Document:

DEBT CONVERSION AND REIMBURSEMENT AGREEMENT DATED JULY 16, 2003

 Exhibit 10.1 
  
 DEBT CONVERSION AND REIMBURSEMENT AGREEMENT 
  
 AGREEMENT, dated as of July 16, 2003, between UM HOLDINGS LTD., a New Jersey corporation (“UM”), and CYBEX INTERNATIONAL, INC., a
New York corporation (“Cybex”). 
  
 PRELIMINARY
STATEMENT 
  
 A. UM has heretofore made advances to Cybex,
evidenced by subordinated promissory notes in an aggregate outstanding principal amount of $4,900,000 (the “Outstanding Notes”). 
  
 B. UM is providing financial support to Cybex by means of providing a letter of credit or other collateral (a) in the amount of $1,500,000, as security
for the loans and other obligations from time to time outstanding pursuant to the Financing Agreement dated as of the date hereof (the “Financing Agreement”), between Cybex and The CIT Group/Business Credit, Inc. and (b) in the amount of
$1,600,000 as security for the letter of credit issued by First Union National Bank with respect to the $4,300,000 Massachusetts Industrial Finance Agency Revenue Bonds, United Medical Corporation Issue, Series 1992 (any actual loss incurred by UM
with respect to the financial support described in this paragraph B is referred to herein as a “Reimbursement Obligation”). 
  
 C. UM and Cybex have agreed that (a) the outstanding Notes shall be exchanged for and converted into shares of Cybex’s Series B Convertible Preferred
Stock (the “Preferred Stock”), and (b) if UM incurs any Reimbursement Obligations, Cybex will satisfy the same by issuing shares of the Preferred Stock, all as hereinafter provided. 
  
 NOW, THEREFORE, the parties hereto hereby agree as follows: 
  
 1. Discharge and Exchange of Outstanding Notes. Effective as of the
date hereof, the Outstanding Notes are hereby canceled and discharged in full and, in exchange and replacement thereof, Cybex shall issue and deliver to UM a number of whole shares of Preferred Stock equal to the result of (a) the outstanding
aggregate principal balance of the Outstanding Notes, divided by (b) the Exchange Rate (as hereinafter defined), with any fractional share rounded up to the next whole number. 
  
 2. Reimbursement Obligation. Cybex agrees that it shall hold harmless UM, and reimburse UM, with respect to any
Reimbursement Obligation incurred by UM, by promptly thereafter issuing to UM a number of whole shares of Preferred Stock equal to the result of (a) the dollar amount of such Reimbursement Obligation, divided by (b) the Exchange Rate, with any
fractional share rounded up to the next whole number. 

 3. Exchange Rate. The term “Exchange Rate” as utilized herein refers to the result of
(a) the average of the closing prices of the Cybex Common Stock on the securities exchange on which the security is at the time listed, during the thirty trading days preceding the date of determination, or if such security is not then listed, the
fair value thereof as jointly determined by Cybex and UM; multiplied by (b) 1.1; multiplied by (c) the then applicable Conversion Ratio of the Preferred Stock. 
  
 4. Commitment Fee. Cybex is paying to UM a commitment fee of $120,000 for its financial support provided herein.

  
 5. Restricted Nature of the Stock. UM represents and
warrants that it will acquire the shares of the Preferred Stock hereunder for its own account for the purpose of investment and not with a view to or for sale in connection with any distribution thereof. UM further acknowledges that it understands
that (a) such shares have not been registered under the Securities Act of 1933, as amended, by reason of their issuance in a transaction exempt from the registration requirements thereof, and (b) such shares may not be transferred by it except
pursuant to an effective registration statement under said Act or pursuant to an available exemption from the registration requirements thereof. UM agrees that it will not attempt to sell such shares, without first delivering to Cybex an unqualified
opinion, in form and substance satisfactory to Cybex, of counsel acceptable to Cybex, to the effect that neither the sale nor any offering in connection therewith violates any applicable provision of any federal or state securities laws. 

 
 6. Representations and Warranties. Cybex hereby represents,
covenants and warrants to UM as follows: 
  
 (a) Corporate
Existence and Power. Cybex is a corporation duly incorporated, in good standing and validly existing under the laws of the state of its incorporation, and is duly qualified as a foreign corporation in all jurisdictions wherein the character of
the property owned or leased or the nature of the business transacted by it makes qualification as a foreign corporation necessary; Cybex has the necessary corporate power to execute, deliver and perform this Agreement and to issue the Preferred
Stock hereunder. 
  
 (b) Corporate Authority; Etc. The
making and performance by Cybex of this Agreement, including the issuance of the Preferred Stock hereunder, have been duly authorized by all necessary action and will not violate any provision of law or of its Certificate of Incorporation or By-Laws
or other constituent document, or result in the breach of, or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any property or assets of Cybex pursuant to, any indenture, agreement or instrument to which
Cybex is a party or by which Cybex or any of its property may be bound or affected. This Agreement has been duly executed and delivered by Cybex and constitutes the legal, valid and binding obligations of Cybex enforceable in accordance with its
terms. 
  
 (c) The Preferred Stock. The Preferred Stock
has the rights, limitations and preferences set forth on Annex I hereto. The shares of Preferred Stock issued and 

  

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to be issued to UM hereunder, when issued in accordance with the terms hereof, shall constitute validly authorized, duly issued, fully paid and
non-assessable shares of the capital stock of Cybex. 
  
 7.
Affirmative Covenants. So long as UM, directly or indirectly, holds at least 25% of the shares of Preferred Stock issued hereunder, Cybex covenants to UM that, unless UM shall otherwise consent in writing: 
  
 (a) Compliance with Laws, Etc. Cybex will comply in all respects
with all applicable laws, rules, regulations and orders. 
  
 (b)
Preservation of Existence. Cybex will (i) maintain its corporate existence and rights in full force and effect, (ii) take all reasonable and ordinary prudent business steps to maintain its businesses and assets, (iii) keep all of its assets
adequately insured, (iv) pay taxes when due, and (v) make no substantial change in the nature of its businesses. 
  
 (c) Financial Statements; Reports. Cybex shall provide to UM such financial statements and reports as UM shall from time to time request.

  
 (d) Audits. Cybex shall permit UM, or its agents or
representatives, (i) to examine and make copies of and abstracts from all books, records and documents in the possession or under the control of Cybex and (ii) to visit the offices and properties of Cybex and to discuss the affairs, finances and
accounts of Cybex with any of their officers and directors. Cybex shall reimburse UM for all reasonable costs incurred by UM in connection with any such audit. 
  

8. Shares Reserved for Issuance. Cybex shall at all times have reserved and available for issuance a sufficient number of shares of Preferred
Stock to be issued hereunder and a sufficient number of shares of Common Stock into which the Preferred Stock may be converted. 
  
 9. Notices. All notices and other communications hereunder shall be in writing and shall be deemed made when personally delivered at or sent by
telecopy to, or three days after mailing with adequate postage by certified mail, return receipt requested, to the following addresses, or to such other address as the party to be notified shall have specified pursuant to this paragraph 9.

  
 If to UM: 
  
 UM Holdings, Ltd. 
 56 Haddon Avenue 
 Haddonfield, NJ 08033 
 Attn: Chief Financial Officer 
  
 If to Cybex: 
  

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 Cybex International, Inc. 
 10 Trotter Drive 
 Medway, MA 02053 
 Attn: Controller 
  
 10. Miscellaneous. 
  
 (a) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the
same instrument. This Agreement shall be binding upon and inure to the benefit of Cybex and UM and their respective successors and assigns, except that Cybex shall not have the right to assign its rights hereunder or any interest herein without the
prior written consent of UM. UM may cause all or any portion of the Preferred Stock to be registered in the name of a subsidiary, which subsidiary will have all the benefits of this Agreement and shall be subject to the provisions of paragraph 5
above. This Agreement shall be deemed executed and delivered within New Jersey and this Agreement shall be governed by, and construed in accordance with, the laws of the State of New Jersey. 
  
 (b) No amendment, modification, termination, or waiver of any provision of
this Agreement shall be effective unless the same shall be in writing and signed by UM. 
  
 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. 
  

	 CYBEX INTERNATIONAL, INC.

		
	 BY:
	 	 /s/Arthur W. Hicks, Jr.

	 	 	 Name: Arthur W. Hicks, Jr.

	 	 	 Title: Chief Financial Officer

	
	 UM HOLDINGS LTD.

		
	 BY:
	 	 /s/ Arthur W. Hicks, Jr.

	 	 	 Name: Arthur W. Hicks, Jr.

	 	 	 Title: Chief Financial Officer

  

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 ANNEX I 
  
 CYBEX INTERNATIONAL, INC. 
  
 Description of the 
 Series B
Convertible Cumulative Preferred Stock 
  
 The Series B
Convertible Cumulative Preferred Stock, par value $1.00 per share, of Cybex International, Inc. shall have the following relative rights, preferences and limitations: 
  
 Series B Convertible Cumulative Preferred Stock. 
  
 (a) Designation. A total of 100,000 shares of the Corporation’s
Preferred Stock shall be designated the “Series B Convertible Cumulative Preferred Stock” (the “Series B Preferred Stock”). 
  
 (b) Dividends. The holders of the Series B Preferred Stock, in preference to the holders of Common Stock and any subsequently designated series of
Preferred Stock which is junior in right of payment to the Series B Preferred Stock, shall be entitled to receive, as and when declared by the Board of Directors and out of assets which by law are available for payment of dividends, and subject to
the dividend rights of any subsequently designated series of Preferred Stock which is senior to or on a parity with the Series B Preferred Stock in payment preference, cumulative dividends at the rate of 10% per annum of the original issuance price
of each share (or a pro rata portion thereof if the Series B Preferred Stock is outstanding for only a portion of the year), payable at such time or times as may be determined by the Board of Directors, and accruing from the date on which the
respective shares of Series B Preferred Stock shall be issued. Such dividends will be cumulative so that if dividends with respect to any period at the aforesaid rate shall not have been paid upon or declared and set apart for the Series B Preferred
Stock, the deficiency shall be fully paid and set apart before any dividends shall be paid upon or declared or set apart for the Common Stock or any such junior series of Preferred Stock. Accumulation of dividends shall not bear interest. The
holders of Series B Preferred Stock shall be entitled to participate in such dividends ratably on the basis of the amount of all accrued but unpaid dividends on each outstanding share. All references herein to the issuance price of a share of Series
B Preferred Stock refers to the price at which such share was issued by the Corporation, as reasonably determined by the Board of Directors, adjusted to equitably reflect any subsequent stock split, stock dividend, combination, reorganization,
recapitalization, reclassification or other similar event involving a change in the Series B Preferred Stock. 
  
 (c) Liquidation. The Series B Preferred Stock shall be preferred as to assets over the Common Stock and any subsequently designated series of
Preferred Stock which is junior in liquidation preference to the Series B Preferred Stock, so that in the event of the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and subject to the liquidation rights and
preferences of any subsequently designated series of Preferred Stock which is senior to or on a parity with the Series B Preferred Stock in liquidation preference, the 

  

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holders of Series B Preferred Stock shall be entitled to have set apart for them, or to be paid, out of the assets of the Corporation before any distribution
is made to or set apart for the holders of Common Stock or any such junior series of Preferred Stock, an amount in cash equal to the original issuance price of each share plus all accrued but unpaid dividends thereon, whether or not declared. In the
event there are insufficient assets to satisfy in full the liquidation preferences of the Series B Preferred Stock, the holders of the Series B Preferred Stock shall be entitled to participate in such distributions ratably on the basis of the amount
of liquidating distributions otherwise payable to each such holder. 
  
 (d) Voting. (i) The holders of each share of Series B Preferred Stock shall not be entitled to vote, except (x) as provided in clause (ii) below or (y) where a provision of law expressly confers a right to vote on a particular
matter. 
  
 (ii) So long as shares of the Series B Preferred
Stock are outstanding, the Corporation shall not, without first obtaining the approval by vote or written consent, in the manner provided by law, of holders of at least 66 2/3% of the outstanding shares of Series B Preferred Stock, alter or change any of the powers, preferences, privileges or rights of the Series B Preferred Stock. 

 
 (e) Conversion. (i) Each outstanding share of Series B Preferred
Stock shall be convertible, from and after the Convertibility Date (as herein defined), into Common Stock of the Corporation, as follows: 
  
 (x) At the option of the holder thereof at any time, by written notice of conversion delivered to the Secretary of the Corporation; or 
  
 (y) The affirmative vote or written consent of the holders of record of at
least 66 2/3% of the outstanding shares of the Series B Preferred Stock, voting as a class. 
  
 (ii) Notwithstanding any contrary provision contained in this subparagraph
(e), the shares of Series B Preferred Stock shall not be convertible into Common Stock until on or after the date (the “Convertibility Date”) which is the later of (x) six months and one day from the original issuance date of such
share, (y) June 30, 2004, or (z) the date on which the shareholders of the Corporation approve the convertibility rights set forth in this subparagraph (e). 
  
 (iii) Each share of the Series B Preferred Stock, upon conversion, shall be converted into one-hundred (100) shares of Common Stock (the “Conversion
Ratio”) subject to adjustment as set forth in subsection (vii) below. 
  
 (iv) For all purposes the rights of a holder of shares of Preferred Stock as such holder (including the accrual of dividends) shall cease, and the person or persons in whose name or names the certificates for the
shares of Common Stock issuable upon such 
  

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conversion are to be issued shall be deemed to have become the record holder or holders of such shares of Common Stock, at the close of business on the date
of conversion. 
  
 (v) Within 30 full business days after the
date of conversion, the holder of the converted shares of Preferred Stock shall receive, in payment of all accrued but unpaid dividends to the date of conversion, either a cash payment in such amount or, at the option of the Corporation, a number of
shares of Common Stock determined by dividing the amount of such dividends by the Market Value (as herein defined) of a share of Common Stock on the date of conversion. 
  
 (vi) The Corporation shall, within 30 full business days after the date of conversion, execute and deliver to each
converted holder of the Preferred Stock a certificate or certificates for the applicable number of full shares of Common Stock (including any shares issuable pursuant to clause (v) above). The Corporation shall not be required upon such conversion
to issue a certificate representing any fraction of a share of Common Stock, but in lieu thereof may pay cash for such fraction of a share equal to its proportionate Market Value on the date of conversion. All shares of Common Stock issuable upon
such conversion shall be fully paid and nonassessable. 
  
 (vii)
The Conversion Ratio shall be adjusted from time to time pursuant to this subparagraph (vii). In case the Corporation shall at any time subdivide its outstanding shares of Common Stock into a greater number of shares (including by means of a
dividend payable in shares of the Common Stock), the Conversion Ratio shall be proportionately reduced (i.e., each share of Series B Preferred Stock shall be convertible into a larger number of Common Shares). Conversely, in case the outstanding
shares of Common Stock shall be combined into a smaller number of shares, the Conversion Ratio shall be proportionately increased. Upon any adjustment of the Conversion Ratio, the Corporation shall give written notice thereof to the registered
holders of the Series B Preferred Stock, setting forth the then Conversion Ratio. 
  
 (viii) The term “Market Value” as utilized herein refers to the average of the closing prices of the Common Stock on the securities exchange on which the security is at the time listed, during the thirty
trading days preceding the date of determination, or if such security is not then so listed, the fair value thereof as determined by the Board of Directors in its reasonable discretion. 
  
 (f) Redemption. (i) Mandatory Redemption. In the event that either (x) the shareholder approval specified in
subparagraph (e)(ii)(z) above shall not have been obtained on or before June 30, 2004, or (y) a Sale (as hereafter defined) shall have occurred, at the option and written election of holders of the majority of the outstanding shares of Series B
Preferred Stock, the Corporation shall redeem all or such portion of the outstanding shares of Series B Preferred Stock as is specified in such election, at a price equal to the original issuance price of each such share, plus all accrued but unpaid
dividends to the date of redemption. Notice of the election of such right shall be given by the holders of a majority of the outstanding shares of Series B Preferred Stock to the Corporation (and to the holders of the Senior Debt (as defined
herein), if any Senior Debt is then outstanding, which notice shall also specify the number of 

  

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shares held by such holders which shall be redeemed by the Corporation. Such redemption shall occur within 45 full business days after the delivery of such
written notice and shall be subject to the surrender of the certificate(s) representing such shares and such other reasonable conditions as shall be specified by the Corporation. Notwithstanding the foregoing, such right of redemption shall not be
exercisable at any time the Senior Debt is outstanding, except with the prior written consent of all holders of the Senior Debt. 
  
 The term “Sale” as utilized herein refers to (x) a sale of substantially all of the assets of the Corporation, not in the ordinary course, to an
unaffiliated third party; or (y) the transfer, in one transaction or a series of transactions, to an unaffiliated third party of outstanding shares of capital stock of the Corporation representing at least 60% of the then outstanding voting capital
stock of the Corporation; or (z) a merger or consolidation of the Company having the same effect as item (x) or (y) above. 
  
 (ii) Optional Redemption. At any time after June 30, 2008, at the option of the Corporation, the Corporation may redeem all or any portion of the
outstanding shares of Series B Preferred Stock, at a price equal to the original issuance price of each such share, plus all accrued but unpaid dividends to the date of redemption. If less than all outstanding shares of Series B Preferred Stock are
to be redeemed, the shares to be redeemed will be chosen by lot in such manner and subject to such procedures as may be specified by the Board of Directors. At least 30 full business days prior to the date for redemption of such shares, written
notice thereof shall be mailed to each holder of record of shares of Series B Preferred Stock in a postage paid envelope addressed to such holder at his address as shown on the stock records of the Corporation, notifying the holder of such election
to redeem such shares, stating the date fixed for redemption thereof and calling on the holder to surrender on the redemption date the certificate(s) representing such shares to be redeemed and setting forth such other reasonable conditions as shall
be specified by the Corporation. Such holders shall, however, at any time prior to the redemption date, have the right to exercise the right of conversion with respect to such shares pursuant to subparagraph (e) above, but only to extent the
Convertibility Date shall have occurred. 
  
 (g) Subordination
to Senior Debt. (i) The term “Senior Debt” as utilized herein refers to all present and future indebtedness (whether principal, interest (including without limitation, interest accruing after the commencing of a bankruptcy proceeding
by or against the Corporation, fees, collection costs, expenses, liabilities, obligations (including, without limitation, letter of credit reimbursement obligations), and other amounts now or hereafter owing by the Corporation, whether direct or
indirect, absolute or contingent, secured or unsecured, due or to become due, liquidated or unliquidated, whether now existing or hereafter arising, pursuant to or arising out of (x) the Financing Agreement, between the Corporation and the CIT
Group/Business Credit, Inc., entered into on or about the time the Certificate of Amendment creating the Series B Preferred Stock was filed of record (as the same may be amended, renewed, extended or supplemented from time to time), and (y) the
Financing Agreement, between the Corporation and Hilco Capital, LP, entered into on or about the time the Certificate of Amendment creating the Series B Preferred Stock was filed of record (as the same may be amended, renewed, extended or
supplemented from time to time). 
  

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 (ii) Notwithstanding any contrary provision contained herein, the right of holders of shares of the
Series B Preferred Stock to receive any cash payment with respect to the Series B Preferred Stock (whether as a dividend, a liquidation or redemption payment or otherwise) is junior and subordinate to the Senior Debt and, except with the prior
written consent of all holders of the Senior Debt, the Corporation will not make, and the holders of the Series B Preferred Stock will not accept, any such payment until the Senior Debt shall have been indefeasibly paid in full. Any holder of the
Series B Preferred Stock which receives any payment in violation of this subparagraph (g) will hold such payment in trust for the holders of the Senior Debt. 
  
 (h) No Preemptive Rights. Holders of shares of the Series B Preferred Stock shall have no preemptive rights. 
  

 9FINANCING AGREEMENT DATED JULY 16, 2003

 Exhibit 10.2 
  
 EXECUTION COPY 
  
 FINANCING AGREEMENT 
  
 The CIT Group/Business Credit, Inc. 
  
 And 
  
 Cybex International, Inc. 
  
 Dated: July 16, 2003 

 TABLE OF CONTENTS 
  

	 	  	 	  	Page

	    SECTION 1.	  	 Definitions
	  	3
	    SECTION 2.	  	 Conditions Precedent
	  	20
	    SECTION 3.	  	 Revolving Loans
	  	25
	    SECTION 4.	  	 Term Loans
	  	29
	    SECTION 5.	  	 Letters of Credit
	  	30
	    SECTION 6.	  	 Collateral
	  	32
	    SECTION 7.	  	 Representations, Warranties and Covenants
	  	36
	    SECTION 8.	  	 Interest, Fees and Expenses
	  	49
	    SECTION 9.	  	 Powers
	  	56
	    SECTION 10.	  	 Events of Default and Remedies
	  	57
	    SECTION 11.	  	 Termination
	  	60
	    SECTION 12.	  	 Miscellaneous
	  	61

  

	EXHIBIT	 	 	  	 
			
	    Exhibit A	 	-	  	Form of Term Loan A Promissory Note
	    Exhibit B	 	-	  	Form of Term Loan B Promissory Note
			
	SCHEDULES	 	 	  	 
			
	    Schedule 1	 	-	  	Collateral Information
	    Schedule 2	 	-	  	Litigation
	    Schedule 3	 	-	  	ERISA
	    Schedule 4	 	-	  	EBITDA Projections (2003)
	    Schedule 5	 	-	  	Permitted Affiliate Payments

 THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation, with offices located at Two Wachovia
Center, 23rd Floor, 301 South Tryon Street, Charlotte, North Carolina 28202 (hereinafter “CIT”), is
pleased to confirm the terms and conditions under which CIT shall make revolving loans, term loans and other financial accommodations to CYBEX INTERNATIONAL, INC., a New York corporation with a principal place of business at 10 Trotter Drive,
Medway, Massachusetts 02053 (herein the “Company”). 
  
 SECTION 1. Definitions 
  
 Accounts shall mean all of the Company’s now existing and future: (a) accounts (as defined in the UCC), and any and all other receivables (whether or not specifically listed on schedules furnished to CIT),
including, without limitation, all accounts created by, or arising from, all of the Company’s sales, leases, rentals of goods or renditions of services to its customers, including but not limited to, those accounts arising under any of the
Company’s trade names or styles, or through any of the Company’s divisions; (b) any and all instruments, documents, chattel paper (including electronic chattel paper) (all as defined in the UCC); (c) unpaid seller’s or
lessor’s rights (including rescission, replevin, reclamation, repossession and stoppage in transit) relating to the foregoing or arising therefrom; (d) rights to any goods represented by any of the foregoing, including rights to
returned, reclaimed or repossessed goods; (e) reserves and credit balances arising in connection with or pursuant hereto; (f) guarantees, supporting obligations, payment intangibles and letter of credit rights (all as defined in the
UCC); (g) insurance policies or rights relating to any of the foregoing; (h) general intangibles pertaining to any and all of the foregoing (including all rights to payment, including those arising in connection with bank and non-bank
credit cards), and including books and records and any electronic media and software thereto; (i) notes, deposits or property of account debtors securing the obligations of any such account debtors to the Company; and (j) cash and
non-cash proceeds (as defined in the UCC) of any and all of the foregoing. 
  
 Administrative Management Fee shall mean the annual sum of $18,000.00 which shall be paid to CIT in accordance with Section 8, paragraph 8.8 hereof to offset the expenses and costs (excluding
Out-of-Pocket Expenses and auditor fees) of CIT in connection with administration, record keeping, analyzing and evaluating the Collateral. 
  
 Affiliate shall mean any Person that, directly or indirectly, Controls, is Controlled by, or is under common Control with, a specified
Person. For the purposes of this Agreement, “Control” means having the power to direct the management and policies of a Person, whether through the ownership of voting securities or beneficial interests, by contract, or otherwise.

  
 Anniversary Date shall mean the date occurring
three (3) years from the Closing Date and the same date in every year thereafter. 
  
 Applicable Margin shall mean the appropriate applicable percentage corresponding to Fixed Charge Coverage Ratio in effect as of the most recent Calculation Date: 

	 Tier

	  	 Fixed Charge Coverage Ratio

	  	Applicable Margin
for LIBOR Loans

	 	 	Applicable Margin
For Chase Bank Rate
Loans

	 
	 	  	 	  	Revolving
Loans

	 	 	Term
Loan A

	 	 	Revolving
Loans

	 	 	Term
Loan A

	 
	 I
	  	 Less than 1.2 to 1.0
	  	3.25	%	 	3.50	%	 	0.50	%	 	0.75	%
	 II
	  	 Equal to or greater than 1.2 to 1.0 but less than 1.4 to 1.0
	  	2.75	%	 	3.00	%	 	0.00	%	 	0.25	%
	 III
	  	 Greater than or equal to 1.4 to 1.0
	  	2.50	%	 	2.75	%	 	-0.25	%	 	0.00	%

  
 The Applicable Margin
shall be determined and adjusted quarterly on the first day of the month immediately following the receipt by CIT of the financial information for the preceding fiscal quarter in accordance with Paragraph 7.8(b) of Section 7.8 (each a
“Calculation Date”); provided, however, that (i) the initial Applicable Margin shall be based on Tier II (as shown above) and shall remain at Tier II until the first Calculation Date subsequent to the date the Bank receives
the financial statements for the fiscal quarter ending September 30, 2003, and (ii) if the Company fails to provide any financial statements for any fiscal quarter within the time period set forth herein, the Applicable Margin from the Calculation
Date applicable to such fiscal quarter shall be based on Tier I until such time as such financial statements are provided, whereupon the Applicable Margin shall be determined as set forth above. Each Applicable Margin shall be effective from one
Calculation Date until the next Calculation Date. 
  
 Availability shall mean at any time the amount by which: (a) the Borrowing Base exceeds (b) the sum of (i) the outstanding aggregate amount of all Obligations with respect to Revolving Loans and the Letters of Credit and (ii)
the Availability Reserve. 
  
 Availability Reserve
shall mean the sum of: (a) the sum of (x) three (3) months rental payments or similar charges for any of the Company’s leased premises (other than the Company’s leased premises in Portland, Oregon so long as no Inventory of the Company is
physically located there) or other Collateral locations (other than the Company’s leased premises in Portland, Oregon so long as no Inventory of the Company is physically located there) for which the Company has not delivered to CIT a
landlord’s waiver in form and substance reasonably satisfactory to CIT, plus (y) three (3) months estimated payments due by the Company to any applicable warehousemen or third party processor (as determined by CIT in its reasonable business
judgement), provided that any of the foregoing amounts shall be adjusted from time to time hereafter upon (i) delivery to CIT of any such acceptable waiver, (ii) the opening or closing of a Collateral location and/or (iii) any change in the amount
of rental, storage or processor payments or similar charges; (b) any reserve which CIT may reasonably require from time to time pursuant to the explicit terms of this Financing Agreement, including without 
  

 4 

 
limitation, for Letters of Credit pursuant to Paragraph 5.1 of Section 5 hereof; and (c) such other reserves as CIT deems necessary in its commercially
reasonable judgment as a result of (x) negative forecasts and/or trends in the Company’s business, industry, prospects, profits, operations or financial condition or (y) other issues, circumstances or facts that could otherwise negatively
impact the Company, its business, prospects, profits, operations, industry, financial condition or assets. 
  
 Benefit Plan shall mean a defined benefit plan as defined in Section 3(35) of ERISA (other than a “multiemployer plan,” as
such term is defined in ERISA) in respect of which the Company or any ERISA Affiliate is, or within the immediately preceding six (6) years was, an “employer” as defined in Section 3(5) of ERISA. 
  
 Board of Directors means the board of directors (or comparable
managers) of the Company or any committee thereof duly authorized to act on behalf of the board of directors (or comparable managers). 
  
 Borrower Agreement shall mean the Borrower Agreement between the Company and Ex-Im Bank. 
  
 Borrowing Base shall mean the sum of the Domestic Borrowing
Base and the Foreign Borrowing Base. 
  
 Business
Day shall mean any day on which CIT and JP Morgan Chase Bank are open for business. 
  
 Capital Expenditures shall mean for any period the aggregate of all expenditures of the Company during such period that, in conformity with GAAP, are required to be included in or reflected by the
property, plant or equipment or similar fixed asset account reflected in the balance sheet of the Company. 
  
 Capital Lease shall mean any lease of property (whether real, personal or mixed) which, in conformity with GAAP, is accounted for as a
capital lease or a Capital Expenditure in the balance sheet of the Company. 
  
 Chase Bank Rate shall mean the rate of interest per annum announced by JP Morgan Chase Bank from time to time as its prime rate in effect at its principal office in New York City. (The prime rate is not
intended to be the lowest rate of interest charged by JP Morgan Chase Bank to its borrowers). 
  
 Chase Bank Rate Loans shall mean any loans or advances pursuant to this Financing Agreement made or maintained at a rate of interest based upon the Chase Bank Rate. 
  
 Closing Date shall mean the date that this Financing Agreement
has been duly executed by the parties hereto and delivered to CIT. 
  

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 Collateral shall mean all present and future Accounts, Equipment, Inventory, Documents of
Title, General Intangibles, Investment Property, Real Estate, pledged stock of the Company’s subsidiaries and Other Collateral. 
  
 Collection Days shall mean one (1) Business Day to provide for the deposit, clearance and collection of checks or other instruments
representing the proceeds of Collateral, the amount of which has been credited to the Company’s Revolving Loan Account, and for which interest may be charged on the aggregate amount of such deposits, at the rate provided for in Paragraph 8.1 of
Section 8 of this Financing Agreement. 
  
 Commitment
Letter shall mean the Commitment Letter, dated June 12, 2003, issued by CIT to, and accepted by, the Company. 
  
 Consolidated Balance Sheet shall mean a consolidated or compiled, as applicable, balance sheet for the Company and its consolidated
subsidiaries, eliminating all inter-company transactions and prepared in accordance with GAAP. 
  
 Consolidating Balance Sheet shall mean a Consolidated Balance Sheet plus individual balance sheets for the Company and its consolidated subsidiaries, showing all eliminations of inter-company
transactions and prepared in accordance with GAAP, and including a balance sheet for the Company exclusively. 
  
 Continuing Director means (a) any member of the Board of Directors who was a director (or comparable manager) of the Company on the Closing
Date, and (b) any individual who becomes a member of the Board of Directors after the Closing Date if such individual was appointed or nominated for election to the Board of Directors by a majority of the Continuing Directors, but excluding any such
individual originally proposed for election in opposition to the Board of Directors in office at the Closing Date in an actual or threatened election contest relating to the election of the directors (or comparable managers) of the Company and whose
initial assumption of office resulted from such contest or the settlement thereof. 
  
 Copyrights shall mean all present and hereafter acquired copyrights, copyright registrations, recordings, applications, designs, styles, licenses, marks, prints and labels bearing any of the foregoing,
goodwill, any and all general intangibles, intellectual property and rights pertaining thereto, and all cash and non-cash proceeds thereof. 
  
 Current Assets shall mean those assets of the Company which, in accordance with GAAP, are classified as current. 
  
 Current Liabilities shall mean those liabilities of the Company
which, in accordance with GAAP, are classified as “current”, provided however, that, notwithstanding GAAP, the Revolving Loans and the current portion of Permitted Indebtedness shall be considered “current liabilities”.

  
 Cybex UK shall mean Cybex International UK
Limited. 
  

 6 

 Default shall mean any event specified in Section 10 hereof, whether or not any requirement
for the giving of notice, the lapse of time, or both, or any other condition, event or act, has been satisfied. 
  
 Default Rate of Interest shall mean a rate of interest per annum on any Obligations hereunder, equal to the sum of: (a) two percent (2%) and
(b) the applicable interest rates set forth in Paragraphs 8.1, 8.2 and 8.14 which CIT shall be entitled to charge the Company on all Obligations due CIT by the Company, as further set forth in Paragraph 10.2 of Section 10 of this Financing
Agreement. 
  
 Depository Accounts shall mean the
collection accounts, which are subject to CIT’s instructions, as specified in Paragraph 3.4 of Section 3 of this Financing Agreement. 
  
 Documentary Letter of Credit Sub-Line shall mean the commitment of CIT to assist the Company in obtaining documentary Letters of Credit,
pursuant to Section 5 hereof, in an aggregate amount of $4,000,000. 
  
 Documentation Fee shall mean subsequent to the Closing Date, CIT’s standard fees relating to any and all modifications, waivers, releases, amendments or additional collateral with respect to this
Financing Agreement, the Collateral and/or the Obligations. 
  
 Documents of Title shall mean all present and future documents (as defined in the UCC), and any and all warehouse receipts, bills of lading, shipping documents, chattel paper, instruments and similar documents, all whether
negotiable or not and all goods and Inventory relating thereto and all cash and non-cash proceeds of the foregoing. 
  
 Domestic Borrowing Base shall mean the sum of (a) eighty-five percent (85%) of the Company’s aggregate outstanding Eligible Domestic
Accounts Receivable, plus (b) fifty percent (50%) of aggregate value of the Company’s Eligible Domestic Inventory which consists of raw materials, valued at the lower of cost or market, on a first in, first out basis, plus (c) sixty percent
(60%) of the aggregate value of the Company’s Eligible Domestic Inventory which consists of finished goods, valued at the lower of cost or market, on a first in, first out basis, plus (d) one hundred percent (100%) of all letters of credit
issued to CIT and accepted by CIT in its sole discretion for purposes of securing the Obligations. 
  
 Early Termination Date shall mean the date on which the Company terminates this Financing Agreement or the Revolving Line of Credit which
date is prior to an Anniversary Date. 
  
 Early Termination
Fee shall: (a) mean the fee CIT is entitled to charge the Company in the event the Company terminates the Revolving Line of Credit or this Financing Agreement on a date prior to an Anniversary Date; and (b) be determined by
multiplying the Revolving Line of Credit by (x) three percent (3%) if the Early Termination Date occurs on or before one (1) year from the Closing Date, (y) two percent (2%) if the Early Termination Date occurs after one (1) year from the Closing
Date but on or before two (2) years from the Closing Date; and (z) one percent (1%) if the Early Termination Date occurs after two (2) years from the Closing Date but 
  

 7 

 
prior to an Anniversary Date; provided, however, the fee set forth in subparagraph (z) above shall not be applicable if the termination occurs after three
(3) years from the Closing Date because of or in connection with a sale of all or substantially all of the stock or assets of the Company. 
  
 EBIT shall mean, in any period, all earnings of the Company for said period before all interest and tax obligations of the Company for said
period, determined in accordance with GAAP on a consistent basis with the latest audited financial statements of the Company, but excluding the effect of extraordinary or non-reoccurring gains or losses for such period. 
  
 EBITDA shall mean, in any period, all earnings of the Company
for said period before all interest and tax obligations of the Company for said period and all depreciation and amortization expense for said period, determined in accordance with GAAP on a consistent basis with the latest audited financial
statements of the Company, but excluding the effect of extraordinary or non-reoccurring gains or losses for such period. 
  
 Eligible Domestic Accounts Receivable shall mean the gross amount of the Company’s Trade Accounts Receivable that are subject to a
valid, exclusive, first priority and fully perfected security interest in favor of CIT, which conform to the warranties contained herein and at all times continue to be acceptable to CIT in the exercise of its reasonable business judgment,
less, without duplication, the sum of: (a) any returns, discounts, claims, credits and allowances of any nature (whether issued, owing, granted, claimed or outstanding), and (b) reserves for any such Trade Accounts Receivable that arise from
or are subject to or include: (i) sales to the United States of America, any state or other governmental entity or to any agency, department or division thereof, except for any such sales as to which the Company has complied with the Assignment of
Claims Act of 1940 or any other applicable statute, rules or regulation, to CIT’s satisfaction in the exercise of its reasonable business judgment; (ii) foreign sales, other than sales which otherwise comply with all of the other criteria for
eligibility hereunder and are secured by letters of credit (in form and substance satisfactory to CIT) issued or confirmed by, and payable at, banks having a place of business in the United States of America; (iii) Accounts that are more than 60
days past due; (iv) Accounts that remain unpaid more than ninety (90) days from invoice date (except for those such Accounts which are less than $300,000 in the aggregate and which do not remain unpaid more than one hundred fifty (150) days from
invoice date); (v) contra accounts; (vi) sales to any subsidiary, or to any company affiliated with the Company in any way; (vii) bill and hold (deferred shipment) or consignment sales; (viii) sales to any customer which is (A) insolvent or (B) the
debtor in any bankruptcy, insolvency, arrangement, reorganization, receivership or similar proceedings under any federal or state law or (C) negotiating, or has called a meeting of its creditors for purposes of negotiating, a compromise of its debts
or (D) financially unacceptable to CIT or has a credit rating unacceptable to CIT; (ix) all sales to any customer if fifty percent (50%) or more of the aggregate dollar amount of all outstanding invoices to such customer are more than 60 days past
due or remain unpaid more than ninety (90) days from invoice date (except for those such Accounts which are less than $300,000 in the aggregate and which do not remain unpaid more than one hundred fifty (150) days from invoice date); (x) pre-billed
receivables and receivables arising from progress billing; (xi) an amount representing, historically, returns, discounts, claims, credits, allowances and applicable terms; (xii) sales not payable in United States currency; and (xiii) any other
reasons 

  

 8 

 
deemed necessary by CIT in its reasonable business judgment, including those which are customary either in the commercial finance industry or in the lending
practices of CIT. 
  
 Eligible Domestic Inventory
shall mean the gross amount of the Company’s Inventory that is subject to a valid, exclusive, first priority and fully perfected security interest in favor of CIT and which conforms to the warranties contained herein and which at all times
continue to be acceptable to CIT in the exercise of its reasonable business judgment, less, without duplication, any (a) work-in-process, (b) supplies (other than raw materials), (c) Inventory not present in the United States of America or
Inventory which is Export-Related Inventory, (d) Inventory returned or rejected by the Company’s customers (other than goods that are undamaged and resalable in the normal course of business) and goods to be returned to the Company’s
suppliers, (e) Inventory in transit to third parties (other than the Company’s agents or warehouses), or Inventory in possession of a warehouseman, bailee, third party processor, or other third party, unless such warehouseman, bailee or third
party has executed a notice of security interest agreement (in form and substance satisfactory to CIT) and CIT shall have a first priority perfected security interest in such Inventory, and (f) less any reserves required by CIT in its reasonable
discretion, including for special order goods, discontinued, slow-moving and obsolete Inventory, market value declines, bill and hold (deferred shipment), consignment sales, shrinkage and any applicable customs, freight, duties and Taxes.

  
 Eligible Foreign Accounts Receivables shall
mean, at the date of determination, all Foreign Accounts of the Company and Cybex UK which would be included in the determination of the Foreign Borrowing Base in accordance with the Ex-Im Bank Documents and would otherwise be Eligible Domestic
Accounts Receivable but for clause (b)(ii) of the definition thereof and without regard to the $300,000 limitation set forth in clause (b) (iv) of the definition thereof. 
  
 Eligible Foreign Inventory shall mean at the date of determination, all Export-Related Inventory which would
be included in the determination of the Foreign Borrowing Base in accordance with the Ex-Im Bank Documents and would otherwise be Eligible Domestic Inventory but for clause (c) of the definition thereof. 
  
 Equipment shall mean all present and hereafter acquired
equipment (as defined in the UCC) including, without limitation, all machinery, equipment, furnishings and fixtures, and all additions, substitutions and replacements thereof, wherever located, together with all attachments, components, parts,
equipment and accessories installed thereon or affixed thereto and all proceeds thereof of whatever sort. 
  
 ERISA shall mean the Employee Retirement Income Security Act or 1974, as amended from time to time and the rules and regulations promulgated
thereunder from time to time. 
  
 ERISA Affiliate
shall mean any (i) corporation which is or was at any time a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Internal Revenue Code) as the Company; (ii) partnership or other trade or business
(whether or not incorporated) at any time under common control (within the meaning of Section 414(c) of the Internal Revenue Code) with the Company; and (iii) member of the same affiliated service group 

  

 9 

 
(within the meaning of Section 414(m) of the Internal Revenue Code) as the Company, any corporation described in clause (i) above, or any partnership
or trade or business described in clause (ii) above. 
  
 Eurocurrency Reserve Requirements for any day, as applied to a LIBOR Loan, shall mean the aggregate (without duplication) of the maximum rates of reserve requirements (expressed as a decimal fraction) in effect with respect to
CIT and/or any present or future lender or participant on such day (including, without limitation, basic, supplemental, marginal and emergency reserves under Regulation D or any other applicable regulations of the Board of Governors of the Federal
Reserve System or other governmental authority having jurisdiction with respect thereto, as now and from time to time in effect, dealing with reserve requirements prescribed for Eurocurrency funding (currently referred to as “Eurocurrency
Liabilities” in Regulation D of such Board) maintained by CIT and/or any such lenders or participants (such rate to be adjusted to the nearest one sixteenth of one percent (1/16 of 1%) or, if there is not a nearest one sixteenth of one percent
(1/16 of 1%), to the next higher one sixteenth of one percent (1/16 of 1%)). 
  
 Event(s) of Default shall have the meaning provided for in Section 10 of this Financing Agreement. 
  
 Executive Officers shall mean the Chairman, President, Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Executive
Vice President(s), Senior Vice President(s), Treasurer, Controller and Secretary of the Company. 
  
 Ex-Im Bank shall mean the Export-Import Bank of the United States. 
  
 Ex-Im Bank Documents shall mean the Ex-Im Bank Guarantee, the Loan Authorization Agreement between CIT and
Ex-Im Bank and the Borrower Agreement. 
  
 Ex-Im
Guarantee shall mean the guarantee executed by Ex-Im Bank in favor of CIT and in form and substance satisfactory to CIT, together with all amendments, modifications and supplements thereto. 
  
 Export-Related Inventory shall mean, at the date of
determination, all Inventory of the Company and Cybex UK that has been purchased or manufactured by the Company or Cybex UK for re-sale in an Export Transaction and for which Company or Cybex UK has received a signed written purchase order
acceptable to CIT from the buyer in such Export Transaction. 
  
 Export Transaction shall mean any transaction in which the Company or Cybex UK will sell goods or services to an account debtor located in a foreign country. 
  
 Fiscal Quarter shall mean, with respect to the Company, each three (3) month period ending on the last
Saturday in March, June and September and December 31 of each Fiscal Year. 
  
 Fiscal Year shall mean each twelve (12) month period commencing on January 1 of each year and ending on the following December 31. 
  

 10 

 Fixed Charge Coverage Ratio shall mean, for any applicable period of computation, the ratio
of the following for the Company and its subsidiaries on a consolidated basis determined in accordance with GAAP: (a) EBITDA less non-financed Capital Expenditures for such period, less, without duplication, losses incurred in respect of Support
Obligations during such period to (b) Fixed Charges for such period. 
  
 Fixed Charges shall mean, for any applicable twelve-month period of computation, the sum of (a) interest expense paid or accrued (other than interest accrued with respect to any Subordinated Debt) in respect of any
Indebtedness during such period, without duplication, plus (b) taxes to the extent paid during or with respect to such period plus (c) regularly scheduled payments of principal paid on Indebtedness (excluding the Revolving Loans)
during such period. 
  
 Foreign Accounts shall mean
those Accounts of the Company and Cybex UK that are an obligation of an account debtor located in a foreign country and which arise from an Export Transaction. 
  

Foreign Borrowing Base shall mean the sum of (a) ninety percent (90%) of the Company’s aggregate outstanding Eligible Foreign
Accounts Receivable, plus (b) seventy percent (70%) of Cybex UK’s aggregate outstanding Eligible Foreign Accounts Receivable, plus (c) seventy-five percent (75%) of aggregate value of the Company’s Eligible Foreign Inventory which consists
of raw materials, work-in-process and finished goods, valued at the lower of cost or market, on a first in, first out basis, plus (d) fifty-five percent (55%) of aggregate value of Cybex UK’s Eligible Foreign Inventory which consists of raw
materials, work-in-process and finished goods, valued at the lower of cost or market, on a first in, first out basis. 
  
 GAAP shall mean generally accepted accounting principles in the United States of America as in effect from time to time and for the period
as to which such accounting principles are to apply, provided that in the event the Company modifies its accounting principles and procedures as applied as of the Closing Date, the Company shall provide such statements of reconciliation as shall be
in form and substance) acceptable to CIT. 
  
 General
Intangibles shall mean all present and hereafter acquired general intangibles (as defined in the UCC), and shall include, without limitation, all present and future right, title and interest in and to: (a) all Trademarks, tradenames,
corporate names, business names, logos and any other designs or sources of business identities, (b) Patents, together with any improvements on said Patents, utility models, industrial models, and designs, (c) Copyrights, (d) trade secrets, (e)
licenses, (f) all applications with respect to the foregoing, (g) all right, title and interest in and to any and all extensions and renewals, (h) goodwill with respect to any of the foregoing, (i) any other forms of similar intellectual property,
(j) all customer lists, distribution agreements, supply agreements, blueprints, indemnification rights and tax refunds, together with all monies and claims for monies now or hereafter due and payable in connection with any of the foregoing or
otherwise, and all cash and non-cash proceeds thereof, including, without limitation, the proceeds or royalties of any licensing agreements between the Company and any licensee of any of the Company’s General Intangibles. 
  

 11 

 Guaranties shall mean the guaranty documents executed and delivered by the Guarantors
guaranteeing the Obligations. 
  
 Guarantors shall
mean Tectrix Fitness Equipment, Inc., Cybex Capital Corporation and Cybex UK. 
  
 Hilco shall mean Hilco Capital L.P., its successors and permitted assigns and any replacement lender under the Hilco Loan Agreement. 
  
 Hilco Intercreditor Agreement shall mean the Intercreditor Agreement between Hilco and CIT dated
            , 2003. 
  
 Hilco Loan shall mean the $11,000,000.00 term loan made by Hilco to the Company as of the Closing Date. 
  
 Hilco Loan Agreement shall mean the Financing Agreement, dated the date hereof, between Hilco and the Company, as the same now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or refinanced from time to time in accordance with Section 7.9(e) of this Agreement. 
  

Hilco Loan Documents shall mean the Hilco Loan Agreement and all other documents, instruments, and agreements executed from time to time
in connection with the Hilco Loan Agreement, as all of the foregoing now exist or may hereafter be amended, modified, supplemented, extended, renewed, restated or refinanced from time to time in accordance with Section 7.9(e) of this Agreement.

  
 Inactive Subsidiary shall mean Cybex Fitness
Gerate Vertriebes GmbH. 
  
 Indebtedness shall mean,
without duplication, all liabilities, contingent or otherwise, which are any of the following: (a) obligations in respect of borrowed money or for the deferred purchase price of property, services or assets, other than Inventory, or (b) lease
obligations which, in accordance with GAAP, have been, or which should be capitalized. 
  
 Insurance Proceeds shall mean proceeds or payments from an insurance carrier with respect to any loss, casualty or damage to Collateral. 
  
 Interest Period shall mean: 
  
 (a) with respect to any initial request by the Company for a LIBOR Loan, a one month, two month or three
month period commencing on the borrowing or conversion date with respect to a LIBOR Loan and ending one, two or three months thereafter, as applicable; and 
  
 (b) hereafter with respect to any continuation of, or conversion to, a LIBOR Loan, at the option of the Company, any one month, two month
or three month period commencing on the last day of the immediately preceding Interest Period applicable to such LIBOR Loan and ending one, two or three months thereafter, as applicable; 
  

 12 

 provided that, the foregoing provisions relating to Interest Periods are subject to the following:

  
 (i) if any Interest Period would otherwise end on a day
which is not a Working Day, that Interest Period shall be extended to the next succeeding Working Day, unless the result of such extension would extend such payment into another calendar month in which event such Interest Period shall end on the
immediately preceding Working Day; 
  
 (ii) any Interest Period
that begins on the last Working Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month, at the end of such Interest Period) shall end on the last Working Day of a calendar month; and

  
 (iii) for purposes of determining the availability of
Interest Periods, such Interest Periods shall be deemed available if (x) JP Morgan Chase Bank quotes an applicable rate or CIT determines LIBOR, as provided in the definition of LIBOR, (y) the LIBOR determined by JP Morgan Chase Bank or CIT will
adequately and fairly reflect the cost of maintaining or funding its loans bearing interest at LIBOR, for such Interest Period, and (z) such Interest Period will end on or before the earlier of Anniversary Date or the last day of the then current
term of this Financing Agreement. If a requested Interest Period shall be unavailable in accordance with the foregoing sentence, the Company shall continue to pay interest on the Obligations at the applicable per annum rate based upon the Chase Bank
Rate. 
  
 Inventory shall mean all of the
Company’s present and hereafter acquired inventory (as defined in the UCC) and including, without limitation, all merchandise, inventory and goods, and all additions, substitutions and replacements thereof, wherever located, together with all
goods and materials used or usable in manufacturing, processing, packaging or shipping same in all stages of production from raw materials through work-in-process to finished goods—and all proceeds thereof of whatever sort. 
  
 Investment Property shall mean the Company’s now owned or
hereafter acquired right, title and interest with respect to “investment property” as that term is defined in the UCC, and any and all supporting obligations in respect thereof. 
  
 IRB shall mean the Massachusetts Industrial Finance Agency Industrial Revenue Bonds – United Medical
Corporation Issue – Series 1992 in the original principal amount of $3,779,069. 
  
 IRB Letter of Credit shall mean the letter of credit issued by Wachovia Bank, National Association on the application of the Company providing credit support for the IRB. 
  
 Issuing Bank shall mean the bank issuing Letters of Credit for
the Company. 
  

 13 

 Letters of Credit shall mean all letters of credit issued with the assistance of CIT in
accordance with Section 5 hereof by the Issuing Bank for or on behalf of the Company. 
  
 Letter of Credit Guaranty Fee shall mean the fee CIT may charge the Company under Paragraph 8.3 of Section 8 of this Financing Agreement for: (a) issuing a Letter of Credit Guaranty, and/or (b) otherwise
aiding the Company in obtaining Letters of Credit, all pursuant to Section 5 hereof. 
  
 LIBOR shall mean, at any time of determination, and subject to availability, for each applicable Interest Period, a variable rate of interest equal to: (a) at CIT’s election (i) the applicable LIBOR
quoted to CIT by JP Morgan Chase Bank (or any successor thereof), or (ii) the rate of interest determined by CIT at which deposits in U.S. dollars are offered for the relevant Interest Period based on information presented on Telerate Systems at
Page 3750 as of 11:00 A.M. (London time) on the day which is two (2) Business Days prior to the first day of such Interest Period, provided that, if at least two such offered rates appear on the Telerate System at Page 3750 in respect
of such Interest Period, the arithmetic mean of all such rates (as determined by CIT) will be the rate used; divided by (b) a number equal to 1.0 minus the aggregate (but without duplication) of the rates (expressed as a decimal fraction) of
Eurocurrency Reserve Requirements in effect on the day which is two (2) Business Days prior to the beginning of such Interest Period. 
  
 LIBOR Lending Office with respect to CIT, shall mean the office of JP Morgan Chase Bank, or any successor thereof, maintained at 270 Park
Avenue, New York, NY 10017. 
  
 LIBOR Loan shall
mean any loans made pursuant to this Financing Agreement which are made or maintained at a rate of interest based upon LIBOR, provided that (i) no Default or Event of Default has occurred hereunder, which has not been waived in writing by CIT, and
(ii) no LIBOR Loan shall be made with an Interest Period that ends subsequent to an Anniversary Date or any applicable Early Termination Date. 
  
 Line of Credit shall mean the aggregate commitment of CIT to (a) make Revolving Loans pursuant to Section 3 of this Financing Agreement (b)
assist the Company in opening Letters of Credit pursuant to Section 5 of this Financing Agreement and (c) make Term Loans pursuant to Section 4 of this Financing Agreement, in the aggregate amount equal to $19,000,000. 
  
 Line of Credit Fee shall: (a) mean the fee due CIT at
the end of each month for the Line of Credit, and (b) be determined by multiplying the difference between (i) the Revolving Line of Credit (less $1,500,000) and (ii) the sum, for said month, of (x) the average daily balance of Revolving Loans
plus (y) the average daily balance of Letters of Credit outstanding, by three-eighths percent (0.375%) per annum for the number of days in said month. 
  
 Loan Documents shall mean this Financing Agreement, the Promissory Notes, the Guaranties, the Pledge Agreement, the mortgages and/or deeds
of trust on the Real Estate, any warrants, the other closing documents and any other ancillary loan and security agreements 

  

 14 

 
executed from time to time in connection with this Financing Agreement, all as may be renewed, amended, extended, increased or supplemented from time to
time. 
  
 Loan Facility Fee shall mean the fee
payable to CIT in accordance with, and pursuant to, the provisions of Paragraph 8.7 of Section 8 of this Financing Agreement. 
  
 Mandatory Prepayment shall: (a) mean the amount by which the Company must prepay Term Loan A on or before the 90th day after the end of each
Fiscal Year of the Company; and (b) be determined as set forth in Paragraph 4.9 of Section 4 of this Financing Agreement. 
  
 Net Income shall mean with respect to any person and for any period, the aggregate net income (or loss) after taxes of such person for such
period, determined in accordance with GAAP. 
  
 Obligations shall mean all loans, advances and extensions of credit made or to be made by CIT to the Company or to others for the Company’s account (including, without limitation, all Revolving Loans, Letter of Credit
Guaranties and Term Loans); any and all indebtedness and obligations which may at any time be owing by the Company to CIT howsoever arising, whether now in existence or incurred by the Company from time to time hereafter; whether secured by pledge,
lien upon or security interest in any of the Company’s Collateral, assets or property or the assets or property of any other person, firm, entity or corporation; whether such indebtedness is absolute or contingent, joint or several, matured or
unmatured, direct or indirect and whether the Company is liable to CIT for such indebtedness as principal, surety, endorser, guarantor or otherwise. Obligations shall also include indebtedness owing to CIT by the Company under any Loan Document or
under any other agreement or arrangement now or hereafter entered into between the Company and CIT; indebtedness or obligations incurred by, or imposed on, CIT as a result of environmental claims arising out of the Company’s operations,
premises or waste disposal practices or sites in accordance with paragraph 7.7 hereof; the Company’s liability to CIT as maker or endorser of any promissory note or other instrument for the payment of money; the Company’s liability to CIT
under any instrument of guaranty or indemnity, or arising under any guaranty, endorsement or undertaking which CIT may make or issue to others for the Company’s account, including any accommodation extended with respect to applications for
Letters of Credit, CIT’s acceptance of drafts or CIT’s endorsement of notes or other instruments for the Company’s account and benefit. 
  
 Other Collateral shall mean all now owned and hereafter acquired lockbox, blocked account and any other deposit accounts maintained with any
bank or financial institutions into which the proceeds of Collateral are or may be deposited; all cash and other monies and property in the possession or control of CIT; all books, records, ledger cards, disks and related data processing software at
any time evidencing or containing information relating to any of the Collateral described herein or otherwise necessary or helpful in the collection thereof or realization thereon; and all cash and non-cash proceeds of the foregoing. 
  
 Out-of-Pocket Expenses shall mean all of CIT’s present and
future expenses incurred relative to this Financing Agreement or any other Loan Documents, whether incurred heretofore or hereafter, which expenses shall include, without being limited to: the cost of record searches, 
  

 15 

 
all costs and expenses incurred by CIT in opening bank accounts, depositing checks, receiving and transferring funds, and wire transfer charges, any charges
imposed on CIT due to returned items and “insufficient funds” of deposited checks and CIT’s standard fees relating thereto, any amounts paid by, incurred by or charged to, CIT by the Issuing Bank under the Letter of Credit Guaranty or
the Company’s reimbursement agreement, application for Letter of Credit or other like document which pertain either directly or indirectly to such Letters of Credit, and CIT’s standard fees relating to the Letters of Credit and any drafts
thereunder, travel, lodging and similar expenses of CIT’s personnel in connection with inspecting and monitoring the Collateral from time to time hereunder (including field examination fees of $750 per person per day plus out-of-pocket
expenses), any applicable counsel fees and disbursements, fees and taxes relative to the filing of financing statements, all expenses, costs and fees set forth in Paragraph 10.3 of Section 10 of this Financing Agreement, and title insurance
premiums, real estate survey costs, costs of preparing and recording mortgages/deeds of trust against the Real Estate. 
  
 Overadvance Rate shall mean a rate equal to two percent (2%) per annum in excess of the applicable contract rate of interest determined in
accordance with Section 8, Paragraph 8.1(a) of this Financing Agreement. 
  
 Overadvances shall mean the amount by which (a) the sum of all outstanding Revolving Loans and Letters of Credit exceed (b) the Borrowing Base less $1,500,000.00. 
  
 Patents shall mean all of the Company’s present and
hereafter acquired patents, patent applications, registrations, any reissues or renewals thereof, licenses, any inventions and improvements claimed thereunder, and all general intangible, intellectual property and patent rights with respect thereto
of the Company and all income, royalties, cash and non-cash proceeds thereof. 
  
 Permitted Encumbrances shall mean: (a) liens existing on the date hereof on specific items of Equipment and other liens expressly permitted, or consented to in writing by CIT; (b) Purchase Money Liens;
(c) liens of local or state authorities for franchise or other like Taxes, provided that the aggregate amounts of such liens shall not exceed $100,000.00 in the aggregate at any one time; (d) statutory liens of landlords and liens of carriers,
warehousemen, mechanics, materialmen and other like liens imposed by law, created in the ordinary course of business and for amounts not yet due (or which are being contested in good faith, by appropriate proceedings or other appropriate actions
which are sufficient to prevent imminent foreclosure of such liens) and with respect to which adequate reserves or other appropriate provisions are being maintained by the Company in accordance with GAAP; (e) deposits made (and the liens thereon) in
the ordinary course of business of the Company (including, without limitation, security deposits for leases, indemnity bonds, surety bonds and appeal bonds) in connection with workers’ compensation, unemployment insurance and other types of
social security benefits or to secure the performance of tenders, bids, contracts (other than for the repayment or guarantee of borrowed money or purchase money obligations), statutory obligations and other similar obligations arising as a result of
progress payments under government contracts; (f) easements (including, without limitation, reciprocal easement agreements and utility agreements), encroachments, minor defects or irregularities in title, variation and other restrictions, charges or
encumbrances (whether or not recorded) affecting the Real Estate, if applicable, and which in the 
  

 16 

 
aggregate (A) do not materially interfere with the occupation, use or enjoyment by the Company in its business of the property so encumbered and (B) in the
reasonable business judgment of CIT do not materially and adversely affect the value of such Real Estate; and (g) liens granted CIT by the Company; (h) liens of judgment creditors provided such liens do not exceed, in the aggregate, at any time,
$50,000.00 (other than liens bonded or insured to the reasonable satisfaction of CIT); (i) tax liens which are not yet due and payable or which are being diligently contested in good faith by the Company by appropriate proceedings, and which liens
are not (x) filed on any public records, (y) other than with respect to Real Estate, senior to the liens of CIT or (z) for Taxes due the United States of America or any state thereof having similar priority statutes, as further set forth in
paragraph 7.6 hereof; (j) liens on the Company’s assets to secure the Hilco Loan; and (k) liens and encumbrances and other title exceptions noted on the title insurance policies for the Real Estate delivered to and accepted by CIT on the
Closing Date. 
  
 Permitted Indebtedness shall mean:
(a) Indebtedness under the Hilco Loan; (b) Indebtedness under the IRB, provided that such Indebtedness is not secured by any assets of the Company; (c) current Indebtedness (other than Indebtedness for borrowed money) maturing
in less than one year and incurred in the ordinary course of business for raw materials, supplies, equipment, services, Taxes or labor; (d) the Indebtedness secured by Purchase Money Liens; (e) Subordinated Debt; (f)
Indebtedness arising under the Letters of Credit and this Financing Agreement; (g) deferred Taxes and other expenses incurred in the ordinary course of business; and (h) recourse Indebtedness with respect to leases and third party
financing arrangements pertaining to the Company’s products and related matters (the “Support Obligations”) which shall not at any time exceed $6,000,000 in the aggregate; and (i) other Indebtedness existing on the date of
execution of this Financing Agreement and listed in the most recent financial statement delivered to CIT or otherwise disclosed to CIT in writing prior to the Closing Date. 
  
 Person shall mean any individual, corporation, governmental authority, partnership, limited liability company,
unincorporated business association, trust or other entity. 
  
 Pledge Agreement shall mean the Stock Pledge Agreement dated July 16, 2003 from the Company in favor of the Lender. 
  
 Prepayment Premium shall: (a) mean the amount due CIT by the Company upon any voluntary prepayment, in whole or in part, of Term Loan
A and (b) be computed by multiplying the amount so prepaid by : 
  
 (i) three percent (3%) if such prepayment occurs on or before the expiration of one (1) year from the Closing Date; 
  
 (ii) two percent (2%) if such prepayment occurs after one (1) from the Closing Date but before the expiration of two (2) years from the
Closing Date; and 
  
 (iii) one percent (1%) if
such prepayment occurs on or after two (2) years from the Closing Date and prior to the third anniversary of the Closing Date. 
  

 17 

 Promissory Notes shall mean Term Loan Promissory Note A and Term Loan Promissory Note B.

  
 Purchase Money Liens shall mean liens on any
item of Equipment acquired after the date of this Financing Agreement provided that (a) each such lien shall attach only to the property to be acquired, (b) a description of the Equipment so acquired is furnished to CIT, and (c)
the debt incurred in connection with such acquisitions shall not exceed, in the aggregate, $300,000.00 in any Fiscal Year. 
  
 Real Estate shall mean the Company’s fee and/or leasehold interests in the real property, including any such real property which has
been, or will be, encumbered, mortgaged, pledged or assigned to CIT or its designee. 
  
 Revolving Line of Credit shall mean the aggregate commitment of CIT to make loans and advances pursuant to Section 3 of this Financing Agreement and issue Letters of Credit Guaranties pursuant to Section
5 hereof to the Company, in the aggregate amount of $14,000,000.00. 
  
 Revolving Loan Account shall mean the account on CIT’s books, in the Company’s name, in which the Company will be charged with all Obligations under this Financing Agreement. 
  
 Revolving Loans shall mean the loans and advances made, from
time to time, to or for the account of the Company by CIT pursuant to Section 3 of this Financing Agreement. 
  
 Standby Letter of Credit Sub-Line shall mean the commitment of CIT to assist the Company in obtaining standby Letters of Credit, pursuant to
Section 5 hereof, in an aggregate amount of $4,000,000. 
  
 Support Obligations shall have the meaning given to such term in the definition of “Permitted Indebtedness.” 
  
 Subordinated Debt shall mean the debt due a Subordinating Creditor (and the note(s) evidencing such) which has been subordinated, by a
Subordination Agreement, to the prior payment and satisfaction of the Obligations of the Company to CIT. 
  
 Subordinating Creditor shall mean UM Holdings, Ltd. and any other party hereafter executing a Subordination Agreement. 
  
 Subordination Agreement shall mean the agreement (in form and
substance satisfactory to CIT) among the Company, a Subordinating Creditor and CIT pursuant to which Subordinated Debt is subordinated to the prior payment and satisfaction of the Company’s Obligations to CIT. 
  
 Surplus Cash shall mean for any Fiscal Year (a) the sum of (i)
EBIT and (ii) depreciation less (b) the sum of (i) all interest obligations paid or due by the Company, (ii) the 

  

 18 

 
amount of principal repaid CIT on the Term Loans and the amount of any principal repaid to Hilco in accordance with the terms of the Hilco Loan, (iii)
unfunded Capital Expenditures actually incurred, and (iv) all federal, state and local tax obligations of the Company. 
  
 Taxes shall mean all federal, state, municipal and other governmental taxes, levies, charges, claims and assessments which are or may be due
by the Company with respect to its business, operations, Collateral or otherwise. 
  
 Term Loan Promissory Note A shall mean the promissory note in the form of Exhibit A hereto executed by the Company to evidence Term Loan A made by CIT under Section 4 hereof. 
  
 Term Loan Promissory Note B shall mean the promissory note in
the form of Exhibit B hereto executed by the Company to evidence Term Loan B made by CIT under Section 4 hereof. 
  
 Term Loans shall mean the term loans in the respective principal amounts of $2,000,000.00 (herein “Term Loan A”) and $3,000,000.00
(herein “Term Loan B”) made by CIT pursuant to, and repayable in accordance with, the provisions of Section 4 of this Financing Agreement. 
  
 Total Assets shall mean total assets determined in accordance with GAAP, on a basis consistent with the latest audited financial statements
of the Company. 
  
 Total Liabilities
shall mean total liabilities determined in accordance with GAAP, on a basis consistent with the latest audited financial statements of the Company. 
  
 Trade Accounts Receivable shall mean that portion of the Company’s Accounts which arises from the sale of Inventory or the rendition of
services in the ordinary course of the Company’s business. 
  
 Trademarks shall mean all present and hereafter acquired trademarks, trademark registrations, recordings, applications, tradenames, trade styles, service marks, prints and labels (on which any of the foregoing may appear),
licenses, reissues, renewals, and any other intellectual property and trademark rights pertaining to any of the foregoing, together with the goodwill associated therewith, and all cash and non-cash proceeds thereof. 
  
 Transfer shall mean any conveyance, transfer, pledge,
assignment, hypothecation, refinancing, mortgage, encumbrance, gift, sale, lease (including any amendment, extension, modification, waiver or renewal thereof), lien, or other disposition, whether direct or indirect, legal or beneficial, by law or
otherwise. 
  
 UCC shall mean the Uniform Commercial
Code as in effect from time to time in the state of New York. 
  
 UM Holdings Letter of Credit shall mean the letter of credit issued by Wachovia Bank, National Association in favor of CIT on the application of UM Holdings, Ltd. in the face amount of $1,500,000.00. 
  

 19 

 Working Capital shall mean Current Assets in excess of Current Liabilities. 
  
 Working Day shall mean any Business Day on which dealings in
foreign currencies and exchanges between banks may be transacted. 
  
 SECTION 2. Conditions Precedent 
  
 2.1 The obligation of CIT to make the initial loans hereunder is subject to the satisfaction of, extension of or waiver of, on or prior to, the Closing Date, the following conditions precedent: 
  
 (a) Lien Searches - CIT shall have received
tax, judgment and Uniform Commercial Code searches satisfactory to CIT for all locations presently occupied or used by the Company. 
  
 (b) Casualty Insurance - The Company shall have delivered to CIT evidence satisfactory to CIT that casualty insurance
policies listing CIT as loss payee or mortgagee, as the case may be, are in full force and effect, all as set forth in Paragraph 7.5 of Section 7 of this Financing Agreement. 
  
 (c) UCC Filings - Any financing statements required to be filed in order to create, in favor
of CIT, a first perfected security interest in the Collateral, subject only to the Permitted Encumbrances, shall have been properly filed in each office in each jurisdiction required in order to create in favor of CIT a perfected lien on the
Collateral. CIT shall have received acknowledgment copies of all such filings (or, in lieu thereof, CIT shall have received other evidence satisfactory to CIT that all such filings have been made) and CIT shall have received evidence that all
necessary filing fees and all taxes or other expenses related to such filings have been paid in full. 
  
 (d) Board Resolution - CIT shall have received a copy of the resolutions of the Board of Directors or Executive
Committee of each of the Company and the Guarantors (as the case may be) authorizing the execution, delivery and performance of (i) this Financing Agreement, (ii) the Guaranties, and (iii) any related agreements, in each case certified by the
Secretary, Assistant Secretary or other senior authorized officer of the Company and the Guarantors (as the case may be) as of the date hereof, together with a certificate of the Secretary or Assistant Secretary or other senior authorized officer of
the Company and the Guarantors (as the case may be) as to the incumbency and signature of the officers of the Company and/or the Guarantors executing such Loan Documents and any certificate or other documents to be delivered by them pursuant hereto,
together with evidence of the incumbency of such Secretary or Assistant Secretary or other senior authorized officer. 
  
 (e) Corporate Organization - CIT shall have received (i) a copy of the Certificate of Incorporation of the Company and the
Guarantors certified by the Secretary of State of the state of its incorporation, and (ii) a copy of the By-Laws of the Company 

  

 20 

 
certified by the Secretary or Assistant Secretary or other senior authorized officer thereof, all as amended through the date hereof. 
  
 (f) Officer’s Certificate - CIT
shall have received an executed Officer’s Certificate of the Company, satisfactory in form and substance to CIT, certifying that (i) the representations and warranties contained herein are true and correct in all material respects on and as of
the Closing Date; (ii) the Company is in compliance with all of the terms and provisions set forth herein; and (iii) no Default or Event of Default has occurred 
  
 (g) Opinions - Counsel for the Company and the Guarantors shall have delivered to CIT opinions
satisfactory to CIT opining, inter alia, that, subject to the (i) filing, priority and remedies provisions of the Uniform Commercial Code, (ii) the provisions of the Bankruptcy Code, insolvency statutes or other like laws, (iii) the equity powers of
a court of law and (iv) such other matters as may be agreed upon with CIT: (x) this Financing Agreement, the Guaranty, the Pledge Agreement and all other Loan Documents of the Company and the Guarantors are (A) valid, binding and enforceable
according to their terms, (B) are duly authorized, executed and delivered, and (C) do not violate any terms, provisions, representations or covenants in the charter or by-laws of the Company or the Guarantors or, to the best knowledge of such
counsel, of any loan agreement, mortgage, deed of trust, note, security or pledge agreement or indenture to which the Company or the Guarantors are signatories or by which the Company or the Guarantors or their assets are bound; and (y) the
provisions of all federal and state securities laws, Bulk Sales Law and the Hart-Scott-Rodino Anti-Trust Improvements Act have been fully complied with or that compliance is not legally required and the reasons supporting such non-compliance. In
addition, counsel to the Subordinating Creditor(s) shall have delivered an opinion satisfactory to CIT that the Subordination Agreement(s) have been duly authorized, executed and delivered and constitute valid and binding agreements enforceable
against such Subordinating Creditor(s) in accordance with the terms thereof. 
  
 (h) Absence of Default - No Default or Event of Default shall have occurred and no material adverse change shall have
occurred in the financial condition, business, prospects, profits, operations or assets of the Company or the Company’s subsidiaries. 
  
 (i) Legal Restraints/Litigation - As of the Closing Date, there shall be no (x) litigation, investigation or proceeding
(judicial or administrative) pending or threatened against the Company or the Guarantors or their assets, by any agency, division or department of any county, city, state or federal government arising out of this Financing Agreement, (y) injunction,
writ or restraining order restraining or prohibiting the financing arrangements contemplated under this Financing Agreement or (z) suit, action, investigation or proceeding (judicial or administrative) pending against the Company or the Guarantors
or their assets, which, in the opinion of CIT, if adversely determined, could have a material adverse effect on the business, operation, assets, financial condition or Collateral of the Company and/or the Guarantors. 
  

 21 

 (j) Guaranties - The Guarantors shall have executed and delivered to CIT
guaranties, in form acceptable to CIT, guaranteeing all present and future Obligations of the Company. 
  
 (k) Subordination Agreement - The Subordinating Creditor shall have executed and delivered to CIT a Subordination
Agreement, in form and substance satisfactory to CIT, subordinating the debt due the Subordinating Creditor by the Company to the prior payment and satisfaction of the Obligations of the Company. 
  
 (l) Cash Budget Projections - CIT shall
have received, reviewed and been satisfied with a twelve (12) month cash budget projection prepared by the Company on the form provided by CIT. 
  
 (m) Pledge Agreement - The Company shall (i) execute and deliver to CIT the Pledge Agreement pledging to CIT as additional
collateral for the Obligations of the Company not less than 100% of the stock each Guarantor and (ii) deliver to CIT the stock certificates evidencing such stock together with duly executed stock powers (undated and in-blank) with respect thereto.

  
 (n) Additional Documents - The
Company shall have executed and delivered to CIT all Loan Documents necessary to consummate the lending arrangement contemplated between the Company and CIT. 
  

(o) Disbursement Authorization - The Company shall have delivered to CIT all information necessary for CIT to issue wire
transfer instructions on behalf of the Company for the initial and subsequent loans and/or advances to be made under this Financing Agreement including, but not limited to, disbursement authorizations in form acceptable to CIT. 
  
 (p) Examination & Verification - CIT shall
have completed, to its satisfaction  , an examination and verification of the Accounts, Inventory, books and records of the Company which examination shall indicate that, after giving effect to all Revolving Loans, advances and extensions
of credit to be made at closing, the Company shall have an opening additional Availability of at least $4,500,000.00, as evidenced by a Borrowing Base certificate delivered by the Company to CIT as of the Closing Date, all as more fully required by
the Commitment Letter. It is understood that such requirement contemplates that all debts and obligations are current, and that all payables are being handled in the normal course of the Company’s business and consistent with its past practice.

  
 (q) Depository Accounts - The
Company shall have established a system of lockbox and bank accounts with respect to the collection of Accounts and the deposit of proceeds of Collateral as shall be acceptable to CIT in all respects. Such accounts shall be subject to three party
agreements (between the Company, CIT and the depository bank), which shall be in form and substance satisfactory to CIT. 
  

 22 

 (r) Existing Revolving Credit Agreement - The Company’s existing
credit agreement with Wachovia Bank, National Association (the “Existing Lender”) shall be (x) terminated, (y) all loans and obligations of the Company and/or the Guarantors thereunder shall be paid or satisfied in full, including through
utilization of the proceeds of the initial Revolving Loans and Term Loans to be made under this Financing Agreement (except the Company’s reimbursement obligation with respect to the IRB Letter of Credit) and (z) all liens or security interests
in favor of the Existing Lender on the Collateral and otherwise in connection therewith shall be terminated and/or released upon such payment; provided, however, the IRB Letter of Credit shall remain in place so long as the obligations of the
Company with respect thereto are not secured by any assets of the Company or any subsidiary of the Company. 
  
 (s) Mortgages/Deeds of Trust - The Company shall have executed and delivered to CIT, an agent of CIT or to a title insurance
company acceptable to CIT, such mortgages and/or deeds of trust as CIT may reasonably require to obtain second liens, subordinate to the liens granted by the Company to Hilco, on the Real Estate owned by the Company. 
  
 (t) Title Insurance Policies - CIT shall have
received, in respect of each mortgage or deed of trust, a mortgagee’s title policy or marked-up unconditional binder for such insurance. Each such policy shall (i) be in an amount reasonably satisfactory to CIT; (ii) insure that the mortgage or
deed of trust insured thereby creates a valid second lien on the property covered by such mortgage or deed of trust, free and clear of all defects and encumbrances except those acceptable to CIT; (iii) name CIT as the insured thereunder; and (iv)
contain such available endorsements and effective coverage as CIT may reasonably request, including, without limitation, the revolving line of credit endorsement. CIT shall also have received evidence that all premiums in respect of such policies
have been paid and that all charges for mortgage recording taxes, if any, shall have been paid. 
  
 (u) Surveys - CIT and the title insurance company issuing each policy referred to in the immediately preceding paragraph
(each, a “Title Insurance Company”) shall have received maps or plats of a perimeter or boundary of the site of each of the properties covered by the mortgages or deeds of trust, dated a date satisfactory to CIT and the relevant
Title Insurance Company prepared by an independent professional licensed land surveyor satisfactory to CIT and the relevant Title Insurance Company, which maps or plats and the surveys on which they are based shall be made in accordance with the
Minimum Standard Detail Requirements for Land Title Surveys jointly established and adopted by the American Land Title Association and the American Congress on Surveying and Mapping; and, without limiting the generality of the foregoing, there shall
be surveyed and shown on the maps or plats or surveys the following: (i) the locations on such sites of all the buildings, structures and other improvements and the established building setback lines insofar as the foregoing affect the perimeter or
boundary of such property; (ii) the lines of streets abutting the sites and width thereof; (iii) all access and other easements appurtenant to the sites or necessary or desirable to use the sites; (iv) all roadways, paths, driveways, easements,
encroachments and overhanging projections and 

  

 23 

 
similar encumbrances affecting the sites, if recorded, apparent from a physical inspection of the sites or otherwise known to the surveyor; (v) any
encroachments on any adjoining property by the building, structures and improvements on the sites; and (vi) if the site is designated as being on a filed map, a legend relating the survey to said map. Further, the survey shall (x) be certified to
CIT, the Company, Hilco and the Title Insurance Company and (y) contain a legend reciting as to whether or not the site is located in a flood zone. 
  
 (v) Environmental Report - CIT shall have received environmental audit reports on (i) all of the Company’s leasehold
and fee interests, and (ii) the Company’s waste disposal practices. The reports must (x) be satisfactory to CIT and (y) not disclose or indicate any material liability (real or potential) stemming from the Company’s premises, its
operations, its waste disposal practices or waste disposal sites used by Company. 
  
 (w) UM Holdings Letter of Credit – The UM Holdings Letter of Credit shall have been delivered to CIT and shall be in
form and substance satisfactory to CIT. 
  
 (x) Hilco Loan – The Company shall have received the proceeds of the Hilco Loan and all documentation with respect thereto shall be satisfactory to CIT. 
  
 (y) Hilco Intercreditor Agreement
– Hilco and CIT shall have entered into the Hilco Intercreditor Agreement in form and substance satisfactory to CIT. 
  
 (z) Opening Balance Sheet – CIT shall have received an opening balance sheet of the Company as of the Closing
Date which shall be in form and substance satisfactory to CIT. 
  
 (aa) Warrants – CIT shall have received documentation satisfactory to it regarding the granting to CIT of warrants to purchase up to two percent (2.0%) of the outstanding shares of voting common
stock of the Company for an amount based on the average of the prior 30 days’ market closing price. The terms and provisions of such warrants (including, without limitation, anti-dilution, registration and put/call rights) shall be mutually
agreed upon between CIT and the Company. 
  
 (bb) Additional Collateral for IRB Letter of Credit – UM Holdings, Ltd. shall have provided additional collateral for the IRB Letter of Credit and CIT shall be satisfied with the terms and provisions relating to such
additional collateral. 
  
 (cc) Ex-Im Bank
Guarantee – CIT shall have received the Ex-Im Bank Guarantee duly executed by Ex-Im Bank on terms acceptable to CIT and the Company shall have entered into the Borrower Agreement with Ex-Im Bank in accordance with the Ex-Im Bank
Guarantee. 
  
 (dd) Schedules - The
Company or its counsel shall provide CIT with schedules of: (a) any of the Company’s and its subsidiaries (i) Trademarks, (ii) Patents, and (iii) 

  

 24 

 
Copyrights, as applicable and all in such detail as to provide appropriate recording information with respect thereto, (b) any tradenames, (c) monthly rental
payments for any leased premises or any other premises where any Collateral may be stored or processed, and (d) Permitted Liens, all of the foregoing in form and substance satisfactory to CIT. 
  
 (ee) Commitment Letter - The Company shall
have fully complied, to the reasonable satisfaction of CIT, with all of the terms and conditions of the Commitment Letter. 
  
 Upon the execution of this Financing Agreement and the initial disbursement of loans hereunder, all of the above Conditions Precedent shall have been deemed satisfied
except as otherwise set forth hereinabove or as the Company and CIT shall otherwise agree in writing. 
  
 2.2 Conditions to Each Extension of Credit 
  
 Except to the extent expressly set forth in this Financing Agreement, the agreement of CIT to make any extension of credit requested to be made by it to
the Company on any date (including without limitation, the initial extension of credit) is subject to the satisfaction of the following conditions precedent: 
  

(a) Representations and Warranties - Each of the representations and warranties made by the Company in or pursuant
to this Financing Agreement shall be true and correct in all material respects on and as of such date as if made on and as of such date. 
  
 (b) No Default - No Default or Event of Default shall have occurred and be continuing on such date or after giving
effect to the extension of credit requested to be made on such date. 
  
 (c) Credit Limits/Availability - Except as may be otherwise agreed to from time to time by CIT and the Company in writing, after giving effect to the extension of credit requested to be made by
the Company on such date, none of the limits set forth in Section 3.1 or 5.1 shall have been exceeded and Availability shall not be less than $1,500,000.00. 
  
 Each borrowing by the Company hereunder shall constitute a representation and warranty by the Company as of the date of such loan or advance that each of the
representations, warranties and covenants contained in the Financing Agreement have been satisfied and are true and correct, except as the Company and CIT shall otherwise agree herein or in a separate writing. 
  
 SECTION 3. Revolving Loans 
  
 3.1 CIT agrees, subject to the terms and conditions of this Financing
Agreement, from time to time (but subject to CIT’s right to make Overadvances), to make loans and advances to the Company on a revolving basis (i.e. subject to the limitations set forth herein, the Company may borrow, repay and re-borrow
Revolving Loans) in the following amounts: (a) up to the 

  

 25 

 
lesser of (i) $9,000,000 or (ii) the Domestic Borrowing Base less Availability Reserves; and (b) up to the lesser of (i) $5,000,000 or (ii) the
Foreign Borrowing Base less Availability Reserves; provided, however, CIT shall be under no obligation to make any Revolving Loan if Availability is less than $1,500,000 after the making of any such Revolving Loan. All requests for
loans and advances must be received by an officer of CIT no later than (i) 2:00 p.m., New York time, of the Business Day on which any such Chase Bank Rate Loans and advances are required or (ii) three Business Days prior to any requested LIBOR Loan.
Should CIT for any reason honor requests for Overadvances, any such Overadvances shall be made in CIT’s sole discretion and subject to any additional terms CIT deems necessary. 
  
 3.2 In furtherance of the continuing assignment and security interest in the Company’s Accounts and Inventory,
the Company will, upon the creation of Accounts and purchase or acquisition of Inventory, execute and deliver to CIT in such form and manner as CIT may reasonably require, solely for CIT’s convenience in maintaining records of Collateral, such
confirmatory schedules of Accounts and Inventory as CIT may reasonably request, including, without limitation, weekly schedules of Accounts and monthly schedules of Inventory, all in form and substance satisfactory to CIT, and such other appropriate
reports designating, identifying and describing the Accounts and Inventory as CIT may reasonably request, and provided further that CIT may request any such information more frequently, from time to time, upon its reasonable prior request. In
addition, upon CIT’s request, the Company shall provide CIT with copies of agreements with, or purchase orders from, the Company’s customers, and copies of invoices to customers, proof of shipment or delivery, access to its computers,
electronic media and software programs associated therewith (including any electronic records, contracts and signatures) and such other documentation and information relating to said Accounts and other Collateral as CIT may reasonably require.
Failure to provide CIT with any of the foregoing shall in no way affect, diminish, modify or otherwise limit the security interests granted herein. The Company hereby authorizes CIT to regard the Company’s printed name or rubber stamp signature
on assignment schedules or invoices as the equivalent of a manual signature by one of the Company’s authorized officers or agents. 
  
 3.3 The Company hereby represents and warrants that: each Trade Account Receivable is based on an actual and bona fide sale and delivery of
Inventory or rendition of services to customers, made by the Company in the ordinary course of its business; the Inventory being sold, and the Trade Accounts Receivable created, are the exclusive property of the Company and are not and shall not be
subject to any lien, consignment arrangement, encumbrance, security interest or financing statement whatsoever, other than the Permitted Encumbrances; the invoices evidencing such Trade Accounts Receivable are in the name of the Company; and the
customers of the Company have accepted the Inventory or services, owe and are obligated to pay the full amounts stated in the invoices according to their terms, without dispute, offset, defense, counterclaim or contra, except for disputes and other
matters arising in the ordinary course of business with respect to which the Company has complied with the notification requirements of Paragraph 3.5 of this Section 3. The Company confirms to CIT that any and all Taxes or fees relating to its
business, its sales, the Accounts or Inventory relating thereto, are its sole responsibility and that same will be paid by the Company when due, subject to Paragraph 7.6 of Section 7 of this Financing Agreement, and that none of said Taxes or fees
represent a lien on or claim against the Accounts. The Company hereby further represents and 

  

 26 

 
warrants that it shall not acquire any Inventory on a consignment basis, nor co-mingle its Inventory with any of its customers or any other person, including
pursuant to any bill and hold sale or otherwise, and that its Inventory is marketable to its customers in the ordinary course of business of the Company, except as it may otherwise report in writing to CIT pursuant to Paragraph 3.5 hereof from time
to time. The Company also warrants and represents that it is a duly and validly existing corporation and is qualified in all states where the failure to so qualify would have an adverse effect on the business of the Company or the ability of the
Company to enforce collection of Accounts due from customers residing in that state. The Company agrees to maintain such books and records regarding Accounts and Inventory as CIT may reasonably require and agrees that the books and records of the
Company will reflect CIT’s interest in the Accounts and Inventory. All of the books and records of the Company will be available to CIT at normal business hours, including any records handled or maintained for the Company by any other company
or entity. 
  
 3.4 (a) Until CIT has advised the Company to
the contrary after the occurrence of an Event of Default, the Company, at its expense, will enforce, collect and receive all amounts owing on the Accounts in the ordinary course of its business and any proceeds it so receives shall be subject to the
terms hereof, and held on behalf of and in trust for CIT. Such privilege shall terminate at the election of CIT, upon the occurrence of an Event of Default. Any checks, cash, credit card sales and receipts, notes or other instruments or property
received by the Company with respect to any Collateral, including Accounts, shall be held by the Company in trust for CIT, separate from the Company’s own property and funds, and promptly turned over to CIT with proper assignments or
endorsements by deposit to the Depository Accounts. The Company shall: (i) indicate on all of its invoices that funds should be delivered to and deposited in a Depository Account; (ii) direct all of its account debtors to deposit any and all
proceeds of Collateral into the Depository Accounts; (iii) irrevocably authorize and direct any banks which maintain the Company’s initial receipt of cash, checks and other items to promptly wire transfer all available funds to a Depository
Account; and (iv) advise all such banks of CIT’s security interest in such funds. The Company shall provide CIT with prior written notice of any and all deposit accounts opened or to be opened subsequent to the Closing Date. Subject to
Collection Days, all amounts received by CIT in payment of Accounts will be credited to the Revolving Loan Account when CIT is advised by its bank of its receipt of “collected funds” at CIT’s bank account in New York, New York on the
Business Day of such advise if advised no later than 1:00 p.m. EST or on the next succeeding Business Day if so advised after 1:00 PM EST. No checks, drafts or other instrument received by CIT shall constitute final payment to CIT unless and until
such instruments have actually been collected. 
  
 (b) The
Company shall establish and maintain, in its name and at its expense, deposit accounts with such banks as are acceptable to CIT (the “Blocked Accounts”) into which the Company shall promptly cause to be deposited: (i) all proceeds of
Collateral received by the Company, including all amounts payable to the Company from credit card issuers and credit card processors, and (ii) all amounts on deposit in deposit accounts used by the Company at each of its locations, all as further
provided in Paragraph 3.4(a) above. The banks at which the Blocked Accounts are established shall enter into an agreement, in form and substance satisfactory to CIT (the “Blocked Account Agreements”), providing that all cash, checks and
items received or deposited in the Blocked Accounts are the property of CIT, that the depository bank has no lien 

  

 27 

 
upon, or right of set off against, the Blocked Accounts and any cash, checks, items, wires or other funds from time to time on deposit therein, except as
otherwise provided in the Blocked Account Agreements, and that automatically, on a daily basis the depository bank will wire, or otherwise transfer, in immediately available funds, all funds received or deposited into the Blocked Accounts to such
bank account as CIT may from time to time designate for such purpose. The Company hereby confirms and agrees that all amounts deposited in such Blocked Accounts and any other funds received and collected by CIT, whether as proceeds of Inventory or
other Collateral or otherwise, shall be the property of CIT. 
  
 3.5 The Company agrees to notify CIT: (a) of any matters affecting more than $100,000 of the value, enforceability or collectibility of any Account and of all customer disputes, offsets, defenses, counterclaims, returns, rejections
and all reclaimed or repossessed merchandise or goods (in each case in excess of $100,000), and of any adverse effect in more than $100,000 of the value of its Inventory, in its weekly and monthly collateral reports (as applicable) provided to CIT
hereunder, in such detail and format as CIT may reasonably require from time to time and (b) promptly of any such matters which are material, as a whole, to the Accounts and/or the Inventory. The Company agrees to issue credit memoranda promptly
(with duplicates to CIT upon request after the occurrence of an Event of Default) upon accepting returns or granting allowances. Upon the occurrence of an Event of Default (which is not waived in writing by CIT) and on notice from CIT, the Company
agrees that all returned, reclaimed or repossessed merchandise or goods shall be set aside by the Company, marked with CIT’s name (as secured party) and held by the Company for CIT’s account. 
  
 3.6 CIT shall maintain a Revolving Loan Account on its books in which
the Company will be charged with all loans and advances made by CIT to it or for its account, and with any other Obligations, including any and all costs, expenses and reasonable attorney’s fees which CIT may incur in connection with the
exercise by or for CIT of any of the rights or powers herein conferred upon CIT, or in the prosecution or defense of any action or proceeding to enforce or protect any rights of CIT in connection with this Financing Agreement, the other Loan
Documents or the Collateral assigned hereunder, or any Obligations owing by the Company. The Company will be credited with all amounts received by CIT from the Company or from others for the Company’s account, including, as above set forth, all
amounts received by CIT in payment of Accounts, and such amounts will be applied to payment of the Obligations as set forth herein. In no event shall prior recourse to any Accounts or other security granted to or by the Company be a prerequisite to
CIT’s right to demand payment of any Obligation. Further, it is understood that CIT shall have no obligation whatsoever to perform in any respect any of the Company’s contracts or obligations relating to the Accounts. 
  
 3.7 After the end of each month, CIT shall promptly send the Company a
statement showing the accounting for the charges, loans, advances and other transactions occurring between CIT and the Company during that month. The monthly statements shall be deemed correct and binding upon the Company and shall constitute an
account stated between the Company and CIT unless CIT receives a written statement of the exceptions within thirty (30) days of the date of the monthly statement. 
  

 28 

 3.8 In the event that (a) the sum of (i) the outstanding balance of Revolving Loans and (ii)
outstanding balance of Letters of Credit exceeds (b) the lesser of (x) the Borrowing Base less $1,500,000.00 or (y) the Revolving Line of Credit, any such nonconsensual Overadvance shall be due and payable to CIT immediately upon CIT’s demand
therefor. 
  
 SECTION 4. Term Loans  
  
 TERM LOAN A 
  
 4.1 The Company hereby agrees to execute and deliver to CIT Term Loan
Promissory Note A, in the form of Exhibit A attached hereto, to evidence Term Loan A to be extended by CIT. 
  
 4.2 Upon receipt of such Term Loan Promissory Note A, CIT hereby agrees to extend to the Company Term Loan A in the principal amount of
$2,000,000.00. 
  
 4.3 The principal amount of Term Loan A
shall be repaid to CIT by the Company by: (i) eleven (11) equal quarterly principal installments of $100,000.00 each, followed by (ii) one (1) installment of $900,000.00, whereof the first installment shall be due and payable on September 30, 2003
and the subsequent installments shall be due and payable on the last day of each calendar quarter thereafter until paid in full. 
  
 TERM LOAN B 
  
 4.4 The Company hereby agrees to execute and deliver to CIT Term Loan Promissory Note B, in the form of Exhibit B attached hereto, to evidence Term
Loan B to be extended by CIT. 
  
 4.5 Upon receipt of such
Term Loan Promissory Note B, CIT hereby agrees to extend to the Company Term Loan B in the principal amount of $3,000,000.00. 
  
 4.6 The principal amount of Term Loan B shall be repaid CIT by the Company by: (i) twelve (12) equal quarterly principal installments of
$250,000.00 each, whereof the first installment shall be due and payable on September 30, 2003 and the subsequent installments shall be due and payable on the last day of each calendar quarter thereafter until paid in full. 
  
 ADDITIONAL PROVISIONS FOR TERM LOANS 
  
 4.7 In the event this Financing Agreement or the Line of Credit is
terminated by either CIT or the Company for any reason whatsoever, the Term Loans shall become due and payable on the effective date of such termination notwithstanding any provision to the contrary in the Promissory Notes or this Financing
Agreement. 
  
 4.8 The Company may prepay at any time, at
its option, in whole or in part, the Term Loans, provided that on each such prepayment, the Company shall pay: (a) accrued interest on the principal so prepaid to the date of such prepayment and (b)the Prepayment Premium, if any. 
  

 29 

 4.9 In the event the Company has Surplus Cash in any Fiscal Year beginning with the Fiscal Year
ending December 31, 2003, the Company must make a Mandatory Prepayment of the Term Loans within ninety (90) days of the end of any such Fiscal Year by an amount equal to twenty-five (25%) of said Surplus Cash. Such prepayment shall be applied first
to Term Loan B and then to Term Loan A. 
  
 4.10 Each
prepayment (whether voluntary or mandatory) shall be applied to the then last maturing installments of principal of the applicable Term Loan. 
  
 4.11 The Company hereby authorizes CIT to charge its Revolving Loan Account with the amount of all amounts due under this Section 4 as such amounts
become due. The Company confirms that any charges which CIT may so make to its Revolving Loan Account as herein provided will be made as an accommodation to the Company and solely at CIT’s discretion. 
  
 SECTION 5. Letters of Credit 
  
 In order to assist the Company in establishing or opening Letters of Credit
with an Issuing Bank, the Company has requested CIT to join in the applications for such Letters of Credit, and/or guarantee payment or performance of such Letters of Credit and any drafts or acceptances thereunder through the issuance of the
Letters of Credit Guaranty, thereby lending CIT’s credit to the Company and CIT has agreed to do so. These arrangements shall be handled by CIT subject to the terms and conditions set forth below. 
  
 5.1 CIT shall assist the Company in obtaining standby Letter(s) of
Credit in an amount not to exceed the outstanding amount of the Standby Letter of Credit Sub-Line and CIT shall assist the Company in obtaining documentary Letter(s) of Credit in an amount not to exceed the outstanding amount of the Documentary
Letter of Credit Sub-Line; provided, however, CIT shall be under no obligation to assist the Company in obtaining any Letter of Credit if Availability is less than $1,500,000 after the obtaining of any such Letter of Credit. CIT’s
assistance for amounts in excess of the limitation set forth herein shall at all times and in all respects be in CIT’s sole discretion. It is understood that the term, form and purpose of each Letter of Credit and all documentation in
connection therewith, and any amendments, modifications or extensions thereof, must be mutually acceptable to CIT, the Issuing Bank and the Company, provided that Letters of Credit shall not be used for the purchase of domestic Inventory or to
secure present or future debt of domestic Inventory suppliers. Any and all outstanding Letters of Credit shall be reserved dollar for dollar from Availability as an Availability Reserve. 
  
 5.2 CIT shall have the right, without notice to the Company, to charge the Company’s Revolving Loan Account with
the amount of any and all indebtedness, liability or obligation of any kind incurred by CIT under the Letters of Credit Guaranty at the earlier of (a) payment by CIT under the Letters of Credit Guaranty, or (b) the occurrence of an Event of Default.
Any amount charged to Company’s Revolving Loan Account shall be deemed a Revolving Loan hereunder and shall incur interest at the rate provided in Paragraph 8.1 of Section 8 of this Financing Agreement. 
  

 30 

 5.3 The Company unconditionally indemnifies CIT and holds CIT harmless from any and all loss,
claim or liability incurred by CIT arising from any transactions or occurrences relating to Letters of Credit established or opened for the Company’s account, the collateral relating thereto and any drafts or acceptances thereunder, and all
Obligations thereunder, including any such loss or claim due to any errors, omissions, negligence, misconduct or action taken by any Issuing Bank, other than for any such loss, claim or liability arising out of the gross negligence or willful
misconduct by CIT under the Letters of Credit Guaranty. This indemnity shall survive termination of this Financing Agreement. The Company agrees that any charges incurred by CIT for the Company account by the Issuing Bank shall be conclusive on CIT
and may be charged to the Company’s Revolving Loan Account. 
  
 5.4 CIT shall not be responsible for: the existence, character, quality, quantity, condition, packing, value or delivery of the goods purporting to be represented by any documents; any difference or variation in the character,
quality, quantity, condition, packing, value or delivery of the goods from that expressed in the documents; the validity, sufficiency or genuineness of any documents or of any endorsements thereon, even if such documents should in fact prove to be
in any or all respects invalid, insufficient, fraudulent or forged; the time, place, manner or order in which shipment is made; partial or incomplete shipment, or failure or omission to ship any or all of the goods referred to in the Letters of
Credit or documents; any deviation from instructions; delay, default, or fraud by the shipper and/or anyone else in connection with the goods or the shipping thereof; or any breach of contract between the shipper or vendors and the Company.

  
 5.5 The Company agrees that any action taken by CIT, if
taken in good faith, or any action taken by any Issuing Bank, under or in connection with the Letters of Credit, the guarantees, the drafts or acceptances, or the Collateral, shall be binding on the Company and shall not put CIT in any resulting
liability to the Company. In furtherance thereof, CIT shall have the full right and authority to clear and resolve any questions of non-compliance of documents; to give any instructions as to acceptance or rejection of any documents or goods; to
execute any and all steamship or airways guaranties (and applications therefore), indemnities or delivery orders; to grant any extensions of the maturity of, time of payment for, or time of presentation of, any drafts, acceptances, or documents; and
to agree to any amendments, renewals, extensions, modifications, changes or cancellations of any of the terms or conditions of any of the applications, Letters of Credit, drafts or acceptances; all in CIT’s sole name, and the Issuing Bank shall
be entitled to comply with and honor any and all such documents or instruments executed by or received solely from CIT, all without any notice to or any consent from the Company. Notwithstanding any prior course of conduct or dealing with respect to
the foregoing including amendments and non-compliance with documents and/or the Company’s instructions with respect thereto, CIT may exercise its rights hereunder in its sole and reasonable business judgement. In addition, without CIT’s
express consent and endorsement in writing, the Company agrees: (a) not to execute any and all applications for steamship or airway guaranties, indemnities or delivery orders; to grant any extensions of the maturity of, time of payment for, or time
of presentation of, any drafts, acceptances or documents; or to agree to any amendments, renewals, extensions, modifications, changes or cancellations of any of the terms or conditions of any of the applications, Letters of Credit, drafts or
acceptances; and (b) after the occurrence of an 

  

 31 

 
Event of Default which is not cured within any applicable grace period, if any, or waived by CIT, not to (i) clear and resolve any questions of
non-compliance of documents, or (ii) give any instructions as to acceptances or rejection of any documents or goods. 
  
 5.6 The Company agrees that any necessary import, export or other licenses or certificates for the import or handling of the Collateral will have
been promptly procured; all foreign and domestic governmental laws and regulations in regard to the shipment and importation of the Collateral, or the financing thereof will have been promptly and fully complied with; and any certificates in that
regard that CIT may at any time request will be promptly furnished. In this connection, the Company warrants and represents that all shipments made under any such Letters of Credit are in accordance with the laws and regulations of the countries in
which the shipments originate and terminate, and are not prohibited by any such laws and regulations. The Company assumes all risk, liability and responsibility for, and agrees to pay and discharge, all present and future local, state, federal or
foreign Taxes, duties, or levies. Any embargo, restriction, laws, customs or regulations of any country, state, city, or other political subdivision, where the Collateral is or may be located, or wherein payments are to be made, or wherein drafts
may be drawn, negotiated, accepted, or paid, shall be solely the Company’s risk, liability and responsibility. 
  
 5.7 Upon any payments made to the Issuing Bank under the Letter of Credit Guaranty, CIT shall acquire by subrogation, any rights, remedies, duties
or obligations granted or undertaken by the Company to the Issuing Bank in any application for Letters of Credit, any standing agreement relating to Letters of Credit or otherwise, all of which shall be deemed to have been granted to CIT and apply
in all respects to CIT and shall be in addition to any rights, remedies, duties or obligations contained herein. 
  
 SECTION 6. Collateral 
  
 6.1 As security for the prompt payment in full of all Obligations, the Company hereby pledges and grants to CIT a continuing general lien upon, and
security interest in, all of its assets including, without limitation, all of its: 
  
 (a) Accounts; 
  
 (b) Inventory; 
  
 (c) General Intangibles; 
  
 (d) Documents of Title; 
  
 (e) Other Collateral; 
  
 (f) Investment Property; 
  
 (g) Equipment; and 
  

 32 

 (h) Real Estate. 
  
 Notwithstanding anything to the contrary herein or in the Ex-Im Bank Documents, if Ex-Im Bank obtains any rights (whether
arising directly or indirectly by operation of law, by contract or otherwise) to assert any claim against the Collateral on account of any payments made under the Ex-Im Guarantee, including, without limitation, any and all rights of subrogation,
reimbursement, exoneration, contribution and/or indemnity, Ex-Im Bank has agreed that it will not, directly or indirectly, seek or receive any proceeds from a liquidation or other exercise of remedies with respect to the Secondary Collateral (as
such term is defined, together with all related definitions, in the Ex-Im Bank Documents as in effect on the date hereof) until all obligations owing to Hilco under the Hilco Loan Agreement have been paid in full in cash. 
  
 6.2 The security interests granted hereunder shall extend and attach
to: 
  
 (a) All Collateral which is
presently in existence and which is owned by the Company or in which the Company has any interest, whether held by the Company or others for its account, and, if any Collateral is Equipment, whether the Company’s interest in such Equipment is
as owner, finance lessee or conditional vendee; 
  
 (b) All Equipment, whether the same constitutes personal property or fixtures, including, but without limiting the generality of the foregoing, all dies, jigs, tools, benches, molds, tables, accretions, component parts thereof and
additions thereto, as well as all accessories, motors, engines and auxiliary parts used in connection with, or attached to, the Equipment; and 
  
 (c) All Inventory and any portion thereof which may be returned, rejected, reclaimed or repossessed by either CIT or the Company
from the Company’s customers, as well as to all supplies, goods, incidentals, packaging materials, labels and any other items which contribute to the finished goods or products manufactured or processed by the Company, or to the sale, promotion
or shipment thereof. 
  
 6.3 The Company agrees to
safeguard, protect and hold all Inventory for CIT’s account and make no disposition thereof except in the ordinary course of its business of the Company, as herein provided. The Company represents and warrants that Inventory will be sold and
shipped by the Company to its customers only in the ordinary course of the Company’s business, and then only on open account and on terms currently being extended by the Company to its customers, provided that, absent the prior written consent
of CIT, the Company shall not sell Inventory on a consignment basis nor retain any lien or security interest in any sold Inventory. Upon the sale, exchange, or other disposition of Inventory, as herein provided, the security interest in the
Inventory provided for herein shall, without break in continuity and without further formality or act, continue in, and attach to, all proceeds, including any instruments for the payment of money, Trade Accounts Receivable, documents of title,
shipping documents, chattel paper and all other cash and non-cash proceeds of such sale, exchange or disposition. As to any such sale, exchange or other disposition, CIT shall have all of the rights of an unpaid seller, including stoppage in
transit, replevin, rescission and reclamation. The Company hereby agrees to immediately forward any and all proceeds of Collateral to the Deposit 

  

 33 

 
Account, and to hold any such proceeds (including any notes and instruments), in trust for CIT pending delivery to CIT. Irrespective of CIT’s perfection
status in any and all of the General Intangibles, including, without limitations, any Trademarks, Copyrights or licenses with respect thereto, the Company hereby irrevocably grants CIT a royalty free license to sell, or otherwise dispose or
transfer, in accordance with Paragraph 10.3 of Section 10 of this Financing Agreement, and the applicable terms hereof, of any of the Inventory upon the occurrence of an Event of Default which has not been waived in writing by CIT. 
  
 6.4 The Company agrees at its own cost and expense to keep the
Equipment in as good and substantial repair and condition as the same is now or at the time the lien and security interest granted herein shall attach thereto, reasonable wear and tear excepted, making any and all repairs and replacements when and
where necessary. The Company also agrees to safeguard, protect and hold all Equipment in accordance with the terms hereof and subject to CIT’s security interest. Absent CIT’s prior written consent, any sale, exchange or other disposition
of any Equipment shall be made by the Company in the ordinary course of business and as set forth herein. The Company may, in the ordinary course of its business, sell, exchange or otherwise dispose of obsolete or surplus Equipment provided,
however, that (a) the then value of the Equipment so disposed of in any Fiscal Year does not exceed $250,000.00 in the aggregate and (b) the proceeds of any such sales or dispositions shall be held in trust by the Company for CIT and shall be
immediately delivered to CIT by deposit to the Depository Account, except that the Company may retain and use such proceeds to purchase forthwith replacement Equipment which the Company determines in its reasonable business judgment to have a
collateral value at least equal to the Equipment so disposed of or sold, provided, however, that the aforesaid right shall automatically cease upon the occurrence of a Default or an Event of Default which is not waived in writing by CIT. Upon the
sale, exchange, or other disposition of the Equipment, as herein provided, the security interest provided for herein shall, without break in continuity and without further formality or act, continue in, and attach to, all proceeds, including any
instruments for the payment of money, Accounts, documents of title, shipping documents, chattel paper and all other cash and non-cash proceeds of such sales, exchange or disposition. As to any such sale, exchange or other disposition, CIT shall have
all of the rights of an unpaid seller, including stoppage in transit, replevin, rescission and reclamation. 
  
 6.5 The rights and security interests granted to CIT hereunder are to continue in full force and effect, notwithstanding the termination of this
Financing Agreement or the fact that the Revolving Loan Account may from time to time be temporarily in a credit position, until the final payment in full to CIT of all Obligations and the termination of this Financing Agreement. Any delay, or
omission by CIT to exercise any right hereunder shall not be deemed a waiver thereof, or be deemed a waiver of any other right, unless such waiver shall be in writing and signed by CIT. A waiver on any one occasion shall not be construed as a bar
to, or waiver of, any right or remedy on any future occasion. 
  
 6.6 Notwithstanding CIT’s security interest in the Collateral and to the extent that the Obligations are now or hereafter secured by any assets or property other than the Collateral or by the guarantee, endorsement, assets or
property of any other person, CIT shall have the right in its sole discretion to determine which rights, liens, security interests or remedies CIT shall at any 

  

 34 

 
time pursue, foreclose upon, relinquish, subordinate, modify or take any other action with respect to, without in any way modifying or affecting any of them,
or any of CIT’s rights hereunder. 
  
 6.7 Any balances
to the credit of the Company and any other property or assets of the Company in the possession or control of CIT may be held by CIT as security for any Obligations and applied in whole or partial satisfaction of such Obligations when due. The liens
and security interests granted herein, and any other lien or security interest CIT may have in any other assets of the Company, shall secure payment and performance of all now existing and future Obligations. CIT may in its discretion charge any or
all of the Obligations to the Revolving Loan Account when due. 
  
 6.8 The Company possess all General Intangibles and rights thereto necessary to conduct its business as conducted as of the Closing Date and the Company shall maintain its rights in, and the value of, the foregoing in the ordinary
course of its business, including, without limitation, by making timely payment with respect to any applicable licensed rights. The Company shall deliver to CIT, and/or shall cause the appropriate party to deliver to CIT, from time to time such
pledge or security agreements with respect to General Intangibles (now or hereafter acquired) of the Company and its subsidiaries as CIT shall require to obtain valid first liens thereon. In furtherance of the foregoing, the Company shall provide
timely notice to CIT of any additional Patents, Trademarks, tradenames, service marks, Copyrights, brand names, trade names, logos and other trade designations acquired or applied for subsequent to the Closing Date and the Company shall execute such
documentation as CIT may reasonably require to obtain and perfect its lien thereon. The Company hereby confirms that it shall deliver, or cause to be delivered, any pledged stock issued subsequent to the Closing Date to CIT in accordance with the
applicable terms of the Pledge Agreement and prior to such delivery, shall hold any such stock in trust for CIT. The Company hereby irrevocably grants to CIT a royalty-free, non-exclusive license in the General Intangibles, including
tradenames, Trademarks, Copyrights, Patents, licenses, and any other proprietary and intellectual property rights and any and all right, title and interest in any of the foregoing, for the sole purpose, upon the occurrence of an Event of Default, of
the right to: (i) advertise for sale and sell or transfer any Inventory bearing any of the General Intangibles, and (ii) make, assemble, prepare for sale or complete, or cause others to do so, any applicable raw materials or Inventory bearing any of
the General Intangibles, including use of the Equipment and Real Estate for the purpose of completing the manufacture of unfinished goods, raw materials or work-in-process comprising Inventory, and apply the proceeds thereof to the Obligations
hereunder, all as further set forth in this Financing Agreement and irrespective of CIT’s lien and perfection in any General Intangibles. 
  
 6.9 This Financing Agreement and the obligation of the Company to perform all of its covenants and obligations hereunder are further secured by
mortgage(s), deed(s) of trust or assignment(s) on the Real Estate. 
  
 6.10 The Company shall give to CIT from time to time such mortgage(s), deed(s) of trust or assignment(s) on the Real Estate or real estate acquired after the date hereof as CIT shall require to obtain a valid second lien thereon
subject only to those exceptions of title as set forth in future title insurance policies that are satisfactory to CIT. 
  

 35 

 6.11 As additional credit support for the Obligations, the Company agrees to provide the UM
Holdings Letter of Credit to CIT on the Closing Date. CIT agrees to release the UM Holdings Letter of Credit within thirty (30) days of CIT’s receipt of the Company’s annual audited financial statements for the fiscal year ending December
31, 2003 provided the following conditions are satisfied to the reasonable satisfaction of CIT: 
  
 (i) no Default or Event of Default has occurred prior to the receipt by CIT of such audited financial statements or is indicated on such
financial statements; 
  
 (ii) the Company has
met or has exceeded its forecasted projections for EBITDA for the fiscal quarters ending June 28, 2003, September 27, 2003 and December 31, 2003 (as such projections are set forth on Schedule 4 attached hereto); 
  
 (iii) the Company has maintained a liquidity position
satisfactory to CIT at all times prior to the receipt by CIT of such audited financial statements; and 
  
 (iv) CIT is otherwise reasonably satisfied with the financial condition and prospects of the Company. 
  
 If CIT releases the UM Holdings Letter of Credit, the UM Holdings Letter of
Credit will no longer be included in the Domestic Borrowing Base. 
  
 SECTION 7. Representations, Warranties and Covenants 
  
 7.1 The Company hereby warrants, represents and covenants that: (a) the fair value of the Total Assets exceeds the book value of the Total Liabilities; (b) the Company is generally able to pay its debts as they
become due and payable; and (c) the Company does not have unreasonably small capital to carry on its business as it is currently conducted absent extraordinary and unforeseen circumstances. The Company further warrants and represents that: (i)
Schedule 1 hereto correctly and completely sets forth the Company’s (A) chief executive office, (B) Collateral locations, (C) tradenames, and (D) all the other information listed on said Schedule; (ii) except for the Permitted Encumbrances,
after filing of financing statements in the applicable filing clerks office at the locations set forth in Schedule 1, this Financing Agreement creates a valid, perfected and first priority security interest in the Collateral and the security
interests granted herein constitute and shall at all times constitute the first and only liens on the Collateral; (iii), except for the Permitted Encumbrances, the Company is, or will be, at the time additional Collateral is acquired by it, the
absolute owner of the Collateral with full right to pledge, sell, consign, transfer and create a security interest therein, free and clear of any and all claims or liens in favor of others; (iv) the Company will, at its expense, forever warrant and,
at CIT’s request, defend the same from any and all claims and demands of any other person other than a holder of a Permitted Encumbrance; (v) the Company will not grant, create or permit to exist, any lien upon, or security interest in, the
Collateral, or any proceeds thereof, in favor of any other person other than the holders of the Permitted Encumbrances; and that the Equipment does not comprise a part of the Inventory of the Company, and (vi) the Equipment is and will only be used
by the Company in its business and will not be held for sale or lease, or removed 

  

 36 

 
from its premises, or otherwise disposed of by the Company except as otherwise permitted in this Financing Agreement. 
  
 7.2 The Company agrees to maintain books and records pertaining to the
Collateral in accordance with GAAP and in such additional detail, form and scope as CIT shall reasonably require. The Company agrees that CIT or its agents may enter upon the Company’s premises at any time during normal business hours, and from
time to time in its reasonable business judgement, for the purpose of inspecting the Collateral and any and all records pertaining thereto. The Company agrees to afford CIT thirty (30) days prior written notice of any change in the location of any
Collateral, other than to locations, that as of the Closing Date, are known to CIT and at which CIT has filed financing statements and otherwise fully perfected its liens thereon. The Company is also to advise CIT promptly, in sufficient detail, of
any material adverse change relating to the type, quantity or quality of the Collateral or on the security interests granted to CIT therein. 
  
 7.3 The Company agrees to: (a) execute and deliver to CIT, from time to time, solely for CIT’s convenience in maintaining a record of the
Collateral, such written statements, and schedules as CIT may reasonably require, designating, identifying or describing the Collateral; and (b) provide CIT, on request, with an appraisal of the Inventory which appraisal shall be at the
Company’s expense and otherwise acceptable to CIT. The Company’s failure, however, to promptly give CIT such statements, or schedules shall not affect, diminish, modify or otherwise limit CIT’s security interests in the Collateral.

  
 7.4 The Company agrees to comply with the requirements
of all state and federal laws in order to grant to CIT valid and perfected first security interests in the Collateral, subject only to the Permitted Encumbrances. CIT is hereby authorized by the Company to file (including pursuant to the applicable
terms of the UCC) from time to time any financing statements, continuations or amendments covering the Collateral whether or not the Company’s signature appears thereon. The Company hereby consents to and ratifies any and all execution and/or
filing of financing statements on or prior to the Closing Date by CIT. The Company agrees to do whatever CIT may reasonably request, from time to time, by way of: filing notices of liens, financing statements, amendments, renewals and continuations
thereof; cooperating with CIT’s agents and employees; keeping Collateral records; transferring proceeds of Collateral to CIT’s possession; and performing such further acts as CIT may reasonably require in order to effect the purposes of
this Financing Agreement. 
  
 7.5 (a) The Company agrees
to maintain insurance on the Real Estate, Equipment and Inventory under such policies of insurance, with such insurance companies, in such reasonable amounts and covering such insurable risks as are at all times reasonably satisfactory to CIT. All
policies covering the Real Estate, Equipment and Inventory are, subject to the rights of any holders of Permitted Encumbrances holding claims senior to CIT, to be made payable to CIT, in case of loss, under a standard non-contributory
“mortgagee”, “lender” or “secured party” clause and are to contain such other provisions as CIT may require to fully protect CIT’s interest in the Real Estate, Inventory and Equipment and to any payments to be made
under such policies. All original policies or true copies thereof are to be delivered to CIT, premium prepaid, with the loss payable 

  

 37 

 
endorsement in CIT’s favor, and shall provide for not less than thirty (30) days prior written notice to CIT of the exercise of any right of
cancellation. At the Company’s request, or if the Company fails to maintain such insurance, CIT may arrange for such insurance, but at the Company’s expense and without any responsibility on CIT’s part for: obtaining the insurance,
the solvency of the insurance companies, the adequacy of the coverage, or the collection of claims. Upon the occurrence of an Event of Default which is not waived in writing by CIT, CIT shall, subject to the rights of any holders of Permitted
Encumbrances holding claims senior to CIT, have the sole right, in the name of CIT or the Company, to file claims under any insurance policies, to receive, receipt and give acquittance for any payments that may be payable thereunder, and to execute
any and all endorsements, receipts, releases, assignments, reassignments or other documents that may be necessary to effect the collection, compromise or settlement of any claims under any such insurance policies. 
  
 (b)(i) In the event of any loss or damage by fire or
other casualty, insurance proceeds relating to Inventory shall first reduce the Company’s Revolving Loan, then the Term Loans; 
  
 (ii) In the event any part of the Company’s Real Estate or Equipment is damaged by fire or other casualty and the Insurance
Proceeds for such damage or other casualty is less than or equal to $100,000.00, CIT shall promptly apply such Proceeds to reduce the Company’s outstanding balance in the Revolving Loan Account. 
  
 (iii) As long as an Event of Default has not occurred
(or which has not been waived in writing), the Company has sufficient business interruption insurance to replace the lost profits of any of the Company’s facilities, and the Insurance Proceeds are in excess of $100,000.00, the Company may elect
(by delivering written notice to CIT) to replace, repair or restore such Real Estate or Equipment to substantially the equivalent condition prior to such fire or other casualty as set forth herein. If the Company does not, or cannot, elect to use
the Insurance Proceeds as set forth above, CIT may, subject to the rights of any holders of Permitted Encumbrances holding claims senior to CIT, apply the Insurance Proceeds to the payment of the Obligations in such manner and in such order as CIT
may reasonably elect. 
  
 (iv) If the
Company elects to use the Insurance Proceeds for the repair, replacement or restoration of any Real Estate and/or Equipment, and there is then no Event of Default, (i) Insurance Proceeds in excess of $100,000.00 on Equipment and/or Real Estate will
be applied to the reduction of the Revolving Loans and (ii) CIT may set up a reserve against Availability for an amount equal to said Insurance Proceeds. The reserve will be reduced dollar-for-dollar upon receipt of non-cancelable executed purchase
orders, delivery receipts or contracts for the replacement, repair or restoration of Equipment and/or the Real Estate and disbursements in connection therewith. Prior to the commencement of any material restoration, repair or replacement of Real
Estate, the Company shall 

  

 38 

 
provide CIT with a restoration plan and a total budget certified by an independent third party experienced in construction costing. If there are insufficient
Insurance Proceeds to cover the cost of restoration as so determined, the Company shall be responsible for the amount of any such insufficiency, prior to the commencement of restoration and shall demonstrate evidence of such before the reserve will
be reduced. Completion of restoration shall be evidenced by a final, unqualified certification of the design architect employed, if any; an unconditional Certificate of Occupancy, if applicable; such other certification as may be required by law; or
if none of the above is applicable, a written good faith determination of completion by the Company (herein collectively the “Completion”). Upon Completion, any remaining reserve as established hereunder will be automatically released.

  
 (c) In the event the Company fails to
provide CIT with timely evidence, acceptable to CIT, of its maintenance of insurance coverage required pursuant to paragraph 7.5(a) above, CIT may purchase, at the Company’s expense, insurance to protect CIT’s interests in the Collateral.
The insurance acquired by CIT may, but need not, protect the Company’s interest in the Collateral, and therefore such insurance may not pay claims which the Company may have with respect to the Collateral or pay any claim which may be made
against the Company in connection with the Collateral. In the event CIT purchases, obtains or acquires insurance covering all or any portion of the Collateral, the Company shall be responsible for all of the applicable costs of such insurance,
including premiums, interest (at the applicable Chase Bank Rate for Revolving Loans set forth in paragraph 8.1 of Section 8 hereof), fees and any other charges with respect thereto, until the effective date of the cancellation or the expiration of
such insurance. CIT may charge all of such premiums, fees, costs, interest and other charges to the Company’s Revolving Loan Account. The Company hereby acknowledges that the costs of the premiums of any insurance acquired by CIT may exceed the
costs of insurance which the Company may be able to purchase on its own. In the event that CIT purchases such insurance, CIT will notify the Company of said purchase within thirty (30) days of the date of such purchase. If, within thirty (30) days
of the date of such notice, the Company provides CIT with proof that the Company had the insurance coverage required pursuant to 7.5(a) above (in form and substance satisfactory to CIT) as of the date on which CIT purchased insurance and the Company
continued at all times to have such insurance, then CIT agrees to cancel the insurance purchased by CIT and credit the Company’s Revolving Loan Account with the amount of all costs, interest and other charges associated with any insurance
purchased by CIT, including with any amounts previously charged to the Revolving Loan Account. 
  
 7.6 The Company agrees to pay, when due, all Taxes, including sales taxes, assessments, claims and other charges lawfully levied or assessed upon the Company or the Collateral unless such Taxes are being
diligently contested in good faith by the Company by appropriate proceedings and adequate reserves are established in accordance with GAAP. Notwithstanding the foregoing, if any lien shall be filed or claimed thereunder (x) for Taxes due the United
States of America or (y) which in CIT’s opinion might create a valid obligation having priority over the rights granted to CIT herein (exclusive of Real Estate), such lien shall not be deemed to be a Permitted Encumbrance hereunder and the
Company shall immediately pay such tax 

  

 39 

 
and remove the lien of record. If the Company fails to do so promptly, then at CIT’s election, CIT may (i) create an Availability Reserve in such amount
as it may deem appropriate in its business judgement, or (ii) upon the occurrence of a Default or Event of Default, imminent risk of seizure, filing of any priority lien, forfeiture, or sale of the Collateral, pay Taxes on the Company’s behalf,
and the amount thereof shall be an Obligation secured hereby and due on demand. 
  
 7.7 The Company: (a) agrees to comply with all acts, rules, regulations and orders of any legislative, administrative or judicial body or official, which the failure to comply with would have a material and
adverse impact on the Collateral, or any material part thereof, or on the business or operations of the Company, provided that the Company may contest any acts, rules, regulations, orders and directions of such bodies or officials in any reasonable
manner which will not, in CIT’s reasonable opinion, materially and adversely effect CIT’s rights or priority in the Collateral; (b) agrees to comply with all environmental statutes, acts, rules, regulations or orders as presently existing
or as adopted or amended in the future, applicable to the Collateral, the ownership and/or use of its real property and operation of its business, which the failure to comply with would have a material and adverse impact on the Collateral, or any
material part thereof, or on the operation of the business of the Company; and (c) shall not be deemed to have breached any provision of this Paragraph 7.7 if (i) the failure to comply with the requirements of this Paragraph 7.7 resulted from good
faith error or innocent omission, (ii) the Company promptly commences and diligently pursues a cure of such breach, and (iii) such failure is cured within (30) days following the Company’s receipt of notice of such failure, or if such cannot in
good faith be cured within thirty (30) days, then such breach is cured within a reasonable time frame based upon the extent and nature of the breach and the necessary remediation, and in conformity with any applicable consent order, consensual
agreement and applicable law. 
  
 7.8 Until termination of
this Financing Agreement and payment and satisfaction of all Obligations due hereunder, the Company agrees that, unless CIT shall have otherwise consented in writing, the Company will furnish to CIT: (a) within one hundred five (105) days after the
end of each Fiscal Year of the Company, an audited Consolidated Balance Sheet, with an unaudited Consolidating Balance Sheet attached thereto, as at the close of such year, and statements of profit and loss, cash flow and reconciliation of surplus
of the Company and its consolidated subsidiaries for such year, audited (with respect to consolidated financial statements only) by independent public accountants selected by the Company and satisfactory to CIT; (b) within sixty (60) days after the
end of each Fiscal Quarter (i) a Consolidated Balance Sheet and Consolidating Balance Sheet as at the end of such period and statements of profit and loss and statements of cash flow of the Company and its consolidated subsidiaries, certified by an
authorized financial or accounting officer of the Company and (ii) a detailed report setting forth the amount of all Support Obligations, the amount of all Support Obligations entered into during such Fiscal Quarter and the amount of all payments
made under Support Obligations during such Fiscal Quarter; (c) within thirty (30) days after the end of each month a Consolidated Balance Sheet as at the end of such period and statements of profit and loss and statements of cash flow of the Company
and all subsidiaries for such period, certified by an authorized financial or accounting officer of the Company; and (d) from time to time, such further information regarding the business affairs and financial condition of the Company and its
consolidated subsidiaries as CIT may reasonably request, including, without limitation (i) the accountant’s 

  

 40 

 
management practice letter and (ii) annual cash flow projections in form satisfactory to CIT. Each financial statement which the Company is required to
submit hereunder must be accompanied by an officer’s certificate, signed by the President, Vice President, Controller, or Treasurer, pursuant to which any one such officer must certify that: (x) the financial statement(s) fairly and accurately
represent(s) the Company’s financial condition at the end of the particular accounting period, as well as the Company’s operating results during such accounting period, subject to year-end audit adjustments; and (y) during the particular
accounting period: (A) there has been no Default or Event of Default under this Financing Agreement, provided, however, that if any such officer has knowledge that any such Default or Event of Default, has occurred during such period, the
existence of and a detailed description of same shall be set forth in such officer’s certificate; (B) the Company has not received any notice of cancellation with respect to its property insurance policies; (C) the Company has not received any
notice that could result in a material adverse effect on the value of the Collateral taken as a whole; and (D) the exhibits attached to such financial statement(s) constitute detailed calculations showing compliance with all financial covenants
contained in this Financing Agreement. 
  
 7.9 Until
termination of the Financing Agreement and payment and satisfaction of all Obligations due hereunder, the Company agrees that, without the prior written consent of CIT, except as otherwise herein provided, the Company will not: 
  

	 	(a)	Mortgage, assign, pledge, transfer or otherwise permit any lien, charge, security interest, encumbrance or judgment, (whether as a result of a purchase money or title retention
transaction, or other security interest, or otherwise) to exist on any of the Company’s Collateral or any other assets, whether now owned or hereafter acquired, except for the Permitted Encumbrances; 

  

	 	(b)	Incur or create any Indebtedness other than the Permitted Indebtedness; 

  

	 	(c)	Sell, lease, assign, transfer or otherwise dispose of (i) Collateral, except as otherwise specifically permitted by this Financing Agreement, or (ii) either all or substantially all
of the Company’s assets, which do not constitute Collateral; 

  

	 	(d)	Merge, consolidate or otherwise alter or modify its corporate name, principal place of business, structure, or existence, re-incorporate or re-organize, or enter into or engage in
any operation or activity materially different from that presently being conducted by the Company, or purchase or acquire all or substantially all of the capital stock or assets of any corporation or entity, except that the Company may change its
corporate name or address, provided that (i) the Company shall give CIT thirty (30) days prior written notice thereof and (ii) the Company shall execute and deliver, prior to or simultaneously with any such action, any and all documents and
agreements requested by CIT to confirm the continuation and preservation of all security interests and liens granted to CIT hereunder; 

  

	 	(e)	 (i) Amend, modify or otherwise change (or permit the amendment, modification or other change in any manner of) any of the provisions of any of its or its
subsidiaries’ Indebtedness or of any instrument or agreement (including, without limitation, any purchase agreement, indenture, loan agreement or security agreement) relating to any such Indebtedness if such amendment, modification or change
would shorten the final maturity or average life to maturity of, or 

  

 41 

	 	 
require any payment to be made earlier than the date originally scheduled on, such Indebtedness, would increase the interest rate applicable to such
Indebtedness, would change the subordination provision, if any, of such Indebtedness, or would otherwise be adverse to CIT or the issuer of such Indebtedness in any respect, or, in the case of the Hilco Loan, accelerate (other than an acceleration
of the Hilco Loan after an event of default under the Hilco Loan Documents) the due date or increase the amounts of any principal payments in respect of the Hilco Loan, or (ii) except for the Obligations and Indebtedness with respect to the Hilco
Loan, make any voluntary or optional payment, prepayment, redemption, defeasance, sinking fund payment or other acquisition for value of any of its or its subsidiaries’ Indebtedness (including, without limitation, by way of depositing money or
securities with the trustee therefor before the date required for the purpose of paying any portion of such Indebtedness when due), or refund, refinance, replace or exchange any other Indebtedness for any such Indebtedness (except to the extent such
Indebtedness is otherwise expressly permitted by the definition of “Permitted Indebtedness”) (provided that prepayments of the “Loans” (as such term is defined in the Hilco Loan Agreement) shall not be permitted to be made unless
both immediately before and after such prepayment Availability is not less than $2,500,000), or make any payment, prepayment, redemption, defeasance, sinking fund payment or repurchase of any outstanding Indebtedness as a result of any asset sale,
change of control, issuance and sale of debt or equity securities or similar event, or give any notice with respect to any of the foregoing; 

  

	 	(f)	Assume, guarantee, endorse, or otherwise become liable upon the obligations of any person, firm, entity or corporation, except (i) for Support Obligations to the extent permitted in
clause (h) of the definition of Permitted Indebtedness and (ii) by the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; 

  

	 	(g)	Declare or pay any dividend or distributions of any kind on, or purchase, acquire, redeem or retire, any of the capital stock or equity interest, of any class whatsoever,
whether now or hereafter outstanding; 

  

	 	(h)	Make any advance or loan to, or any investment in, any firm, entity, person or corporation or purchase or acquire all or substantially all of the stock or assets of any entity,
person or corporation; 

  

	 	(i)	Pay any management, consulting or other similar fees to any person, corporation or other entity affiliated with the Company (other than payments to any Affiliate described on
Schedule 5 hereto); or; 

  

	 	(j)	engage in any sale – leaseback transactions. 

  
 7.10 Until termination of the Financing Agreement and payment and satisfaction in full of all Obligations hereunder, the Company shall: 

 

	 	(a)	 have for each Fiscal Quarter set forth below the Fixed Charge Coverage Ratio corresponding to such Fiscal Quarter; provided that (v) for the Fiscal Quarter ending
September 27, 2003, the Fixed Charge Coverage Ratio 

  

 42 

	 	 
shall be calculated for the Fiscal Quarter ending September 27, 2003, (w) for the Fiscal Quarter ending December 31, 2003, the Fixed Charge Coverage Ratio
shall be calculated for the two consecutive Fiscal Quarters ending December 31, 2003, (x) for the Fiscal Quarter ending March 27, 2004, the Fixed Charge Coverage Ratio shall be calculated for the three consecutive Fiscal Quarters ending March 27,
2004, (y) for the Fiscal Quarter ending June 26, 2004, the Fixed Charge Coverage Ratio shall be calculated for the four consecutive Fiscal Quarters ending June 26, 2004, and (z) for each Fiscal Quarter thereafter, the Fixed Charge Coverage Ratio
shall be calculated for the four consecutive Fiscal Quarters ending at the end of such Fiscal Quarter. 

  

	 Period

	  	 Ratio

	 (i) For each Fiscal Quarter ending
 during the period commencing on
 the Closing Date through and including
 June 26, 2004
	  	 greater than 1.0 to 1.0

		
	 (ii) For each Fiscal Quarter ending
 during the period commencing on
 June 27 2004 through and including
 June 25, 2005
	  	 greater than 1.1 to 1.0

		
	 (iii) For each Fiscal Quarter ending
 thereafter
	  	 greater than 1.2 to 1.0; and

  

	 	(b)	not contract for, purchase, make expenditures for, lease pursuant to a Capital Lease or otherwise incur obligations with respect to Capital Expenditures (whether subject to a
security interest or otherwise) in excess of $2,500,000 during the Company’s Fiscal Year ended December 31, 2003, $3,000,000 during the Company’s Fiscal year ended December 32, 2004 and $3,500,000 during the Company’s Fixed Year ended
December 31, 2005 and during each Fiscal Year thereafter (computed on a non-cumulative basis); and 

  

	 	(c)	have Availability of at least $1,500,000 at all times. 

  
 7.11 The Company agrees to advise CIT in writing of: (a) all expenditures (actual or anticipated) in excess of $150,000.00 from the budgeted amount
therefor in any Fiscal Year for (x) environmental clean-up, (y) environmental compliance or (z) environmental testing and the impact of said expenses on the Company’s Working Capital; and (b) any notices the Company receives from any local,
state or federal authority advising the Company of any environmental liability (real or potential) stemming from the Company’s operations, its premises, its waste disposal practices, or waste disposal sites used by the Company and to provide
CIT with copies of all such notices if so required. 
  

 43 

 7.12 The Company hereby agrees to indemnify and hold harmless CIT and its officers, directors,
employees, attorneys and agents (each an “Indemnified Party”) from, and holds each of them harmless against, any and all losses, liabilities, obligations, claims, actions, damages, costs and expenses (including attorney’s fees) and
any payments made by CIT pursuant to any indemnity provided by CIT with respect to or to which any Indemnified Party could be subject insofar as such losses, liabilities, obligations, claims, actions, damages, costs, fees or expenses with respect to
the Loan Documents, including without limitation those which may arise from or relate to: (i) the Depository Account, the Blocked Accounts, the lockbox and/or any other depository account and/or the agreements executed in connection therewith, and
(ii) any and all claims or expenses asserted against CIT as a result of any environmental pollution, hazardous material or environmental clean-up relating to the Real Estate; or any claim or expense which results from the Company’s operations
(including, but not limited to, the Company’s off-site disposal practices) and use of the Real Estate, which CIT may sustain or incur (other than solely as a result of the physical actions of CIT on the Company’s premises which are
determined to constitute gross negligence or willful misconduct by a court of competent jurisdiction), all whether through the alleged or actual negligence of such person or otherwise, except and to the extent that the same results solely and
directly from the gross negligence or willful misconduct of such Indemnified Party as finally determined by a court of competent jurisdiction. The Company hereby agrees that this indemnity shall survive termination of this Financing Agreement, as
well as payments of Obligations which may be due hereunder. CIT may, in its sole business judgement, establish such Availability Reserves with respect thereto as it may deem advisable under the circumstances and, upon any termination hereof, hold
such reserves as cash reserves for any such contingent liabilities. 
  
 7.13 Without the prior written consent of CIT, the Company agrees that it will not enter into any transaction, including, without limitation, any purchase, sale, lease, loan or exchange of property any of its Affiliates (other than
transactions between the Company and a Guarantor, provided that the aggregate amount of all loans, advances or other Transfers of assets by the Company to such Guarantor shall not exceed $500,000 in the aggregate), provided that, except as otherwise
set forth in this Financing Agreement (including, without limitation, in Schedule 5 attached hereto), the Company may enter into sale and service transactions in the ordinary course of its business and pursuant to the reasonable requirements of the
Company, and upon standard terms and conditions and fair and reasonable terms, no less favorable to the Company than the Company could obtain in a comparable arms length transaction with an unrelated third party, provided further that no Default or
Event of Default exists or will occur hereunder prior to and after giving effect to any such transaction.. 
  
 7.14 The Company agrees to maintain and preserve, and cause each of its subsidiaries to maintain and preserve, all of its properties which are
necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted, and comply, and cause each of its subsidiaries to comply, at all times with the material provisions of all leases to
which it is a party as lessee or under which it occupies property, so as to prevent any loss or forfeiture thereof or thereunder. 
  
 7.15 The Company agrees to obtain, maintain and preserve, and cause each of its subsidiaries to obtain, maintain and preserve, and take all
necessary action to timely renew, all 

  

 44 

 
material permits, licenses, authorizations, approvals, entitlements and accreditations which are necessary or useful in the proper conduct of its business.

  
 7.16 The Company agrees to take such action and
execute, acknowledge and deliver, and cause each of its subsidiaries to take such action and execute, acknowledge and deliver, at its sole cost and expense, such agreements, instruments or other documents as CIT may require from time to time in
order (a) to carry out more effectively the purposes of this Agreement and the other Loan Documents, (b) to subject to valid and perfected liens any of the Collateral or any other property of the Company, (c) to establish and maintain the validity
and effectiveness of any of the Loan Documents and, subject to the terms of the Hilco Intercreditor Agreement, the validity, perfection and priority of the liens intended to be created thereby, and (d) to better assure, convey, grant, assign,
transfer and confirm unto CIT the rights now or hereafter intended to be granted to its under this Agreement or any other Loan Document. In furtherance of the foregoing, to the maximum extent permitted by applicable law, the Company (i) authorizes
CIT to execute any such agreements, instruments or other documents in Company’s name and to file such agreements, instruments or other documents in the filing office, (ii) authorizes CIT to file any financing statement required hereunder or
under any appropriate filing office without the signature of the Company, and (iii) ratifies the filing of any financing statement, and any continuation statement or amendment with respect thereto, filed without signature of the Company prior to the
date hereof. 
  
 7.17 The Company agrees to cause all
Indebtedness (other than Indebtedness and obligations described on Schedule 5 attached hereto) and other obligations now or hereafter owed by it to any of its affiliates, to be subordinated in right of payment and security to agreement in form and
substance satisfactory to CIT. 
  
 7.18 In order to induce
CIT to enter into this Agreement and to make the loans and advances provided for herein and to assist the Company in establishing or opening Letters of Credit, the Company makes, on or as of the occurrence of each such loan, advance or assistance
(except to the extent such representations or warranties relate to an earlier date or are no longer true and correct in all material respects solely as a result of transactions not prohibited by the Loan Documents), the following representations and
warranties to CIT. 
  
 (a) Organization and
Qualification. The Company (i) is duly organized validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, (ii) has the corporate or limited liability company (as the case may be) power to
own its property and to carry on its business as now conducted and (iii) is duly qualified to do business and is in good standing, in each case in each jurisdiction in which the failure to be so qualified or in good standing would reasonably be
expected to have a Material Adverse Effect. 
  
 (b)
Authorization and Validity. The Company has the corporate or limited liability company (as the case may be) power and authority to execute, deliver and perform its obligations hereunder and under the other Loan Documents to which the
Company is a party and all such action has been duly authorized by all necessary corporate proceedings on its part. The Loan Documents to which it is a party have been duly and validly executed and delivered by the Company and constitute valid and
legally binding agreements of the Company enforceable in 
  

 45 

 
accordance with the respective terms thereof, except, in each case, as such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws relating to or affecting the enforcement of creditors’ rights generally and general principles of equity. 
  
 (c) Consents. No authorization, consent, approval, license or exemption (other than such exemptions that exist
under applicable law, that are permitted, or that have been obtained) of any person or filing or registration with any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, is necessary for the
valid, delivery or performance by the Company of any Loan Document to which it is a party or for the grant of a security interest in or mortgage on the collateral covered by the Loan Documents, except such matters relating to performance as would
ordinarily be done in the ordinary course of business after the date hereof. 
  
 (d) Conflicting or Adverse Agreements or Ratifications. Neither the delivery of the Loan Documents nor compliance with the terms and provisions hereof or thereof will be contrary to the provisions of, or
constitute a default under (i) the charter or bylaws or operating agreement (as the case may be) of the Company or (ii) any applicable law or any applicable regulation, order, writ, injunction or decree of any court or governmental instrumentality
or (iii) any material agreement to which the Company is a party or by which it is bound or to which it is subject. 
  
 (e) Title to Assets; Licenses and Permits. The Company has good title to all personal property and good and indefeasible title to or a
subsisting leasehold interest in, all realty as reflected as of the date hereof on its books and records as being owned or leased by it after giving effect to the transaction contemplated herein, subject to no liens except Permitted Encumbrances.
All of such assets are being maintained by the appropriate person in good working condition in accordance with industry standards. 
  
 (f) Litigation. Except as set forth in Schedule 2, no proceedings before any court or governmental agency or department are pending against
the Company and to the knowledge of the Company, none of same have been threatened which if adversely determined could reasonably be expected to have a Material Adverse Effect. 
  
 (g) No Defaults. The Company is not in default (i) under any material provisions of any instrument evidencing
any Indebtedness or of any agreement relating thereto in such manner as to cause a Material Adverse Effect or (ii) in any respect under or in violation of any order, writ, injunction or decree of any court or governmental instrumentality, in such
manner as to cause a Material Adverse Effect or (iii) under any provision of any material contract to which the Company is a party, which default would reasonably be expected to have a Material Adverse Effect. The Company will give CIT prompt
written notice of any event or circumstance that may constitute such a default and, in any event, will provide it upon receipt with copies of all material notices from landlords or other property owners with respect to any business location or
operation of the Company. 
  

 46 

 (h) Investment Company Act. The Company is not an “investment company,” as such
term is defined in, or subject to registration under, the Investment Company Act of 1940, as amended. 
  
 (i) ERISA. The Company does not maintain or contribute to any Benefit Plan other than those listed on Schedule 3. Each Benefit Plan
has been and is being maintained and funded in accordance with its terms and in compliance in all material respects with all provisions of ERISA and the Internal Revenue Code applicable thereto. The Company and each ERISA Affiliate have fulfilled
all obligations related to the minimum funding standards of ERISA and the Internal Revenue Code for each Benefit Plan and no “accumulated funding deficiency,” as such term is defined in Section 302 of ERISA and Section 412 of the Internal
Revenue Code, has occurred or is reasonably likely to occur, nor do the conditions for imposition of a lien under Section 302(f) of ERISA exist or are reasonably likely to exist, with respect to any Benefit Plan, and neither the Company nor any
ERISA Affiliate has incurred any liability (other than routine liability for premiums) under Title IV of ERISA with respect to any Benefit Plan. No event or events have occurred with respect to any Benefit Plan in connection with which the Company,
any ERISA Affiliate, or, to the knowledge of the Company, any fiduciary of a Benefit Plan, directly or indirectly, would be subject to any material liability (other than routine liability for premiums, contributions (if required) and, with respect
to a Benefit Plan, routine liabilities for benefits), individually or in the aggregate, under ERISA or the Internal Revenue Code. 
  
 (j) Environmental Matters. To the best of the Company’s knowledge, the Company (a) possesses all environmental, health and safety
licenses, permits, authorizations, registrations, approvals and similar rights necessary under Environmental Laws for the Company to conduct its operations as now being conducted, except where failure to have such licenses, permits, authorizations,
registrations, approvals, and similar rights would not reasonably be expected to have a Material Adverse Effect, and (b) each of such licenses, permits, authorizations, registrations, approvals and similar rights is valid and subsisting, in full
force and effect and enforceable by the Company, and the Company is in compliance with all terms, conditions or other provisions of such permits, authorizations, regulations, approvals and similar rights except for such failure or noncompliance
that, individually or in the aggregate for the Company, would not reasonably be expected to have a Material Adverse Effect. The Company has not received any written notices of any violation or noncompliance with, or remedial obligation under, any
Environmental Laws (which violation, non-compliance, or remedial obligation has not been cured or would not reasonably be expected to have a Material Adverse Effect) and there are no writs, injunctions, decrees, orders or judgments outstanding under
the Environmental Laws, or lawsuits, claims, proceedings, or, to the knowledge of the Company, investigations or inquiries pending or threatened under Environmental Laws, relating to the ownership, use, condition, maintenance or operation of, or
conduct of business related to, any property owned, leased or operated by the Company or other assets of the Company other than those violations, instances of noncompliance, obligations, writs, injunctions, decrees, orders, judgments, lawsuits,
claims, proceedings, investigations or inquiries that individually or in the aggregate for the Company, would not reasonably be expected to have a Material Adverse Effect. There are no obligations, undertakings or liabilities arising out of or
relating to Environmental Laws which the Company has agreed to, assumed or retained, or to the best of the Company’s knowledge by which the Company are adversely affected, by contract or otherwise, 

  

 47 

 
except such obligations, undertakings or liabilities as would not reasonably be expected to have a Material Adverse Effect. The Company has not received a
written notice or claim to the effect that any of them are or may be liable to any other person as the result of a release or threatened release of a Hazardous Material except such notice or claim that would not reasonably be expected to have a
Material Adverse Effect. The Company has complied with all Environmental Laws and the requirements of any permits, licenses or other authorizations issued under any Environmental Laws, except any noncompliance that would not reasonably be expected
to have a Material Adverse Effect. 
  
 (k) Purpose of
Loans. The proceeds of the Revolving Loans and the Term Loans will be used by the Company to refinance existing Indebtedness and for working capital purposes. None of the proceeds of any Revolving Loans or the Term Loans will be used
directly or indirectly for the purpose of purchasing or carrying any “margin stock” within the meaning of Regulation U (herein called “margin stock”) or for the purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry margin stock, or for any other purpose which might constitute this transaction as a “purpose credit” within the meaning of Regulation U. Neither the Company nor any agent acting on its behalf has
taken or will take any action which might cause this Agreement or any other Loan Document to violate Regulation U, Regulation X or any other regulation of the Board of Governors or to violate the Securities Exchange Act of 1934. 
  
 (l) Insurance. The Company maintains insurance of such types as
is usually carried by corporations of established reputation engaged in the same or similar businesses and similarly situated with financially sound, responsible and reputable insurance companies or associations (or, as to workers’ compensation
or similar insurance, with an insurance fund or by self-insurance authorized by the jurisdiction in which its operations are carried on) and in such amounts (and with co-insurance and deductibles) as such insurance is usually carried by corporations
of established reputation and engaged in the same or similar businesses and similarly situated, but in any event, with respect to improvements to real property and tangible personal property (assuming the subject improvements are in fact replaced or
restored), in amounts acceptable to CIT. Company does not maintain any formalized self-insurance program with respect to its assets or operations or material risks with respect thereto. 
  
 (m) Indebtedness and Contingent Liabilities. Except as disclosed in writing to CIT, the Company does not have
any outstanding Indebtedness (excluding the loans and advances hereunder) or material contractually assumed contingent liabilities other than Permitted Indebtedness. 
  
 (n) Security Interests in Favor of CIT. This Agreement and the other Loan Documents create valid security
interest and liens in all of the Collateral described therein in favor of CIT securing the Obligations and constitute (subject to (i) the filing of financing statements on the date hereof and thereafter from time to time on the CIT’s request
therefor and (ii) delivery of any collateral after the date hereof as provided herein or any other Loan Document and (iii) the execution of Blocked Account Agreements with the banks which maintain Depository Accounts) and, except for Permitted
Encumbrances, perfected first priority 

  

 48 

 
liens and security interests in substantially all of such collateral described therein subject to no liens other than Permitted Encumbrances 
  
 (o) USA Patriot Act. Neither the making of the Loans
hereunder (or the extension of any other credit contemplated hereunder) nor the Company’s use of the proceeds thereof will violate Sections 326 and 371 through 377 of the Uniting and Strengthening America by Providing Appropriate Tools Required
to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56 (also known as the USA Patriot Act) or any enabling legislation or rules, regulations or executive orders relating thereto. 
  
 (p) Guarantors. Tetrix Fitness Equipment, Inc. has no assets
other than intangible assets associated with its acquisition by the Company and Cybex Capital Corp. has no assets other than a depreciating asset of $350,000, comprised of leases which are in run-down. 
  
 (q) Inactive Subsidiary. The Inactive Subsidiary does not (i)
have any material operations or conduct any material business, or (ii) have assets of $50,000 or greater. 
  
 SECTION 8. Interest, Fees and Expenses 
  
 8.1 (a) Interest on the Revolving Loans, whether bearing interest based on the Chase Bank Rate or LIBOR, shall be payable monthly as of the end of
each month. Revolving Loans which are Chase Bank Rate Loans shall bear interest during each month at a rate equal to the Chase Bank Rate plus the Applicable Margin on the average of the net balances owing by the Company to CIT in the Revolving Loan
Account at the close of each day during such month. In the event of any change in said Chase Bank Rate, the rate hereunder for Revolving Loans which are Chase Bank Rate Loans shall change, as of the date of such change, so as to remain at the Chase
Bank Rate plus the Applicable Margin. The rate hereunder for Revolving Loans which are Chase Bank Rate Loans shall be calculated based on a 360-day year. CIT shall be entitled to charge the Company’s Revolving Loan Account at the rate provided
for herein when due until all Obligations have been paid in full. 
  
 (b) Notwithstanding any provision to the contrary contained in this section 8, in the event that the sum of (i) the outstanding Revolving Loans and (ii) the outstanding Letters of Credit exceed the lesser of either (x) the Borrowing
Base less Availability Reserves or (y) the Revolving Line of Credit: (A) as a result of Revolving Loans advanced by CIT at the request of the Company (herein “Requested Overadvances”), for any one (1) or more days in any month or (B) for
any other reason whatsoever (herein “Other Overadvances”) and such Other Overadvances continue for five (5) or more days in any month, the average net balance of all Revolving Loans for such month shall bear interest at the Overadvance
Rate. Upon and after the occurrence of an Event of Default and the giving of any required notice by CIT in accordance with the provisions of Section 10, Paragraph 10.2 hereof, all Obligations shall bear interest at the Default Rate of Interest.

  
 8.2 (a) Interest on Term Loan A, whether bearing
interest based on the Chase Bank Rate or LIBOR, shall be payable monthly as of the end of each month on the unpaid balance or on payment in full prior to maturity. That portion of Term Loan A which consists of Chase Bank 

  

 49 

 
Rate Loans shall bear interest in an amount equal to the Chase Bank Rate plus the Applicable Margin. In the event of any change in said Chase Bank Rate the
rate hereunder for any such Chase Bank Rate Loans shall change, as of the date of such change, so as to remain at the Chase Bank Rate plus the Applicable Margin. The rate hereunder shall be calculated based on a 360 day year. CIT shall be entitled
to charge the Revolving Loan Account at the rate provided for herein when due until all Obligations have been paid in full. 
  
 (b) Interest on Term Loan B shall be payable monthly as of the end of each month on the unpaid balance or on payment in full prior to maturity and
shall be in an amount equal to the greater of (i) the Chase Bank Rate plus five percent (5.0%) per annum or (ii) ten percent (10%) per annum. In the event of any change in said Chase Bank Rate the rate hereunder for Term Loan B shall change, as of
the date of such change, so as to remain at the greater of (i) five percent (5.0%) above the Chase Bank Rate or (ii) ten percent (10%) per annum. The rate hereunder shall be calculated based on a 360 day year. CIT shall be entitled to charge the
Revolving Loan Account at the rate provided for herein when due. 
  
 8.3 In consideration of the Letter of Credit Guaranty of CIT, the Company shall pay CIT the Letter of Credit Guaranty Fee which shall be an amount equal to (a) three percent (3.0%) on the face amount of each documentary Letter of
Credit payable upon issuance thereof and (b) three percent (3.0%) per annum, payable monthly, on the face amount of each standby Letter of Credit less the amount of any and all amounts previously drawn under such standby Letter of Credit.

  
 8.4 Any and all charges, fees, commissions, costs and
expenses charged to CIT for the Company’s account by any Issuing Bank in connection with, or arising out of, Letters of Credit or out of transactions relating thereto will be charged to the Revolving Loan Account in full when charged to, or
paid by CIT, or as may be due upon any termination of this Financing Agreement hereof, and when made by any such Issuing Bank shall be conclusive on CIT. 
  
 8.5 The Company shall reimburse or pay CIT, as the case may be, for: (a) all Out-of-Pocket Expenses and (b) any applicable Documentation Fee.

  
 8.6 Upon the last Business Day of each month,
commencing on July 31, 2003, the Company shall pay to CIT (i) the Line of Credit Fee, and (ii) interest on the Collection Days. Interest will be computed at the rate, and in the manner, set forth in Paragraph 8.1 of this Financing Agreement.

  
 8.7 To induce CIT to enter into this Financing
Agreement and to extend to the Company the Revolving Loans and Term Loans, the Company shall pay to CIT a Loan Facility Fee in the amount of $380,000, $190,000 of which will be payable on the Closing Date (reduced by the $50,000 fee payable on the
Closing Date pursuant to Section 8.8(ii) below), $95,000 of which will be payable on December 31, 2003 and $95,000 of which will be payable on June 30, 2004; provided, however, CIT agrees to waive the final payment of $95,000 on June 30, 2004 if the
following conditions are satisfied to the reasonable satisfaction of CIT: 
  

 50 

 (i) no Default or Event of Default has occurred prior to the receipt by CIT of the annual
audited financial statements of the Company for fiscal year 2003 delivered in accordance with subparagraph 7.8(a) of Section 7 hereof or is indicated on such financial statements; 
  
 (ii) the Company has met or exceeded its forecasted projections for EBITDA for the fiscal quarters ending
June 30, 2003, September 30, 2003 and December 31, 2003 (as such projections are set forth on Schedule 4 attached hereto); 
  
 (iii) the Company has maintained a liquidity position satisfactory to CIT at all times prior to receipt by CIT of the Company’s
audited financial statements for the Fiscal Year ended December 31, 2003; and 
  
 (iv) CIT is otherwise reasonably satisfied with the financial condition and prospects of the Company. 
  
 8.8 On the Closing Date and each anniversary of the Closing Date thereafter, the Company shall pay to CIT (i) the Administrative Management Fee in
the amount of $18,000.00 and (ii) a fee in the amount of $50,000.00 for the administration of the Foreign Borrowing Base. 
  
 8.9 The Company shall pay CIT’s standard charges and fees for CIT’s personnel used by CIT for reviewing the books and records of the
Company and for verifying, testing, protecting, safeguarding, preserving or disposing of all or any part of the Collateral (which fees shall be in addition to the Administrative Management Fee and any Out-of-Pocket Expenses). 
  
 8.10 The Company hereby authorizes CIT to charge the Revolving Loan
Account with the amount of all payments due hereunder as such payments become due. The Company confirms that any charges which CIT may so make to the Revolving Loan Account as herein provided will be made as an accommodation to the Company and
solely at CIT’s discretion. 
  
 8.11 In the event that
CIT or any participant hereunder (or any financial institution which may from time to time become a participant or lender hereunder) shall have determined in the exercise of its reasonable business judgement that subsequent to the Closing Date any
change in applicable law, rule, regulation or guideline regarding capital adequacy, or any change in the interpretation or administration thereof, or compliance by CIT or such participant with any new request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on CIT’s or such participant’s capital as a consequence of its obligations
hereunder to a level below that which CIT or such participant could have achieved but for such adoption, change or compliance (taking into consideration CIT or such participant’s policies with respect to capital adequacy) by an amount
reasonably deemed by CIT or such participant to be material, then, from time to time, the Company shall pay no later than five (5) days following demand to CIT or such participant such additional amount or amounts as will compensate CIT’s or
such participant’s for such reduction. In determining such amount or amounts, CIT or such participant may use any reasonable averaging or attribution methods. The protection of this Paragraph 8.11 shall be available to CIT or such participant
regardless of any possible contention 

  

 51 

 
of invalidity or inapplicability with respect to the applicable law, regulation or condition. A certificate of CIT or such participant setting forth such
amount or amounts as shall be necessary to compensate CIT or such participant with respect to this Section 8 and the calculation thereof when delivered to the Company shall be conclusive on the Company absent manifest error. Notwithstanding anything
in this paragraph to the contrary, in the event CIT or such participant has exercised its rights pursuant to this paragraph, and subsequent thereto determines that the additional amounts paid by the Company in whole or in part exceed the amount
which CIT or such participant actually required pursuant hereto, the excess, if any, shall be returned to the Company by CIT or such participant. 
  
 8.12 In the event that any applicable law, treaty or governmental regulation, or any change therein or in the interpretation or application
thereof, or compliance by CIT or such participant with any request or directive (whether or not having the force of law) from any central bank or other financial, monetary or other authority, shall: 
  
 (a) subject CIT or such participant to any tax of any
kind whatsoever with respect to this Financing Agreement or change the basis of taxation of payments to CIT or such participant of principal, fees, interest or any other amount payable hereunder or under any other documents (except for changes in
the rate of tax on the overall net income of CIT or such participant by the federal government or the jurisdiction in which it maintains its principal office); 
  

(b) impose, modify or hold applicable any reserve, special deposit, assessment or similar requirement against assets held by, or
deposits in or for the account of, advances or loans by, or other credit extended by CIT or such participant by reason of or in respect to this Financing Agreement and the Loan Documents, including (without limitation) pursuant to Regulation D of
the Board of Governors of the Federal Reserve System; or 
  
 (c) impose on CIT or such participant any other condition with respect to this Financing Agreement or any other document, and the result of any of the foregoing is to increase the cost to CIT or such
participant of making, renewing or maintaining its loans hereunder by an amount that CIT or such participant deems to be material in the exercise of its reasonable business judgement or to reduce the amount of any payment (whether of principal,
interest or otherwise) in respect of any of the loans by an amount that CIT or such participant deems to be material in the exercise of its reasonable business judgement, then, in any case the Company shall pay CIT or such participant, within five
(5) days following its demand, such additional cost or such reduction, as the case may be. CIT or such participant shall certify the amount of such additional cost or reduced amount to the Company and the calculation thereof and such certification
shall be conclusive upon the Company absent manifest error. Notwithstanding anything in this paragraph to the contrary, in the event CIT or such participant has exercised its rights pursuant to this paragraph, and subsequent thereto determine that
the additional amounts paid by the Company in whole or in part exceed the amount which CIT or such participant actually required pursuant hereto, the excess, if any, shall be returned to the Company by CIT or such participant. 
  

 52 

 8.13 The Company may request LIBOR Loans on the following terms and conditions: 

 
 (a) The Company may elect, subsequent to five (5)
days from the Closing Date and from time to time thereafter (i) to request any loan made hereunder to be a LIBOR Loan as of the date of such loan or (ii) to convert Chase Bank Rate Loans to LIBOR Loans, and may elect from time to time to convert
LIBOR Loans to Chase Bank Rate Loans by giving CIT at least three (3) Business Days’ prior irrevocable notice of such election, provided that any such conversion of LIBOR Loans to Chase Bank Rate Loans shall only be made, subject to the
second following sentence, on the last day of an Interest Period with respect thereto. Should the Company elect to convert Chase Bank Rate Loans to LIBOR Loans, it shall give CIT at least four Business Days’ prior irrevocable notice of such
election. If the last day of an Interest Period with respect to a loan that is to be converted is not a Business Day or Working Day, then such conversion shall be made on the next succeeding Business Day or Working Day, as the case may be, and
during the period from such last day of an Interest Period to such succeeding Business Day, as the case may be, such loan shall bear interest as if it were an Chase Bank Rate Loan. All or any part of outstanding Chase Bank Rate Loans then
outstanding with respect to Revolving Loans, Term Loans may be converted to LIBOR Loans as provided herein, provided that partial conversions shall be in multiples in an aggregate principal amount of $1,000,000 or more. The aggregate
amount of all such LIBOR Loans shall not exceed $7,000,000.00 at any one time outstanding. CIT shall be entitled to charge the Company a $500 fee upon the first effective day of any such election for a LIBOR Loan. 
  
 (b) Any LIBOR Loans may be continued as such upon the
expiration of an Interest Period, provided the Company so notifies CIT, at least three (3) Business Days’ prior to the expiration of said Interest Period, and provided further that no LIBOR Loan may be continued as such upon the
occurrence of any Default or Event of Default under this Financing Agreement, but shall be automatically converted to a Chase Bank Rate Loan on the last day of the Interest Period during which occurred such Default or Event of Default. Absent such
notification, LIBOR Rate Loans shall convert to Chase Bank Rate Loans on the last day of the applicable Interest Period. Each notice of election, conversion or continuation furnished by the Company pursuant hereto shall specify whether such
election, conversion or continuation is for a month period. Notwithstanding anything to the contrary contained herein, CIT (or any participant, if applicable) shall not be required to purchase United States Dollar deposits in the London interbank
market or from any other applicable LIBOR Rate market or source or otherwise “match fund” to fund LIBOR Rate Loans, but any and all provisions hereof relating to LIBOR Rate Loans shall be deemed to apply as if CIT (and any participant, if
applicable) had purchased such deposits to fund any LIBOR Rate Loans. 
  
 (c) The Company may request a LIBOR Loan, convert any Chase Bank Rate Loan or continue any LIBOR Loan provided there is then no Default or Event of Default in effect. 
  

 53 

 8.14 (a) The LIBOR Loans shall bear interest for each Interest Period with respect thereto on the
unpaid principal amount thereof at a rate per annum equal to the LIBOR determined for each Interest Period in accordance with the terms hereof plus the Applicable Margin. 
  
 (b) If all or a portion of the outstanding principal amount of the Obligations shall not be paid when
due (whether at the stated maturity, by acceleration or otherwise), such outstanding amount, to the extent it is a LIBOR Loan, shall be converted to a Chase Bank Rate Loan at the end of the last Interest Period therefor. 
  
 (c) The Company may not have more than four (4) LIBOR
Loans outstanding at any given time. 
  
 8.15 (a) Interest
in respect of the LIBOR Loans shall be calculated on the basis of a 360 day year and shall be payable on the last day of each month and the last day of the applicable Interest Period. 
  
 (b) CIT shall, at the request of the Company, deliver to the Company a statement showing the
quotations given by JP Morgan Chase Bank and the computations used in determining any interest rate pursuant to Paragraph 8.14 of Section 8 hereof. 
  
 8.16 As further set forth in paragraph 8.12 above, in the event that CIT (or any financial institution which may become a participant hereunder)
shall have determined in the exercise of its reasonable business judgement (which determination shall be conclusive and binding upon the Company) that by reason of circumstances affecting the interbank LIBOR market, adequate and reasonable means do
not exist for ascertaining LIBOR applicable for any Interest Period with respect to (a) a proposed loan that the Company has requested be made as a LIBOR Loan, (b) a LIBOR Loan that will result from the requested conversion of a Chase Bank Rate Loan
into a LIBOR Loan or (c) the continuation of LIBOR Loans beyond the expiration of the then current Interest Period with respect thereto, CIT shall forthwith give written notice of such determination to the Company at least one day prior to, as the
case may be, the requested borrowing date for such LIBOR Loan, the conversion date of such Chase Bank Rate Loan or the last day of such Interest Period. If such notice is given (i) any requested LIBOR Loan shall be made as a Chase Bank Rate Loan,
(ii) any Chase Bank Rate Loan that was to have been converted to a LIBOR Loan shall be continued as a Chase Bank Rate Loan, and (iii) any outstanding LIBOR Loan shall be converted, on the last day of then current Interest Period with respect
thereto, to a Chase Bank Rate Loan. Until such notice has been withdrawn by CIT, no further LIBOR Loan shall be made nor shall the Company have the right to convert a Chase Bank Rate Loan to a LIBOR Loan. 
  
 8.17 If any payment on a LIBOR Loan becomes due and payable on a day
other than a Business Day or Working Day, the maturity thereof shall be extended to the next succeeding Business Day or Working Day unless the result of such extension would be to extend such payment into another calendar month in which event such
payment shall be made on the immediately preceding Business Day or Working Day. 
  

 54 

 8.18 Notwithstanding any other provisions herein, if any law, regulation, treaty or directive or
any change therein or in the interpretation or application thereof, shall make it unlawful for CIT to make or maintain LIBOR Loans as contemplated herein, the then outstanding LIBOR Loans, if any, shall be converted automatically to Chase Bank Rate
Loans as of the end of such month, or within such earlier period as required by law. The Company hereby agrees promptly to pay CIT, upon its demand, any additional amounts necessary to compensate CIT for any costs incurred by CIT in making any
conversion in accordance with this Section 8 including, but not limited to, any interest or fees payable by CIT to lenders of funds obtained by CIT in order to make or maintain LIBOR Loans hereunder. 
  
 8.19 The Company agrees to indemnify and to hold CIT (including any
participant) harmless from any loss or expense which CIT or such participant may sustain or incur as a consequence of (a) default by the Company in payment of the principal amount of or interest on any LIBOR Loans, as and when the same shall be due
and payable in accordance with the terms of this Financing Agreement, including, but not limited to, any such loss or expense arising from interest or fees payable by CIT or such participant to lenders of funds obtained by either of them in order to
maintain the LIBOR Loans hereunder, (b) default by the Company in making a borrowing or conversion after the Company has given a notice in accordance with Paragraph 8.13 of Section 8 hereof, (c) any prepayment of LIBOR Loans on a day which is not
the last day of the Interest Period applicable thereto, including, without limitation, prepayments arising as a result of the application of the proceeds of Collateral to the Revolving Loans and (d) default by the Company in making any prepayment
after the Company had given notice to CIT thereof. The determination by CIT of the amount of any such loss or expense, when set forth in a written notice to the Company, containing CIT’s calculations thereof in reasonable detail, shall be
conclusive on the Company in the absence of manifest error. Calculation of all amounts payable under this paragraph with regard to LIBOR Loans shall be made as though CIT had actually funded the LIBOR Loans through the purchase of deposits in the
relevant market and currency, as the case may be, bearing interest at the rate applicable to such LIBOR Loans in an amount equal to the amount of the LIBOR Loans and having a maturity comparable to the relevant interest period provided,
however, that CIT may fund each of the LIBOR Loans in any manner CIT sees fit and the foregoing assumption shall be used only for calculation of amounts payable under this paragraph. In addition, notwithstanding anything to the contrary
contained herein, CIT shall apply all proceeds of Collateral and all other amounts received by it from or on behalf of the Company (i) initially to the Chase Bank Rate Loans and (ii) subsequently to LIBOR Loans; provided, however, (x)
upon the occurrence of an Event of Default or (y) in the event the aggregate amount of outstanding LIBOR Rate Loans exceeds Availability or the applicable maximum levels set forth therefor, CIT may apply all such amounts received by it to the
payment of Obligations in such manner and in such order as CIT may elect in its reasonable business judgment. In the event that any such amounts are applied to Revolving Loans which are LIBOR Loans, such application shall be treated as a prepayment
of such loans and CIT shall be entitled to indemnification hereunder. This covenant shall survive termination of this Financing Agreement and payment of the outstanding Obligations. 
  
 8.20 Notwithstanding anything to the contrary in this Agreement, in the event that, by reason of any Regulatory
Change (for purposes hereof “Regulatory Change” shall mean, with respect to CIT, any change after the date of this Financing Agreement in United States federal, 

  

 55 

 
state or foreign law or regulations (including, without limitation, Regulation D) or the adoption or making after such date of any interpretation, directive
or request applying to a class of banks including CIT of or under any United States federal, state or foreign law or regulations (whether or not having the force of law and whether or not failure to comply therewith would be unlawful), CIT either
(a) incurs any material additional costs based on or measured by the excess above a specified level of the amount of a category of deposits or other liabilities of such bank which includes deposits by reference to which the interest rate on LIBOR
Loans is determined as provided in this Financing Agreement or a category of extensions of credit or other assets of CIT which includes LIBOR Loans or (b) becomes subject to any material restrictions on the amount of such a category of liabilities
or assets which it may hold, then, if CIT so elects by notice to the Company the obligation of CIT to make or continue, or to convert Chase Bank Rate Loans into LIBOR Loans hereunder shall be suspended until such Regulatory Change ceases to be in
effect. 
  
 8.21 For purposes of this Financing Agreement
and Section 8 thereof, any reference to CIT shall include any financial institution which may become a participant or co-lender subsequent to the Closing Date. 
  

SECTION 9. Powers 
  
 The Company hereby constitutes CIT, or any person or agent CIT may designate, as its attorney-in-fact, at the Company’s cost and expense, to exercise
all of the following powers, which being coupled with an interest, shall be irrevocable until all Obligations to CIT have been paid in full: 
  
 (a) To receive, take, endorse, sign, assign and deliver, all in the name of CIT or the Company, any and all checks, notes, drafts,
and other documents or instruments relating to the Collateral; 
  
 (b) To receive, open and dispose of all mail addressed to the Company and to notify postal authorities to change the address for delivery thereof to such address as CIT may designate; 
  
 (c) To request from customers indebted on Accounts at
any time, in the name of CIT information concerning the amounts owing on the Accounts; 
  
 (d) To request from customers indebted on Accounts at any time, in the name of the Company, in the name of certified public
accountant designated by CIT or in the name of CIT’s designee, information concerning the amounts owing on the Accounts; 
  
 (e) To transmit to customers indebted on Accounts notice of CIT’s interest therein and to notify customers indebted on
Accounts to make payment directly to CIT for the Company’s account; and 
  
 (f) To take or bring, in the name of CIT or the Company, all steps, actions, suits or proceedings deemed by CIT necessary or
desirable to enforce or effect collection of the Accounts. 
  

 56 

 Notwithstanding anything hereinabove contained to the contrary, the powers set forth in (b), (c), (e) and
(f) above may only be exercised after the occurrence of an Event of Default and until such time as such Event of Default is waived in writing by CIT. 
  
 SECTION 10. Events of Default and Remedies 
  
 10.1 Notwithstanding anything hereinabove to the contrary, CIT may terminate this Financing Agreement immediately upon the occurrence of any of the
following (herein “Events of Default”): 
  

	 	(a)	cessation of the business of the Company or the calling of a meeting of the creditors of the Company for purposes of compromising the debts and obligations of the Company;

  

	 	(b)	the failure of the Company to generally meet its debts as they mature; 

  

	 	(c)	(i) the commencement by the Company of any bankruptcy, insolvency, arrangement, reorganization, receivership or similar proceedings under any federal or state law; (ii) the
commencement against the Company, of any bankruptcy, insolvency, arrangement, reorganization, receivership or similar proceeding under any federal or state law by creditors of the Company, provided that such Default shall not be deemed an Event of
Default if such proceeding is controverted within ten (10) days and dismissed and vacated within thirty (30) days of commencement, except in the event that any of the actions sought in any such proceeding shall occur or the Company shall take action
to authorize or effect any of the actions in any such proceeding, or (iii) the commencement (x) by the Company’s subsidiaries, or any one of them, of any bankruptcy, insolvency, arrangement, reorganization, receivership or similar proceeding
under any applicable state law, or (y) against the Company’s subsidiaries, or any one of them, of any involuntary bankruptcy, insolvency, arrangement, reorganization, receivership or similar proceeding under applicable law, provided that such
Default shall not be deemed an Event of Default if such proceeding is controverted within ten (10) days and dismissed or vacated within thirty (30) days of commencement, except in the event that any of the actions sought in any such proceeding shall
occur or the Company’s subsidiaries, or any one of them, shall take action to authorize or effect any of the actions in any such proceeding; 

  

	 	(d)	breach by the Company of any warranty, representation or covenant contained herein (other than those referred to in sub-paragraph (e) below) or in any other written agreement
between the Company or CIT, provided that such Default by the Company of any of the warranties, representations or covenants referred in this clause (d) shall not be deemed to be an Event of Default unless and until such Default shall remain
unremedied to CIT’s satisfaction for a period of ten (10) days from the date of such breach; 

  

	 	(e)	 breach by the Company of any warranty, representation or covenant of Paragraphs 3.3 (other than the fourth sentence of Paragraph 3.3) and 3.4 of Section 3 hereof;
Paragraphs 6.3 and 6.4 (other than the first sentence of 

  

 57 

	 	 
Paragraph 6.4) of Section 6 hereof; Paragraphs 7.1, 7.5, 7.6, and 7.8 through 7.18 hereof; 

  

	 	(f)	failure of the Company to pay any of the Obligations within five (5) Business Days of the due date thereof, provided that nothing contained herein shall prohibit CIT from charging
such amounts to the Revolving Loan Account on the due date thereof; 

  

	 	(g)	the Company shall (i) engage in any “prohibited transaction” as defined in ERISA, (ii) have any “accumulated funding deficiency” as defined in ERISA, (iii) have
any “reportable event” as defined in ERISA, (iv) terminate any “plan”, as defined in ERISA or (v) be engaged in any proceeding in which the Pension Benefit Guaranty Corporation shall seek appointment, or is appointed, as trustee
or administrator of any “plan”, as defined in ERISA, and with respect to this sub-paragraph (h) such event or condition (x) remains uncured for a period of thirty (30) days from date of occurrence and (y) could, in the reasonable opinion
of CIT, subject the Company to any tax, penalty or other liability material to the business, operations or financial condition of the Company; 

  

	 	(h)	without the prior written consent of CIT and, except as permitted in the Subordination Agreement, the Company shall (x) amend or modify the Subordinated Debt, or (y) make any
payment on account of the Subordinated Debt; 

  

	 	(i)	the occurrence of any default or event of default (after giving effect to any applicable grace or cure periods) under any instrument or agreement evidencing (x) Subordinated Debt or
(y) any other Indebtedness of the Company having a principal amount in excess of $250,000 (including Indebtedness with respect to the Hilco Loan); or 

  

	 	(j)	(i) any “person” or “group” (within the meaning of Sections 13(d) and 14(d) of the Exchange Act) becomes the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of a percentage of the stock of the Company having the right to vote for the election of members of the Board of Directors which is in excess of the percentage of such stock beneficially owned by UM Holdings,
Ltd. and its Affiliates, (ii) a majority of the members of the Board of Directors do not constitute Continuing Directors, (iii) the Company ceases to own, directly or indirectly, and control 100% of the outstanding stock of each of its subsidiaries
(other than the Inactive Subsidiaries) existing on the Closing Date, (iv) John Aglialoro ceases for any reason whatsoever (other than as a result of death or disability) to be actively engaged in the management of the Company or (v) UM Holdings,
Ltd. and/or its Affiliates shall at any time collectively own less than 40% of the issued and outstanding voting stock of the Company; 

  

	 	(k)	 the receipt by CIT of notice from the issuer of the UM Holdings Letter of Credit that such issuer elects not to renew UM Holdings Letter of Credit for an additional
one year period and the failure of UM Holdings, Ltd. or the Company, unless the UM Holdings Letter of Credit has been returned to UM Holdings, Ltd. in accordance with the terms of this Financing Agreement, to replace the UM Holdings Letter of Credit
with a replacement letter of credit (in form and substance satisfactory to CIT and issued by an issuer satisfactory to 

  

 58 

	 	 
CIT) no less than 45 days prior to the expiration of the UM Holdings Letter of Credit. 

  
 10.2 Upon the occurrence of a Default and/or an Event of Default, at
the option of CIT, all loans, advances and extensions of credit provided for in Sections 3, 4 and 5 of this Financing Agreement shall be thereafter in CIT’s sole discretion and the obligation of CIT to make Revolving Loans and/or open Letters
of Credit shall cease unless such Default is cured to CIT’s satisfaction or Event of Default is waived in writing by CIT , and at the option of CIT upon the occurrence of an Event of Default: (a) all Obligations shall become immediately
due and payable; (b) CIT may charge the Company the Default Rate of Interest on all then outstanding or thereafter incurred Obligations in lieu of the interest provided for in Section 8 of this Financing Agreement, provided that, with respect
to this clause “(b)” CIT has given the Company written notice of the Event of Default, provided, however, that no notice is required if the Event of Default is the Event listed in Paragraph 10.1(c) of this Section 10, and (c) CIT
may immediately terminate this Financing Agreement upon notice to the Company, provided, however, that upon the occurrence of an Event of Default listed in Paragraph 10.1(c) of this Section 10, this Financing Agreement shall automatically terminate
and all Obligations shall become due and payable, without any action, declaration, notice or demand by CIT. The exercise of any option is not exclusive of any other option, which may be exercised at any time by CIT. 
  
 10.3 Immediately upon the occurrence of any Event of Default, CIT may,
to the extent permitted by law: (a) remove from any premises where same may be located any and all books and records, computers, electronic media and software programs associated with any Collateral (including any electronic records,
contracts and signatures pertaining thereto), documents, instruments, files and records, and any receptacles or cabinets containing same, relating to the Accounts, or CIT may use, at the Company’s expense, such of the Company’s personnel,
supplies or space at the Company’s places of business or otherwise, as may be necessary to properly administer and control the Accounts or the handling of collections and realizations thereon; (b) bring suit, in the name of the Company
or CIT, and generally shall have all other rights respecting said Accounts, including without limitation the right to: accelerate or extend the time of payment, settle, compromise, release in whole or in part any amounts owing on any Accounts and
issue credits in the name of the Company or CIT; (c) sell, assign and deliver the Collateral and any returned, reclaimed or repossessed Inventory, with or without advertisement, at public or private sale, for cash, on credit or otherwise, at
CIT’s sole option and discretion, and CIT may bid or become a purchaser at any such sale, free from any right of redemption, which right is hereby expressly waived by the Company; (d) foreclose the security interests in the Collateral
created herein or by the Loan Documents by any available judicial procedure, or to take possession of any or all of the Collateral, including any Inventory, Equipment and/or Other Collateral without judicial process, and to enter any premises where
any Inventory and Equipment and/or Other Collateral may be located for the purpose of taking possession of or removing the same and (e) exercise any other rights and remedies provided in law, in equity, by contract or otherwise. CIT shall
have the right, without notice or advertisement, to sell, lease, or otherwise dispose of all or any part of the Collateral, whether in its then condition or after further preparation or processing, in the name of the Company or CIT, or in the name
of such other party as CIT may designate, either at public or private sale or at any broker’s board, in lots or in bulk, 

  

 59 

 
for cash or for credit, with or without warranties or representations, and upon such other terms and conditions as CIT in its sole discretion may deem
advisable, and CIT shall have the right to purchase at any such sale. If any Inventory and Equipment shall require rebuilding, repairing, maintenance or preparation, CIT shall have the right, at its option, to do such of the aforesaid as is
necessary, for the purpose of putting the Inventory and Equipment in such saleable form as CIT shall deem appropriate. The Company agrees, at the request of CIT, to assemble the Inventory and Equipment and to make it available to CIT at premises of
the Company or elsewhere and to make available to CIT the premises and facilities of the Company for the purpose of CIT’s taking possession of, removing or putting the Inventory and Equipment in saleable form. If notice of intended disposition
of any Collateral is required by law, it is agreed that ten (10) days notice shall constitute reasonable notification and full compliance with the law. The net cash proceeds resulting from CIT’s exercise of any of the foregoing rights, (after
deducting all charges, costs and expenses, including reasonable attorneys’ fees) shall be applied by CIT to the payment of the Obligations, whether due or to become due, in such order as CIT may elect, and the Company shall remain liable to CIT
for any deficiencies, and CIT in turn agrees to remit to the Company or its successors or assigns, any surplus resulting therefrom. The enumeration of the foregoing rights is not intended to be exhaustive and the exercise of any right shall not
preclude the exercise of any other rights, all of which shall be cumulative. The Company hereby indemnifies CIT and holds CIT harmless from any and all costs, expenses, claims, liabilities, Out-of-Pocket Expenses or otherwise, incurred or imposed on
CIT by reason of the exercise of any of its rights, remedies and interests hereunder, including, without limitation, from any sale or transfer of Collateral, preserving, maintaining or securing the Collateral, defending its interests in Collateral
(including pursuant to any claims brought by the Company, the Company as debtor-in-possession, any secured or unsecured creditors of the Company, any trustee or receiver in bankruptcy, or otherwise), and the Company hereby agrees to so indemnify and
hold CIT harmless, absent CIT’s gross negligence or willful misconduct as finally determined by a court of competent jurisdiction. The foregoing indemnification shall survive termination of this Financing Agreement until such time as all
Obligations (including the foregoing) have been finally and indefeasibly paid in full. In furtherance thereof CIT, may establish such reserves for Obligations hereunder (including any contingent Obligations) as it may deem advisable in its
reasonable business judgement. Any applicable mortgage(s), deed(s) of trust or assignment(s) issued to CIT on the Real Estate shall govern the rights and remedies of CIT thereto. 
  
 SECTION 11. Termination 
  
 Except as otherwise permitted herein, CIT may terminate this Financing Agreement only as of the initial or any subsequent
Anniversary Date and then only by giving the Company at least sixty (60) days prior written notice of termination. Notwithstanding the foregoing CIT may terminate the Financing Agreement immediately upon the occurrence of an Event of Default,
provided, however, that if the Event of Default is an event listed in Paragraph 10.1(c) of Section 10 of this Financing Agreement, this Financing Agreement shall terminate in accordance with paragraph 10.2 of Section 10. This Financing Agreement,
unless terminated as herein provided, shall automatically continue from Anniversary Date to Anniversary Date. The Company may terminate this Financing Agreement at any time upon sixty (60) days’ prior written notice to CIT, provided that the
Company pays to CIT immediately on demand an Early Termination Fee 

  

 60 

 
and/or the Prepayment Premium, if applicable. All Obligations shall become due and payable as of any termination hereunder or under Section 10 hereof and,
pending a final accounting, CIT may withhold any balances in the Company’s account (unless supplied with an indemnity satisfactory to CIT) to cover all of the Obligations, whether absolute or contingent, including, but not limited to, cash
reserves for any contingent Obligations, including an amount of 110% of the face amount of any outstanding Letters of Credit with an expiry date on, or within thirty (30) days of the effective date of termination of this Financing Agreement. All of
CIT’s rights, liens and security interests shall continue after any termination until all Obligations have been paid and satisfied in full. 
  
 SECTION 12. Miscellaneous 
  
 12.1 The Company hereby waives diligence, notice of intent to accelerate, notice of acceleration, demand, presentment and protest and any notices
thereof as well as notice of nonpayment. No delay or omission of CIT or the Company to exercise any right or remedy hereunder, whether before or after the happening of any Event of Default, shall impair any such right or shall operate as a waiver
thereof or as a waiver of any such Event of Default. No single or partial exercise by CIT of any right or remedy precludes any other or further exercise thereof, or precludes any other right or remedy. 
  
 12.2 This Financing Agreement and the Loan Documents executed and
delivered in connection therewith constitute the entire agreement between the Company and CIT; supersede any prior agreements; can be changed only by a writing signed by both the Company and CIT; and shall bind and benefit the Company and CIT and
their respective successors and assigns. 
  
 12.3 In no
event shall the Company, upon demand by CIT for payment of any indebtedness relating hereto, by acceleration of the maturity thereof, or otherwise, be obligated to pay interest and fees in excess of the amount permitted by law. Regardless of any
provision herein or in any agreement made in connection herewith, CIT shall never be entitled to receive, charge or apply, as interest on any indebtedness relating hereto, any amount in excess of the maximum amount of interest permissible under
applicable law. If CIT ever receives, collects or applies any such excess, it shall be deemed a partial repayment of principal and treated as such; and if principal is paid in full, any remaining excess shall be refunded to the Company. This
paragraph shall control every other provision hereof, the Loan Documents and of any other agreement made in connection herewith. 
  
 12.4 If any provision hereof or of any other agreement made in connection herewith is held to be illegal or unenforceable, such provision shall be
fully severable, and the remaining provisions of the applicable agreement shall remain in full force and effect and shall not be affected by such provision’s severance. Furthermore, in lieu of any such provision, there shall be added
automatically as a part of the applicable agreement a legal and enforceable provision as similar in terms to the severed provision as may be possible. 
  
 12.5 THE COMPANY AND CIT EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS FINANCING AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED 

  

 61 

 
THEREUNDER. THE COMPANY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO SERVICE OF PROCESS BY CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED. IN NO EVENT WILL CIT BE LIABLE FOR LOST PROFITS OR OTHER SPECIAL OR CONSEQUENTIAL DAMAGES. 
  
 12.6 Except as otherwise herein provided, any notice or other communication required hereunder shall be in writing (provided that, any electronic
communications from the Company with respect to any request, transmission, document, electronic signature, electronic mail or facsimile transmission shall be deemed binding on the Company for purposes of this Financing Agreement, provided further
that any such transmission shall not relieve the Company from any other obligation hereunder to communicate further in writing), and shall be deemed to have been validly served, given or delivered when hand delivered or sent by facsimile, or three
days after deposit in the United State mails, with proper first class postage prepaid and addressed to the party to be notified or to such other address as any party hereto may designate for itself by like notice, as follows: 
  
 (A) if to CIT, at: 
  
 The CIT Group/Business Credit, Inc. 
 2WO Wachovia Center, 25th Floor 
 301 South Tryon Street 
 Charlotte, NC 28202 
 Attn: Regional Credit Manager 
 Fax No.: (704) 339-2894 
  
 (B) if to the Company at: 
  
 Cybex International, Inc. 
 10 Trotter Drive 
 Medway, MA 02083 
 Attn: Arthur Hicks 
 Fax No: (508) 533-5799 
  
 With a courtesy copy of any material notice to the Company’s counsel at: 
  
 Archer & Greiner, PC 
 One Centennial Square 
 Haddenfield, NJ 08038 
 Attn: James H. Carll, Esquire 
 Fax No. (856) 795-0574 
  
 provided, however, that
the failure of CIT to provide the Company’s counsel with a copy of such notice shall not invalidate any notice given to the Company and shall not give the Company any rights, claims or defenses due to the failure of CIT to provide such
additional notice. 
  

 62 

 12.7 THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS FINANCING AGREEMENT AND THE OTHER LOAN
DOCUMENTS SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT ANY OTHER LOAN DOCUMENT INCLUDES AN EXPRESS ELECTION TO BE GOVERNED BY THE LAWS OF ANOTHER JURISDICTION. 
  

 63 

 IN WITNESS WHEREOF, the parties hereto have caused this Financing Agreement to be effective,
executed and accepted by their proper and duly authorized officers as of the date set forth above. 
  

	CYBEX INTERNATIONAL, INC.	 	 THE CIT GROUP/
 BUSINESS CREDIT, INC.

				
	 By:
	 	 /s/ Arthur W. Hicks, Jr.

	 	By:	 	 /s/ Richard S. Cassels

	 Title:
	 	 Chief Financial Officer
	 	 Title:
	 	 Senior Vice President

 SCHEDULE 1 – COLLATERAL INFORMATION 

 

	CYBEX INTERNATIONAL, INC.	 	 
	STATE INCORPORATION OR FORMATION:	 	New York
	FEDERAL TAX I.D. NUMBER:	 	11-1731581
	CHIEF EXECUTIVE OFFICE:	 	10 Trotter Drive, Medway MA 02053-2275
	COLLATERAL LOCATIONS:	 	 10 Trotter Drive, Medway MA 02053-2275
 151 24th Avenue NW, Owatonna MN 55060-1099
 728 N. Cedar Avenue, Owatonna MN 55060-1137

		
	CYBEX CAPITAL CORPORATION	 	 
	STATE OF INCORPORATION OR FORMATION:	 	New York
	FEDERAL TAX I.D. NUMBER:	 	11-3135906
	CHIEF EXECUTIVE OFFICE:	 	99 SW Wilshire, Suite 190, Portland OR 97225
	COLLATERAL LOCATIONS:	 	99 SW Wilshire, Suite 190, Portland OR 97225
		
	CYBEX INTERNATIONAL UK LIMITED	 	 
	STATE OF INCORPORATION OR FORMATION:	 	England
	FEDERAL TAX I.D. NUMBER:	 	N/A
	CHIEF EXECUTIVE OFFICE:	 	10 North Parkway Close, Round Spinney, Northampton NN38RQ UK
	COLLATERAL LOCATIONS:	 	10 North Parkway Close, Round Spinney, Northampton NN38RQ UK
		
	TECTRIX FITNESS EQUIPMENT, INC.	 	 
	STATE OF INCORPORATION OR FORMATION:	 	California
	FEDERAL TAX I.D. NUMBER:	 	33-0338901
	CHIEF EXECUTIVE OFFICE:	 	10 Trotter Drive, Medway MA 02053-2275
	COLLATERAL LOCATIONS:	 	N/A DORMANT
		
	CYBEX FITNESS GERATE VERTRIEBS GMBH	 	 
	STATE OF INCORPORATION OR FORMATION:	 	Germany
	FEDERAL TAX I.D. NUMBER:	 	N/A
	CHIEF EXECUTIVE OFFICE:	 	N/A DORMANT
	COLLATERAL LOCATIONS:	 	N/A DORMANT

  

 65 

 Schedule 2 
  
 Litigation 
  
 Hot New Products, Inc. d/b/a Fitnesszone v. Trotter, Inc. and Cybex International, Inc., CV 98-JEO-1730-S, United States District Court for the Northern District
of Alabama, Southern Division. The Hot New Products suit was initiated in July 1997 as a breach of contract, fraud, unjust enrichment and recoupment action in Alabama state court. Amended in 1998 to include federal antitrust claims, including
price discrimination and price conspiracy violations. Plaintiff has made a claim of $3.5 Million (not including any possible punitive and/or other exemplary damages). 
  
 Gary J. Colassi v. Cybex International, Inc., Civil Action 02-11909 RWZ, United States District Court for the District of
Massachusetts. The Colassi matter was initiated in August 2002and is a patent infringement action alleging that Cybex is infringing on U.S. Patent 6,123,646 issued to Mr. Colassi. Plaintiff has not formulated a specific demand amount but has
intimated that an adverse judgment would involve a significant royalty on all Cybex treadmills containing the Stableflex system as well as punitive damages. 
  

Free Motion Fitness, Inc. f/k/a Ground Zero Design Corporation v. Cybex International, Inc., 1:01CV00152 BSJ, United States District Court for the District of
Utah. Action initiated by Free Motion in December 2001 alleging that Cybex is infringing on a patent owned by Free Motion. No specific amount has been demanded, however, an adverse judgment would involve a significant royalty on all sales of the
FT-360 Functional Trainer and possible punitive damages. 
  
 Chris J.
Creighton and Healthline, Inc. v. Cybex International, Inc., et. al., Case Number 788623, Superior Court of the State of California, Orange County. Initiated in January 1997, the Creighton matter involved claims for fraud, negligent
misrepresentation, breach of contract and other allegations. Settled in March 2003 for a cash payment of $285,000 over time as well as an equipment component of $140,000 also over time. To date more than $30,000 of the equipment component has been
satisfied and cash payments of $100,000 have been made. The settlement agreement contains a $600,000 consent judgment in case of breach. 
  
 Gene Kirilla, II, et al v. Cybex International, Inc., et al, Civil Division G.D. No. 1997-1725, Court of Common Pleas of Mercer County, Pennsylvania. Initiated
in April 1997, the Kirilla matter involved a claim of $12,000,000 on allegations of breach of covenant of good faith and fair dealing, negligent misrepresentation and unjust enrichment. This matter went to trial in 2002 and the jury rendered a
verdict for approximately $875,000 in favor of Mr. Kirilla. Both sides filed post-trial motions and the judge elected not to enter a judgment on the verdict until the post-trial motions were resolved. Post-trial motions were argued in August 2002
and have not yet been ruled on by the judge. A ruling could come at anytime and could involve an award of fees and interest by the judge in addition to the jury verdict by could also involve a reduction of the jury award. The Company intends to
appeal any judgment in this matter. 
  
 The Company in the ordinary course of
business is subject to product liability and similar litigation, all of which the Company believes is covered by insurance. 
  

 66 

 The descriptions for all matter provided on this Schedule (in italics) are provided for informational purposes only and
are not in any way intended to limit the scope of this Schedule. 
  

 67 

 SCHEDULE #3 
 CYBEX INTERNATONAL, INC. 
  

	BENEFIT PLANS	  	PLANS
		
	Medical	  	 90/70 Blue Care Elect PPO
 80/60
Blue Care Elect PPO
 Network Blue New England HMO
  
 Fallon HMO

		
	Vision	  	 
		
	Dental	  	Delta Premier Plan
		
	Continental Assurance Company	  	 Group Life Insurance
 Supplemental Life Insurance
 Short Term Disability (Advice to Pay only)
 Long Term Disability

		
	Business Travel Accident Insurance	  	 
		
	Flexible Spending Accounts	  	 Healthcare Flexible Spending
 Dependent Care Spending

		
	401 (K)	  	Cybex Savings and Investment Plan
	
	Employee Assistance Programs
	
	Group Home/Auto Discount Insurance (employee voluntary)
	
	COBRA Administrator
	
	Payroll Service
	
	Workman’s Compensation Insurance

  

 68 

 PROVIDER 
  
 Blue Cross Blue Shield of Massachusetts 
 Blue
Cross Blue Shield of Massachusetts 
 Blue Cross Blue Shield of Massachusetts 
  
 Fallon Community Health Plan 
  
 Vision Service Plan 
  
 Delta Dental USA 
  
  
  
  
  
 AIG Life Insurance Company 
  
 Medical Claims Service 
  
 Fidelity Investments 
  
 Health Resources (Medway) 
 South Central Human Resources Center (Owatonna) 
  
 MetLife 
  
 Benefit Concepts Inc. of Rhode Island 
  
 ADP 
  
 Liberty Mutual Company 
  

 69 

 SCHEDULE 4 
  
 2003 EBITDA PROJECTIONS 
  

	 2ND QUARTER 2003
	  	$	2,022,000
	 3RD QUARTER 2003
	  	$	2,222,000
	 4TH QUARTER 2003
	  	$	3,178,000
	 	  	
	

	 CUMULATIVE 9 MONTHS
	  	$	5,422,000
	 	  	
	

  

 70 

 SCHEDULE 5 
  
 Related Party Payments 
  
 1. Compensation payable to John Aglialoro as an employee of Cybex International, Inc., as authorized from time to time by the independent Directors of
Cybex International, Inc. Mr. Aglialoro’s current salary is at the rate of $360,000 per annum, subject to increase of up to 10% per year as authorized by the independent Directors of Cybex International, Inc. Any bonus payable to Mr. Aglialoro
with respect to any year will be authorized by the independent Directors of Cybex International, Inc. and will not exceed 50% of approved salary. 
  
 2. Fees (not to exceed $200,000 per annum) payable to UM Holdings Ltd under Services Agreement pursuant to which services of Chief Financial Officer are
provided. 
  
 3. Fees (not to exceed $100,000 per annum) payable
to UM Holdings Ltd under Services Agreement pursuant to which services of General Counsel are provided. 
  

 71

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