 401(a) of the Code to maintain such qualification; (c) not terminate
any of such Plans so as to incur any liability to the Pension Benefit Guaranty
Corporation; (d) not allow or suffer to exist any prohibited transaction
involving any of such Plans or any trust created thereunder which would subject
Borrower or such ERISA Affiliate to a tax or penalty or other liability on
prohibited transactions imposed under Section 4975 of the Code or ERISA; (e)
make all required contributions to any Plan which it is obligated to pay under
Section 302 of ERISA, Section 412 of the Code or the terms of such Plan; (f)
not allow or suffer to exist any accumulated funding deficiency, whether or not
waived, with respect to any such Plan; or (g) not allow or suffer to exist any
occurrence of a reportable event or any other event or condition which presents
a material risk of termination by the Pension Benefit Guaranty Corporation of
any such Plan that is a single employer plan, which termination could result in
any liability to the Pension Benefit Guaranty Corporation.

9.14         End of Fiscal Years and Fiscal
Quarters; Changes in Accounting Practices.

(a)           Borrower shall, for financial
reporting purposes, cause its, and each of its Subsidiaries’ (i) fiscal years
to end on the dates set forth on Schedule 9.14 hereto as fiscal year
ends, (ii) fiscal quarters to end on the dates set forth on Schedule 9.14
hereto as fiscal quarter ends and (iii) fiscal months to end on the dates set
forth on Schedule 9.14 hereto as fiscal month ends.

(b)           Borrower shall not materialy change
any of its accounting policies except as may be required or permitted in
accordance with GAAP.

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

9.16         Limitation of Restrictions
Affecting Subsidiaries. 
Borrower shall not, directly, or indirectly, create or otherwise cause
or suffer to exist any encumbrance or restriction which prohibits or limits the
ability of any Subsidiary of Borrower to (a) pay dividends or make other
distributions or pay any Indebtedness owed to Borrower or any Subsidiary of
Borrower; (b) make loans or advances to Borrower or any Subsidiary of Borrower,
or (c) create, incur, assume or suffer to exist any lien upon any of its
property, assets or revenues, whether now owned or hereafter acquired, other
than encumbrances and restrictions (i) that are void or ineffective under
applicable law or (ii) arising under (A) applicable law, (B) this Agreement or
the Term Loan Agreement, (C) customary provisions restricting subletting or
assignment of any lease governing a leasehold interest of Borrower or any of
its Subsidiaries, (D) customary restrictions on dispositions of real property
interests found in reciprocal easement agreements of Borrower or its
Subsidiary, (E) any agreement relating to permitted Indebtedness incurred by a
Subsidiary of

 

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Borrower prior to
the date on which such Subsidiary was acquired by Borrower and outstanding on
such acquisition date, and (F) the extension or continuation of contractual
obligations in existence on the date hereof; provided, that, any such
encumbrances or restrictions contained in such extension or continuation are no
less favorable to Administrative and Collateral Agent and Lenders than those
encumbrances and restrictions under or pursuant to the contractual obligations
so extended or continued.

9.17         Financial
Covenants.  During a Compliance
Period, Borrower shall, when measured as of the month most recently ended:

(a)           Fixed Charge Coverage Ratio.  Maintain, on a consolidated basis, its Fixed
Charge Coverage Ratio at not less than 1.1 to 1.0.

(b)           Capital Expenditures.  Not incur
Capital Expenditures of more than $20,000,000 in any fiscal year; provided,
however, if Capital Expenditures of less than $20,000,000 are incurred
in any fiscal year (such difference referred to herein as an “Unused CapEx
Allowance”), up to $10,000,000 of the amount of such Unused CapEx Allowance
may be incurred in the succeeding fiscal year.

9.18         License Agreements.

(a)           Except where failure to do so could
not reasonably be expected to cause a Material Adverse Change and with respect
to License Agreements that are Material Contracts, Borrower shall (i) promptly
and faithfully observe and perform all of the terms, covenants, conditions and
provisions of such License Agreement to be observed and performed by it, at the
times set forth therein, if any, (ii) not do, permit, suffer or refrain from
doing anything that could reasonably be expected to result in a default under
or breach of any of the terms of such License Agreement, (iii) not cancel,
surrender, modify, amend, waive or release such License Agreement in any
respect or any material term, provision or right of the licensee thereunder in
any respect, or consent to or permit to occur any of the foregoing, (iv) give
Administrative and Collateral Agent prompt written notice of such License
Agreement entered into by Borrower after the date hereof, together with a true,
correct and complete copy thereof and such other information with respect
thereto as Administrative and Collateral Agent may reasonably request, (v) give
Administrative and Collateral Agent prompt written notice of any breach of any
obligation, or any default, by any party under such License Agreement, and
deliver to Administrative and Collateral Agent (promptly upon the receipt
thereof by Borrower in the case of a notice to Borrower, and concurrently with
the sending thereof in the case of a notice from Borrower) a copy of each
notice of default and every other notice and other communication received or
delivered by Borrower in connection with such License Agreement which relates
to any adverse change in the right of Borrower to continue to use the property
subject to such License Agreement, and (vi) furnish to Administrative and
Collateral Agent, promptly upon the request of Administrative and Collateral
Agent, such information and evidence as Administrative and Collateral Agent may
require from time to time concerning the observance, performance and compliance
by Borrower or the other party or parties thereto with the terms, covenants or
provisions of such License Agreement.

 

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

9.19         After
Acquired Real Property.  If Borrower
hereafter acquires any Real Property, fixtures or similar property and such
Real Property, fixtures or other property at any one location has a fair market
value in an amount equal to or greater than Five Million Dollars ($5,000,000)
(or if an Event of Default exists, then regardless of the fair market value of
such assets), without limiting any other rights of Administrative and
Collateral Agent, or duties or obligations of Borrower, upon Administrative and
Collateral Agent’s request, Borrower shall execute and deliver to
Administrative and Collateral Agent a mortgage, deed of trust or deed to secure
debt, as Administrative and Collateral Agent may determine, in form and
substance satisfactory to Administrative and Collateral Agent and in form appropriate
for recording in the real estate records of the jurisdiction in which such Real
Property or other property is located granting to Administrative and Collateral
Agent, for itself and the ratable benefit of the Lenders and the Bank Product
Providers, a first and only lien and mortgage on and security interest in such
Real Property, fixtures or other property (except as Borrower would otherwise
be permitted to incur hereunder or as otherwise consented to in writing by
Administrative and Collateral Agent) and such other agreements, documents and
instruments as Administrative and Collateral Agent may require in connection
therewith.

9.20         Costs and
Expenses.  Borrower shall pay to
Administrative and Collateral Agent, for itself and the ratable benefit of the
Lenders and the Bank Product Providers, on demand and if requested, accompanied
by an invoice in reasonable detail, all costs, expenses, filing fees and filing
or recording taxes paid or payable by any Agent in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations,
Administrative and Collateral Agent’s and Lender’s rights in the Collateral,
this Agreement, the other Financing Agreements and all other documents related
hereto or thereto, including any amendments, supplements or consents which may
hereafter be contemplated (whether or not executed) or entered into in respect
hereof and thereof, including:  (a) all
costs and expenses of filing or recording (including Uniform Commercial Code
financing

 

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statement filing
taxes and fees, documentary taxes, recording taxes and fees, if applicable);
(b) costs and expenses and fees for insurance premiums, environmental audits,
surveys, assessments, engineering reports and inspections, background checks,
appraisal fees and search fees, costs and expenses of remitting loan proceeds,
collecting checks and other items of payment, and establishing and maintaining the
Blocked Accounts, together with Administrative and Collateral Agent’s customary
charges and fees with respect thereto; (c) charges, fees or expenses charged by
any bank or issuer in connection with the Letter of Credit Accommodations; (d)
costs and expenses of preserving and protecting the Collateral; (e) costs and
expenses paid or incurred in connection with obtaining payment of the
Obligations, enforcing the security interests and liens of Administrative and
Collateral Agent, for itself and the ratable benefit of the Lenders and the
Bank Product Providers, selling or otherwise realizing upon the Collateral, and
otherwise enforcing the provisions of this Agreement and the other Financing
Agreements or defending any claims made or threatened against any Agent and/or
Lenders arising out of the transactions contemplated hereby and thereby
(including preparations for and consultations concerning any such matters); (f)
all out-of-pocket expenses and costs heretofore and from time to time hereafter
incurred by Administrative and Collateral Agent or any Lender during the course
of periodic field examinations of the Collateral and Borrower’s operations,
plus a per diem charge at the then standard rate of Administrative and
Collateral Agent, per person per day for Administrative and Collateral Agent’s
examiners in the field and office (which rate is currently $850 per person per
day); provided, however, unless an Event of Default exists,
Borrower shall not be required to pay such costs and expenses associated with more
than 3 such field examinations per year; and (g) the reasonable fees and
disbursements of counsel (including legal assistants) to any Agent in
connection with any of the foregoing.

9.21         Further
Assurances.  At the request of
Administrative and Collateral Agent at any time and from time to time, Borrower
shall, at its expense, duly execute and deliver, or cause to be duly executed
and delivered, such further agreements, documents and instruments, and do or
cause to be done such further acts as may be necessary or proper to evidence,
perfect, maintain and enforce the security interests and the priority thereof
in the Collateral and to otherwise effectuate the provisions or purposes of
this Agreement or any of the other Financing Agreements, including, without
limitation, upon Administrative and Collateral Agent’s request, executing and
delivering, or causing to be executed and delivered, such other agreements,
documents and instruments as may be required by Administrative and Collateral
Agent to perfect the security interests of Administrative and Collateral Agent,
for itself and the ratable benefit of the Lenders and the Bank Product
Providers, in those Accounts of an account debtor with its chief executive
office or principal place of business in Canada in accordance with the
applicable laws of the Province of Canada in which such chief executive office
or principal place of business is located and taking or causing to be taken
such other and further actions as Administrative and Collateral Agent may reasonably
request to enable Administrative and Collateral Agent, as secured party with
respect thereto, to collect such Accounts under the applicable Federal or
Provincial laws of Canada.  If requested
by Administrative and Collateral Agent, Borrower agrees to cause a certificate
to be issued by one of its officer representing that, as of such date, all
conditions precedent to providing Loans contained herein are satisfied.

 

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SECTION
10.                          EVENTS
OF DEFAULT AND REMEDIES

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

(a)           (i) Borrower fails to pay any of the
Obligations pursuant to Section 2.1(b) within one (1) Business Day after demand
therefor, (ii) Borrower fails to pay any of the other Obligations (including
amounts due pursuant to Section 9.20) within two (2) Business Days after the
same becomes due and payable, (iii) Borrower fails to perform any of the
covenants contained in Sections 9.3, 9.4, 9.5, 9.6, 9.13, 9.14, 9.16, 9.18,
9.19 or 9.21 of this Agreement or any of the affirmative covenants set forth in
any other Financing Agreement (other than payment obligations) and such failure
continues for ten (10) Business Days; provided, that, such ten
(10) Business Day period shall not apply in the case of: (A) any failure to
observe any such covenant which is not capable of being cured at all or within
such ten (10) Business Day period or which has been the subject of a prior
failure within a six (6) month period or (B) an intentional breach by Borrower
of any such covenant or (iv) Borrower fails to perform any of the terms,
covenants, conditions or provisions contained in this Agreement or any of the
other Financing Agreements other than those described in subsections (i), (ii)
or (iii) of this Section 10.1(a);

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

(c)           any Obligor revokes or terminates or
fails to perform any of the material terms, covenants, conditions or provisions
of any guaranty, endorsement or other agreement of such party in favor of
Administrative and Collateral Agent or any Lender;

(d)           any judgments for the payment of
money are rendered against Borrower or any Obligor in excess of Five Million
Dollars ($5,000,000) in any one case or Ten Million Dollars ($10,000,000) in
the aggregate which remain undischarged or unvacated for a period in excess of
sixty (60) days or execution thereof is not at any time effectively stayed, or
any other judgment other than for the payment of money, injunction, attachment,
garnishment or execution is rendered against Borrower or any Obligor or any of
their assets which constitutes a Material Adverse Change;

(e)           Borrower or any Obligor dissolves or
suspends or discontinues doing business;

(f)            Borrower or any Obligor becomes
insolvent (however defined or evidenced), makes an assignment for the benefit
of creditors, makes or sends notice of a bulk transfer or calls a meeting of
its creditors or principal creditors;

(g)           a case or proceeding under the
bankruptcy laws of the United States of America now or hereafter in effect or
under any insolvency, reorganization, receivership, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction now or hereafter
in effect (whether at law or in equity) is filed against Borrower or any
Obligor or all or any part

 

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of their respective
properties and such petition or application is not dismissed within forty-five
(45) days after the date of its filing or Borrower or any Obligor shall file
any answer admitting or not contesting such petition or application or
indicates its consent to, acquiescence in or approval of, any such action or
proceeding or the relief requested is granted sooner;

(h)           a case or proceeding under the
bankruptcy laws of the United States of America now or hereafter in effect or
under any insolvency, reorganization, receivership, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction now or hereafter
in effect (whether at a law or equity) is filed by Borrower or any Obligor or
for all or any part of its property; or

(i)            any default occurs with respect to
the Term Loan Agreement or any other Indebtedness of Borrower or any Obligor
(other than Indebtedness owing hereunder), in any case in an amount in excess
of Ten Million Dollars ($10,000,000), which default continues for more than the
applicable cure period, if any, with respect thereto;

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

(k)           an ERISA Event shall occur which (i)
results in or could reasonably be expected to result in liability of Borrower
in an aggregate amount in excess of Ten Million Dollars ($10,000,000) which is
not removed or resolved without liability to Borrower or reasonably likely to
be removed or resolved without liability to Borrower within forty-five (45)
days after the date such liability is incurred or (ii) results in a lien in
favor of the Pension Benefit Guaranty Corporation;

(l)            any Change of Control shall occur;
or

(m)          the indictment by any Governmental
Authority of Borrower or any Obligor of which Borrower, any Obligor or any
Agent receives notice, in either case, as to which there is a reasonable
possibility of an adverse determination, in the good faith determination of
Administrative and Collateral Agent, under any criminal statute, or
commencement by any Governmental Authority of criminal or civil proceedings
against Borrower or any Obligor, pursuant to which statute or proceedings the
penalties or remedies sought or available include forfeiture of (i) any of the
Collateral or property of any Obligor having a value in excess of Five Million
Dollars ($5,000,000) or (ii) any other property of Borrower or any Obligor
which is necessary or material to the conduct of its business.

 

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10.2         Remedies.

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

(b)           Without limiting the foregoing, at
any time an Event of Default exists or has occurred and is continuing,
Administrative and Collateral Agent may, to the extent permitted by applicable
law, and upon the direction of the Required Lenders, shall (i) accelerate the
payment of all Obligations and demand immediate payment thereof to
Administrative and Collateral Agent, for itself and the ratable benefit of the
Lenders and the Bank Product Providers, (provided, that, upon the occurrence of
any Event of Default described in Sections 10.1(g) and 10.1(h), all Obligations
shall automatically become immediately due and payable), (ii) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require Borrower, at its expense, to assemble
and make available to Administrative and Collateral Agent any part or all of
the Collateral at any place and time designated by Administrative and
Collateral Agent, (iv) collect, foreclose, receive, appropriate, setoff and
realize upon any and all Collateral, (v) remove any or all of the Collateral
from any premises on or in which the same may be located for the purpose of
effecting the sale, foreclosure or other disposition thereof or for any other
purpose, (vi) sell, lease, transfer, assign, deliver or otherwise dispose of
any and all Collateral (including entering into contracts with respect thereto,
public or private sales at any exchange, broker’s board, at any office of
Administrative and Collateral Agent or elsewhere) at such prices or terms as
Administrative and Collateral Agent may deem reasonable, for cash, upon credit
or for future delivery, with Administrative and Collateral Agent or any Lender
having the right to purchase the whole or any part of the Collateral at any
such public sale, all of the foregoing being free from any right or equity of
redemption of Borrower, which right or equity of redemption is hereby expressly
waived and released by Borrower and/or (vii) terminate this Agreement.  If any of the Collateral is sold or leased
by Administrative and Collateral Agent upon credit terms or for future delivery,
the Obligations shall not be reduced as a result thereof until payment therefor
is finally collected by Administrative and Collateral Agent, for itself and the
ratable benefit of the Lenders and the Bank Product Providers.  If notice of disposition of Collateral is
required by law, ten (10) days prior notice by Administrative and Collateral
Agent to Borrower designating the time and place of any public sale or the time
after which any private

 

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sale or other intended
disposition of Collateral is to be made, shall be deemed to be reasonable
notice thereof and Borrower waives any other notice.  In the event Administrative and Collateral Agent institutes an
action to recover any Collateral or seeks recovery of any Collateral by way of
prejudgment remedy, Borrower waives the posting of any bond which might
otherwise be required.  At any time an
Event of Default exists or has occurred and is continuing, upon Administrative
and Collateral Agent’s request, Borrower will either, as Administrative and
Collateral Agent shall specify, furnish cash collateral to the issuer to be
used to secure and fund Administrative and Collateral Agent’s and/or Lenders’
reimbursement obligations to the issuer in connection with any Letter of Credit
Accommodations or furnish cash collateral to Administrative and Collateral
Agent, for itself and the ratable benefit of the Revolving Loan Lenders, for
the Letter of Credit Accommodations. 
Such cash collateral shall be in the amount equal to one hundred five
percent (105%) of the amount of the Letter of Credit Accommodations plus the
amount of any fees and expenses payable in connection therewith through the end
of the expiration of such Letter of Credit Accommodations.

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

 

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discounts or allowances
with respect thereto without Administrative and Collateral Agent’s prior written
consent.

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

(e)           For the purpose of enabling
Administrative and Collateral Agent and Lenders to exercise the rights and
remedies hereunder, Borrower hereby grants to Administrative and Collateral
Agent, for itself and the ratable benefit of the Lenders and the Bank Product
Providers, to the extent assignable, an irrevocable, non-exclusive license
(exercisable without payment of royalty or other compensation to Borrower) to
use, assign, license or sublicense any of the trademarks, service-marks, trade
names, business names, trade styles, designs, logos and other source of
business identifiers and other Intellectual Property and general intangibles
now owned or hereafter acquired by Borrower, wherever the same maybe located,
including in such

 

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license reasonable access
to all media in which any of the licensed items may be recorded or stored and
to all computer programs used for the compilation or printout thereof.

(f)            Administrative and Collateral Agent
may apply the cash proceeds of Collateral actually received by it from any
sale, lease, foreclosure or other disposition of the Collateral to payment of
the Obligations, in whole or in part and in such order as Administrative and
Collateral Agent may elect, whether or not then due.  Borrower shall remain liable to Administrative and Collateral
Agent and Lenders for the payment of any deficiency with interest at the
highest rate provided for herein and all costs and expenses of collection or
enforcement, including reasonable attorneys’ fees and legal expenses.

(g)           Without limiting the foregoing,
during the existence of a Default or Event of Default, Administrative and
Collateral Agent may, and upon the direction of the Required Lenders, shall,
without notice, (i) cease providing Loans or reduce the lending formulas or
amounts of Loans available to Borrower, (ii) terminate any provision of this
Agreement providing for any future Loans to be provided by Administrative and
Collateral Agent or Lenders to Borrower and/or (iii) establish such Reserves as
Administrative and Collateral Agent determines without limitation or
restriction, notwithstanding anything to the contrary contained herein.

SECTION
11.                          JURY TRIAL
WAIVER; OTHER
WAIVERS AND CONSENTS; GOVERNING LAW

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

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

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

 

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

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

(e)           No Agent or any Lender shall have any
liability to Borrower (whether in tort, contract, equity or otherwise) for
losses suffered by Borrower in connection with, arising out of, or in any way
related to the transactions or relationships contemplated by this Agreement, or
any act, omission or event occurring in connection herewith, unless it is
determined by a final and non-appealable judgment or court order binding on
such Person, that the losses were the result of acts or omissions constituting
gross negligence or willful misconduct of such Person.  Except as prohibited by law, Borrower waives
any right which it may have to claim or recover in any litigation with any
Agent or any Lender any special, exemplary, punitive or consequential damages
or any damages other than, or in addition to, actual damages.  Borrower: 
(i) certifies that none of any Agent, any Lender, or any of their
respective representatives, agents or attorneys acting for or on behalf of such
Person has, prior to the date hereof, represented, expressly or otherwise, that
such Person would not, in the event of litigation, seek to enforce any of the
waivers provided for in this Agreement or any of the other Financing Agreements
and (ii) acknowledges that in entering into this Agreement and the other
Financing Agreements, Agents and Lenders are relying upon, among other things,
the waivers and certifications set forth in this Section 11.1 and elsewhere
herein and therein.

11.2         Waiver of
Notices.  Borrower hereby
expressly waives demand, presentment, protest and notice of protest and notice
of dishonor with respect to any and all instruments and chattel paper, included
in or evidencing any of the Obligations or the Collateral, and any and all
other demands and notices of any kind or nature whatsoever with respect to the
Obligations, the Collateral and this Agreement, except such as are expressly
provided for herein.  No notice to or

 

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demand on Borrower
which Administrative and Collateral Agent or any Lender may elect to give shall
entitle Borrower to any other or further notice or demand in the same, similar
or other circumstances.

11.3         Amendments and Waivers.

(a)           Neither this Agreement nor any other
Financing Agreement nor any terms hereof or thereof may be amended, waived,
discharged or terminated unless such amendment, waiver, discharge or
termination is in writing signed by Administrative and Collateral Agent and the
Required Lenders or at Administrative and Collateral Agent’s option, by
Administrative and Collateral Agent with the authorization of the Required
Lenders, and as to amendments to any of the Financing Agreements (other than
with respect to any provision of Section 12 hereof), by Borrower; except,
that:

(i)            without the prior written consent of
Administrative and Collateral Agent and each Lender other than the Sponsor
Affiliated Lenders, no such amendment, waiver, discharge or termination shall:

(A)          amend, modify or waive any of the
provisions of the introductory paragraph of Section 11.3(a) or any of the
provisions of this Section 11.3(a)(i);

(B)           reduce any percentage specified in
the definition of Required Lenders or Required Super-Majority Lenders or amend,
modify or waive any provision of the definition of Pro Rata Share;

(C)           consent to the assignment or transfer
by Borrower or any Obligor of any of their rights and obligations under this
Agreement; or

(D)          reduce the Interest Rate or any fees
or indemnities related to the Revolving Loans or Letter of Credit
Accommodations, amend, modify or waive the provisions of Section 13.1(a) hereof
or otherwise extend the Final Maturity Date or the time of payment of principal
of the Revolving Loans, extend the time of payment of interest or any fees
related to the Revolving Loans or reduce the principal amount of any Revolving
Loans or Letter of Credit Accommodations; or

(E)           release all or substantially all of
the Collateral;

(ii)           without the prior written consent of
Administrative and Collateral Agent and the Required Super-Majority Lenders, no
such amendment, waiver, discharge or termination shall:

(A)          amend, modify or waive any of the
provisions of this Section 11.3(a)(ii);

(B)           release any Collateral (except as
expressly required hereunder or under any of the other Financing Agreements or
applicable law and except as permitted under Section 12.11(b) hereof);

 

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(C)           amend, modify or waive any of the
provisions of Sections 6.4, 12.8 or 12.11(a) hereof;

(D)          increase (1) the advance rates set
forth in the definition of Borrowing Base, (2) the Revolving Loan Limit, or (3)
the amount of Revolving Loans or Letter of Credit Accommodations available to
Borrower at any time;

(E)           amend, modify or waive any of the
provisions of the definition of Borrowing Base or of any of the defined terms
referred to in the definition of Borrowing Base if the effect thereof increases
the amount of the Borrowing Base; or

(F)           amend, modify or waive any provision
of the definitions of, Blocked Account Activation Period, Adjusted Excess
Availability, Compliance Period, Excess Availability or Qualified Cash; and

(iii)          Without the prior written consent of
the Revolving Loan Lender directly affected thereby, no such amendment, waiver,
discharge or termination shall increase the Revolving Loan Commitment of such
Revolving Loan Lender over the amount thereof then in effect or provided
hereunder.

(b)           Notwithstanding anything to the
contrary contained in Section 11.3(a) above, Administrative and Collateral
Agent may, in its discretion and without the consent of the Lenders or the
other Agent, amend or otherwise modify the Borrowing Base, the Reserves or any
of their respective components which amendments or modifications have the
effect of increasing the Borrowing Base, decreasing the Reserves or otherwise
increasing the amounts available for borrowing hereunder to the extent that
such amendment or modification is made to restore the Borrowing Base, Reserves
or other components thereof if the reason for such reduction or increase no
longer exists, as determined by Administrative and Collateral Agent.

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

(d)           Notwithstanding anything to the
contrary contained in Section 11.3(a) above, in the event that Borrower
requests that this Agreement or any other Financing Agreements be amended or
otherwise modified in a manner which would require the unanimous consent of all
of the Lenders and such amendment or other modification is agreed to by the
Administrative and Collateral Agent and the Required Lenders, then, Borrower,
Administrative and Collateral Agent and the Required Lenders, may amend this
Agreement without the consent of the Lender or Lenders which did not agree to
such amendment or other modification (collectively, the “Non-Consenting
Lenders”) to provide for (i) the termination of the Commitment of each of
the Non-Consenting Lenders, (ii) the addition to this Agreement of one or more
other Lenders, or an increase in the Commitment of one or more of the Required

 

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Lenders, so that the
Commitments, after giving effect to such amendment, shall be in the same
aggregate amount as the Commitments immediately before giving effect to such
amendment, (iii) if any Loans are outstanding at the time of such amendment,
the making of such additional Loans by such new Lenders or Required Lenders, as
the case may be, as may be necessary to repay in full the outstanding Loans of
the Non-Consenting Lenders immediately before giving effect to such amendment,
(iv) the payment of all interest, fees and other Obligations payable or accrued
in favor of the Non-Consenting Lenders and (v) such other modifications to this
Agreement as Borrower and the Required Lenders may determine to be appropriate.

(e)           The consent of Administrative and
Collateral Agent shall be required for any amendment, waiver or consent
affecting the rights or duties of Administrative and Collateral Agent hereunder
or under any of the other Financing Agreements, in addition to the consent of
the Lenders otherwise required by this Section.  The consent of the applicable Agent shall be required for any
amendment, waiver or consent affecting the rights or duties of such Agent
hereunder or under any of the other Financing Agreements, in addition to the
consent of the Lenders otherwise required by this Section.  The exercise by Administrative and
Collateral Agent of any of its rights hereunder with respect to Reserves,
Eligible Accounts, Eligible Inventory, Eligible Domestic In-Transit Inventory,
Eligible International In-Transit Inventory or Eligible Re-Load Inventory shall
not be deemed an amendment to the advance rates for purposes of this Section
11.3.

(f)            Notwithstanding anything to the
contrary contained in this Agreement or any other Financing Agreement, in no
event shall any Sponsor Affiliated Lender be entitled to (i) consent to any
amendment, modification, waiver, consent or other such action with respect to
any of the terms of this Agreement or any other Financing Agreement, (ii)
require any Agent or other Lender to undertake any action (or refrain from
taking any action) with respect to this Agreement or any other Financing
Agreement or (iii) otherwise vote on any matter related to this Agreement or
any other Financing Agreement; provided, however, no amendment,
modification or waiver shall deprive any Sponsor Affiliate Lender of its Pro
Rata Share of any payments to which the Lenders are entitled to share on a pro
rata basis hereunder.

11.4         Confidentiality.  Each Lender agrees that it will use its
reasonable best efforts not to disclose, without the prior consent of Borrower,
confidential information with respect to Borrower, any Obligor or any of their
respective Subsidiaries which is furnished pursuant to this Agreement and which
is specifically designated as confidential in writing by Borrower or which such
Lender would otherwise reasonably be expected to know is confidential; provided,
that, any Lender may disclose any such information (a) to its employees,
Affiliates, auditors or counsel, or to another Lender if the disclosing Lender
or such disclosing Lender’s holding or parent company in its sole discretion
determines that any such party should have access to such information, (b) as
has become generally available to the public, (c) as may be required or
appropriate in any report, statement or testimony submitted to any Governmental
Authority having or claiming to have jurisdiction over such Lender, (d) as may
be required or appropriate in response to any summons or subpoena or in
connection with any litigation, (e) in order to comply with any statute or
regulation, and (f) to any prospective or actual assignee or Participant

 

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in connection with
any contemplated transfer or participation of any of the Revolving Loan
Commitments or any interest therein by such Lender, provided, that,
such assignee or Participant has been generally advised as to the
confidentiality of any such confidential information and such assignee or Participant
agrees in writing to abide by the terms of this Section 11.4.

11.5         Other Waivers.  Borrower waives all rights to interpose any
claims, deductions, setoffs or counterclaims of any nature (other than
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.  To the
extent permitted by applicable law, Borrower shall not assert, and Borrower
hereby waives, any claim against any Agent and/or any Lender, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement, any of the other Financing Agreements or any undertaking or
transaction contemplated hereby.

11.6         Indemnification.  Borrower shall indemnify and hold each Agent
and each Lender, and its directors, agents, employees and counsel, harmless
from and against any and all losses, claims, damages, liabilities, reasonable
costs or expenses (other than Excluded Taxes or any other Taxes for which
Borrower is not obligated to provide indemnification pursuant to Section 6.5
hereof) imposed on, incurred by or asserted against any of them in connection with
any litigation, investigation, claim or proceeding commenced or threatened
related to the negotiation, preparation, execution, delivery, enforcement,
performance or administration of this Agreement, any other Financing
Agreements, or any undertaking or proceeding related to any of the transactions
contemplated hereby or any act, omission, event or transaction related or
attendant thereto, including amounts paid in settlement, court costs, and the
reasonable fees and expenses of counsel, but excluding any losses, claims,
damages, liabilities, costs or expenses arising from the gross negligence or
willful misconduct of any indemnified Person and excluding any indirect,
consequential or punitive damages.  To
the extent that the undertaking to indemnify, pay and hold harmless set forth
in this Section may be unenforceable because it violates any law or public
policy, Borrower shall pay the maximum portion which it is permitted to pay
under applicable law to Agents and Lenders in satisfaction of indemnified matters
under this Section.  The foregoing
indemnity shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement.

SECTION
12.                          THE ADMINISTRATIVE AND COLLATERAL AGENT

12.1         Appointment;
Powers and Immunities.

(a)           Each Lender hereby, and each Bank
Product Provider by providing any Bank Products to Borrower, irrevocably
designates, appoints and authorizes Congress to act as Administrative and
Collateral Agent hereunder and under the other Financing Agreements with such
powers as are specifically delegated to Administrative and Collateral Agent by
the terms of this Agreement and of the other Financing Agreements, together
with such other powers as are reasonably incidental thereto.  Administrative and Collateral Agent: (i)
shall have no duties or responsibilities except those expressly set forth in
this Agreement and in the other Financing Agreements, and shall not by reason
of this Agreement or any other Financing Agreement be a trustee or fiduciary
for any Lender or Bank Product Provider; (ii) shall not be responsible to
Lenders or Bank Product Providers for any recitals, statements, representations
or warranties contained in this Agreement or in any other Financing Agreement,
or in any certificate or other document referred to or provided for in, or
received by any of them under, this Agreement or any

 

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other Financing
Agreement, or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Financing
Agreement or any other document referred to or provided for herein or therein
or for any failure by Borrower or any Obligor or any other Person to perform
any of its obligations hereunder or thereunder; and (iii) shall not be responsible
to Lenders or Bank Product Providers for any action taken or omitted to be
taken by it hereunder or under any other Financing Agreement or under any other
document or instrument referred to or provided for herein or therein or in
connection herewith or therewith, except for its own gross negligence or
willful misconduct as determined by a final non-appealable judgment of a court
of competent jurisdiction. 
Administrative and Collateral Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it in good faith.  Administrative and Collateral Agent may deem
and treat the payee of any note as the holder thereof for all purposes hereof
unless and until the assignment thereof pursuant to an agreement (if and to the
extent permitted herein) in form and substance satisfactory to Administrative
and Collateral Agent shall have been delivered to and acknowledged by
Administrative and Collateral Agent.

(b)           Without prejudice to the foregoing
paragraph, each Lender, each Bank Product Provider by providing any Bank
Products to Borrower, and the Administrative and Collateral Agent (collectively
the “Creditors” for purposes of this Section 12.1(b) only), hereby designate
and appoint Congress as the person holding the power of attorney (fondé de
pouvoir) of the Creditors as contemplated under Article 2692 of the
Civil Code of Quebec, to enter into, to take and to hold on their behalf, and
for their benefit, a deed of hypothec (“Deed of Hypothec”) to be
executed by Borrower under the laws of the Province of Quebec and creating a
hypothec (security interest) on Borrower’s Collateral located in such Province
and to exercise such powers and duties which are conferred upon Congress under
such deed.  Each Creditor hereby
additionally designates and appoints Congress as agent and custodian for and on
behalf of each of them (i) to hold and to be the sole registered holder of any
bond (“Bond”) issued under the Deed of Hypothec, the whole
notwithstanding Section 32 of the Act respecting the special powers of legal persons
(Quebec) or any other applicable law, and (ii) to enter into, to take and to
hold on their behalf, and for their benefit, a movable hypothec (“Movable
Hypothec”) to be executed by Borrower under the laws of the Province of
Quebec and pledging the Bond as security for the payment and performance of the
Obligations (which include any and all obligations under the Deed of
Hyphothec).  In this respect, (m)
Congress, as agent and custodian of the Creditors, shall keep a record
indicating the names and addresses of, and the pro rata portion of the
Obligations and indebtedness secured by the Movable Hypothec, owing to the
Persons for and on behalf of whom the Bond is so held from time to time, and
(n) each Creditor will be entitled to the benefits of any Collateral of
Borrower charged under the Deed of Hypothec and the Movable Hypothec and will
participate in the proceeds of realization of any such Collateral, the whole in
accordance with the terms hereof. 
Congress, in such aforesaid capacities shall (x) have the sole and
exclusive right and authority to exercise, except as may be otherwise
specifically restricted by the terms hereof, all rights and remedies given to
Congress with respect to the Collateral under the Deed of Hypothec and Movable
Hypothec, applicable law or otherwise, and (y) benefit from and be subject to
all provisions hereof with respect to the Administrative and Collateral Agent mutatis
mutandis, including, without limitation, all such provisions with
respect to the liability or responsibility to and indemnification by the
Lenders and Bank Product Providers.  Any
Person who becomes a Lender or a Bank Product Provider, as the case may be,
shall be deemed to have consented to and confirmed Congress as the person

 

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holding the power of
attorney (fondé
de pouvoir) and as the agent and custodian as aforesaid and to have
ratified, as of the date it becomes a Lender or a Bank Product Provider, as the
case may be, all actions taken by Congress in such capacities.  Congress shall be entitled to delegate from
time to time any of its powers or duties under the Deed of Hypothec and the
Movable Hypothec to any Person and on such terms and conditions as Congress may
determine from time to time.

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

12.3         Events of Default.

(a)           Administrative and Collateral Agent
shall not be deemed to have knowledge or notice of the occurrence of an Event
of Default or other failure of a condition precedent to the Loans hereunder,
unless and until Administrative and Collateral Agent has received written
notice from a Lender, Borrower or any Obligor specifying such Event of Default
or any unfulfilled condition precedent, and stating that such notice is a
“Notice of Default or Failure of Condition”. 
In the event that Administrative and Collateral Agent receives such a
notice, Administrative and Collateral Agent shall give prompt notice thereof to
the Lenders.  Administrative and
Collateral Agent shall (subject to Section 12.7) take such action with respect
to any such Event of Default or failure of condition precedent as shall be
directed by the Required Lenders; provided, that, unless and
until Administrative and Collateral Agent shall have received such directions,
Administrative and Collateral Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to or by reason
of such Event of Default or failure of condition precedent, as it shall deem
advisable in the best interest of Lenders. 
Without limiting the foregoing, and notwithstanding the existence or
occurrence and continuance of an Event of Default or any other failure to
satisfy any of the conditions precedent set forth in Section 4 of this
Agreement to the contrary, subject to the provisions of Section 12.8 and
Section 12.11(a), Administrative and Collateral Agent may, but shall have no
obligation to, continue to provide Loans for the ratable account and risk of
Lenders from time to time if Administrative and Collateral Agent believes
providing such Loans is in the best interests of Lenders.

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

 

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

12.5         Indemnification.  Lenders agree to indemnify Administrative
and Collateral Agent (to the extent not reimbursed by Borrower hereunder and
without limiting the Obligations of Borrower hereunder) ratably, in accordance
with their Pro Rata Shares, for any and all claims of any kind and nature
whatsoever that may be imposed on, incurred by or asserted against
Administrative and Collateral Agent (including by any Lender) arising out of or
by reason of any investigation in or in any way relating to or arising out of
this Agreement or any other Financing Agreement or any other documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby (including the costs and expenses that
Administrative and Collateral Agent is obligated to pay hereunder) or the
enforcement of any of the terms hereof or thereof or of any such other
documents, provided, that, no Lender shall be liable for any of
the foregoing to the extent it arises from the gross negligence or willful
misconduct of the party to be indemnified as determined by a final
non-appealable judgment of a court of competent jurisdiction.

12.6         Non-Reliance on Agents and Other
Lenders.  Each Lender agrees
that it has, independently and without reliance on any Agent or any other
Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis of Borrower and Obligors and has made
its own decision to enter into this Agreement and that it will, independently
and without reliance upon any Agent or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own analysis and decisions in taking or not taking action under this
Agreement or any of the other Financing Agreements.  Agents shall not be required to keep themselves informed as to
the performance or observance by Borrower or any Obligor of any term or
provision of this Agreement or any of the other Financing Agreements or any
other document referred to or provided for herein or therein or to inspect the
properties or books of Borrower or any Obligor.  Agents will use reasonable efforts to provide Lenders with any
information received by Agents from Borrower or any Obligor which is required
to be provided to Lenders hereunder and with a copy of any “Notice of Default
or Failure of Condition” received by any Agent from Borrower, any Obligor or
any Lender; provided, that, no Agent shall be liable to any
Lender for any failure to do so, except to the extent that such failure is
attributable to such Agent’s own gross negligence or willful misconduct as
determined by a final non-appealable judgment of a court of competent
jurisdiction.  Except for notices,
reports and other documents expressly required to be furnished to Lenders by
any Agent hereunder, no Agent shall have any duty or responsibility to

 

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provide any Lender
with any other credit or other information concerning the affairs, financial
condition or business of Borrower or any Obligor that may come into the
possession of such Agent.

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

12.8         Additional
Revolving Loans.  Administrative
and Collateral Agent shall not make any Revolving Loans or provide any Letter
of Credit Accommodations to Borrower on behalf of Lenders intentionally and
with actual knowledge that such Revolving Loans or Letter of Credit
Accommodations would cause the aggregate amount of the total outstanding
Revolving Loans and Letter of Credit Accommodations to Borrower to exceed the
Borrowing Base, without the prior consent of the Required Super-Majority
Lenders, except, that, Administrative and Collateral Agent may
make such additional Revolving Loans or provide such additional Letter of
Credit Accommodations on behalf of Revolving Loan Lenders, intentionally and
with actual knowledge that such Revolving Loans or Letter of Credit
Accommodations will cause the total outstanding Revolving Loans and Letter of
Credit Accommodations to Borrower exceed the Borrowing Base as Administrative
and Collateral Agent may deem necessary or advisable in its discretion, provided,
that, (a) without the consent of the Required Super-Majority Lenders: (i)
the total principal amount of the additional Revolving Loans or additional
Letter of Credit Accommodations to Borrower which Administrative and Collateral
Agent may make or provide after obtaining such actual knowledge that the
aggregate principal amount of the Revolving Loans equal or exceed the Borrowing
Base, together with the Special Agent Advances then outstanding, shall not
exceed the amount equal to ten (10%) percent of the Borrowing Base at the time
and shall not cause the total principal amount of the Revolving Loans and
Letter of Credit Accommodations to exceed the Revolving Loan Limit and (ii)
Administrative and Collateral Agent shall not make any such additional
Revolving Loans or Letter of Credit Accommodations more than ninety (90) days
from the date of the first such additional Revolving Loans or Letter of Credit
Accommodations and (b) at the direction of the Required Lenders, Administrative
and Collateral Agent shall cease making such additional Revolving Loans or
Letter of Credit Accommodations.  Each
Revolving Lender shall be obligated to pay Administrative and Collateral Agent
the amount of its Pro Rata Share of any such additional Revolving Loans or
Letter of Credit Accommodations provided that Administrative and Collateral
Agent is acting in accordance with the terms of this Section 12.8.

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

 

106

 

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

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

(b)           expressly agrees and acknowledges
that Administrative and Collateral Agent (i) does not make any representation
or warranty as to the accuracy of any Report, or (ii) shall not be liable for
any information contained in any Report; provided, that, nothing
contained in this Section 12.10 shall be construed to limit the liability of
Administrative and Collateral Agent under Section 12.1(c) hereof in the event
of the gross negligence or willful misconduct of Administrative and Collateral
Agent as determined pursuant to a final non-appealable order of a court of
competent jurisdiction;

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

(d)           agrees to keep all Reports
confidential and strictly for its internal use in accordance with the terms of
Section 11.3(a) hereof, and not to distribute or use any Report in any other
manner.

12.11       Collateral Matters.

(a)           Administrative and Collateral Agent
may, at its option, from time to time, at any time on or after an Event of
Default and for so long as the same is continuing or upon any other failure of
a condition precedent to the Loans hereunder, make such disbursements and
advances (“Special Agent Advances”) which Administrative and Collateral
Agent, in its reasonable credit judgment, deems necessary or desirable either (i)
to preserve or protect the Collateral or any portion thereof or (ii) to pay any
other amount chargeable to Borrower pursuant to the terms of this Agreement
consisting of costs, fees and expenses and payments to any issuer of Letter of
Credit Accommodations; provided  that, without the consent of the
Required Super-Majority Lenders, in no event shall the aggregate amount of
Special Agent Advances, together with the Revolving Loans and Letter of Credit
Accommodations made pursuant to Section 12.8 hereof, exceed an amount equal to
ten percent (10%) of the Borrowing Base at any time or cause the total
principal amount of the Revolving Loans and Letter of Credit Accommodations to
exceed the Revolving Loan Limit. 
Special Agent Advances shall be repayable on demand and be secured by
the Collateral.  Administrative and Collateral
Agent shall notify each Lender and Borrower in writing of each such Special
Agent Advance, which notice shall include a description of the purpose of such
Special Agent Advance.  Without
limitation of its obligations pursuant to Section 6.10, each Lender agrees that
it shall make available to Administrative and Collateral Agent, upon
Administrative and Collateral Agent’s demand, in immediately available

 

107

 

funds, the amount equal
to such Lender’s Pro Rata Share of each such Special Agent Advance.  If such funds are not made available to
Administrative and Collateral Agent by such Lender, Administrative and
Collateral Agent shall be entitled to recover such funds, on demand from such
Lender together with interest thereon, for each day from the date such payment
was due until the date such amount is paid to Administrative and Collateral
Agent at the Interest Rate then payable by Borrower in respect of the Revolving
Loans as set forth in Section 3.1 hereof.

(b)           Lenders hereby irrevocably authorize
Administrative and Collateral Agent, at its option and in its discretion to
release any security interest in, mortgage or lien upon, any of the
Collateral:  (i) upon termination of the
Revolving Loan Commitments and payment and satisfaction of all of the
Obligations and delivery of cash collateral to the extent required under
Section 13.1 hereof, (ii) constituting property being sold or disposed of in
compliance with the applicable terms of this Agreement or any consent granted
in connection with this Agreement, (iii) constituting property in which neither
Borrower nor any Obligor owned an interest at the time the security interest,
mortgage or lien was granted or at any time thereafter, (iv) having a value of
less than $25,000,000 or (v) in accordance with the terms of Sections
11.3(a)(i)(E) or 11.3(a)(ii)(B).  Except
as provided above, Administrative and Collateral Agent will not release any
security interest in, mortgage or lien upon, any of the Collateral without the
prior written authorization of all of Lenders (and any Lender may require that
the proceeds from any sale or other disposition of the Collateral to be so
released be applied to the Obligations in a manner satisfactory to such
Lender).  Upon request by Administrative
and Collateral Agent at any time, Lenders will promptly confirm in writing
Administrative and Collateral Agent’s authority to release particular types or
items of Collateral pursuant to this Section.

(c)           Without in any manner limiting Administrative
and Collateral Agent’s authority to act without any specific or further
authorization or consent by the Required Lenders, each Lender agrees to confirm
in writing, upon request by Administrative and Collateral Agent, the authority
to release Collateral conferred upon Administrative and Collateral Agent under
this Section.  Administrative and
Collateral Agent shall (and is hereby irrevocably authorized by Lenders to)
execute such documents as may be necessary to evidence the release of the
security interest, mortgage or liens granted to Administrative and Collateral
Agent, for itself and the ratable benefit of the Lenders and the Bank Product
Providers, upon any Collateral to the extent set forth above; provided, that,
(i) Administrative and Collateral Agent shall not be required to execute any
such document on terms which, in Administrative and Collateral Agent’s opinion,
would expose Administrative and Collateral Agent to liability or create any
obligations or entail any consequence other than the release of such security
interest, mortgage or liens without recourse or warranty and (ii) such release
shall not in any manner discharge, affect or impair the Obligations or any
security interest, mortgage or lien upon (or obligations of Borrower in respect
of) the Collateral retained by Borrower.

(d)           Except as expressly required under
the terms of this Agreement, Administrative and Collateral Agent shall have no
obligation whatsoever to any Lender or any other Person to investigate, confirm
or assure that the Collateral exists or is owned by Borrower or any Obligor or
is cared for, protected or insured or has been encumbered, or that any
particular items of Collateral meet the eligibility criteria applicable in
respect of the Loans hereunder, or whether any particular reserves are
appropriate, or that the liens and security interests granted to Administrative
and Collateral Agent herein or pursuant hereto or otherwise

 

108

 

have been properly or
sufficiently or lawfully created, perfected, protected or enforced or are
entitled to any particular priority, or to exercise at all or in any particular
manner or under any duty of care, disclosure or fidelity, or to continue
exercising, any of the rights, authorities and powers granted or available to
Administrative and Collateral Agent in this Agreement or in any of the other
Financing Agreements, it being understood and agreed that in respect of the
Collateral, or any act, omission or event related thereto, Administrative and
Collateral Agent may act in any manner it may deem appropriate, in its
discretion, given Administrative and Collateral Agent’s own interest in the
Collateral as a Lender and that Administrative and Collateral Agent shall have
no duty or liability whatsoever to any other Lender.

12.12       Agency for
Perfection.  Administrative and
Collateral Agent and each Lender hereby appoints each Lender as agent for the
purpose of perfecting the security interests in and liens upon the Collateral
of Administrative and Collateral Agent, for itself and the ratable benefit of
the Lenders and the Bank Product Providers, in assets which, in accordance with
Article 9 of the UCC can be perfected only by possession.  Should any Lender obtain possession of any
such Collateral, such Lender shall notify Administrative and Collateral Agent
thereof, and, promptly upon Administrative and Collateral Agent’s request
therefor shall deliver such Collateral to Administrative and Collateral Agent
or in accordance with Administrative and Collateral Agent’s instructions.  Each Lender confirms the appointment by
Administrative and Collateral Agent of any Person as it’s or the Lenders’ agent
for the purpose of perfecting the security interests granted under this
Agreement and the other Financing Agreements.

12.13       Failure
to Respond Deemed Consent.  In
the event any Lender’s consent is required pursuant to the provisions of this
Agreement and such Lender does not respond to any request by Administrative and
Collateral Agent for such consent within ten (10) days after such request is
made to such Lender, such failure to respond shall be deemed a consent.

12.14       Legal
Representation of Agents.  In
connection with the negotiation, drafting, and execution of this Agreement and
the other Financing Agreements, or in connection with future legal
representation relating to loan administration, amendments, modifications,
waivers, or enforcement of remedies, Mayer, Brown, Rowe & Maw LLP (“MBR&M”)
only has represented and only shall represent Congress and GSCP in their
respective capacities as Agents and Congress as a Lender.  Each other Lender hereby acknowledges that
MBR&M does not represent it in connection with any such matters.

SECTION
13.                          TERM OF
AGREEMENT;
MISCELLANEOUS

13.1         Term.

(a)           This Agreement and the other
Financing Agreements shall become effective as of the date set forth on the
first page hereof and shall continue in full force and effect for a term ending
on the Final Maturity Date, unless sooner terminated pursuant to the terms
hereof.  Borrower may, upon not less
than ten (10) days prior written notice to Administrative and Collateral Agent,
terminate this Agreement and the other Financing Agreements.  Upon the effective date of termination of
this Agreement and the other Financing Agreements, Borrower shall pay to
Administrative and Collateral Agent, for itself and the ratable benefit of the
Lenders and the Bank Product Providers, in full, all outstanding and unpaid
Obligations and shall furnish

 

109

 

cash collateral to
Administrative and Collateral Agent, (or at Administrative and Collateral
Agent’s option, a letter of credit issued for the account of Borrower and at
Borrower’s expense, in form and substance satisfactory to Administrative and
Collateral Agent, by an issuer acceptable to Administrative and Collateral
Agent and payable to Administrative and Collateral Agent as beneficiary, for
itself and the ratable benefit of the Lenders and the Bank Product Providers)
in such amounts as Administrative and Collateral Agent determines are
reasonably necessary to secure (or reimburse) Administrative and Collateral
Agent and Lenders from loss, cost, damage or expense, including attorneys’ fees
and legal expenses, in connection with any contingent Obligations, including
issued and outstanding Letter of Credit Accommodations and checks or other
payments provisionally credited to the Obligations and/or as to which
Administrative and Collateral Agent and Lenders have not yet received final and
indefeasible payment and any continuing obligations of Administrative and
Collateral Agent or any Lender to any bank, financial institution or other
Person under or pursuant to any Deposit Account Control Agreement or Investment
Property Control Agreement.  Such
payments in respect of the Obligations and cash collateral shall be remitted by
wire transfer in Federal funds to such bank account of Administrative and
Collateral Agent, as Administrative and Collateral Agent may, in its
discretion, designate in writing to Borrower for such purpose.  Interest shall be due until and including
the next Business Day, if the amounts so paid by Borrower to the bank account
designated by Administrative and Collateral Agent are received in such bank
account later than 12:00 noon, New York time.

(b)           No termination of this Agreement or
the other Financing Agreements shall relieve or discharge Borrower of its
duties, obligations and covenants under this Agreement or the other Financing
Agreements until all Obligations due and owing have been fully and finally
discharged and paid (or cash collateralized in accordance with the terms of
this Agreement), and the continuing security interest of Administrative and
Collateral Agent, for itself and the ratable benefit of the Lenders and the
Bank Product Providers, in the Collateral and the rights and remedies of
Administrative and Collateral Agent and Lenders hereunder, under the other
Financing Agreements and applicable law, shall remain in effect until all such
Obligations due and owing have been fully and finally discharged and paid (or
cash collateralized in accordance with the terms of this Agreement).  Accordingly, Borrower waives any rights
which it may have under the UCC to demand the filing of termination statements
with respect to the Collateral, and neither Administrative and Collateral Agent
nor any Lender shall be required to send such termination statements to
Borrower, or to file them with any filing office, unless and until this
Agreement is terminated in accordance with its terms and all of the Obligations
due and owing are paid (or cash collateralized in accordance with the terms of
this Agreement) and satisfied in full in immediately available funds.

13.2         Interpretive Provisions.

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

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

 

110

 

(c)           All references to any party hereto
pursuant to the definitions set forth in the recitals hereto, or to any other
person herein, shall include their respective successors and assigns.

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

(e)           The word “including” when used in
this Agreement shall mean “including, without limitation”.

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

(g)           An Event of Default shall exist or
continue or be continuing until such Event of Default is waived in accordance
with Section 11.3 or is cured, if such Event of Default is capable of being
cured as determined by Administrative and Collateral Agent.

(h)           Any accounting term used in this
Agreement shall have, unless otherwise specifically provided herein, the
meaning customarily given in accordance with GAAP, and all financial
computations hereunder shall be computed unless otherwise specifically provided
herein, in accordance with GAAP as consistently applied and using the same
method for inventory valuation as used in the preparation of the financial
statements of Borrower most recently received by Administrative and Collateral
Agent.

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

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

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

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

 

111

 

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

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

	
   

  	
  If to Borrower:

  	
  BlueLinx Corporation

  
	
   

  	
   

  	
  4100 Wildwood Parkway

  
	
   

  	
   

  	
  Atlanta, Georgia 30339

  
	
   

  	
   

  	
  Attention: David Morris

  
	
   

  	
   

  	
  Telephone No.: (770) 221-2668

  
	
   

  	
   

  	
  Telecopy No.: (770) 221-2090

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  	
  Schulte, Roth & Zabel LLP

  
	
   

  	
   

  	
  919 Third Avenue

  
	
   

  	
   

  	
  New York, New York 10022

  
	
   

  	
   

  	
  Attention:

  	
  Stuart D. Freedman, Esq.

  
	
   

  	
   

  	
   

  	
  Daniel V. Oshinsky, Esq.

  
	
   

  	
   

  	
  Telephone No.: (212)
  756-2000

  
	
   

  	
   

  	
  Telecopy No.: (212)
  593-5955

  
	
   

  	
   

  	
   

  
	
   

  	
  and a copy to:

  	
  Cerberus Capital Management, LP

  
	
   

  	
   

  	
  299 Park Avenue, Floors 21-23

  
	
   

  	
   

  	
  New York, New York 10171

  
	
   

  	
   

  	
  Attention: 
  Lenard Tessler

  
	
   

  	
   

  	
  Telephone No.: (212) 891-2100

  
	
   

  	
   

  	
  Telecopy No.: (212) 909-1409

  
	
   

  	
   

  	
   

  
	
   

  	
  If to Agents:

  	
  Congress Financial Corporation

  
	
   

  	
   

  	
  1133 Avenue of the Americas

  
	
   

  	
   

  	
  New York, New York 10036

  
	
   

  	
   

  	
  Attention: 
  Portfolio Manager

  
	
   

  	
   

  	
  Telephone No.: 
  (212) 545-4200

  
	
   

  	
   

  	
  Telecopy No.: 
  (212) 545-4283

  

 

112

 

	
   

  	
  with a copy to:

  	
  Mayer, Brown, Rowe & Maw LLP

  
	
   

  	
   

  	
  Attention: 
  Marshall C. Stoddard, Jr., Esq.

  
	
   

  	
   

  	
  Telephone No.: 
  (213) 229-9500

  
	
   

  	
   

  	
  Telecopy No.: 
  (213) 625-0248

  
	
   

  	
   

  	
   

  
	
   

  	
  and a copy to:

  	
  Goldman Sachs Credit Partners, L.P.

  
	
   

  	
   

  	
  85 Broad Street

  
	
   

  	
   

  	
  New York, New York 10004

  
	
   

  	
   

  	
  Attention: 
  Stephen King

  
	
   

  	
   

  	
  Telephone No.: 
  (212) 902-1000

  
	
   

  	
   

  	
  Telecopy No.: 
  (212) 397-9110

  

 

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

13.5         Successors.  This Agreement, the other Financing
Agreements and any other document referred to herein or therein shall be
binding upon and inure to the benefit of and be enforceable by Agents, Lenders,
Bank Product Providers, Borrower and their respective successors and assigns,
except that Borrower may not assign its rights under this Agreement, the other
Financing Agreements and any other document referred to herein or therein
without the prior written consent of Administrative and Collateral Agent and
Lenders.  No Lender may assign its
rights and obligations under this Agreement (or any part thereof) without the
prior written consent of all Lenders other than the Sponsor Affiliated Lenders
and Administrative and Collateral Agent, except as permitted under Section 13.6
hereof.  Any purported assignment by a
Lender without such prior express consent or compliance with Section 13.6 where
applicable, shall be void.  The terms and
provisions of this Agreement and the other Financing Agreements are for the purpose
of defining the relative rights and obligations of Borrower, Obligors, Agents
and Lenders with respect to the transactions contemplated hereby and there
shall be no third party beneficiaries of any of the terms and provisions of
this Agreement or any of the other Financing Agreements.

13.6         Assignments; Participations.

(a)           Each Lender may (i) assign all or a
portion of its rights and obligations under this Agreement (including, without
limitation, a portion of its Revolving Loan Commitment, the Loans owing to it
and its rights and obligations as a Lender with respect to Letters of Credit
Accommodations) and the other Financing Agreements: (A) to its parent company
and/or any Affiliate of such Lender which is at least fifty (50%) percent owned
by such Lender or its parent company or to one or more Lenders or (B) in
connection with any merger, consolidation, sale, transfer or other disposition
of all or any substantial portion of the business or loan portfolio of such
Lender; or (ii) assign all, or if less than all a portion equal to at least
$10,000,000 in the aggregate for the assigning Lender or assigning Lenders, of
such rights and

 

113

 

obligations under this
Agreement to one or more Eligible Transferees, each of which assignees shall
become a party to this Agreement as a Lender by execution of an Assignment and
Acceptance; provided, that, (A) the consent of Administrative and
Collateral Agent shall be required in connection with any assignment to an Eligible
Transferee pursuant to clause (ii) above, (B) if such Eligible Transferee is
not a bank, Administrative and Collateral Agent shall receive a representation
in writing by such Eligible Transferee that either (1) no part of its
acquisition of its Loans is made out of assets of any employee benefit plan, or
(2) after consultation, in good faith, with Borrower and provision by Borrower
of such information as may be reasonably requested by such Eligible Transferee,
the acquisition and holding of such Revolving Loan Commitments and Loans does
not constitute a non-exempt prohibited transaction under Section 406 of ERISA
and Section 4975 of the Code, or (3) such assignment is an “insurance company
general account,” as such term is defined in the Department of Labor Prohibited
Transaction Class Exemption 95.60 (issued July 12, 1995) (“PTCE 95-60”),
and, as of the date of the assignment, there is no “employee benefit plan” with
respect to which the aggregate amount of such general account’s reserves and
liabilities for the contracts held by or on behalf of such “employee benefit
plan” and all other “employee benefit plans” maintained by the same employer
(and affiliates thereof as defined in Section V(a)(1) of PTCE 95-60) or by the
same employee organization (in each case determined in accordance with the
provisions of PTCE 95-60) exceeds ten (10%) percent of the total reserves and
liabilities of such general account (as determined under PTCE 95-60) (exclusive
of separate account liabilities) plus surplus as set forth in the National
Association of Insurance Commissioners Annual Statement filed with the state of
domicile of such Eligible Transferee, and (C) such transfer or assignment will
not be effective until recorded by Administrative and Collateral Agent on the Register
and Administrative and Collateral Agent has received, for its own account,
payment of a processing fee from the assigning Lender or the assignee in the
amount of $5,000.  As used in this
Section, the term “employee benefit plan” shall have the meaning assigned to it
in Title I of ERISA and shall also include a “plan” as defined in Section
4975(e)(1) of the Code.

(b)           Administrative and Collateral Agent
shall maintain a register of the names and addresses of Lenders, their
Revolving Loan Commitments and the principal amount of their Loans (the “Register”).  Administrative and Collateral Agent shall
also maintain a copy of each Assignment and Acceptance delivered to and
accepted by them and shall modify the Register to give effect to each
Assignment and Acceptance.  Upon their
receipt of each Assignment and Acceptance, Administrative and Collateral Agent
will give prompt notice thereof to Lenders and deliver to each of them a copy
of the executed Assignment and Acceptance. 
The entries in the Register shall be conclusive and binding for all
purposes, absent manifest error, and Borrower, Obligors, Agents and Lenders may
treat each Person whose name is recorded in the Register as a Lender hereunder
for all purposes of this Agreement.  The
Register shall be available for inspection by Borrower, Obligors and any Lender
at any reasonable time and from time to time upon reasonable prior notice.

(c)           Upon such execution, delivery,
acceptance and recording, from and after the effective date specified in each
Assignment and Acceptance, (i) the assignee thereunder shall be a party hereto
and to the other Financing Agreements and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations (including, without limitation, the
obligation to participate in Letter of Credit Accommodations) of a Lender
hereunder and thereunder; provided, however, if

 

114

 

at the time of such
assignment, such assigning Lender is not then entitled to receive any amounts
pursuant to Section 6.5 hereof, Borrower shall not be obligated to make any
payments to such assignee under Section 6.5 hereof if the assignee would
otherwise be entitled to receive such amounts at the time of such assignment
and (ii) the assigning Lender shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under this
Agreement.

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

(e)           Each Lender may sell participations
to one or more banks or other entities in or to all or a portion of its rights
and obligations under this Agreement and the other Financing Agreements
(including, without limitation, all or a portion of its Revolving Loan
Commitments and the Loans owing to it and its participation in the Letter of
Credit Accommodations, without the consent of Administrative and Collateral
Agent or the other Lenders); provided, that, (i) such Lender’s
obligations under this Agreement (including, without limitation, its Revolving
Loan Commitment hereunder) and the other Financing Agreements shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, and Borrower, Obligors,
Agents and the other Lenders shall continue to deal solely and directly with
such Lender in connection with such Lender’s rights and obligations under this

 

115

 

Agreement and the other
Financing Agreements, (iii) the Participant shall not have any rights under
this Agreement or any of the other Financing Agreements (the Participant’s
rights against such Lender in respect of such participation to be those set
forth in the agreement executed by such Lender in favor of the Participant
relating thereto) and all amounts payable by Borrower or any Obligor hereunder
shall be determined as if such Lender had not sold such participation, (iv) if
such Participant is not a bank, represent that either (A) no part of its
acquisition of its participation is made out of assets of any employee benefit
plan, or (B) after consultation, in good faith, with Borrower and provision by
Borrower of such information as may be reasonably requested by the Participant,
the acquisition and holding of such participation does not constitute a
non-exempt prohibited transaction under Section 406 of ERISA and Section 4975
of the Code, or (C) such participation is an “insurance company general
account, “ as such term is defined in the “PTCE 95-60”, and, as of the date of
the transfer there is no “employee benefit plan” with respect to which the
aggregate amount of such general account’s reserves and liabilities for the
contracts held by or on behalf of such “employee benefit plan” and all other
“employee benefit plans” maintained by the same employer (and affiliates
thereof as defined in Section V(a)(1) of PTCE 95-60) or by the same employee
organization (in each case determined in accordance with the provisions of PTCE
95-60) exceeds ten (10%) percent of the total reserves and liabilities of such
general account (as determined under PTCE 95-60) (exclusive of separate account
liabilities) plus surplus as set forth in the National Association of Insurance
Commissioners Annual Statement filed with the state of domicile of the
Participant and (v) the agreements between such Lender and such Participant
shall not grant such Participant the right to consent to or vote on (A) any
matters other than those set forth in Section 11.3(a)(i) hereof or (B) if such
Participant is a Sponsor Affiliate Lender, any matters which pursuant to
Section 11.3(f) hereof, a Sponsor Affiliate Lender is not permitted to consent
to or vote on.

(f)            Nothing in this Agreement shall
prevent or prohibit any Lender from pledging its Loans hereunder to a Federal
Reserve Bank in support of borrowings made by such Lenders from such Federal
Reserve Bank.

(g)           Borrower shall assist Agents or any
Lender permitted to sell assignments or participations under this Section 13.6
in whatever manner reasonably necessary in order to enable or effect any such
assignment or participation, including (but not limited to) the execution and
delivery of any and all agreements, notes and other documents and instruments
as shall be requested and the delivery of informational materials, appraisals
or other documents for, and the participation of relevant management in
meetings and conference calls with, potential assignees or Participants.  Borrower shall certify the correctness,
completeness and accuracy of all descriptions of Borrower and its affairs
provided, prepared or reviewed by Borrower that are contained in any selling
materials and all other information provided by it and included in such
materials.

(h)           Administrative and Collateral Agent
agrees that, so long as an Event of Default does not then exist, Administrative
and Collateral Agent shall not, without the prior consent of Borrower (such consent
not to be unreasonably withheld, conditioned or delayed) assign to any Person
(i) its rights and duties as administrative agent for the Lenders without also
assigning to such Person its rights and duties as collateral agent for the
Lenders and Bank Product Providers, (ii) its rights and duties as collateral
agent for the Lenders and Bank Product Providers without also assigning to such
Person its rights and duties as administrative agent for

 

116

 

the Lenders, or (iii) its
rights and duties as administrative and collateral agent for the Lenders and
Bank Product Providers unless such assignment is made (A) to its parent company
or any of its Affiliates which is at least 50% owned by Administrative and Collateral
Agent or its parent or (B) in connection with any merger, consolidation, sale,
transfer or other disposition of all or any substantial portion of the business
or loan portfolio of Administrative Collateral Agent.  Notwithstanding anything to the contrary in this Agreement, in no
event shall any Sponsor Affiliate Lender be appointed as, or succeed to the
rights and duties of, the Administrative and Collateral Agent, or any Agent,
under this Agreement.

13.7         Participant’s
Security Interests.  If a Participant
shall at any time participate with any Lender in the Loans, Borrower hereby
grants to such Participant and such Participant shall have and is hereby given,
a continuing lien on and security interest in any money, securities and other
property of Borrower in the custody or possession of such Participant,
including the right of setoff, to the extent of such Participant’s
participation in the Obligations, and such Participant shall be deemed to have
the same right of setoff to the extent of its participation in the Obligations,
as it would have if it were a direct Lender.

13.8         ERISA
Representation.  Each Lender
hereby represents and warrants to Borrower and Administrative and Collateral
Agent that either (a) no part of the Loans made by such Lender are made out
of ”plan assets” of any employee benefit plan subject to ERISA or any plan
subject to Section 4975 of the Code or (b) the making and holding of such
Lender’s Revolving Loan Commitments and Loans does not constitute a non-exempt
prohibited transaction under Section 406 of ERISA or Section 4975 of the
Code.

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

13.10       Counterparts,
Etc.  This Agreement or any of the other Financing Agreements may be
executed in any number of counterparts, each of which shall be an original, but
all of which taken together shall constitute one and the same agreement.  Delivery of an executed counterpart of this
Agreement or any of the other Financing Agreements by telefacsimile or a
substantially similar electronic transmission shall have the same force and
effect as the delivery of an original executed counterpart of this Agreement or
any of such other Financing Agreements. 
Any party delivering an executed counterpart of any such agreement by
telefacsimile or a substantially similar electronic transmission shall also
deliver an original executed counterpart, but the failure to do so shall not
affect the validity, enforceability or binding effect of such agreement.

[Signatures follow
on next page]

 

117

 

IN WITNESS WHEREOF, the
parties hereto have caused these presents to be duly executed as of the day and
year first above written.

	
  BORROWER

  	
   

  
	
   

  	
   

  
	
  BLUELINX CORPORATION

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Barbara V. Tinsley

  	
   

  
	
   

  	
  Name:

  	
  Barbara V. Tinsley

  
	
   

  	
  Title:

  	
  Secretary & General Counsel

  
	
   

  	
   

  
	
   

  	
   

  
	
  AGENTS

  	
   

  
	
   

  	
   

  
	
  CONGRESS FINANCIAL CORPORATION, as
  Administrative and Collateral Agent, Co-Lead Arranger and Co-Syndication
  Agent

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Vicky Balmot

  	
   

  
	
   

  	
  Name:

  	
  Vicky Balmot 

  
	
   

  	
  Title:

  	
  Executive Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  GOLDMAN SACHS CREDIT PARTNERS, L.P., as
  Co-Lead Arranger and Co-Syndication Agent

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ William W. Archer

  	
   

  
	
   

  	
  Name:

  	
  William W. Archer

  
	
   

  	
  Title:

  	
  Managing Director

  
					

 

118

 

	
  DOCUMENTATION AGENTS

  	
   

  
	
   

  	
   

  
	
  BANK OF AMERICA, N.A.,

  as a Documentation Agent

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  Illegible

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  WELLS FARGO FOOTHILL, LLC,

  as a Documentation Agent

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Sanat Amladi

  	
   

  
	
   

  	
  Name:

  	
  Sanat Amladi

  
	
   

  	
  Title:

  	
  Vice President

  
					

 

119

 

	
  LENDERS

  	
   

  
	
   

  	
   

  
	
  CONGRESS FINANCIAL CORPORATION

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Vicky Balmot

  	
   

  
	
   

  	
  Name:

  	
  Vicky Balmot

  
	
   

  	
  Title:

  	
  Executive Vice President

  
	
   

  	
   

  	
   

  
	
  Revolving Loan Commitment:  $125,000,000

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  GOLDMAN SACHS CREDIT
  PARTNERS, L.P.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ William W. Archer

  	
   

  
	
   

  	
  Name:

  	
  William W. Archer

  
	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  	
   

  
	
  Revolving Loan Commitment:  $50,000,000

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  BANK OF AMERICA, N.A.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Richard Levenson

  	
   

  
	
   

  	
  Name:

  	
  Richard Levenson

  
	
   

  	
  Title:

  	
  Senior Vice President

  
	
   

  	
   

  	
   

  
	
  Revolving Loan Commitment:  $100,000,000

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  WELLS FARGO FOOTHILL,
  LLC

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Sanat Amladi

  	
   

  
	
   

  	
  Name:

  	
  Sanat Amladi

  
	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
  Revolving Loan Commitment:  $100,000,000

  
					

 

120

 

	
  GENERAL ELECTRIC
  CAPITAL CORPORATION

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Scott Lorimer

  	
   

  
	
   

  	
  Name:

  	
  Scott Lorimer

  
	
   

  	
  Title:

  	
  Duly Authorized Signatory

  
	
   

  	
   

  	
   

  
	
  Revolving Loan Commitment:  $100,000,000

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  GMAC COMMERCIAL FINANCE
  LLC

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Robert J. Brandow

  	
   

  
	
   

  	
  Name:

  	
  Robert J. Brandow

  
	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
   

  
	
  Revolving Loan Commitment:  $75,000,000

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  ING CAPITAL LLC

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ William
  Beddingfield

  	
   

  
	
   

  	
  Name:

  	
  William Beddingfield

  
	
   

  	
  Title:

  	
  Managing Director

  
	
   

  	
   

  	
   

  
	
  Revolving Loan Commitment:  $75,000,000

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
					

 

121Exhibit
10.5

May 7, 2004

 

Charles
H. McElrea

430
Cherry Hill Drive

Marietta,
Georgia 30067

 

Dear
Chuck:

 

BlueLinx Corporation (the “Company”) desires to set forth the payments
to which you (the “Executive”) would be entitled following the termination of
the Executive’s employment with the Company as well as the Executive’s
continuing obligations to the Company during and after the Executive’s
employment with the Company. This Agreement shall only become effective on the
Closing Date as defined in the Asset Purchase Agreement by and among
Georgia-Pacific Corporation, Georgia-Pacific Building Materials Sales, Ltd. and
the Company (f/k/a ABP Distribution Inc.), dated as of March 12, 2004 (the
“Asset Purchase Agreement”). For the purposes of this Agreement, the Company’s
subsidiaries and APB Distribution Holdings Inc., so long as APB Holdings
Distribution Inc. owns at least a majority of the outstanding common stock of
the Company, shall be referred to as “Affiliated Companies.” By signing this
letter agreement (“Agreement”), the Executive agrees to the terms and
conditions set forth herein.

 

1.                                       Reasons for Termination of Employment. The Executive’s employment shall terminate
under the following circumstances:

 

(a)                                  the Executive’s death;

 

(b)                                 a determination by the Company in good faith
that the Executive has incurred a “Disability” (as defined below) as follows:
The Company may give to the Executive written notice of its intention to
terminate the Executive’s employment because of his Disability (as defined below).
In such event, the Executive’s employment with the Company shall terminate
effective on the 30th day after receipt of such notice by the Executive (the
“Disability Effective Date”), provided that, within the 30 days after
such receipt, the Executive shall not have returned to full-time performance of
the Executive’s duties.

 

For purposes of this Agreement, “Disability” means the determination by
the Company, in accordance with applicable law, based on information provided
by a physician selected by the Company or its insurers and reasonably
acceptable to the Executive or the Executive’s legal representative that, as a
result of a physical or mental injury or illness, the Executive has been unable
to perform the essential functions of his job with or without reasonable
accommodation for a period of (i) 90 consecutive days or (ii) 180 days in any
one year period.

 

(c)                                  by the Company with or without Cause; or

 

 

For purposes of this Agreement, “Cause” shall mean (i) commission of a
felony by the Executive, (ii) acts of dishonesty by the Executive resulting or
intending to result in personal gain or enrichment at the expense of the
Company or its Affiliated Companies, (iii) the Executive’s material breach of
any provision of this Agreement, (iv) the Executive’s failure to follow the
lawful written directions of the Board of Directors of the Company, or (v)
conduct by the Executive in connection with his duties hereunder that is
fraudulent, unlawful or willful and materially injurious to the Company or its
Affiliated Companies; provided, that, the Executive shall have ten (10)
business days following the Company’s written notice of its intention to
terminate the Executive’s employment to cure such Cause, if curable, as
determined by the Company, in its sole discretion.

 

For the purposes of this Section l(c), no act or failure to act on
the part of the Executive shall be considered “willful” unless it is done, or
omitted to be done, by the Executive in bad faith or without reasonable belief
that the Executive’s action or omission was in the best interests of the
Company. Any act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by the Board of Directors of the Company or upon the
instructions of the Chief Executive Officer or a senior officer of the Company
(in the case of the Chief Executive Officer, the Board of Directors of the
Company) or based upon the advice of counsel for the Company shall be
conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company.

 

(d)                                 by the Executive with or without Good Reason.

 

(i)                                     For purposes of this Agreement, “Good Reason”
shall mean, without the consent of the Executive, (A) the assignment to the
Executive of any duties inconsistent in any material adverse respect with the
Executive’s position (including offices, titles and reporting requirements),
authority, duties or responsibilities immediately following the Closing Date,
or any other action by the Company which results in a material diminution in
such position, authority, duties or responsibilities; (B) a reduction by the
Company in the Executive’s base salary or in the percentage of base salary on
which the Executive’s bonus is based; (C) the Company’s requiring the Executive
to be based at any office or location outside of twenty-five (25) miles from
Marietta, Georgia; (D) any purported termination by the Company of the
Executive’s employment otherwise than as expressly permitted by this Agreement
or (E) any failure by the Company to comply with and satisfy Section 15 of
this Agreement.

 

(ii)                                  “Good Reason” shall not include for purposes
of Sections l(d)(i)(A) through (D) above, an isolated, insubstantial and
inadvertent action not taken in bad faith which is remedied by the Company
within ten (10) business days after receipt of notice thereof given by the
Executive.

 

2.                                       Notice of Termination. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 17
of this Agreement. For purposes of this Agreement, a “Notice of Termination”
means a written notice which (i) indicates the specific termination provision
in this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the

 

2

 

Executive’s
employment under the provision so indicated and (iii) indicates the Date of
Termination (as defined below). The failure by the Executive or the Company to
set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder, or preclude the
Executive or the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive’s or the Company’s rights hereunder.

 

3.                                       Date of Termination. “Date of Termination” means (i) if the
Executive’s employment is terminated by the Company for Cause or by the
Executive for Good Reason, ten (10) business days following the Company’s or
Executive’s receipt of the Notice of Termination, unless, in the case of Cause,
the Company determines that the reason (or reasons) for the Cause termination
is (or are) not curable in which case the Date of Termination shall be the date
set forth by the Company in the Notice of Termination, (ii) if the Executive’s
employment is terminated by the Company without Cause, the Date of Termination
shall be the date on which the Company notifies the Executive of such
termination, (iii) if the Executive’s employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of the death of
the Executive or the Disability Effective Date, as the case may be, and (iv) if
the Executive resigns for reasons that do not constitute Good Reason, the Date
of Termination shall be the last day of the month in which such resignation
occurs.

 

4.                                       Termination of Employment by the Company
without Cause or by the Executive for Good Reason. If the Company terminates the Executive’s
employment without Cause or the Executive terminates his employment for Good
Reason, the Executive shall be entitled to the following; provided that the
Executive delivers to the Company a valid release substantially in the form
attached hereto as Exhibit A.

 

(a)                                  the Executive’s accrued but unpaid base salary
and any accrued, but unpaid portion of bonus through the Date of Termination,
if any (the “Accrued Obligations”);

 

(b)                                 payment equal to two times the Executive’s
annual base salary in effect immediately prior to the Date of Termination plus
two times the bonus amount received by the Executive for the year prior to the
calendar year of the Executive’s termination; provided, that, if termination
occurs during 2004, such bonus amount shall be the bonus amount received by the
Executive from Georgia-Pacific Corporation in respect of fiscal year 2003
performance, payable in equal monthly installments over a twenty-four (24)
month period from the Date of Termination;

 

(c)                                  a lump sum in cash within 30 days after the
Date of Termination in an amount equal to the contributions the Company would
have made for the benefit of the Executive to the Company’s qualified salaried
401(k) plan, (if the Company is making matching contributions or other
contributions to the salaried 401(k) plan at the time of the Executive’s
termination), assuming (i) the Executive continued as an employee of the Company
for a period of two years beginning on the Executive’s Date of Termination, and
(ii) the Executive during such period contributed six percent of his base
salary (as in effect immediately prior to the Date of Termination) to the
401(k) plan;

 

3

 

(d)                                 continued health and welfare benefits to the
Executive and his family for a period of two (2) years as if the Executive’s
employment had not been terminated or, if more favorable to the Executive, as
in effect generally at any time thereafter with respect to other similarly
situated executives of the Company and their families, at no additional cost to
the Executive other than the cost of such benefits to the Executive as in
effect immediately prior to the Date of Termination. If, at the end of this two
year period of continued health and welfare benefit coverage, the Executive is
at least age 55 and has 10 years of service (determined as if the Executive had
remained employed by the Company during the two year period of continued
benefit coverage and, pursuant to the terms of the Human Resources Agreement
(as defined under the Asset Purchase Agreement), including the Executive’s
period of service with Georgia-Pacific Corporation), the Company shall provide
the Executive (and the Executive’s eligible dependents) with retiree medical
and dental benefit coverage no less favorable than the coverage provided to
retirees of the Company (and their dependents) immediately prior to the Date of
Termination; provided, that, in all cases, the Executive shall pay the full
cost of any applicable premium without any subsidy provided by the Company in a
manner which results in no cost to the Company on a FAS 106 basis. In the event
the Executive becomes reemployed with another employer and is eligible to
receive medical or other welfare benefits under another employer-provided plan
or becomes eligible for Medicare, the medical and other welfare benefits
described herein shall be secondary to those provided under such other plan or
Medicare, as applicable, during such applicable period of eligibility.

 

(e)                                  $25,000 of outplacement services, the scope
and provider of which shall be selected by the Executive in his sole
discretion; and

 

(f)                                    to the extent not theretofore paid or provided,
any other amounts or benefits required to be paid or provided or which the
Executive is eligible to receive under any plan, program, policy or practice or
contract or agreement of the Company (such other amounts and benefits shall be
hereinafter referred to as the “Other Benefits”).

 

5.                                       Termination Due to Executive’s Death. If the Executive’s employment is terminated
by reason of the Executive’s death, the Company shall have no further
obligations to the Executive’s legal representatives under this Agreement,
other than for the payment of Accrued Obligations and the timely payment or
provision of Other Benefits. Accrued Obligations shall be paid to the
Executive’s estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination. The term “Other Benefits” as used in this
Section 5 shall include, without limitation, and the Executive’s estate
and/or beneficiaries shall be entitled to receive, benefits under such plans,
programs, practices and policies relating to death benefits, if any, as are
applicable to the Executive on the Date of Termination.

 

6.                                       Termination Due to Executive’s Disability. If the Executive’s employment is terminated
by reason of the Executive’s Disability, the Company shall have no further
obligations to the Executive, other than for payment of Accrued Obligations and
the timely payment or provision of Other Benefits. Accrued Obligations shall be
paid to the Executive in a lump sum in cash within 30 days of the Date of
Termination. The term “Other Benefits” as used in this Section 6 shall
include, without limitation, and Executive shall be entitled to receive,
disability and other benefits under such plans, programs, practices and
policies relating to disability, if any, as are applicable to Executive and his
family on the Date of Termination.

 

4

 

7.                                       Termination of Executive’s Employment by the
Company for Cause or By the Executive without Good Reason. If the Executive’s employment is terminated
by the Company for Cause or by the Executive without Good Reason, the Company
shall have no further obligations to the Executive, other than for payment to
the Executive of his accrued but unpaid base salary and benefits through the
Date of Termination, if any, and Other Benefits, in each case to the extent
theretofore unpaid.

 

8.                                       Exclusivity of Severance. Payments under this Agreement shall be in
lieu of any payments to which Executive may be entitled under any Company
severance plan for salaried employees.

 

9.                                       No Mitigation. In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any of the provisions
of this Agreement and, except as provided in Section 4(d), such amounts
shall not be reduced whether or not the Executive obtains other employment.

 

10.                                 Parachute Payments. At the Executive’s request, the Company
will use its reasonable best efforts to obtain approvals as may be required,
including shareholder approvals, to cause payments made under this Agreement to
be exempt from the definition of “parachute payments” under Section 280G
of the Internal Revenue Code of 1986, as amended (the “Code”), if such payments
hereunder are made in connection with the events described under
Section 280G of the Code. Notwithstanding any provision contained herein
to the contrary, the Company shall not be responsible for the payment of any
excise taxes incurred by the Executive under Section 4999 of the Code or
for any tax gross-up payments at any time, including, but not limited to, in
the event that the appropriate approvals are not obtained or in the event that
exemptions to “parachute payments” no longer apply.

 

11.                                 Confidential Information.

 

(a)                                  The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its Affiliated Companies,
and their respective businesses, which shall have been (i) obtained by the
Executive during the Executive’s employment by the Company or any of its
Affiliated Companies or (ii) acquired by the Company or any of its Affiliated
Companies from Georgia-Pacific Corporation, and which shall not be or become
public knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement) (“Confidential Information”). After
termination of the Executive’s employment with the Company, the Executive shall
not, without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those designated by it.

 

(b)                                 All files, records, documents, drawings,
specifications, data, computer programs, customer or vendor lists, specific
customer or vendor information, marketing techniques, business strategies,
contract terms, pricing terms, discounts and management compensation of the
Company and its Affiliated Companies, whether prepared by the Executive or
otherwise coming into the Executive’s possession, shall remain the exclusive
property of the Company and its Affiliated Companies, and the Executive shall
not remove any

 

5

 

such items from the premises of the Company and its Affiliated Companies,
except in furtherance of the Executive’s duties.

 

(c)                                  It is understood that while employed by the
Company or its Affiliated Companies, the Executive will promptly disclose to
the Company, and assign to the Company the Executive’s interest in any
invention, improvement or discovery made or conceived by the Executive, either
alone or jointly with others, which arises out of the Executive’s employment.
At the Company’s request and expense, the Executive will reasonably assist the
Company and its Affiliated Companies during the period of the Executive’s
employment by the Company or its Affiliated Companies and thereafter in
connection with any controversy or legal proceeding relating to such invention,
improvement or discovery and in obtaining domestic and foreign patent or other
protection covering the same.

 

(d)                                 As requested by the Company and at the
Company’s expense, from time to time and upon the termination of the
Executive’s employment with the Company for any reason, the Executive will
promptly deliver to the Company and its Affiliated Companies all copies and
embodiments, in whatever form, of all Confidential Information in the
Executive’s possession or within his control (including, but not limited to,
memoranda, records, notes, plans, photographs, manuals, notebooks,
documentation, program listings, flow charts, magnetic media, disks, diskettes,
tapes and all other materials containing any Confidential Information)
irrespective of the location or form of such material. If requested by the
Company, the Executive will provide the Company with written confirmation that
all such materials have been delivered to the Company as provided herein.

 

12.                                 Non-Solicitation or Hire. During his employment with the Company and
for a period of eighteen months (18) months following the termination of the
Executive’s employment for any reason, the Executive shall not solicit or
attempt to solicit, (a) any party who is a customer of the Company or its
Affiliated Companies, for the purpose of marketing, selling or providing to any
such party any services or products offered by the Company or its Affiliated
Companies to such customer other than general solicitations to the public and
not directed specifically at a customer of the Company, (b) any party who is a
vendor of the Company or its Affiliated Companies to sell similar products or
(c) any employee of the Company or any of its Affiliated Companies to terminate
such employee’s employment relationship with the Company and its Affiliated
Companies in order, in either case, to enter into a similar relationship with
the Executive, or any other person or any entity in competition with the
Company or any of its Affiliated Companies (other than with respect to general
employment solicitations to the public and not directed specifically at
employees of the Company and its Affiliated Companies).

 

13.                                 Non-Competition During Executive’s employment by the Company
and for a period of eighteen (18) months following the termination of the
Executive’s employment for any reason, the Executive shall not, whether
individually, as a director, manager, member, stockholder, partner, owner,
employee, consultant or agent of any business, or in any other capacity, other
than on behalf of the Company or it Affiliated Companies, organize, establish,
own, operate, manage, control, engage in, participate in, invest in, permit his
name to be used by, act as a consultant or advisor to, render services for
(alone or in association with any person, firm, corporation or business
organization), or otherwise assist any person or entity that engages in or
owns, invests in, operates, manages or controls any venture or enterprise which
engages or

 

6

 

proposes to engage in the building products distribution business in the United
States or Canada (the “Business”). Notwithstanding the foregoing, nothing in
this Agreement shall prevent the Executive from owning for passive investment
purposes not intended to circumvent this Agreement, less than five percent (5%)
of the publicly traded voting securities of any company engaged in the Business
(so long as the Executive has no power to manage, operate, advise, consult with
or control the competing enterprise and no power, alone or in conjunction with
other affiliated parties, to select a director, manager, general partner, or
similar governing official of the competing enterprise other than in connection
with the normal and customary voting powers afforded the Executive in connection
with any permissible equity ownership).

 

14.                                 Remedies; Specific Performance. The parties acknowledge and agree that the
Executive’s breach or threatened breach of any of the restrictions set forth in
Sections 11 through 13 will result in irreparable and continuing damage to the
Company and its Affiliated Companies for which there may be no adequate remedy
at law and that the Company and its Affiliated Companies shall be entitled to
equitable relief, including specific performance and injunctive relief as
remedies for any such breach or threatened or attempted breach. The Executive
hereby consents to the grant of an injunction (temporary or otherwise) against
the Executive or the entry of any other court order against the Executive
prohibiting and enjoining him from violating, or directing him to comply with
any provision of Sections . The Executive also agrees that such remedies shall
be in addition to any and all remedies, including damages, available to the
Company and its Affiliated Companies against him for such breaches or
threatened or attempted breaches. In addition, without limiting the remedies of
the Company and its Affiliated Companies for any breach of any restriction on
the Executive set forth in Sections 11 through 13, except as required by law,
the Executive shall not be entitled to any payments set forth in Section 4
hereof if the Executive breaches the covenant applicable to the Executive
contained in Sections 11 through 13 and the Company and its Affiliated
Companies will have no obligation to pay any of the amounts that remain payable
by the Company under Section 4.

 

15.                                 Successors. This Agreement is personal to the Executive and without prior written
consent of the Company, shall not be assignable by the Executive. To the extent
provisions contained herein relate to the Executive’s legal representatives,
this Agreement shall inure to the benefit of and be enforceable by such legal
representatives. This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns. The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if not such succession had taken place. As used in this Agreement, “Company”
shall mean the Company as hereinbefore defined and any successor to its business
and/or assets as set forth herein and any successor to its business and/or
assets as set forth herein which assumes and agrees to perform this Agreement.

 

16.                                 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.

 

7

 

17.                                 Notices. All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:

 

	
  If
  to the Executive:

  
	
   

  
	
  Charles
  H. McElrea

  
	
  430
  Cherry Hill Drive

  
	
  Marietta,
  Georgia 30067

  
	
   

  
	
  If
  to the Company:

  
	
   

  
	
  BlueLinx
  Corporation

  
	
  4100
  Wildwood Parkway

  
	
  Atlanta,
  Georgia 30339

  
	
  Attention:
  Board of Directors

  
	
   

  
	
  With
  a copy to:

  
	
   

  
	
  Cerberus
  Capital Management, L.P.

  
	
  299
  Park Avenue

  
	
  New
  York, New York 10171

  
	
  Attention:
  Lenard Tessler

  
	
   

  
	
  And
  a copy to:

  
	
  Schulte
  Roth & Zabel LLP

  
	
  919
  Third Avenue

  
	
  New
  York, New York 10022

  
	
  Attention:
  Stuart D. Freedman, Esq.

  

 

or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notice and communications shall be
effective when actually received by the addressee.

 

18.                                 Tax Withholding. The Company may withhold from any amounts
payable under this Agreement such federal, state, local or foreign taxes as
shall be required to be withheld pursuant to any applicable law or regulation.

 

19.                                 Entire Agreement. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements, written or oral, with respect thereto. The
parties hereto understand and acknowledge that the agreement dated
April 1, 2002 between the Executive and Georgia-Pacific Corporation has
been terminated.

 

8

 

20.                                 Waiver and Amendments. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the parties or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any right, power or
privilege hereunder, nor any single or partial exercise of any right, power or
privilege hereunder, preclude any other or further exercise thereof or the exercise
of any other right, power or privilege hereunder.

 

21.                                 Arbitration. The Company and Executive agree to arbitrate any controversy or claim
arising out of this Agreement or otherwise relating to Executive’s employment
by the Company or the termination of such employment to the extent required
(including, but not limited to, any claims of breach of contract, wrongful
termination or age, sex, race or other discrimination); provided that the
Company shall have the right to, and be permitted to, seek and obtain
injunctive relief from a court of competent jurisdiction pursuant to
Section 14 above in the state or federal courts located in the State of
New York. Any such arbitration shall be fully and finally resolved in binding
arbitration in a proceeding in the State of New York, in accordance with the
National Rules for the Resolution of Employment Disputes of the American
Arbitration Association before a single arbitrator. The arbitrator shall not
have the authority to modify or change any of the terms of this Agreement,
except as provided in Section 25 hereof. The arbitrator’s award shall be
final and binding upon the parties, and judgment upon the award may be entered
in any court of competent jurisdiction in any state of the United States or
country or application may be made to such court for a judicial acceptance of
the award and an enforcement as the law of such jurisdiction may require or
allow. Each party thereto shall bear its own costs incurred in any such
arbitration, including legal fees and expenses.

 

22.                                 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.

 

23.                                 Headings. The headings in this Agreement are for convenience of reference only
and shall not limit or otherwise affect the meaning of terms contained herein.

 

24.                                 Severability. If any term, provision, covenant or
restriction of this Agreement, or any part thereof, is held by a court of
competent jurisdiction of any foreign, federal, state, county or local
government or any other governmental, regulatory or administrative agency or
authority to be invalid, void, unenforceable or against public policy for any
reason, the remainder of the terms, provisions, covenants and restrictions of
this Agreement shall remain in full force and effect and shall in no way be
affected or impaired or invalidated. The Executive acknowledges that the
restrictive covenants contained in Sections 11 through 13 are a condition of
this Agreement and are reasonable and valid in temporal scope and in all other
respects.

 

25.                                 Judicial Modification. If any court or arbitrator determines that
any of the covenants in Sections 11 through 13, or any part of any of them, is
invalid or unenforceable, the remainder of such covenants and parts thereof
shall not thereby be affected and shall be given full effect, without regard to
the invalid portion. If any court or arbitrator determines that any of such
covenants, or any part thereof, is invalid or unenforceable because of the
geographic or

 

9

 

temporal scope of such provision, such court or arbitrator shall reduce such
scope to the minimum extent necessary to make such covenants valid and
enforceable.

 

10

 

IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Agreement as of the day and year first above
mentioned.

 

	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Charles H. McElrea

  	
   

  
	
   

  	
  Name:
  Charles H. McElrea

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BLUELINX
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Barbara V. Tinsley

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Barbara V. Tinsley

  
	
   

  	
   

  	
  Title:

  	
  Secretary

  
					

 

11

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