Document:

Exhibit 10.21

 

COMMON STOCK PURCHASE AGREEMENT

 

 

THIS AGREEMENT is made this 30th day of November, 2004,
by and between Altra Industrial Motion, Inc., a Delaware corporation (the “Company”),
and Altra Holdings, Inc., a Delaware corporation (the “Purchaser”).

 

WHEREAS, Purchaser is purchasing shares of common
stock of the Company prior to the issuance of any other shares of common stock
of the Company;

 

NOW THEREFORE, IT IS HEREBY AGREED:

 

1.                                       Sale of Stock. 
Subject to the terms hereof, the Company shall sell to Purchaser and
Purchaser shall purchase from the Company, One Thousand (1000) shares of common
stock of the Company (the “Stock”) at a price of $48,814.443 per share, or $48,814,443
in the aggregate (the “Purchase Price”).

 

2.                                       Payment of Purchase Price. 
Concurrently with the execution of this Agreement, the Purchaser shall
deliver to the Secretary of the Company the aggregate Purchase Price payable
for the Stock in cash and all of the outstanding capital stock of The Kilian
Company, in each case as set forth on Exhibit A hereto.

 

3.                                       Issuance of Shares. 
Upon execution of this Agreement, the Company shall issue a duly
executed certificate evidencing the Stock in the name of Purchaser.

 

4.                                       Representations and Warranties of
Purchaser.

 

(a)                                  Investment Intent. 
This Agreement is made with Purchaser in reliance upon Purchaser’s
representation to the Company, which by Purchaser’s acceptance hereof Purchaser
confirms, that the Stock has been acquired with Purchaser’s own funds for
investment for an indefinite period for Purchaser’s own account, not as a
nominee or agent, and not with a view to the sale or distribution of any part
thereof, and that Purchaser has no present intention of selling, granting
participation in, or otherwise distributing the same.  By executing this Agreement, Purchaser
further represents that Purchaser does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer, or grant
participations, to such person or to any third person, with respect to any of the
Stock.

 

(b)                                 Restricted Securities. 
Purchaser understands that the Stock has not been registered under the
Act, on the ground that the sale provided for in this Agreement is exempt from
the registration requirements of the Act, and that the Company’s reliance on
such exemption is predicated on Purchaser’s representations set forth herein.

 

Purchaser understands that if the Company does not
register the Stock with the Securities and Exchange Commission pursuant to
Sections 12 or 15 of the Securities Exchange Act of 1934 or if a registration
statement covering the Stock (or a filing pursuant to the exemption from
registration under Regulation A of the Act) under the Act is not in effect when
Purchaser desires to sell the Stock, Purchaser may be required to hold the
Stock for an indeterminate period.  The
Purchaser also acknowledges that Purchaser understands that any sale

 

 

of the Securities that might be made by it in reliance
upon Rule 144 under the Act may be made only in limited amounts in
accordance with the terms and conditions of that rule and that Purchaser may
not be able to sell the Stock at the time or in the amount Purchaser so
desires.  Purchaser is familiar with
Rule 144 and understands that the Stock constitutes “restricted securities”
within the meaning of that Rule.

 

(c)                                  Investment Experience. 
In connection with the investment representations made herein, Purchaser
represents that Purchaser is able to fend for itself in the transactions
contemplated by this Agreement, has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of
Purchaser’s investment, has the ability to bear the economic risks of Purchaser’s
investment and has been furnished with and has had access to such information
as Purchaser has requested and deems appropriate to Purchaser’s investment
decision.

 

(d)                                 Legends. 
All certificates representing any shares of Stock of the Company subject
to the provisions of this Agreement shall have endorsed thereon the following legends:

 

(i)                                     “THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.  THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE
TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER
THE SECURITIES ACT OF 1933, OR PURSUANT TO RULE 144 UNDER THE ACT OR AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER
SUCH ACT.”

 

(ii)                                  Any legend required to be placed
thereon by applicable state laws.

 

5.                                       Miscellaneous.

 

(a)                                  Further Instruments and Actions. 
The parties agree to execute such further instruments and to take such
further action as may reasonably be necessary to carry out the intent of this
Agreement.

 

(b)                                 Notices. 
Any notice required or permitted hereunder shall be given in writing and
shall be deemed effectively given upon personal delivery or upon deposit in the
United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to the other party at the address hereinafter shown
below such party’s signature or at such other address as such party may
designate by ten (10) days’ advance written notice to the other party to this
Agreement.

 

(c)                                  Governing Law, Assignment and
Enforcement.  This Agreement is governed by the laws of Delaware
without regard to its choice of law rules and shall inure to the benefit of the
successors and assigns of the Company and be binding upon Purchaser, Purchaser’s
heirs, executors, administrators, guardians, successors and assigns.  The prevailing party in any action to enforce
this Agreement shall be entitled to attorneys’ fees and costs.  The

 

2

 

parties agree that damages are not an
adequate remedy for Purchaser’s breach hereof and the Company shall accordingly
be entitled to specific performance of this Agreement.

 

(d)                                 Amendments and Waivers. 
This Agreement represents the entire understanding of the parties with
respect to the subject matter hereof and supersedes all previous
understandings, written or oral.  This
Agreement may only be amended with the written consent of the parties or the
successors or assigns of the foregoing, and no oral waiver or amendment shall
be effective under any circumstances whatsoever.

 

(e)                                  Cooperation. 
Purchaser agrees to cooperate affirmatively with the Company, to the
extent reasonably requested by the Company, to enforce rights and obligations
pursuant to this Agreement.

 

 

[SIGNATURE PAGE
FOLLOWS]

 

3

 

IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year first written above.

 

 

	
   

  	
  THE
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  ALTRA INDUSTRIAL
  MOTION, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name: Charles W. Nims

  
	
   

  	
  Title: President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PURCHASER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ALTRA HOLDINGS,
  INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name: Michael L. Hurt

  
	
   

  	
  Title: Chief
  Executive Officer

  

 

 

[Common Stock Purchase Agreement]

 

 

Exhibit A

 

Purchase Price

 

Contributed Capital Stock of The Kilian Company

 

	
  Class of Stock

  	
   

  	
  Number of Shares

  	
   

  	
  FMV

  	
   

  
	
  Series A Preferred Stock

  	
   

  	
  87,656

  	
   

  	
  $

  	
  8,765,600.00

  	
   

  
	
  Common Stock

  	
   

  	
  8,767

  	
   

  	
  $

  	
  54,443.07

  	
   

  

 

 

Contributed Total Cash:   $39,994,400.00Exhibit 10.22

 

EXECUTION COPY

 

 

CREDIT AGREEMENT

 

by and among

 

ALTRA INDUSTRIAL MOTION, INC.

 

as Parent,

 

and

 

EACH OF ITS SUBSIDIARIES THAT ARE SIGNATORIES
HERETO

 

as Borrowers,

 

THE LENDERS THAT ARE SIGNATORIES HERETO

 

as the Lenders,

 

and

 

WELLS FARGO FOOTHILL, INC.

 

as the Arranger and Administrative Agent

 

Dated as of November 30, 2004

 

 

 

TABLE OF CONTENTS

 

	
  1.

  	
  DEFINITIONS AND CONSTRUCTION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
  Definitions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.2

  	
  Accounting
  Terms

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.3

  	
  Code

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.4

  	
  Construction

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.5

  	
  Schedules
  and Exhibits

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  LOAN AND TERMS OF PAYMENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Revolver
  Advances

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.2

  	
  Intentionally
  Omitted

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.3

  	
  Borrowing
  Procedures and Settlements

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.4

  	
  Payments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.5

  	
  Overadvances

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.6

  	
  Interest
  Rates and Letter of Credit Fee:  Rates,
  Payments, and Calculations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.7

  	
  Cash
  Management

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.8

  	
  Crediting
  Payments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.9

  	
  Designated
  Account

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.10

  	
  Maintenance
  of Loan Account; Statements of Obligations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.11

  	
  Fees

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.12

  	
  Letters
  of Credit

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.13

  	
  LIBOR
  Option

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.14

  	
  Capital
  Requirements

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.15

  	
  Joint
  and Several Liability of Borrowers

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  CONDITIONS; TERM OF AGREEMENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Conditions
  Precedent to the Initial Extension of Credit

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.2

  	
  Conditions
  Precedent to all Extensions of Credit

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.3

  	
  Term

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.4

  	
  Effect
  of Termination

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.5

  	
  Early
  Termination by Borrowers

  	
   

  

 

i

 

	
   

  	
  3.6

  	
  Conditions
  Subsequent to the Initial Extension of Credit

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  No
  Encumbrances

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.2

  	
  Eligible
  Accounts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.3

  	
  Eligible
  Inventory

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.4

  	
  Equipment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.5

  	
  Location
  of Inventory and Equipment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.6

  	
  Inventory
  Records

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.7

  	
  State
  of Incorporation; Location of Chief Executive Office; Organizational
  Identification Number; Commercial Tort Claims

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.8

  	
  Due
  Organization and Qualification; Restricted Subsidiaries

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.9

  	
  Due
  Authorization; No Conflict

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.10

  	
  Litigation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.11

  	
  No
  Material Adverse Change

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.12

  	
  Fraudulent
  Transfer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.13

  	
  Employee
  Compliance

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.14

  	
  Environmental
  Condition

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.15

  	
  Intellectual
  Property

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.16

  	
  Leases

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.17

  	
  Deposit
  Accounts and Securities Accounts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.18

  	
  Complete
  Disclosure

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.19

  	
  Indebtedness

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.20

  	
  Material Contracts

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  AFFIRMATIVE
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Accounting System

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.2

  	
  Collateral Reporting

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.3

  	
  Financial Statements, Reports, Certificates

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.4

  	
  Intentionally Omitted

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.5

  	
  Inspection

  	
   

  

 

ii

 

	
   

  	
  5.6

  	
  Maintenance of Properties

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.7

  	
  Taxes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.8

  	
  Insurance

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.9

  	
  Location of Inventory and Equipment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.10

  	
  Compliance with Laws

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.11

  	
  Leases

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.12

  	
  Existence

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.13

  	
  Environmental

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.14

  	
  Intentionally Omitted

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.15

  	
  Control Agreements

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.16

  	
  Formation of Subsidiaries

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.17

  	
  Real Property

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.18

  	
  ERISA Compliance

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  NEGATIVE COVENANTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Indebtedness

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.2

  	
  Liens

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.3

  	
  Restrictions on Fundamental Changes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.4

  	
  Disposal of Assets

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.5

  	
  Change Name

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.6

  	
  Nature of Business

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.7

  	
  Prepayments and Amendments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.8

  	
  Intentionally Omitted

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.9

  	
  Intentionally Omitted

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.10

  	
  Distributions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.11

  	
  Fiscal Year

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.12

  	
  Investments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.13

  	
  Transactions with Affiliates

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.14

  	
  Use of Proceeds

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.15

  	
  Intentionally Omitted

  	
   

  

 

iii

 

	
   

  	
  6.16

  	
  Financial Covenants

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.17

  	
  Acquisition Documents

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.18

  	
  Indenture Documents

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.19

  	
  Governing Documents

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.20

  	
  Real Property Collateral

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  EVENTS OF DEFAULT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  THE LENDER GROUP’S
  RIGHTS AND REMEDIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  Rights and Remedies

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.2

  	
  Remedies Cumulative

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  TAXES AND EXPENSES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  WAIVERS;
  INDEMNIFICATION

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
  Demand; Protest; etc

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.2

  	
  The Lender Group’s Liability for Collateral

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.3

  	
  Indemnification

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  NOTICES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  CHOICE OF LAW AND
  VENUE; JURY TRIAL WAIVER

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  ASSIGNMENTS AND
  PARTICIPATIONS; SUCCESSORS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.1

  	
  Assignments and Participations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.2

  	
  Successors

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
  AMENDMENTS;
  WAIVERS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  14.1

  	
  Amendments and Waivers

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  14.2

  	
  Replacement of Holdout Lender

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  14.3

  	
  No Waivers; Cumulative Remedies

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
  AGENT; THE LENDER
  GROUP

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.1

  	
  Appointment and Authorization of Agent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.2

  	
  Delegation of Duties

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.3

  	
  Liability of Agent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.4

  	
  Reliance by Agent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.5

  	
  Notice of Default or Event of Default

  	
   

  

 

iv

 

	
   

  	
  15.6

  	
  Credit Decision

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.7

  	
  Costs and Expenses; Indemnification

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.8

  	
  Agent in Individual Capacity

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.9

  	
  Successor Agent

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.10

  	
  Lender in Individual Capacity

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.11

  	
  Withholding Taxes

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.12

  	
  Collateral Matters

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.13

  	
  Restrictions on Actions by Lenders; Sharing of
  Payments

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.14

  	
  Agency for Perfection

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.15

  	
  Payments by Agent to the Lenders

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.16

  	
  Concerning the Collateral and Related Loan
  Documents

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.17

  	
  Field Audits and Examination Reports;
  Confidentiality; Disclaimers by Lenders; Other Reports and Information

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.18

  	
  Several Obligations; No Liability

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  15.19

  	
  Bank Product Providers

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
  GENERAL
  PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.1

  	
  Effectiveness

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.2

  	
  Section Headings

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.3

  	
  Interpretation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.4

  	
  Severability of Provisions

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.5

  	
  Counterparts; Electronic Execution

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.6

  	
  Revival and Reinstatement of Obligations

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.7

  	
  Confidentiality

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.8

  	
  Integration

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  16.9

  	
  Altra Industrial Motion, Inc. as Agent for
  Borrowers

  	
   

  

 

iv

 

EXHIBITS AND SCHEDULES

 

	
  Exhibit
  A-1

  	
   

  	
  Form of Assignment and
  Acceptance

  	
   

  
	
  Exhibit
  B-1

  	
   

  	
  Form of Borrowing Base
  Certificate

  	
   

  
	
  Exhibit
  C-1

  	
   

  	
  Form of Compliance
  Certificate

  	
   

  
	
  Exhibit
  L-1

  	
   

  	
  Form of LIBOR Notice

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Schedule
  A-1

  	
   

  	
  Agent’s Account

  	
   

  
	
  Schedule
  C-1

  	
   

  	
  Commitments

  	
   

  
	
  Schedule
  D-1

  	
   

  	
  Designated Account

  	
   

  
	
  Schedule
  P-1

  	
   

  	
  Permitted Holders

  	
   

  
	
  Schedule
  P-2

  	
   

  	
  Permitted Liens

  	
   

  
	
  Schedule
  P-3

  	
   

  	
  Permitted Investments

  	
   

  
	
  Schedule
  R-1

  	
   

  	
  Real Property Collateral

  	
   

  
	
  Schedule
  1.1

  	
   

  	
  Definitions

  	
   

  
	
  Schedule
  2.7(a)

  	
   

  	
  Cash Management Banks

  	
   

  
	
  Schedule
  3.1

  	
   

  	
  Conditions Precedent

  	
   

  
	
  Schedule
  4.5(a)

  	
   

  	
  Inventory and Equipment
  Stored with Bailees or Warehousemen

  	
   

  
	
  Schedule
  4.5(b)

  	
   

  	
  Locations of Inventory and
  Equipment

  	
   

  
	
  Schedule
  4.7(a)

  	
   

  	
  States of Organization

  	
   

  
	
  Schedule
  4.7(b)

  	
   

  	
  Chief Executive Offices

  	
   

  
	
  Schedule
  4.7(c)

  	
   

  	
  Organizational
  Identification Numbers

  	
   

  
	
  Schedule
  4.7(d)

  	
   

  	
  Commercial Tort Claims

  	
   

  
	
  Schedule
  4.8(b)

  	
   

  	
  Capitalization of
  Borrowers

  	
   

  
	
  Schedule
  4.8(c)

  	
   

  	
  Capitalization of
  Borrowers’ Restricted Subsidiaries

  	
   

  
	
  Schedule
  4.10

  	
   

  	
  Litigation

  	
   

  
	
  Schedule
  4.13(a)

  	
   

  	
  ERISA Plans

  	
   

  
	
  Schedule
  4.14

  	
   

  	
  Environmental Matters

  	
   

  
	
  Schedule
  4.17

  	
   

  	
  Deposit Accounts and
  Securities Accounts

  	
   

  
	
  Schedule
  4.19

  	
   

  	
  Permitted Indebtedness

  	
   

  
	
  Schedule
  5.2

  	
   

  	
  Collateral Reporting

  	
   

  
	
  Schedule
  5.3

  	
   

  	
  Financial Statements,
  Reports, Certificates

  	
   

  

 

 

CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT (this “Agreement”), is entered into as
of November 30, 2004, by and among the lenders identified on the
signature pages hereof (such lenders, together with their respective successors
and permitted assigns, are referred to hereinafter each individually as a “Lender”
and collectively as the “Lenders”), and WELLS FARGO FOOTHILL, INC., a California corporation, as the
arranger and administrative agent for the Lenders (in such capacity, together
with its successors and assigns in such capacity, “Agent”), and ALTRA INDUSTRIAL MOTION, INC., a Delaware corporation (“Parent”),
and each of Parent’s Subsidiaries identified on the signature pages hereof (Parent
and such Subsidiaries are referred to hereinafter each individually as a “Borrower”,
and individually and collectively, jointly and severally, as the “Borrowers”).

 

The parties agree as
follows:

 

1.             DEFINITIONS AND
CONSTRUCTION.

 

1.1           Definitions. 
Capitalized terms used in this Agreement shall have the meanings
specified therefor on Schedule 1.1.

 

1.2           Accounting Terms.  All accounting terms not specifically defined herein shall be construed
in accordance with GAAP.  In the event of
any change in GAAP that occurs after the date of this Agreement that would
affect the calculation or application of the financial or other covenants
contained herein, Agent and Borrowers agree to negotiate to amend such
financial or other covenants (or the definitions used therein) to eliminate the
effect of such change and no Event of Default shall be deemed to exist solely
as a result of such change in GAAP during the period prior to the effectiveness
of such amendment; provided. that such financial or other covenants
shall continue to be calculated in the manner provided immediately prior to
such change until such amendment has been executed by Borrowers and the
Required Lenders.  When used herein, the
term “financial statements” shall include the notes and schedules thereto, if
any.  Whenever the term “Borrowers” or
the term “Parent” is used in respect of a financial covenant or a related
definition, it shall be understood to mean Borrowers and their Subsidiaries or
Parent and its Subsidiaries, as applicable, on a consolidated basis unless the
context clearly requires otherwise.

 

1.3           Code.  Any terms used in this Agreement that are defined in the Code shall be
construed and defined as set forth in the Code unless otherwise defined herein,
provided, however, that to the extent that the Code is used to
define any term herein and such term is defined differently in different
Articles of the Code, the definition of such term contained in Article 9 shall
govern.

 

1.4           Construction.  Unless the context of this Agreement or any other Loan Document clearly
requires otherwise, references to the plural include the singular, references
to the singular include the plural, and the terms “includes” and “including”
are not limiting.  The words “hereof,” “herein,”
“hereby,” “hereunder,” and similar terms in this Agreement or any other Loan
Document refer to this Agreement or such other Loan Document, as the case may
be, as a whole and not to any particular provision of this Agreement or such
other Loan Document, as the case may be. 
Section, subsection, clause, schedule, and exhibit references herein are
to this Agreement unless otherwise specified. 
Any reference in this Agreement or in the other Loan Documents to any
agreement, instrument, or document shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements, thereto and thereof, as applicable (subject to any
restrictions on such alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and supplements
set forth herein).  Any reference herein
to the satisfaction, payment or repayment in full of the Obligations or the
Bank Product Obligations, as the case may be, shall mean the repayment in full
in cash (or cash collateralization or the provision of other security in
accordance with the terms hereof) of all Obligations other than contingent
indemnification Obligations and other than any Bank Product Obligations that,
at such time, are allowed by the applicable Bank Product Provider to remain
outstanding and are not required to be repaid or cash collateralized

 

 

pursuant to the provisions
of this Agreement.  Any reference herein
to any Person shall be construed to include such Person’s successors and
assigns.  Any requirement of a writing
contained herein or in the other Loan Documents shall be satisfied by the
transmission of a Record.

 

1.5           Schedules and Exhibits.  All of the schedules and exhibits attached to this Agreement shall be
deemed incorporated herein by reference.

 

2.             LOAN AND TERMS OF PAYMENT.

 

2.1           Revolver Advances.

 

(a)           Subject to the terms and conditions of this Agreement, and during the
term of this Agreement, each Lender agrees (severally, not jointly or jointly
and severally) to make advances (“Advances”) to Borrowers in an amount
at any one time outstanding not to exceed such Lender’s Pro Rata Share of an
amount equal to the lesser of (i)
the Maximum Revolver Amount less the
Letter of Credit Usage, or (ii) the Borrowing Base less the Letter of Credit Usage.  

 

(b)           Anything to the contrary in this Section 2.1 notwithstanding,
Agent shall have the right to establish reserves in such amounts, and with
respect to such matters, as Agent in its Permitted Discretion shall deem
necessary, against the Borrowing Base, including reserves (i) with respect to
(A) sums that Borrowers are required to pay by any Section of this Agreement or
any other Loan Document (such as taxes, assessments, insurance premiums, or, in
the case of leased assets, rents or other amounts payable under such leases)
and have failed to pay, and (B) amounts owing by Borrowers or their Restricted
Subsidiaries to any Person to the extent secured by a Lien on, or trust over,
any of the Collateral (other than a Permitted Lien), which Lien or trust, in
the Permitted Discretion of Agent likely would have a priority superior to the
Agent’s Liens (such as Liens or trusts in favor of landlords, warehousemen,
carriers, mechanics, materialmen, laborers, or suppliers, or Liens or trusts
for ad valorem, excise, sales, or
other taxes where given priority under applicable law) in and to such item of
the Collateral, and (ii) after the occurrence and during the continuance
of an Event of Default, with respect to such other matters as Agent in its
Permitted Discretion shall deem necessary or appropriate.  In addition to the foregoing and subject to any
specific limitations set forth in any other Loan Document, Agent shall have the
right to have the Inventory reappraised by a qualified appraisal company
selected by Agent from time to time after the Closing Date for the purpose of
redetermining the Eligible Inventory portion of the Collateral and, as a
result, redetermining the Borrowing Base. 

 

(c)           Amounts borrowed pursuant to this Section 2.1 may be repaid and,
subject to the terms and conditions of this Agreement, reborrowed at any time
during the term of this Agreement.

 

(d)           Notwithstanding anything to the contrary contained herein, Lenders
shall not be obligated to make any Advances against any Inventory or Equipment
located at any of the locations set forth on Schedule 4.5(a) unless and
until Agent shall have received reasonably satisfactory information as to the
value of the Inventory and/or Equipment stored at such locations and as to the
monthly rent payable in respect of such locations.

 

2.2           Intentionally Omitted

 

2.3           Borrowing Procedures and
Settlements.

 

(a)           Procedure for Borrowing.  Each Borrowing shall be made by an irrevocable written request by an
Authorized Person delivered to Agent.  If
Swing Lender is obligated to make a Swing Loan pursuant to Section 2.3(b)
below, such notice must be received by Agent no later than 10:00 a.m.
(California time) on the Business Day that is the requested Funding Date
specifying (i) the amount of such Borrowing, and (ii) the requested Funding
Date, which shall be a Business Day; provided, however, that if
Swing Lender is not obligated to make a Swing Loan as to a requested Borrowing,
such notice must be received by Agent no later

 

2

 

than 10:00 a.m. (California
time) on the Business Day prior to the date that is the requested Funding
Date.  At Agent’s election, in lieu of
delivering the above-described written request, any Authorized Person may give
Agent telephonic notice of such request by the required time.  In such circumstances, Borrowers agree that
any such telephonic notice will be confirmed in writing within 24 hours of the
giving of such telephonic notice, but the failure to provide such written
confirmation shall not affect the validity of the request.

 

(b)           Making of Swing Loans.  In
the case of a request for an Advance and so long as either (i) the aggregate
amount of Swing Loans made since the last Settlement Date plus the amount of
the requested Advance does not exceed $10,000,000, or (ii) Swing Lender, in its
sole discretion, shall agree to make a Swing Loan notwithstanding the foregoing
limitation, Swing Lender, as a Lender, shall make an Advance in the amount of
such Borrowing (any such Advance made solely by Swing Lender as a Lender
pursuant to this Section 2.3(b) being referred to as a “Swing Loan”
and such Advances being referred to collectively as “Swing Loans”)
available to Borrowers on the Funding Date applicable thereto by transferring
immediately available funds to Borrowers’ Designated Account.  Each Swing Loan shall be deemed to be an
Advance hereunder and shall be subject to all the terms and conditions
applicable to other Advances, except that all payments on any Swing Loan shall
be payable to Swing Lender as a Lender solely for its own account.  Subject to the provisions of Section
2.3(d)(ii), Swing Lender as a Lender shall not make and shall not be
obligated to make any Swing Loan if Swing Lender has actual knowledge that (i)
one or more of the applicable conditions precedent set forth in Section 3
will not be satisfied on the requested Funding Date for the applicable Borrowing,
or (ii) the requested Borrowing would exceed the Availability on such Funding
Date.  Swing Lender as a Lender shall not
otherwise be required to determine whether the applicable conditions precedent
set forth in Section 3 have been satisfied on the Funding Date
applicable thereto prior to making any Swing Loan.  The Swing Loans shall be secured by the Agent’s
Liens, constitute Obligations hereunder, and bear interest at the rate
applicable from time to time to Advances that are Base Rate Loans.  Notwithstanding the foregoing, after a Swing
Loan is made and after settlement of such Swing Loan is effected in accordance
with Section 2.3(e), Administrative Borrower shall have the right to
request that such Swing Loan be eligible to be a LIBOR Rate Loan by exercising
the LIBOR Option in accordance with Section 2.13.

 

(c)           Making of Loans.

 

(i)            In the event that Swing Lender is not
obligated to make a Swing Loan, then promptly after receipt of a request for a
Borrowing pursuant to Section 2.3(a), Agent shall notify the Lenders,
not later than 1:00 p.m. (California time) on the Business Day immediately
preceding the Funding Date applicable thereto, by telecopy, telephone, or other
similar form of transmission, of the requested Borrowing.  Each Lender shall make the amount of such
Lender’s Pro Rata Share of the requested Borrowing available to Agent in
immediately available funds, to Agent’s Account, not later than 10:00 a.m.
(California time) on the Funding Date applicable thereto.  After Agent’s receipt of the proceeds of such
Advances, Agent shall make the proceeds thereof available to Administrative
Borrower on the applicable Funding Date by transferring immediately available
funds equal to such proceeds received by Agent to Administrative Borrower’s
Designated Account; provided, however, that, subject to the
provisions of Section 2.3(d)(ii), Agent shall not request any Lender to
make, and no Lender shall have the obligation to make, any Advance if Agent
shall have actual knowledge that (1) one or more of the applicable conditions
precedent set forth in Section 3 will not be satisfied on the requested
Funding Date for the applicable Borrowing unless such condition has been
waived, or (2) the requested Borrowing would exceed the Availability on such
Funding Date.

 

(ii)           Unless Agent receives notice from a Lender prior to 9:00 a.m.
(California time) on the date of a Borrowing, that such Lender will not make
available as and when required hereunder to Agent for the account of Borrowers
the amount of that Lender’s Pro Rata Share of the Borrowing, Agent may assume
that each Lender has made or will make such amount available to Agent in
immediately available funds on the Funding Date and Agent may (but shall not be
so required), in reliance upon such assumption, make available to Borrowers on
such date a corresponding amount.  If and
to the extent any Lender shall not have made its full amount available to Agent
in immediately available funds and Agent in such circumstances has made
available to Borrowers such amount, that Lender shall on the Business Day
following such Funding

 

3

 

Date make such amount
available to Agent, together with interest at the Defaulting Lender Rate for
each day during such period.  A notice
submitted by Agent to any Lender with respect to amounts owing under this
subsection shall be conclusive, absent manifest error.  If such amount is so made available, such
payment to Agent shall constitute such Lender’s Advance on the date of
Borrowing for all purposes of this Agreement. 
If such amount is not made available to Agent on the Business Day
following the Funding Date, Agent will notify Administrative Borrower of such
failure to fund and, upon demand by Agent, Borrowers shall pay such amount to
Agent for Agent’s account, together with interest thereon for each day elapsed
since the date of such Borrowing, at a rate per annum equal to the interest
rate applicable at the time to the Advances composing such Borrowing.  The failure of any Lender to make any Advance
on any Funding Date shall not relieve any other Lender of any obligation
hereunder to make an Advance on such Funding Date, but no Lender shall be
responsible for the failure of any other Lender to make the Advance to be made
by such other Lender on any Funding Date. 

 

(iii)          Agent shall not be obligated to transfer to a Defaulting Lender any
payments made by Borrowers to Agent for the Defaulting Lender’s benefit, and,
in the absence of such transfer to the Defaulting Lender, Agent shall transfer
any such payments to each other non-Defaulting Lender member of the Lender
Group ratably in accordance with their Commitments (but only to the extent that
such Defaulting Lender’s Advance was funded by the other members of the Lender
Group) or, if so directed by Administrative Borrower and if no Default or Event
of Default had occurred and is continuing (and to the extent such Defaulting
Lender’s Advance was not funded by the Lender Group), retain same to be
re-advanced to Borrowers as if such Defaulting Lender had made Advances to
Borrowers.  Subject to the foregoing,
Agent may hold and, in its Permitted Discretion, re-lend to Borrowers for the
account of such Defaulting Lender the amount of all such payments received and
retained by Agent for the account of such Defaulting Lender.  Solely for the purposes of voting or
consenting to matters with respect to the Loan Documents, such Defaulting
Lender shall be deemed not to be a “Lender” and such Lender’s Commitment shall
be deemed to be zero.  This Section shall
remain effective with respect to such Lender until (x) the Obligations under
this Agreement shall have been declared or shall have become immediately due
and payable, (y) the non-Defaulting Lenders, Agent, and Administrative Borrower
shall have waived such Defaulting Lender’s default in writing, or (z) the
Defaulting Lender makes its Pro Rata Share of the applicable Advance and pays
to Agent all amounts owing by Defaulting Lender in respect thereof.  The operation of this Section shall not be
construed to increase or otherwise affect the Commitment of any Lender, to
relieve or excuse the performance by such Defaulting Lender or any other Lender
of its duties and obligations hereunder, or to relieve or excuse the
performance by Borrowers of their duties and obligations hereunder to Agent or
to the Lenders other than such Defaulting Lender.  Any such failure to fund by any Defaulting
Lender shall constitute a material breach by such Defaulting Lender of this
Agreement and shall entitle Administrative Borrower at its option, upon written
notice to Agent, to arrange for a substitute Lender to assume the Commitment of
such Defaulting Lender, such substitute Lender to be reasonably acceptable to
Agent.  In connection with the
arrangement of such a substitute Lender, the Defaulting Lender shall have no
right to refuse to be replaced hereunder, and agrees to execute and deliver a
completed form of Assignment and Acceptance in favor of the substitute Lender
(and agrees that it shall be deemed to have executed and delivered such
document if it fails to do so) subject only to being repaid its share of the
outstanding Obligations (including an assumption of its Pro Rata Share of the
Risk Participation Liability) without any premium or penalty of any kind
whatsoever; provided however, that any such assumption of the Commitment of
such Defaulting Lender shall not be deemed to constitute a waiver of any of the
Lender Groups’ or Borrowers’ rights or remedies against any such Defaulting
Lender arising out of or in relation to such failure to fund.

 

(d)           Protective Advances and Optional Overadvances.

 

(i)            Agent hereby is authorized by Borrowers and
the Lenders, from time to time in Agent’s sole discretion, (A) after the
occurrence and during the continuance of a Default or an Event of Default, or
(B) at any time that any of the other applicable conditions precedent set forth
in Section 3 are not satisfied, to make Advances to Borrowers on behalf
of the Lenders that Agent, in its Permitted Discretion deems necessary or
desirable (1) to preserve or protect the Collateral, or any portion thereof,
(2) to enhance the

 

4

 

likelihood of repayment of
the Obligations, or (3) to pay any other amount chargeable to Borrowers
pursuant to the terms of this Agreement, including Lender Group Expenses and
the costs, fees, and expenses described in Section 9 (any of the
Advances described in this Section 2.3(d)(i) shall be referred to as “Protective
Advances”).

 

(ii)           Any contrary provision of this Agreement notwithstanding, the Lenders
hereby authorize Agent or Swing Lender, as applicable, and either Agent or
Swing Lender, as applicable, may, but is not obligated to, knowingly and
intentionally, continue to make Advances (including Swing Loans) to Borrowers
notwithstanding that an Overadvance exists or thereby would be created, so long
as (A) after giving effect to such Advances, the outstanding Revolver Usage
does not exceed the Borrowing Base by more than $6,000,000, and (B) after
giving effect to such Advances, the outstanding Revolver Usage (except for and
excluding amounts charged to the Loan Account for interest, fees, or Lender
Group Expenses) does not exceed the Maximum Revolver Amount.  In the event Agent obtains actual knowledge
that the Revolver Usage exceeds the amounts permitted by the immediately
foregoing provisions, regardless of the amount of, or reason for, such excess,
Agent shall notify the Lenders as soon as practicable (and prior to making any
(or any additional) intentional Overadvances (except for and excluding amounts
charged to the Loan Account for interest, fees, or Lender Group Expenses)
unless Agent determines that prior notice would result in imminent harm to the
Collateral or its value), and the Lenders thereupon shall, together with Agent,
jointly determine the terms of arrangements that shall be implemented with
Borrowers intended to reduce, within a reasonable time, the outstanding
principal amount of the Advances to Borrowers to an amount permitted by the foregoing
provisions.  In such circumstances, if
any Lender disagrees over the proposed terms of reduction or repayment of any
Overadvance, the terms of reduction or repayment thereof shall be implemented
according to the determination of the Required Lenders.  Each Lender shall be obligated to settle with
Agent as provided in Section 2.3(e) for the amount of such Lender’s Pro
Rata Share of any unintentional Overadvances by Agent reported to such Lender,
any intentional Overadvances made as permitted under this Section 2.3(d)(ii),
and any Overadvances resulting from the charging to the Loan Account of
interest, fees, or Lender Group Expenses.

 

(iii)          Each Protective Advance and each Overadvance shall be deemed to be an
Advance hereunder, except that no Protective Advance or Overadvance shall be
eligible to be a LIBOR Rate Loan and all payments on the Protective Advances
shall be payable to Agent solely for its own account.  The Protective Advances and Overadvances
shall be repayable on demand, secured by the Agent’s Liens, constitute
Obligations hereunder, and bear interest at the rate applicable from time to
time to Advances that are Base Rate Loans. 
The provisions of this Section 2.3(d) are for the exclusive
benefit of Agent, Swing Lender, and the Lenders and are not intended to benefit
any Borrower in any way.  

 

(e)           Settlement.  It is agreed that each Lender’s funded portion of the Advances is
intended by the Lenders to equal, at all times, such Lender’s Pro Rata Share of
the outstanding Advances.  Such agreement
notwithstanding, Agent, Swing Lender, and the other Lenders agree (which
agreement shall not be for the benefit of any Borrower) that in order to
facilitate the administration of this Agreement and the other Loan Documents,
settlement among the Lenders as to the Advances, the Swing Loans, and the
Protective Advances shall take place on a periodic basis in accordance with the
following provisions:

 

(i)            Agent shall request settlement (“Settlement”)
with the Lenders on a weekly basis, or on a more frequent basis if so determined
by Agent, (1) on behalf of Swing Lender, with respect to each outstanding Swing
Loan, (2) for itself, with respect to the outstanding Protective Advances, and
(3) with respect to Borrowers’ or their respective Restricted Subsidiaries’
Collections received by Agent, as to each by notifying the Lenders by telecopy,
telephone, or other similar form of transmission, of such requested Settlement,
no later than 2:00 p.m. (California time) on the Business Day immediately prior
to the date of such requested Settlement (the date of such requested Settlement
being the “Settlement Date”). 
Such notice of a Settlement Date shall include a summary statement of
the amount of outstanding Advances, Swing 
Loans, and Protective Advances for the period since the prior Settlement
Date.  Subject to the terms and
conditions contained herein (including Section 2.3(c)(iii)):  (y) if a Lender’s balance of the Advances
(including Swing Loans and Protective Advances) exceeds such Lender’s Pro Rata
Share of the Advances (including Swing

 

5

 

Loans and Protective
Advances) as of a Settlement Date, then Agent shall, by no later than 12:00
p.m. (California time) on the Settlement Date, transfer in immediately
available funds to a Deposit Account of such Lender (as such Lender may
designate), an amount such that each such Lender shall, upon receipt of such
amount, have as of the Settlement Date, its Pro Rata Share of the Advances
(including Swing Loans and Protective Advances), and (z) if a Lender’s balance
of the Advances (including Swing Loans and Protective Advances) is less than
such Lender’s Pro Rata Share of the Advances (including Swing Loans and
Protective Advances) as of a Settlement Date, such Lender shall no later than
12:00 p.m. (California time) on the Settlement Date transfer in immediately
available funds to the Agent’s Account, an amount such that each such Lender
shall, upon transfer of such amount, have as of the Settlement Date, its Pro
Rata Share of the Advances (including Swing Loans and Protective
Advances).  Such amounts made available
to Agent under clause (z) of the immediately preceding sentence shall be
applied against the amounts of the applicable Swing Loans or Protective Advances
and, together with the portion of such Swing Loans or Protective Advances
representing Swing Lender’s Pro Rata Share thereof, shall constitute Advances
of such Lenders.  If any such amount is
not made available to Agent by any Lender on the Settlement Date applicable
thereto to the extent required by the terms hereof, Agent shall be entitled to
recover for its account such amount on demand from such Lender together with
interest thereon at the Defaulting Lender Rate.

 

(ii)           In determining whether a Lender’s balance of the Advances, Swing Loans,
and Protective Advances is less than, equal to, or greater than such Lender’s
Pro Rata Share of the Advances, Swing Loans, and Protective Advances as of a
Settlement Date, Agent shall, as part of the relevant Settlement, apply to such
balance the portion of payments actually received in good funds by Agent with
respect to principal, interest, fees payable by Borrowers and allocable to the
Lenders hereunder, and proceeds of Collateral. 
To the extent that a net amount is owed to any such Lender after such
application, such net amount shall be distributed by Agent to that Lender as
part of such next Settlement.

 

(iii)          Between Settlement Dates, Agent, to the extent no Protective Advances
or Swing Loans are outstanding, may pay over to Swing Lender any payments
received by Agent, that in accordance with the terms of this Agreement would be
applied to the reduction of the Advances, for application to Swing Lender’s Pro
Rata Share of the Advances.  If, as of
any Settlement Date, Collections of Borrowers or their respective Restricted Subsidiaries
received by Agent since the then immediately preceding Settlement Date have
been applied to Swing Lender’s Pro Rata Share of the Advances other than to
Swing Loans, as provided for in the previous sentence, Swing Lender shall pay
to Agent for the accounts of the Lenders, and Agent shall pay to the Lenders,
to be applied to the outstanding Advances of such Lenders, an amount such that
each Lender shall, upon receipt of such amount, have, as of such Settlement
Date, its Pro Rata Share of the Advances. 
During the period between Settlement Dates, Swing Lender with respect to
Swing Loans, Agent with respect to Protective Advances, and each Lender
(subject to the effect of agreements between Agent and individual Lenders) with
respect to the Advances other than Swing Loans and Protective Advances, shall
be entitled to interest at the applicable rate or rates payable under this
Agreement on the daily amount of funds employed by Swing Lender, Agent, or the
Lenders, as applicable.

 

(f)            Notation.  Agent shall record on its books the principal amount of the Advances
owing to each Lender, including the Swing Loans owing to Swing Lender, and
Protective Advances owing to Agent, and the interests therein of each Lender,
from time to time and such records shall, absent manifest error, conclusively
be presumed to be correct and accurate.  

 

(g)           Lenders’ Failure to
Perform.  All Advances (other than Swing Loans and
Protective Advances) shall be made by the Lenders contemporaneously and in accordance
with their Pro Rata Shares.  It is
understood that (i) no Lender shall be responsible for any failure by any other
Lender to perform its obligation to make any Advance (or other extension of
credit) hereunder, nor shall any Commitment of any Lender be increased or
decreased as a result of any failure by any other Lender to perform its
obligations hereunder, and (ii) no failure by any Lender to perform its
obligations hereunder shall excuse any other Lender from its obligations
hereunder.

 

6

 

2.4           Payments.

 

(a)           Payments by Borrowers.

 

(i)            Except as otherwise expressly provided
herein, all payments by Borrowers shall be made to Agent’s Account for the
account of the Lender Group and shall be made in immediately available funds,
no later than 11:00 a.m. (California time) on the date specified herein.  Any payment received by Agent later than
11:00 a.m. (California time), shall be deemed to have been received on the following
Business Day and any applicable interest or fee shall continue to accrue until
such following Business Day.

 

(ii)           Unless Agent receives notice from Administrative Borrower prior to the
date on which any payment is due to the Lenders that Borrowers will not make
such payment in full as and when required, Agent may assume that Borrowers have
made (or will make) such payment in full to Agent on such date in immediately
available funds and Agent may (but shall not be so required), in reliance upon
such assumption, distribute to each Lender on such due date an amount equal to
the amount then due such Lender.  If and
to the extent Borrowers do not make such payment in full to Agent on the date
when due, each Lender severally shall repay to Agent on demand such amount
distributed to such Lender, together with interest thereon at the Defaulting
Lender Rate for each day from the date such amount is distributed to such
Lender until the date repaid.

 

(b)           Apportionment and Application.

 

(i)            Except as otherwise provided with respect to
Defaulting Lenders and except as otherwise provided in the Loan Documents
(including agreements between Agent and individual Lenders), aggregate
principal and interest payments shall be apportioned ratably among the Lenders
(according to the unpaid principal balance of the Obligations to which such
payments relate held by each Lender) and payments of fees and expenses (other
than fees or expenses that are for Agent’s separate account, after giving
effect to any agreements between Agent and individual Lenders) shall be apportioned
ratably among the Lenders having a Pro Rata Share of the Obligation to which a
particular fee relates.  Except as
provided in Section 2.4(b)(iii), all payments shall be remitted to Agent
and all such payments, and all proceeds of Collateral received by Agent, shall
be applied as follows:

 

(A)          first, ratably to pay any Lender Group Expenses then due to Agent or any of
the Lenders under the Loan Documents until paid in full,

 

(B)           second, ratably to pay any fees or premiums then due to Agent (for its separate
account, after giving effect to any agreements between Agent and individual
Lenders) or any of the Lenders under the Loan Documents until paid in full,

 

(C)           third, to pay interest due in respect of all Protective Advances until paid
in full,

 

(D)          fourth, to pay the principal of all Protective Advances until paid in full, 

 

(E)           fifth, ratably to pay interest due in respect of the Advances (other than
Protective Advances) and the Swing Loans until paid in full, 

 

(F)           sixth, to pay the principal of all Swing Loans until paid in full,

 

(G)           seventh, so long as no Event of Default has occurred and is continuing, to pay
the principal of all Advances until paid in full,

 

7

 

(H)          eighth, so long as no Event of Default has occurred and is continuing, and at
Agent’s election (which election Agent agrees will not be made if an
Overadvance would be created thereby), to pay amounts then due and owing by
Administrative Borrower or its Subsidiaries in respect of Bank Products, until
paid in full,

 

(I)            ninth, if an Event of Default has occurred and is continuing, ratably (i) to
pay the principal of all Advances until paid in full, (ii) to Agent, to be held
by Agent, for the ratable benefit of Issuing Lender and Lenders, as cash
collateral in an amount up to 105% of the Letter of Credit Usage until paid in
full, and (iii) to Agent, to be held by Agent, for the benefit of the Bank
Product Providers, as cash collateral in an amount up to the amount of the Bank
Product Reserve established prior to the occurrence of, and not in
contemplation of, the subject Event of Default until the obligations of
Borrowers and their respective Restricted Subsidiaries in respect of Bank
Products have been paid in full or the cash collateral amount has been
exhausted, 

 

(J)            tenth, if an Event of Default has occurred and is continuing, to pay any
other Obligations and Bank Product Obligations (including the provision of
amounts to Agent, to be held by Agent, for the benefit of the Bank Product Providers,
as cash collateral in an amount up to the amount determined by Agent in its
Permitted Discretion as the amount necessary to secure the obligations of
Borrowers and their respective Restricted Subsidiaries in respect of Bank
Products), and

 

(K)          eleventh, to Borrowers (to be wired to the Designated Account) or such other
Person entitled thereto under applicable law.

 

(ii)           Agent promptly shall distribute to each Lender, pursuant to the
applicable wire instructions received from each Lender in writing, such funds
as it may be entitled to receive, subject to a Settlement delay as provided in Section
2.3(e).

 

(iii)          In each instance, so long as no Event of Default has occurred and is
continuing, this Section 2.4(b) shall not apply to any payment made by
Borrowers to Agent and specified by Borrowers to be for the payment of specific
Obligations then due and payable (or prepayable) under any provision of this
Agreement.

 

(iv)          For purposes of the foregoing, “paid in full” means payment of all
amounts owing under the Loan Documents according to the terms thereof,
including loan fees, service fees, professional fees, interest (and
specifically including interest accrued after the commencement of any
Insolvency Proceeding), default interest, interest on interest, and expense
reimbursements, whether or not any of the foregoing would be or is allowed or
disallowed in whole or in part in any Insolvency Proceeding.

 

(v)           In the event of a direct conflict between the priority provisions of
this Section 2.4 and other provisions contained in any other Loan
Document, it is the intention of the parties hereto that such priority
provisions in such documents shall be read together and construed, to the
fullest extent possible, to be in concert with each other.  In the event of any actual, irreconcilable
conflict that cannot be resolved as aforesaid, the terms and provisions of this
Section 2.4 shall control and govern.

 

(c)           Mandatory Prepayments.  

 

(i)            At any time that an
Event of Default has occurred and is continuing, subject to Section 5.8(b),
upon the receipt by Parent, any Borrower or any of  their respective Subsidiaries of Net Cash
Proceeds in connection with the sale or disposition by any Loan Party of
property or assets pursuant to clauses
(l) or (m) of the definition of Permitted Dispositions, Borrowers shall
immediately prepay the outstanding principal of the Advances in an amount equal
to 100% of such Net Cash Proceeds.   

 

8

 

(ii)           At
any time that an Event of Default
has occurred and is continuing, upon the sale or issuance by any Loan Party or
any of its Restricted Subsidiaries of any shares of Stock, Borrowers shall immediately prepay the outstanding
principal of the Advances in an amount equal to 100% of the Net Cash Proceeds
received by such Person in connection therewith.  

 

2.5           Overadvances.  If, at any time or for any reason, the amount of Obligations owed by
Borrowers to the Lender Group pursuant to Section 2.1 or Section 2.12
is greater than any of the limitations set forth in Section 2.1, Section
2.3 or Section 2.12, as applicable (an “Overadvance”),
Borrowers immediately shall pay to Agent, in cash, the amount of such excess,
which amount shall be used by Agent to reduce the Obligations in accordance
with the priorities set forth in Section 2.4(b); provided, however,
that if an Overadvance occurs solely as a result of Agent making a change in
the criteria used to determine Eligible Accounts, Eligible Finished Goods
Inventory or Eligible Raw Materials Inventory, then Borrowers shall have 3
Business Days to pay Agent, in cash, the amount of such excess.  In addition, Borrowers hereby promise to pay
the Obligations (including principal, interest, fees, costs, and expenses) in
Dollars in full as and when due and payable under the terms of this Agreement
and the other Loan Documents.

 

2.6           Interest Rates and Letter of
Credit Fee:  Rates, Payments, and
Calculations.

 

(a)           Interest Rates.  Except as provided in clause (c) below, all Obligations (except for
undrawn Letters of Credit) that have been charged to the Loan Account pursuant
to the terms hereof shall bear interest on the Daily Balance thereof as follows:
(i) if the relevant Obligation is an Advance that is a LIBOR Rate Loan, at a
per annum rate equal to the LIBOR Rate plus the LIBOR Rate Margin, and (ii) otherwise,
at a per annum rate equal to the Base Rate plus the Base Rate Margin.

 

The foregoing
notwithstanding, at no time shall any portion of the Obligations bear interest
on the Daily Balance thereof at a per annum rate less than 3.75%.  To the extent that interest accrued hereunder
at the rate set forth herein would be less than the foregoing minimum daily
rate, the interest rate chargeable hereunder for such day automatically shall
be deemed increased to the minimum rate.

 

(b)           Letter of Credit Fee.  Borrowers shall pay Agent (for the ratable benefit of the Lenders,
subject to any agreements between Agent and individual Lenders), a Letter of
Credit fee (in addition to the charges, commissions, fees, and costs set forth
in Section 2.12(e)) which shall accrue at a rate equal to 2.00% per
annum times the Daily Balance of the undrawn amount of all outstanding Letters
of Credit.

 

(c)           Default Rate.  Upon the occurrence and during the continuation of an Event of Default,
but solely at the election of Agent or the Required Lenders,

 

(i)            all Obligations (except for undrawn Letters
of Credit) that have been charged to the Loan Account pursuant to the terms
hereof shall bear interest on the Daily Balance thereof at a per annum rate
equal to 2 percentage points above the per annum rate otherwise applicable
hereunder, and

 

(ii)           the Letter of Credit fee provided for above shall be increased to 2
percentage points above the per annum rate otherwise applicable hereunder.

 

(d)           Payment.  Except as provided to the contrary in Section 2.11 or Section
2.13(a), interest, Letter of Credit fees, and all other fees payable
hereunder shall be due and payable, in arrears, on the first day of each month during
the term hereof.  Borrowers hereby authorize
Agent, from time to time, without prior notice to Borrowers (except as
otherwise specifically provided in any Loan Document), to charge all interest
and fees (when due and payable), all Lender Group Expenses (as and when
incurred), all charges, commissions, fees, and costs provided for in Section
2.12(e) (as and when accrued or incurred), all fees and costs provided for
in Section 2.11 (as and when accrued or incurred), and all other
payments as and when due and payable under any Loan Document (including any
amounts due and payable to the Bank Product Providers in respect of Bank
Products up to the amount of the Bank Product Reserve) to Borrowers’ Loan
Account,

 

9

 

which amounts thereafter
shall constitute Advances hereunder and shall accrue interest at the rate then
applicable to Advances hereunder.  Any
interest not paid when due shall be compounded by being charged to Borrowers’
Loan Account and shall thereafter constitute Advances hereunder and shall
accrue interest at the rate then applicable to Advances that are Base Rate
Loans hereunder.

 

(e)           Computation.  All interest and fees chargeable under the Loan Documents shall be
computed on the basis of a 360 day year for the actual number of days elapsed.  In the event the Base Rate is changed from
time to time hereafter, the rates of interest hereunder based upon the Base
Rate automatically and immediately shall be increased or decreased by an amount
equal to such change in the Base Rate.  

 

(f)            Intent to Limit Charges to
Maximum Lawful Rate.  In no event shall the interest rate or rates
payable under this Agreement, plus any other amounts paid in connection
herewith, exceed the highest rate permissible under any law that a court of
competent jurisdiction shall, in a final determination, deem applicable.  Borrowers and the Lender Group, in executing
and delivering this Agreement, intend legally to agree upon the rate or rates
of interest and manner of payment stated within it; provided, however,
that, anything contained herein to the contrary notwithstanding, if said rate
or rates of interest or manner of payment exceeds the maximum allowable under
applicable law, then, ipso facto,
as of the date of this Agreement, Borrowers are and shall be liable only for
the payment of such maximum as allowed by law, and payment received from
Borrowers in excess of such legal maximum, whenever received, shall be applied
to reduce the principal balance of the Obligations to the extent of such
excess.

 

2.7           Cash Management.

 

(a)           Subject to Section 3.6(b), Borrowers shall and shall cause each
of their Restricted Subsidiaries to (i) establish and maintain cash management
services of a type and on terms reasonably satisfactory to Agent at one or more
of the banks set forth on Schedule 2.7(a) (each a “Cash Management
Bank”), and shall request in writing and otherwise take such reasonable
steps to ensure that all of their and their Restricted Subsidiaries’ Account
Debtors forward payment of the amounts owed by them directly to such Cash
Management Bank, and (ii) deposit or cause to be deposited promptly, and in any
event no later than the first Business Day after the date of receipt thereof,
all of their Collections (including those sent directly by their Account
Debtors to Borrowers or their Restricted Subsidiaries) into a bank account in
Agent’s name (a “Cash Management Account”) at one of the Cash Management
Banks.

 

(b)           Each Cash Management Bank shall establish and maintain Cash Management
Agreements with Agent and Borrowers, in form and substance reasonably acceptable
to Agent.  Each such Cash Management
Agreement shall provide, among other things, that (i) the Cash Management Bank
will comply with any instructions  (each,
a “Cash Disposition Instruction”), originated by Agent directing the disposition of the funds in such Cash
Management Account without further consent by a Borrower or its Restricted
Subsidiary, as applicable, (ii) the Cash Management Bank has no rights of
setoff or recoupment or any other claim against the applicable Cash Management
Account, other than for payment of its service fees and other charges directly
related to the administration of such Cash Management Account and for returned
checks or other items of payment, (iii) at any time after which the Agent so
instructs such Cash Management Bank (a “Cash Sweep Instruction”), it
immediately will forward by daily sweep all amounts in the applicable Cash
Management Account to the Agent’s Account until such time (if any) as Agent
notifies it that the Cash Sweep Instruction is terminated pursuant to the last
sentence of this Section 2.7(b); and (iv) if clause (iii) is not
applicable, then Agent shall direct the Cash Management bank to immediately
transfer all such amounts to Borrowers’ Designated Account.  Agent may issue a Cash Sweep Instruction or
Cash Disposition Instruction only on or after any date that: (x) an Event of
Default shall have occurred and be continuing or (y) the Borrowers’ average
Excess Availability during any consecutive 30-day period is less than $10,000,000.
 Agent shall terminate a Cash Sweep
Instruction by issuing new instructions to the Cash Management Bank within
three (3) Business Days after Borrowers’ average Excess Availability during any
consecutive 30-day period exceeds $10,000,000; provided, however,
that in no event shall Agent be required to terminate a Cash Sweep Instruction
more than three (3) times during any consecutive twelve (12) month period.

 

10

 

(c)           So long as no Default or Event of Default has occurred and is
continuing, Administrative Borrower may amend Schedule 2.7(a) to add or
replace a Cash Management Bank or Cash Management Account; provided, however,
that (i) such prospective Cash Management Bank shall be reasonably satisfactory
to Agent, and (ii) prior to the time of the opening of such Cash Management
Account, a Borrower or its Restricted Subsidiary, as applicable, and such
prospective Cash Management Bank shall have executed and delivered to Agent a
Cash Management Agreement.  Borrowers (or
their Restricted Subsidiaries, as applicable) shall close any of their Cash
Management Accounts (and establish replacement cash management accounts in
accordance with the foregoing sentence) promptly and in any event within 45
days of notice from Agent that the creditworthiness of any Cash Management Bank
is no longer acceptable in Agent’s reasonable judgment, or as promptly as
practicable and in any event within 75 days of notice from Agent that the
operating performance, funds transfer, or availability procedures or
performance of the Cash Management Bank with respect to Cash Management
Accounts or Agent’s liability under any Cash Management Agreement with such
Cash Management Bank is no longer acceptable in Agent’s reasonable judgment.

 

(d)           The Cash Management Accounts shall be cash collateral accounts subject
to Control Agreements.

 

(e)           Notwithstanding anything to the contrary contained herein, Agent
acknowledges that the Cash Management Accounts may contain from time to time
Trust Funds (as defined below), which, by law, Borrowers and their Subsidiaries
are required to collect and remit from time to time but which, pending such
remittance, shall be contained or held in the Cash Management Accounts.  Upon Agent’s delivery of a Cash Sweep
Instruction, Cash Disposition Instruction or any other exercise of control by
Agent under a Control Agreement or a Cash Management Agreement, Agent agrees to
notify Borrowers and their Subsidiaries of such exercise (which notice may be
by delivery of a copy of such Cash Sweep Instruction, if any).  Upon receipt of such notice, Borrowers and
their Subsidiaries shall send written notice to Agent certifying the type and
amount of any Trust Funds contained or held in the Cash Management
Accounts.  Within 3 Business Days after
receipt of such notice by Agent, Agent shall remit the amount of the Trust
Funds to Borrowers and their Subsidiaries for payment to the appropriate Person;
provided, that, during such 3 Business Day period, Agent shall have the
right to ask for further clarification, verification or other supporting
documentation with respect to any such type or amount certified by Borrowers or
their Subsidiaries as constituting Trust Funds and Agent shall not be required
to remit the amount of such Trust Funds so certified unless and until Agent is reasonably
satisfied as to such clarification, verification or other supporting
documentation.  For the purposes of this Agreement,
“Trust Funds” means all funds held by Borrowers and their Subsidiaries,
as a fiduciary, all taxes required to be collected or withheld (including,
without limitation, federal and state withholding taxes (including the employer’s
share thereof), taxes owing to any governmental unit thereof, sales, use and
excise taxes, customs duties, import duties and independent customs brokers’
charges), other taxes for which Borrowers and their Subsidiaries may become
liable, and accrued and unpaid employee compensation (including salaries,
wages, benefits and expense reimbursements).

 

2.8           Crediting Payments.  The receipt of any payment item by Agent (whether from transfers to
Agent by the Cash Management Banks pursuant to the Cash Management Agreements
or otherwise) shall not be considered a payment on account unless such payment
item is a wire transfer of immediately available federal funds made to the
Agent’s Account or unless and until such payment item is honored when presented
for payment.  Should any payment item not
be honored when presented for payment, then Borrowers shall be deemed not to have
made such payment and interest shall be calculated accordingly.  Anything to the contrary contained herein
notwithstanding, any payment item shall be deemed received by Agent only if it
is received into the Agent’s Account on a Business Day on or before 11:00 a.m.
(California time).  If any payment item
is received into the Agent’s Account on a non-Business Day or after 11:00 a.m.
(California time) on a Business Day, it shall be deemed to have been received
by Agent as of the opening of business on the immediately following Business
Day.  

 

2.9           Designated Account.  Agent is authorized to make the Advances, and Issuing Lender is
authorized to issue the Letters of Credit, under this Agreement based upon
telephonic or other instructions

 

11

 

received from anyone
purporting to be an Authorized Person or, without instructions, if pursuant to Section
2.6(d).  Administrative Borrower
agrees to establish and maintain the Designated Account with the Designated
Account Bank for the purpose of receiving the proceeds of the Advances
requested by Borrowers and made by Agent or the Lenders hereunder.  Unless otherwise agreed by Agent and
Administrative Borrower, any Advance, Protective Advance, or Swing Loan
requested by Borrowers and made by Agent or the Lenders hereunder shall be made
to the Designated Account.

 

2.10         Maintenance of Loan Account;
Statements of Obligations.  Agent shall maintain an account on its books
in the name of Borrowers (the “Loan Account”) on which Borrowers will be
charged with all Advances (including Protective Advances and Swing Loans) made
by Agent, Swing Lender, or the Lenders to Borrowers or for Borrowers’ account,
the Letters of Credit issued by Issuing Lender for Borrowers’ account, and with
all other payment Obligations hereunder or under the other Loan Documents,
including, accrued interest, fees and expenses, and Lender Group Expenses.  In accordance with Section 2.8, the
Loan Account will be credited with all payments received by Agent from
Borrowers or for Borrowers’ account, including all amounts received in the
Agent’s Account from any Cash Management Bank. 
In accordance with Section 2.6(d), Agent shall render statements
regarding the Loan Account to Administrative Borrower, including principal,
interest, fees, and including an itemization of all charges and expenses
constituting Lender Group Expenses owing, and such statements, absent manifest
error, shall be conclusively presumed to be correct and accurate and constitute
an account stated between Borrowers and the Lender Group unless, within 30 days
after receipt thereof by Administrative Borrower, Administrative Borrower shall
deliver to Agent written objection thereto describing the error or errors
contained in any such statements.

 

2.11         Fees.  Borrowers shall pay to Agent, as and when due and payable under the
terms of the Fee Letter, the fees set forth in the Fee Letter. 

 

2.12         Letters of Credit.

 

(a)           Subject to the terms and conditions of this Agreement, the Issuing
Lender agrees to issue letters of credit for the account of Borrowers (each, an
“L/C”) or to purchase participations or execute indemnities or
reimbursement obligations (each such undertaking, an “L/C Undertaking”)
with respect to letters of credit issued by an Underlying Issuer (as of the
Closing Date, the prospective Underlying Issuer is to be Wells Fargo) for the
account of Borrowers.  Each request for
the issuance of a Letter of Credit or the amendment, renewal, or extension of any
outstanding Letter of Credit shall be made in writing by an Authorized Person
and delivered to the Issuing Lender and Agent via hand delivery, telefacsimile,
or other electronic method of transmission reasonably in advance of the
requested date of issuance, amendment, renewal, or extension.  Each such request shall be in form and
substance satisfactory to the Issuing Lender in its reasonable discretion and
shall specify (i) the amount of such Letter of Credit, (ii) the date of
issuance, amendment, renewal, or extension of such Letter of Credit, (iii) the
expiration date of such Letter of Credit, (iv) the name and address of the
beneficiary thereof (or the beneficiary of the Underlying Letter of Credit, as
applicable), and (v) such other information (including, in the case of an
amendment, renewal, or extension, identification of the outstanding Letter of
Credit to be so amended, renewed, or extended) as shall be necessary to
prepare, amend, renew, or extend such Letter of Credit.  If requested by the Issuing Lender, Borrowers
also shall be an applicant under the application with respect to any Underlying
Letter of Credit that is to be the subject of an L/C Undertaking.  The Issuing Lender shall have no obligation
to issue a Letter of Credit if any of the following would result after giving
effect to the issuance of such requested Letter of Credit:

 

(i)            the Letter of Credit Usage would exceed the
Borrowing Base less the
outstanding amount of Advances, or

 

(ii)           the Letter of Credit Usage would exceed $10,000,000, or

 

(iii)          the Letter of Credit Usage would exceed the Maximum Revolver Amount less the outstanding amount of Advances.

 

12

 

Borrowers and the Lender
Group acknowledge and agree that certain Underlying Letters of Credit may be
issued to support letters of credit that already are outstanding as of the
Closing Date.  Each Letter of Credit (and
corresponding Underlying Letter of Credit) shall be in form and substance
acceptable to the Issuing Lender (in the exercise of its reasonable discretion),
including the requirement that the amounts payable thereunder must be payable
in Dollars.  If Issuing Lender is
obligated to advance funds under a Letter of Credit, Borrowers immediately
shall reimburse such L/C Disbursement to Issuing Lender upon receiving written or
telephonic notice of such L/C Disbursement by paying to Agent an amount equal
to such L/C Disbursement not later than 11:00 a.m., California time, on the
date that such L/C Disbursement is made, provided, that Administrative
Borrower has received written or telephonic notice of such L/C Disbursement
prior to 10:00 a.m., California time, on such date, or, if such notice has not
been received by Administrative Borrower prior to such time on such date, then
not later than 11:00 a.m., California time, on the Business Day immediately
following the day that Administrative Borrower receives such notice, pursuant
to the foregoing, and, in the absence of such reimbursement, the L/C
Disbursement immediately and automatically shall be deemed to be an Advance
hereunder and, thereafter, shall bear interest at the rate then applicable to
Advances that are Base Rate Loans under Section 2.6.  To the extent an L/C Disbursement is deemed
to be an Advance hereunder, Borrowers’ obligation to reimburse such L/C Disbursement
shall be discharged and replaced by the resulting Advance.  Promptly following receipt by Agent of any
payment from Borrowers pursuant to this paragraph, Agent shall distribute such
payment to the Issuing Lender or, to the extent that Lenders have made payments
pursuant to Section 2.12(c) to reimburse the Issuing Lender, then to
such Lenders and the Issuing Lender as their interests may appear.

 

(b)           Promptly following receipt of a notice of L/C Disbursement pursuant to Section
2.12(a), each Lender agrees to fund its Pro Rata Share of any Advance
deemed made pursuant to the foregoing subsection on the same terms and
conditions as if Borrowers had requested such Advance and Agent shall promptly
pay to Issuing Lender the amounts so received by it from the Lenders.  By the issuance of a Letter of Credit (or an
amendment to a Letter of Credit increasing the amount thereof) and without any
further action on the part of the Issuing Lender or the Lenders, the Issuing
Lender shall be deemed to have granted to each Lender, and each Lender shall be
deemed to have purchased, a participation in each Letter of Credit, in an
amount equal to its Pro Rata Share of the Risk Participation Liability of such
Letter of Credit, and each such Lender agrees to pay to Agent, for the account
of the Issuing Lender, such Lender’s Pro Rata Share of any payments made by the
Issuing Lender under such Letter of Credit. 
In consideration and in furtherance of the foregoing, each Lender hereby
absolutely and unconditionally agrees to pay to Agent, for the account of the
Issuing Lender, such Lender’s Pro Rata Share of each L/C Disbursement made by
the Issuing Lender and not reimbursed by Borrowers on the date due as provided
in clause (a) of this Section, or of any reimbursement payment required to be
refunded to Borrowers for any reason.  Each
Lender acknowledges and agrees that its obligation to deliver to Agent, for the
account of the Issuing Lender, an amount equal to its respective Pro Rata Share
of each L/C Disbursement made by the Issuing Lender pursuant to this Section
2.12(b) shall be absolute and unconditional and such remittance shall be
made notwithstanding the occurrence or continuation of an Event of Default or
Default or the failure to satisfy any condition set forth in Section 3
hereof.  If any such Lender fails to make
available to Agent the amount of such Lender’s Pro Rata Share of each L/C
Disbursement made by the Issuing Lender in respect of such Letter of Credit as
provided in this Section, such Lender shall be deemed to be a Defaulting Lender
and Agent (for the account of the Issuing Lender) shall be entitled to recover
such amount on demand from such Lender together with interest thereon at the
Defaulting Lender Rate until paid in full.

 

(c)           Each Borrower hereby agrees to indemnify, save, defend, and hold the
Lender Group harmless from any loss, cost, expense, or liability, and
reasonable attorneys fees incurred by the Lender Group arising out of or in
connection with any Letter of Credit; provided, however, that no
Borrower shall be obligated hereunder to indemnify for any loss, cost, expense,
or liability to the extent that it is caused by the gross negligence or willful
misconduct of the Issuing Lender or any other member of the Lender Group.  Each Borrower agrees to be bound by the
Underlying Issuer’s regulations and interpretations of any Underlying Letter of
Credit or by Issuing Lender’s interpretations of any L/C issued by Issuing
Lender to or for such Borrower’s account, even though this interpretation may
be different from such Borrower’s own, and each

 

13

 

Borrower understands and
agrees that the Lender Group shall not be liable for any error, negligence, or
mistake, whether of omission or commission, in following Borrowers’
instructions or those contained in the Letter of Credit or any modifications,
amendments, or supplements thereto.  Each
Borrower understands that the L/C Undertakings may require Issuing Lender to
indemnify the Underlying Issuer for certain costs or liabilities arising out of
claims by Borrowers against such Underlying Issuer.  Each Borrower hereby agrees to indemnify,
save, defend, and hold the Lender Group harmless with respect to any loss,
cost, expense (including reasonable attorneys fees), or liability incurred by
the Lender Group under any L/C Undertaking as a result of the Lender Group’s
indemnification of any Underlying Issuer; provided, however, that
no Borrower shall be obligated hereunder to indemnify for any loss, cost,
expense, or liability to the extent that it is caused by the gross negligence
or willful misconduct of the Issuing Lender or any other member of the Lender
Group.  Each Borrower hereby acknowledges
and agrees that neither the Lender Group nor the Issuing Lender shall be responsible
for delays, errors, or omissions resulting from the malfunction of equipment in
connection with any Letter of Credit.

 

(d)           Each Borrower hereby authorizes and directs any Underlying Issuer to
deliver to the Issuing Lender all instruments, documents, and other writings
and property received by such Underlying Issuer pursuant to such Underlying
Letter of Credit and to accept and rely upon the Issuing Lender’s instructions
with respect to all matters arising in connection with such Underlying Letter
of Credit and the related application. 

 

(e)           Any and all issuance charges, commissions, fees, and costs incurred by
the Issuing Lender relating to Underlying Letters of Credit shall be Lender
Group Expenses for purposes of this Agreement and immediately shall be
reimbursable by Borrowers to Agent for the account of the Issuing Lender; it
being acknowledged and agreed by each Borrower that, as of the Closing Date,
the issuance charge imposed by the prospective Underlying Issuer is .825% per
annum times the face amount of each Underlying Letter of Credit, that such
issuance charge may be changed from time to time, and that the Underlying
Issuer also imposes a schedule of charges for amendments, extensions, drawings,
and renewals.

 

(f)            If by reason of (i) any change after the
Closing Date in any applicable law, treaty, rule, or regulation or any change
in the interpretation or application thereof by any Governmental Authority, or
(ii) compliance by the Underlying Issuer or the Lender Group with any
direction, request, or requirement (irrespective of whether having the force of
law) of any Governmental Authority or monetary authority including, Regulation
D of the Federal Reserve Board as from time to time in effect (and any
successor thereto):

 

(i)            any reserve, deposit, or similar requirement
is or shall be imposed or modified in respect of any Letter of Credit issued
hereunder, or

 

(ii)           there shall be imposed on the Underlying Issuer or the Lender Group any
other condition regarding any Underlying Letter of Credit or any Letter of
Credit issued pursuant hereto;

 

and the result of the
foregoing is to increase, directly or indirectly, the cost to the Lender Group
of issuing, making, guaranteeing, or maintaining any Letter of Credit or to
reduce the amount receivable in respect thereof by the Lender Group, then, and
in any such case, Agent may, at any time within a reasonable period after the
additional cost is incurred or the amount received is reduced, notify
Administrative Borrower, and Borrowers shall pay on demand such amounts as
Agent may specify to be necessary to compensate the Lender Group for such
additional cost or reduced receipt, together with interest on such amount from
the date of such demand until payment in full thereof at the rate then
applicable to Base Rate Loans hereunder. 
The determination by Agent of any amount due pursuant to this Section,
as set forth in a certificate setting forth the calculation thereof in
reasonable detail, shall, in the absence of manifest or demonstrable error, be
final and conclusive and binding on all of the parties hereto.

 

14

 

2.13         LIBOR Option.

 

(a)           Interest and Interest
Payment Dates.  In lieu of having interest charged at the
rate based upon the Base Rate, Borrowers shall have the option (the “LIBOR
Option”) to have interest on all or a portion of the Advances be charged at
a rate of interest based upon the LIBOR Rate. 
Interest on LIBOR Rate Loans shall be payable on the earliest of (i) the
last day of the Interest Period applicable thereto (provided, however,
that, subject to the following clauses (ii) and (iii), in the case of any
Interest Period greater than 3 months in duration, interest shall be payable at
3 month intervals after the commencement of the applicable Interest Period and
on the last day of such Interest Period), (ii) the occurrence of an Event of
Default in consequence of which the Required Lenders or Agent on behalf thereof
have elected to accelerate the maturity of all or any portion of the
Obligations, or (iii) termination of this Agreement pursuant to the terms
hereof.  On the last day of each
applicable Interest Period, unless Administrative Borrower properly has
exercised the LIBOR Option with respect thereto, the interest rate applicable
to such LIBOR Rate Loan automatically shall convert to the rate of interest
then applicable to Base Rate Loans of the same type hereunder.  At any time that an Event of Default has
occurred and is continuing, Borrowers no longer shall have the option to
request that Advances bear interest at a rate based upon the LIBOR Rate and
Agent shall have the right to convert the interest rate on all outstanding
LIBOR Rate Loans to the rate then applicable to Base Rate Loans hereunder.

 

(b)           LIBOR Election.

 

(i)            Administrative Borrower may, at any time and
from time to time, so long as no Event of Default has occurred and is
continuing, elect to exercise the LIBOR Option by notifying Agent prior to
11:00 a.m. (California time) at least 3 Business Days prior to the commencement
of the proposed Interest Period (the “LIBOR Deadline”).  Notice of Administrative Borrower’s election
of the LIBOR Option for a permitted portion of the Advances and an Interest
Period pursuant to this Section shall be made by delivery to Agent of a LIBOR
Notice received by Agent before the LIBOR Deadline, or by telephonic notice
received by Agent before the LIBOR Deadline (to be confirmed by delivery to
Agent of a LIBOR Notice received by Agent prior to 5:00 p.m. (California time)
on the same day).  Promptly upon its
receipt of each such LIBOR Notice, Agent shall provide a copy thereof to each
of the Lenders.

 

(ii)           Each LIBOR Notice shall be irrevocable and binding on Borrowers.  In connection with each LIBOR Rate Loan, each
Borrower shall indemnify, defend, and hold Agent and the Lenders harmless
against any loss, cost, or expense incurred by Agent or any Lender as a result
of (A) the payment of any principal of any LIBOR Rate Loan other than on the
last day of an Interest Period applicable thereto (including as a result of an
Event of Default), (B) the conversion of any LIBOR Rate Loan other than on the
last day of the Interest Period applicable thereto, or (C) the failure to
borrow, convert, continue or prepay any LIBOR Rate Loan on the date specified
in any LIBOR Notice delivered pursuant hereto (such losses, costs, and
expenses, collectively, “Funding Losses”).  Funding Losses shall, with respect to Agent
or any Lender, be deemed to equal the amount determined by Agent or such Lender
to be the excess, if any, of (1) the amount of interest that would have accrued
on the principal amount of such LIBOR Rate Loan had such event not occurred, at
the LIBOR Rate that would have been applicable thereto, for the period from the
date of such event to the last day of the then current Interest Period therefor
(or, in the case of a failure to borrow, convert or continue, for the period
that would have been the Interest Period therefor), minus (2) the amount of interest that would accrue on such
principal amount for such period at the interest rate which Agent or such
Lender would be offered were it to be offered, at the commencement of such
period, Dollar deposits of a comparable amount and period in the London
interbank market.  A certificate of Agent
or a Lender delivered to Administrative Borrower setting forth any amount or
amounts that Agent or such Lender is entitled to receive pursuant to this Section
2.13 shall be conclusive absent manifest error unless the Administrative
Borrower shall object in writing within seven (7) Business Days of receipt
thereof, specifying the basis for such objection in detail.

 

15

 

(iii)          Borrowers shall have not more than 5 LIBOR Rate Loans in effect at any
given time.  Borrowers only may exercise
the LIBOR Option for LIBOR Rate Loans of at least $1,000,000 and integral
multiples of $500,000 in excess thereof.

 

(c)           Prepayments.  Borrowers may prepay LIBOR Rate Loans or convert such Loans to Base
Rate Loans at any time; provided, however, that in the event that
LIBOR Rate Loans are so prepaid or converted on any date that is not the last
day of the Interest Period applicable thereto, including as a result of any
automatic prepayment through the required application by Agent of proceeds of
Borrowers’ and their respective Restricted Subsidiaries’ Collections in
accordance with Section 2.4(b) or for any other reason, including early
termination of the term of this Agreement or acceleration of all or any portion
of the Obligations pursuant to the terms hereof, each Borrower shall indemnify,
defend, and hold Agent and the Lenders and their Participants harmless against
any and all Funding Losses in accordance with clause (b)(ii) above.

 

(d)           Special Provisions Applicable to LIBOR Rate.

 

(i)            The LIBOR Rate may be adjusted by Agent with
respect to any Lender on a prospective basis to take into account any
additional or increased costs to such Lender of maintaining or obtaining any
eurodollar deposits or increased costs, in each case, due to changes in applicable
law occurring subsequent to the commencement of the then applicable Interest
Period, including changes in tax laws (except changes of general applicability
in tax laws relating to taxes based on income, profits, receipts or capital)
and changes in the reserve requirements imposed by the Board of Governors of
the Federal Reserve System (or any successor), excluding the Reserve
Percentage, which additional or increased costs would increase the cost of
funding loans bearing interest at the LIBOR Rate.  In any such event, the affected Lender shall
give Administrative Borrower and Agent notice of such a determination and
adjustment and Agent promptly shall transmit the notice to each other Lender
and, upon its receipt of the notice from the affected Lender, Administrative
Borrower may, by notice to such affected Lender (y) require such Lender to
furnish to Administrative Borrower a statement setting forth the basis for
adjusting such LIBOR Rate and the method for determining the amount of such
adjustment accompanied by a certificate of such Lender stating that it is
charging such similar increased costs to similarly situated borrowers, or
(z) repay the LIBOR Rate Loans with respect to which such adjustment is
made (together with any amounts due under clause (b)(ii) above).

 

(ii)           In the event that any change in market conditions or any law,
regulation, treaty, or directive, or any change therein or in the
interpretation of application thereof, shall at any time after the date hereof,
in the reasonable opinion of any Lender, make it unlawful or impractical for
such Lender to fund or maintain LIBOR Rate Loans or to continue such funding or
maintaining, or to determine or charge interest rates at the LIBOR Rate, such
Lender shall give notice of such changed circumstances to Agent and
Administrative Borrower and Agent promptly shall transmit the notice to each
other Lender and (y) in the case of any LIBOR Rate Loans of such Lender that
are outstanding, the date specified in such Lender’s notice shall be deemed to
be the last day of the Interest Period of such LIBOR Rate Loans, and interest
upon the LIBOR Rate Loans of such Lender thereafter shall accrue interest at
the rate then applicable to Base Rate Loans, and (z) Borrowers shall not be
entitled to elect the LIBOR Option until such Lender determines that it would
no longer be unlawful or impractical to do so.

 

(e)           No Requirement of Matched
Funding.  Anything to the contrary contained herein
notwithstanding, neither Agent, nor any Lender, nor any of their Participants,
is required actually to acquire eurodollar deposits to fund or otherwise match
fund any Obligation as to which interest accrues at the LIBOR Rate.  The provisions of this Section shall apply as
if each Lender or its Participants had match funded any Obligation as to which
interest is accruing at the LIBOR Rate by acquiring eurodollar deposits for
each Interest Period in the amount of the LIBOR Rate Loans.

 

2.14         Capital Requirements.  If, after the date hereof, either (i) the adoption of or change in any law,
rule, regulation or guideline regarding capital requirements for banks or bank
holding companies, or any

 

16

 

change in the interpretation
or application thereof by any Governmental Authority charged with the
administration thereof, or (ii) compliance by any Lender or its parent bank
holding company with any guideline, request or directive of any such entity
regarding capital adequacy (whether or not having the force of law), has the
effect of reducing the return on such Lender’s or such holding company’s
capital as a consequence of such Lender’s Commitments hereunder to a level
below that which such Lender or such holding company could have achieved but
for such adoption, change, or compliance (taking into consideration such Lender’s
or such holding company’s then existing policies with respect to capital
adequacy and assuming the full utilization of such entity’s capital) by any
amount deemed in good faith by such Lender to be material and the result is an
increase in the cost to any Lender of funding or maintaining any Advances to
Borrowers, then such Lender may notify Administrative Borrower and Agent
thereof.  Following receipt of such
notice, Borrowers agree to pay such Lender on demand the amount of such
reduction of return of capital as and when such reduction is determined,
payable within 90 days after presentation by such Lender of a statement in the
amount and setting forth in reasonable detail such Lender’s calculation thereof
and the assumptions upon which such calculation was based (which statement
shall be deemed true and correct absent manifest error).  In determining such amount, such Lender may
use any reasonable averaging and attribution methods.

 

2.15         Joint and Several Liability
of Borrowers.

 

(a)           Each Borrower is accepting joint and several liability hereunder and
under the other Loan Documents in consideration of the financial accommodations
to be provided by the Lender Group under this Agreement, for the mutual
benefit, directly and indirectly, of each Borrower and in consideration of the
undertakings of the other Borrowers to accept joint and several liability for
the Obligations.

 

(b)           Each Borrower, jointly and severally, hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor, joint
and several liability with the other Borrowers, with respect to the payment and
performance of all of the Obligations (including, without limitation, any
Obligations arising under this Section 2.15), it being the intention of
the parties hereto that all the Obligations shall be the joint and several
obligations of each Borrower without preferences or distinction among them.

 

(c)           If and to the extent that any Borrower shall fail to make any payment
with respect to any of the Obligations as and when due or to perform any of the
Obligations in accordance with the terms thereof, then in each such event the
other Borrowers will make such payment with respect to, or perform, such
Obligation. 

 

(d)           The Obligations of each Borrower under the provisions of this Section
2.15 constitute the absolute and unconditional, full recourse Obligations
of each Borrower enforceable against each Borrower to the full extent of its
properties and assets, irrespective of the validity, regularity or
enforceability of this Agreement or any other circumstances whatsoever.

 

(e)           Except as otherwise expressly provided in this Agreement, each Borrower
hereby waives notice of acceptance of its joint and several liability, notice
of any Advances or Letters of Credit issued under or pursuant to this
Agreement, notice of the occurrence of any Default, Event of Default, or of any
demand for any payment under this Agreement, notice of any action at any time
taken or omitted by Agent or Lenders under or in respect of any of the
Obligations, any requirement of diligence or to mitigate damages and,
generally, to the extent permitted by applicable law, all demands, notices and
other formalities of every kind in connection with this Agreement (except as
otherwise provided in this Agreement). 
Each Borrower hereby assents to, and waives notice of, any extension or
postponement of the time for the payment of any of the Obligations, the
acceptance of any payment of any of the Obligations, the acceptance of any
partial payment thereon, any waiver, consent or other action or acquiescence by
Agent or Lenders at any time or times in respect of any default by any Borrower
in the performance or satisfaction of any term, covenant, condition or
provision of this Agreement, and the taking, addition, substitution or release,
in whole or in part, at any time or times, of any security for any of the
Obligations or the addition, substitution or release, in whole or in part, of
any Borrower.  Without limiting the
generality of the foregoing, each Borrower assents to any other action or

 

17

 

delay in acting or failure
to act on the part of any Agent or Lender with respect to the failure by any
Borrower to comply with any of its respective Obligations, including, without
limitation, any failure strictly or diligently to assert any right or to pursue
any remedy or to comply fully with applicable laws or regulations thereunder,
which might, but for the provisions of this Section 2.15 afford grounds
for terminating, discharging or relieving any Borrower, in whole or in part,
from any of its Obligations under this Section 2.15, it being the
intention of each Borrower that, so long as any of the Obligations hereunder
remain unsatisfied, the Obligations of each Borrower under this Section 2.15
shall not be discharged except by performance and then only to the extent of
such performance.  The Obligations of
each Borrower under this Section 2.15 shall not be diminished or
rendered unenforceable by any winding up, reorganization, arrangement,
liquidation, reconstruction or similar proceeding with respect to any Borrower
or any Agent or Lender.  

 

(f)            Each Borrower represents and warrants to
Agent and Lenders that such Borrower is currently informed of the financial
condition of Borrowers and of all other circumstances which a diligent inquiry
would reveal and which bear upon the risk of nonpayment of the
Obligations.  Each Borrower further
represents and warrants to Agent and Lenders that such Borrower has read and
understands the terms and conditions of the Loan Documents.  Each Borrower hereby covenants that such
Borrower will continue to keep informed of Borrowers’ financial condition, the
financial condition of other guarantors, if any, and of all other circumstances
which bear upon the risk of nonpayment or nonperformance of the Obligations.

 

(g)           Each Borrower waives all rights and defenses arising out of an election
of remedies by Agent or any Lender, even though that election of remedies, such
as a nonjudicial foreclosure with respect to security for a guaranteed
obligation, has destroyed Agent’s or such Lender’s rights of subrogation and
reimbursement against such Borrower by the operation of Section 580(d) of the
California Code of Civil Procedure or otherwise.

 

(h)           Each Borrower waives all rights and defenses that such Borrower may
have because the Obligations are secured by Real Property.  This means, among other things:

 

(i)            Agent and Lenders may collect from such
Borrower without first foreclosing on any Collateral pledged by Borrowers.

 

(ii)           If Agent or any Lender forecloses on any Real Property Collateral
pledged by Borrowers:

 

(A)          The amount of the Obligations may be reduced only by the price for
which that collateral is sold at the foreclosure sale, even if the collateral
is worth more than the sale price.

 

(B)           Agent and Lenders may  collect
from such Borrower even if Agent or Lenders, by foreclosing on the Real
Property Collateral, has destroyed any right such Borrower may have to collect
from the other Borrowers.

 

This is an unconditional and
irrevocable waiver of any rights and defenses such Borrower may have because
the Obligations are secured by Real Property. 
These rights and defenses include, but are not limited to, any rights or
defenses based upon Section 580a, 580b, 580d or 726 of the California Code of
Civil Procedure.

 

(i)            The provisions of this Section 2.15
are made for the benefit of Agent, Lenders and their respective successors and
assigns, and may be enforced by it or them from time to time against any or all
Borrowers as often as occasion therefor may arise and without requirement on
the part of any such Agent, Lender, successor or assign first to marshal any of
its or their claims or to exercise any of its or their rights against any
Borrower or to exhaust any remedies available to it or them against any
Borrower or to resort to any other source or means of obtaining payment of any
of the Obligations hereunder or to elect any other remedy.  The provisions of this Section 2.15
shall remain in effect until all of the Obligations shall have been paid in
full or otherwise fully satisfied.  If at
any time, any payment, or any part thereof, made in respect of any

 

18

 

of the Obligations, is rescinded
or must otherwise be restored or returned by any Agent or Lender upon the
insolvency, bankruptcy or reorganization of any Borrower, or otherwise, the
provisions of this Section 2.15 will forthwith be reinstated in effect,
as though such payment had not been made.

 

(j)            Each Borrower hereby agrees that it will not
enforce any of its rights of contribution or subrogation against any other
Borrower with respect to any liability incurred by it hereunder or under any of
the other Loan Documents, any payments made by it to Agent or Lenders with
respect to any of the Obligations or any collateral security therefor until
such time as all of the Obligations have been paid in full in cash.  Any claim which any Borrower may have against
any other Borrower with respect to any payments to any Agent or Lender
hereunder or under any other Loan Documents are hereby expressly made
subordinate and junior in right of payment, without limitation as to any
increases in the Obligations arising hereunder or thereunder, to the prior
payment in full in cash of the Obligations and, in the event of any insolvency,
bankruptcy, receivership, liquidation, reorganization or other similar
proceeding under the laws of any jurisdiction relating to any Borrower, its
debts or its assets, whether voluntary or involuntary, all such Obligations
shall be paid in full in cash before any payment or distribution of any
character, whether in cash, securities or other property, shall be made to any
other Borrower therefor.

 

(k)           Each Borrower hereby agrees that, after the occurrence and during the
continuance of any Default or Event of Default, the payment of any amounts due
with respect to the indebtedness owing by any Borrower to any other Borrower is
hereby subordinated to the prior payment in full in cash of the
Obligations.  Each Borrower hereby agrees
that after the occurrence and during the continuance of any Default or Event of
Default, such Borrower will not demand, sue for or otherwise attempt to collect
any indebtedness of any other Borrower owing to such Borrower until the
Obligations shall have been paid in full in cash.  If, notwithstanding the foregoing sentence,
such Borrower shall collect, enforce or receive any amounts in respect of such
indebtedness, such amounts shall be collected, enforced and received by such
Borrower as trustee for Agent, and such Borrower shall deliver any such amounts
to Agent for application to the Obligations in accordance with Section
2.4(b).

 

3.             CONDITIONS; TERM OF
AGREEMENT.

 

3.1           Conditions Precedent to the
Initial Extension of Credit.  The obligation of each Lender to make its
initial extension of credit provided for hereunder, is subject to the
fulfillment, to the satisfaction of Agent and each Lender of each of the
conditions precedent set forth on Schedule 3.1 (the making of such
initial extension of credit by a Lender being conclusively deemed to be its
satisfaction or waiver of the conditions precedent).

 

3.2           Conditions Precedent to all
Extensions of Credit.  The obligation of the Lender Group (or any
member thereof) to make any Advances hereunder at any time (or to extend any
other credit hereunder) shall be subject to the following conditions precedent:

 

(a)           the representations and warranties contained in this Agreement and in
the other Loan Documents shall be true and correct in all material respects on
and as of the date of such extension of credit, as though made on and as of
such date (except to the extent that such representations and warranties relate
solely to an earlier date);

 

(b)           no Default or Event of Default shall have occurred and be continuing on
the date of such extension of credit, nor shall either result from the making
thereof; 

 

(c)           no injunction, writ, restraining order, or other order of any nature
restricting or prohibiting, directly or indirectly, the extending of such
credit shall have been issued and remain in force by any Governmental Authority
against any Borrower, Agent, any Lender, or any of their Affiliates; and

 

(d)           no Material Adverse Change shall have occurred.

 

19

 

3.3           Term.  This Agreement shall continue in full force and effect for a term
ending on the fifth anniversary of the date hereof (the “Maturity Date”).  The foregoing notwithstanding, the Lender
Group, upon the election of the Required Lenders, shall have the right to
terminate its obligations under this Agreement immediately and without notice
upon the occurrence and during the continuation of an Event of Default.

 

3.4           Effect of Termination.  On the date of termination of this Agreement, all Obligations
(including contingent reimbursement obligations of Borrowers with respect to
outstanding Letters of Credit) and Bank Product Obligations immediately shall
become due and payable without notice or demand and Borrowers agree to (a)
either (i) provide cash collateral to be held by Agent for the benefit of those
Lenders in an amount equal to 105% of the Letter of Credit Usage, or (ii) cause
the original Letters of Credit to be returned to the Issuing Lender, and (b)
provide cash collateral or other security reasonably satisfactory to Agent (in
an amount determined by Agent as sufficient to satisfy the reasonably estimated
credit exposure) to be held by Agent for the benefit of the Bank Product
Providers with respect to the Bank Product Obligations).  No termination of this Agreement, however,
shall relieve or discharge Borrowers or their respective Restricted
Subsidiaries of their duties, Obligations, Bank Product Obligations, or
covenants hereunder or under any other Loan Document and the Agent’s Liens in
the Collateral shall remain in effect until all Obligations and Bank Product
Obligations have been paid in full and the Lender Group’s obligations to
provide additional credit hereunder have been terminated.  When this Agreement has been terminated and
all of the Obligations and Bank Product Obligations have been paid in full and
the Lender Group’s obligations to provide additional credit under the Loan
Documents have been terminated irrevocably, Agent will, at Borrowers’ sole
expense, execute and deliver any termination statements, lien releases,
mortgage releases, re-assignments of trademarks, discharges of security
interests, and other similar discharge or release documents (and, if
applicable, in recordable form) as are reasonably necessary to release, as of
record, the Agent’s Liens and all notices of security interests and liens
previously filed by Agent with respect to the Obligations and Bank Product
Obligations.  

 

3.5           Early Termination by
Borrowers.  Borrowers have the option, at any time upon
30 days prior written notice by Administrative Borrower to Agent, to terminate
this Agreement by paying to Agent, in cash, the Obligations and the Bank
Product Obligations (including (a) either (i) providing cash collateral to be
held by Agent for the benefit of those Lenders in an amount equal to 105% of
the Letter of Credit Usage, or (ii) causing the original Letters of Credit
to be returned to the Issuing Lender, and (b) providing cash collateral or
other security reasonably satisfactory to Agent (in an amount determined by
Agent as sufficient to satisfy the reasonably estimated credit exposure) to be
held by Agent for the benefit of the Bank Product Providers with respect to the
Bank Products Obligations), in full, together with the Applicable Prepayment
Premium.  If Administrative Borrower has
sent a notice of termination pursuant to the provisions of this Section, then,
absent an agreement to the contrary contained in any Loan Document, the Commitments
shall terminate and Borrowers shall be obligated to repay the Obligations and
the Bank Product Obligations (including (a) either (i) providing cash
collateral to be held by Agent for the benefit of those Lenders in an amount
equal to 105% of the Letter of Credit Usage, or (ii) causing the original
Letters of Credit to be returned to the Issuing Lender, and (b) providing cash
collateral or other security reasonably satisfactory to Agent (in an amount
determined by Agent as sufficient to satisfy the reasonably estimated credit exposure)
to be held by Agent for the benefit of the Bank Product Providers with respect
to the Bank Products Obligations), in full, together with the Applicable
Prepayment Premium, on the date set forth as the date of termination of this
Agreement in such notice.

 

3.6           Conditions Subsequent to the Initial Extension of Credit.  The obligation of the Lender Group (or any member thereof) to continue
to make Advances (or otherwise extend credit hereunder) is subject to the
fulfillment, on or before the date applicable thereto, of each of the
conditions subsequent set forth below (the failure by Borrowers to so perform
or cause to be performed constituting an Event of Default):

 

(a)           within 30 days after the Closing Date,
Borrowers shall have delivered to Agent certified copies of the policies of
insurance, together with the endorsements thereto, as are required by Section
5.8, the form and substance of which shall be reasonably satisfactory to
Agent and its counsel;

 

20

 

(b)           within 45 days after the Closing Date,
Borrowers shall deliver to Agent Cash Management Agreements and Control
Agreements, in form and substance reasonably satisfactory to Agent;

 

(c)           within 90 days after the Closing Date, Borrowers shall use their commercially
reasonable efforts to deliver to Agent Collateral Access Agreements with
respect to all leased locations, including, without limitation, the following
locations: Niagara International Trade Center, 2221 Niagara Falls Boulevard,
Wheatfield, New York; 701 I-85 North, Charlotte, North Carolina; 14 Hayward
Street, Quincy, Massachusetts; and 16319 Arthur Street, Cerritos, California (it being understood and agreed that Agent
may, in its Permitted Discretion, take a reserve for rent payable in respect of
any leased location for which a Collateral Access Agreement is not so obtained);

 

(d)           within 5 days (or, in the case of clause (iv)
below, 10 days) after the Closing Date, Borrowers shall deliver to Agent the following
certificates representing shares of Stock pledged under the Security Agreement,
as well as Stock powers with respect thereto endorsed in blank: (i) Certificate
#5 for 65 Common Shares of 3091780 Nova Scotia Company, (ii) Certificate #7 for
65 Common Shares of 3091780 Nova Scotia Company, (iii) Certificate #102 for 10
shares of Kilian Manufacturing Corporation, and (iv) a certificate representing
65% of the Stock of Warner Electric UK Group Ltd.; and

 

(e)           within 60 days after the Closing Date, the
following conditions shall have been satisfied with respect to all Real
Property Collateral (other than the Real Property Collateral located in the
State of New York): (a) Agent shall have been granted a first priority Mortgage
on such Real Property Collateral; (b) Agent shall have received mortgagee title
insurance policies (or marked commitments to issue the same) for such Real
Property Collateral issued by a title insurance company reasonably satisfactory
to Agent in an amount reasonably satisfactory to Agent assuring Agent that the
Mortgage on such Real Property Collateral is a valid and enforceable first
priority mortgage Lien on such Real Property Collateral free and clear of all
defects and encumbrances except Permitted Liens, and such mortgagee title
insurance policies (or marked commitments to issue the same) otherwise shall be
in form and substance reasonably satisfactory to Agent; (c) Borrowers and their
Subsidiaries shall have paid to said title insurance company all expenses and
premiums of said title insurance company in connection with the issuance of
such mortgagee title insurance policies (or marked commitments to issue the
same) and in addition shall, to the extent required, have paid all recording
costs, stamp taxes, mortgage taxes, intangibles taxes and other fees and costs
(including reasonable attorneys fees and expenses) incurred in connection
therewith; and (d) Agent shall have received such other documentation and
opinions of counsel, in form and substance reasonably satisfactory to Agent, in
connection with the grant of such Mortgage as Agent shall request in its
Permitted Discretion, including, without limitation, surveys (or existing
surveys and survey affidavits that are (x) sufficient to have the “matters that
would be shown on a survey” exception deleted from the mortgagee policy of
title insurance and (y) reasonably satisfactory to Agent), financing statements
and fixture filings.

 

4.             REPRESENTATIONS AND
WARRANTIES.

 

In order to induce the
Lender Group to enter into this Agreement, each Borrower makes the following
representations and warranties to the Lender Group which shall be true,
correct, and complete, in all material respects, as of the date hereof, and
shall be true, correct, and complete, in all material respects, as of the
Closing Date, and at and as of the date of the making of each Advance (or other
extension of credit) made thereafter, as though made on and as of the date of
such Advance (or other extension of credit) (except to the extent that such
representations and warranties relate solely to an earlier date) and such
representations and warranties shall survive the execution and delivery of this
Agreement:

 

4.1           No Encumbrances.  Borrowers and their respective Restricted Subsidiaries have good and
indefeasible title to, or a valid leasehold interest in, their material
personal property assets and good and marketable title to, or a valid leasehold
interest in, their Real Property, in each case, free and clear of Liens except
for Permitted Liens.

 

21

 

4.2           Eligible Accounts.  As to each Account that is identified by a Borrower as an Eligible
Account in a borrowing base report submitted to Agent, such Account is (a) a
bona fide existing payment obligation of the applicable Account Debtors created
by the sale and delivery of Inventory or the rendition of services to such
Account Debtors in the ordinary course of Borrowers’ business, (b) owed to
Borrowers without any known defenses, disputes, offsets, counterclaims, or
rights of cancellation, and (c) not excluded as ineligible by virtue of one or
more of the excluding criteria set forth in the definition of Eligible
Accounts.

 

4.3           Eligible Inventory.  

 

(a)           As to each item of
Inventory that is identified by a Borrower as Eligible Raw Materials Inventory
in a borrowing base report submitted to Agent, such Inventory is not excluded
as ineligible by virtue of one or more of the excluding criteria set forth in
the definition of Eligible Raw Materials Inventory. 

 

(b)           As to each item of
Inventory that is identified by a Borrower as Finished Goods Inventory in a
borrowing base report submitted to Agent, such Inventory is (a) to such
Borrower’s knowledge, of good and merchantable quality, free from known
defects, and (b) not excluded as ineligible by virtue of one or more of the excluding
criteria set forth in the definition of Eligible Finished Goods Inventory. 

 

4.4           Equipment.  Each material item of Equipment of Borrowers and their respective Restricted
Subsidiaries is used or held for use in their business and, to such owner’s knowledge,
is in good working order, ordinary wear and tear and damage by casualty
excepted.

 

4.5           Location of Inventory and
Equipment.  The Inventory and Equipment (other than (i)
vehicles, (ii) Equipment out for repair, (iii) Equipment and Inventory in transit
between locations identified on Schedule 4.5(b), (iv) dies, tools,
patterns, molds and similar items maintained with customers in the ordinary
course of business, and (v) items of de minimus value) of Borrowers and their respective
Restricted Subsidiaries are not stored with a bailee, warehouseman, or similar
party (except as identified on Schedule 4.5(a), as such Schedule shall
be required to be updated pursuant to the immediately succeeding sentence) and
are located only at the locations identified on Schedule 4.5(b) (as such
Schedule shall be required to be updated pursuant to the immediately succeeding
sentence).  Administrative Borrower shall
be required to update Schedules 4.5(a) and Schedule 4.5(b)
simultaneously with the delivery of quarterly financial statements required
pursuant to Section 5.3;  provided, that such Schedules shall be
required to be updated only with respect to Equipment or Inventory having an
aggregate value of $250,000 or greater.

 

4.6           Inventory Records.  Each Borrower keeps correct and accurate records itemizing and
describing the type, quality, and quantity of its and its Restricted Subsidiaries’
Inventory and the book value thereof.

 

4.7           State of Incorporation;
Location of Chief Executive Office; Organizational Identification Number;
Commercial Tort Claims.  

 

(a)           The jurisdiction of organization of Borrowers and each of their
respective Restricted Subsidiaries is set forth on Schedule 4.7(a). 

 

(b)           The chief executive office of Borrowers and each of their respective Restricted
Subsidiaries is located at the address indicated on Schedule 4.7(b) (as
such Schedule may be updated pursuant to Section 5.9).  

 

(c)           Borrowers’ and each of their respective Restricted Subsidiaries’
organizational identification numbers, if any, are identified on Schedule
4.7(c).

 

22

 

(d)           As of the Closing Date, Borrowers and their respective Restricted Subsidiaries
do not hold any commercial tort claims, except as set forth on Schedule
4.7(d).  

 

4.8           Due Organization and
Qualification; Restricted Subsidiaries.

 

(a)           Each Borrower is duly organized and existing and in good standing under
the laws of the jurisdiction of their organization and qualified to do business
in any state where the failure to be so qualified reasonably could be expected
to result in a Material Adverse Change. 

 

(b)           Set forth on Schedule 4.8(b) is a complete and accurate
description of the authorized capital Stock of each Borrower and their
respective Restricted Subsidiaries, by class, and, as of the Closing Date, a
description of the number of shares of each such class that are issued and
outstanding.  Other than as described on Schedule
4.8(b), as of the Closing Date, there are no subscriptions, options,
warrants, or calls relating to any shares of each Borrower’s or any of their
respective Restricted Subsidiaries’ capital Stock, including any right of
conversion or exchange under any outstanding security or other instrument.  None of Borrowers or any of their respective Restricted
Subsidiaries is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital Stock or
any security convertible into or exchangeable for any of its capital Stock.

 

(c)           Set forth on Schedule 4.8(c) is a complete and accurate list of each
Borrower’s direct and indirect Restricted Subsidiaries, showing, as of the
Closing Date, the number and the percentage of the outstanding shares of each class
of common and preferred Stock authorized for each of such Restricted
Subsidiaries owned directly or indirectly by the applicable Borrower.  All of the outstanding capital Stock of each
such Restricted Subsidiary has been validly issued and is fully paid and
non-assessable.

 

4.9           Due Authorization; No
Conflict.

 

(a)           The execution, delivery, and performance by each Borrower of this
Agreement, the other Loan Documents and the Acquisition Documents to which each
is a party have been duly authorized by all necessary action on the part of
such Borrower.

 

(b)           (i) The execution, delivery, and performance by each Borrower of this
Agreement and the other Loan Documents to which it is a party do not (A)
violate any material provision of federal, state, or local law or regulation
applicable to any Borrower, the Governing Documents of any Borrower, or any material
order, judgment, or decree of any court or other Governmental Authority binding
on any Borrower, (B) conflict with, result in a breach of, or constitute (with
due notice or lapse of time or both) a default under any material contractual
obligation of any Borrower, (C) result in or require the creation or imposition
of any Lien of any nature whatsoever upon any properties or assets of any Borrower,
other than Permitted Liens, or (D) require any approval or consent of any Person
under any material contractual obligation of any Borrower, other than consents
or approvals that have been obtained and that are still in force and effect;
and (ii) the execution, delivery, and performance by each Borrower of the
Acquisition Documents to which it is a party do not (A) violate any provision
of federal, state, or local law or regulation applicable to any Borrower, the
Governing Documents of any Borrower, or any order, judgment, or decree of any
court or other Governmental Authority binding on any Borrower, (B) conflict
with, result in a breach of, or constitute (with due notice or lapse of time or
both) a default under any contractual obligation of any Borrower, (C) result in
or require the creation or imposition of any Lien of any nature whatsoever upon
any properties or assets of any Borrower, other than Permitted Liens, or (D)
require any approval or consent of any Person under any contractual obligation
of any Borrower, other than consents or approvals that have been obtained and
that are still in force and effect, which, in each of cases (A), (B), (C) and
(D) of this clause (ii), could reasonably be expected to result in a Material
Adverse Change.

 

(c)           (i) Other than the filing of financing statements, and the recordation
of the Mortgages, the execution, delivery, and performance by each Borrower of
this Agreement and the other Loan

 

23

 

Documents to which it is a
party do not require any registration with, consent, or approval of, or notice
to, or other action with or by, any Governmental Authority, other than consents
or approvals that have been obtained and that are still in force and effect;
and (ii) other than the filing of financing statements, and the recordation of
the Mortgages, the execution, delivery, and performance by each Borrower of the
Acquisition Documents to which it is a party do not require any registration
with, consent, or approval of, or notice to, or other action with or by, any
Governmental Authority, other than consents or approvals that have been
obtained and that are still in force and effect and other than those items
which could not reasonably be expected to result in a Material Adverse Change.

 

(d)           (i) This Agreement and the other Loan Documents to which each Borrower
is a party, and all other documents contemplated hereby and thereby, when
executed and delivered by such Borrower will be the legally valid and binding
obligations of such Borrower, enforceable against such Borrower in accordance
with their respective terms, except as enforcement may be limited by equitable
principles or by bankruptcy, insolvency, reorganization, moratorium, or similar
laws relating to or limiting creditors’ rights generally; and (ii) the
Acquisition Documents to which each Borrower is a party, and all other
documents contemplated hereby and thereby, when executed and delivered by such
Borrower will be the legally valid and binding obligations of such Borrower,
enforceable against such Borrower in accordance with their respective terms,
except as enforcement may be limited by equitable principles or by bankruptcy,
insolvency, reorganization, moratorium, or similar laws relating to or limiting
creditors’ rights generally and except to the extent that the lack of such
enforceability could not reasonably be expected to result in a Material Adverse
Change.

 

(e)           The Agent’s Liens in the Collateral are validly created, perfected, and
first priority Liens to the extent provided for in the other Loan Documents,
subject only to Permitted Liens.

 

(f)            (i) The execution, delivery, and performance
by each Guarantor of the Loan Documents to which it is a party have been duly
authorized by all necessary action on the part of such Guarantor; and (ii) the
execution, delivery, and performance by each Guarantor of the Acquisition
Documents to which it is a party have been duly authorized by all necessary
action on the part of such Guarantor except to the extent that the lack of such
authorization could not reasonably be expected to result in a Material Adverse
Change.

 

(g)           The execution, delivery, and performance by each Guarantor of the Loan
Documents to which it is a party do not (i) violate any material provision of
federal, state, or local law or regulation applicable to such Guarantor, the
Governing Documents of such Guarantor, or any material order, judgment, or
decree of any court or other Governmental Authority binding on such Guarantor,
(ii) conflict with, result in a breach of, or constitute (with due notice or
lapse of time or both) a default under any material contractual obligation of
such Guarantor, (iii) result in or require the creation or imposition of any
Lien of any nature whatsoever upon any properties or assets of such Guarantor,
other than Permitted Liens, or (iv) require any approval or consent of any
Person under any material contractual obligation of such Guarantor, other than
consents or approvals that have been obtained and that are still in force and
effect.

 

(h)           Other than the filing of financing statements and the recordation of
the Mortgages, the execution, delivery, and performance by each Guarantor of
the Loan Documents to which such Guarantor is a party do not require any
registration with, consent, or approval of, or notice to, or other action with
or by, any Governmental Authority, other than consents or approvals that have
been obtained and that are still in force and effect.

 

(i)            (i) The Loan Documents to which each
Guarantor is a party, and all other documents contemplated hereby and thereby,
when executed and delivered by such Guarantor will be the legally valid and
binding obligations of such Guarantor, enforceable against such Guarantor in
accordance with their respective terms, except as enforcement may be limited by
equitable principles or by bankruptcy, insolvency, reorganization, moratorium,
or similar laws relating to or limiting creditors’ rights generally; and (ii)
the

 

24

 

Acquisition Documents to
which each Guarantor is a party, and all other documents contemplated hereby
and thereby, when executed and delivered by such Guarantor will be the legally
valid and binding obligations of such Guarantor, enforceable against such
Guarantor in accordance with their respective terms, except as enforcement may
be limited by equitable principles or by bankruptcy, insolvency,
reorganization, moratorium, or similar laws relating to or limiting creditors’
rights generally and except to the extent that the lack of such enforceability
could not reasonably be expected to result in a Material Adverse Change.

 

4.10         Litigation.  Other than those matters disclosed on Schedule 4.10, there are
no actions, suits, or proceedings pending or, to the knowledge of each
Borrower, threatened against any Borrower or any of its Restricted Subsidiaries
that (a) if adversely determined, could result in a Material Adverse Change or
(b) relate to this Agreement or any other Loan Documents or any transaction
contemplated hereby or thereby. 

 

4.11         No Material Adverse Change.  All financial statements relating to Borrowers and their respective
Restricted Subsidiaries that have been delivered by Borrowers to the Lender
Group have been prepared in accordance with GAAP (except, in the case of
unaudited financial statements, for the lack of footnotes and being subject to
year-end audit adjustments) and present fairly in all material respects, Borrowers’
and their respective Restricted Subsidiaries’ financial condition as of the
date thereof and results of operations for the period then ended.  There has not been a Material Adverse Change
with respect to Borrowers and their respective Restricted Subsidiaries since October
1, 2004.

 

4.12         Fraudulent Transfer.

 

(a)           Each Borrower and each of their respective Restricted Subsidiaries,
taken as a whole, is Solvent.

 

(b)           No transfer of property is being made by any Borrower or any of its
Restricted Subsidiaries and no obligation is being incurred by any Borrower or
any of its Restricted Subsidiaries in connection with the transactions
contemplated by this Agreement or the other Loan Documents with the intent to
hinder, delay, or defraud either present or future creditors of Borrowers or any
of their respective Restricted Subsidiaries.

 

4.13         Employee Compliance.  

 

(a)           Set forth on Schedule 4.13(a) is a complete and accurate list of
all Plans that meet the definition of an “employee pension benefit plan” under
Section 3(2) of ERISA and that are currently maintained or contributed to by
any Borrower, any of their respective Restricted Subsidiaries or any of their
respective ERISA Affiliates as of the Closing Date.

 

(b)           each Borrower, their respective Restricted Subsidiaries, and their
respective ERISA Affiliates are in compliance in all material respects with all
applicable provisions and requirements of ERISA and the regulations and published
interpretations thereunder with respect to each Plan, and have performed all
their obligations in all material respects under each Plan.

 

(c)           No ERISA Event has occurred or is reasonably expected to occur.

 

(d)           All liabilities under each Plan are (i) funded to at least the minimum
level required by law or, if higher, to the level required by the terms
governing the Plans, (ii) insured with a reputable insurance company, (iii)
provided for or recognized in the financial statements most recently delivered
to Agent pursuant to Section 5.3 hereof to the extent required by GAAP
or (iv) estimated in the formal notes to the financial statements most recently
delivered to Agent pursuant to Section 5.3 hereof to the extent required
by GAAP.

 

25

 

(e)           To the best knowledge of each Borrower, there are no circumstances
which may give rise to a material liability in relation to any Plan which is
not funded, insured, provided for, recognized or estimated in the manner
described in subsection (d) above.

 

4.14         Environmental Condition.  Except as set forth on Schedule 4.14 or disclosed in the Phase I
Environmental Site Assessment prepared by URS, and except for matters that
would not reasonably be expected to result in the Borrowers or any of their
respective Restricted Subsidiaries incurring material liability, (a) to
Borrowers’ knowledge, none of Borrowers’ or their respective Restricted Subsidiaries’
properties or assets has ever been used by Borrowers, any of their respective Restricted
Subsidiaries, or by previous owners or operators in the disposal of, or to
produce, store, handle, treat, release, or transport, any Hazardous Materials,
where such use, production, storage, handling, treatment, release or transport
was in violation, in any material respect, of any applicable Environmental Law,
(b) to Borrowers’ knowledge, none of Borrowers’ nor any of their respective Restricted
Subsidiaries’ properties is or has ever been designated or identified pursuant
to any environmental protection statute as a site requiring investigation or
remediation due to the disposal or release of Hazardous Materials, (c) none of
Borrowers nor any of their respective Restricted Subsidiaries have received
notice that a Lien arising under any Environmental Law has attached to any
revenues of any Borrower or any of its Restricted Subsidiaries or to any Real
Property owned or operated by Borrowers or any of their respective Restricted Subsidiaries,
and (d) none of Borrowers nor any of their respective Restricted Subsidiaries
have received a summons, citation, notice, or directive from the United States
Environmental Protection Agency or any other federal or state governmental
agency (“Environmental Claim”) concerning any action or omission by any Borrower
or any of its Restricted Subsidiaries resulting in the releasing or disposing
of Hazardous Materials into the environment other than Environmental Claims
that would not reasonably be expected to result in a Material Adverse Change,
and there are no material Environmental Claims currently pending against
Borrowers or any of their respective Restricted Subsidiaries.

 

4.15         Intellectual Property.  Except for the matters which could not
reasonably be expected to result in a Material Adverse Change, each Borrower and each of their respective
Restricted Subsidiaries owns, or holds licenses in, all trademarks, trade
names, copyrights, patents, patent rights, and licenses that are necessary to
the conduct of its business as currently conducted.

 

4.16         Leases.  Except for the matters which could not reasonably be expected to
result in a Material Adverse Change, Borrowers and their respective Restricted Subsidiaries
enjoy peaceful and undisturbed possession under all leases material to their
business and to which they are parties or under which they are operating and
all of such material leases are valid and subsisting and no material default by
Borrowers or their respective Restricted Subsidiaries exists under any of them
except for payments which are the subject of a Permitted Protest.

 

4.17         Deposit Accounts and
Securities Accounts.  As of the Closing
Date, set forth on Schedule 4.17 is a
listing of all of Borrowers’ and their respective Restricted Subsidiaries’
Deposit Accounts and Securities Accounts, including, with respect to each bank
or securities intermediary (a) the name and address of such Person, and (b) the
account numbers of the Deposit Accounts or Securities Accounts maintained with
such Person.

 

4.18         Complete Disclosure.  All factual information furnished by or on behalf of Borrowers or their
respective Restricted Subsidiaries with respect to Borrowers or such Restricted
Subsidiaries in writing to Agent or any Lender for purposes of or in connection
with this Agreement and the other Loan Documents is, when taken as a whole with
all other furnished information, true and accurate in all material respects on
the date as of which such information is dated or certified and not incomplete
by omitting to state any fact necessary to make such information (when taken as
a whole with all other furnished information) not misleading in any material
respect at such time in light of the circumstances under which such information
was provided.  On the Closing Date, the
Projections received by Agent pursuant to clause (t) of Schedule 3.1 represent,
and as of the date on which any other Projections are delivered to Agent, such
additional Projections represent Borrowers’ good faith estimate of their and
their respective Restricted Subsidiaries’ future

 

26

 

performance for the periods
covered thereby (it being understood that the Projections are subject to
significant uncertainties and contingencies, many of which are beyond control
and that no assurance is or can be given that the Projections will be realized
and that actual results may vary from such Projections and such variances may
be material).

 

4.19         Indebtedness.  Set forth on Schedule 4.19 is a true and complete list of all
Indebtedness of each Borrower and each of their respective Restricted Subsidiaries
outstanding immediately prior to the Closing Date that is to remain outstanding
after the Closing Date and such Schedule accurately reflects the aggregate
principal amount of such Indebtedness and describes the principal terms
thereof.

 

4.20         Material Contracts. 
Except for matters which, either individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Change, each
Material Contract (a) is in full force and effect and is binding upon and
enforceable against each Person that is a party thereto in accordance with its
terms, (b) has not been otherwise amended or modified (except as not otherwise
prohibited hereby), and (c) is not in default due to the action of any Borrower
or any of its Restricted Subsidiaries.

 

5.             AFFIRMATIVE COVENANTS.

 

Each Borrower covenants and
agrees that, until termination of all of the Commitments and payment in full of
the Obligations, Borrowers shall and shall cause each of their respective Restricted
Subsidiaries to do all of the following:

 

5.1           Accounting System.  Maintain a system of accounting that enables Borrowers to produce
financial statements in accordance with GAAP and maintain records pertaining to
the Collateral that contain information as from time to time reasonably may be
requested by Agent.  Borrowers also shall
keep a reporting system that shows all additions, sales, claims, returns, and
allowances with respect to their and their respective Restricted Subsidiaries’
sales.

 

5.2           Collateral Reporting.  Provide Agent with each of the reports set forth on Schedule 5.2
at the times specified therein.  In
addition, each Borrower agrees to cooperate fully with Agent to facilitate and
implement, where appropriate, a system of electronic collateral reporting in
order to provide electronic reporting of each of the items set forth above.

 

5.3           Financial Statements,
Reports, Certificates.  Deliver to Agent each of the financial
statements, reports, or other items set forth on Schedule 5.3 at
the time specified herein.  In addition,
Parent agrees that no Restricted Subsidiary of Parent will have a fiscal year
different from that of Parent.

 

5.4           Intentionally Omitted.

 

5.5           Inspection.  Subject to any specific limitations set forth
in any other Loan Document, permit Agent and each of its duly authorized
representatives or agents to visit any of its properties and inspect any of its
assets or books and records, to examine and make copies of its books and
records, and to discuss its affairs, finances, and accounts with, and to be
advised as to the same by, its officers and employees at such reasonable times
and intervals as Agent may designate and, so long as no Default or Event of
Default exists, with reasonable prior notice to Administrative Borrower.

 

5.6           Maintenance of Properties.  Maintain and preserve all of their properties which are necessary or
useful in the proper conduct to their business in good working order and
condition, ordinary wear, tear, and casualty excepted (and except where the
failure to do so could not be expected to result in a Material Adverse Change),
and comply at all times with the provisions of all material leases to which it
is a party as lessee (except where the failure to do so could not reasonably be
expected to result in a Material Adverse Change), so as to prevent any loss or
forfeiture thereof or thereunder.

 

27

 

5.7           Taxes.  Cause all material assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against Borrowers,
their respective Restricted Subsidiaries, or any of their respective assets to
be paid in full, before delinquency or before the expiration of any extension
period, except to the extent that the validity of such assessment or tax shall
be the subject of a Permitted Protest. 
Borrowers will and will cause their respective Restricted Subsidiaries
to make timely payment or deposit of all tax payments and withholding taxes
required of them by applicable laws, including those laws concerning F.I.C.A.,
F.U.T.A., state disability, and local, state, and federal income taxes, and
will, upon request, furnish Agent with proof reasonably satisfactory to Agent
indicating that the applicable Borrower or applicable Restricted Subsidiary has
made such payments or deposits (except to the extent the subject of a Permitted
Protest).  

 

5.8           Insurance.

 

(a)           At Borrowers’ expense, maintain insurance respecting their and their respective
Restricted Subsidiaries’ assets wherever located, covering loss or damage by
fire, theft, explosion, and all other hazards and risks as ordinarily are
insured against by other Persons engaged in the same or similar businesses and
in the same geographic area.  Borrowers
also shall maintain business interruption, public liability, and product liability
insurance, as well as insurance against larceny, embezzlement, and criminal
misappropriation.  All such policies of
insurance shall be in such amounts and with such insurance companies as are
reasonably satisfactory to Agent.  Borrowers
shall deliver copies of all such policies to Agent with an endorsement naming
Agent as the sole loss payee (under a reasonably satisfactory lender’s loss
payable endorsement) or additional insured, as appropriate.  Each policy of insurance or endorsement shall
contain a clause requiring the insurer to give not less than 30 days prior
written notice to Agent in the event of cancellation of the policy for any
reason whatsoever.   

 

(b)           Administrative Borrower shall give Agent prompt notice of any loss
exceeding $500,000 covered by such insurance. 
So long as no Event of Default has occurred and is continuing, Borrowers
shall have the exclusive right to adjust any losses payable under any such
insurance policies which are less than $500,000.  Following the occurrence and during the
continuation of an Event of Default, or in the case of any losses payable under
such insurance exceeding $500,000, Agent shall have the exclusive right to
adjust any losses payable under any such insurance policies, without any
liability to Borrowers whatsoever in respect of such adjustments.  Any monies received as payment for any loss
under any insurance policy mentioned above (other than liability insurance
policies) or as payment of any award or compensation for condemnation or taking
by eminent domain, shall be paid over to Agent to be applied at the option of
the Required Lenders either to the prepayment of the Obligations or to be
disbursed to Administrative Borrower under staged payment terms reasonably
satisfactory to the Required Lenders for application to the cost of repairs,
replacements, or restorations; provided, however, that, with
respect to any such monies in an aggregate amount during any 12 consecutive
month period not in excess of $500,000, so long as (A) no Default or Event of
Default shall have occurred and is continuing, (B) Borrowers’ Excess
Availability is greater than $10,000,000, (C) Administrative Borrower
shall have given Agent prior written notice of the intention of Borrowers or
their respective Restricted Subsidiaries to apply such monies to the costs of
repairs, replacement, or restoration of the property which is the subject of
the loss, destruction, or taking by condemnation, (D) the monies are held in a
cash collateral account in which Agent has a perfected first-priority security
interest, and (E) Borrowers or their respective Restricted Subsidiaries
complete such repairs, replacements, or restoration within 360 days after the
initial receipt of such monies, Borrowers shall have the option to apply such
monies to the costs of repairs, replacement, or restoration of the property
which is the subject of the loss, destruction, or taking by condemnation unless
and to the extent that such applicable period shall have expired without such
repairs, replacements, or restoration being made, in which case, any amounts
remaining in the cash collateral account shall be paid to Agent and applied as
set forth above.

 

(c)           Borrowers will not, and will not suffer or permit their respective Restricted
Subsidiaries to, take out separate insurance concurrent in form or contributing
in the event of loss with that required to be maintained under this Section
5.8, unless Agent is included thereon as an additional insured or

 

28

 

loss payee under a lender’s
loss payable endorsement.  Administrative
Borrower promptly shall notify Agent whenever such separate insurance is taken
out, specifying the insurer thereunder and full particulars as to the policies
evidencing the same, and copies of such policies promptly shall be provided to
Agent.

 

5.9           Location of Inventory and
Equipment.  Keep Borrowers’ and their respective Restricted
Subsidiaries’ Inventory and Equipment (other than (i) vehicles, (ii) Equipment
out for repair, (iii) Equipment and Inventory in transit between locations
identified on Schedule 4.5(b), (iv) items stored with a bailee,
warehouseman, or similar party to the extent disclosed on Schedule 4.5(a),
(v) dies, tools, patterns, molds and similar items maintained with customers in
the ordinary course of business, and (vi) items of de minimus value) only at
the locations identified on Schedule 4.5(b) and their chief
executive offices only at the locations identified on Schedule 4.7(b); provided,
however, that Administrative Borrower may amend Schedule 4.5(b)
or Schedule 4.7(b) so long as (A) with respect to Schedule 4.5(b),
such amendment occurs by written notice to Agent in accordance with the last
sentence of Section 4.5, and with respect to Schedule 4.7(b),
such amendment occurs by written notice to Agent not less than 30 days prior to
the date on which such chief executive office is relocated, (B) such new
location is within the continental United States, and (C) at the time of such
written notification, the applicable Borrower or Restricted Subsidiary (x) with
respect to any location at which books and records (other than prior years’
historical records) are maintained or Inventory and/or Equipment having an
aggregate value of $2,000,000 or greater is maintained, obtains a Collateral
Access Agreement with respect thereto and (y) with respect to any other
location, uses its commercially reasonable efforts to provide Agent a
Collateral Access Agreement with respect thereto.

 

5.10         Compliance with Laws.  Comply with the requirements of all applicable laws, rules,
regulations, and orders of any Governmental Authority, other than laws, rules,
regulations, and orders the non-compliance with which, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Change.

 

5.11         Leases.  Except for matters which could not reasonably be expected to result in a
Material Adverse Change, pay when due all rents and other amounts payable under
any material leases to which any Borrower or any of its Restricted Subsidiaries
is a party or by which any Borrower’s or any of their respective Restricted
Subsidiaries’ properties and assets are bound, unless such payments are the
subject of a Permitted Protest.

 

5.12         Existence.  Except as permitted by Section 6.3 and
Section 6.4, at all times preserve and keep in full force
and effect each Borrower’s and each of their respective Restricted Subsidiaries’
valid existence and, except to the extent failure to do so could not reasonably
be expected to result in a Material Adverse Change, good standing and any rights,
franchises, permits, licenses, authorizations, approvals, entitlements and
accreditations material to their businesses.

 

5.13         Environmental.

 

(a)           Keep any property either owned or operated by any Borrower or any of its
Restricted Subsidiaries free of any Environmental Liens or post bonds or other
financial assurances sufficient to satisfy the obligations or liability
evidenced by such Environmental Liens, (b) comply, in all material respects,
with Environmental Laws and provide to Agent reasonable documentation of such
compliance which Agent reasonably requests, provided that, so long as no
Default or Event of Default shall have occurred and be continuing, Agent shall
not make such a request more than once per any consecutive 12-month period, (c)
promptly notify Agent of any release of a Hazardous Material in any reportable
quantity from or onto property owned or operated by any Borrower or any of its
Restricted Subsidiaries and take any Remedial Actions required to abate said
release or otherwise to come into material compliance with applicable
Environmental Law, and (d) promptly, but in any event within 10 Business Days
of its receipt thereof, provide Agent with written notice of any of the
following:  (i) notice that an Environmental
Lien has been filed against any of the real or personal property of any
Borrower or any of its Restricted Subsidiaries, (ii) commencement of any
Environmental Action or notice that an Environmental Action will be filed
against any Borrower or any of its

 

29

 

Restricted Subsidiaries
which Environmental Action could reasonably be expected to result in any
Borrower or any of its Restricted Subsidiaries incurring material liability
under Environmental Laws, and (iii) notice of a violation, citation, or other
administrative order which reasonably could be expected to result in a Material
Adverse Change.

 

5.14         Intentionally Omitted. 

 

5.15         Control Agreements.  Subject
to Section 3.6(b), take all reasonable steps in order for Agent to
obtain control in accordance with Sections 8-106, 9-104, 9-105, 9-106, and
9-107 of the Code with respect to (subject to the proviso contained in Section 6.12)
all of its Securities Accounts, Deposit Accounts, electronic chattel paper,
investment property, and letter of credit rights.

 

5.16         Formation of Subsidiaries.  At the time that any Borrower or any Guarantor forms any direct or
indirect Subsidiary or acquires any direct or indirect Subsidiary after the
Closing Date and such Subsidiary is a Restricted Subsidiary, such Borrower or
such Guarantor shall (a) cause such new Restricted Subsidiary to provide to
Agent a joinder to this Agreement or the Guaranty, as applicable (it being
understood and agreed that Agent shall determine, in its Permitted Discretion,
whether such new Restricted Subsidiary would become a Borrower or a Guarantor,
based primarily on whether such new Restricted Subsidiary would be an operating
company that would generate Borrowing Base), and the Security Agreement,
together with such other security documents (including Mortgages with respect
to any Real Property of such new Restricted Subsidiary, subject to Section
5.17), as well as appropriate financing statements (and with respect to all
property subject to a Mortgage, fixture filings), all in form and substance reasonably
satisfactory to Agent (including being sufficient to grant Agent a first
priority Lien (subject to Permitted Liens) in and to the assets of such newly
formed or acquired Restricted Subsidiary), (b) provide to Agent a pledge
agreement and appropriate certificates and powers or financing statements,
hypothecating all of the direct or beneficial ownership interest in such new Restricted
Subsidiary, in form and substance reasonably satisfactory to Agent, and (c)
provide to Agent all other documentation, including one or more opinions of
counsel reasonably satisfactory to Agent, which in its opinion is appropriate
with respect to the execution and delivery of the applicable documentation
referred to above (including policies of title insurance or other documentation
with respect to all property subject to a Mortgage).  Notwithstanding the foregoing, if a
Subsidiary that is so formed or acquired is a Controlled Foreign Corporation,
then clause (a) of the immediately preceding sentence shall not be applicable
and, with respect to clause (b) of the immediately preceding sentence, such
pledge shall be limited to 65% of the voting power of all classes of capital
Stock of such Subsidiary entitled to vote. 
Any document, agreement, or instrument executed or issued pursuant to
this Section 5.16 shall be a Loan Document.  Notwithstanding the foregoing, Agent and
Lenders shall not be obligated to consent to any such formation or acquisition
of a Subsidiary unless such formation or acquisition is otherwise expressly
permitted hereunder.

 

5.17         Real Property.  Upon
the acquisition of any fee interest in Real Property with a purchase price or
Fair Market Value in excess of $500,000 (other than Real Property located in
the State of New York or in any other state having substantially similar real
estate mortgage taxes), promptly notify Agent of the acquisition of such Real
Property and within 60 days (or such longer time as Agent, in its reasonable
discretion, may agree) thereafter: (a) grant Agent a first priority Mortgage on
such Real Property; (b) deliver mortgagee title insurance policies (or marked
commitments to issue the same) for such Real Property issued by a title
insurance company reasonably satisfactory to Agent in an amount reasonably
satisfactory to Agent assuring Agent that the Mortgage on such Real Property
Collateral is a valid and enforceable first priority mortgage Lien on such Real
Property Collateral free and clear of all defects and encumbrances except
Permitted Liens, and such mortgagee title insurance policies (or marked
commitments to issue the same) otherwise shall be in form and substance
reasonably satisfactory to Agent; (c) Borrowers and their Subsidiaries shall pay
to said title insurance company all expenses and premiums of said title
insurance company in connection with the issuance of such mortgagee title
insurance policies (or marked commitments to issue the same) and in addition
shall, to the extent required, pay all recording costs, stamp taxes, mortgage
taxes, intangibles taxes and other fees and costs (including reasonable
attorneys fees and expenses) incurred in

 

30

 

connection therewith; and
(d) execute and/or deliver to Agent such other documentation and opinions of
counsel, in form and substance reasonably satisfactory to Agent, in connection
with the grant of such Mortgage as Agent shall request in its Permitted
Discretion, including, without limitation, surveys (or existing surveys and
survey affidavits that are (x) sufficient to have the “matters that would be
shown on a survey” exception deleted from the mortgagee policy of title
insurance and (y) reasonably satisfactory to Agent), financing statements and
fixture filings.

 

5.18         ERISA Compliance 

 

(a)           Each Borrower shall do, and shall cause each of their respective
Restricted Subsidiaries and ERISA Affiliates to do, each of the following:  (i) maintain each Plan in compliance in all
material respects with the applicable provisions of ERISA, the IRC and each
other applicable federal or state law; (ii) cause each Qualified Plan to
maintain its qualified status under Section 401(a) of the IRC; (iii) make all
required contributions to each Plan; (iv) ensure that all liabilities under each
Plan are (A) funded to at least the minimum level required by law or, if
higher, to the level required by the terms governing such Plan; (B) insured
with a reputable insurance company; or (C) provided for or recognized in the
financial statements most recently delivered to Agent under Section 5.3
(to the extent required by GAAP); and (v) ensure that the contributions or
premium payments to or in respect of each Plan are and continue to be promptly
paid at no less than the rates required under the rules of such Plan and in
accordance with the most recent actuarial advice received in relation to such
Plan and applicable law.

 

(b)           Deliver to Agent such certifications or other evidence of compliance
with the provisions of Section 4.13 as Agent may from time to time
reasonably request.

 

(c)           Promptly notify Agent of each of the following ERISA events affecting
any Borrower, any of their respective Restricted Subsidiaries or any ERISA
Affiliates (but in no event more than ten (10) days after such event), together
with a copy of each notice with respect to such event that may be required to
be filed with a Governmental Authority and each notice delivered by a
Governmental Authority to any Borrower, any of their respective Restricted
Subsidiaries or any ERISA Affiliates with respect to such event:

 

(i)            an ERISA Event;

 

(ii)           the adoption of any new Pension Plan by any Borrower, any of their
respective Restricted Subsidiaries or any ERISA Affiliates; or

 

(iii)          except as required under the terms of any collective bargaining
agreement, the adoption of any amendment to a Pension Plan, if such amendment
will result in a material increase in benefits or unfunded benefit liabilities
(as defined in Section 4001(a)(18) of ERISA).

 

(d)           Promptly deliver to Agent, upon request, copies of (i) each Schedule B
(Actuarial Information) to the annual report (Form 5500 Series) filed by any
Borrower, any of their respective Restricted Subsidiaries or any ERISA
Affiliates with the Internal Revenue Service with respect to each Pension Plan;
(ii) all notices received by any Borrower, any of their respective Restricted
Subsidiaries or any of their respective ERISA Affiliates from a Multiemployer
Plan sponsor concerning an ERISA Event; and (iii) such other documents or
governmental reports or filings relating to any Plan as Agent shall reasonably
request.

 

6.             NEGATIVE COVENANTS.

 

Borrowers covenant and agree
that, until termination of all of the Commitments and payment in full of the
Obligations, Borrowers will not and will not permit any of their respective Restricted
Subsidiaries to do any of the following:

 

31

 

6.1           Indebtedness.  Create, incur, assume, suffer to exist, guarantee, or otherwise become
or remain, directly or indirectly, liable with respect to any Indebtedness,
except:

 

(a)           Indebtedness evidenced by this Agreement and the other Loan Documents,
together with Indebtedness owed to Underlying Issuers with respect to
Underlying Letters of Credit,

 

(b)           Indebtedness set forth on Schedule 4.19,

 

(c)           Permitted Purchase Money Indebtedness, 

 

(d)           refinancings, renewals, or extensions of Indebtedness permitted under
clauses (b) and (c) of this Section 6.1 (and continuance or renewal of
any Permitted Liens associated therewith) so long as: (i) such refinancings,
renewals, or extensions do not result in an increase in the principal amount of
the Indebtedness so refinanced, renewed, or extended, (ii) such refinancings,
renewals, or extensions do not result in a shortening of the average weighted
maturity of the Indebtedness so refinanced, renewed, or extended, nor are they
on terms or conditions, that, taken as a whole, are materially more burdensome
or restrictive to the applicable Borrower, (iii) if the Indebtedness that is
refinanced, renewed, or extended was subordinated in right of payment to the
Obligations, then the terms and conditions of the refinancing, renewal, or
extension Indebtedness must include subordination terms and conditions that are
at least as favorable to the Lender Group, taken as a whole, as those that were
applicable to the refinanced, renewed, or extended Indebtedness, and (iv) the
Indebtedness that is refinanced, renewed, or extended is not recourse to any
Person that is liable on account of the Obligations other than those Persons
which were obligated with respect to the Indebtedness that was refinanced,
renewed, or extended or as otherwise permitted pursuant to Section 6.1,

 

(e)           endorsement of instruments or other payment items for deposit,

 

(f)            Indebtedness consisting of Permitted
Investments,

 

(g)           Indebtedness represented by any notes issued pursuant to the Indenture,
including any Senior Notes (or any other evidence of indebtedness for borrowed
money under the Senior Notes or the Indenture) in an aggregate principal amount
not to exceed $165,000,000 (provided, however, that such
Indebtedness may exceed $165,000,000 up to $250,000,000 so long as with respect
to the incurrence of any such Indebtedness in excess of $165,000,000, both
immediately before and immediately after giving effect to any such incurrence,
(i) no Default or Event of Default shall have occurred and be continuing and
(ii) the Borrowers and the Restricted Subsidiaries shall be in pro forma compliance with the covenants set forth in Section
6.16) at any one time outstanding and any Refinancing Indebtedness in
respect thereof (whether in whole or in part), ,

 

(h)           Hedge Agreements entered into in the ordinary course of business and
not for speculative purposes;

 

(i)            Indebtedness of a Loan Party to another Loan
Party and any Refinancing Indebtedness in respect thereof (whether in whole or
in part) so long as such Indebtedness is subject to the Intercompany
Subordination Agreement;

 

(j)            Guarantees by a Loan Party of Indebtedness
incurred by another Loan Party so long as the incurrence of such Indebtedness
is otherwise permitted by the terms hereof; 

 

(k)           Permitted Subordinated Indebtedness in an aggregate principal amount
not to exceed $75,000,000 and any Refinancing Indebtedness in respect thereof so
long as with respect to the incurrence of any such Permitted Subordinated
Indebtedness, both immediately before and immediately after giving effect to
any such incurrence, the Borrowers and the Restricted Subsidiaries shall be in pro forma compliance with the covenants set forth in Section
6.16;

 

32

 

(l)            Indebtedness (other than for borrowed money)
solely to the extent subject to Permitted Liens;

 

(m)          (i) Permitted Acquired Indebtedness and (ii)
Indebtedness of any Borrower and the Restricted Subsidiaries owed to the seller
of any property acquired in a Permitted Acquisition on an unsecured
subordinated basis, which subordination shall be on terms reasonably
satisfactory to Agent, in each case, so long as both immediately prior and
after giving effect thereto, (x) no Event of Default shall exist or result
therefrom, and (y) the Borrowers and the Restricted Subsidiaries will be in pro forma compliance with the covenants set forth in Section
6.16, after giving effect to such Permitted Acquisition and the incurrence
or issuance of such Indebtedness;

 

(n)           Indebtedness consisting of promissory notes
issued by any Borrower or any Restricted Subsidiary to current or former
directors, officers, employees and consultants, their respective estates,
spouses or former spouses to finance the purchase or redemption of Stock
permitted by Section 6.10;

 

(o)           Indebtedness consisting of obligations of any
Borrower or any Restricted Subsidiary under deferred compensation, adjustment
of purchase price, earn outs, indemnification or other similar arrangements
incurred by such Person in connection with the Acquisition Transactions,
Permitted Acquisitions and Permitted Dispositions;

 

(p)           cash management obligations and other
Indebtedness in respect of netting services, overdraft protections and similar
arrangements, in each case in connection with cash management and Deposit Accounts
and incurred in the ordinary course of business; and

 

(q)           additional Indebtedness of Borrowers and their Restricted Subsidiaries in
an aggregate principal amount not to exceed $15,000,000 at any time outstanding
solely to the extent that such Indebtedness consists of either (i) Purchase
Money Indebtedness or (ii) Indebtedness that is subordinated to the Obligations
on terms reasonably satisfactory to Agent.

 

6.2           Liens.  Create, incur, assume, or suffer to exist, directly or indirectly, any
Lien on or with respect to any of its assets, of any kind, whether now owned or
hereafter acquired, or any income or profits therefrom, except for Permitted
Liens (including Liens that are replacements of Permitted Liens to the extent
that the original Indebtedness is refinanced, renewed, or extended under Section 6.1
and so long as the replacement Liens only encumber those assets that secured the
refinanced, renewed, or extended Indebtedness and proceeds thereof or additions
or accessions thereto).

 

6.3           Restrictions on Fundamental
Changes.  Enter into any merger, consolidation, reorganization, or
recapitalization, or liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution), except that:

 

(a)           any Borrower or any Restricted
Subsidiary may merge with (i) any Borrower (including a merger, the purpose of
which is to reorganize such Borrower into a new jurisdiction), or (ii) any one
or more other Restricted Subsidiaries; provided that a Borrower shall be
the continuing or surviving Person or the continuing or surviving Person shall
expressly assume the obligations of such Borrower in a manner reasonably
acceptable to Agent;

 

(b)           any Borrower or Restricted
Subsidiary may liquidate or dissolve or change its legal form so long as its
assets are transferred to (i) in the case of a Borrower, to another Borrower
and (ii) in the case of a Restricted Subsidiary, to a Loan Party or any other
Restricted Subsidiary;

 

(c)           so long as no Default or
Event of Default has occurred and is continuing or would result therefrom, any
Borrower or Restricted Subsidiary may merge with any other Person in order to
effect an Investment permitted pursuant to Section 6.12; provided that the
continuing or surviving Person shall be a

 

33

 

Restricted Subsidiary, which
together with each of its Restricted Subsidiaries, shall have complied with the
requirements of Section 5.16;

 

(d)           the Borrowers and the
Restricted Subsidiaries may consummate the Acquisition Transactions; and

 

(e)           so long as no Event of Default exists or would result therefrom, a
merger, consolidation, reorganization, recapitalization, liquidation, windup or
dissolution, the sole purpose of which is to effect a Disposition permitted
pursuant to Section 6.4.

 

6.4           Disposal of Assets.  Other than Permitted Dispositions, convey, sell, lease, license,
assign, transfer, or otherwise dispose of (collectively, a “Disposition”)
any of the assets of any Borrower or any of its Restricted Subsidiaries.

 

6.5           Change Name.  Change any Borrower’s or any of their respective Restricted Subsidiaries’
name, organizational identification number, jurisdiction of organization, or
organizational identity; provided, however, that any Borrower or
any of its Restricted Subsidiaries may change its name upon at least 10 days
prior written notice by Parent or Administrative Borrower to Agent of such
change so long as, (a) at the time of such written notification, such Borrower
or such Restricted Subsidiary provides any financing statements necessary to
perfect and continue perfected the Agent’s Liens and (b) immediately after such
name change, Administrative Borrower provides Agent with evidence of such name
change (including copies of any related public filings).

 

6.6           Nature of Business.  Engage in any material line of business substantially different from
those lines of business conducted by Borrowers and the Restricted Subsidiaries
on the Closing Date other than any businesses reasonably related or ancillary
thereto.

 

6.7           Prepayments and Amendments.  Except in connection with a refinancing permitted by Section 6.1,

 

(a)           optionally prepay, redeem, defease, purchase, or otherwise acquire any
Indebtedness of any Borrower or any Restricted Subsidiary of a Borrower, except
(i) Purchase Money Indebtedness, (ii) the Obligations in accordance with this
Agreement; (iii) Borrowers may optionally redeem the Senior Notes to the extent
permitted by the Indenture so long as (x) no Event of Default has occurred and
is continuing or would result therefrom and (y) Borrowers’ Excess Availability
exceeds $10,000,000 after giving effect to any such payment, and (iv) any other
Indebtedness (other than Permitted Subordinated Indebtedness) so long as (x) no
Event of Default has occurred and is continuing or would result therefrom and
(y) Borrowers’ Excess Availability exceeds $10,000,000 after giving effect to
any such payment;

 

(b)           make any payment on account of Indebtedness that has been contractually
subordinated in right of payment if such payment is not permitted at such time
under the subordination terms and conditions, or

 

(c)           directly or indirectly, amend, modify, alter, increase, or change any
of the terms or conditions of any agreement, instrument, document, indenture,
or other writing evidencing or concerning the Senior Notes or any Permitted
Subordinated Indebtedness in a manner materially adverse to the interests of
the Lender Group other than to consummate a Refinancing Indebtedness in respect
thereof.

 

6.8           Intentionally Omitted.

 

6.9           Intentionally Omitted.  

 

34

 

6.10         Distributions.  Make any distribution or declare or pay any dividends (in cash or other
property, other than common Stock) on, or purchase, acquire, redeem, or retire (a
“Restricted Payment”) any of Parent’s Stock, of any class, whether now
or hereafter outstanding, except as follows:

 

(a)           to pay Holdings to enable it to pay general corporate overhead expenses
of Holdings, including franchise taxes and other fees required to maintain the
existence of Holdings, insurance premiums and indemnification claims made by
directors or officers of Holdings attributable to the ownership or operation of
any Loan Party;

 

(b)           (i) so long as (x) no Default or Event of Default has occurred and is
continuing or would result therefrom and (y) immediately after giving effect
thereto, Borrowers shall have Excess Availability of not less than $10,000,000,
to pay reasonable fees paid to non-independent members of Holdings’ Board of
Directors, (ii) to pay reasonable expenses incurred by non-independent members
of Holdings’ Board of Directors, and (iii) to pay reasonable fees paid to and
expenses incurred by independent members of Holdings’ Board of Directors, collectively
for clauses (i), (ii) and (iii), in an aggregate amount not to exceed $500,000
in any fiscal year;

 

(c)           so long as (i) no Default or Event of Default has occurred and is
continuing or would result therefrom and (ii) immediately after giving effect
thereto, Borrowers shall have Excess Availability of not less than $3,000,000,
to permit Holdings to purchase, repurchase, redeem or otherwise acquire shares
of capital Stock of any Loan Party from employees, former employees, directors
or former directors of such Loan Party (or permitted transferees of such
employees, former employees, directors or former directors), pursuant to the
terms of agreements (including employment agreements) or plans (or amendments
thereto) approved by such Loan Party’s Board of Directors under which such
Persons purchase or sell, or are granted the option to purchase or sell, shares
of such Stock; provided, that the aggregate amount of such repurchases
and other acquisitions in any calendar year shall not exceed $500,000; 

 

(d)           so long as (i) no Default or Event of Default has occurred and is
continuing or would result therefrom and (ii) immediately after giving effect
thereto, Borrowers shall have Excess Availability of not less than $1,000,000,
to permit Holdings to pay management fees pursuant to the terms of the Management
Agreement; provided, that the aggregate amount of such management fees
in any calendar year shall not exceed $1,000,000; provided, further, that in
the event the payment of such management fees is restricted based on Excess
Availability, such management fees shall continue to accrue, and all accrued
but unpaid amounts shall be payable following the increase in Excess
Availability above such limitation (after giving effect to any payment of such
accrued but unpaid amounts);

 

(e)           Restricted Payments made on the Closing Date
to consummate the Acquisition Transactions;

 

(f)            to the extent constituting Restricted
Payments, the Borrowers and the Restricted Subsidiaries may enter into
transactions expressly permitted by Section 6.4 or Section 6.12;

 

(g)           cashless repurchases of Stock deemed to occur
upon exercise of stock options or warrants if such Stock represents a portion
of the exercise price of such options or warrants;

 

(h)           to Holdings (or any direct or indirect parent
of Holdings) to be used solely to pay federal, state and local income taxes
made no earlier than five days prior to the date on which such Person is
required to make such payment in an amount not to exceed the aggregate tax
liability attributable to Borrowers and their respective Subsidiaries for such
calendar year determined as if Borrowers and their respective Subsidiaries were
a separate affiliated group (as defined in Section 1504 of the IRC, as amended)
filing a consolidated return, or, to the extent applicable, a separate group
filing combined or unitary returns, and then only to the extent that any such
payments are actually paid by Holdings to governmental entities; and

 

35

 

(i)            so long as (i) no Default or Event of Default
has occurred and is continuing or would result therefrom and (ii) immediately
after giving effect thereto, Borrowers shall have Excess Availability of not
less than $10,000,000, other Restricted Payments not to exceed $10,000,000 in
the aggregate since the Closing Date; provided that such amount may be
increased by an amount equal to amounts available for Restricted Payments
pursuant to Section 4.09(iii) of the Indenture.

 

6.11         Fiscal Year.  Modify or change its fiscal year. 

 

6.12         Investments.  Except for Permitted Investments, directly or indirectly, make or
acquire any Investment, or incur any liabilities (including contingent
obligations) for or in connection with any Investment; provided, however,
that Borrowers and their respective Restricted Subsidiaries shall not have
Permitted Investments (other than in the Cash Management Accounts) in Deposit
Accounts or Securities Accounts in an aggregate amount in excess of $50,000 (exclusive
of Trust Funds) at any one time unless the applicable Borrower or the
applicable Restricted Subsidiary, and the applicable securities intermediary or
bank have entered into Control Agreements governing such Permitted Investments
in order to perfect (and further establish) the Agent’s Liens in such Permitted
Investments.  Subject to the foregoing
proviso, Borrowers shall not and shall not permit their respective Restricted Subsidiaries
to establish or maintain any Deposit Account or Securities Account unless Agent
shall have received a Control Agreement in respect of such Deposit Account or
Securities Account.

 

6.13         Transactions with Affiliates.  Directly or indirectly enter into or permit to exist any transaction
with any Affiliate of any Borrower except for transactions that (a) are in the
ordinary course of Borrowers’ business, (b) are upon fair and reasonable terms
and (c) are no less favorable to Borrowers or their respective Restricted
Subsidiaries, as applicable, than would be obtained in an arm’s length
transaction with a non-Affiliate; provided, however, that if any such
transaction involves aggregate payments or other property with a Fair Market
Value in excess of $2,500,000, it shall be approved by a majority of the
members of the Board of Directors of Parent (including a majority of the
disinterested members thereof), such approval to be evidenced by board
resolutions stating that the Parent’s Board of Directors has determined that
such transactions comply with the foregoing provisions, and if any such
transaction involves an aggregate Fair Market Value of more than $5,000,000, Parent
will, prior to the consummation thereof, obtain a favorable opinion as to the
fairness of the financial terms of such transactions or series of related
transactions to the applicable Loan Party, from an Independent Financial
Advisor and file the same with Agent; provided, further, however,
that such restrictions shall not apply to:

 

(a)           transactions exclusively between or among Holdings and its Subsidiaries
permitted hereby;

 

(b)           reasonable fees and compensation paid to, and indemnity provided for
directors, officers, employees and consultants to Holdings and its Subsidiaries
(provided, that to the extent otherwise covered by clauses (b) or (d) of Section
6.10, then such clauses of Section 6.10 shall also apply); 

 

(c)           any Permitted Acquisition from a non-Affiliate that is an arm’s length
transaction and fails to comply with this Section solely because such a
non-Affiliate becomes an Affiliate as a result of such Permitted Acquisition;

 

(d)           transactions otherwise permitted by this Agreement; 

 

(e)           any Investment permitted pursuant to Section 6.12; 

 

(f)            any sale of the Stock of any Loan Party in
exchange for equity contributions from Parent;

 

36

 

(g)           any merger or other transaction with an Affiliate solely for the
purpose of reincorporating a Loan Party in another jurisdiction or creating a
holding company, to the extent otherwise permitted by this Agreement; 

 

(h)           any employment, stock option, stock repurchase, employee benefit
compensation, business expense reimbursement, severance, termination or other
employment-related agreements, arrangements or plans entered into in good faith
by a Loan Party in the ordinary course of business; 

 

(i)            sales or purchases of inventory, other
products or services to or from any Affiliate of the Borrowers entered into in
the ordinary course of business on terms no less favorable to the Borrowers and
its Subsidiaries than those that could be obtained at the time of such sale or
purchase in arm’s-length dealings with a Person who is not an Affiliate;

 

(j)            any agreement in effect as of the Closing
Date or any transaction contemplated thereby and any amendment thereto so long
as any such amendment or replacement agreement is not more disadvantageous to
Borrowers or the Restricted Subsidiaries in any material respect than the
original agreement as in effect on the Closing Date; and

 

(k)           the Management Agreement.

 

6.14         Use of Proceeds.  Use the proceeds of the Advances for any purpose other than (a) on the
Closing Date, to pay transactional fees, costs, and expenses incurred in
connection with this Agreement, the other Loan Documents, and the transactions contemplated
hereby and thereby and to backstop or replace Letters of Credit, and (b)
thereafter, consistent with the terms and conditions hereof, to finance ongoing
working capital, capital expenditure, and general corporate needs of Borrowers,
including Permitted Acquisitions, and for its lawful and permitted purposes.

 

6.15         Intentionally Omitted.

 

6.16         Financial Covenants.

 

(a)           Fixed Charge Coverage
Ratio.  Fail to maintain or achieve a Fixed Charge
Coverage Ratio, measured on a fiscal quarter-end basis, of at least the
required amount set forth in the following table for the “Applicable Period”
set forth opposite thereto; provided, however, that, with respect
to any “Applicable Period”, if daily average Excess Availability was at least $12,500,000
during the 30 day period immediately preceding the applicable date of
determination and on the applicable date of determination, then the foregoing
covenant shall not apply for such applicable period:

 

37

 

	
  Applicable Ratio

  	
   

  	
  Applicable
  Period

  
	
  1.05:1.0

  	
   

  	
  For the 4 quarter period

  ending March 31, 2005

  
	
  1.10:1.0

  	
   

  	
  For the 4 quarter period

  ending June 30, 2005

  
	
  1.10:1.0

  	
   

  	
  For the 4 quarter period

  ending September 30, 2005

  
	
  1.10:1.0

  	
   

  	
  For the 4 quarter period

  ending December 31, 2005

  
	
  1.20:1.0

  	
   

  	
  For the 4 quarter period

  ending each fiscal quarter thereafter

  

 

(b)           Capital Expenditures.  Make Capital Expenditures in any fiscal year in excess of the amount set
forth in the following table for the applicable period:

 

	
  Applicable Amount

  	
   

  	
  Applicable
  Period

  
	
  $

  	
  7,900,000

  	
   

  	
  fiscal year 2005

  
	
  $

  	
  8,200,000

  	
   

  	
  fiscal year 2006

  
	
  $

  	
  8,300,000

  	
   

  	
  fiscal year 2007

  
	
  $

  	
  8,500,000

  	
   

  	
  fiscal year 2008

  
	
  $

  	
  8,800,000

  	
   

  	
  fiscal year 2009 and each fiscal year thereafter

  

 

provided, however, that up to 75% of the
difference between the amount of Capital Expenditure that may be made in any
fiscal year and the amount of Capital Expenditures actually made in such fiscal
year, may be made in the immediately succeeding fiscal year; provided
further, however, that with respect to any Permitted Acquisitions, the
“Applicable Amount” for the “Applicable Period” in which such Permitted
Acquisition is consummated shall be increased by an amount equal to the product
of (a) 1.25 times (b) the average amount per year of Capital Expenditures made
by such acquired Person during the immediately preceding three (3) year period.

 

6.17         Acquisition Documents.  Amend, modify or waive in any way materially
adverse to the Lender Group, any term or provision of the Acquisition
Documents.

 

6.18         Indenture Documents.  Amend, modify or waive in any way materially
adverse to the Lender Group, any term or provision of the Indenture Documents.

 

6.19         Governing Documents Amend, modify or
waive in any way materially adverse to the Lender Group, any term or provision
of any Governing Document of any Borrower or Guarantor.

 

38

 

6.20         Real Property
Collateral.  Without in any
manner limiting Section 6.2, execute and deliver a mortgage with respect
to any Real Property located in the State of New York or any other Real
Property for which Borrowers and their Restricted Subsidiaries are not required
to grant a Mortgage pursuant to Section 5.17, except (a) in favor of
Agent or (b) if the Agent has been, or will simultaneously be, granted a first
priority mortgage with respect thereto, in favor of the Trustee as a second
priority mortgage to the extent permitted by the Intercreditor Agreement.

 

7.             EVENTS OF DEFAULT.

 

Any one or more of the
following events shall constitute an event of default (each, an “Event of
Default”) under this Agreement:

 

7.1           If Borrowers fail to pay when due and payable, or when declared due and
payable, (a) all or any portion of the Obligations consisting of interest,
fees, or charges due the Lender Group, reimbursement of Lender Group Expenses,
or other amounts (other than any portion thereof constituting principal)
constituting Obligations (including any portion thereof that accrues after the
commencement of an Insolvency Proceeding, regardless of whether allowed or
allowable in whole or in part as a claim in any such Insolvency Proceeding),
and such failure continues for a period of 3 Business Days, or (b) all or any
portion of the principal of the Obligations);

 

7.2           If any Borrower or any of its Restricted Subsidiaries

 

(a)           fails to perform or observe any covenant or other agreement contained
in any of Sections 5.5, 5.8, 5.12 (as to existence), and 6.1
through 6.20 of this Agreement or Section 6 of the Security
Agreement;

 

(b)           fails to perform or observe any covenant or other agreement contained
in any of Sections 2.7, 5.2, and 5.3 of this Agreement and such
failure continues for a period of 3 Business Days after written notice thereof
is given to Administrative Borrower by Agent;

 

(c)           fails to perform or observe any covenant or other agreement contained
in any of Sections 5.6, 5.7, 5.9, 5.15, 5.16,
and 5.17 of this Agreement and such failure continues for a period of 10
Business Days after written notice thereof is given to Administrative Borrower
by Agent; or

 

(d)           fails to perform or observe any covenant or other agreement contained
in this Agreement, or in any of the other Loan Documents; in each case, other
than any such covenant or agreement that is the subject of another provision of
this Section 7 (in which event such other provision of this Section 7
shall govern), and such failure continues for a period of 20 Business Days
after written notice thereof is given to Administrative Borrower by Agent;

 

7.3           If any of any Borrower’s or any of its Restricted Subsidiaries’ assets
with an individual fair market value of $1,000,000 or more or assets with an
aggregate fair market value of $3,000,000 or more is attached, seized,
subjected to a writ or distress warrant, or is levied upon, or comes into the
possession of any third Person and the same is not discharged before the
earlier of 30 days after the date it first arises or 5 days prior to the date
on which such property or asset is subject to forfeiture by such Borrower or
the applicable Restricted Subsidiary;

 

7.4           If an Insolvency Proceeding is commenced by any Borrower or any of its Restricted
Subsidiaries;

 

39

 

7.5           If an Insolvency Proceeding is commenced against any Borrower or any of
its Restricted Subsidiaries, and any of the following events occur:  (a) the applicable Borrower or Restricted Subsidiary
consents to the institution of such Insolvency Proceeding against it, (b) the
petition commencing the Insolvency Proceeding is not timely controverted, (c)
the petition commencing the Insolvency Proceeding is not dismissed within 60
calendar days of the date of the filing thereof, (d) an interim trustee is
appointed to take possession of all or any substantial portion of the
properties or assets of, or to operate all or any substantial portion of the
business of, any Borrower or any such Restricted Subsidiary, or (e) an order
for relief shall have been issued or entered therein;

 

7.6           If any Borrower or any of its Restricted Subsidiaries is enjoined,
restrained, or in any way prevented by court order from continuing to conduct
all or any material part of its business affairs;

 

7.7           If one or more judgments, orders, or awards involving an individual
amount of $1,000,000 or more or an aggregate amount of $3,000,000, or more
(except to the extent fully covered by insurance pursuant to which the insurer
has accepted liability therefor in writing) shall be entered or filed against any
Borrower or any of its Restricted Subsidiaries or with respect to any of their
respective assets, and the same is not released, discharged, bonded against, or
stayed pending appeal before 30 days after the date it first arises;

 

7.8           If there is a default in one or more agreements to which any Borrower
or any of its Restricted Subsidiaries is a party with one or more third Persons
relative to Indebtedness of any Borrower or any of its Restricted Subsidiaries
involving an aggregate amount of $3,000,000 or more, and (a) such default (i) occurs
at the final maturity of the obligations thereunder, or (ii) results in a
right by such third Person(s), irrespective of whether exercised, to accelerate
the maturity of the applicable Borrower’s or Restricted Subsidiary’s
obligations thereunder, or (b) or any such Indebtedness obligations shall be
required to be prepaid or redeemed (other than by a regularly scheduled
required prepayment or redemption), prior to the stated maturity thereof;

 

7.9           If any warranty, representation, statement, or Record made herein or in
any other Loan Document or delivered to Agent or any Lender in connection with
this Agreement or any other Loan Document proves to be untrue in any material respect
as of the date of issuance or making or deemed making thereof; 

 

7.10         If the obligation of any Guarantor under the Guaranty is limited or
terminated by operation of law or by such Guarantor or any such Guarantor
becomes the subject of an Insolvency Proceeding; 

 

7.11         If the Security Agreement or any other Loan Document that purports to
create a Lien, shall, for any reason, fail or cease to create a valid and perfected
and, except to the extent permitted by the terms hereof or thereof, first
priority Lien on or security interest in the Collateral covered hereby or
thereby, except as permitted under this Agreement;  

 

7.12         Any provision of any Loan Document shall at any time for any reason be
declared to be null and void, or the validity or enforceability thereof shall
be contested by any Borrower or any of its Restricted Subsidiaries, or a
proceeding shall be commenced by any Borrower or any of its Restricted Subsidiaries,
or by any Governmental Authority having jurisdiction over any Borrower or any
of its Restricted Subsidiaries, seeking to establish the invalidity or
unenforceability thereof, or any Borrower or any of its Restricted Subsidiaries
shall deny that it has any liability or obligation purported to be created
under any Loan Document; 

 

7.13         If any Change of Control shall have occurred; 

 

7.14         If (a) there shall occur and be continuing any “Event of Default”
(or any comparable term) under, and as defined in any Indenture Document, (b)
any of the Obligations for any reason shall cease to be “Credit Agreement
Secured Obligations” (or any comparable terms) under, and as defined in the
Intercreditor Agreement, (c) any Indebtedness other than the Obligations shall
constitute “Credit Agreement Senior

 

40

 

Obligations” (or any
comparable term) under, and as defined in, any Intercreditor Agreement or any
other document evidencing or governing any Indebtedness that has been
contractually subordinated in right of payment to the Obligations, except as
expressly permitted by this Agreement, (d) any holder of any Senior Note shall
fail to perform or comply with any of the subordination provisions of the
documents evidencing or governing such Indebtedness, or (e) the subordination
provisions of the Intercreditor Agreement shall, in whole or in part,
terminate, cease to be effective or cease to be legally valid, binding and
enforceable against any holder of such Indebtedness; or

 

7.15         If there occurs one or more ERISA Events which results in or otherwise
is associated with liability of any Borrower, any of its Restricted
Subsidiaries, or any of their respective ERISA Affiliates in excess of
$3,000,000 in the aggregate during the term of this Agreement.

 

8.             THE LENDER GROUP’S RIGHTS
AND REMEDIES.

 

8.1           Rights and Remedies.  Upon the occurrence, and during the continuation, of an Event of
Default, the Required Lenders (at their election but without notice of their
election and without demand) may authorize and instruct Agent to do any one or
more of the following on behalf of the Lender Group (and Agent, acting upon the
instructions of the Required Lenders, shall do the same on behalf of the Lender
Group), all of which are authorized by Borrowers:

 

(a)           Declare all or any portion of the Obligations, whether evidenced by
this Agreement, by any of the other Loan Documents, or otherwise, immediately
due and payable;

 

(b)           Cease or restrict advancing money or extending credit to or for the benefit
of Borrowers under this Agreement, under any of the Loan Documents, or under
any other agreement between Borrowers and the Lender Group;

 

(c)           Terminate this Agreement and any of the other Loan Documents as to any
future liability or obligation of the Lender Group, but without affecting any
of the Agent’s Liens in the Collateral and without affecting the Obligations;
and

 

(d)           The Lender Group shall have all other rights and remedies available at
law or in equity or pursuant to any other Loan Document.

 

The foregoing to the
contrary notwithstanding, upon the occurrence of any Event of Default described
in Section 7.4 or Section 7.5, in addition to the remedies set
forth above, without any notice to Borrowers or any other Person or any act by
the Lender Group, the Commitments shall automatically terminate and the
Obligations then outstanding, together with all accrued and unpaid interest
thereon and all fees and all other amounts due under this Agreement and the
other Loan Documents, shall automatically and immediately become due and
payable, without presentment, demand, protest, or notice of any kind, all of
which are expressly waived by Borrowers.

 

8.2           Remedies Cumulative.  The rights and remedies of the Lender Group under this Agreement, the
other Loan Documents, and all other agreements shall be cumulative.  The Lender Group shall have all other rights
and remedies not inconsistent herewith as provided under the Code, by law, or
in equity.  No exercise by the Lender
Group of one right or remedy shall be deemed an election, and no waiver by the
Lender Group of any Event of Default shall be deemed a continuing waiver.  No delay by the Lender Group shall constitute
a waiver, election, or acquiescence by it.

 

9.             TAXES AND EXPENSES.

 

If any Borrower or any of its
Restricted Subsidiaries fails to pay any monies (whether taxes, assessments,
insurance premiums, or, in the case of leased properties or assets, rents or
other amounts payable

 

41

 

under such leases) due to
third Persons, or fails to make any deposits or furnish any required proof of
payment or deposit, all as required under the terms of this Agreement, then,
Agent, in its sole discretion and without prior notice to such Person, may do
any or all of the following:  (a) except
for payments which are the subject of a Permitted Protest, make payment of the
same or any part thereof, (b) set up such reserves against the Borrowing Base
or the Maximum Revolver Amount as Agent deems necessary in its Permitted Discretion
to protect the Lender Group from the exposure created by such failure, or (c)
in the case of the failure to comply with Section 5.8 hereof, obtain and
maintain insurance policies of the type described in Section 5.8 and
take any action with respect to such policies as Agent deems prudent in its
Permitted Discretion.  Any such amounts
paid by Agent shall constitute Lender Group Expenses and any such payments
shall not constitute an agreement by the Lender Group to make similar payments
in the future or a waiver by the Lender Group of any Event of Default under
this Agreement.  Except in connection
with payments made by Agent pursuant to clause (a) above, Agent need not
inquire as to, or contest the validity of, any such expense, tax, or Lien and
the receipt of the usual official notice for the payment thereof shall be
conclusive evidence that the same was validly due and owing.

 

10.           WAIVERS; INDEMNIFICATION.

 

10.1         Demand; Protest; etc.  Each Borrower waives demand, protest, notice of protest, notice of default
or dishonor, notice of payment and nonpayment, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of documents, instruments,
chattel paper, and guarantees at any time held by the Lender Group on which any
Borrower may in any way be liable.

 

10.2         The Lender Group’s Liability
for Collateral.  Each Borrower hereby agrees that:  (a) so long as Agent complies with its
obligations, if any, under the Code, the Lender Group shall not in any way or
manner be liable or responsible for:  (i)
the safekeeping of the Collateral, (ii) any loss or damage thereto occurring or
arising in any manner or fashion from any cause, (iii) any diminution in the
value thereof, or (iv) any act or default of any carrier, warehouseman, bailee,
forwarding agency, or other Person, and (b) all risk of loss, damage, or
destruction of the Collateral shall be borne by Borrowers.

 

10.3         Indemnification.  Each Borrower shall pay, indemnify, defend, and hold the Agent-Related
Persons, the Lender-Related Persons, and each Participant (each, an “Indemnified
Person”) harmless (to the fullest extent permitted by law) from and against
any and all claims, demands, suits, actions, investigations, proceedings, liabilities,
fines, costs, penalties and damages, and all reasonable fees and disbursements
of attorneys, experts and consultants and other costs and expenses actually
incurred in connection therewith or in connection with the enforcement of this
indemnification (as and when they are incurred and irrespective of whether suit
is brought), at any time asserted against, imposed upon, or incurred by any of
them (a) in connection with or as a result of or related to the execution,
delivery, enforcement, performance, or administration (including any
restructuring or workout with respect hereto) of this Agreement, any of the
other Loan Documents, or the transactions contemplated hereby or thereby or the
monitoring of Borrowers’ and their respective Restricted Subsidiaries’
compliance with the terms of the Loan Documents, (b) with respect to any
investigation, litigation, or proceeding related to this Agreement, any other
Loan Document, or the use of the proceeds of the credit provided hereunder
(irrespective of whether any Indemnified Person is a party thereto), or any
act, omission, event, or circumstance in any manner related thereto, and (c) in
connection with or arising out of any presence or release of Hazardous
Materials at, on, under, to or from any assets or properties owned, leased or
operated by any Borrower or any of its Subsidiaries or any Environmental
Actions, Environmental Liabilities and Costs or Remedial Actions related in any
way to any such assets or properties of any Borrower or any of its Subsidiaries
(all the foregoing, collectively, the “Indemnified Liabilities”) provided,
however, that any claim with respect to taxes should be governed solely
by Section 15.11.  The foregoing
to the contrary notwithstanding, Borrowers shall have no obligation to any
Indemnified Person under this Section 10.3 with respect to any
Indemnified Liability that a court of competent jurisdiction finally determines
to have resulted from the gross negligence or willful misconduct of such
Indemnified Person.  This provision shall
survive the termination of this Agreement and the repayment of the
Obligations.  If any Indemnified Person
makes any payment to any other Indemnified Person with respect to an
Indemnified Liability as to which

 

42

 

Borrowers were required to
indemnify the Indemnified Person receiving such payment, the Indemnified Person
making such payment is entitled to be indemnified and reimbursed by Borrowers
with respect thereto.  WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL
APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH
IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION
OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON.

 

11.           NOTICES.

 

Unless otherwise provided in
this Agreement, all notices or demands by Borrowers or Agent to the other
relating to this Agreement or any other Loan Document shall be in writing and
(except for financial statements and other informational documents which may be
sent by first-class mail, postage prepaid) shall be personally delivered or
sent by registered or certified mail (postage prepaid, return receipt
requested), overnight courier, electronic mail (at such email addresses as Parent,
Administrative Borrower or Agent, as applicable, may designate to each other in
accordance herewith), or telefacsimile to Borrowers in care of Administrative
Borrower or to Agent, as the case may be, at its address set forth below:

 

	
   

  	
  If
  to Parent of Administrative Borrower:

  	
  ALTRA
  INDUSTRIAL MOTION, INC.

  
	
   

  	
   

  	
  14
  Hayward St.

  
	
   

  	
   

  	
  Quincy,
  Massachusetts 02171

  
	
   

  	
   

  	
  Attn:  Michael L. Hurt

  
	
   

  	
   

  	
  Fax
  No.:  (617) 689-6202

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  with
  copies to:

  	
  GENSTAR
  CAPITAL, L.P.

  
	
   

  	
   

  	
  Four
  Embarcadero Center

  
	
   

  	
   

  	
  Suite
  1900

  
	
   

  	
   

  	
  San
  Francisco, CA 94111

  
	
   

  	
   

  	
  Attn:  Darren J. Gold

  
	
   

  	
   

  	
  Fax
  No.: (415) 834-2383

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  WEIL,
  GOTSHAL & MANGES LLP

  
	
   

  	
   

  	
  200
  Crescent Court, Suite 300

  
	
   

  	
   

  	
  Dallas,
  Texas 75201

  
	
   

  	
   

  	
  Attn:  Angela L. Fontana, Esq.

  
	
   

  	
   

  	
  Fax
  No.:  (214) 746-7777

  
	
   

  	
   

  	
   

  
	
   

  	
  If
  to Agent:

  	
  WELLS FARGO FOOTHILL, INC.

  
	
   

  	
   

  	
  One
  Boston Place

  
	
   

  	
   

  	
  Boston,
  Massachusetts 02108

  
	
   

  	
   

  	
  Attn:
  Business Finance Manager

  
	
   

  	
   

  	
  Fax
  No.:  (617) 523-5839

  
	
   

  	
   

  	
   

  
	
   

  	
  with
  copies to:

  	
  MORRISON
  & FOERSTER LLP

  
	
   

  	
   

  	
  1290
  Avenue of the Americas, 40th Floor

  
	
   

  	
   

  	
  New
  York, New York 10104-0050

  
	
   

  	
   

  	
  Attn:  Mark B. Joachim, Esq.

  
	
   

  	
   

  	
  Fax
  No.:  (212) 468-7900

  

 

43

 

Agent and Borrowers may
change the address at which they are to receive notices hereunder, by notice in
writing in the foregoing manner given to the other party.  All notices or demands sent in accordance
with this Section 11, other than notices by Agent in connection with
enforcement rights against the Collateral under the provisions of the Code,
shall be deemed received on the earlier of the date of actual receipt or 3
Business Days after the deposit thereof in the mail or, where permitted by law,
transmitted by telefacsimile or any other method set forth above.

 

12.           CHOICE OF LAW AND VENUE;
JURY TRIAL WAIVER.

 

(a)           THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT
OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT
HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH
RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR
THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.

 

(b)           THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND TO THE EXTENT PERMITTED BY APPLICABLE LAW,
FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, PROVIDED,
HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR
OTHER PROPERTY MAY BE BROUGHT, AT AGENT’S OPTION, IN THE COURTS OF ANY
JURISDICTION WHERE AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH COLLATERAL
OR OTHER PROPERTY MAY BE FOUND.  EACH
BORROWER AND EACH MEMBER OF THE LENDER GROUP WAIVE, TO THE EXTENT PERMITTED
UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM
NON  CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING
IS BROUGHT IN ACCORDANCE WITH THIS SECTION 12(b).

 

(c)           EACH BORROWER AND EACH MEMBER OF THE LENDER GROUP HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.  EACH BORROWER AND EACH MEMBER OF THE LENDER
GROUP REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL.  IN THE EVENT OF LITIGATION, A
COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.

 

13.           ASSIGNMENTS AND
PARTICIPATIONS; SUCCESSORS.

 

13.1         Assignments and
Participations.

 

(a)           Any Lender may assign and delegate to one or more assignees (each an “Assignee”)
that are Eligible Transferees all, or any ratable part of all, of the
Obligations, the Commitments and the other rights and obligations of such
Lender hereunder and under the other Loan Documents, in a minimum amount of
$5,000,000; provided, however, that Borrowers and Agent may
continue to deal solely and directly with such Lender in connection with the
interest so assigned to an Assignee until (i) written notice of such
assignment, together with payment instructions, addresses, and related
information with respect to the Assignee, have been given to Administrative
Borrower and Agent by such Lender and the Assignee, (ii) such

 

44

 

Lender and its Assignee have
delivered to Administrative Borrower and Agent an Assignment and Acceptance,
and (iii) the assigning Lender or Assignee has paid to Agent for Agent’s
separate account a processing fee in the amount of $3,500.  Anything contained herein to the contrary
notwithstanding, the payment of any fees shall not be required and the Assignee
need not be an Eligible Transferee if such assignment is in connection with any
merger, consolidation, sale, transfer, or other disposition of all or any
substantial portion of the business or loan portfolio of the assigning Lender.

 

(b)           From and after the date that Agent notifies the assigning Lender (with
a copy to Administrative Borrower) that it has received an executed Assignment
and Acceptance and payment of the above-referenced processing fee and the
satisfaction of the other conditions in Section 13.1(a), (i) the
Assignee thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Acceptance, shall have the rights and obligations of a Lender under the Loan
Documents, and (ii) the assigning Lender shall, to the extent that rights and
obligations hereunder and under the other Loan Documents have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights (except
with respect to Section 10.3 hereof) and be released from any future
obligations under this Agreement (and in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender’s
rights and obligations under this Agreement and the other Loan Documents, such
Lender shall cease to be a party hereto and thereto), and such assignment shall
effect a novation between Borrowers and the Assignee; provided, however,
that nothing contained herein shall release any assigning Lender from
obligations that survive the termination of this Agreement, including such
assigning Lender’s obligations under Article 16 and Section 16.7
of this Agreement.

 

(c)           By executing and delivering an Assignment and Acceptance, the assigning
Lender thereunder and the 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, such
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 the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement
or any other Loan Document furnished pursuant hereto, (ii) such assigning Lender
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of Borrowers or the performance or observance by
Borrowers of any of their obligations under this Agreement or any other Loan
Document furnished pursuant hereto, (iii) such Assignee confirms that it has
received a copy of this Agreement, together with such other documents and
information as 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 Agent, such assigning Lender 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, (v) such Assignee appoints and
authorizes Agent to take such actions and to exercise such powers under this
Agreement as are delegated to Agent, by the terms hereof, together with such
powers as are reasonably incidental thereto, and (vi) such Assignee agrees that
it will perform all of the obligations which by the terms of this Agreement are
required to be performed by it as a Lender.

 

(d)           Immediately upon Agent’s receipt of the required processing fee payment
and the fully executed Assignment and Acceptance and the satisfaction of the
other conditions in Section 13.1(a), this Agreement shall be deemed to
be amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and the resulting adjustment of the Commitments
arising therefrom.  The Commitment
allocated to each Assignee shall reduce such Commitments of the assigning
Lender pro tanto.

 

(e)           Any Lender may at any time sell to one or more commercial banks,
financial institutions, or other Persons (a “Participant”) participating
interests in all or any portion of its Obligations, the Commitment, and the
other rights and interests of that Lender (the “Originating Lender”)
hereunder and under the other Loan Documents; provided, however,
that (i) the Originating Lender shall remain a “Lender” for all purposes of
this Agreement and the other Loan Documents and the Participant receiving the
participating interest in the Obligations, the Commitments, and the other
rights and interests of the Originating Lender

 

45

 

hereunder shall not
constitute a “Lender” hereunder or under the other Loan Documents and the
Originating Lender’s obligations under this Agreement shall remain unchanged, (ii)
the Originating Lender shall remain solely responsible for the performance of
such obligations, (iii) Borrowers, Agent, and the Lenders shall continue to
deal solely and directly with the Originating Lender in connection with the
Originating Lender’s rights and obligations under this Agreement and the other
Loan Documents, (iv) no Originating Lender shall transfer or grant any
participating interest under which the Participant has the right to approve any
amendment to, or any consent or waiver with respect to, this Agreement or any
other Loan Document, except to the extent such amendment to, or consent or
waiver with respect to this Agreement or of any other Loan Document would (A)
extend the final maturity date of the Obligations hereunder in which such
Participant is participating, (B) reduce the interest rate applicable to the
Obligations hereunder in which such Participant is participating, (C) release
all or substantially all of the Collateral or guaranties (except to the extent
expressly provided herein or in any of the Loan Documents) supporting the
Obligations hereunder in which such Participant is participating, (D) postpone
the payment of, or reduce the amount of, the interest or fees payable to such
Participant through such Lender, or (E) change the amount or due dates of
scheduled principal repayments or prepayments or premiums, and (v) all amounts
payable by Borrowers hereunder shall be determined as if such Lender had not
sold such participation, except that, if amounts outstanding under this
Agreement are due and unpaid, or shall have been declared or shall have become
due and payable upon the occurrence of an Event of Default, each Participant
shall be deemed to have the right of set off in respect of its participating
interest in amounts owing under this Agreement to the same extent as if the
amount of its participating interest were owing directly to it as a Lender
under this Agreement.  The rights of any
Participant only shall be derivative through the Originating Lender with whom
such Participant participates and no Participant shall have any rights under
this Agreement or the other Loan Documents or any direct rights as to the other
Lenders, Agent, Borrowers, the Collections of Borrowers or their respective
Subsidiaries, the Collateral, or otherwise in respect of the Obligations.  No Participant shall have the right to
participate directly in the making of decisions by the Lenders among
themselves.

 

(f)            In connection with any such assignment or
participation or proposed assignment or participation, a Lender may, subject to
the provisions of Section 16.7, disclose all documents and information
which it now or hereafter may have relating to Borrowers and their respective Restricted
Subsidiaries and their respective businesses.

 

(g)           Any other provision in this Agreement notwithstanding, any Lender may
at any time create a security interest in, or pledge, all or any portion of its
rights under and interest in this Agreement in favor of any Federal Reserve
Bank in accordance with Regulation A of the Federal Reserve Bank or U.S.
Treasury Regulation 31 CFR § 203.24, and such Federal Reserve Bank may enforce
such pledge or security interest in any manner permitted under applicable law.

 

(h)           Agent (on behalf of Borrowers) shall maintain, or cause to be
maintained, a register (the “Register”) on which it enters the name of a
Lender as the registered owner of each Advance held by such Lender.  Other than in connection with an assignment
by a Lender of all or any portion of its Commitment to an Affiliate of such
Lender (i) a Registered Loan may be assigned or sold in whole or in part only
by registration of such assignment or sale on the Register and (ii) any
assignment or sale of all or part of such Registered Loan may be effected only
by registration of such assignment or sale on the Register, together with the
surrender of any note, if any, evidencing the same duly endorsed by (or
accompanied by a written instrument of assignment or sale duly executed by) the
holder of such note, if any, whereupon, at the request of the designated
assignee(s) or transferee(s), one or more new notes in the same aggregate
principal amount shall be issued to the designated assignee(s) or
transferee(s).  Prior to the registration
of assignment or sale of any Registered Loan, Borrowers shall treat the Person
in whose name such Loan is registered as the owner thereof for the purpose of
receiving all payments thereon and for all other purposes, notwithstanding
notice to the contrary.  In the case of
any assignment by a Lender of all or any portion of its Commitment to an
Affiliate of such Lender, and which assignment is not recorded in the Register,
the assigning Lender, on behalf of Borrowers, shall maintain a register
comparable to the Register.

 

46

 

13.2         Successors.  This Agreement shall bind and inure to the benefit of the respective
successors and assigns of each of the parties; provided, however,
that Borrowers may not assign this Agreement or any rights or duties hereunder
without the Lenders’ prior written consent and any prohibited assignment shall
be absolutely void ab initio.  No consent to assignment by the Lenders shall
release any Borrower from its Obligations. 
A Lender may assign this Agreement and the other Loan Documents and its
rights and duties hereunder and thereunder pursuant to Section 13.1
hereof and, except as expressly required pursuant to Section 13.1
hereof, no consent or approval by any Borrower is required in connection with
any such assignment.

 

14.           AMENDMENTS; WAIVERS.

 

14.1         Amendments and Waivers.  No amendment or waiver of any provision of this Agreement or any other
Loan Document (other than Bank Product Agreements), and no consent with respect
to any departure by Borrowers or any of their respective Restricted Subsidiaries
therefrom, shall be effective unless the same shall be in writing and signed by
the Required Lenders (or by Agent at the written request of the Required
Lenders) and Administrative Borrower (on behalf of all Loan Parties) and then
any such waiver or consent shall be effective, but only in the specific
instance and for the specific purpose for which given; provided, however,
that no such waiver, amendment, or consent shall, unless in writing and signed
by all of the Lenders affected thereby and Administrative Borrower (on behalf
of all Loan Parties), do any of the following:

 

(a)           increase or extend any Commitment of any Lender,

 

(b)           postpone or delay any date fixed by this Agreement or any other Loan
Document for any payment of principal, interest, fees, or other amounts due
hereunder or under any other Loan Document,

 

(c)           reduce the principal of, or the rate of interest on, any loan or other
extension of credit hereunder, or reduce any fees or other amounts payable
hereunder or under any other Loan Document,

 

(d)           change the Pro Rata Share that is required to take any action
hereunder, 

 

(e)           amend or modify this Section or any provision of this Agreement
providing for consent or other action by all Lenders,

 

(f)            other than as permitted by Section 15.12,
release Agent’s Lien in and to any of the Collateral,

 

(g)           change the definition of “Required Lenders” or “Pro Rata Share”,

 

(h)           contractually subordinate any of the Agent’s Liens,

 

(i)            release any Borrower or any Guarantor from
any obligation for the payment of money, 

 

(j)            change the definition of Borrowing Base or
the definitions of Eligible Accounts, Eligible Inventory, Maximum Revolver
Amount, or change Section 2.1(b), or

 

(k)           amend any of the provisions of Section 15.

 

and, provided further,
however, that no amendment, waiver or consent shall, unless in writing
and signed by Agent, Issuing Lender, or Swing Lender, as applicable, affect the
rights or duties of Agent, Issuing Lender, or Swing Lender, as applicable,
under this Agreement or any other Loan Document.  The foregoing notwithstanding, any amendment,
modification, waiver, consent, termination, or release of, or with respect to,
any provision of this Agreement or any other Loan Document that relates only to
the relationship of the Lender

 

47

 

Group among themselves, and
that does not affect the rights or obligations of Borrowers, shall not require
consent by or the agreement of Borrowers.

 

14.2         Replacement of Holdout
Lender.  

 

(a)           If any action to be taken by the Lender Group or Agent hereunder
requires the unanimous consent, authorization, or agreement of all Lenders, and
a Lender (“Holdout Lender”) fails to give its consent, authorization, or
agreement, then Agent, upon at least 5 Business Days prior irrevocable notice
to the Holdout Lender, may permanently replace the Holdout Lender with one or
more substitute Lenders (each, a “Replacement Lender”), and the Holdout
Lender shall have no right to refuse to be replaced hereunder.  Such notice to replace the Holdout Lender
shall specify an effective date for such replacement, which date shall not be
later than 15 Business Days after the date such notice is given.

 

(b)           Prior to the effective date of such replacement, the Holdout Lender and
each Replacement Lender shall execute and deliver an Assignment and Acceptance,
subject only to the Holdout Lender being repaid its share of the outstanding
Obligations (including an assumption of its Pro Rata Share of the Risk
Participation Liability) without any premium or penalty of any kind
whatsoever.  If the Holdout Lender shall
refuse or fail to execute and deliver any such Assignment and Acceptance prior
to the effective date of such replacement, the Holdout Lender shall be deemed
to have executed and delivered such Assignment and Acceptance.  The replacement of any Holdout Lender shall
be made in accordance with the terms of Section 13.1.  Until such time as the Replacement Lenders
shall have acquired all of the Obligations, the Commitments, and the other
rights and obligations of the Holdout Lender hereunder and under the other Loan
Documents, the Holdout Lender shall remain obligated to make the Holdout Lender’s
Pro Rata Share of Advances and to purchase a participation in each Letter of
Credit, in an amount equal to its Pro Rata Share of the Risk Participation
Liability of such Letter of Credit.

 

14.3         No Waivers; Cumulative
Remedies.  No failure by Agent or any Lender to exercise
any right, remedy, or option under this Agreement or any other Loan Document,
or delay by Agent or any Lender in exercising the same, will operate as a
waiver thereof.  No waiver by Agent or
any Lender will be effective unless it is in writing, and then only to the
extent specifically stated.  No waiver by
Agent or any Lender on any occasion shall affect or diminish Agent’s and each
Lender’s rights thereafter to require strict performance by Borrowers or any of
their respective Restricted Subsidiaries of any provision of this
Agreement.  Agent’s and each Lender’s
rights under this Agreement and the other Loan Documents will be cumulative and
not exclusive of any other right or remedy that Agent or any Lender may have. 

 

15.           AGENT; THE LENDER GROUP.

 

15.1         Appointment and
Authorization of Agent.  Each Lender hereby designates and appoints
WFF as its representative under this Agreement and the other Loan Documents and
each Lender hereby irrevocably authorizes Agent to execute and deliver each of
the other Loan Documents on its behalf and to take such other action on its
behalf under the provisions of this Agreement and each other Loan Document and
to exercise such powers and perform such duties as are expressly delegated to
Agent by the terms of this Agreement or any other Loan Document, together with
such powers as are reasonably incidental thereto.  Agent agrees to act as such on the express
conditions contained in this Section 15. 
The provisions of this Section 15 (other than the proviso to Section
15.11(a)) are solely for the benefit of Agent, and the Lenders, and
Borrowers and their respective Restricted Subsidiaries shall have no rights as
a third party beneficiary of any of the provisions contained herein.  Any provision to the contrary contained
elsewhere in this Agreement or in any other Loan Document notwithstanding, Agent
shall not have any duties or responsibilities, except those expressly set forth
herein, nor shall Agent have or be deemed to have any fiduciary relationship
with any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against Agent; it being expressly understood and
agreed that the use of the word “Agent” is for convenience only, that WFF is
merely the representative of the Lenders, and only has the contractual duties
set forth herein.  Except as expressly
otherwise provided in

 

48

 

this Agreement, Agent shall
have and may use its sole discretion with respect to exercising or refraining
from exercising any discretionary rights or taking or refraining from taking
any actions that Agent expressly is entitled to take or assert under or
pursuant to this Agreement and the other Loan Documents.  Without limiting the generality of the
foregoing, or of any other provision of the Loan Documents that provides rights
or powers to Agent, Lenders agree that Agent shall have the right to exercise
the following powers as long as this Agreement remains in effect:  (a) maintain, in accordance with the Loan
Documents and its customary business practices, ledgers and records reflecting
the status of the Obligations, the Collateral, the Collections of Borrowers and
their respective Restricted Subsidiaries, and related matters, (b) execute or
file any and all financing or similar statements or notices, amendments,
renewals, supplements, documents, instruments, proofs of claim, notices and
other written agreements with respect to the Loan Documents, (c) make Advances,
for itself or on behalf of Lenders as provided in the Loan Documents, (d)
exclusively receive, apply, and distribute the Collections of Borrowers and
their respective Restricted Subsidiaries as provided in the Loan Documents, (e)
open and maintain such bank accounts and cash management arrangements as Agent
deems necessary and appropriate in accordance with the Loan Documents for the
foregoing purposes with respect to the Collateral and the Collections of
Borrowers and their respective Restricted Subsidiaries, (f) perform,
exercise, and enforce any and all other rights and remedies of the Lender Group
with respect to the Loan Parties, the Obligations, the Collateral, the
Collections of Borrowers and their respective Restricted Subsidiaries, or
otherwise related to any of same as provided in the Loan Documents, and (g)
incur and pay such Lender Group Expenses as Agent may deem necessary or
appropriate for the performance and fulfillment of its functions and powers
pursuant to the Loan Documents.

 

15.2         Delegation of Duties.  Agent may execute any of its duties under this Agreement or any other
Loan Document by or through agents, employees or attorneys in fact and shall be
entitled to advice of counsel concerning all matters pertaining to such
duties.  Agent shall not be responsible
for the negligence or misconduct of any agent or attorney in fact that it
selects as long as such selection was made without gross negligence or willful
misconduct.  

 

15.3         Liability of Agent.  None of the Agent-Related Persons shall (a) be liable for any action
taken or omitted to be taken by any of them under or in connection with this
Agreement or any other Loan Document or the transactions contemplated hereby
(except for its own gross negligence or willful misconduct), or (b) be
responsible in any manner to any of the Lenders for any recital, statement, representation
or warranty made by any Borrower or any Subsidiary or Affiliate of any
Borrower, or any officer or director thereof, contained in this Agreement or in
any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by Agent under or in
connection with, this Agreement or any other Loan Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document, or for any failure of any Borrower or any other party
to any Loan Document to perform its obligations hereunder or thereunder.  No Agent-Related Person shall be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the books and records or
properties of Borrowers or the books or records or properties of any of Borrowers’
Subsidiaries or Affiliates.

 

15.4         Reliance by Agent.  Agent shall be entitled to rely, and shall be fully protected in
relying, upon any writing, resolution, notice, consent, certificate, affidavit,
letter, telegram, telefacsimile or other electronic method of transmission,
telex or telephone message, statement or other document or conversation
believed by it to be genuine and correct and to have been signed, sent, or made
by the proper Person or Persons, and upon advice and statements of legal
counsel (including counsel to Borrowers or counsel to any Lender), independent
accountants and other experts selected by Agent.  Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other Loan Document
unless Agent shall first receive such advice of legal counsel and until such advice
is received, Agent shall act, or refrain from acting, as it deems reasonably advisable.  If Agent so requests, it shall first be
indemnified to its reasonable satisfaction by the Lenders against any and all liability
and expense that may be incurred by it by reason of taking or continuing to
take any such action.  Agent shall in all
cases be fully protected in acting, or in

 

49

 

refraining from acting,
under this Agreement or any other Loan Document in accordance with a request or
consent of the requisite Lenders and such request and any action taken or
failure to act pursuant thereto shall be binding upon all of the Lenders.

 

15.5         Notice of Default or Event
of Default.  Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default, except with
respect to defaults in the payment of principal, interest, fees, and expenses
required to be paid to Agent for the account of the Lenders and, except with
respect to Events of Default of which Agent has actual knowledge, unless Agent
shall have received written notice from a Lender or Administrative Borrower
referring to this Agreement, describing such Default or Event of Default, and
stating that such notice is a “notice of default.”  Agent promptly will notify the Lenders of its
receipt of any such notice or of any Event of Default of which Agent has actual
knowledge.  If any Lender obtains actual
knowledge of any Event of Default, such Lender promptly shall notify the other
Lenders and Agent of such Event of Default. 
Each Lender shall be solely responsible for giving any notices to its
Participants, if any.  Subject to Section
15.4, Agent shall take such action with respect to such Default or Event of
Default as may be requested by the Required Lenders in accordance with Section
8; provided, however, that unless and until Agent has
received any such request, Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable.

 

15.6         Credit Decision.  Each Lender acknowledges that none of the Agent-Related Persons has
made any representation or warranty to it, and that no act by Agent hereinafter
taken, including any review of the affairs of Borrowers and their respective Subsidiaries
or Affiliates, shall be deemed to constitute any representation or warranty by
any Agent-Related Person to any Lender. 
Each Lender represents to Agent that it has, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of Borrowers and any other Person party to
a Loan Document, and all applicable bank regulatory laws relating to the
transactions contemplated hereby, and made its own decision to enter into this
Agreement and to extend credit to Borrowers. 
Each Lender also represents that it will, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigations as
it deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of Borrowers and
any other Person party to a Loan Document. 
Except for notices, reports, and other documents expressly herein
required to be furnished to the Lenders by Agent, Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of Borrowers and any other Person party to a Loan
Document that may come into the possession of any of the Agent-Related Persons.

 

15.7         Costs and Expenses;
Indemnification.  Agent may incur and pay Lender Group Expenses
to the extent Agent reasonably deems necessary or appropriate for the
performance and fulfillment of its functions, powers, and obligations pursuant
to the Loan Documents, including court costs, attorneys fees and expenses, fees
and expenses of financial accountants, advisors, consultants, and appraisers,
costs of collection by outside collection agencies, auctioneer fees and
expenses, and costs of security guards or insurance premiums paid to maintain
the Collateral, whether or not Borrowers are obligated to reimburse Agent or
Lenders for such expenses pursuant to this Agreement or otherwise.  Agent is authorized and directed to deduct
and retain sufficient amounts from the Collections of Borrowers and their respective
Restricted Subsidiaries received by Agent to reimburse Agent for such
out-of-pocket costs and expenses prior to the distribution of any amounts to
Lenders.  In the event Agent is not
reimbursed for such costs and expenses from the Collections of Borrowers and
their respective Restricted Subsidiaries received by Agent, each Lender hereby
agrees that it is and shall be obligated to pay to or reimburse Agent for the
amount of such Lender’s Pro Rata Share thereof. 
Whether or not the transactions contemplated hereby are consummated, the
Lenders shall indemnify upon demand the Agent-Related Persons (to the extent
not reimbursed by or on behalf of Borrowers

 

50

 

and without limiting the
obligation of Borrowers to do so), according to their Pro Rata Shares, from and
against any and all Indemnified Liabilities; provided, however,
that no Lender shall be liable for the payment to any Agent-Related Person of
any portion of such Indemnified Liabilities resulting solely from such Person’s
gross negligence or willful misconduct nor shall any Lender be liable for the
obligations of any Defaulting Lender in failing to make an Advance or other
extension of credit hereunder.  Without
limitation of the foregoing, each Lender shall reimburse Agent upon demand for
such Lender’s Pro Rata Share of any costs or out of pocket expenses (including reasonable
attorneys, accountants, advisors, and consultants fees and expenses) incurred
by Agent in connection with the preparation, execution, delivery,
administration, modification, amendment, or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, any other Loan Document, or
any document contemplated by or referred to herein or therein, to the extent
that Agent is not reimbursed for such expenses by or on behalf of
Borrowers.  The undertaking in this
Section shall survive the payment of all Obligations hereunder and the
resignation or replacement of Agent.

 

15.8         Agent in Individual Capacity.  WFF and its Affiliates may make loans to, issue letters of credit for
the account of, accept deposits from, acquire equity interests in, and
generally engage in any kind of banking, trust, financial advisory, underwriting,
or other business with Borrowers and their respective Subsidiaries and
Affiliates and any other Person party to any Loan Documents as though WFF were
not Agent hereunder, and, in each case, without notice to or consent of the
other members of the Lender Group.  The
other members of the Lender Group acknowledge that, pursuant to such
activities, WFF or its Affiliates may receive information regarding Borrowers
or their respective Affiliates and any other Person party to any Loan Documents
that is subject to confidentiality obligations in favor of Borrowers or such
other Person and that prohibit the disclosure of such information to the Lenders,
and the Lenders acknowledge that, in such circumstances (and in the absence of
a waiver of such confidentiality obligations, which waiver Agent will use its
reasonable best efforts to obtain), Agent shall not be under any obligation to
provide such information to them.  The
terms “Lender” and “Lenders” include WFF in its individual capacity. 

 

15.9         Successor Agent.  Agent may resign as Agent upon 45 days notice to the Lenders.  If Agent resigns under this Agreement, the
Required Lenders shall appoint a successor Agent for the Lenders.  If no successor Agent is appointed prior to
the effective date of the resignation of Agent, Agent may appoint, after
consulting with the Lenders, a successor Agent. 
If Agent has materially breached or failed to perform any material
provision of this Agreement or of applicable law, the Required Lenders may
agree in writing to remove and replace Agent with a successor Agent from among
the Lenders.  In any such event, upon the
acceptance of its appointment as successor Agent hereunder, such successor
Agent shall succeed to all the rights, powers, and duties of the retiring Agent
and the term “Agent” shall mean such successor Agent and the retiring Agent’s
appointment, powers, and duties as Agent shall be terminated.  After any retiring Agent’s resignation
hereunder as Agent, the provisions of this Section 15 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement.  If no successor
Agent has accepted appointment as Agent by the date which is 45 days following
a retiring Agent’s notice of resignation, the retiring Agent’s resignation
shall nevertheless thereupon become effective and the Lenders shall perform all
of the duties of Agent hereunder until such time, if any, as the Lenders
appoint a successor Agent as provided for above.

 

15.10       Lender in Individual
Capacity.  Any Lender and its respective Affiliates may
make loans to, issue letters of credit for the account of, accept deposits
from, acquire equity interests in and generally engage in any kind of banking,
trust, financial advisory, underwriting or other business with Borrowers and
their respective Subsidiaries and Affiliates and any other Person party to any
Loan Documents as though such Lender were not a Lender hereunder without notice
to or consent of the other members of the Lender Group.  The other members of the Lender Group
acknowledge that, pursuant to such activities, such Lender and its respective
Affiliates may receive information regarding Borrowers or their Affiliates and
any other Person party to any Loan Documents that is subject to confidentiality
obligations in favor of Borrowers or such other Person and that prohibit the
disclosure of such information to the Lenders, and the Lenders acknowledge that,
in such circumstances (and in the absence of a waiver of such confidentiality
obligations, which waiver such

 

51

 

Lender will use its
reasonable best efforts to obtain), such Lender shall not be under any
obligation to provide such information to them. 
With respect to the Swing Loans and Protective Advances, Swing Lender
shall have the same rights and powers under this Agreement as any other Lender
and may exercise the same as though it were not the sub-agent of Agent.

 

15.11       Withholding Taxes.

 

(a)           All payments made by any Borrower hereunder or under any note or other
Loan Document will be made without setoff, counterclaim, or other defense.  In addition, except as provided in this
Section, all such payments will be made free and clear of, and without
deduction or withholding for, any present or future Taxes, and in the event any
deduction or withholding of Taxes is required, each Borrower shall comply with
the penultimate sentence of this Section 15.11(a).  “Taxes” shall mean, any taxes, levies,
imposts, duties, fees, assessments or other charges of whatever nature now or
hereafter imposed by any jurisdiction or by any political subdivision or taxing
authority thereof or therein with respect to such payments (but excluding (i) any
tax imposed by any jurisdiction or by any political subdivision or taxing
authority thereof or therein measured by or based on the net income, capital,
receipts or profits of any Lender, (ii) franchise or similar taxes, (iii) any
non-United States taxes imposed by the jurisdictions under the laws of which
the Lender or Agent, as the case may be, is organized, conducts business or has
a present or former connection (other than by reason of the transactions
contemplated hereby or by the other Loan Documents), or any political
subdivision thereof, in effect on the Closing Date (or, in the case of (A) an
Assignee, the date of the Assignment and Acceptance, (B) a successor Lender,
the date such successor Lender becomes a Lender hereunder and (C) a successor
Agent, the date of the appointment of such Agent) applicable to such Lender or
Agent, as the case may be, but not excluding any United States withholding tax
payable with respect to interest arising under any Loan Document as a result of
any change in such laws occurring after the Closing Date (or the date of such
Assignment and Acceptance, the date such successor Lender becomes a Lender or
the date of the appointment of such Agent), (iv) any taxes that are
attributable to such Lender’s or Agent’s failure to comply with the
requirements of Section 15.11(b) and (v) all liabilities, penalties and
interest with respect to any of the forgoing excluded taxes) and all interest,
penalties or similar liabilities with respect thereto.  If any Taxes are so levied or imposed, each
Borrower agrees to pay the full amount of such Taxes and such additional
amounts as may be necessary so that every payment of all amounts due under this
Agreement, any note, or Loan Document, including any amount paid pursuant to
this Section 15.11(a) after withholding or deduction for or on account
of any Taxes, will not be less than the amount provided for herein; provided,
however, that Borrowers shall not be required to increase any such amounts if
the increase in such amount payable results from Agent’s or such Lender’s own
willful misconduct or gross negligence (as finally determined by a court of
competent jurisdiction).  Each Borrower
will furnish to Agent as promptly as is commercially reasonable after the date
the payment of any Tax is due pursuant to applicable law certified copies of any
tax receipts provided by the taxing authority evidencing such payment by any
Borrower.

 

(b)           (i) Each Lender, Assignee, successor Lender,
Agent or successor Agent that is not a “United States person” within the
meaning of Section 7701(a)(30) of the IRC (each, a “Foreign Lender”)
shall deliver to the Administrative Borrower and Agent, on or prior to the date
which is fifteen (15) Business Days after the Closing Date (or upon accepting
an assignment of an interest herein), two duly signed, properly completed
copies of either IRS Form W-8BEN or any successor thereto (relating to such
Foreign Lender and entitling it to an exemption from, or reduction of, United
States withholding tax on all payments to be made to such Foreign Lender by a
Borrower or any other Loan Party pursuant to this Agreement or any other Loan
Document) or IRS Form W-8ECI or any successor thereto (relating to all payments
to be made to such Foreign Lender by a Borrower or any other Loan Party
pursuant to this Agreement or any other Loan Document) or such other evidence
reasonably satisfactory to Administrative Borrower and Agent that such Foreign
Lender is entitled to an exemption from, or reduction of, United States withholding
tax, including any exemption pursuant to Section 881(c) of the IRC, and in the
case of a Foreign Lender claiming such an exemption under Section 881(c) of the
IRC, a certificate that establishes in writing to the Administrative Borrower
and the Administrative Agent that such Foreign Lender is not (i) a “bank” as
defined in Section 881(c)(3)(A) of the IRC, (ii) a 10-percent shareholder
within the meaning of Section 871(h)(3)(B) of the IRC, or (iii) a Controlled

 

52

 

Foreign Corporation related to a Borrower
with the meaning of Section 864(d) of the IRC.  Thereafter and from time to time, each such
Foreign Lender shall (A) within a commercially reasonable period submit to the
Administrative Borrower and Agent such additional duly and properly completed
and signed copies of one or more of such forms or certificates (or such
successor forms or certificates as shall be adopted from time to time by the
relevant United States taxing authorities) as may then be available under then
current United States laws and regulations to avoid, or such evidence as is
reasonably satisfactory to the Administrative Borrower and Agent of any
available exemption from, or reduction of, United States withholding taxes in
respect of all payments to be made to such Foreign Lender by a Borrower or
other Loan Party pursuant to this Agreement, or any other Loan Document, in
each case, (1) on or before the date that any such form, certificate or other
evidence expires or becomes obsolete, (2) after the occurrence of any event
requiring a change in the most recent form, certificate or evidence previously
delivered by it to the Administrative Borrower and Agent and (3) from time to
time thereafter if reasonably requested by the Administrative Borrower or the
Administrative Agent, and (B) within a commercially reasonable period notify
the Administrative Borrower and Agent of any change in circumstances which
would modify or render invalid any claimed exemption or reduction. 

(ii) The Borrowers shall not be required to pay any additional amount
or any indemnity payment to (A) any Foreign Lender with respect to any taxes
required to be deducted or withheld solely on the basis of the information,
certificates or statements of exemption such Lender transmits pursuant to this
Section 15.11(b) or (B) any Lender if such Lender shall have failed to satisfy
the foregoing provisions of this Section 15.11(b). 

 

(c)           If a Lender claims an exemption from withholding tax in a jurisdiction
other than the United States, Lender agrees with and in favor of Agent and
Borrowers, to deliver to Agent any such form or forms, as may be required under
the laws of such jurisdiction as a condition to exemption from, or reduction
of, foreign withholding or backup withholding tax before receiving its first
payment under this Agreement and at any other time reasonably requested by
Agent or Administrative Borrower.

 

Lender agrees promptly to
notify Agent and Administrative Borrower of any change in circumstances which
would modify or render invalid any claimed exemption or reduction.

 

(d)           If any Lender is entitled to a reduction in the applicable withholding
tax, Agent may withhold from any interest payment to such Lender an amount
equivalent to the applicable withholding tax after taking into account such
reduction.  If the forms or other
documentation required by subsection (b) or (c) of this Section 15.11
are not delivered to Agent, then Agent may withhold from any interest payment
to such Lender not providing such forms or other documentation an amount
equivalent to the applicable withholding tax.

 

(e)           If the IRS or any other Governmental Authority of the United States or
other jurisdiction asserts a claim that Agent did not properly withhold tax
from amounts paid to or for the account of any Lender due to a failure on the
part of the Lender (because the appropriate form was not delivered, was not
properly executed, or because such Lender failed to notify Agent of a change in
circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason) such Lender shall indemnify and hold
Agent harmless for all amounts paid, directly or indirectly, by Agent, as tax
or otherwise, including penalties and interest, and including any taxes imposed
by any jurisdiction on the amounts payable to Agent under this Section 15.11,
together with all costs and expenses (including attorneys fees and
expenses).  The obligation of the Lenders
under this subsection shall survive the payment of all Obligations and the
resignation or replacement of Agent.

 

(f)            Each Lender agrees that, upon the occurrence
of any event giving rise to the operation of Section 15.11(a) with
respect to such Lender, it will, if requested by the Administrative Borrower,
use reasonable efforts (subject to overall policy considerations of such
Lender) to designate another lending office for any loans affected by such
event with the object of avoiding the consequences of such event; provided,
that such designation is made on terms that cause such Lender and its lending
office(s) to suffer no

 

53

 

economic, legal or
regulatory disadvantage, and provided, further, that nothing in
this Section shall affect or postpone any of the obligations of the Borrowers
or the rights of any Lender pursuant to Section 15.11(a). In determining
whether designating another lending office would cause such Lender or its
lending office(s) to suffer economic disadvantage, such Lender shall disregard
any economic disadvantage that the Administrative Borrower agrees, in form and
substance reasonably satisfactory to such Lender, to indemnify and hold such
Lender harmless therefrom.  If, after
such reasonable efforts by such Lender, such Lender does not so designate a
different one of its lending offices so as to avoid the consequences of such
event, then the Administrative Borrower may, at its sole expense and effort,
upon notice to such Lender and the Agent, require such Lender to assign and
delegate, without recourse, all its interests, rights and obligations under
this Agreement to an assignee that shall assume such obligations (which
assignee may be another Lender, if a Lender accepts such assignment, and which
assignee shall be reasonably acceptable to Agent). A Lender shall not be
required to make any such assignment and delegation if, prior thereto, as a
result of a waiver by such Lender or otherwise, the circumstances entitling
such Borrower to require such assignment and delegation cease to apply.

 

15.12       Collateral Matters.

 

(a)           The Lenders hereby irrevocably authorize Agent, at its option and in
its sole discretion, to release any Lien on any Collateral (i) upon the
termination of the Commitments and payment and satisfaction in full by
Borrowers of all non-contingent Obligations, (ii) constituting property being
sold or disposed of if a release is required or desirable in connection
therewith and if Administrative Borrower certifies to Agent that the sale or
disposition is permitted under Section 6.4 of this Agreement or the
other Loan Documents (and Agent may rely conclusively on any such certificate,
without further inquiry), (iii) constituting property in which none of any
Borrower or any of its Restricted Subsidiaries owned any interest at the time
the Agent’s Lien was granted nor at any time thereafter, or (iv) constituting
property leased to a Borrower or any of its Restricted Subsidiaries under a
lease that has expired or is terminated in a transaction permitted under this
Agreement.  Except as provided above,
Agent will not execute and deliver a release of any Lien on any Collateral
without the prior written authorization of (y) if the release is of all or
substantially all of the Collateral, all of the Lenders, or (z) otherwise, the
Required Lenders.  Upon request by Agent
or Administrative Borrower at any time, the Lenders will confirm in writing
Agent’s authority to release any such Liens on particular types or items of
Collateral pursuant to this Section 15.12; provided, however,
that (1) Agent shall not be required to execute any document necessary to
evidence such release on terms that, in Agent’s opinion, would expose Agent to
liability or create any obligation or entail any consequence other than the
release of such Lien without recourse, representation, or warranty, and (2)
such release shall not in any manner discharge, affect, or impair the
Obligations or any Liens (other than those expressly being released) upon (or
obligations of Borrowers in respect of) all interests retained by Borrowers or any
of their respective Restricted Subsidiaries, including, the proceeds of any
sale, all of which shall continue to constitute part of the Collateral.  

 

(b)           Agent shall have no obligation whatsoever to any of the Lenders to
assure that the Collateral exists or is owned by Borrowers or any of their
respective Restricted Subsidiaries or is cared for, protected, or insured or
has been encumbered, or that the Agent’s Liens have been properly or
sufficiently or lawfully created, perfected, protected, or enforced or are
entitled to any particular priority, or to exercise at all or in any particular
manner or under any duty of care, disclosure or fidelity, or to continue
exercising, any of the rights, authorities and powers granted or available to
Agent pursuant to any of the Loan Documents, it being understood and agreed
that in respect of the Collateral, or any act, omission, or event related
thereto, subject to the terms and conditions contained herein, Agent may act in
any manner it may deem appropriate, in its sole discretion given Agent’s own
interest in the Collateral in its capacity as one of the Lenders and that Agent
shall have no other duty or liability whatsoever to any Lender as to any of the
foregoing, except as otherwise provided herein.

 

54

 

15.13       Restrictions on Actions by
Lenders; Sharing of Payments.

 

(a)           Each of the Lenders agrees that it shall not, without the express
written consent of Agent, set off against the Obligations, any amounts owing by
such Lender to Borrowers or any of their respective Restricted Subsidiaries or
any deposit accounts of Borrowers or any of their respective Restricted Subsidiaries
now or hereafter maintained with such Lender. 
Each of the Lenders further agrees that it shall not, unless
specifically requested to do so in writing by Agent, take or cause to be taken
any action, including, the commencement of any legal or equitable proceedings,
to foreclose any Lien on, or otherwise enforce any security interest in, any of
the Collateral.

 

(b)           If, at any time or times any Lender shall receive (i) by payment,
foreclosure, setoff, or otherwise, any proceeds of Collateral or any payments
with respect to the Obligations, except for any such proceeds or payments
received by such Lender from Agent pursuant to the terms of this Agreement, or
(ii) payments from Agent in excess of such Lender’s ratable portion of all such
distributions by Agent, such Lender promptly shall (A) turn the same over to
Agent, in kind, and with such endorsements as may be required to negotiate the
same to Agent, or in immediately available funds, as applicable, for the
account of all of the Lenders and for application to the Obligations in
accordance with the applicable provisions of this Agreement, or (B) purchase,
without recourse or warranty, an undivided interest and participation in the
Obligations owed to the other Lenders so that such excess payment received
shall be applied ratably as among the Lenders in accordance with their Pro Rata
Shares; provided, however, that to the extent that such excess
payment received by the purchasing party is thereafter recovered from it, those
purchases of participations shall be rescinded in whole or in part, as
applicable, and the applicable portion of the purchase price paid therefor
shall be returned to such purchasing party, but without interest except to the
extent that such purchasing party is required to pay interest in connection
with the recovery of the excess payment.

 

15.14       Agency for Perfection.  Agent hereby appoints each other Lender as its agent (and each Lender
hereby accepts such appointment) for the purpose of perfecting the Agent’s
Liens in assets which, in accordance with Article 8 or Article 9, as
applicable, of the Code can be perfected only by possession or control.  Should any Lender obtain possession or
control of any such Collateral, such Lender shall notify Agent thereof, and,
promptly upon Agent’s request therefor shall deliver possession or control of
such Collateral to Agent or in accordance with Agent’s instructions.

 

15.15       Payments by Agent to the
Lenders.  All payments to be made by Agent to the
Lenders shall be made by bank wire transfer of immediately available funds
pursuant to such wire transfer instructions as each party may designate for
itself by written notice to Agent. 
Concurrently with each such payment, Agent shall identify whether such
payment (or any portion thereof) represents principal, premium, fees, or
interest of the Obligations.

 

15.16       Concerning the Collateral
and Related Loan Documents.  Each member of the Lender Group authorizes
and directs Agent to enter into this Agreement and the other Loan
Documents.  Each member of the Lender
Group agrees that any action taken by Agent in accordance with the terms of
this Agreement or the other Loan Documents relating to the Collateral and the
exercise by Agent of its powers set forth therein or herein, together with such
other powers that are reasonably incidental thereto, shall be binding upon all
of the Lenders.

 

55

 

15.17       Field Audits and Examination
Reports; Confidentiality; Disclaimers by Lenders; Other Reports and Information.  By becoming a party to this Agreement, each Lender:

 

(a)           is deemed to have requested that Agent furnish such Lender, promptly
after it becomes available, a copy of each field audit or examination report
(each a “Report” and collectively, “Reports”) prepared by or at
the request of Agent, and Agent shall so furnish each Lender with such Reports,

 

(b)           expressly agrees and acknowledges that neither the Borrowers nor the
Agent (i) make any representation or warranty as to the accuracy of any Report,
and (ii) shall be liable for any information contained in any Report,

 

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

 

(d)           agrees to keep all Reports and other material, non-public information regarding
Borrowers and their respective Restricted Subsidiaries and their operations,
assets, and existing and contemplated business plans in a confidential manner
in accordance with Section 16.7, and 

 

(e)           without limiting the generality of any other indemnification provision
contained in this Agreement, agrees:  (i)
to hold Agent and any such other Lender preparing a Report harmless from any
action the indemnifying Lender may take or fail to take or any conclusion the
indemnifying Lender may reach or draw from any Report in connection with any
loans or other credit accommodations that the indemnifying Lender has made or
may make to Borrowers, or the indemnifying Lender’s participation in, or the
indemnifying Lender’s purchase of, a loan or loans of Borrowers; and (ii) to
pay and protect, and indemnify, defend and hold Agent, and any such other
Lender preparing a Report harmless from and against, the claims, actions,
proceedings, damages, costs, expenses, and other amounts (including, attorneys
fees and costs) incurred by Agent and any such other Lender preparing a Report
as the direct or indirect result of any third parties who might obtain all or
part of any Report through the indemnifying Lender.

 

In addition to the
foregoing:  (x) any Lender may from time
to time request of Agent in writing that Agent provide to such Lender a copy of
any report or document provided by Borrowers and their respective Restricted Subsidiaries
to Agent that has not been contemporaneously provided by Borrowers and their
respective Restricted Subsidiaries to such Lender, and, upon receipt of such
request, Agent promptly shall provide a copy of same to such Lender, (y) to the
extent that Agent is entitled, under any provision of the Loan Documents, to
request additional reports or information from Borrowers and their respective Restricted
Subsidiaries, any Lender may, from time to time, reasonably request Agent to
exercise such right as specified in such Lender’s notice to Agent, whereupon
Agent promptly shall request of the applicable Person the additional reports or
information reasonably specified by such Lender, and, upon receipt thereof from
the applicable Person, Agent promptly shall provide a copy of same to such
Lender, and (z) any time that Agent renders to Administrative Borrower a
statement regarding the Loan Account, Agent shall send a copy of such statement
to each Lender.

 

15.18       Several Obligations; No
Liability.  Notwithstanding that certain of the Loan
Documents now or hereafter may have been or will be executed only by or in
favor of Agent in its capacity as such, and not by or in favor of the Lenders,
any and all obligations on the part of Agent (if any) to make any credit
available hereunder shall constitute the several (and not joint) obligations of
the respective Lenders on a ratable basis, according to their Commitments, to
make an amount of such credit not to exceed, in principal amount, at any one
time outstanding, the amount of their Commitments.  Nothing contained herein shall confer upon
any Lender any interest in, or subject any Lender to any liability for, or in
respect of, the business, assets, profits, losses, or liabilities of any other
Lender.  Each Lender shall be solely
responsible for notifying its

 

56

 

Participants of any matters
relating to the Loan Documents to the extent any such notice may be required,
and no Lender shall have any obligation, duty, or liability to any Participant
of any other Lender.  Except as provided
in Section 15.7, no member of the Lender Group shall have any liability
for the acts of any other member of the Lender Group.  No Lender shall be responsible to any
Borrower or any other Person for any failure by any other Lender to fulfill its
obligations to make credit available hereunder, nor to advance for it or on its
behalf in connection with its Commitment, nor to take any other action on its
behalf hereunder or in connection with the financing contemplated herein.

 

15.19       Bank Product Providers.  Each Bank Product Provider shall be deemed a party hereto for purposes
of any reference in a Loan Document to the parties for whom Agent is acting; it
being understood and agreed that the rights and benefits of such Bank Product
Provider under the Loan Documents consist exclusively of such Bank Product
Provider’s right to share in payments and collections out of the Collateral as
more fully set forth herein.  In
connection with any such distribution of payments and collections, Agent shall
be entitled to assume no amounts are due to any Bank Product Provider unless
such Bank Product Provider has notified Agent in writing of the amount of any
such liability owed to it prior to such distribution.

 

16.           GENERAL PROVISIONS.

 

16.1         Effectiveness.  This Agreement shall be binding and deemed effective when executed by each
Borrower, Agent, and each Lender whose signature is provided for on the
signature pages hereof.

 

16.2         Section Headings.  Headings and numbers have been set forth herein for convenience
only.  Unless the contrary is compelled
by the context, everything contained in each Section applies equally to this
entire Agreement.

 

16.3         Interpretation.  Neither this Agreement nor any uncertainty or ambiguity herein shall be
construed against the Lender Group or Borrowers, whether under any rule of
construction or otherwise.  On the
contrary, this Agreement has been reviewed by all parties and shall be
construed and interpreted according to the ordinary meaning of the words used
so as to accomplish fairly the purposes and intentions of all parties hereto.

 

16.4         Severability of Provisions.  Each provision of this Agreement shall be severable from every other
provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.

 

16.5         Counterparts; Electronic Execution.  This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Agreement.  Delivery of an executed counterpart of this
Agreement by telefacsimile or other electronic method of transmission shall be
equally as effective as delivery of an original executed counterpart of this
Agreement.  Any party delivering an
executed counterpart of this Agreement by telefacsimile or other electronic
method of transmission also shall deliver an original executed counterpart of
this Agreement but the failure to deliver an original executed counterpart
shall not affect the validity, enforceability, and binding effect of this
Agreement.  The foregoing shall apply to
each other Loan Document mutatis mutandis.

 

16.6         Revival and Reinstatement of
Obligations.  If the incurrence or payment of the
Obligations by any Borrower or any Guarantor or the transfer to the Lender
Group of any property should for any reason subsequently be declared to be void
or voidable under any state or federal law relating to creditors’ rights,
including provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, or other voidable or recoverable payments of money or transfers of
property (collectively, a “Voidable Transfer”), and if the Lender Group
is required to repay or restore, in whole or in part, any such Voidable Transfer,
or elects to do so upon the reasonable advice of its counsel, then, as to any
such Voidable Transfer, or the amount thereof that

 

57

 

the Lender Group is required
or elects to repay or restore, and as to all reasonable costs, expenses, and
attorneys fees of the Lender Group related thereto, the liability of Borrowers
or such Guarantor automatically shall be revived, reinstated, and restored and
shall exist as though such Voidable Transfer had never been made.

 

16.7         Confidentiality.  Agent and Lenders each individually (and not jointly or jointly and
severally) agree that material, non-public information regarding Borrowers and
their respective Subsidiaries, their operations, assets, and existing and
contemplated business plans shall be treated by Agent and the Lenders in a
confidential manner, and shall not be disclosed by Agent and the Lenders to
Persons who are not parties to this Agreement, except:  (a) to attorneys for and other advisors,
accountants, auditors, and consultants to any member of the Lender Group for
matters in connection with this Agreement, (b) to Subsidiaries and Affiliates
of any member of the Lender Group (including the Bank Product Providers),
provided that any such Subsidiary or Affiliate shall have agreed to receive
such information hereunder subject to the terms of this Section 16.7,
(c) as may be required by statute, decision, or judicial or administrative
order, rule, or regulation, (d) as may be agreed to in advance by Parent or Administrative
Borrower or its Subsidiaries or as requested or required by any Governmental
Authority pursuant to any subpoena or other legal process, (e) as to any such
information that is or becomes generally available to the public (other than as
a result of prohibited disclosure by Agent or the Lenders or their respective
Affiliates and Subsidiaries), (f) in connection with any assignment,
prospective assignment, sale, prospective sale, participation or prospective
participations, or pledge or prospective pledge of any Lender’s interest under
this Agreement, provided that any such assignee, prospective assignee,
purchaser, prospective purchaser, participant, prospective participant,
pledgee, or prospective pledgee shall have agreed in writing to receive such
information hereunder and keep it confidential subject to the terms of this
Section, and (g) in connection with any litigation or other adversary
proceeding involving parties hereto which such litigation or adversary
proceeding involves claims related to the rights or duties of such parties
under this Agreement or the other Loan Documents.  The provisions of this Section 16.7
shall survive for 2 years after the payment in full of the Obligations.  

 

16.8         Integration.  This Agreement, together with the other Loan Documents, reflects the
entire understanding of the parties with respect to the transactions
contemplated hereby and shall not be contradicted or qualified by any other
agreement, oral or written, before the date hereof.

 

16.9         Altra Industrial Motion,
Inc. as Agent for Borrowers.  Each Borrower hereby irrevocably appoints Altra
Industrial Motion, Inc. as the borrowing agent and attorney-in-fact for all
Borrowers (the “Administrative Borrower”) which appointment shall remain
in full force and effect unless and until Agent shall have received prior
written notice signed by each Borrower that such appointment has been revoked
and that another Loan Party has been appointed Administrative Borrower.  Each Borrower hereby irrevocably appoints and
authorizes the Administrative Borrower (a) to provide Agent with all notices
with respect to Advances and Letters of Credit obtained for the benefit of any
Borrower and all other notices and instructions under this Agreement and (b) to
take such action as the Administrative Borrower deems appropriate on its behalf
to obtain Advances and Letters of Credit and to exercise such other powers as
are reasonably necessary to carry out the purposes of this Agreement.  It is understood that the handling of the
Loan Account and Collateral in a combined fashion, as more fully set forth
herein, is done solely as an accommodation to Borrowers in order to utilize the
collective borrowing powers of Borrowers in the most efficient and economical
manner and at their request, and that Lender Group shall not incur liability to
any Borrower as a result hereof.  Each
Borrower expects to derive benefit, directly or indirectly, from the handling
of the Loan Account and the Collateral in a combined fashion since the
successful operation of each Borrower is dependent on the continued successful
performance of the integrated group.  To
induce the Lender Group to do so, and in consideration thereof, each Borrower
hereby jointly and severally agrees to indemnify each member of the Lender
Group and hold each member of the Lender Group harmless against any and all
liability, expense, loss or claim of damage or injury, made against the Lender
Group by any Borrower or by any third party whosoever, arising from or incurred
by reason of (a) the handling of the Loan Account and Collateral as herein
provided, (b) the Lender Group’s relying on any instructions of the
Administrative Borrower, or (c) any other action taken by the Lender Group
hereunder or under the other Loan Documents, except that Borrowers will

 

58

 

have no liability to the
relevant Agent-Related Person or Lender-Related Person under this Section 16.9
with respect to any liability that has been finally determined by a court of
competent jurisdiction to have resulted solely from the gross negligence or
willful misconduct of such Agent-Related Person or Lender-Related Person, as
the case may be.

 

[Signature
pages to follow.]

 

59

 

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered as of the date first above written.

 

	
   

  	
  ALTRA
  INDUSTRIAL MOTION, INC., a Delaware corporation,

  
	
   

  	
  WARNER
  ELECTRIC LLC, a
  Delaware limited liability company,

  
	
   

  	
  KILIAN
  MANUFACTURING CORPORATION, a Delaware corporation,

  
	
   

  	
  WARNER
  ELECTRIC TECHNOLOGY LLC, a Delaware limited liability company,

  
	
   

  	
  FORMSPRAG
  LLC, a Delaware
  limited liability company,

  
	
   

  	
  BOSTON
  GEAR LLC, a
  Delaware limited liability company,

  
	
   

  	
  NUTTALL
  GEAR L L C, a
  Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Michael
  L. Hurt

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  AMERIDRIVES
  INTERNATIONAL, L.P.,
  a Delaware limited partnership,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  American
  Enterprises MPT Corp., its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Michael
  L. Hurt

  
	
   

  	
   

  	
  Title:

  	
  Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  	
  WELLS
  FARGO FOOTHILL, INC.,

  
	
   

  	
   

  	
  a
  California corporation, as Agent and as a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
												

 

60

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00085-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00085-of-00352.parquet"}]]