Document:

Exhibit 10.02

 

CREDIT AGREEMENT

 

DATED AS OF SEPTEMBER 27, 2004

 

AMONG

 

WILLIAMS CONTROLS INDUSTRIES, INC.,

and

WILLIAMS CONTROLS, INC.

 

jointly and severally as Borrowers

 

MERRILL LYNCH CAPITAL,

a Division of Merrill Lynch Business Financial Services Inc.,

as Administrative Agent, as a Lender and as

 

Sole Bookrunner and Sole Lead Arranger

 

AND

 

THE ADDITIONAL LENDERS

FROM TIME TO TIME PARTY HERETO

 

 

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I DEFINITIONS

  	
   

  
	
  Section 1.1

  	
  Certain
  Defined Terms

  	
   

  
	
  Section 1.2

  	
  Accounting
  Terms and Determinations

  	
   

  
	
  Section 1.3

  	
  Other
  Definitional Provisions

  	
   

  
	
  ARTICLE II LOANS AND
  LETTERS OF CREDIT

  	
   

  
	
  Section 2.1

  	
  Term Loans.

  	
   

  
	
  Section 2.2

  	
  Revolving Loans.

  	
   

  
	
  Section 2.3

  	
  Interest,
  Interest Calculations and Certain Fees.

  	
   

  
	
  Section 2.4

  	
  Notes

  	
   

  
	
  Section 2.5

  	
  Letters of
  Credit and Letter of Credit Fees.

  	
   

  
	
  Section 2.6

  	
  General Provisions
  Regarding Payment; Loan Account.

  	
   

  
	
  Section 2.7

  	
  Maximum
  Interest.

  	
   

  
	
  Section 2.8

  	
  Taxes.

  	
   

  
	
  ARTICLE III
  REPRESENTATION AND WARRANTIES

  	
   

  
	
  Section 3.1

  	
  Existence
  and Power

  	
   

  
	
  Section 3.2

  	
  Organization
  and Governmental Authorization; No Contravention

  	
   

  
	
  Section 3.3

  	
  Binding
  Effect

  	
   

  
	
  Section 3.4

  	
  Capitalization

  	
   

  
	
  Section 3.5

  	
  Financial
  Information.

  	
   

  
	
  Section 3.6

  	
  Litigation

  	
   

  
	
  Section 3.7

  	
  Ownership
  of Property

  	
   

  
	
  Section 3.8

  	
  No
  Default

  	
   

  
	
  Section 3.9

  	
  Labor
  Matters

  	
   

  
	
  Section 3.10

  	
  Regulated
  Entities

  	
   

  
	
  Section 3.11

  	
  Margin
  Regulations

  	
   

  
	
  Section 3.12

  	
  Compliance
  With Laws

  	
   

  
	
  Section 3.13

  	
  Taxes

  	
   

  
	
  Section 3.14

  	
  Compliance
  with ERISA.

  	
   

  
	
  Section 3.15

  	
  Brokers

  	
   

  
	
  Section 3.16

  	
  Related
  Transactions

  	
   

  
	
  Section 3.17

  	
  Employment,
  Equityholders and Subscription Agreements

  	
   

  
	
  Section 3.18

  	
  Compliance
  with Environmental Requirements; No Hazardous Materials

  	
   

  
	
  Section 3.19

  	
  Intellectual
  Property

  	
   

  
	
  Section 3.20

  	
  Real
  Property Interests

  	
   

  
	
  Section 3.21

  	
  Solvency

  	
   

  
	
  Section 3.22

  	
  Full
  Disclosure

  	
   

  
	
  Section 3.23

  	
  Representations
  and Warranties Incorporated from Other Operative Documents

  	
   

  
	
  ARTICLE IV
  AFFIRMATIVE COVENANTS

  	
   

  
	
  Section 4.1

  	
  Financial
  Statements and Other Reports

  	
   

  
	
  Section 4.2

  	
  Payment
  and Performance of Obligations

  	
   

  
	
  Section 4.3

  	
  Conduct
  of Business and Maintenance of Existence

  	
   

  
	
  Section 4.4

  	
  Maintenance
  of Property; Insurance.

  	
   

  
	
  Section 4.5

  	
  Compliance
  with Laws

  	
   

  

 

i

 

	
  Section 4.6

  	
  Inspection
  of Property, Books and Records

  	
   

  
	
  Section 4.7

  	
  Use of
  Proceeds

  	
   

  
	
  Section 4.8

  	
  Lenders’
  Meetings

  	
   

  
	
  Section 4.9

  	
  [Reserved]

  	
   

  
	
  Section 4.10

  	
  Hazardous
  Materials; Remediation

  	
   

  
	
  Section 4.11

  	
  [Reserved]

  	
   

  
	
  Section 4.12

  	
  Further
  Assurances

  	
   

  
	
  ARTICLE V
  NEGATIVE COVENANTS

  	
   

  
	
  Section 5.1

  	
  Debt

  	
   

  
	
  Section 5.2

  	
  Liens

  	
   

  
	
  Section 5.3

  	
  Contingent
  Obligations

  	
   

  
	
  Section 5.4

  	
  Restricted
  Distributions

  	
   

  
	
  Section 5.5

  	
  Restrictive
  Agreements

  	
   

  
	
  Section 5.6

  	
  Payments
  and Modifications of Subordinated Debt

  	
   

  
	
  Section 5.7

  	
  Consolidations,
  Mergers and Sales of Assets

  	
   

  
	
  Section 5.8

  	
  Purchase
  of Assets, Investments

  	
   

  
	
  Section 5.9

  	
  Transactions
  with Affiliates

  	
   

  
	
  Section 5.10

  	
  Modification
  of Organizational Documents

  	
   

  
	
  Section 5.11

  	
  Fiscal
  Year

  	
   

  
	
  Section 5.12

  	
  Conduct
  of Business

  	
   

  
	
  Section 5.13

  	
  Investor
  Fees

  	
   

  
	
  Section 5.14

  	
  Lease
  Payments

  	
   

  
	
  Section 5.15

  	
  Bank
  Accounts

  	
   

  
	
  ARTICLE VI
  FINANCIAL COVENANTS

  	
   

  
	
  Section 6.1

  	
  Capital
  Expenditures

  	
   

  
	
  Section 6.2

  	
  Minimum
  EBITDA.

  	
   

  
	
  Section 6.3

  	
  Fixed
  Charge Coverage Ratio.

  	
   

  
	
  Section 6.4

  	
  Interest
  Coverage Ratio.

  	
   

  
	
  Section 6.5

  	
  Total
  Debt to EBITDA Ratio

  	
   

  
	
  ARTICLE VII
  CONDITIONS

  	
   

  
	
  Section 7.1

  	
  Conditions
  to Initial Funding

  	
   

  
	
  Section 7.2

  	
  Conditions
  to Each Loan and Support Agreement

  	
   

  
	
  ARTICLE VIII
  EVENTS OF DEFAULT

  	
   

  
	
  Section 8.1

  	
  Events
  of Default

  	
   

  
	
  Section 8.2

  	
  Acceleration
  and Suspension or Termination of Revolving Loan Commitment

  	
   

  
	
  Section 8.3

  	
  Cash
  Collateral

  	
   

  
	
  Section 8.4

  	
  Default
  Rate of Interest and Suspension of LIBOR Rate Options

  	
   

  
	
  Section 8.5

  	
  Setoff
  Rights

  	
   

  
	
  Section 8.6

  	
  Application
  of Proceeds

  	
   

  
	
  ARTICLE IX
  EXPENSES, INDEMNITY, TAXES AND RIGHT TO PERFORM

  	
   

  
	
  Section 9.1

  	
  Expenses

  	
   

  
	
  Section 9.2

  	
  Indemnity

  	
   

  
	
  Section 9.3

  	
  Taxes

  	
   

  
	
  Section 9.4

  	
  Right to
  Perform

  	
   

  
	
  ARTICLE X
  AGENT

  	
   

  
	
  Section 10.1

  	
  Appointment
  and Authorization

  	
   

  

 

ii

 

	
  Section 10.2

  	
  Agent
  and Affiliates

  	
   

  
	
  Section 10.3

  	
  Action
  by Agent

  	
   

  
	
  Section 10.4

  	
  Consultation
  with Experts

  	
   

  
	
  Section 10.5

  	
  Liability
  of Agent

  	
   

  
	
  Section 10.6

  	
  Indemnification

  	
   

  
	
  Section 10.7

  	
  Right
  to Request and Act on Instructions

  	
   

  
	
  Section 10.8

  	
  Credit
  Decision

  	
   

  
	
  Section 10.9

  	
  Collateral
  Matters

  	
   

  
	
  Section 10.10

  	
  Agency
  for Perfection

  	
   

  
	
  Section 10.11

  	
  Notice
  of Default

  	
   

  
	
  Section 10.12

  	
  Successor
  Agent

  	
   

  
	
  Section 10.13

  	
  Disbursements
  of Revolving Loans; Payment.

  	
   

  
	
  Section 10.14

  	
  Additional
  Titled Agents

  	
   

  
	
  ARTICLE XI
  MISCELLANEOUS

  	
   

  
	
  Section 11.1

  	
  Survival

  	
   

  
	
  Section 11.2

  	
  No
  Waivers

  	
   

  
	
  Section 11.3

  	
  Notices

  	
   

  
	
  Section 11.4

  	
  Severability

  	
   

  
	
  Section 11.5

  	
  Amendments
  and Waivers

  	
   

  
	
  Section 11.6

  	
  Assignments;
  Participations; Replacement of Lenders.

  	
   

  
	
  Section 11.7

  	
  Headings

  	
   

  
	
  Section 11.8

  	
  Confidentiality

  	
   

  
	
  Section 11.9

  	
  GOVERNING
  LAW; SUBMISSION TO JURISDICTION

  	
   

  
	
  Section 11.10

  	
  WAIVER
  OF JURY TRIAL

  	
   

  
	
  Section 11.11

  	
  Publication;
  Advertisement.

  	
   

  
	
  Section 11.12

  	
  Counterparts;
  Integration

  	
   

  
	
  Section 11.13

  	
  Waiver
  of Consequential and Other Damages

  	
   

  
	
  Section 11.14

  	
  No
  Strict Construction

  	
   

  

 

iii

 

ANNEXES
AND EXHIBITS

 

	
  ANNEXES

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Annex A

  	
   

  	
  -

  	
   

  	
  Commitment Annex

  
	
  Annex B

  	
   

  	
  -

  	
   

  	
  Closing
  Checklist

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBITS

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Exhibit
  A

  	
   

  	
  -

  	
   

  	
  Assignment
  Agreement

  
	
  Exhibit
  B

  	
   

  	
  -

  	
   

  	
  Excess
  Cash Flow Certificate

  
	
  Exhibit
  C

  	
   

  	
  -

  	
   

  	
  Compliance
  Certificate

  
	
  Exhibit
  D

  	
   

  	
  -

  	
   

  	
  Borrowing
  Base Certificate

  
	
  Exhibit
  E

  	
   

  	
  -

  	
   

  	
  Notice
  of Borrowing

  

 

iv

 

CREDIT AGREEMENT

 

CREDIT
AGREEMENT dated as of September 27, 2004 among WILLIAMS CONTROLS, INC., a
Delaware corporation (“Holdings”),
WILLIAMS CONTROLS INDUSTRIES, INC., a Delaware (“Williams”; together with
Holdings, the “Borrowers” and
each, individually, a “Borrower”),
as Borrowers, the financial institutions from time to time parties hereto, each
as a Lender, and MERRILL LYNCH CAPITAL, a division of Merrill Lynch Business
Financial Services Inc., individually as a Lender, as Agent, as Sole Bookrunner
and as Sole Lead Arranger.

 

RECITALS:

 

WHEREAS,
Borrowers desire that Lenders extend certain term credit and working capital
facilities to Borrowers to provide funds necessary (i) to permit Holdings to
repurchase Series B Preferred Stock, as described in that certain
Schedule 14A Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 and in accordance with the provisions of
documents described therein (such transaction, together with the other
transactions incidental thereto and expressly contemplated thereunder being
referred to in their integrated entirety as the “Redemption”), (ii) to provide working capital financing for
Borrower and (iii) to provide funds for other general business purposes of
Borrower; and

 

WHEREAS,
each Borrower desires to secure all of its joint and several obligations under
the Financing Documents (as defined in Section 1.1 below) by granting to
Agent, for the benefit of Agent and Lenders, a security interest in and lien
upon all of its personal and real property, including without limitation all of
the outstanding capital stock or other equity securities, as applicable, of
each Subsidiary; and

 

WHEREAS,
each Subsidiary is willing to guaranty all of the Obligations (as defined in
Section 1.1 below) to Lenders under the Financing Documents, and to grant
to Agent, for the benefit of Agent and Lenders, a security interest in and lien
upon all of its personal and real property;

 

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

 

ARTICLE I

DEFINITIONS

 

Section 1.1             Certain Defined Terms.  The
following terms have the following meanings:

 

“Accounts” means “accounts” (as defined in
Article 9 of the UCC) of Williams and its Subsidiaries, including without
limitation any and all rights to payment for the sale or lease of goods or
rendition of services, whether or not they have been earned by performance, in
each case, for purposes of calculating the Borrowing Base, net of any credits,
rebates or offsets owed by Williams or any Subsidiary thereof to the respective
customer.

 

 

“Affected Lender” has the meaning set forth in Section 11.6(c).

 

“Affiliate” means with respect to any Person
(i) any Person that directly or indirectly controls such Person, (ii) any
Person which is controlled by or is under common control with such controlling
Person, (iii) each of such Person’s (other than, with respect to any Lender,
any Lender’s) officers or directors (or persons functioning in substantially
similar roles) and the spouses, parents, descendants and siblings of such
officers and directors (or such other persons functioning in substantially
similar roles).  As used in this
definition, the term “control” of
a Person means the possession, directly or indirectly, of the power to vote
five percent (5%) or more of any class of voting securities of such Person or
to direct or cause the direction of the management or policies of a Person,
whether through the ownership of voting securities, by contract or otherwise..

 

“Agent” means Merrill Lynch in its capacity
as administrative agent for the Lenders hereunder, as such capacity is
established and subject to the provisions of Article X, and the successors
of Merrill Lynch in such capacity.

 

“Agent Advances” has the meaning set forth
in Section 2.2(a)(ii).

 

“Agreement” means this Credit Agreement, as
the same may be amended, supplemented, restated or otherwise modified from time
to time.

 

“AIP” means American Industrial Partners, a
Delaware general partnership.

 

“Approved Fund” means any (i) investment company, trust, securitization vehicle or
conduit that is (or will be) engaged in making, purchasing, holding or
otherwise investing in commercial loans and similar extensions of credit in the
ordinary course of its business or (ii) any Person (other than a natural
person) which temporarily warehouses loans for any Lender or any entity
described in the preceding clause (i) and that, with respect to each of the
preceding clauses (i) and (ii), is administered or managed by (a) a Lender, (b)
an Affiliate of a Lender or (c) a Person (other than a natural person) or an
Affiliate of a Person (other than a natural person) that administers or manages
a Lender.

 

“Asset Disposition” means any sale, lease,
license or other consensual disposition by any Credit Party of any asset, but
excluding (i) dispositions of Inventory in the ordinary course of business, and
(ii) dispositions of Cash Equivalents.

 

“Assignment Agreement” means an agreement
substantially in the form of Exhibit A hereto.

 

“Available Investment Basket” means, as of
any date of determination, an amount equal to (a) $1,500,000, plus (b) proceeds of cash equity
contributed to Holdings to the extent not required to be applied to the
Obligations and used, within thirty (30) days of being contributed, to fund an
Investment in Permitted China Joint Ventures or in a Foreign Subsidiary, plus (c) cash distributions (including
pursuant to repayment of intercompany loans permitted hereunder) received by
Holdings or a Domestic Subsidiary of Holdings from a Permitted China Joint
Venture or a Foreign Subsidiary, minus
(d) aggregate cash Investments theretofore made by

 

 

Holdings
and its Domestic Subsidiaries in Permitted China Joint Ventures and Foreign
Subsidiaries.

 

“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy”.

 

“Borrower”, as defined in the Preamble to
this Agreement, refers to any or each of Williams or Holdings, as the context
requires or otherwise permits.

 

“Borrowers”, as defined in the Preamble to
this Agreement, refers to Williams and to Holdings on a joint and several basis.

 

“Borrower’s Account” means the account
specified on the signature pages hereof below Borrower’s name into which Loans
(other than Agent Advances, which shall be disbursed by Agent in a manner
permitted by Section 2.2(a)(ii)) shall, absent other written instructions,
be made, or such other account as Borrower may specify by written notice to
Agent.

 

“Borrowing Base” means, as of any date of
calculation, a dollar amount calculated pursuant to the Borrowing Base
Certificate most recently delivered to Agent in accordance with the terms
hereof, equal to the sum of 85% of Eligible Accounts and 60% of Eligible
Inventory.

 

“Borrowing Base Certificate” means a
certificate, duly executed by a Responsible Officer, appropriately completed
and substantially in the form of Exhibit D hereto.

 

“Business Day” means any day except a
Saturday, Sunday or other day on which either the New York Stock Exchange is
closed, or on which commercial banks in Chicago are authorized by law to close
and, in the case of a Business Day which relates to a LIBOR Loan, a day on
which dealings are carried on in the London interbank eurodollar market.

 

“Capital Expenditures” has the meaning
provided in the Compliance Certificate.

 

“Capital Lease” of any Person means any
lease of any property by such Person as lessee which would, in accordance with
GAAP, be required to be accounted for as a capital lease on the balance sheet
of such Person.

 

“Cash Equivalents” means any Investment in
(i) direct obligations of the United States or any agency thereof, or
obligations guaranteed by the United States or any agency thereof, (ii)
commercial paper rated at least A-1 by Standard & Poor’s Ratings Service
and P-1 by Moody’s Investors Services, Inc., (iii) time deposits with,
including certificates of deposit issued by, any office located in the United
States of any bank or trust company which is organized under the laws of the
United States or any State thereof and has capital, surplus and undivided
profits aggregating at least $500,000,000 and which issues (or the parent of
which issues) certificates of deposit or commercial paper with a rating
described in clause (ii) above, (iv) repurchase agreements with respect to
securities described in clause (i) above entered into with an office of a bank
or trust company meeting the criteria specified in clause (iii) above, provided
in each case that such Investment matures within one year from the date of
acquisition thereof by any Credit Party, or (v) any money market or mutual fund
which invests only in the foregoing types of investments and the liquidity of
which is satisfactory to Agent.

 

 

“Closing Checklist” means Annex B to this
Agreement.

 

“Closing Date” means the date of this
Agreement.

 

“Code” means the Internal Revenue Code of
1986.

 

“Collateral” means all property, now
existing or hereafter acquired, mortgaged or pledged to, or purported to be
subjected to a Lien in favor of, Agent, for the benefit of Agent and Lenders,
pursuant to the Security Documents.

 

“Commitment Annex” means Annex A to this
Agreement.

 

“Commitment Expiry Date” means
September 29, 2009.

 

“Compliance Certificate” means a
certificate, duly executed by a Responsible Officer, appropriately completed
and substantially in the form of Exhibit C hereto.

 

“Consolidated Subsidiary” means at any date
any Subsidiary or other Person the accounts of which would be consolidated with
those of Holdings in its consolidated financial statements if such statements
were prepared as of such date.

 

“Contingent Obligations” means, with respect to any Person, any
direct or indirect liability of such Person: (i) with respect to any debt,
lease, dividend or other obligation of another Person if the purpose or intent
of such Person incurring such liability, or the effect thereof, is to provide
assurance to the obligee of such liability that such liability will be paid or
discharged, or that any agreement relating thereto will be complied with, or
that any holder of such liability will be protected, in whole or in part,
against loss with respect thereto; (ii) with respect to any letter of credit
issued for the account of such Person or as to which such Person is otherwise
liable for the reimbursement of any drawing; (iii) under any Swap Contract (but
excluding any such liability to the extent constituting Debt); (iv) to make
take-or-pay or similar payments if required regardless of nonperformance by any
other party or parties to an agreement; or (v) for any obligation of another
Person pursuant to any agreement to purchase or otherwise acquire any
obligation or any property constituting security therefor, to provide funds for
the payment or discharge of such obligation or to preserve the solvency,
financial condition or level of income of another Person.  The amount of any Contingent Obligation
shall be equal to the amount of the obligation so guaranteed or otherwise
supported or, if not a fixed determinable amount, the maximum amount so
guaranteed or otherwise supported.

 

“Controlled Group” means all members of a
group of corporations and all members of a group of trades or businesses
(whether or not incorporated) under common control which, together with
Borrower, are treated as a single employer under Section 414(b), (c), (m)
or (o) of the Code or Section 4001(b) of ERISA.

 

“Credit Exposure” means any period of time during
which the Revolving Loan Commitment is outstanding or any Loan, Reimbursement
Obligation or other Obligation remains unpaid or any Letter of Credit or
Support Agreement remains outstanding; provided,
that no Credit Exposure shall be deemed to exist solely due to the existence of
contingent indemnification liability, absent the assertion of a claim with
respect thereto.

 

 

“Credit Party” means Holdings, Williams and
each of their respective direct and indirect Subsidiaries, provided, however, that Credit Party shall
not include any of the Inactive Entities.

 

“Debt” of a Person means at any date,
without duplication, (i) all obligations of such Person for borrowed money,
(ii) all obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments, (iii) all obligations of such Person to pay the
deferred purchase price of property or services, except trade accounts payable
arising and paid in the ordinary course of business, (iv) all Capital Leases of
such Person, (v) all non-contingent obligations of such Person to reimburse any
bank or other Person in respect of amounts paid under a letter of credit or
similar instrument, (vi) all equity securities of such Person subject to
repurchase or redemption otherwise than at the sole option of such Person,
(vii) all obligations secured by a Lien on any asset of such Person, whether or
not such obligation is otherwise an obligation of such Person, (viii)
“earnouts” and similar payment obligations and (ix) all Debt of others
Guaranteed by such Person.

 

“Default” means any condition or event which
with the giving of notice or lapse of time or both would, unless cured or
waived, become an Event of Default.

 

“Defaulted Lender” means, so long as such
failure shall remain in existence and uncured, any Lender which shall have
failed to make any Loan or other credit accommodation, disbursement or
reimbursement required pursuant to the terms of any Financing Documents.

 

“Domestic Subsidiary” means a Subsidiary
incorporated, formed or otherwise organized under the laws of a state within
the United States.

 

“EBITDA” has the meaning as defined pursuant
to the terms of the Compliance Certificate.

 

“Eligible Accounts” has the meaning provided
in the Borrowing Base Certificate.

 

“Eligible Assignee” means (i) a Lender, (ii)
an Affiliate of a Lender, (iii) an Approved Fund, and (iv) any other Person
(other than a natural person) approved by (a) Agent, and (b) unless an Event of
Default has occurred and is continuing, Borrower (each such approval not to be unreasonably
withheld or delayed, and Borrower’s consent shall be deemed provided unless
expressly withheld by Borrower within three (3) Business Days of request
therefor); provided that
notwithstanding the foregoing, (x) “Eligible Assignee” shall not include
Borrower or any of Borrower’s Affiliates or Subsidiaries and (y) no proposed
assignee intending to assume all or any portion of the Revolving Loan
Commitment shall be an Eligible Assignee unless such proposed assignee either
already holds a portion of the Revolving Loan Commitment, or has been approved
as an Eligible Assignee by Agent.

 

“Eligible Inventory” has the meaning
provided in the Borrowing Base Certificate.

 

“Eligible Swap Counterparty” means Agent,
any Affiliate of Agent, any Lender and/or any Affiliate of any Lender that (i)
from time to time enters into a Swap Contract with Borrower or any Subsidiary
and (ii) in the case of a Lender or an Affiliate of a Lender other than Agent,
is expressly identified by Agent, in its sole discretion, as an Eligible Swap
Counterparty.  Without limitation of
Agent’s discretion to identify a Lender or Affiliate of a Lender as an Eligible
Swap

 

 

Counterparty,
no Lender or Affiliate of any Lender shall be designated an Eligible Swap
Counterparty unless such Person maintains reporting systems acceptable to Agent
with respect to Swap Contract exposure.

 

“Environmental Laws” means any and all
federal, state, local and foreign statutes, laws, judicial decisions,
regulations, ordinances, rules, judgments, orders, decrees, codes, plans,
injunctions, permits, concessions, grants, franchises, licenses, agreements and
governmental restrictions, whether now or hereafter in effect, relating to the
environment or the effect of the environment on human health or to emissions, discharges
or releases of pollutants, contaminants, Hazardous Materials or wastes into the
environment, including ambient air, surface water, ground water or land, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants, Hazardous Materials or wastes or the clean-up or other
remediation thereof.

 

“Equity Documents” means, collectively, that
certain Certificate of Amendment to the Certificate of Incorporation of Williams
Controls, Inc. and those related documents described in and attached as forms
to that certain Schedule 14A Proxy Statement Pursuant to
Section 14(a) of the Securities Exchange Act of 1934, filed with the
Securities and Exchange Commission on September 14, 2004, including,
without limitation, the Certificate of Amendment to the Series A-1 Designation
and that Certificate of Amendment to the Series B Designation, each filed on or
about the date hereof by the Board of Directors of Holdings with the secretary
of State of the State of Delaware and that certain Put and Call Agreement dated
as of September 27, 2004  (the “Put and Call Agreement”) by and among
Holdings and issued to Investor.

 

“ERISA” means the Employee Retirement Income
Security Act of 1974.

 

“ERISA Plan” means any “employee benefit
plan”, as such term is defined in Section 3(3) of ERISA (other than a
Multiemployer Pension Plan), which Borrower maintains, sponsors or contributes
to, or, in the case of an employee benefit plan which is subject to
Section 412 of the Code or Title IV of ERISA, to which Borrower or any
member of the Controlled Group may have any liability, including any liability
by reason of having been a substantial employer within the meaning of
Section 4063 of ERISA at any time during the preceding five years, or by
reason of being deemed to be a contributing sponsor under Section 4069 of
ERISA.

 

“Event of Default” has the meaning set forth
in Section 8.1.

 

“Excess Cash Flow” has the meaning provided
in the Excess Cash Flow Certificate.

 

“Excess Cash Flow Certificate” means a
certificate, duly executed by a Responsible Officer, appropriately completed
and substantially in the form of Exhibit B hereto.

 

“Federal Funds Rate” means, for any day, the
rate of interest per annum (rounded upwards, if necessary, to the nearest whole
multiple of 1/100 of 1%) equal to the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by the Federal
Reserve Bank of New York on the Business Day next succeeding such day, provided
that (i) if such day is not a Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Business Day and
(ii) if no such rate is so published on such

 

 

next
preceding Business Day, the Federal Funds Rate for such day shall be the
average rate quoted to Agent on such day on such transactions as determined by
Agent.

 

“Financing Documents” means this Agreement,
the Notes, the Security Documents, the Information Certificate, any fee letter
between Merrill Lynch and Borrowers relating to the transactions contemplated
hereby, any Swap Contract entered into between any Credit Party and any
Eligible Swap Counterparty, any agreement subordinating the Subordinated Debt
to all or any portion of the Obligations and all other documents, instruments
and agreements contemplated herein or thereby and executed concurrently
herewith or at any time and from time to time hereafter, as any or all of the
same may be amended, supplemented, restated or otherwise modified from time to
time.

 

“Fiscal Year” means a fiscal year of the
Borrowers, ending on September 30 of each calendar year.

 

“Fixed Charge Coverage Ratio” has the meaning
provided in the Compliance Certificate.

 

“Foreign Lender” has the meaning set forth in Section 2.8(c).

 

“Foreign Subsidiary” means a Subsidiary
other than a Domestic Subsidiary.

 

“GAAP” means generally accepted accounting
principles set forth from time to time in the opinions and pronouncements of
the Accounting Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board (or agencies with similar functions of comparable stature and
authority within the U.S. accounting profession), which are applicable to the
circumstances as of the date of determination.

 

“Guarantee” by any Person means any
obligation, contingent or otherwise, of such Person directly or indirectly
guaranteeing any Debt or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of such Person (i) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Debt or other obligation
(whether arising by virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or services, to take-or-pay,
or to maintain financial statement conditions or otherwise) or (ii) entered
into for the purpose of assuring in any other manner the obligee of such Debt
or other obligation of the payment thereof or to protect such obligee against
loss in respect thereof (in whole or in part), provided that the term Guarantee
shall not include endorsements for collection or deposit in the ordinary course
of business.  The term “Guarantee” used
as a verb has a corresponding meaning.

 

“Hazardous Materials” means (i) any
“hazardous substance” as defined in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, (ii) asbestos, (iii) polychlorinated
biphenyls, (iv) petroleum, its derivatives, by-products and other hydrocarbons,
and (v) any other toxic, radioactive, caustic or otherwise hazardous substance regulated
under Environmental Laws.

 

 

“Hazardous Materials Contamination” means
contamination (whether now existing or hereafter occurring) of the
improvements, buildings, facilities, personalty, soil, groundwater, air or
other elements on or of the relevant property by Hazardous Materials, or any
derivatives thereof, or on or of any other property as a result of Hazardous
Materials, or any derivatives thereof, generated on, emanating from or disposed
of in connection with the relevant property.

 

“Holdings” has the meaning set forth in the
Preamble to this Agreement.

 

“Inactive Entities” means, collectively,
Argotec Williams, Inc., Aptek Williams, Inc., WMCO-GEO, Inc., Hardee Williams,
Inc., Kenco/Williams, Inc., NESC Williams, Inc., Premier Plastic Technologies,
Inc., Proactive Acquisition Corporation, Waccamaw Wheel Williams, Inc.,
Williams Technologies, Inc., Williams World Trade, Inc., Williams Automotive,
Inc., Techwood Williams, Inc., each a Delaware Corporation except for WMCO-GEO,
Inc., which is a Florida corporation and Proactive Acquisition Corporation,
which is a Michigan corporation, and each a wholly owned Subsidiary of
Holdings.

 

“Indemnitees” has the meaning set forth in
Section 9.2.

 

“Information Certificate” means that certain
Information Certificate of even date herewith executed by Borrower and
delivered to Agent.

 

“Intellectual Property” means, with respect
to any Person, all patents, trademarks, trade names, copyrights, technology,
know-how and processes, and all applications therefor, used in or necessary for
the conduct of business by such Person.

 

“Interest Coverage Ratio” has the meaning
provided in the Compliance Certificate.

 

“Interest Period” means, as to any LIBOR
Loan, the period commencing on the date such Loan is borrowed or continued as,
or converted into, a LIBOR Loan and ending on the date one (1), two (2), three
(3) or six (6) months thereafter, as selected by Borrower pursuant to
Section 2.3(e); provided,
that:  (a) if any Interest Period would
otherwise end on a day that is not a Business Day, such Interest Period shall
be extended to the following Business Day unless the result of such extension
would be to carry such Interest Period into another calendar month, in which
event such Interest Period shall end on the preceding Business Day; (b) any
Interest Period that begins 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 Business Day of the calendar month at the end of such
Interest Period; (c) Borrower may not select any Interest Period for a
Revolving Loan which would extend beyond the Commitment Expiry Date; and (d)
Borrower may not select any Interest Period for any portion of the Term Loan
if, after giving effect to such selection, the aggregate principal amount of
such portions of the Term Loan having Interest Periods ending after any date on
which an installment of the Term Loan is scheduled to be repaid would exceed
the aggregate principal amount of the Term Loan scheduled to be outstanding
after giving effect to such repayment.

 

“Inventory” means “inventory” (as defined in
Article 9 of the UCC) of Williams and its Subsidiaries.

 

 

“Investment” means any investment in any
Person, whether by means of acquiring or holding securities, capital
contribution, loan, time deposit, advance, Guarantee or otherwise.

 

“Investor” means American Industrial
Partners Capital Fund III, L.P., a Delaware limited partnership.

 

“LC Issuer” means a bank or trust company
acceptable to Merrill Lynch, as issuer of one or more Letters of Credit
outstanding at any time.

 

“Lender” means each of (i) Merrill Lynch,
(ii) each other financial institution party hereto, (iii) each other Eligible
Assignee that becomes a party hereto pursuant to Section 11.6, (iv) Agent,
to the extent of any Agent Advances and other Revolving Loans made by Agent
which have not been settled among the Lenders pursuant to Section 10.13,
and (v) the respective successors of all of the foregoing, and Lenders means
all of the foregoing.  In addition to
the foregoing, for the purpose of identifying the Persons entitled to share in
the Collateral and the proceeds thereof under, and in accordance with the
provisions of, this Agreement and the Security Documents, the term “Lender”
shall include Eligible Swap Counterparties.

 

“Letter of Credit” means a standby letter of
credit issued for the account of Borrower by an LC Issuer which expires by its
terms within one year after the date of issuance and in any event at least
thirty (30) days prior to the Commitment Expiry Date.  Notwithstanding the foregoing, a Letter of Credit may provide for
automatic extensions of its expiry date for one or more successive one (1) year
periods provided that the LC Issuer that issued such Letter of Credit has the right
to terminate such Letter of Credit on each such annual expiration date and no
renewal term may extend the term of the Letter of Credit to a date that is
later than the thirtieth (30th) day prior to the Commitment Expiry Date.

 

“Letter of Credit Liabilities” means, at any
time of calculation, the sum of (i) the amount then available for drawing under
all outstanding Letters of Credit (without regard to whether any conditions to
drawing thereunder can then be met), to the extent subject to a Support Agreement
plus (ii) the aggregate unpaid amount of all reimbursement obligations in
respect of previous drawings made under such Letters of Credit, to the extent
subject to a Support Agreement.

 

“LIBOR” means, with respect to any LIBOR
Loan for any Interest Period, a rate per annum (rounded upwards, if necessary,
to the nearest 1/16 of 1%) equal to (i) the rate of interest which is
identified and normally published by Bloomberg Professional Service Page BBAM 1
as the offered rate for loans in U.S. dollars for the applicable Interest
Period under the caption British Bankers Association LIBOR Rates as of 11:00
a.m. (London time), on the second full Business Day next preceding the first
day of such Interest Period (unless such date is not a Business Day, in which event
the next succeeding Business Day will be used); divided by (ii) the sum of one
minus the daily average during such Interest Period of the aggregate maximum
reserve requirement (expressed as a decimal) then imposed under Regulation D of
the Board of Governors of the Federal Reserve System (or any successor thereto)
for “Eurocurrency Liabilities” (as defined therein).  If Bloomberg Professional Service no longer reports the LIBOR or
Agent determines in good faith that the rate so reported no longer accurately
reflects the rate available to Agent in the London Interbank Market or if such
index no longer exists or if Page

 

 

BBAM
1 no longer exists or accurately reflects the rate available to Agent in the
London Interbank Market, Agent may select a replacement index or replacement
page, as the case may be.

 

“LIBOR Loans” means any Loans which accrue
interest by reference to the LIBOR, in accordance with the terms of this
Agreement.

 

“LIBOR Margin” means 3.75% per annum, with
respect to the Revolving Loans and other Obligations (other than the Term
Loan), and 4.25% per annum with respect to the Term Loan.

 

“Lien” means, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind,
or any other type of preferential arrangement that has the practical effect of
creating a security interest, in respect of such asset.  For the purposes of this Agreement and the
other Financing Documents, each Borrower or any Subsidiary shall be deemed to
own subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, Capital
Lease or other title retention agreement relating to such asset.

 

“Loan Account” has the meaning set forth in
Section 2.6(b).

 

“Loans” means the Term Loan and the
Revolving Loans, or any combination of the foregoing, as the context may
require.

 

“Major Casualty Proceeds” means (i) the
aggregate insurance proceeds received in connection with one or more related
events under any Property Insurance Policy or (ii) any award or other
compensation with respect to any condemnation of property (or any transfer or
disposition of property in lieu of condemnation), if the amount of such
aggregate insurance proceeds or award or other compensation exceeds $500,000.

 

“Management Agreement” means that certain
Amended and Restated Management Services Agreement among Holdings, AIP and
Dolphin Advisors, LLC, a Delaware limited liability company, dated as of
September 27, 2004.

 

“Margin Stock” has the meaning assigned
thereto in Regulation U of the Federal Reserve Board.

 

“Material Adverse Effect” means, with
respect to any event, act, condition or occurrence of whatever nature
(including any adverse determination in any litigation, arbitration, or governmental
investigation or proceeding), whether singly or in conjunction with any other
event or events, act or acts, condition or conditions, occurrence or
occurrences, whether or not related, a material adverse change in, or a
material adverse effect upon, any of (i) the financial condition, operations,
business, properties or prospects of the Credit Parties, taken as a whole, (ii)
the rights and remedies of Agent or Lenders under any Financing Document, or
the ability of any Credit Party to perform any of its obligations under any
Financing Document to which it is a party, (iii) the legality, validity or
enforceability of any Financing Document, or (iv) the existence, perfection or
priority of any security interest granted in any Financing Document or the value
of any material Collateral.

 

 

“Maximum Lawful Rate” has the meaning set
forth in Section 2.7(b).

 

“Merrill Lynch” means Merrill Lynch Capital,
a division of Merrill Lynch Business Financial Services Inc., and its
successors.

 

“Multiemployer Pension Plan” means a
multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which
Borrower or any member of the Controlled Group may have any liability.

 

“Net Cash Proceeds” means, with respect to
any transaction or event, an amount equal to the cash proceeds received by the
Credit Party from or in respect of such transaction or event (including
proceeds of any non-cash proceeds of such transaction), less (i) any
out-of-pocket expenses reasonably incurred by such Person in connection
therewith and (ii) in the case of an Asset Disposition, the amount of any Debt
secured by a Lien on the related asset and discharged from the proceeds of such
Asset Disposition and any taxes paid or payable by such Person in respect of
such Asset Disposition.

 

“Notes” means the Term Notes and the
Revolving Loan Notes, or any combination of the foregoing, as the context may
require.

 

“Notice of Borrowing” means a written notice
of a Responsible Officer, appropriately completed and substantially in the form
of Exhibit E hereto.

 

“Notice of LC Credit Event” means a written
notice from a Responsible Officer to Agent with respect to any issuance,
increase or extension of a Letter of Credit specifying: (i) the date of
issuance or increase of a Letter of Credit; (ii) the expiry date of such Letter
of Credit; (iii) the proposed terms of such Letter of Credit, including the
face amount; and (iv) the transactions or additional transaction or
transactions that are to be supported or financed with such Letter of Credit or
increase thereof.

 

“Obligations” means all obligations,
liabilities and indebtedness (monetary (including post-petition interest,
whether or not allowed) or otherwise) of each Credit Party under this Agreement
or any other Financing Document, in each case howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent, now or hereafter
existing, or due or to become due.  The
Obligations shall include, without limitation, all obligations, liabilities and
indebtedness arising from or in connection with all Support Agreements and all
Swap Contracts entered into with any Eligible Swap Counterparty.

 

“Operative Documents” means the Financing
Documents and the Equity Documents.

 

“Organizational Documents” means, with
respect to any Person other than a natural person, the documents by which such
Person was organized (such as a certificate of incorporation, certificate of
limited partnership or articles of organization, and including, without
limitation, any certificates of designation for preferred stock or other forms
of preferred equity) and which relate to the internal governance of such Person
(such as by-laws, a partnership agreement or an operating, limited liability or
members agreement).

 

“Participant” has the meaning set forth in
Section 11.6(b).

 

 

“Payment Account” means the account
specified on the signature pages hereof into which all payments by or on behalf
of Borrowers to Agent under the Financing Documents shall be made, or such
other account as Agent shall from time to time specify by notice to Borrowers.

 

“PBGC” means the Pension Benefit Guaranty
Corporation and any Person succeeding to any or all of its functions under
ERISA.

 

“Pension Plan” means any ERISA Plan that is subject to Section 412 of the Code
or Title IV of ERISA.

 

“Permitted China Joint Venture” means an
arrangement pursuant to which Holdings or one of its Subsidiaries, and another
Person who, prior to entering into such arrangement, is not an Affiliate of a
Borrower, enter into a business relationship to engage in a business permitted
by, or complimentary to a business permitted by Section 4.3 in the
People’s Republic of China, provided
(i) neither Borrowers nor any of their Subsidiaries (other than such Subsidiary
if it is a Permitted China Joint Venture) shall have any liability, whether
pursuant to contract or applicable law, for any obligations and liabilities of
such other Person or joint venture except for the amount of the Investment
therein to the extent permitted hereunder, and (ii) subject to
Section 4.12 hereof, Holdings or its Subsidiary, as applicable, shall have
pledged all of its interests therein to Agent, for the benefit of Agent and
Lenders, as security for the Obligations, provided that in no event shall such
Person be required to guaranty the Obligations or pledge its assets to secure
the Obligations.

 

“Permitted Contest” means a contest
maintained in good faith by appropriate proceedings promptly instituted and
diligently conducted and with respect to which such reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made; provided
that compliance with the obligation that is the subject of such contest is
effectively stayed during such challenge.

 

“Permitted Liens” means Liens permitted
pursuant to Section 5.2.

 

“Person” means any natural person,
corporation, limited liability company, professional association, limited
partnership, general partnership, joint stock company, joint venture,
association, company, trust, bank, trust company, land trust, business trust or
other organization, whether or not a legal entity, and any government or agency
or political subdivision thereof.

 

“Prime Rate” means a variable per annum
rate, as of any date of determination, equal to the greater of (i) the Federal
Funds Rate plus one-half of one percent (0.50%) per annum and (ii) the
rate from time to time published in the “Money Rates” section of The Wall Street Journal as being the
“Prime Rate” (or, if more than one rate is published as the Prime Rate, then
the highest of such rates).  The Prime
Rate will change as of the date of publication in The Wall Street Journal of a Prime Rate that is different
from that published on the preceding Business Day.  In the event that The Wall
Street Journal shall, for any reason, fail or cease to publish the
Prime Rate, Agent shall choose a reasonably comparable index or source to use
as the basis for the Prime Rate.

 

“Prime Rate Loans” means Loans which accrue
interest by reference to the Prime Rate, in accordance with the terms of this
Agreement.

 

 

“Prime Rate Margin” means 2.75% per annum,
with respect to the Revolving Loans and other Obligations (other than the Term
Loan), and 3.25% per annum with respect to the Term Loan.

 

“Property Insurance Policy” means any
insurance policy maintained by any Credit Party covering losses with respect to
tangible real or personal property or improvements or losses from business
interruption.

 

“Pro Rata Share” means (i) with respect to a
Lender’s right to receive payments of principal and interest with respect to
the Term Loan , the Term Loan Commitment Percentage of such Lender, (ii) with
respect to a Lender’s obligation to make Revolving Loans, such Lender’s right
to receive payments of principal and interest with respect thereto, such
Lender’s right to receive the unused line fee described in Section 2.3(b),
and such Lender’s obligation to share in Letter of Credit Liabilities and to
receive the related Letter of Credit fee described in Section 2.5(b), the
Revolving Loan Commitment Percentage of such Lender, and (iii) for all other
purposes (including without limitation the indemnification obligations arising
under Section 10.6) with respect to any Lender, the percentage obtained by
dividing (x) the sum of the Revolving Loan Commitment Amount of such Lender
(or, in the event the Revolving Loan Commitment shall have been terminated,
such Lender’s then existing Revolving Loan Outstandings), plus such Lender’s then outstanding
principal amount of the Term Loan by (y) the sum of the Revolving Loan
Commitment (or, in the event the Revolving Loan Commitment shall have been
terminated, the then existing Revolving Loan Outstandings of all Lenders), plus the then outstanding principal amount
of the Term Loan.

 

“Redemption” is defined in the first Recital
to this Agreement.

 

“Reimbursement Obligations” means, at any
date, the obligations of Borrowers then outstanding to reimburse Merrill Lynch
for payments made by Merrill Lynch under a Support Agreement.

 

“Reinvestment Reserve” has the meaning set
forth in Section 2.1(c).

 

“Replacement Lender” has the meaning set forth in Section 11.6(c).

 

“Required Lenders” means at any time Lenders
holding (i) sixty-six and two thirds percent (66 2/3%) or more of the sum of
the Revolving Loan Commitment and the outstanding principal balance of the Term
Loan or (ii) if the Revolving Loan Commitment has been terminated, sixty-six
and two thirds percent (66 2/3%) or more of the sum of (x) the aggregate
outstanding principal balance of the Loans plus
(y) the aggregate amount of Reimbursement Obligations.

 

“Responsible Officer” means either of the
Chief Executive Officer or Chief Financial Officer of either Borrower.

 

“Restricted Distribution” means as to any
Person (i) any dividend or other distribution on any equity interest in such
Person (except those payable solely in its equity interests of the same class)
or (ii) any payment on account of (a) the purchase, redemption, retirement,
defeasance, surrender or acquisition of any equity interests in such Person or
any claim

 

 

respecting
the purchase or sale of any equity interest in such Person or (b) any option,
warrant or other right to acquire any equity interests in such Person.

 

“Revolving Loan Borrowing” means a borrowing
of a Revolving Loan.

 

“Revolving Loan Commitment” means the sum of
each Lender’s Revolving Loan Commitment Amount.

 

“Revolving Loan Commitment Amount” means, as
to any Lender, the dollar amount set forth opposite such Lender’s name on the
Commitment Annex under the column “Revolving Loan Commitment Amount”, or, if different,
in the most recent Assignment Agreement to which such Lender is a party.

 

“Revolving Loan Commitment Percentage”
means, as to any Lender, the percentage set forth opposite such Lender’s name
on the Commitment Annex under the column “Revolving Loan Commitment
Percentage”, or, if different, in the most recent Assignment Agreement to which
such Lender is a party.

 

“Revolving Loan Limit” means, at any time,
the lesser of (i) the Borrowing Base, plus any Agent Advances and (ii) the
Revolving Loan Commitment.

 

“Revolving Loan Note” has the meaning set
forth in Section 2.4.

 

“Revolving Loan Outstandings” means at any
time of calculation the sum of the then existing aggregate outstanding
principal amount of Revolving Loans and the then existing Letter of Credit
Liabilities.

 

“Revolving Loans” has the meaning set forth
in Section 2.2(a), and includes all Agent Advances.

 

“Security Documents” means any agreement,
document or instrument executed concurrently herewith or at any time hereafter
pursuant to which one or more Credit Parties or any other Person either (i)
Guarantees payment or performance of all or any portion of the Obligations
and/or (ii) provides, as security for all or any portion of the Obligations, a
Lien on any of its assets in favor of Agent for its own benefit and the benefit
of the Lenders, as any or all of the same may be amended, supplemented,
restated or otherwise modified from time to time.

 

“Settlement Date” has the meaning set forth
in Section 10.13(a).

 

“Stated Rate” has the meaning set forth in
Section 2.7(b).

 

“Subsidiary” means, with respect to any
Person, any corporation, limited liability company, limited partnership or
other entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly owned by
such Person.  Unless otherwise
specified, the term Subsidiary shall refer to a Subsidiary of a Borrower.

 

“Support Agreement” has the meaning set
forth in Section 2.5(a).

 

 

“Swap Contract” means any “swap agreement”,
as defined in Section 101 of the Bankruptcy Code, that is intended to
provide protection against fluctuations in interest or currency exchange rates.

 

“Taxes” has the meaning set forth in
Section 2.8.

 

“Taxpayer” means any Person described in Section 7701(a)(1) of the Code.

 

“Term Loan” has the meaning set forth in
Section 2.1.

 

“Term Loan Commitment Percentage” means, as
to any Lender, the percentage set forth opposite such Lender’s name on the
Commitment Annex under the column “Term Loan Commitment Percentage”, or, if
different, in the most recent Assignment Agreement to which such Lender is a
party.

 

“Term Note” has the meaning set forth in
Section 2.4.

 

“Termination Date” has the meaning set forth
in Section 2.2(c).

 

“Total Debt” has the meaning provided in the
Compliance Certificate.

 

“UCC” means the Uniform Commercial Code of
the State of Illinois or of any other state the laws of which are required to
be applied in connection with the perfection of security interests in any
Collateral.

 

Section 1.2             Accounting Terms and
Determinations.  Unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all accounting
determinations hereunder (including without limitation determinations made
pursuant to the exhibits hereto) shall be made, and all financial statements
required to be delivered hereunder shall be prepared on a consolidated basis in
accordance with GAAP applied on a basis consistent with the most recent audited
consolidated financial statements of Holdings and its Consolidated Subsidiaries
delivered to Agent and each of the Lenders. 
If at any time any change in GAAP would affect the computation of any
financial ratio or financial requirement set forth in any Financing Document,
and either Borrowers or the Required Lenders shall so request, the Agent, the
Lenders and Borrowers shall negotiate in good faith to amend such ratio or
requirement to preserve the original intent thereof in light of such change in
GAAP (subject to the approval of the Required Lenders); provided that, until so amended, (i) such
ratio or requirement shall continue to be computed in accordance with GAAP
prior to such change therein and (ii) Borrowers shall provide to the Agent and
the Lenders financial statements and other documents required under this
Agreement which include a reconciliation between calculations of such ratio or
requirement made before and after giving effect to such change in GAAP.  All amounts used for purposes of financial
calculations required to be made herein shall be without duplication.

 

Section 1.3             Other Definitional
Provisions.  References in this Agreement to “Articles”,
“Sections”, “Annexes” or “Exhibits” shall be to Articles, Sections, Annexes or
Exhibits of or to this Agreement unless otherwise specifically provided.  Any term defined herein may be used in the
singular or plural.  “Include”,
“includes” and “including” shall be deemed to be followed by “without
limitation”.  Except as otherwise
specified herein, references

 

 

to
any Person include the successors and assigns of such Person.  References “from” or “through” any date
mean, unless otherwise specified, “from and including” or “through and
including”, respectively.  References to
any statute or act shall include all related current regulations and all
amendments and any successor statutes, acts and regulations.

 

ARTICLE II

LOANS AND LETTERS OF CREDIT

 

Section 2.1             Term Loan.

 

(a)           Term Loan Amount.  On
the terms and subject to the conditions set forth herein, the Lenders hereby
agree to make a term loan in an original principal amount equal to $17,000,000
(“Term Loan”) to Borrowers on the
Closing Date.  Each Lender’s obligation
to fund the Term Loan shall be limited to such Lender’s Term Loan Commitment
Percentage of the Term Loan and no Lender shall have any obligation to fund any
portion of the Term Loan required to be funded by any other Lender, but not so
funded.  Borrowers shall not have any
right to re-borrow any portion of the Term Loan which are repaid or prepaid
from time to time.

 

(b)           Scheduled Repayments. 
There shall become due and payable, and Borrowers shall repay the Term
Loan through, equal quarterly scheduled payments of $850,000 each (or, if less,
the outstanding amount of the applicable Loan) on March 31, June 30,
September 30 and December 31 of each year.  Notwithstanding the payment schedules set forth above, the
outstanding principal amount of Term Loan shall become immediately due and
payable in full on the Termination Date.

 

(c)           Mandatory Prepayments. 
There shall become due and payable and Borrowers shall prepay the Term
Loan (and the Revolving Loans, to the extent required by
Section 2.1(e)(i)) in the following amounts and at the following times:

 

(i)            on
the ninety-fifth (95th) day following the last day of each Fiscal
Year, beginning with the Fiscal Year ending September 30, 2005, an amount
equal to seventy five percent (75%) of Excess Cash Flow for such Fiscal Year;

 

(ii)           on
the date on which any Credit Party (or Agent as loss payee or assignee)
receives any payment which constitutes Major Casualty Proceeds, an amount equal
to the amount of such payment; provided,
that the recipient (other than Agent) of any payment which constitutes Major
Casualty Proceeds may reinvest such payment within one hundred eighty (180)
days, in replacement assets comparable to the assets giving rise to such
payment; provided, that the
aggregate amount which may be reinvested by Borrowers and their Subsidiaries
(other than the Inactive Entities) pursuant to the preceding proviso may not
exceed $500,000 in any Fiscal Year; provided,
further, that if the applicable Credit Party does not intend to reinvest such
payment, or if the time period set forth in this sentence expires without such
Credit Party having reinvested such payment, Borrowers shall prepay the Loans
in an amount equal to such payment;

 

(iii)          promptly
upon receipt by any Credit Party of the proceeds from the issuance and sale of
any Debt or equity securities (other than (1) proceeds of Debt securities
expressly permitted pursuant to Section 5.1, (2) proceeds of the issuance
of

 

 

equity securities by Holdings received on or before the Closing Date,
(3) proceeds from the issuance of equity securities to members of the management
of any Credit Party and (4) proceeds of the issuance of equity securities to
Borrower or any Subsidiary), an amount equal to one hundred percent (100%) of
the Net Cash Proceeds of such issuance and sale; and

 

(iv)          promptly
upon receipt by any Credit Party of the proceeds of any Asset Disposition, an
amount equal to one hundred percent (100%) of the Net Cash Proceeds of such
Asset Disposition; provided, that
no prepayment shall be required pursuant to this Section 2.1(c)(iv) unless
and until the aggregate Net Cash Proceeds received during any Fiscal Year from
Asset Dispositions exceeds $500,000 (in which case all Net Cash Proceeds in
excess of such amount shall be used to make prepayments pursuant to this
Section 2.1(c)(iv)), and provided,
that the recipient of such Net Cash Proceeds may reinvest such Net Cash
Proceeds within one hundred eighty (180) days, in replacement fixed assets of a
kind then used or usable in the business of such Credit Party.  If the applicable Credit Party does not
intend to so reinvest such Net Cash Proceeds, or if the period set forth in the
immediately preceding sentence expires without such Credit Party having
reinvested such Net Cash Proceeds, Borrowers shall prepay the Loans in an
amount equal to such Net Cash Proceeds.

 

Any
amounts permitted to be reinvested pursuant to the preceding clauses (ii) or
(iv) shall be immediately applied by Borrowers as a prepayment against then
outstanding Revolving Loans, and Agent shall establish a reserve (the “Reinvestment Reserve”) against the
Revolving Loan Limit in an amount equal to such permitted reinvestment
amount.  So long as no Event of Default
then exists, Agent shall permit Revolving Loan Borrowings to finance the making
of reinvestments permitted pursuant to the preceding clauses (ii) and (iv), and
shall concurrently reduce the Reinvestment Reserve by an equivalent
amount.  Any remaining portion of the
Reinvestment Reserve shall be reduced to zero (0) upon the expiration of the
applicable reinvestment periods pursuant to the preceding clauses (ii) and
(iv).

 

(d)           Optional Prepayments. 
Borrowers may from time to time, on at least one (1) Business Day’s
prior written notice to Agent specifying the date and amount of such
prepayment, prepay the Term Loan in whole or in part; provided that any such partial prepayment
shall be in an amount equal to $100,000 or a higher integral multiple of
$25,000.  No payment pursuant to this
Section 2.1(d) shall (except as reflected in any determination of Excess
Cash Flow), reduce the amount of any payment required by Section 2.1(c).

 

 

(e)           All Prepayments.  Any
prepayment of a LIBOR Loan on a day other than the last day of an Interest
Period therefor shall include interest on the principal amount being repaid and
shall be subject to Section 2.3(e)(iv). 
All prepayments of a Loan shall be applied first to that portion of such
Loan comprised of Prime Rate Loans and then to that portion of such Loan
comprised of LIBOR Loans, in direct order of Interest Period maturities.  All prepayments of the Term Loan shall be
applied pro rata to the remaining installments thereof.  Following the payment in full of the Term
Loan, any remaining amounts required by Section 2.1(c) to be used to
prepay the Term Loan shall instead be applied as a repayment of the outstanding
Revolving Loans and as a concurrent equivalent reduction of the Revolving Loan
Commitment, pro rata among all
Lenders having a Revolving Loan Commitment Percentage.

 

Section 2.2             Revolving
Loans.

 

(a)           Revolving
Loans and Borrowings.

 

(i)            On
the terms and subject to the conditions set forth herein, each Lender severally
agrees to make Loans to Borrowers from time to time as set forth herein equal
to such Lender’s Revolving Loan Commitment Percentage of revolving loans (“Revolving Loans”) requested by Borrowers
hereunder, provided that after
giving effect thereto, the Revolving Loan Outstandings shall not exceed the
Revolving Loan Limit.  Within the
foregoing limits, Borrower may borrow under this Section 2.2(a)(i), prepay
or repay Revolving Loans as required or permitted under this Section 2.2
and re-borrow Revolving Loans pursuant to this Section 2.2(a)(i).

 

(ii)           Agent
Advances.  Subject to the limitations set forth in this
Section 2.2(a)(ii), Agent is hereby authorized by Borrowers and Lenders,
from time to time in Agent’s sole discretion, (A) after the occurrence of a
Default or an Event of Default, or (B) at any time that any of the other
applicable conditions precedent set forth in Section 7.2 have not been
satisfied (including without limitation the condition precedent that the
Revolving Loan Outstandings not exceed the Borrowing Base plus any other then
outstanding Agent Advances), to make Revolving Loans to Borrowers on behalf of
the Lenders which Agent, in its reasonable business judgment, deems necessary
or desirable (1) to preserve or protect the business conducted by Borrowers,
the Collateral, or any portion thereof, (2) to enhance the likelihood of, or
maximize the amount of, repayment of the Loans and other Obligations, (3) to
pay any amount chargeable to the Borrowers pursuant to the terms of this
Agreement, including required principal payments on Term Loan, interest costs,
fees and expenses as described in Section 9.1 and/or Section 9.4 or
(4) to satisfy payment obligations under Support Agreements (any of the
advances described in this Section 2.2(a)(ii) being hereafter referred to
as “Agent Advances”); provided, that (i) Required Lenders may at
any time revoke Agent’s authorization to make Agent Advances, except Agent
Advances applied in the manner described in the preceding clauses (3) and (4),
any such revocation to be in writing and to become effective prospectively upon
the Agent’s receipt thereof, (ii) Agent Advances shall be made solely as Prime
Rate Loans, (iii) the aggregate amount of Agent Advances outstanding at any
time, exclusive of those made pursuant to the preceding clauses (3) and (4),
shall not exceed $800,000 and (iv) Agent shall be prohibited from making Agent

 

 

Advances to the extent the making thereof would cause the Revolving
Loan Outstandings (inclusive of Agent Advances) to exceed the Revolving Loan
Commitment.

 

(b)           Advancing
Revolving Loans.

 

(i)            Borrowers
shall deliver to Agent a Notice of Borrowing with respect to each proposed
Revolving Loan Borrowing (other than Agent Advances), such Notice of Borrowing
to be delivered no later than noon (Chicago time) (i) on the day of such
proposed borrowing, in the case of Prime Rate Loans in an aggregate principal
amount equal to or less than $5,000,000, (ii) on the Business Day prior to such
proposed borrowing, in the case of Prime Rate Loans in an aggregate principal
amount greater than $5,000,000 and (iii) on the third (3rd) Business
Day prior to such proposed borrowing, in the case of all LIBOR Loans.  Once given, except as provided in
Section 2.3(e)(ii), a Notice of Borrowing shall be irrevocable and
Borrowers shall be bound thereby.

 

(ii)           Borrowers
hereby authorize Lenders and Agent to make Revolving Loans (other than LIBOR
Loans) based on telephonic notices made by any Person which Agent, in good
faith, believes to be acting on behalf of Borrowers.  Borrowers agree to deliver to Agent a Notice of Borrowing in
respect of each Revolving Loan requested by telephone no later than one
Business Day following such request.  If
the Notice of Borrowing differs in any respect from the action taken by Agent
and Lenders, the records of Agent and the Lenders shall govern absent manifest
error.  Each Borrower further hereby
authorizes Lenders and Agent to make Revolving Loans based on electronic
notices made by any Person which Agent, in good faith, believes to be acting on
behalf of Borrowers, but only after Agent shall have established procedures
acceptable to Agent for accepting electronic Notices of Borrowing, as indicated
by Agent’s written confirmation thereof.

 

(c)           Mandatory
Revolving Loan Repayments and Prepayments.

 

(i)            The
Revolving Loan Commitment shall terminate upon the earlier to occur of (i) the
Commitment Expiry Date and (ii) the date on which Agent or Required Lenders
elect to terminate the Revolving Loan Commitment pursuant to Section 8.2
(such earlier date being the “Termination
Date”), and there shall become due and Borrowers shall pay on the
Termination Date, the entire outstanding principal amount of each Revolving
Loan, together with accrued and unpaid interest thereon to but excluding the
Termination Date.

 

(ii)           If
at any time the Revolving Loan Outstandings exceed the Revolving Loan Limit,
then, on the next succeeding Business Day, Borrowers shall repay the Revolving
Loans or cash collateralize Letter of Credit Liabilities in the manner
specified in Section 2.5(e) or cancel outstanding Letters of Credit, or
any combination of the foregoing, in an aggregate amount equal to such excess.

 

Section 2.3             Interest,
Interest Calculations and Certain Fees.

 

(a)           Interest.  From and following the
Closing Date, depending upon Borrowers’ election from time to time, subject to
the terms hereof, to have portions of the Loans accrue

 

 

interest
determined by reference to the Prime Rate or the LIBOR, the Loans and the other
Obligations shall bear interest at the applicable rates set forth below:

 

(i)            If
a Prime Rate Loan, or any other Obligation other than a LIBOR Loan, then at the
sum of the Prime Rate plus the applicable Prime Rate Margin.

 

(ii)           If a
LIBOR Loan, then at the sum of the LIBOR plus the applicable LIBOR
Margin.

 

(b)           Unused Line Fee. 
From and following the Closing Date, Borrowers shall pay Agent, for the
benefit of all Lenders committed to make Revolving Loans, in accordance with
their respective Pro Rata Shares, a fee in an amount equal to (1) (a) the
Revolving Loan Commitment less
(b) the average daily balance of the Revolving Loan Outstandings during the
preceding month, multiplied by
(2) one half percent (0.50%) per annum. 
Such fee is to be paid monthly in arrears on the first day of each
month.

 

(c)           [Reserved]

 

(d)           Computation of Interest and Related Fees.  All
interest and fees under each Financing Document shall be calculated on the
basis of a 360-day year for the actual number of days elapsed.  The date of funding of a Prime Rate Loan and
the first day of an Interest Period with respect to a LIBOR Loan shall be
included in the calculation of interest. 
The date of payment of a Prime Rate Loan and the last day of an Interest
Period with respect to a LIBOR Loan shall be excluded from the calculation of
interest.  If a Loan is repaid on the
same day that it is made, one (1) days’ interest shall be charged.  Interest on all Prime Rate Loans is payable
in arrears on the first day of each month and on the maturity of such Loans,
whether by acceleration or otherwise. 
Interest on LIBOR Loans shall be payable on the last day of the
applicable Interest Period, unless the Interest Period is greater than three
(3) months, in which case interest will be payable on the last day of each
three (3) month interval.  In addition,
interest on LIBOR Loans is due on the maturity of such Loans, whether by
acceleration or otherwise.

 

(e)           LIBOR
Provisions.

 

(i)            LIBOR
Election.  All Loans made on the Closing Date shall be
Prime Rate Loans and shall remain so until three (3) Business Days after the
Closing Date.  Thereafter, Borrowers may
request that Revolving Loans to be made be LIBOR Loans, that outstanding portions
of Revolving Loans and outstanding portions of each Term Loan be converted to
LIBOR Loans and that all or any portion of a LIBOR Loan be continued as a LIBOR
Loan upon expiration of the applicable Interest Period.  Any such request will be made by submitting
a Notice of Borrowing to Agent.  Once
given, and except as provided in clause (ii) below, a Notice of Borrowing shall
be irrevocable and Borrowers shall be bound thereby.  Upon the expiration of an Interest Period, in the absence of a
new Notice of Borrowing submitted to Agent not less than three (3) Business
Days prior to the end of such Interest Period, the LIBOR Loan then maturing
shall be automatically converted to a Prime Rate Loan.  There may be no more than six (6) LIBOR
Loans outstanding at any one time. 
Loans which are not requested as LIBOR Loans in accordance with this
Section 2.3(e)(i) shall be Prime Rate Loans.  Agent will

 

 

notify Lenders, by telephonic or facsimile notice, of each Notice of
Borrowing received by Agent not less than two (2) Business Days prior to the first
day of the Interest Period of the LIBOR Loan requested thereby.

 

(ii)           Inability
to Determine LIBOR.  In the event, prior to commencement of any
Interest Period relating to a LIBOR Loan, Agent shall determine or be notified
in writing by Required Lenders that adequate and reasonable methods do not
exist for ascertaining LIBOR, Agent shall promptly provide notice of such
determination to Borrowers and Lenders (which shall be conclusive and binding
on Borrower and Lenders).  In such event
(1) any request for a LIBOR Loan or for a conversion to or continuation of a
LIBOR Loan shall be automatically withdrawn and shall be deemed a request for a
Prime Rate Loan, (2) each LIBOR Loan will automatically, on the last day of the
then current Interest Period relating thereto, become a Prime Rate Loan and (3)
the obligations of Lenders to make LIBOR Loans shall be suspended until Agent
or Required Lenders determine that the circumstances giving rise to such
suspension no longer exist, in which event Agent shall so notify Borrowers and
Lenders.

 

(iii)          Illegality. 
Notwithstanding any other provisions hereof, if any law, rule,
regulation, treaty or directive or interpretation or application thereof shall
make it unlawful for any Lender to make, fund or maintain LIBOR Loans, such
Lender shall promptly give notice of such circumstances to Agent, Borrowers and
the other Lenders.  In such an event,
(1) the commitment of such Lender to make LIBOR Loans, continue LIBOR Loans as
LIBOR Loans or convert Prime Rate Loans to LIBOR Loans shall be immediately
suspended and (2) such Lender’s outstanding LIBOR Loans shall be converted
automatically to Prime Rate Loans on the last day of the Interest Period
thereof or at such earlier time as may be required by law.

 

(iv)          LIBOR
Breakage Fee.  Upon (i) any default by Borrowers in making
any borrowing of, conversion into or continuation of any LIBOR Loan following
Borrowers’ delivery to Agent of any applicable Notice of Borrowing or (ii) any
payment of a LIBOR Loan on any day that is not the last day of the Interest
Period applicable thereto (regardless of the source of such prepayment and
whether voluntary, by acceleration or otherwise), Borrowers shall promptly pay
Agent, for the benefit of all Lenders that funded or were prepared to fund any
such LIBOR Loan, an amount equal to the amount of any losses, expenses and
liabilities (including, without limitation, any loss (including interest paid)
in connection with the re-employment of such funds) that any Lender may sustain
as a result of such default or such payment. 
For purposes of calculating amounts payable to a Lender under this
paragraph, each Lender shall be deemed to have actually funded its relevant
LIBOR Loan through the purchase of a deposit bearing interest at LIBOR in an
amount equal to the amount of that LIBOR Loan and having a maturity and
repricing characteristics comparable to the relevant Interest Period; provided, however, that each Lender may
fund each of its LIBOR Loans in any manner it sees fit, and the foregoing
assumption shall be utilized only for the calculation of amounts payable under
this subsection.

 

(v)           Increased
Costs.  If, after the Closing Date, the adoption of,
or any change in, any applicable law, rule or regulation, or any change in the
interpretation or

 

 

administration of any applicable law, rule or regulation by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender with any
request or directive (whether or not having the force of law) of any such
authority, central bank or comparable agency: 
(i) shall impose, modify or deem applicable any reserve (including any
reserve imposed by the Board of Governors of the Federal Reserve System, or any
successor thereto, but excluding any reserve included in the determination of
the LIBOR pursuant to the provisions of this Agreement), special deposit or
similar requirement against assets of, deposits with or for the account of, or
credit extended by any Lender; or (ii) shall impose on any Lender any other
condition affecting its LIBOR Loans, its Notes or its obligation to make LIBOR
Loans; and the result of anything described in clauses (i) above and (ii) is to
increase the cost to (or to impose a cost on) such Lender of making or
maintaining any LIBOR Loan, or to reduce the amount of any sum received or
receivable by such Lender under this Agreement or under its Notes with respect
thereto, then upon demand by such Lender (which demand shall be accompanied by
a statement setting forth the basis for such demand and a calculation of the
amount thereof in reasonable detail, a copy of which shall be furnished to
Agent), Borrowers shall pay directly to such Lender such additional amount as
will compensate such Lender for such increased cost or such reduction, so long
as such amounts have accrued on or after the day which is one hundred eighty
(180) days prior to the date on which such Lender first made demand therefor.

 

(f)            Capital Adequacy.  If
any Lender shall reasonably determine that any change in, or the adoption or
phase-in of, any applicable law, rule or regulation regarding capital adequacy,
or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or the compliance by any Lender or
any Person controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on such Lender’s or such controlling Person’s
capital as a consequence of such Lender’s obligations hereunder or under any
Support Agreement to a level below that which such Lender or such controlling
Person could have achieved but for such change, adoption, phase-in or
compliance (taking into consideration such Lender’s or such controlling
Person’s policies with respect to capital adequacy) by an amount deemed by such
Lender or such controlling Person to be material, then from time to time, upon
demand by such Lender (which demand shall be accompanied by a statement setting
forth the basis for such demand and a calculation of the amount thereof in
reasonable detail, a copy of which shall be furnished to Agent), Borrowers
shall pay to such Lender such additional amount as will compensate such Lender
or such controlling Person for such reduction, so long as such amounts have
accrued on or after the day which is one hundred eighty (180) days prior to the
date on which such Lender first made demand therefor.

 

Section 2.4             Notes. 
The portion of the Term Loan made by each Lender shall be evidenced by a
promissory note executed by each Borrower (a “Term
Note”) and the portion of the Revolving Loans made by each Lender
shall be evidenced by a promissory note executed by each Borrower (a “Revolving Loan Note”) in an original
principal amount equal to such Lender’s Pro Rata Share of the Term Loan and the
Revolving Loan Commitment, respectively.

 

 

Section 2.5             Letters
of Credit and Letter of Credit Fees.

 

(a)           Letter of Credit.  On
the terms and subject to the conditions set forth herein, Agent will prior to
the Termination Date issue letters of credit or guarantees (each, a “Support Agreement”) to induce an LC Issuer
to issue or increase the amount of, or extend the expiry date of, a Letter of
Credit so long as:

 

(i)            Agent
shall have received a Notice of LC Credit Event at least two (2) Business days
before the relevant date of issuance, increase or extension; and

 

(ii)           After
giving effect to such issuance or increase (x) the aggregate Letter of Credit
Liabilities under all Letters of Credit do not exceed $2,000,000 and (y) the
Revolving Loan Outstandings do not exceed the Revolving Loan Limit.

 

(b)           Letter of Credit Fee. 
Borrowers shall pay to Agent, for the benefit of the Lenders which have
committed to make Revolving Loans, a letter of credit fee with respect to the
Letter of Credit Liabilities for each Letter of Credit, computed for each day
from the date of issuance of such Letter of Credit to the date that is the last
day a drawing is available under such Letter of Credit, at a rate per annum
equal to the LIBOR Margin then applicable to Revolving Loans.  Such fee shall be payable in arrears on the
first Business Day of each calendar month prior to the Termination Date and on
such date.  In addition, Borrowers agree
to pay promptly to the LC Issuer any fronting or other fees that it may charge
in connection with any Letter of Credit.

 

(c)           Reimbursement Obligations of Borrower.  If
Agent shall make a payment to an LC Issuer pursuant to a Support Agreement,
Borrowers shall promptly reimburse Agent for the amount of such payment and, to
the extent that so doing would not, to Agent’s knowledge, cause the Revolving
Loan Outstandings to exceed the Revolving Loan Limit, Borrowers shall be deemed
to have requested a Revolving Loan, the proceeds of which will be used to
satisfy such Reimbursement Obligations. 
Borrowers shall pay interest, on demand, on all amounts so paid by Agent
for each day until Borrowers reimburse Agent therefor at a rate per annum equal
to the sum of two percent (2%) plus
the interest rate applicable to Revolving Loans (which are Prime Rate Loans)
for such day.

 

(d)           Reimbursement and Other Payments by Borrower.  The
obligations of Borrowers to reimburse Agent pursuant to Section 2.5(c)
shall be absolute, unconditional and irrevocable, and shall be performed
strictly in accordance with the terms of this Agreement, under all circumstances
whatsoever, including the following:

 

(i)            any
lack of validity or enforceability of, or any amendment or waiver of or any
consent to departure from, any Letter of Credit or any related document;

 

(ii)           the
existence of any claim, set-off, defense or other right which Borrower may have
at any time against the beneficiary of any Letter of Credit, the LC Issuer
(including any claim for improper payment), Agent, any Lender or any other
Person, whether in connection with any Financing Document or any unrelated
transaction, provided that
nothing herein shall prevent the assertion of any such claim by separate suit
or compulsory counterclaim;

 

 

 

(iii)          any
statement or any other document presented under any Letter of Credit proving to
be forged, fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect whatsoever;

 

(iv)          any
affiliation between the LC Issuer and Agent; or

 

(v)           to
the extent permitted under applicable law, any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing.

 

(e)           Deposit Obligations of Borrower.  In
the event any Letters of Credit are outstanding at the time that Borrowers
prepay or are required to repay the Obligations or the Revolving Loan Commitment
is terminated, Borrowers shall (1) deposit with Agent for the benefit of all
Lenders with a portion of the Revolving Loan Commitment cash in an amount equal
to one hundred and five percent (105%) of the aggregate outstanding Letter of
Credit Liabilities to be available to Agent to reimburse payments of drafts
drawn under such Letters of Credit and pay any fees and expenses related
thereto and (2) prepay the fee payable under Section 2.5(b) with respect
to such Letters of Credit for the full remaining terms of such Letters of
Credit.  Upon termination of any such
Letter of Credit, the unearned portion of such prepaid fee attributable to such
Letter of Credit shall be refunded to Borrowers, together with the deposit
described in the preceding clause (1) to the extent not previously applied by
Agent in the manner described herein.

 

(f)            Participations
in Support Agreements.

 

(i)            Concurrently
with the issuance of each Letter of Credit, Agent shall be deemed to have sold
and transferred to each Lender, and each Lender shall be deemed irrevocably and
unconditionally to have purchased and received from Agent, without recourse or
warranty, an undivided interest and participation in, to the extent of such
Lender’s Pro Rata Share of the Revolving Loan Commitment, Agent’s Support
Agreement liabilities and obligations in respect of such Letters of Credit and
Borrowers’ Reimbursement Obligations with respect thereto.  If Borrowers do not pay any Reimbursement
Obligation when due, then Borrowers shall be deemed to have immediately
requested that Lenders make a Revolving Loan which is a Prime Rate Loan in a
principal amount equal to such Reimbursement Obligation.  Agent shall promptly notify Lenders of such
deemed request and each Lender shall make available to Agent its Pro Rata Share
of such Loan.  The proceeds of such Loan
shall be paid over by Agent to the LC Issuer for the account of Borrower in
satisfaction of reimbursement obligations then owing by Borrowers to such LC
Issuer in respect of outstanding Letters of Credit.

 

(ii)           If
Agent makes any payment or disbursement under any Support Agreement and (x)
Borrowers have not reimbursed Agent in full for such payment or disbursement in
accordance with Section 2.5(c), (y) a Revolving Loan may not be made
pursuant to the immediately preceding clause (i) or (z) any reimbursement
received by Agent from Borrowers is or must be returned or rescinded upon or
during any bankruptcy or reorganization of any Credit Party or otherwise, each
Lender shall be irrevocably and unconditionally obligated to pay to Agent its
Pro Rata Share of such payment or disbursement (but no such payment shall
diminish the Obligations of Borrowers under

 

 

Section 2.5(c)).  To the
extent any Lender shall not have made such amount available to Agent by noon
(Chicago time) on the Business Day on which such Lender receives notice from
Agent of such payment or disbursement, such Lender agrees to pay interest on
such amount to Agent forthwith on demand accruing daily at the Federal Funds
Rate, for the first three (3) days following such Lender’s receipt of such
notice, and thereafter at the Prime Rate plus the Prime Rate Margin in respect
of Revolving Loans.  Any Lender’s
failure to make available to Agent its Pro Rata Share of any such payment or
disbursement shall not relieve any other Lender of its obligation hereunder to
make available to Agent such other Lender’s Pro Rata Share of such payment, but
no Lender shall be responsible for the failure of any other Lender to make
available to Agent such other Lender’s Pro Rata Share of any such payment or
disbursement.

 

Section 2.6             General
Provisions Regarding Payment; Loan Account.

 

(a)           All payments to be made by Borrowers under
any Financing Document, including payments of principal and interest on the
Notes, and all fees, expenses, indemnities and reimbursements, shall be made
without set-off or counterclaim, in lawful money of the United States of
America and in immediately available funds. 
If any payment hereunder becomes due and payable on a day other than a
Business Day, such payment shall be extended to the next succeeding Business
Day and, with respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension.  Borrowers shall make all payments in immediately
available funds to the Payment Account before noon (Chicago time) on the date
when due.  Notwithstanding anything to
the contrary set forth in this Section 2.6(a), Agent shall be permitted,
in its sole discretion, but subject to the limitations set forth in
Section 2.2(a)(ii), to satisfy any of the payment obligations described in
this Section 2.6(a) through the making of Agent Advances.

 

(b)           Agent shall maintain a loan account (the “Loan Account”) on its books to record Loans
and other extensions of credit made by the Lenders hereunder or under any other
Financing Document, and all payments thereon made by Borrowers.  All entries in the Loan Account shall be
made in accordance with Agent’s customary accounting practices as in effect
from time to time.  The balance in the
Loan Account, as recorded on Agent’s most recent printout or other written
statement, shall be conclusive and binding evidence of the amounts due and
owing to Agent by Borrowers absent clear and convincing evidence to the
contrary; provided that any
failure to so record or any error in so recording shall not limit or otherwise
affect Borrowers’ duties to pay all amounts owing hereunder or under any other
Financing Document.  Unless Borrowers
notify Agent in writing of any objection to any such printout or statement
(specifically describing the basis for such objection) within thirty (30) days
after the date of receipt thereof, it shall be deemed final, binding and
conclusive upon Borrowers in all respects as to all matters reflected therein.

 

(c)           In order to efficiently fund and operate
their respective businesses and minimize the number of borrowings which they
will make under this Agreement and thereby reduce the administrative costs and
record keeping required in connection therewith, including the necessity to
enter into and maintain separately identified and monitored borrowing
facilities, the Borrowers have requested, and the Agent and the Lenders have
agreed that, subject to subsection 11.15, (i) all Loans will be advanced to
and for the account of the Borrowers on a joint and

 

 

several
basis to the Borrowers’ Account and (ii) all Letters of Credit and Support
Agreements will be issued pursuant to requests made by any Borrower on behalf
of and for the account of Williams, the Reimbursement Obligations of which
shall, notwithstanding the foregoing, be a joint and several obligation of
Borrowers.  Each Borrower hereby
acknowledges that it will be receiving substantial direct and indirect benefit
from each Loan made and each Letter of Credit or Support Agreement issued
pursuant to this Agreement since the successful operation of each of the
Borrowers will be facilitated by the efficiencies achieved by the integrated
financial management currently practiced by Borrowers.   In addition, Borrowers have informed the
Agent that:

 

(i)            Holdings,
in order to increase the efficiency and productivity of each Borrower, has
centralized in itself a cash management system and treasury function which
entails, in part, central disbursement and operating accounts in which it
provides the working capital needs of each Borrower; and

 

(ii)           Since
Borrowers are engaged in operations that benefit from financing on an
integrated basis and since each Borrower expects to benefit from the continued
successful performance of such integrated financial management and in order to
best utilize the collective borrowing powers of each Borrower in the most
effective and cost efficient manner and to avoid adverse effects on the
financial management of each Borrower and the existing back-office practices of
the Borrowers, each Borrower has requested that all Revolving Loans and
advances be disbursed solely upon the request of Holdings and to bank accounts
managed solely by Holdings and that Holdings will manage for the benefit of
each Borrower the expenditure and usage of such funds.

 

(iii)          In
consideration of the foregoing, Williams hereby designates, appoints,
authorizes and empowers Holdings as its agent to act as specified herein and in
each of the other Financing Documents (including, without limitation, for
purposes of making payment to Agent on behalf of itself, of any amounts due or
payable by Williams hereunder). 
Williams hereby irrevocably authorizes and directs Holdings to take such
action on its behalf under the respective provisions of this Agreement and the
other Financing Documents, and any other instruments, documents and agreements
referred to herein or therein, and to exercise such powers and to perform such
duties hereunder and thereunder as are specifically delegated to or required by
the respective terms and provisions hereof and thereof, and such other powers
as are reasonably incidental thereto, including, without limitation, to take
the following actions for and on its behalf:

 

(i)            to submit on behalf of Williams Notices of
Borrowing to Agent in accordance with the provisions of this Agreement;

 

(ii)           to receive on behalf of each Borrower the
proceeds of the Loans in accordance with the provisions of this Agreement, such
proceeds to be disbursed to or for the account of the applicable Borrower as
soon as practicable after its receipt thereof;

 

 

(iii)          to submit on behalf
of Williams requests for the issuance of Letters of Credit and Support
Agreements in accordance with the provisions of this Agreement; and

 

(iv)          to submit on behalf
of each Borrower, Compliance Certificates, Excess Cash Flow Certificates, and
all other certificates, notices and other communications given or required to
be given, hereunder.

 

(d)           The administration by Agent and Lenders of this credit
facility under this Agreement as a co-borrowing facility in the manner set
forth herein is solely as an accommodation to Borrowers and at their request
and neither Agent nor any Lender shall incur any liability to any of the
Borrowers as a result thereof.

 

Section 2.7                                      Maximum
Interest.

 

(a)           In no event shall the interest charged with respect to the
Notes or any other obligations of Borrowers under any Financing Document exceed
the maximum amount permitted under the laws of the State of Illinois or of any
other applicable jurisdiction.

 

(b)           Notwithstanding anything to the contrary herein or
elsewhere, if at any time the rate of interest payable hereunder or under any
Note or other Financing Document (the “Stated
Rate”) would exceed the highest rate of interest permitted under any
applicable law to be charged (the “Maximum
Lawful Rate”), then for so long as the Maximum Lawful Rate would be
so exceeded, the rate of interest payable shall be equal to the Maximum Lawful
Rate; provided, that if at any
time thereafter the Stated Rate is less than the Maximum Lawful Rate, Borrowers
shall, to the extent permitted by law, continue to pay interest at the Maximum
Lawful Rate until such time as the total interest received is equal to the
total interest which would have received had the Stated Rate been (but for the
operation of this provision) the interest rate payable.  Thereafter, the interest rate payable shall
be the Stated Rate unless and until the Stated Rate again would exceed the
Maximum Lawful Rate, in which event this provision shall again apply.

 

(c)           In no event shall the total interest received by any
Lender exceed the amount which it could lawfully have received had the interest
been calculated for the full term hereof at the Maximum Lawful Rate. If,
notwithstanding the prior sentence, any Lender has received interest hereunder
in excess of the Maximum Lawful Rate, such excess amount shall be applied to
the reduction of the principal balance of the Loans or to other amounts (other
than interest) payable hereunder, and if no such principal or other amounts are
then outstanding, such excess or part thereof remaining shall be paid to
Borrowers.

 

(d)           In computing interest payable with reference to the
Maximum Lawful Rate applicable to any Lender, such interest shall be calculated
at a daily rate equal to the Maximum Lawful Rate divided by the number of days
in the year in which such calculation is made.

 

Section 2.8             Taxes.

 

(a)           All payments of principal and interest on the Loans and
all other amounts payable hereunder shall be made free and clear of and without
deduction for any present or future

 

 

income, excise, stamp,
documentary, property or franchise taxes and other taxes, fees, duties, levies,
withholdings or other charges of any nature whatsoever imposed by any taxing
authority, excluding taxes imposed on or measured by Agent’s or any Lender’s
net income by the jurisdiction under which Agent or such Lender is organized or
conducts business (all non-excluded items being called “Taxes”). 
If any withholding or deduction from any payment to be made by Borrowers
hereunder is required in respect of any Taxes pursuant to any applicable law,
rule or regulation, then Borrowers will: 
(a) pay directly to the relevant authority the full amount required to
be so withheld or deducted; (b) promptly forward to Agent an official receipt
or other documentation satisfactory to Agent evidencing such payment to such
authority; and (c) pay to Agent for the account of Agent and Lenders such
additional amount or amounts as is necessary to ensure that the net amount
actually received by Agent and each Lender will equal the full amount Agent and
such Lender would have received had no such withholding or deduction been
required.  If any Taxes are directly
asserted against Agent or any Lender with respect to any payment received by
Agent or such Lender hereunder, Agent or such Lender may pay such Taxes and
Borrowers will promptly pay such additional amounts (including any penalty,
interest or expense) as is necessary in order that the net amount received by
such Person after the payment of such Taxes (including any Taxes on such
additional amount) shall equal the amount such Person would have received had
such Taxes not been asserted so long as such amounts have accrued on or after
the day which is one hundred eighty (180) days prior to the date on which Agent
or such Lender first made demand therefor.

 

(b)           If Borrowers fail to pay any Taxes when due to the
appropriate taxing authority or fails to remit to Agent, for the account of
Agent and the respective Lenders, the required receipts or other required
documentary evidence, each Borrower shall, jointly and severally, indemnify
Agent and Lenders for any incremental Taxes, interest or penalties that may
become payable by Agent or any Lender as a result of any such failure.

 

(c)           Each Lender that (i) is organized under the laws of a
jurisdiction other than the United States of America and (ii)(A) is a party
hereto on the Closing Date or (B) becomes an assignee of an interest under this
Agreement under Section 11.6(a) after the Closing Date (unless such Lender was
already a Lender hereunder immediately prior to such assignment) (each such
Lender, a “Foreign Lender”) shall
execute and deliver to Borrowers and Agent one or more (as Borrowers or Agent
may reasonably request) United States Internal Revenue Forms W-8ECI, W-8BEN,
W-8IMY (as applicable) or other applicable form, certificate or document
prescribed by the United States Internal Revenue Service certifying as to such
Lender’s entitlement to a complete exemption from withholding or deduction of
Taxes.  Borrowers shall not be required
to pay additional amounts to any Lender pursuant to this Section 2.8 to the
extent that the obligation to pay such additional amounts would not have arisen
but for the failure of such Lender to comply with this paragraph.

 

ARTICLE III

REPRESENTATION AND WARRANTIES

 

To
induce Agent and Lenders to enter into this Agreement and to make the Loans and
other credit accommodations contemplated hereby, each Borrower hereby
represents and warrants to Agent and each Lender that:

 

 

Section 3.1             Existence and Power. 
Each Credit Party is an entity as specified on the Information
Certificate, duly organized, validly existing and in good standing under the
laws of the jurisdiction specified on the Information Certificate, has an
organizational identification number (if any) as specified on the Information
Certificate, and has all powers and all governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted,
except where the failure to have such licenses, authorizations, consents and
approvals could not reasonably be expected to have a Material Adverse
Effect.  Each Credit Party is qualified
to do business as a foreign entity in each jurisdiction in which it is required
to be so qualified, which jurisdictions as of the Closing Date are specified on
the Information Certificate, except where the failure to be so qualified could
not reasonably be expected to have a Material Adverse Effect.

 

Section 3.2             Organization and Governmental Authorization; No Contravention.  The execution, delivery and performance by
each Credit Party of the Operative Documents to which it is a party are within
its powers, have been duly authorized by all necessary action pursuant to its
Organizational Documents, require no further action by or in respect of, or
filing with, any governmental body, agency or official and do not violate,
conflict with or cause a breach or a default under any provision of applicable
law or regulation or of the Organizational Documents of any Credit Party or of
any agreement, judgment, injunction, order, decree or other instrument binding
upon it, except for such violations, conflicts, breaches or defaults as could
not reasonably be expected to have a Material Adverse Effect.

 

Section 3.3             Binding Effect. 
Each of the Operative Documents to which any Credit Party is a party
constitutes a valid and binding agreement or instrument of such Credit Party,
enforceable against such Credit Party in accordance with its respective terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency
or other similar laws relating to the enforcement of creditors’ rights
generally and by general equitable principles.

 

Section 3.4             Capitalization. 
The authorized equity securities of each of the Credit Parties as of the
Closing Date is as set forth on the Information Certificate.  All issued and outstanding equity securities
of each of the Credit Parties are duly authorized and validly issued, fully
paid, non-assessable, free and clear of all Liens other than those in favor of
Agent for the benefit of Agent and Lenders, and such equity securities were
issued in compliance with all applicable state, federal and foreign laws
concerning the issuance of securities. 
The identity of the holders of the equity securities of each of the
Credit Parties and the percentage of their fully-diluted ownership of the
equity securities of each of the Credit Parties as of the Closing Date is set
forth on the Information Certificate. 
No shares of the capital stock or other equity securities of any Credit
Party, other than those described above, are issued and outstanding.  Except as set forth on the Information
Certificate, as of the Closing Date there are no preemptive or other
outstanding rights, options, warrants, conversion rights or similar agreements
or understandings for the purchase or acquisition from any Credit Party of any
equity securities of any such entity.

 

Section 3.5                                      Financial
Information.

 

(a)           The consolidated and consolidating balance sheet of
Holdings and its Consolidated Subsidiaries (including, without limitation,
Williams) as of September 30, 2003 and the related consolidated and
consolidating statements of operations, stockholders’ equity and

 

 

cash flows for the fiscal
year then ended, reported on by KPMG LLP, copies of which have been delivered
to Agent, fairly present, in conformity with GAAP, the consolidated and
consolidating financial position of Holdings and its Consolidated Subsidiaries
as of such date and their consolidated and consolidating results of operations,
changes in stockholders’ equity and cash flows for such period.

 

(b)           The un-audited consolidated and consolidating balance
sheet of Holdings and its Consolidated Subsidiaries as of May 31, 2004 and the
related un-audited consolidated and consolidating statements of operations and
cash flows for the eight months then ended, copies of which have been delivered
to Agent, fairly present, in conformity with GAAP (except where otherwise
noted) applied on a basis consistent with the financial statements referred to
in Section 3.5(a), the consolidated and consolidating financial position of
Holdings and its Consolidated Subsidiaries as of such date and their
consolidated and consolidating results of operations and cash flows for the
eight months then ended (subject to normal year-end adjustments and the absence
of footnote disclosures).

 

(c)           The pro forma balance sheet of Holdings and its
Consolidated Subsidiaries (including, without limitation, Williams) as of May
31, 2004, copies of which have been delivered to Agent, fairly presents, in
conformity with GAAP (except where otherwise noted) applied on a basis
consistent with the financial statements referred to in Section 3.5(a), the
consolidated and consolidating financial position of Holdings and its Consolidated
Subsidiaries as of such date, adjusted to give effect (as if such events had
occurred on such date) to (i) the transactions contemplated by the Operative
Documents, (ii) the making of the Loans, (iii) the application of the proceeds
therefrom as contemplated by the Operative Documents and (iv) the payment of
all legal, accounting and other fees related thereto to the extent known at the
time of the preparation of such balance sheet. 
As of the date of such balance sheet and the date hereof, no Credit Party
had or has any material liabilities, contingent or otherwise, including
liabilities for taxes, long-term leases or forward or long-term commitments,
which are not properly reflected on such balance sheet.

 

(d)           The information contained in the most recently delivered
Borrowing Base Certificate is complete and correct and the amounts shown
therein as “Eligible Accounts” and “Eligible Inventory” have been determined as
provided in the Financing Documents.

 

(e)           Since September 30, 2003 there has been no material
adverse change in the business, operations, properties, prospects or condition
(financial or otherwise) of Borrowers and their Consolidated Subsidiaries,
taken as a whole.

 

(f)            Holdings has no significant assets or liabilities other
than its ownership of Williams and as expressly identified on the Information
Certificate.  Holdings owns 100% of the
issued and outstanding capital stock of each of the Inactive Entities.  None of the Inactive Entities has any
significant assets or, other than as specifically set forth in the Information
Certificate, any significant liabilities.

 

Section
3.6             Litigation.  There
is no action, suit or proceeding pending against, or to Borrowers’ knowledge
threatened against or affecting, any Credit Party or, to Borrowers’ knowledge,
any party to any Operative Document other than a Credit Party, before any court
or

 

 

arbitrator or any
governmental body, agency or official in which an adverse decision could
reasonably be expected to have a Material Adverse Effect or which in any manner
draws into question the validity of any of the Operative Documents.

 

Section
3.7             Ownership of Property. 
Each Borrower and each of its Subsidiaries is the lawful owner of, has
good and marketable title to and is in lawful possession of, or has valid
leasehold interests in, all properties and other assets (real or personal,
tangible, intangible or mixed) purported to be owned or leased (as the case may
be) by such Person on the pro forma balance sheet referred to in Section
3.5(c), except as disposed of in the ordinary course of business.

 

Section
3.8             No Default.  No
Default or Event of Default has occurred and is continuing and no Credit Party
is in breach or default under or with respect to any contract, agreement, lease
or other instrument to which it is a party or by which its property is bound or
affected, which breach or default could reasonably be expected to have a
Material Adverse Effect.

 

Section
3.9             Labor Matters.  As
of the Closing Date, there are no strikes or other labor disputes pending or,
to Borrowers’ knowledge, threatened against any Credit Party.  Hours worked and payments made to the
employees of the Credit Parties have not been in violation of the Fair Labor
Standards Act or any other applicable law dealing with such matters.  All payments due from the Credit Parties, or
for which any claim may be made against any of them, on account of wages and
employee and retiree health and welfare insurance and other benefits have been
paid or accrued as a liability on their books, as the case may be.  The consummation of the transactions
contemplated by the Financing Documents and the other Operative Documents will
not give rise to a right of termination or right of renegotiation on the part
of any union under any collective bargaining agreement to which it is a party
or by which it is bound.

 

Section
3.10           Regulated
Entities.  No Credit
Party is an “investment company” or a company “controlled” by an “investment
company” or a “subsidiary” of an “investment company,” all within the meaning
of the Investment Company Act of 1940. 
No Credit Party is a “holding company”, or a “subsidiary company” of a
“holding company”, or an “affiliate” of a “holding company” or of a “subsidiary
company” of a “holding company”, within the meaning of the Public Utility
Holding Company Act of 1935.

 

Section
3.11           Margin
Regulations.  None of the
proceeds from the Loans have been or will be used, directly or indirectly, for
the purpose of purchasing or carrying any Margin Stock, for the purpose of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any Margin Stock or for any other purpose which might cause any of the
Loans to be considered a “purpose credit” within the meaning of Regulation T, U
or X of the Federal Reserve Board.

 

Section
3.12           Compliance
With Laws.  Each Borrower
and each Subsidiary is in compliance with the requirements of all applicable
laws, ordinances, rules, regulations and requests of governmental authorities,
except for such laws, ordinances, rules, regulations and requirements the
noncompliance with which could not reasonably be expected to have a Material
Adverse Effect.

 

 

Section
3.13           Taxes.  Except to the extent subject to a Permitted
Contest, all Federal, state and local tax returns, reports and statements
required to be filed by or on behalf of each Credit Party have been filed with
the appropriate governmental agencies in all jurisdictions in which such
returns, reports and statements are required to be filed, and all Taxes
(including real property Taxes) and other charges shown to be due and payable
in respect thereof have been timely paid prior to the date on which any fine,
penalty, interest, late charge or loss may be added thereto for nonpayment
thereof.  Except to the extent subject
to a Permitted Contest, all state and local sales and use Taxes required to be
paid by each Credit Party have been paid. 
Except to the extent subject to a Permitted Contest, all Federal and
state returns have been filed by each Credit Party for all periods for which returns
were due with respect to employee income tax withholding, social security and
unemployment taxes, and the amounts shown thereon to be due and payable have
been paid in full or adequate provisions therefor have been made.

 

Section 3.14                                Compliance with ERISA.

 

(a)           Each ERISA Plan (and the related trusts and funding
agreements) complies in form and in operation with, has been administered in
compliance with, and the terms of each ERISA Plan satisfy, the applicable
requirements of ERISA and the Code in all material respects.  Each ERISA Plan which is intended to be
qualified under Section 401(a) of the Code is so qualified, and the United
States Internal Revenue Service has issued a favorable determination letter with
respect to each such ERISA Plan which may be relied on currently.  No Credit Party has incurred liability for
any material excise tax under Sections 4971 through 5000 of the Code.

 

(b)           During the thirty-six (36) month period prior to the
Closing Date or the making of any Loan or the issuance of any Letter of Credit,
(i) no steps have been taken to terminate any Pension Plan and (ii) no
contribution failure has occurred with respect to any Pension Plan sufficient
to give rise to a Lien under Section 302(f) of ERISA.  No condition exists or event or transaction has occurred with
respect to any Pension Plan which could result in the incurrence by any Credit
Party of any material liability, fine or penalty.  No Credit Party has incurred liability to the PBGC (other than
for current premiums) with respect to any employee Pension Plan.  All contributions (if any) have been made on
a timely basis to any Multiemployer Pension Plan that are required to be made
by any Credit Party or any other member of the Controlled Group under the terms
of the plan or of any collective bargaining agreement or by applicable law; no
Credit Party nor any member of the Controlled Group has withdrawn or partially
withdrawn from any Multiemployer Pension Plan, incurred any withdrawal
liability with respect to any such plan or received notice of any claim or
demand for withdrawal liability or partial withdrawal liability from any such
plan, and no condition has occurred which, if continued, could result in a
withdrawal or partial withdrawal from any such plan, and no Credit Party nor
any member of the Controlled Group has received any notice that any
Multiemployer Pension Plan is in reorganization, that increased contributions
may be required to avoid a reduction in plan benefits or the imposition of any
excise tax, that any such plan is or has been funded at a rate less than that
required under Section 412 of the Code, that any such plan is or may be
terminated, or that any such plan is or may become insolvent.

 

Section
3.15           Brokers.  Except as set forth in the Information
Certificate, no broker, finder or other intermediary has brought about the
obtaining, making or closing of the transactions contemplated by the Operative
Documents, and no Credit Party has or will have any

 

 

obligation to any Person in
respect of any finder’s or brokerage fees in connection herewith or therewith.

 

Section
3.16           Related
Transactions.  But for
the funding of the Loans hereunder, all conditions precedent (including all
filings with governmental authorities and all consents) have been fully satisfied.  The transactions contemplated by the Equity
Documents and the Subordinated Debt Documents to be consummated on or prior to
the date hereof have been so consummated (including without limitation the
disbursement and transfer of all funds in connection therewith) in all material
respects pursuant to the provisions of the applicable Operative Documents, true
and complete copies of which have been delivered to Agent, and in compliance
with all applicable provisions of law.

 

Section
3.17           Employment,
Equityholders and Subscription Agreements.  Except for the Operative Documents and the
other agreements set forth in the Information Certificate, as of the Closing
Date there are no (i) employment agreements covering the management of any
Credit Party, (ii) collective bargaining agreements or other labor agreements
covering any employees of any Credit Party, (iii) agreements for managerial,
consulting or similar services to which any Credit Party is a party or by which
it is bound or (iv) agreements regarding any Credit Party, its assets or
operations or any investment therein to which any of its equityholders is a
party or by which it is bound.

 

Section
3.18           Compliance
with Environmental Requirements; No Hazardous Materials.  Except in each case as set forth on the
Information Certificate:

 

(a)           No Hazardous Materials are located on any properties now
or previously owned, leased or operated by any Credit Party or have been
released into the environment, or deposited, discharged, placed or disposed of
at, on, under or near any of such properties in a manner that would require the
taking of any action under any Environmental Law or which could reasonably be
expected to have a Material Adverse Effect. 
No portion of any such property is being used, or has been used at any
previous time, for the disposal, storage, treatment, processing or other
handling of Hazardous Materials in violation of any Environmental Law nor is
any such property affected by any Hazardous Materials Contamination.

 

(b)           No underground storage tanks are located on any properties
now or previously owned, leased or operated by any Credit Party, or were
located on any such property and subsequently removed or filled.

 

(c)           No notice, notification, demand, request for information,
complaint, citation, summons, investigation, administrative order, consent
order and agreement, litigation or settlement with respect to Hazardous
Materials or Hazardous Materials Contamination is in existence or, to
Borrowers’ knowledge, proposed, threatened or anticipated with respect to or in
connection with the operation of any properties now or previously owned, leased
or operated by any Credit Party.  All
such properties and their existing and prior uses, and any disposal of
Hazardous Materials from any thereof, comply and at all times have complied
with all Environmental Laws.  There is
no condition on any of such properties which is in violation of any
Environmental Laws and no Credit Party has received any communication from or
on behalf of any governmental authority that any such condition exists.

 

 

(d)           There has been no environmental investigation, study,
audit, test, review or other analysis conducted of which Borrowers have
knowledge in relation to the current or prior business of Borrowers or any
property or facility now or previously owned, leased or operated by any Credit
Party which has not been delivered to Agent.

 

(e)           For purposes of this Section 3.18, each Credit Party shall
be deemed to include any business or business entity (including a corporation)
which is, in whole or in part, a predecessor of such Credit Party.

 

Section
3.19           Intellectual
Property.  Each Credit
Party owns, is licensed to use or otherwise has the right to use, all
Intellectual Property that is material to the condition (financial or other), business
or operations of such Credit Party and all such Intellectual Property existing
as of the Closing Date and registered with the U.S. government, any foreign
government or any agency or department thereof is set forth on the Information
Certificate.  All Intellectual Property
of each Credit Party is fully protected and/or duly and properly registered,
filed or issued in the appropriate office and jurisdictions for such
registrations, filings or issuances.  To
Borrowers’ knowledge, each Credit Party conducts its business without
infringement or claim of infringement of any Intellectual Property rights of
others and there is no infringement or claim of infringement by others of any
Intellectual Property rights of any Credit Party, which infringement or claim
of infringement could reasonably be expected to have a Material Adverse Effect.

 

Section
3.20           Real
Property Interests. 
Except for the ownership, leasehold or other interests set forth in the
Information Certificate, no Credit Party has, as of the Closing Date, any
ownership, leasehold or other interest in real property.

 

Section
3.21           Solvency.  Each Credit Party:  (a) owns and will own assets the fair saleable value of which are
(i) greater than the total amount of its liabilities (including contingent
liabilities) and (ii) greater than the amount that will be required to pay the
probable liabilities of its then existing debts as they become absolute and
matured considering all financing alternatives and potential asset sales
reasonably available to it; (b) has capital that is not unreasonably small in
relation to its business as presently conducted or after giving effect to any
contemplated transaction; and (c) does not intend to incur and does not believe
that it will incur debts beyond its ability to pay such debts as they become
due.

 

Section
3.22           Full
Disclosure.  None of the
information (financial or otherwise) furnished by or on behalf of any Credit
Party to Agent or any Lender in connection with the consummation of the
transactions contemplated by the Operative Documents, including without
limitation the information set forth in the Information Certificate, contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statements contained herein or therein not misleading in
light of the circumstances under which such statements were made.  All financial projections delivered to Agent
and the Lenders have been prepared on the basis of the assumptions stated
therein.  Such projections represent
Borrowers’ best estimate of Borrowers’ future financial performance and such
assumptions are believed by Borrowers to be fair in light of current business
conditions; provided that
Borrowers can give no assurance that such projections will be attained.

 

 

Section
3.23           Representations
and Warranties Incorporated from Other Operative Documents.  As of the Closing Date, each of the
representations and warranties made in the Operative Documents by each of the
parties thereto is true and correct in all material respects, and such
representations and warranties are hereby incorporated herein by reference with
the same effect as though set forth in their entirety herein, as qualified
therein, except to the extent that such representation or warranty relates to a
specific date, in which case such representation and warranty shall be true as
of such earlier date.

 

ARTICLE IV

AFFIRMATIVE COVENANTS

 

Each
Borrower agrees that, so long as any Credit Exposure exists:

 

Section
4.1             Financial Statements and Other Reports.  Each Borrower will maintain a system of
accounting established and administered in accordance with sound business
practices to permit preparation of financial statements in accordance with GAAP
and to provide the information required to be delivered to the Lenders hereunder,
and will deliver to Agent, and, in the case of the deliveries required by
paragraphs (a) through (f), (l), (m), (o) and (p), each Lender:

 

(a)           as soon as practicable and in any event within thirty (30)
days after the end of each month (45 days with respect to any month which is
the end of a fiscal quarter and 90 days after the end of Borrowers’ Fiscal Year
end), a consolidated and consolidating balance sheet of Holdings and its
Consolidated Subsidiaries (including, without limitation, Williams) as at the
end of such month and the related consolidated and consolidating statements of
operations and cash flows for such month, and for the portion of the Fiscal
Year ended at the end of such month setting forth in each case in comparative
form the figures for the corresponding periods of the previous Fiscal Year and
the figures for such month and for such portion of the Fiscal Year ended at the
end of such month set forth in the annual operating and capital expenditure
budgets and cash flow forecast delivered pursuant to Section 4.1(l), all in
reasonable detail and certified by a Responsible Officer as fairly presenting
the financial condition and results of operations of Holdings and its
Consolidated Subsidiaries and as having been prepared in accordance with GAAP
applied on a basis consistent with the audited financial statements of
Holdings, subject to changes resulting from audit and normal year-end
adjustments and the absence of footnote disclosures;

 

(b)           as soon as available and in any event within ninety (90)
days after the end of each Fiscal Year, a consolidated and consolidating
balance sheet of Holdings and its Consolidated Subsidiaries as of the end of
such Fiscal Year and the related consolidated and consolidating statements of
operations, stockholders’ equity and cash flows for such Fiscal Year, setting
forth in each case in comparative form the figures for the previous Fiscal Year
and the figures for such Fiscal Year set forth in the annual operating and
capital expenditure budgets and cash flow forecast delivered pursuant to
Section 4.1(l), certified (solely with respect to such consolidated statements)
without qualification by independent public accountants acceptable to Agent of
nationally recognized standing;

 

 

(c)           together with each delivery of financial statements
pursuant to Sections 4.1(b), a Compliance Certificate and an Excess Cash Flow
Certificate;

 

(d)                                 [Reserved];

 

(e)           promptly upon request of Agent, copies of all reports
submitted to any Credit Party by its independent public accountants in
connection with each annual, interim or special audit of the financial
statements of any Credit Party made by such accountants, including the comment
letter submitted by such accountants to management in connection with their
annual audit;

 

(f)            promptly upon their becoming available, copies of (i) all
financial statements, reports, notices and proxy statements sent or made
available generally by any Credit Party to its security holders, (ii) all
regular and periodic reports and all registration statements and prospectuses
filed by any Credit Party with any securities exchange or with the Securities
and Exchange Commission or any successor, (iii) all press releases and other
statements made available generally by any Credit Party concerning material developments
in the business of any Credit Party and (iv) all Swap Contracts entered into by
any Credit Party;

 

(g)           promptly upon any officer of any Credit Party obtaining
knowledge (i) of the existence of any Event of Default or Default, or becoming
aware that the holder of any Debt of any Credit Party has given any notice or
taken any other action with respect to a claimed default thereunder, (ii) of
any change in any Credit Party’s certified accountant, (iii) that any Person
has given any notice to any Credit Party or taken any other action with respect
to a claimed default under any material agreement or instrument (other than the
Financing Documents) to which any Credit Party is a party or by which any of
its assets is bound or (iv) of the institution of any litigation or arbitration
involving an alleged liability of any Credit Party equal to or greater than
$500,000 or any adverse determination in any litigation or arbitration
involving a potential liability of any Credit Party equal to or greater than $500,000,
a certificate of a Responsible Officer specifying the nature and period of
existence of any such condition or event, or specifying the notice given or
action taken by such holder or Person and the nature of such claimed default
(including any Event of Default or Default), event or condition, and what
action the applicable Credit Party has taken, is taking or proposes to take
with respect thereto;

 

(h)           promptly upon any officer of any Credit Party obtaining
knowledge (other than as set forth in the Information Certificate as of the
Closing Date) of (i) the institution of any steps by any member of the
Controlled Group or any other Person to terminate any Pension Plan, (ii) the
failure of any member of the Controlled Group to make a required contribution
on a timely basis to any ERISA Plan or to any Multiemployer Pension Plan, (iii)
the taking of any action with respect to a Pension Plan which could result in
the requirement that a Borrower or any Subsidiary furnish a bond or other
security to the PBGC or such Pension Plan, (iv) the occurrence of a reportable
event under Section 4043 of ERISA (for which a reporting requirement is not
waived) with respect to any Pension Plan, (v) the occurrence of any event with
respect to any Pension Plan or Multiemployer Pension Plan which could result in
the incurrence by any member of the Controlled Group of any material liability,
fine or penalty (including any claim or demand for withdrawal liability or
partial withdrawal from any Multiemployer Pension Plan), (vi) any material
increase in the contingent liability of a Borrower

 

 

or any Subsidiary with
respect to any post-retirement welfare plan benefit or (vii) any notice that
any Multiemployer Pension Plan is in reorganization, that increased
contributions may be required to avoid a reduction in plan benefits or the
imposition of an excise tax, that any such plan is or has been funded at a rate
less than that required under Section 412 of the Code, that any such plan is or
may be terminated, or that any such plan is or may become insolvent, a
certificate of a Responsible Officer specifying the nature and period of
existence of any such condition or event, or specifying the notice given or
action taken by such holder or Person, and what action the applicable Credit Party
has taken, is taking or proposed to take with respect thereto;

 

(i)            other than as set forth in the Information Certificate as
of the Closing Date, promptly upon any officer of any Credit Party obtaining
knowledge of any complaint, order, citation, notice or other written
communication from any Person delivered to any Credit Party with respect to, or
if any officer of any Credit Party becomes aware of (x) the existence or
alleged existence of a violation of any Environmental Law or the incurrence of
any liability, obligation, loss, damage, cost, expense, fine, penalty or
sanction or the requirement to commence any remedial action resulting from or
in connection with any air emission, water discharge, noise emission, Hazardous
Material or any other environmental, health or safety matter at, upon, under or
within any of the properties now or previously owned, leased or operated by any
Credit Party, or due to the operations or activities of any Credit Party or any
other Person on or in connection with any such property or any part thereof or
(y) any release on any of such properties of Hazardous Materials in a quantity
that is reportable under any applicable Environmental Law, a certificate of a
Responsible Officer specifying the nature and period of existence of any such
condition or event, or specifying the notice given or action taken by such
holder or Person, and what action the applicable Credit Party has taken, is
taking or proposes to take with respect thereto;

 

(j)            promptly upon any officer of any Credit Party obtaining
knowledge that any Credit Party has either (x) registered or applied to
register any Intellectual Property with the U.S. government, any foreign
government or any agency or department thereof, or (y) acquired any interest in
real property (including leasehold interests in real property), a certificate
of a Responsible Officer describing such Intellectual Property and/or such real
property in such detail as Agent shall reasonably require;

 

(k)           promptly upon receipt or transmission, copies of any
reports or notices related to any material taxes and any other material reports
or notices received by any Credit Party from, or filed by any Credit Party
with, any Federal, state or local governmental agency or body;

 

(l)            within thirty (30) days following the conclusion of each
Fiscal Year, Borrowers’ annual operating plans, operating and capital
expenditure budgets, and financial forecasts, including cash flow projections
covering proposed fundings, repayments, additional advances, investments and other
cash receipts and disbursements, each for the then following three (3) Fiscal
Years, presented on a monthly basis for the next Fiscal Year only and on an
annual basis for the two (2) subsequent Fiscal Years, all of which shall be in
a format reasonably consistent with projections, budgets and forecasts
theretofore provided to the Lenders, and promptly following the preparation
thereof, updates to any of the foregoing from time to time prepared by
management of Borrowers;

 

 

(m)          as soon as available and in any event within ten (10)
Business Days after the end of each month, and from time to time upon the
request of Agent, a Borrowing Base Certificate as of the last day of the month
most recently ended;

 

(n)           within two (2) Business Days after any request therefor,
such information in such detail concerning the amount, composition and manner
of calculation of the Borrowing Base as Agent or any Lender may reasonably
request;

 

(o)           upon the request of Agent, which may be made not more than
once each year prior to an Event of Default (and so long as no Event of Default
then exists, at Agent’s expense) and at any time (but not more often than
quarterly) while and so long as an Event of Default shall be continuing (in
which event, at Borrowers’ expense), a report of an independent collateral
auditor satisfactory to Agent (which may be, or be affiliated with, a Lender)
with respect to the components of the Borrowing Base, which report shall
indicate whether or not the information set forth in the Borrowing Base Certificate
most recently delivered is accurate and complete in all material respects based
upon a review by such auditors of the Accounts (including verification with
respect to the amount, aging, identity and credit of the respective account
debtors and the billing practices of Borrowers) and Inventory (including
verification as to the value, location and respective types);

 

(p)           from time to time, if Agent or any Lender determines that
obtaining appraisals is necessary in order for Agent or such Lender to comply
with applicable laws or regulations, appraisal reports in form and substance
and from appraisers satisfactory to Agent stating the then current fair market
values of all or any portion of the real estate owned by a Borrower or any
Subsidiaries.  In addition to the
foregoing, from time to time, but in the absence of a Default or Event of
Default not more than once during each calendar year, Agent may require
Borrowers, at Agent’s expense (so long as no Event of Default then exists) to
obtain and deliver to Agent appraisal reports in form and substance and from
appraisers satisfactory to Agent stating the then current market values of all
or any portion of the real estate and personal property owned by either
Borrower or any Subsidiaries thereof; and

 

(q)           with reasonable promptness, such other information and
data with respect to any Credit Party as from time to time may be reasonably
requested by Agent or any Lender.

 

Section
4.2             Payment and Performance of Obligations.  Each Borrower (i) will pay and discharge,
and cause each of its Subsidiaries to pay and discharge, at or before maturity,
all of their respective obligations and liabilities, including tax liabilities,
except for such obligations and liabilities (x) that may be the subject of a
Permitted Contest and (y) the nonpayment or nondischarge of which could not
reasonably be expected to have a Material Adverse Effect, (ii) will maintain,
and cause each Subsidiary to maintain, in accordance with GAAP, appropriate
reserves for the accrual of all of their respective obligations and liabilities
and (iii) will not breach or permit any Subsidiary to breach, or permit to
exist any default under, the terms of any lease, commitment, contract,
instrument or obligation to which it is a party, or by which its properties or
assets are bound, except for such breaches or defaults which could not
reasonably be expected to have a Material Adverse Effect.

 

 

Section
4.3             Conduct of Business and Maintenance of Existence.  Each Borrower will continue, and will, if
applicable, cause each Subsidiary thereof to continue, to engage in business of
the same general type as it now conducts and will preserve, renew and keep in
full force and effect, and will cause each Subsidiary to preserve, renew and
keep in full force and effect their respective existence and their respective
rights, privileges and franchises necessary or desirable in the normal conduct
of business.

 

Section 4.4                                      Maintenance of Property;
Insurance.

 

(a)           Each Borrower will keep, and will cause each of its Subsidiaries
to keep, all property useful and necessary in its business in good working
order and condition, ordinary wear and tear excepted.

 

(b)           Each Borrower will maintain, and will cause each
Subsidiary thereof to maintain, (i) physical damage insurance on all real and
personal property on an all risks basis (including the perils of flood and
quake), covering the repair and replacement cost of all such property and
consequential loss coverage for business interruption and public liability
insurance (including products/completed operations liability coverage) in each
case of the kinds customarily carried or maintained by Persons of established
reputation engaged in similar businesses and in amounts acceptable to Agent and
(ii) such other insurance coverage in such amounts and with respect to such
risks as Agent may reasonably request. 
All such insurance shall be provided by insurers having an A.M. Best
policyholders rating reasonably acceptable to Agent.

 

(c)           On or prior to the Closing Date, Borrowers will cause
Agent to be named as an additional insured, assignee and loss payee, as
applicable, on each insurance policy required to be maintained pursuant to this
Section 4.4 pursuant to endorsements in form and content acceptable to Agent.  Borrowers will deliver to Agent and the
Lenders (i) on the Closing Date, a certificate from Borrowers’ insurance broker
dated as of such date showing the amount of coverage as of such date, and that
such policies will include effective waivers (whether under the terms of any such
policy or otherwise) by the insurer of all claims for insurance premiums
against all loss payees and additional insureds and all rights of subrogation
against all loss payees and additional insureds, and that if all or any part of
such policy is canceled, terminated or expires, the insurer will forthwith give
notice thereof to each additional insured and loss payee and that no
cancellation, reduction in amount or material change in coverage thereof shall
be effective until at least thirty (30) days after receipt by each additional
insured and loss payee of written notice thereof, (ii) upon the request of any
Lender through Agent from time to time full information as to the insurance
carried, (iii) within five (5) days of receipt of notice from any insurer, a
copy of any notice of cancellation, non-renewal or material change in coverage
from that existing on the date of this Agreement and (iv) forthwith, notice of
any cancellation or non-renewal of coverage by Borrowers.

 

(d)                                 [Reserved]

 

(e)           In the event Borrowers fail to provide Agent with evidence
of the insurance coverage required by this Agreement, Agent may purchase
insurance at Borrowers’ expense to protect Agent’s interests in the
Collateral.  This insurance may, but
need not, protect either Borrower’s interests. 
The coverage purchased by Agent may not pay any claim made by a

 

 

Borrower or any claim that
is made against a Borrower in connection with the Collateral.  Borrowers may later cancel any insurance
purchased by Agent, but only after providing Agent with evidence that Borrowers
have obtained insurance as required by this Agreement.  If Agent purchases insurance for the
Collateral, Borrowers will be responsible for the costs of that insurance,
including interest and other charges imposed by Agent in connection with the
placement of the insurance, until the effective date of the cancellation or
expiration of the insurance.  The costs
of the insurance may be added to the Obligations.  The costs of the insurance may be more than the cost of insurance
Borrowers are able to obtain on its own.

 

Section
4.5             Compliance with Laws. 
Each Borrower will comply, and cause each of its Subsidiaries to comply,
with the requirements of all applicable laws, ordinances, rules, regulations,
and requirements of governmental authorities (including Environmental Laws and
ERISA and the rules and regulations thereunder), except for such laws,
ordinances, rules, regulations and requirements the noncompliance with which
could not reasonably be expected to have a Material Adverse Effect.

 

Section
4.6             Inspection of Property, Books and Records.  Each Borrower will keep, and will cause each
of its Subsidiaries to keep, proper books of record and account in accordance
with GAAP in which full, true and correct entries shall be made of all dealings
and transactions in relation to its business and activities; and will permit,
and will cause each Subsidiary to permit, at the sole cost of Borrowers or any
applicable Subsidiary, representatives of Agent and of any Lender (but at such
Lender’s expense unless such visit or inspection is made concurrently with
Agent) to visit and inspect any of their respective properties, to examine and
make abstracts or copies from any of their respective books and records, to
conduct a collateral audit and analysis of their respective Inventory and
Accounts and to discuss their respective affairs, finances and accounts with
their respective officers, employees and independent public accountants as
often as may reasonably be desired.  In
the absence of an Event of Default, Agent or any Lender exercising any rights
pursuant to this Section 4.6 shall give Borrowers or any applicable Subsidiary
commercially reasonable prior written notice of such exercise.  No notice shall be required during the
existence and continuance of any Event of Default.

 

Section
4.7             Use of Proceeds. 
Borrowers will use the proceeds of the Term Loan solely for payment of
amounts due in connection with effectuating the Redemption, transaction fees
incurred in connection with the Operative Documents and the refinancing on the
Closing Date of Debt owing to a Person not an Affiliate of any Credit
Party.  The proceeds of Revolving Loans
shall be used by Borrowers solely for the purposes set forth in the preceding
sentence and for working capital needs of Borrowers.

 

Section
4.8             Lenders’ Meetings. 
Within forty-five (45) days after the end of each fiscal quarter (90
days with respect to Borrowers’ Fiscal Year end), Borrowers will, if requested
by Agent, conduct a meeting of Agent and the Lenders (which meeting may be
conducted telephonically) to discuss such fiscal quarter’s results and the
financial condition of Borrowers and their Subsidiaries at which shall be
present a Responsible Officer and such officers of the Credit Parties as may be
reasonably requested to attend by Agent or any Lender, such request or requests
to be made within a reasonable time prior to the scheduled date of such
meeting.  Such meetings shall be held at
a time and place convenient to the Lenders and to Borrowers.

 

 

Section 4.9                                      [Reserved].

 

Section
4.10           Hazardous
Materials; Remediation. 
Borrowers will provide Agent within thirty (30) days after demand
therefor with a bond, letter of credit or similar financial assurance
evidencing to the satisfaction of Agent that sufficient funds are available to
pay the cost of removing, treating and disposing of any Hazardous Materials or
Hazardous Materials Contamination and discharging any assessment which may be
established on any property as a result thereof, such demand to be made, if at
all, upon Agent’s reasonable business determination that the failure to remove,
treat or dispose of any Hazardous Materials or Hazardous Materials
Contamination, or the failure to discharge any such assessment could reasonably
be expected to have a Material Adverse Effect; provided,
however, that such financial assurance shall not be required with respect to
Borrowers’ headquarters and corporate offices located 14100 SW 72nd Avenue,
Portland, Oregon and the contamination existing thereon as of the Closing Date
unless the probably costs of remediation associated therewith are, in Agent’s
judgment, greater than $300,000 in any year or exceed $1,500,000 in the
aggregate.

 

Section 4.11                                [Reserved].

 

Section 4.12                                Further Assurances.

 

(a)           Each Borrower will, and will cause each Subsidiary thereof
to, at its own cost and expense, cause to be promptly and duly taken, executed,
acknowledged and delivered all such further acts, documents and assurances as
may from time to time be necessary or as Agent or the Required Lenders may from
time to time request in order to carry out the intent and purposes of the
Financing Documents and the transactions contemplated thereby, including all
such actions to establish, preserve, protect and perfect a first priority Lien
(subject only to Permitted Liens) in favor of Agent for the benefit of the
Lenders on the Collateral (including Collateral acquired after the date
hereof), including on any and all assets of each Credit Party, whether now
owned or hereafter acquired.

 

(b)           Without limiting the generality of the foregoing (but
subject to the provisions contained in the definition of Permitted China Joint
Venture), in the event that either Borrower or any of its Domestic Subsidiaries
shall acquire or form any new Subsidiary after the date hereof, such Borrower
or the respective Domestic Subsidiary will cause such new Subsidiary, upon such
acquisition and concurrent with such formation (or, with respect to the
creation and/or perfection of Liens on the assets of such Subsidiary, within
such reasonable period of time after acquisition or formation as the Agent may,
in its discretion, consent), (i) to execute a Guarantee (in form and content
acceptable to Agent) guaranteeing payment and performance of all of the
Obligations and to take such other action (including, without limitation,
authorizing the filing of such UCC financing statements and delivering
certificates in respect of the equity securities of such Subsidiary) as shall
be necessary or appropriate to establish, create, preserve, protect and perfect
a first priority Lien (subject only to Permitted Liens) in favor of Agent for
the benefit of the Lenders on substantially all assets that would, or are
intended to, constitute Collateral, both real and personal, in which such new
Subsidiary has or may thereafter acquire any interest (it being agreed that
leasehold mortgages will not be required with respect to office leases), (ii)
to execute such other Security Documents, in form and content acceptable to
Agent, as may be reasonably required or reasonably requested by Agent in
connection with the actions contemplated by the

 

 

preceding clause (i) and
(iii) to deliver such proof of corporate (or comparable) action, incumbency of
officers, opinions of counsel and other documents as Agent shall have required
or requested; provided, however,
that anything contained in this Section 4.12 to the contrary notwithstanding,
no Foreign Subsidiary shall be required to execute any such Guarantee or grant
a Lien on any of its assets to the extent but only for long as such Guarantee
or grant would result in adverse tax consequences to the Borrowers under
Section 956 of the Code as reasonably demonstrated by Borrowers.  Until such time that any Subsidiary shall
have fully complied with the provisions of this paragraph, and without
limitation of any rights and remedies available to Agent and Lenders as a
result thereof, the operating results of such Subsidiary shall be disregarded
in the calculation of EBITDA for any measurement period.

 

(c)           Borrowers will, and will cause each of their respective
Subsidiaries to, take such action from time to time as shall be necessary to
ensure that Agent shall have, for the benefit of Lenders, a first priority Lien
on all capital stock or other equity securities of each Subsidiary; provided, however, that anything contained
in this Section 4.12 to the contrary notwithstanding, neither the Borrowers nor
any of their Subsidiaries will be required to pledge more than sixty-five
percent (65%) of the voting equity interests of any Foreign Subsidiary to the
extent that a pledge of a greater percentage thereof would result in adverse
tax consequences to the Borrowers under Section 956 of the Code as reasonably
demonstrated by Borrowers.  In the event
that any additional equity securities shall be issued by any Subsidiary,
Borrowers shall or shall cause each of their respective Subsidiaries to,
concurrently with such issuance, deliver to Agent to the extent required by the
applicable Financing Documents the certificates evidencing such shares of
stock, accompanied by undated stock powers executed in blank and to take such
other action as Agent shall request to perfect the security interest created
therein pursuant to such Financing Documents.

 

ARTICLE V

NEGATIVE COVENANTS

 

Each
Borrower agrees that, so long as any Credit Exposure exists:

 

Section
5.1             Debt.  Neither
Borrower will, nor will it permit any Subsidiary (including, without
limitation, any Inactive Entity) to, directly or indirectly, create, incur,
assume, guarantee or otherwise become or remain directly or indirectly liable
with respect to, any Debt, except for:

 

(a)                                  Debt and Letter of Credit Liabilities under
the Financing Documents;

 

(b)           Debt or such Contingent Obligations outstanding on the
date of this Agreement as set forth in the Information Certificate;

 

(c)           Debt incurred or assumed for the purpose of financing all
or any part of the cost of acquiring any fixed asset (including through Capital
Leases), in an aggregate principal amount at any time outstanding not greater
than $250,000;

 

(d)           net obligations to a counterparty under any Swap Contract
permitted or required pursuant to the terms of this Agreement;

 

 

(e)           unsecured Debt not to exceed $250,000 in the aggregate at
any time outstanding which is subordinated to the Obligations in a manner
satisfactory to Agent; and

 

(f)            intercompany Debt arising from loans made by a Borrower
or a Domestic Subsidiary to a Permitted China Joint Venture or a Foreign
Subsidiary in an amount not to exceed, at the time the loan is made, the
Available Investment Basket; provided,
however, that upon the request of Agent at any time, any such Debt shall be
evidenced by promissory notes having terms reasonably satisfactory to Agent,
the sole originally executed counterparts of which shall be pledged and
delivered to Agent, for the benefit of Agent and Lenders, as security for the
Obligations.

 

Section
5.2             Liens.  Neither
Borrower will, nor will it permit any Subsidiary to, directly or indirectly,
create, assume or suffer to exist any Lien on any asset now owned or hereafter
acquired by it, except:

 

(a)                                  Liens created by the Security Documents;

 

(b)                                 Liens existing on the date of this Agreement
as set forth in the Information Certificate;

 

(c)           any Lien on any asset securing Debt permitted under
Section 5.1(c) incurred or assumed for the purpose of financing all or any part
of the cost of acquiring such asset, provided
that such Lien attaches to such asset concurrently with or within ninety (90)
days after the acquisition thereof;

 

(d)           Liens for taxes or other governmental charges not at the
time delinquent or thereafter payable without penalty or the subject of a
Permitted Contest;

 

(e)           Liens arising in the ordinary course of business (i) in
favor of carriers, warehousemen, mechanics and materialmen, and other similar
Liens imposed by law and (ii) in connection with worker’s compensation,
unemployment compensation and other types of social security (excluding Liens
arising under ERISA) or in connection with surety bonds, bids, performance
bonds and similar obligations) for sums not overdue or the subject of a
Permitted Contest and not involving any deposits or advances or borrowed money
or the deferred purchase price of property or services and, in each case, for
which it maintains adequate reserves;

 

(f)            attachments, appeal bonds, judgments and other similar
Liens, for sums not exceeding $100,000 in the aggregate arising in connection
with court proceedings; provided
that the execution or other enforcement of such Liens is effectively stayed and
the claims secured thereby are the subject of a Permitted Contest; and

 

(g)           easements, rights of way, restrictions, minor defects or
irregularities in title and other similar Liens not interfering in any material
respect with the ordinary conduct of the business of Borrower or any
Subsidiary.

 

Section
5.3             Contingent Obligations. 
Neither Borrower will, nor will it permit any Subsidiary (including any
Inactive Entity) to, directly or indirectly, create, assume, incur or suffer to
exist any Contingent Obligations, except for:

 

 

(a)           Contingent Obligations arising in respect of the Debt and
Letter of Credit Liabilities under the Financing Documents;

 

(b)                                 Contingent Obligations resulting from
endorsements for collection or deposit in the ordinary course of business;

 

(c)           so long as there exists no Event of Default both
immediately before and immediately after giving effect to any such transaction,
Contingent Obligations existing or arising under any Swap Contract, provided that such obligations are (or were)
entered into by a Borrower or a Subsidiary in the Ordinary Course of Business
for the purpose of directly mitigating risks associated with liabilities,
commitments, investments, assets, or property held or reasonably anticipated by
such Person and not for purposes of speculation;

 

(d)                                 Contingent Obligations outstanding on the
date of this Agreement as set forth in the Information Certificate;

 

(e)           Contingent Obligations incurred in the ordinary course of
business with respect to surety and appeal bonds, performance bonds and other
similar obligations not to exceed $100,000 in the aggregate at any time
outstanding;

 

(f)            Contingent Obligations arising under indemnity agreements
with title insurers to cause such title insurers to issue to Agent mortgagee title
insurance policies;

 

(g)           Contingent Obligations arising with respect to customary
indemnification obligations in favor of purchasers in connection with
dispositions permitted under Section 5.8; and

 

(h)                                 Contingent Obligations to the extent
permitted under clause (b) of Section 5.1.

 

Section
5.4             Restricted Distributions. 
Neither Borrower will, nor will it permit any Subsidiary (including,
without limitation any Inactive Entity) to, directly or indirectly, declare,
order, pay, make or set apart any sum for any Restricted Distribution
(including, without limitation pursuant to the terms of the Put and Call
Agreement); provided that the
foregoing shall not restrict or prohibit wholly-owned Subsidiaries from making
dividends or distributions to a Borrower and shall not restrict or prohibit:

 

(a)           purchases of shares by Holdings of (or options to purchase
shares of) equity interests in Holdings or options therefor from employees of
any Credit Party upon their death, termination or retirement, so long as (x) before
and after giving effect to any such dividend or distribution for such purpose,
(i) no Event of Default shall have occurred and be continuing and (ii)
Borrowers are in compliance on a pro forma basis with the covenants set forth
in Article VI recomputed for the most recently ended quarter for which
information is available and is in compliance with all other terms and
conditions of this Agreement and (y) such purchases or payments after the date
hereof do not exceed $100,000 in any Fiscal Year and do not exceed $250,000 in
the aggregate; and

 

(b)           the issuance by Holdings of Series C
preferred stock with terms and provisions reasonably acceptable to Agent as
consideration pursuant to the exercise by

 

 

Investor of its put option
under the Put and Call Agreement with respect to up to 7 million share of
common stock of Holdings held by Investor.

 

Section
5.5             Restrictive Agreements. 
Neither Borrower will, nor will it permit any Subsidiary to, directly or
indirectly (i) enter into or assume any agreement (other than the Financing
Documents and the Subordinated Debt Documents) prohibiting the creation or
assumption of any Lien upon its properties or assets, whether now owned or
hereafter acquired or (ii) create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind (except
as provided by the Subordinated Debt Documents) on the ability of any
Subsidiary to:  (1) pay or make
Restricted Distributions to a Borrower or any other Subsidiary; (2) pay any
Debt owed to a Borrower or any other Subsidiary; (3) make loans or advances to
a Borrower or any other Subsidiary; or (4) transfer any of its property or
assets to a Borrower or any other Subsidiary.

 

Section 5.6                                      Payments and Modifications
of Subordinated Debt and Liabilities Inactive Entities.

 

(a)           Neither Borrower will, nor will it permit any Subsidiary
to, directly or indirectly (i) declare, pay, make or set aside any amount for
payment in respect of Subordinated Debt, except for regularly scheduled
payments of principal and interest (but no voluntary prepayments) in respect of
such Subordinated Debt made in full compliance with any and all subordination
provisions applicable to such Subordinated Debt; and (ii) amend or otherwise
modify the terms of any Subordinated Debt if the effect of such amendment or
modification is to (a) increase the interest rate or fees on such Debt; (b)
change the dates upon which payments of principal or interest are due on, or
the principal amount of, such Debt other than due to the capitalization of
interest; (c) change any event of default or add or make more restrictive any
covenant with respect to such Debt; (d) change the prepayment provisions of
such Debt; (e) change the subordination provisions thereof (or the
subordination terms of any guaranty thereof); or (f) change or amend any other
term if such change or amendment would materially increase the obligations of
the obligor or confer additional material rights on the holder of such Debt in
a manner adverse to Borrowers, any Subsidiaries or Lenders.

 

(b)           Borrowers may pay or may invest sufficient capital to
permit the Inactive Entities to pay those contingent liabilities and expenses
expressly identified on the Information Certificate in the amounts indicated
thereon as of the Closing Date, so long as (x) before and after giving effect
to any such payment or distribution, (i) no Event of Default shall exist or
result therefrom, and (ii) Borrowers are in compliance on a pro forma basis
with the covenants set forth in Article VI recomputed for the most recently
ended quarter for which information is available, and (y) such distributions or
payments do not exceed $1,000,000 in the aggregate.

 

Section
5.7             Consolidations, Mergers and Sales of Assets.  Neither Borrower will, nor will it permit
any Subsidiary to, directly or indirectly (i) consolidate or merge with or into
any other Person or (ii) sell, lease, license or otherwise transfer, directly
or indirectly, any of its or their assets, other than (x) sales of Inventory in
the ordinary course of their respective businesses, (y) dispositions of Cash
Equivalents and (z) dispositions of equipment for cash and fair value that the
board of directors (or comparable body) of Holdings determines in good faith is
no longer used or useful in the business of Borrowers and their Subsidiaries if
all of the

 

 

following conditions are
met:  (a) the market value of assets
sold or otherwise disposed of in any single transaction or series of related
transactions does not exceed $250,000 and the aggregate market value of assets
sold or otherwise disposed of in any Fiscal Year of Borrowers does not exceed
$500,000; (b) the Net Cash Proceeds of such Asset Disposition are applied as
required by 2.1(c); (c) after giving effect to the Asset Disposition and the
repayment of Debt with the proceeds thereof, Borrowers are in compliance on a
pro forma basis with the covenants set forth in Article VI recomputed for the
most recently ended quarter for which information is available and is in
compliance with all other terms and conditions of this Agreement; and (d) no
Default or Event of Default then exists or would result from such Asset
Disposition.

 

Section
5.8             Purchase of Assets, Investments.  Neither Borrower will, nor will it permit any Subsidiary to,
directly or indirectly acquire any assets other than in the ordinary course of
business.  Neither Borrower will, nor
will it permit any Subsidiary to, directly or indirectly make, acquire or own
any Investment in any Person other than (a) Investments set forth on the
Information Certificate; (b) Cash Equivalents; (c) Investments in Foreign
Subsidiaries and Permitted China Joint Ventures, in an amount not to exceed, at
the time the Investment is made, the Available Investment Basket so long as
there has been compliance with Section 4.12; (d) bank deposits established in
accordance with Section 5.15; (e) Investments in securities of account debtors
received pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of such account debtors; (f) Investments in the form
of Swap Contracts permitted under Section 5.3(c); and (g) loans to officers and
employees in an aggregate principal amount not to exceed $100,000 at any time
outstanding.  Without limiting the
generality of the foregoing and except as expressly permitted hereunder,
neither Borrower will, nor will it permit any Subsidiary to, (i) acquire or
create any Subsidiary, (ii) engage in any joint venture or partnership with any
other Person, or (iii) make any Investment in any Inactive Entity except to pay
contingent liabilities that have been reduced to judgment or otherwise
liquidated and are then due and payable by such Inactive Entity to the extent
permitted under and in accordance with Section 5.6(b).

 

Section
5.9             Transactions with Affiliates.  Except (i) as permitted by Section 5.14, (ii) as otherwise
disclosed in the Information Certificate, and (iii) for transactions that are
disclosed to Agent in writing in advance of being entered into and which contain
terms that are no less favorable to Borrowers or any Subsidiary, as the case
may be, than those which might be obtained from a third party not an Affiliate
of any Credit Party, neither Borrower will, nor will it permit any Subsidiary
to, directly or indirectly, enter into or permit to exist any transaction
(including the purchase, sale, lease or exchange of any property or the
rendering of any service) with any Affiliate of a Borrower.

 

Section
5.10           Modification
of Organizational Documents. 
Neither Borrower will, nor will it permit any Subsidiary to, directly or
indirectly amend or otherwise modify any Organizational Documents of such
Person, except for such amendments or other modifications required by law and
fully disclosed to Agent.

 

Section 5.11                                Fiscal Year. 
Neither Borrower will, nor will it permit any Subsidiary to, change its
Fiscal Year.

 

 

Section
5.12           Conduct
of Business.  Neither
Borrower will, nor will it permit any Subsidiary to, directly or indirectly,
engage in any line of business other than those businesses engaged in on the
Closing Date and businesses reasonably related thereto.

 

Section
5.13           Investor/AIP
Fees.  Neither Borrower
will, nor will it permit any Subsidiary to, directly or indirectly, pay or
become obligated to pay any management, consulting or similar advisory fees or
other amounts to or for the account of Investor, AIP or any Affiliate of such
Persons except, so long as no Event of Default is then continuing or would
result therefrom, pursuant to the Management Agreement as it exists on the date
hereof.

 

Section
5.14           Lease
Payments.  Neither
Borrower will, nor will it permit any Subsidiary to, directly or indirectly,
incur or assume (whether pursuant to a Guarantee or otherwise) any liability
for rental payments under a lease with a lease term of one year or more if,
after giving effect thereto, the aggregate amount of minimum lease payments
that Borrower and its Consolidated Subsidiaries have so incurred or assumed
will exceed, on a consolidated basis, $100,000 for any calendar year under all
such leases (excluding Capital Leases).

 

Section
5.15           Bank
Accounts.  Neither
Borrower will, nor will it permit any Subsidiary to, directly or indirectly,
establish any new bank account without prior written notice to Agent and unless
Agent, the applicable Borrower or such Subsidiary and the bank at which the
account is to be opened enter into a control agreement regarding such bank
account pursuant to which such bank acknowledges the security interest of Agent
in such bank account, agrees to comply with instructions originated by Agent
directing disposition of the funds in the bank account without further consent
from such Borrower, and agrees to subordinate and limit any security interest
the bank may have in the bank account on terms satisfactory to Agent.

 

ARTICLE VI

FINANCIAL COVENANTS

 

Each
Borrower agrees that, so long as any Credit Exposure exists:

 

Section
6.1             Capital Expenditures. 
Borrowers will not permit the aggregate amount of Capital Expenditures
for any period set forth below to exceed the amount set forth below for such
period:

 

	
  Period

  	
   

  	
  Amount

  	
   

  
	
  Fiscal Year ended September 30, 2005

  	
   

  	
  $

  	
  4,000,000

  	
   

  
	
  Fiscal Year
  ended September 30, 2006 and each Fiscal Year end thereafter

  	
   

  	
  $

  	
  2,000,000

  	
   

  

 

Section
6.2             Minimum EBITDA. 
Borrowers will not permit EBITDA for the twelve (12) month period ending
on the last day of any fiscal quarter, commencing with the fiscal quarter
ending on December 31, 2004, to be less than $10,000,000.

 

Section
6.3             Fixed Charge Coverage Ratio.  Borrowers will not permit the Fixed Charge Coverage Ratio for the
twelve (12) month period ending on the last day of any fiscal quarter of
Borrower, commencing with its fiscal quarter ending on December 31, 2004, to be
less than 1.10 to 1.00.

 

 

Section
6.4             Interest Coverage Ratio. 
Borrower will not permit the Interest Coverage Ratio for the twelve (12)
month period ending on the last day of any fiscal quarter of Borrower,
commencing with its fiscal quarter ending on December 31, 2004, to be less than
3.00 to 1.00.

 

Section
6.5             Total Debt to EBITDA Ratio.  Borrowers will not permit the ratio of (i) Total Debt on any date
set forth below to (ii) EBITDA for the twelve (12) month period ending on such
date (or, if any portion of such period precedes the Closing Date, for the
period commencing on the Closing Date and ending on such date, expressed on an
annualized basis) to exceed the ratio set forth below opposite such date:

 

	
  Date

  	
   

  	
  Ratio

  	
   

  
	
  December
  31, 2004

  	
   

  	
  2.10

  	
   

  
	
  March
  31, 2005

  	
   

  	
  2.00

  	
   

  
	
  June
  30, 2005

  	
   

  	
  1.75

  	
   

  
	
  September
  30, 2005

  	
   

  	
  1.75

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December
  31, 2005

  	
   

  	
  1.50

  	
   

  
	
  March
  31, 2006

  	
   

  	
  1.50

  	
   

  
	
  June
  30, 2006

  	
   

  	
  1.50

  	
   

  
	
  September
  30, 2006

  	
   

  	
  1.50

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December
  31, 2006

  	
   

  	
  1.25

  	
   

  
	
  March
  31, 2007

  	
   

  	
  1.25

  	
   

  
	
  June
  30, 2007

  	
   

  	
  1.25

  	
   

  
	
  September
  30, 2007

  	
   

  	
  1.25

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December
  31, 2007

  	
   

  	
  1.25

  	
   

  
	
  March
  31, 2008

  	
   

  	
  1.25

  	
   

  
	
  June
  30, 2008

  	
   

  	
  1.25

  	
   

  
	
  September
  30, 2008

  	
   

  	
  1.25

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  December
  31, 2008 and each fiscal quarter thereafter

  	
   

  	
  1.00

  	
   

  

 

ARTICLE VII

CONDITIONS

 

Section
7.1             Conditions to Initial Funding.  The obligation of each Lender to make the initial Loans and of
Agent to issue any Support Agreements on or after the Closing Date shall be
subject to the receipt by Agent of each agreement, document and instrument set
forth on the Closing Checklist, each in form and substance satisfactory to
Agent, and to the consummation of the following conditions precedent, each to
the satisfaction of Agent and Lenders in their sole discretion:

 

(a)           evidence of the consummation of the transactions (other
than the Redemption and the funding of the Loans) contemplated by the Operative
Documents or that all conditions

 

 

precedent thereto, except
for the funding of the Loans, have been fully satisfied in accordance with the
Operative Documents and applicable law;

 

(b)                                 the payment of all fees, expenses and other
amounts due and payable under each Financing Document;

 

(c)           the satisfaction of Agent as to the absence, since
September 30, 2003, of any material adverse change in any aspect of the
business, operations, properties, prospects or condition (financial or
otherwise) of any Credit Party, or any event or condition which could
reasonably be expected to result in such a material adverse change;

 

(d)           the receipt of the initial Borrowing Base Certificate,
prepared as of the Closing Date, which certificate shall evidence immediately
available excess borrowing capacity of Revolving Loans of not less than
$3,000,000 after giving effect to the initial funding of Loans on the Closing
Date and the consummation of the transactions contemplated by the Operative
Documents; and

 

(e)                                  receipt by Agent of such other documents,
instruments and/or agreements as Agent may reasonably request.

 

Section
7.2             Conditions to Each Loan and Support Agreement.  The obligation of the Lenders to make a Loan
or of Agent to issue any Support Agreement (including on the Closing Date) is
subject to the satisfaction of the following additional conditions:

 

(a)           in the case of a Revolving Loan Borrowing, receipt by
Agent of a Notice of Borrowing in accordance with Section 2.2(b) and in the
case of any Support Agreement, receipt by Agent of a Notice of LC Credit Event
in accordance with Section 2.5(a);

 

(b)           the fact that, immediately after such borrowing and after
application of the proceeds thereof or after such issuance, the Revolving Loan
Outstandings will not exceed the Revolving Loan Limit;

 

(c)           the fact that, immediately before and after such borrowing
or issuance, no Default or Event of Default shall have occurred and be
continuing; and

 

(d)           the fact that the representations and warranties of each
Credit Party contained in the Financing Documents shall be true and correct on
and as of the date of such borrowing or issuance, except to the extent that any
such representation or warranty relates to a specific date in which case such
representation or warranty shall be true and correct as of such earlier date.

 

Each
borrowing, each giving of a Notice of LC Credit Event hereunder and each giving
of a Notice of Borrowing hereunder shall be deemed to be a representation and
warranty by Borrowers on the date of such borrowing or notice as to the facts
specified in Sections 7.2(b), 7.2(c) and 7.2(d).

 

 

ARTICLE VIII

EVENTS OF DEFAULT

 

Section
8.1             Events of Default. 
For purposes of the Financing Documents, the occurrence of any of the
following conditions and/or events, whether voluntary or involuntary, by
operation of law or otherwise, shall constitute an “Event of Default”:

 

(a)           Borrowers shall fail to pay when due any principal,
interest, premium or fee under any Financing Document or any other amount
payable under any Financing Document;

 

(b)           Borrowers shall fail to observe or perform any covenant
contained in Section 4.1, Section 4.4, Section 4.7, Section 4.10, Article V, or
Article VI;

 

(c)           any Credit Party defaults in the performance of or
compliance with any term contained in this Agreement or in any other Financing
Document (other than occurrences described in other provisions of this Section
8.1 for which a different grace or cure period is specified or which constitute
immediate Events of Default) and such default is not remedied or waived within
fifteen (15) days after the earlier of (1) receipt by Borrowers of notice from
Agent or Required Lenders of such default or (2) actual knowledge of either
Borrower or any other Credit Party of such default;

 

(d)           any representation, warranty, certification or statement
made by any Credit Party or any other Person in any Financing Document or in
any certificate, financial statement or other document delivered pursuant to
any Financing Document is incorrect in any respect (or in any material respect if
such representation, warranty, certification or statement is not by its terms
already qualified as to materiality) when made (or deemed made);

 

(e)           (1) failure of any Credit Party to pay when due or within
any applicable grace period any principal, interest or other amount on Debt
(other than the Loans) or in respect of any Swap Contract, or the occurrence of
any breach, default, condition or event with respect to any Debt (other than
the Loans) or in respect of any Swap Contract, if the effect of such failure or
occurrence is to cause or to permit the holder or holders of any such Debt, or
the counterparty under any Swap Contracts, to cause, Debt or other liabilities
having an individual principal amount in excess of $250,000 or having an
aggregate principal amount in excess of $500,000 to become or be declared due
prior to its stated maturity or (2) the occurrence of any breach or default
under any terms or provisions of any Subordinated Debt Document;

 

(f)            any Credit Party shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now
or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part
of its property, or shall consent to any such relief or to the appointment of
or taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due, or shall take any corporate action to authorize any of the foregoing;

 

(g)           an involuntary case or other proceeding shall be commenced
against any Credit Party seeking liquidation, reorganization or other relief
with respect to it or its debts under any

 

 

bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of sixty (60) days; or an
order for relief shall be entered against any Credit Party under the federal
bankruptcy laws as now or hereafter in effect;

 

(h)           (1) institution of any steps by any Person to terminate a
Pension Plan if as a result of such termination any Credit Party or any member
of the Controlled Group could be required to make a contribution to such
Pension Plan, or could incur a liability or obligation to such Pension Plan, in
excess of $250,000, (2) a contribution failure occurs with respect to any
Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA,
or (3) there shall occur any withdrawal or partial withdrawal from a
Multiemployer Pension Plan and the withdrawal liability (without un-accrued
interest) to Multiemployer Pension Plans as a result of such withdrawal
(including any outstanding withdrawal liability that any Credit Party or any
member of the Controlled Group have incurred on the date of such withdrawal)
exceeds $250,000;

 

(i)            one or more judgments or orders for the payment of money
aggregating in excess of $250,000 shall be rendered against any or all Credit
Parties and such judgments or orders shall continue unsatisfied and un-stayed
for a period of ten (10) days;

 

(j)            (1) Investor shall collectively cease to, directly or
indirectly, own and control at least (i) 50% of the outstanding equity
interests of Holdings owned by them on the Closing Date (after giving effect to
the consummation of the transactions contemplated by the Operative Documents)
or (ii) that percentage of the outstanding voting equity interests of Holdings
necessary at all times to elect a majority of the board of directors of
Holdings and to direct the management policies and decisions of Holdings, (2)
Holdings shall cease to directly own and control one hundred percent (100%) of
each class of the outstanding equity interests of Williams, or (3) subject to
the provisions of Section 5.7 and Section 5.8 hereof and other than with
respect to Permitted China Joint Ventures, Borrower shall cease to, directly or
indirectly, own and control one hundred percent (100%) of each class of the
outstanding equity interests of each Subsidiary;

 

(k)           any Lien created by any of the Security Documents shall at
any time fail to constitute a valid and perfected Lien on all of the Collateral
purported to be secured thereby, subject to no prior or equal Lien except
Permitted Liens, or any Credit Party shall so assert in writing;

 

(l)            any Credit Party shall be prohibited or otherwise
materially restrained from conducting the business theretofore conducted by it
by virtue of any casualty, any labor strike which, in Agent’s judgment is
likely to cause a material disruption or interference with the conduction of
Borrowers’ business, any determination, ruling, decision, decree or order of
any court or regulatory authority of competent jurisdiction or any other event
and such casualty, labor strike, determination, ruling, decision, decree, order
or other event remains un-stayed and in effect for any period of ten (10) days;

 

(m)          any of the Operative Documents shall for any reason fail to
constitute the valid and binding agreement of any party thereto, or any such
party shall so assert in writing;

 

 

(n)           Holdings engages in any type of business activity other
than the ownership of the capital stock of Williams, and performance of its
obligations under Operative Documents to which it is a party;

 

(o)           (i) any creditor of an Inactive Entity successfully
asserts or imposes liability on any Credit Party, or any Credit Party otherwise
becomes liable for, the liabilities (contingent or otherwise) of any of the Inactive
Entities, including those contingent liabilities set forth on the Information
Certificate or as may hereafter arise, or (ii) any Inactive Subsidiary pays or
is required to pay (whether pursuant to judicial process or otherwise) any
liability to any third party, in each case under clauses (i) and (ii) above,
either individually or in the aggregate, in an amount exceeding $1,000,000; and

 

(p)           The failure of any of the following (each as described in
the Schedule 14A Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 filed by Holdings with the Securities and Exchange
Commission) to occur on or before September 30, 2004:

 

(i)            The filing by the board of directors of Holdings with the
Secretary of State of the State of Delaware of the Certificate of Amendment to
the Series B Designation with respect to Holding’s Series B preferred stock;

 

(ii)           The filing by the board of directors of Holdings with the
Secretary of State of Delaware of the Certificate of Designation for Holdings’
Series C preferred stock; or

 

(iii)          Holdings successfully effects the redemption of at least
98,114 shares of Series B preferred stock of Holdings for an aggregate purchase
price not to exceed $26,000,210.

 

Section
8.2             Acceleration and Suspension or Termination of Revolving Loan Commitment.  Upon the occurrence and during the
continuance of an Event of Default, Agent may, and shall if requested by
Required Lenders, (i) by notice to Borrowers suspend or terminate the Revolving
Loan Commitment, in whole or in part (and, if in part, such reduction shall be
pro rata among the Lenders having a Revolving Loan Commitment Percentage)
and/or (ii) by notice to the Borrowers declare the Obligations to be, and the
Obligations shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by Borrowers and Borrowers will pay the same; provided that in the case of any of the
Events of Default specified in Section 8.1(f) or 8.1(g) above, without any
notice to Borrowers or any other act by Agent or the Lenders, the Revolving
Loan Commitment shall thereupon terminate and all of the Obligations shall
become immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by Borrowers and
Borrowers will pay the same.

 

Section
8.3             Cash Collateral. 
If (i) any Event of Default specified in Section 8.1(f) or 8.1(g) shall
occur, (ii) the Obligations shall have otherwise been accelerated pursuant to
Section 8.2 or (iii) the Revolving Loan Commitment shall have been terminated
pursuant to Section 8.2, then without any request or the taking of any other
action by Agent or the Lenders, Borrowers shall immediately comply with the
provisions of Section 2.5(e) with respect to the deposit of

 

 

cash collateral to secure
the existing Letter of Credit Liabilities and future payment of related fees.

 

Section
8.4             Default Rate of Interest and Suspension of LIBOR Rate Options.  At the election of Agent or Required
Lenders, after the occurrence of an Event of Default and for so long as it
continues, the Loans and other Obligations shall bear interest at rates that
are two percent (2.0%) in excess of the rates otherwise payable under this
Agreement.  Furthermore, at the election
of Agent or Required Lenders during any period in which any Event of Default is
continuing (x) as the Interest Periods for LIBOR Loans then in effect expire,
such Loans shall be converted into Prime Rate Loans and (y) the LIBOR election
will not be available to Borrowers.

 

Section
8.5             Setoff Rights. 
During the continuance of any Event of Default, each Lender is hereby
authorized by Borrowers at any time or from time to time, with reasonably
prompt subsequent notice to Borrower (any prior or contemporaneous notice being
hereby expressly waived) to set off and to appropriate and to apply any and all
(A) balances held by such Lender at any of its offices for the account of
Borrowers or any of their Subsidiaries (regardless of whether such balances are
then due to Borrowers or their Subsidiaries), and (B) other property at any
time held or owing by such Lender to or for the credit or for the account of a
Borrower or any of its Subsidiaries, against and on account of any of the
Obligations; except that no Lender shall exercise any such right without the
prior written consent of Agent.  Any
Lender exercising a right to set off shall purchase for cash (and the other
Lenders shall sell) interests in each of such other Lender’s Pro Rata Share of
the Obligations as would be necessary to cause all Lenders to share the amount
so set off with each other Lender in accordance with their respective Pro Rata
Share of the Obligations.  Each Borrower
agrees, to the fullest extent permitted by law, that any Lender may exercise
its right to set off with respect to the Obligations as provided in this
Section 8.5.

 

Section
8.6             Application of Proceeds. 
Notwithstanding anything to the contrary contained in this Agreement,
upon the occurrence and during the continuance of an Event of Default, (a) each
Borrower irrevocably waives the right to direct the application of any and all
payments at any time or times thereafter received by Agent from or on behalf of
Borrowers or any guarantor of all or any part of the Obligations, and Agent
shall have the continuing and exclusive right to apply and to reapply any and
all payments received at any time or times after the occurrence and during the
continuance of an Event of Default against the Obligations in such manner as Agent
may deem advisable notwithstanding any previous application by Agent and (b) in
the absence of a specific determination by Agent with respect thereto, the
proceeds of any sale of, or other realization upon, all or any part of the
Collateral shall be applied:  first,
to all fees, costs, indemnities and expenses incurred by or owing to Agent,
with respect to this Agreement, the other Financing Documents, or the
Collateral; second, to all fees, costs, indemnities and expenses
incurred by or owing to any Lender, with respect to this Agreement, the other
Financing Documents, or the Collateral; third, to accrued and unpaid
interest on the Obligations (including any interest which but for the
provisions of the Bankruptcy Code, would have accrued on such amounts); fourth,
to the principal amount of the Obligations outstanding; and fifth to any
other indebtedness or obligations of Borrowers owing to Agent or any Lender
under the Financing Documents.  Any
balance remaining shall be delivered to Borrowers or to whomever may be
lawfully entitled to receive such balance or as a court of competent
jurisdiction may direct.

 

 

ARTICLE IX

EXPENSES, INDEMNITY, TAXES AND RIGHT TO PERFORM

 

Section
9.1             Expenses.  Each
Borrower hereby agrees, jointly and severally, to promptly pay (i) all costs
and expenses of Agent (including without limitation the fees, costs and
expenses of counsel to, and independent appraisers and consultants retained by
Agent) in connection with the examination, review, due diligence investigation,
documentation, negotiation, closing and syndication of the transactions
contemplated by the Financing Documents, in connection with the performance by
Agent of its rights and remedies under the Financing Documents and in
connection with the continued administration of the Financing Documents
including any amendments, modifications, consents and waivers to and/or under
any and all Financing Documents, (ii) without limitation of the preceding
clause (i), all costs and expenses of Agent in connection with the creation,
perfection and maintenance of Liens pursuant to the Financing Documents,
including title investigations, (iii) without limitation of the preceding
clause (i), expenses of Agent in connection with protecting, storing, insuring,
handling, maintaining or selling any Collateral and in connection with any
workout, collection, bankruptcy, insolvency and other enforcement proceedings
under any and all of the Financing Documents, and (iv) all costs and expenses
incurred by Lenders in connection with any workout, collection, bankruptcy,
insolvency and other enforcement proceedings under any and all Financing
Documents, provided, that to the
extent that the costs and expenses referred to in this clause (iv) consist of
fees, costs and expenses of counsel, Borrowers shall be obligated to pay such
fees, costs and expenses for only one counsel acting for all Lenders (other
than Agent).

 

Section
9.2             Indemnity. 
Borrowers hereby agree, jointly and severally, to indemnify, pay and
hold harmless Agent and Lenders and the officers, directors, employees and
counsel of Agent and Lenders (collectively called the “Indemnitees”) from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or nature
whatsoever (including the fees and disbursements of counsel for such
Indemnitee) in connection with any investigative, administrative or judicial
proceeding, whether or not such Indemnitee shall be designated a party thereto
and including any such proceeding initiated by or on behalf of a Credit Party,
and the reasonable expenses of investigation by engineers, environmental
consultants and similar technical personnel and any commission, fee or
compensation claimed by any broker (other than any broker retained by Agent or
Lenders) asserting any right to payment for the transactions contemplated
hereby, which may be imposed on, incurred by or asserted against such
Indemnitee as a result of or in connection with the transactions contemplated
hereby or by the other Operative Documents (including (i)(A) as a direct or
indirect result of the presence on or under, or escape, seepage, leakage,
spillage, discharge, emission or release from, any property now or previously
owned, leased or operated by a Borrower, any Subsidiary or any other Person of
any Hazardous Materials or any Hazardous Materials Contamination, (B) arising
out of or relating to the offsite disposal of any materials generated or
present on any such property or (C) arising out of or resulting from the
environmental condition of any such property or the applicability of any
governmental requirements relating to Hazardous Materials, whether or not
occasioned wholly or in part by any condition, accident or event caused by any
act or omission of a Borrower or any Subsidiary, and (ii) proposed and actual
extensions of credit under this Agreement) and the use or intended use of the
proceeds of the Notes and Letters of Credit, except that Borrowers shall have
no obligation hereunder to an Indemnitee with respect to any liability
resulting from the

 

 

gross negligence or willful
misconduct of such Indemnitee, as determined by a court of competent
jurisdiction.  To the extent that the
undertaking set forth in the immediately preceding sentence may be
unenforceable, Borrowers shall contribute the maximum portion which it is
permitted to pay and satisfy under applicable law to the payment and
satisfaction of all such indemnified liabilities incurred by the Indemnitees or
any of them.

 

Section
9.3             Taxes.  Borrowers
agree to pay all governmental assessments, charges or taxes (except income or
other similar taxes imposed on Agent or Lenders), including any interest or
penalties thereon, at any time payable or ruled to be payable in respect of the
existence, execution or delivery of this Agreement or the other Financing
Documents or the issuance of the Notes or Letters of Credit and to indemnify
and hold Agent and Lenders harmless against liability in connection with any
such assessments, charges or taxes.

 

Section
9.4             Right to Perform. 
If any Credit Party fails to perform any obligation hereunder or under
any other Financing Document, Agent itself may, but shall not be obligated to,
cause such obligation to be performed at Borrowers’ expense and Borrowers agree
to reimburse Agent therefor on demand. 
All amounts owing hereunder or under any other Financing Document may be
satisfied in full, subject to the provisions of Section 2.2(a)(ii), through the
making of Agent Advances.

 

ARTICLE X

AGENT

 

Section
10.1           Appointment
and Authorization.  Each
Lender hereby irrevocably appoints and authorizes Agent to enter into each of
the Security Documents on its behalf and to take such actions as Agent on its
behalf and to exercise such powers under the Financing Documents as are
delegated to Agent by the terms thereof, together with all such powers as are
reasonably incidental thereto.  Except
as otherwise expressly provided in Section 11.5 or by the terms of the
Financing Documents, Agent is authorized and empowered to amend, modify, or
waive any provisions of this Agreement or the other Financing Documents on
behalf of Lenders.  The provisions of
this Article X are solely for the benefit of Agent and Lenders and neither Borrowers
nor any other Credit Party shall have any rights as a third party beneficiary
of any of the provisions hereof.  In
performing its functions and duties under this Agreement, Agent shall act
solely as agent of Lenders and does not assume and shall not be deemed to have
assumed any obligation toward or relationship of agency or trust with or for
Borrowers or any other Credit Party. 
Agent may perform any of its duties hereunder, or under the Financing
Documents, by or through its agents or employees.

 

Section
10.2           Agent
and Affiliates.  Agent
shall have the same rights and powers under the Financing Documents as any
other Lender and may exercise or refrain from exercising the same as though it
were not Agent, and Agent and its Affiliates may lend money to, invest in and
generally engage in any kind of business with each Credit Party or Affiliate of
any Credit Party as if it were not Agent hereunder.

 

Section
10.3           Action
by Agent.  The duties of
Agent shall be mechanical and administrative in nature.  Agent shall not have by reason of this Agreement
a fiduciary relationship in respect of any Lender.  Nothing in this Agreement or any of the Financing

 

 

Documents, express or
implied, is intended to or shall be construed to impose upon Agent any
obligations in respect of this Agreement or any of the Financing Documents
except as expressly set forth herein or therein.

 

Section
10.4           Consultation
with Experts.  Agent may
consult with legal counsel, independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken by it in good faith in accordance with the advice of such counsel,
accountants or experts.

 

Section
10.5           Liability
of Agent.  Neither Agent
nor any of its directors, officers, agents or employees shall be liable to any
Lender for any action taken or not taken by it in connection with the Financing
Documents, except that Agent shall be liable to the extent of its own gross
negligence or willful misconduct as determined by a court of competent
jurisdiction.  Neither Agent nor any of
its directors, officers, agents or employees shall be responsible for or have
any duty to ascertain, inquire into or verify (i) any statement, warranty or
representation made in connection with any Financing Document or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements specified in any Financing Document; (iii) the satisfaction of any
condition specified in any Financing Document, except receipt of items required
to be delivered to Agent; (iv) the validity, effectiveness, sufficiency or
genuineness of any Financing Document, any Lien purported to be created or
perfected thereby or any other instrument or writing furnished in connection
therewith; (v) the existence or non-existence of any Default or Event of Default;
or (vi) the financial condition of any Credit Party.  Agent shall not incur any liability by acting in reliance upon
any notice, consent, certificate, statement, or other writing (which may be a
bank wire, telex, facsimile or electronic transmission or similar writing)
believed by it to be genuine or to be signed by the proper party or
parties.  Agent shall not be liable for
any apportionment or distribution of payments made by it in good faith and if
any such apportionment or distribution is subsequently determined to have been
made in error the sole recourse of any Lender to whom payment was due but not
made, shall be to recover from other Lenders any payment in excess of the
amount to which they are determined to be entitled (and such other Lenders
hereby agree to return to such Lender any such erroneous payments received by
them).

 

Section
10.6           Indemnification.  Each Lender shall, in accordance with its
Pro Rata Share, indemnify Agent (to the extent not reimbursed by Borrowers)
against any cost, expense (including counsel fees and disbursements), claim,
demand, action, loss or liability (except such as result from Agent’s gross
negligence or willful misconduct as determined by a final non-appealable
judgment of a court of competent jurisdiction) that Agent may suffer or incur
in connection with the Financing Documents or any action taken or omitted by
Agent hereunder or thereunder.  If any
indemnity furnished to Agent for any purpose shall, in the opinion of Agent, be
insufficient or become impaired, Agent may call for additional indemnity and
cease, or not commence, to do the acts indemnified against even if so directed
by Required Lenders until such additional indemnity is furnished.  The obligations of Lenders under this
Section 10.6 shall survive the payment in full of the Obligations and the
termination of this Agreement.

 

Section
10.7           Right
to Request and Act on Instructions.  Agent may at any time request instructions from Lenders with
respect to any actions or approvals which by the terms of this Agreement or of
any of the Financing Documents Agent is permitted or desires to take or to

 

 

grant, and if such
instructions are promptly requested, Agent shall be absolutely entitled to
refrain from taking any action or to withhold any approval and shall not be
under any liability whatsoever to any Person for refraining from any action or
withholding any approval under any of the Financing Documents until it shall
have received such instructions from Required Lenders or all or such other
portion of the Lenders as shall be prescribed by this Agreement.  Without limiting the foregoing, no Lender
shall have any right of action whatsoever against Agent as a result of Agent
acting or refraining from acting under this Agreement or any of the other
Financing Documents in accordance with the instructions of Required Lenders (or
all or such other portion of the Lenders as shall be prescribed by this
Agreement) and, notwithstanding the instructions of Required Lenders (or such
other applicable portion), Agent shall have no obligation to take any action if
it believes, in good faith, that such action exposes Agent to any liability for
which it has not received satisfactory indemnification in accordance with the
provisions of Section 10.6.

 

Section
10.8           Credit
Decision.  Each Lender
acknowledges that it has, independently and without reliance upon Agent or any
other Lender, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement.  Each Lender also
acknowledges that it will, independently and without reliance upon Agent or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under the Financing Documents.

 

Section
10.9           Collateral
Matters.  Lenders
irrevocably authorize Agent, at its option and in its discretion, to (x)
release any Lien granted to or held by Agent under any Security Document (i)
upon termination of the Revolving Loan Commitment and payment in full of all
Obligations and the expiration, termination or cash collateralization (to the
satisfaction of Agent) of all Letters of Credit; or (ii) constituting property
sold or to be sold or disposed of as part of or in connection with any
disposition permitted under any Financing Document (it being understood and
agreed that Agent may conclusively rely without further inquiry on a
certificate of a Responsible Officer as to the sale or other disposition of
property being made in full compliance with the provisions of the Financing
Documents) and (y) release or subordinate any Lien granted to or held by Agent
under any Security Document constituting property described in Section 5.2(c)
(it being understood and agreed that Agent may conclusively rely without
further inquiry on a certificate of a Responsible Officer as to the
identification of any property described in Section 5.2(c)).  Upon request by Agent at any time, Lenders
will confirm in writing Agent’s authority to release and/or subordinate
particular types or items of Collateral pursuant to this Section 10.9.

 

Section
10.10         Agency
for Perfection.  Agent
and each Lender hereby appoint each other Lender as agent for the purpose of
perfecting Agent’s security interest in assets which, in accordance with the
Uniform Commercial Code in any applicable jurisdiction, can be perfected by
possession or control.  Should any
Lender (other than Agent) obtain possession or control of any such assets, such
Lender shall notify Agent thereof, and, promptly upon Agent’s request
therefore, shall deliver such assets to Agent or in accordance with Agent’s
instructions or transfer control to Agent in accordance with Agent’s
instructions.  Each Lender agrees that
it will not have any right individually to enforce or seek to enforce any
Security Document or to realize

 

 

upon any Collateral for the
Loans unless instructed to do so by Agent, it being understood and agreed that
such rights and remedies may be exercised only by Agent.

 

Section
10.11         Notice
of Default.  Agent shall
not be deemed to have knowledge or notice of the occurrence of any Default or
Event of Default except with respect to defaults in the payment of principal,
interest and fees required to be paid to Agent for the account of Lenders,
unless Agent shall have received written notice from a Lender or Borrowers
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a “notice of default”.  Agent will notify each Lender of its receipt of any such
notice.  Agent shall take such action
with respect to such Default or Event of Default as may be requested by
Required Lenders in accordance with the terms hereof.  Unless and until Agent has received any such request, Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable or in the best interests of Lenders.

 

Section
10.12         Successor
Agent.  Agent may resign
at any time by giving written notice thereof to the Lenders and Borrowers.  Upon any such resignation, Required Lenders
shall have the right to appoint a successor Agent.  If no successor Agent shall have been so appointed by Required
Lenders, and shall have accepted such appointment, within thirty (30) days
after the retiring Agent gives notice of resignation, then the retiring Agent
may, on behalf of Lenders, appoint a successor Agent, which shall be an
institution organized or licensed under the laws of the United States of
America or of any State thereof.  Upon
the acceptance of its appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights and duties of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder.  After any retiring Agent’s resignation hereunder as Agent, the
provisions of this Article shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent.

 

Section 10.13                          Disbursements of Revolving
Loans; Payment.

 

(a)                                  Revolving Loan Advances, Payments and
Settlements; Interest and Fee Payments.

 

(i)            Agent shall have the right, on behalf of Lenders, to
disburse funds to Borrowers for all Revolving Loans requested by Borrowers
pursuant to the terms of this Agreement. 
Absent the prior receipt by Agent of a written notice from any Lender
pursuant to which such Lender notifies Agent that such Lender shall cease
making Revolving Loans (whether due to the existence of a Default or Event of
Default or otherwise), Agent shall be conclusively entitled to assume, for
purposes of the preceding sentence, that each Lender will fund its Pro Rata
Share of all Revolving Loans requested by Borrowers.  Each Lender shall reimburse Agent on demand, in accordance with
the provisions of the immediately following paragraph, for all funds disbursed
on its behalf by Agent pursuant to the first sentence of this clause (i), or if
Agent so requests, each Lender will remit to Agent its Pro Rata Share of any
Revolving Loan before Agent disburses the same to Borrowers.  If Agent elects to require that each Lender
make funds available to Agent, prior to a disbursement by Agent to Borrowers,
Agent shall advise each Lender by telephone, facsimile or e-mail of the amount
of such Lender’s Pro Rata Share of the Revolving Loan requested by Borrowers no
later than noon (Chicago time)

 

 

on the date of funding of such Revolving Loan, and each such Lender
shall pay Agent on such date such Lender’s Pro Rata Share of such requested
Revolving Loan, in same day funds, by wire transfer to the Payment Account, or
such other account as may be identified in writing by Agent to Lenders from
time to time.  If any Lender fails to
pay the amount of its Pro Rata Share within one (1) Business Day after Agent’s
demand, Agent shall promptly notify Borrowers, and Borrowers shall immediately
repay such amount to Agent.  Any
repayment required pursuant to this Section 10.13 shall be without premium or
penalty.  Nothing in this Section 10.13
or elsewhere in this Agreement or the other Financing Documents shall be deemed
to require Agent to advance funds on behalf of any Lender or to relieve any
Lender from its obligation to fulfill its commitments hereunder or to prejudice
any rights that Agent or Borrowers may have against any Lender as a result of
any default by such Lender hereunder.

 

(ii)           On a Business Day of each week as selected from time to
time by Agent, or more frequently (including daily), if Agent so elects (each
such day being a “Settlement Date”),
Agent will advise each Lender by telephone, facsimile or e-mail of the amount
of each such Lender’s Pro Rata Share of the Revolving Loan balance (including
any Agent Advances) as of the close of business of the Business Day immediately
preceding the Settlement Date.  In the
event that payments are necessary to adjust the amount of such Lender’s actual
Pro Rata Share of the Revolving Loan balance to such Lender’s required Pro Rata
Share of the Revolving Loan balance as of any Settlement Date, the party from
which such payment is due (i) shall be deemed, irrevocably and unconditionally,
to have purchased, without recourse or warranty, an undivided interest and
participation in the Revolving Loans sufficient to equate such Lender’s actual
Pro Rata Share of the Revolving Loan balance as of such Settlement Date with
such Lender’s required Pro Rata Share of the Revolving Loans as of such date
and (ii) shall pay Agent, without setoff or discount, in same day funds, by
wire transfer to the Payment Account not later than noon (Chicago time) on the
Business Day following the Settlement Date the full purchase price for such
interest and participation, equal to one hundred percent (100%) of the
principal amount of the Revolving Loans being purchased and sold.  In the event settlement shall not have
occurred by the date and time specified in the immediately preceding sentence,
interest shall accrue on the unsettled amount at the Federal Funds Rate, for
the first three (3) days following the scheduled date of settlement, and
thereafter at the Prime Rate plus the Prime Rate Margin.

 

(iii)          On each Settlement Date, Agent shall advise each Lender by
telephone, facsimile or e-mail of the amount of such Lender’s Pro Rata Share of
principal, interest and fees paid for the benefit of Lenders with respect to
each applicable Loan, to the extent of such Lender’s credit exposure with
respect thereto, and shall make payment to such Lender not later than noon
(Chicago time) on the Business Day following the Settlement Date of such
amounts in accordance with wire instructions delivered by such Lender to Agent,
as the same may be modified from time to time by written notice to Agent; provided, that, in the case such Lender is
a Defaulted Lender, Agent shall be entitled to set off the funding short-fall
against that Defaulted Lender’s respective share of all payments received from
Borrowers.

 

 

(iv)          The provisions of this Section 10.13(a) shall be deemed to
be binding upon Agent and Lenders notwithstanding the occurrence of any Default
or Event of Default, or any insolvency or bankruptcy proceeding pertaining to a
Borrower or any other Credit Party.

 

(b)           Term Loan Principal Payments.  Payments of principal of the Term Loan will
be settled on the date of receipt if received by Agent on the first Business
Day of a month or on the Business Day immediately following the date of receipt
if received on any day other than the first Business Day of a month.

 

(c)                                  Return of Payments.

 

(i)            If Agent pays an amount to a Lender under this Agreement
in the belief or expectation that a related payment has been or will be
received by Agent from Borrowers and such related payment is not received by
Agent, then Agent will be entitled to recover such amount from such Lender on
demand without setoff, counterclaim or deduction of any kind, together with
interest accruing on a daily basis at the Federal Funds Rate.

 

(ii)           If Agent determines at any time that any amount received
by Agent under this Agreement must be returned to Borrowers or paid to any
other Person pursuant to any insolvency law or otherwise, then, notwithstanding
any other term or condition of this Agreement or any other Financing Document,
Agent will not be required to distribute any portion thereof to any
Lender.  In addition, each Lender will
repay to Agent on demand any portion of such amount that Agent has distributed
to such Lender, together with interest at such rate, if any, as Agent is
required to pay to Borrowers or such other Person, without setoff, counterclaim
or deduction of any kind.

 

(d)           Defaulted Lenders. 
The failure of any Defaulted Lender to make any Revolving Loan or any
payment required by it hereunder shall not relieve any other Lender of its
obligations to make such Revolving Loan or payment, but neither any Lender nor
Agent shall be responsible for the failure of any Defaulted Lender to make a
Revolving Loan or make any other payment required hereunder.  Notwithstanding anything set forth herein to
the contrary, a Defaulted Lender shall not have any voting or consent rights
under or with respect to any Financing Document or constitute a “Lender” (or be
included in the calculation of “Required Lenders” hereunder) for any voting or
consent rights under or with respect to any Financing Document.

 

Section
10.14         Additional Titled Agents.  Except for rights and powers, if any,  expressly reserved under this Agreement to
any bookrunner, arranger or to any titled agent named on the cover page of this
Agreement, other than Administrative Agent (collectively, the “Additional Titled Agents”), and except for
obligations, liabilities, duties and responsibilities, if any, expressly
assumed under this Agreement by any Additional Titled Agent, no Additional
Titled Agent, in such capacity, has any rights, powers, liabilities, duties or
responsibilities hereunder or under any of the other Financing Documents.  Without limiting the foregoing, no
Additional Titled Agent shall have nor be deemed to have a fiduciary
relationship with any Lender.  At any
time that any Lender serving as an Additional Titled Agent shall have
transferred to any other Person (other than any Affiliates) all of its
interests in the Loans and in the Revolving Loan

 

 

Commitment, such Lender
shall be deemed to have concurrently resigned as such Additional Titled
Agent.  No successor or replacement
Additional Titled Agent shall be designated or elected to serve upon the
resignation or deemed resignation by any Person of its role as an Additional
Titled Agent.

 

ARTICLE XI

MISCELLANEOUS

 

Section
11.1           Survival.  All agreements, representations and
warranties made herein and in every other Financing Document shall survive the
execution and delivery of this Agreement and the other Financing Documents and
the other Operative Documents and the execution, sale and delivery of the
Notes.  The indemnities and agreements
set forth in Article IX shall survive the payment of the Obligations and any termination
of this Agreement.

 

Section 11.2           No Waivers.  No failure or delay by Agent or any Lender in exercising any
right, power or privilege under any Financing Document shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege.  The rights and remedies
herein and therein provided shall be cumulative and not exclusive of any rights
or remedies provided by law.

 

Section
11.3           Notices.  All notices, requests and other
communications to any party hereunder shall be in writing (including prepaid
overnight courier, facsimile transmission or similar writing) and shall be
given to such party at its address, facsimile number or e-mail address set
forth on the signature pages hereof (or, in the case of any such Lender who
becomes a Lender after the date hereof, in an Assignment Agreement or in a
notice delivered to Borrowers and Agent by the assignee Lender forthwith upon
such assignment) or at such other address, facsimile number or e-mail address
as such party may hereafter specify for the purpose by notice to Agent and
Borrowers; provided, that
notices, requests or other communications shall be permitted by e-mail only
where expressly provided in the Financing Documents.  Each such notice, request or other communication shall be
effective (i) if given by facsimile or e-mail, when such notice is transmitted
to the facsimile number or e-mail address specified by this Section or (ii) if
given by mail, prepaid overnight courier or any other means, when received at
the applicable address specified by this Section.

 

Section
11.4           Severability.  In case any provision of or obligation under
this Agreement or the Notes or any other Financing Document shall be invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such provision
or obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby.

 

Section
11.5           Amendments
and Waivers.  Any
provision of this Agreement or any other Financing Document (other than Swap
Contracts) may be amended or waived if, but only if, such amendment or waiver
is in writing and is signed by Borrowers and the Required Lenders (and, if (x)
any amendment would increase either such Lender’s Revolving Loan Commitment
Amount or increase such Lender’s funding obligations in respect of any Term
Loan, by such Lender and (y) the rights or duties of Agent or LC Issuer are
affected thereby, by Agent or the LC Issuer, as the case may be); provided that no such amendment or waiver
shall, unless signed

 

 

by all the Lenders, (i)
reduce the principal of, rate of interest on or any fees with respect to any
Loan or Reimbursement Obligation; (ii) postpone the date fixed for any payment
(other than a payment pursuant to Section 2.1(c)) of principal of any Loan, or
of any Reimbursement Obligation or of interest on any Loan or any Reimbursement
Obligation or any fees hereunder or for any termination of any commitment;
(iii) change the definition of the term Required Lenders or the percentage of
Lenders which shall be required for Lenders to take any action hereunder; (iv)
increase any of the dollar limitations set forth in Section 5.7 by more than
10% each in the aggregate; (v) amend or waive this Section 11.5 or the
definitions of the terms used in this Section 11.5 insofar as the definitions
affect the substance of this Section 11.5; (vi) consent to the assignment,
delegation or other transfer by any Credit Party of any of its rights and
obligations under any Financing Document; or (vii) increase any of the advance
rates by more than five (5) percentage points each in the aggregate set forth
in the Borrowing Base Certificate.

 

Section 11.6                                Assignments; Participations;
Replacement of Lenders.

 

(a)                                  Assignments.

 

(i)            Any Lender may at any time assign to one or more Eligible
Assignees all or any portion of such Lender’s Loans and interest in the
Revolving Loan Commitment, together with all related obligations of such Lender
hereunder.  Except as Agent may
otherwise agree, the amount of any such assignment (determined as of the date
of the applicable Assignment Agreement or, if a “Trade Date” is specified in
such Assignment Agreement, as of such Trade Date) shall be in a minimum
aggregate amount equal to $1,000,000 or, if less, the assignor’s entire
interests in the Revolving Loan Commitment and outstanding Loans.  Borrowers and Agent shall be entitled to
continue to deal solely and directly with such Lender in connection with the
interests so assigned to an Eligible Assignee until Agent shall have received
and accepted an effective Assignment Agreement executed, delivered and fully
completed by the applicable parties thereto and a processing fee of $3,500.

 

(ii)           From and after the date on which the conditions described
above have been met, (i) such Eligible Assignee shall be deemed automatically
to have become a party hereto and, to the extent of the interests assigned to
such Eligible Assignee pursuant to such Assignment Agreement, shall have the
rights and obligations of a Lender hereunder and (ii) the assigning Lender, to
the extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment Agreement, shall be released from its rights (other
than its indemnification rights) and obligations hereunder.  Upon the request of the Eligible Assignee
(and, as applicable, the assigning Lender) pursuant to an effective Assignment
Agreement, Borrowers shall execute and deliver to Agent for delivery to the
Eligible Assignee (and, as applicable, the assigning Lender) Notes in the
aggregate principal amount of the Eligible Assignee’s percentage interest in
the Revolving Loan Commitment plus the principal amount of the Eligible
Assignee’s Term Loan (and, as applicable, Notes in the principal amount of that
portion of the Revolving Loan Commitment retained by the assigning Lender plus
the principal amount of the Term Loan retained by the assigning Lender).  Upon receipt by the assigning Lender of such
Note, the assigning Lender shall return to Borrowers any prior Note held by it.

 

 

(iii)          Agent, acting solely for this purpose as an agent of
Borrowers, shall maintain at its offices located in Chicago, Illinois a copy of
each Assignment Agreement delivered to it and a register for the recordation of
the names and addresses of each Lender, and the commitments of, and principal
amount of the Loans owing to, such Lender pursuant to the terms hereof.  The entries in such register shall be
conclusive, and Borrowers, Agent and Lenders may treat each Person whose name
is recorded therein pursuant to the terms hereof as a Lender hereunder for all
purposes of this Agreement, notwithstanding notice to the contrary.  Such register shall be available for
inspection by Borrowers and any Lender, at any reasonable time upon reasonable
prior notice to Agent.

 

(iv)          Notwithstanding the foregoing provisions of this Section
11.6(a) or any other provision of this Agreement, any Lender may at any time pledge
or assign a security interest in all or any portion of its rights under this
Agreement to secure obligations of such Lender, including any pledge or
assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment
shall release such Lender from any of its obligations hereunder or substitute
any such pledgee or assignee for such Lender as a party hereto.

 

(b)                                 Participations.

 

Any
Lender may at any time, without the consent of, or notice to, Borrowers or
Agent, sell to one or more Persons participating interests in its Loans,
commitments or other interests hereunder (any such Person, a “Participant”).  In the event of a sale by a Lender of a participating interest to
a Participant, (a) such Lender’s obligations hereunder shall remain unchanged
for all purposes, (b) Borrowers and Agent shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights and
obligations hereunder and (c) all amounts payable by Borrowers shall be determined
as if such Lender had not sold such participation and shall be paid directly to
such Lender.  No Participant shall have
any direct or indirect voting rights hereunder except with respect to any event
described in Section 11.5 expressly requiring the unanimous vote of all Lenders
or, as applicable, all affected Lenders. 
Each Lender agrees to incorporate the requirements of the preceding
sentence into each participation agreement which such Lender enters into with any
Participant.  Borrowers agree that if amounts
outstanding under this Agreement are due and payable (as a result of
acceleration or otherwise), each Participant shall be deemed to have the right
of set-off in respect of its participating interest in amounts owing under this
Agreement and with respect to any Letter of Credit to the same extent as if the
amount of its participating interest were owing directly to it as a Lender
under this Agreement; provided that
such right of set-off shall be subject to the obligation of each Participant to
share with Lenders, and Lenders agree to share with each Participant, as
provided in Section 8.5.  Each Borrower
further agrees that each Participant shall be entitled to the benefits of
Sections 2.3(e)(v), 2.8 and 2.9 to the same extent as if such Participant were
a Lender; provided, that (i) no
Participant shall be entitled to receive any greater payment under Section
2.3(e)(v) or 2.9 than the applicable Lender would have been entitled to receive
with respect to the participation sold to such Participant, unless such sale is
made with Borrowers’ prior written consent and (ii) no Participant that is
organized under the laws of a jurisdiction other than the United States shall
be entitled to the benefits of Section 2.8 unless such Participant shall have
complied with the provisions of Section 2.8(c) (assuming, for such purposes
only, that such Participant is a Lender).

 

 

(c)                                  Replacement of Lenders.

 

Within
thirty (30) days after: (i) receipt by Agent of notice and demand from any
Lender (an “Affected Lender”) for
payment of additional costs as provided in Sections 2.3(e)(v) or Section
2.3(f), which demand shall not have been revoked, (ii) Borrowers are required
to pay any additional amount to any Lender or any Governmental Authority for
the account of any Lender pursuant to Section 2.8, (iii) any Lender is a
Defaulted Lender, and the circumstances causing such status shall not have been
cured or waived; or (iv) any failure by any Lender to consent to a requested
amendment, waiver or modification to any Financing Document in which Required
Lenders have already consented to such amendment, waiver or modification but
the consent of each Lender, or each Lender affected thereby, is required with
respect thereto, Borrowers may, at
their option, notify the Agent and such Affected Lender (or Defaulted Lender or
non-consenting Lender, as the case may be) of Borrowers’ intention to obtain,
at Borrowers’ expense, a replacement Lender (“Replacement
Lender”) for such Lender, which Replacement Lender shall be
reasonably satisfactory to Agent (and to Swingline Lender, in the event the
Replacement Lender intends to assume all or any portion of the Revolving Loan
Commitment). In the event Borrowers obtain a Replacement Lender within ninety
(90) days following notice of its intention to do so, the Affected Lender (or
Defaulted Lender or non-consenting Lender, as the case may be) shall sell and
assign its Loans and funding commitments hereunder to such Replacement Lender
in accordance with the terms of a duly executed and delivered Assignment
Agreement; provided, that (i)
Borrowers shall have reimbursed such Lender for its increased costs for which
it is entitled to reimbursement under this Agreement through the date of such
sale and assignment and (ii) Borrowers shall pay to Agent the $3,500 processing
fee in respect of such assignment.  In
the event that a replaced Lender does not execute an Assignment Agreement
pursuant to Section 11.6(a) within five (5) Business Days after receipt by such
replaced Lender of notice of replacement pursuant to this Section 11.6(c) and
presentation to such replaced Lender of an Assignment Agreement evidencing an
assignment pursuant to this Section 11.6(c), Agent, on behalf of Borrowers,
shall be entitled (but not obligated) to execute such an Assignment Agreement
on behalf of such replaced Lender, and any such Assignment Agreement so
executed by Agent, the replacement Lender and, to the extent required pursuant
to Section 11.6(a), Borrowers, shall be effective for purposes of this Section
11.6(c) and Section 11.6(a). Upon any such assignment and payment, such
replaced Lender shall no longer constitute a “Lender” for purposes hereof; provided, any rights of such replaced
Lender to indemnification hereunder shall survive as to such replaced Lender.

 

(d)           Credit Party Assignments.  No Credit Party may not assign or otherwise transfer any of its
rights or other obligations hereunder or under any other Financing Document
without the prior written consent of Agent and each Lender.

 

Section
11.7           Headings.  Headings and captions used in the Financing
Documents (including the Exhibits, Schedules and Annexes hereto and thereto)
are included for convenience of reference only and shall not be given any
substantive effect.

 

Section
11.8           Confidentiality.  In handling any confidential information of
any Credit Party, Agent and each Lender shall exercise the same degree of care
that it exercises with respect to its own proprietary information of the same
types to maintain the confidentiality of any non-public information thereby
received or received pursuant to this Agreement, except that

 

 

disclosure of such
information may be made (i) to their respective agents, employees,
Subsidiaries, Affiliates, attorneys, auditors, professional consultants, rating
agencies, insurance industry associations and portfolio management services,
(ii) to prospective transferees or purchasers of any interest in the Loans, provided that they have agreed to be bound
by the provisions of this Section 11.8, (iii) as required by law, regulation,
rule, request or order, subpoena, judicial order or similar order and in
connection with any litigation and (iv) as may be required in connection with
the examination, audit or similar investigation of such Person.  Confidential information shall include only
such information identified as such at the time provided to Agent and shall not
include information that either: (i) is in the public domain, or becomes part
of the public domain after disclosure to such Person through no fault of such
Person, or (ii) is disclosed to such Person by a Person other than a Credit
Party, provided Agent does not
have actual knowledge that such third party is prohibited from disclosing such
information.  The obligations of Agent
and Lenders under this Section 11.8 shall supersede and replace the obligations
of Agent and Lenders under any confidentiality agreement in respect of this
financing executed and delivered by Agent or any Lender prior to the date
hereof.

 

Section
11.9           GOVERNING
LAW; SUBMISSION TO JURISDICTION. 
THIS AGREEMENT, EACH NOTE AND EACH OTHER FINANCING DOCUMENT SHALL BE
GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.  BORROWER HEREBY CONSENTS TO THE JURISDICTION
OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK, STATE OF
ILLINOIS AND IRREVOCABLY AGREES THAT, SUBJECT TO AGENT’S ELECTION, ALL ACTIONS
OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER
FINANCING DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS.  BORROWER EXPRESSLY SUBMITS AND CONSENTS TO
THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS.  BORROWER HEREBY WAIVES PERSONAL SERVICE OF
ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE
UPON BORROWER BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED,
ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO
MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.

 

Section 11.10         WAIVER
OF JURY TRIAL.  EACH OF BORROWER, AGENT AND THE LENDERS HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED THEREBY AND AGREES THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

 

Section
11.11                          Publication; Advertisement.

 

(a)           Publication.  No Credit Party will directly or indirectly
publish, disclose or otherwise use in any public disclosure, advertising
material, promotional material, press release or interview, any reference to
the name, logo or any trademark of Merrill Lynch or any of its

 

 

Affiliates
or any reference to this Agreement or the financing evidenced hereby, in any case
except (i) as required by any law, regulation, rule, request or order, subpoena
or judicial or similar order, in which case the applicable Credit Party shall
give Administrative Agent prior written notice of such publication or other
disclosure or (ii) with Merrill Lynch’s prior written consent.

 

(b)           Advertisement.  Each Lender and each Credit Party hereby
authorizes Merrill Lynch to publish the name of such Lender and Credit Party,
the existence of the financing arrangements referenced under this Agreement,
the primary purpose and/or structure of those arrangements, the amount of
credit extended under each facility, the title and role of each party to this
Agreement, and the total amount of the financing evidenced hereby in any
“tombstone”, comparable advertisement or press release which Merrill Lynch
elects to submit for publication.  In
addition, each Lender and each Credit Party agrees that Merrill Lynch may
provide lending industry trade organizations with information necessary and
customary for inclusion in league table measurements after the Closing
Date.  With respect to any of the
foregoing, Merrill Lynch shall provide Borrowers with an opportunity to review
and confer with Merrill Lynch regarding the contents of any such tombstone,
advertisement or information, as applicable, prior to its submission for
publication and, following such review period, Merrill Lynch may, from time to
time, publish such information in any media form desired by Merrill Lynch,
until such time that Borrowers shall have requested Merrill Lynch cease any
such further publication.

 

Section 11.12         Counterparts;
Integration.  This
Agreement and the other Financing Documents may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.  This Agreement and the other Financing
Documents constitute the entire agreement and understanding among the parties
hereto and supersede any and all prior agreements and understandings, oral or
written, relating to the subject matter hereof.

 

Section 11.13         Waiver
of Consequential and Other Damages.   To the fullest extent permitted by applicable law, Borrowers
shall not assert, and hereby waive, any claim against any Indemnitee, on any theory
of liability, for special, indirect, consequential or punitive damages (as
opposed to direct or actual damages) arising out of, in connection with, or as
a result of this Agreement, any other Financing Document or any agreement or
instrument contemplated hereby or thereby, the transactions contemplated hereby
or thereby, any Loan or Letter of Credit or the use of the proceeds
thereof.  No Indemnitee shall be liable
for any damages arising from the use by unintended recipients of any
information or other materials distributed by it through telecommunications,
electronic or other information transmission systems in connection with this
Agreement or the other Financing Documents or the transactions contemplated
hereby or thereby.

 

Section 11.14         No
Strict Construction.  The
parties hereto have participated jointly in the negotiation and drafting of
this Agreement.  In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.

 

 

Section
11.15         Certain Waivers.

 

(a)           Nature of Liability; Knowledge,
etc.  Each of the Borrowers shall be
jointly and severally liable hereunder and under each of the other Financing
Documents with respect to all Obligations, regardless of which of the Borrowers
actually receives the proceeds of the Loans or the benefit of any other
extensions of credit hereunder, or the manner in which the Borrowers, the Agent
or the Lenders account therefor in their respective books and records.  Notwithstanding the foregoing, (i) each
Borrower’s obligations and liabilities with respect to proceeds of Loans which
it receives or Letters of Credit or Support Agreements issued for its account,
and related fees, costs and expenses, and (ii) each Borrower’s obligations and
liabilities arising as a result of the joint and several liability of the
Borrowers hereunder with respect to proceeds of Loans received by, or Letters
of Credit or Support Agreements issued for the account of, any of the other
Borrowers, together with the related fees, costs and expenses, shall be
separate and distinct obligations, both of which are primary obligations of
such Borrower.  Without limiting the
generality of the foregoing in any manner, all representations and warranties
of Borrowers’ contained herein are made jointly and severally.  For purposes of the agreements,
representations, warranties and covenants contained in this Agreement and in
the other Financing Documents, the knowledge of one Borrower shall be imputed
to all Borrowers and any consent by one Borrower shall constitute the consent
of and shall bind all Borrowers. 
Neither the joint and several liability of, nor the Liens granted to the
Agent under the Security Documents by, any of the Borrowers shall be impaired
or released by (A) the failure of the Agent or any Lender, any successors or
assigns thereof, or any holder of any Note or any of the Obligations to assert
any claim or demand or to exercise or enforce any right, power or remedy
against any Borrower, any Subsidiary of any Borrower, any other Person, the
Collateral or otherwise; (B) any extension or renewal for any period (whether
or not longer than the original period) or exchange of any of the Obligations
or the release or compromise of any obligation of any nature of any Person with
respect thereto; (C) the surrender, release or exchange of all or any part of
any property (including without limitation the Collateral) securing payment,
performance and/or observance of any of the Obligations or the compromise or
extension or renewal for any period (whether or not longer than the original
period) of any obligations of any nature of any Person with respect to any such
property; (D) any action or inaction on the part of the Agent or any Lender, or
any other event or condition with respect to any other Borrower, including any
such action or inaction or other event or condition, which might otherwise
constitute a defense available to, or a discharge of, such other Borrower, or a
guarantor or surety of or for any or all of the Obligations; and (E) any other
act, matter or thing (other than payment or performance of the Obligations) which
would or might, in the absence of this provision, operate to release, discharge
or otherwise prejudicially affect the obligations of such or any other
Borrower.

 

(b)           Waivers by Borrowers.  Each Borrower expressly waives all rights it
may have now or in the future under any statute, or at common law, or at law or
in equity, or otherwise, to compel the Agent or Lenders to marshal assets or to
proceed in respect of the Obligations guaranteed hereunder against any other
Borrower or guarantor of the Obligations, any other party or against any
security for the payment and performance of the Obligations before proceeding
against, or as a condition to proceeding against, Borrowers.  It is agreed among Borrowers, the Agent and
the Lenders that the foregoing waivers are of the essence of the transaction
contemplated by this Agreement and the other Financing Documents and that, but
for the provisions of this Article XI and such waivers, the Agent and the
Lenders would decline to enter into this Agreement.

 

 

(c)           Subordination of Subrogation, Etc.  Notwithstanding anything to the contrary in
this Agreement or in any other Financing Document, and except as set forth in
subsection (e) below, each Borrower hereby expressly and irrevocably
subordinates to payment of the Obligations any and all rights at law or in
equity to subrogation, reimbursement, exoneration, contribution,
indemnification or set off and any and all defenses available to a surety,
guarantor or accommodation co-obligor until the Obligations are indefeasibly
paid in full in cash.  Each Borrower
acknowledges and agrees that this subordination is intended to benefit the
Agent and the Lenders and shall not limit or otherwise affect Borrowers’
liability hereunder or the enforceability of this Article XI, and that the
Agent, Lenders and their respective successors and assigns are intended third
party beneficiaries of the waivers and agreements set forth herein.

 

(d)           Limitation.  Notwithstanding any provision herein
contained to the contrary, each Borrower’s liability under this Article XI
(which liability is in any event in addition to amounts for which such Borrower
is primarily liable under Article II) shall be limited to an amount not to
exceed as of any date of determination the greater of:

 

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

 

(ii)           the amount which could be claimed by
the Agent and the Lenders from such Borrower under this Article XI without
rendering such claim voidable or avoidable under Section 548 of the Bankruptcy
Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform
Fraudulent Conveyance Act or similar statute or common law after taking into account,
among other things, such Borrower’s right of contribution and indemnification
from each other Borrower under subsection (e) below.

 

(e)           Contribution with Respect to
Obligations.  To the extent that any
Borrower shall make a payment under this Article XI of all or any of the
Obligations (other than Loans made to that Borrower for which it is primarily
liable) (a “Joint Liability Payment”)
which, taking into account all other Joint Liability Payments then previously
or concurrently made by any other Borrower, exceeds the amount which such
Borrower would otherwise have paid if each Borrower had paid the aggregate
Obligations satisfied by such Joint Liability Payments in the same proportion
that such Borrower’s “Allocable Amount” (as defined below) (as determined
immediately prior to such Joint Liability Payments) bore to the aggregate
Allocable Amounts of each of the Borrowers as determined immediately prior to
the making of such Joint Liability Payments, then, following indefeasible
payment in full in cash of the Obligations and termination of the Commitments,
such Borrower shall be entitled to receive contribution and indemnification
payments from, and be reimbursed by, each other Borrower for the amount of such
excess, pro rata based upon their respective Allocable Amounts in effect
immediately prior to such Joint Liability Payments.  As of any date of determination, the “Allocable Amount” of any Borrower shall be equal to the
maximum amount of the claim which could then be recovered from such Borrower under
this Article XI without rendering such claim voidable or avoidable under
Section 548 of the Bankruptcy Code or under any applicable state Uniform
Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute
or common law.

 

 

(f)            This Section is intended only to
define the relative rights of the Borrowers and nothing set forth in this
Section is intended to or shall impair the obligations of the Borrowers,
jointly and severally, to pay any amounts as and when the same shall become due
and payable in accordance with the terms of this Agreement or any other
Financing Document.  Nothing contained
in this Section shall limit the liability of any Borrower to pay the Loans made
directly or indirectly to that Borrower and accrued interest, Fees and expenses
with respect thereto for which such Borrower shall be primarily liable.

 

(g)           The parties hereto acknowledge that
the rights of contribution and indemnification hereunder shall constitute
assets of the Borrowers to which such contribution and indemnification is
owing.  The rights of any indemnifying a
Borrower against the other Borrowers under this Section shall be exercisable
upon the full and indefeasible payment of the Obligations and the termination
of the Commitments.

 

[Balance
of Page Intentionally Left Blank]

- Signature Page Follows -

 

 

IN WITNESS WHEREOF, the parties
hereto have caused this Credit Agreement to be duly executed by their
respective authorized officers as of the day and year first above written.

 

	
  WILLIAMS
  CONTROLS INC., a

  Delaware corporation

  	
  WILLIAMS
  CONTROLS INDUSTRIES,

  INC., a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address:
  14100 SW 72nd Avenue,

  Portland, Oregon 97224

  
	
   

  	
  Facsimile number: 503-624-3812

  
	
   

  	
   

  	
   

  
	
   

  	
  Borrowers’ Account
  Designation:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  [Name of bank]

  
	
   

  	
   

  	
  ABA No.:

  	
   

  	
   

  
	
   

  	
   

  	
  Account No.:

  	
   

  	
   

  
	
   

  	
   

  	
  Account Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Reference:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MERRILL LYNCH
  CAPITAL, a division of

  Merrill Lynch Business Financial Services Inc., as

  Agent and a Lender

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address: 222 N. LaSalle Street, 17th Floor

  Chicago, Illinois  60601

  Attn:  Legal Department

  
	
   

  	
   

  	
  Facsimile number:  (312)499-3126

  
	
   

  	
   

  	
  E-Mail Address:
  bruce.frank@ml.com  

  
	
   

  	
   

  	
   

  
	
   

  	
  Payment Account
  Designation:

  
	
   

  	
   

  	
  LaSalle Bank, NA

  
	
   

  	
   

  	
  Chicago, IL

  
	
   

  	
   

  	
  ABA No.: 071000505

  
	
   

  	
   

  	
  Account No.: 5800393182

  
	
   

  	
   

  	
  Account Name: MLBFS - Corporate
  Finance

  
	
   

  	
   

  	
  Reference:  Williams Controls, Inc.

  
																			

 

 

Annex A

 

Commitment
Annex

 

	
  Lender

  	
   

  	
  Revolving

  Loan

  Commitment

  Amount

  	
   

  	
  Revolving Loan

  Commitment

  Percentage

  	
   

  	
  Term Loan

  Commitment

  Amount

  	
   

  	
  Term Loan

  Commitment

  Percentage

  	
   

  
	
  Merrill Lynch Capital

  	
   

  	
  $

  	
  8,000,000

  	
   

  	
  100

  	
  %

  	
  $

  	
  17,000,000

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTALS

  	
   

  	
  $

  	
  8,000,000

  	
   

  	
  100

  	
  %

  	
  $

  	
  17,000,000

  	
   

  	
  100

  	
  %

  

 

 

Annex B

 

Closing
Checklist

 

 

Exhibit A
to Credit Agreement (Assignment Agreement)

 

This Assignment Agreement (this “Assignment Agreement”) is entered into as
of
                         
by and between the Assignor named on the signature page hereto (“Assignor”) and the Assignee named on the
signature page hereto (“Assignee”).  Reference is made to the Credit Agreement
dated as of September 27, 2004 (as amended or otherwise modified from time to
time, the “Credit Agreement”)
among Williams Controls Industries, Inc. (“Borrower”),
the financial institutions party thereto from time to time, as Lenders, and
Merrill Lynch Capital, a division of Merrill Lynch Business Financial Services
Inc., as Agent.  Capitalized terms used
herein and not otherwise defined shall have the meanings assigned to them in
the Credit Agreement.

 

Assignor and Assignee hereby agree
as follows:

 

1.             Assignor
hereby sells and assigns to Assignee, and Assignee hereby purchases and assumes
from Assignor the interests set forth on the schedule attached hereto (the
“Schedule”), in and to Assignor’s rights and obligations under the Credit
Agreement as of the effective date set forth on the Schedule (the “Effective Date”).  Such purchase and sale is made without recourse, representation
or warranty except as expressly set forth herein.  On the Effective Date, Assignee shall pay to Assignor an amount
equal to the aggregate amounts assigned pursuant to the Schedule (exclusive of
unfunded portions of the Revolving Loan Commitment) and Assignor shall pay to
Assignee a closing fee in respect of the transactions contemplated hereby in the
amount specified on the Schedule.

 

2.             Assignor
(i) represents that as of the Effective Date, that it is the legal and
beneficial owner of the interests assigned hereunder free and clear of any
adverse claim, (ii) makes no other representation or warranty and assumes no
responsibility with respect to any statement, warranties or representations
made in or in connection with the Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement, any other Financing Documents or any other instrument or document
furnished pursuant thereto; and (iii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of any other
Credit Party or any other Person or the performance or observance by any Credit
Party of its Obligations under the Credit Agreement or any other Financing
Documents or any other instrument or document furnished pursuant thereto.

 

3.             Assignee
(i) confirms that it has received a copy of the Credit Agreement and the other
Financing Documents, together with copies of the most recent financial
statements delivered pursuant thereto and such other documents and information
as it has deemed appropriate to make its own credit analysis and decision to
enter into this Assignment Agreement; (ii) agrees that it will, independently
and without reliance upon Agent, Assignor or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Credit
Agreement; (iii) appoints and authorizes Agent to take such action as agent on
its behalf and to exercise such powers under the Credit Agreement and the other
Financing Documents as are delegated to Agent by the terms thereof, together
with such powers as are reasonably incidental thereto; (iv) agrees that it will
perform in accordance with their terms all obligations which by

 

A - 1

 

the terms of the Credit Agreement
are required to be performed by it as a Lender; (v) represents that on the date
of this Assignment Agreement it is not presently aware of any facts that would
cause it to make a claim under the Credit Agreement; (vi) represents and
warrants that Assignee is not a foreign person (i.e., a person other than a
United States person for United States Federal income tax purposes) or, if it
is a foreign person, that it has delivered to Agent the documentation required
to be delivered to Agent by Section 13 below; (vii) represents and warrants
that Assignee is (or, upon receipt of the required consents hereto by Agent and
Borrowers will become) an Eligible Assignee and (viii) represents and warrants
that it has experience and expertise in the making or the purchasing of loans
such as the Loans, and that it has acquired the interests described herein for
its own account and without any present intention of selling all or any portion
of such interests.

 

4.             Each
of Assignor and Assignee represents and warrants to the other party hereto that
it has full power and authority to enter into this Assignment Agreement and to
perform its obligations hereunder in accordance with the provisions hereof,
that this Assignment Agreement has been duly authorized, executed and delivered
by such party and that this Assignment Agreement constitutes a legal, valid and
binding obligation of such party, enforceable against such party in accordance
with its terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors’ rights generally and by general principles of equity.

 

5.             Upon
the effectiveness of this Assignment Agreement pursuant to Section 13 below,
(i) Agent shall register Assignee as a Lender, pursuant to the terms of the
Credit Agreement, (ii) Assignee shall be a party to the Credit Agreement and,
to the extent provided in this Assignment Agreement, have the rights and
obligations of a Lender thereunder, (iii) Assignor shall, to the extent
provided in this Assignment Agreement, relinquish its rights and be released
from its obligations under the Credit Agreement and (iv) Agent shall thereafter
make all payments in respect of the interest assigned hereby (including payments
of principal, interest, fees and other amounts) to Assignee.  Assignor and Assignee shall make all
appropriate adjustments in payments for periods prior to the Effective Date by
Agent or with respect to the making of this assignment directly between themselves.

 

6.             Each
of Assignor and Assignee hereby agrees from time to time, upon request of the
other such party hereto, to take such additional actions and to execute and
deliver such additional documents and instruments as such other party may
reasonably request to effect the transactions contemplated by, and to carry out
the intent of, this Assignment Agreement.

 

7.             Neither
this Assignment Agreement nor any term hereof may be changed, waived,
discharged or terminated, except by an instrument in writing signed by the
party (including, if applicable, any party required to evidence its consent to
or acceptance of this Assignment Agreement) against whom enforcement of such
change, waiver, discharge or termination is sought.

 

8.             For
the purposes hereof and for purposes of the Credit Agreement, the notice
address of Assignee shall be as set forth on the Schedule.  Any notice or other communication herein
required or permitted to be given shall be in writing and delivered in
accordance with the notice provisions of the Credit Agreement.

 

A - 2

 

9.             In
case any provision in or obligation under this Assignment Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.

 

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

 

11.           This
Assignment Agreement shall be binding upon, and shall inure to the benefit of,
the parties hereto and their respective successors and assigns.

 

12.           This
Assignment Agreement may be signed in any number of counterparts, each of which
shall be an original, with the same effect as if the signatures hereto were
upon the same agreement.

 

13.           This
Assignment Agreement shall become effective as of the Effective Date upon the
satisfaction of each of the following conditions:  (i) the execution of a counterpart hereof by each of Assignor and
Assignee, (ii) the execution of a counterpart hereof by each of Agent and Borrowers
as evidence of its consent hereto to the extent required pursuant to Section
11.6(a) of the Credit Agreement, (iii) the receipt by Agent of the
administrative fee referred to in Section 11.6(a) of the Credit Agreement, (iv)
in the event Assignee is a Foreign Lender, the receipt by Agent of United
States Internal Revenue Service Forms W-8ECI, W-8BEN or Form W-8IMY (as
applicable), or such other forms, certificates or other documents prescribed by
United States Internal Revenue Service properly completed and executed by
Assignee certifying as to Assignee’s entitlement to exception from withholding
or deduction of Taxes, and (v) the receipt by Agent of originals or telecopies
of the counterparts described above.

 

The parties hereto have caused this
Assignment Agreement to be executed and delivered as of the date first written
above.

 

	
   

  	
  ASSIGNOR:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ASSIGNEE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						

 

A - 3

 

	
   

  	
  Consented to:

  
	
   

  	
   

  
	
   

  	
  Merrill Lynch Capital, a division
  of Merrill Lynch

  Business Financial Services Inc., as Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  
	
   

  
	
   

  	
  Williams Controls Industries,
  Inc.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
					

 

A - 4

 

Schedule to
Assignment Agreement

 

	
  Assignor:

  	
   

  
	
  Assignee:

  	
   

  
	
  Effective Date:

  	
   

  

 

Credit Agreement dated as of
                            ,
2004 among Williams Controls Industries, Inc. and Williams Controls, Inc., as
Borrowers, the financial institutions party thereto from time to time, as
Lenders, and Merrill Lynch Capital, a division of Merrill Lynch Business
Financial Services Inc., as Agent

 

Interests Assigned:

 

	
  Commitment/Loan

  	
   

  	
  Revolving Loan

  Commitment

  	
   

  	
  Term Loan

  	
   

  
	
  Assignor Amounts

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
  Amounts Assigned

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
  Assignor Amounts (post-assignment)

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  

 

	
  Closing Fee:

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Assignee
  Information:

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Address for Notices:

  	
  Address for Payments:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Bank:

  
	
   

  	
  Attention:

  	
   

  	
  ABA #:

  
	
   

  	
  Telephone:

  	
   

  	
  Account #:

  
	
   

  	
  Facsimile:

  	
   

  	
  Reference:

  

 

A - 5

 

Exhibit B to
Credit Agreement (Excess Cash Flow Certificate)

 

WILLIAMS
CONTROLS INDUSTRIES, INC.

WILLIAMS CONTROLS, INC.

 

Date: 
              ,
     

 

This certificate is given by
                              ,
a Responsible Officer of                
(“Borrower”), pursuant to Section
4.1(c) of that certain Credit Agreement dated as of September 27, 2004 among
William Controls, Inc., Williams Controls Industries, Inc., the Lenders from
time to time party thereto and Merrill Lynch Capital, a division of Merrill Lynch
Business Financial Services Inc., as Agent for Lenders (as such agreement may
have been amended, restated, supplemented or otherwise modified from time to
time, the “Credit Agreement”).  Capitalized terms used herein without
definition shall have the meanings set forth in the Credit Agreement.

 

The undersigned Responsible Officer
hereby certifies to Agent and Lenders that:

 

(a)                                  set
forth below is a schedule of Excess Cash Flow for the year ended
                              ,
           and the calculation
of the required prepayment of
$                              ;
and

 

(b)                                 the
schedule set forth below is based on the audited financial statements which
have been delivered to Agent in accordance with Section 4.1(b) of the Credit
Agreement.

 

IN WITNESS WHEREOF, the undersigned
officer has executed and delivered this certificate this
        day of
                    ,
           .

 

	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title

  	
   

  	
  of

  	
   

  	
   

  
								

 

B - 1

 

Excess Cash Flow is defined as follows:

 

	
  Operating Cash
  Flow (as calculated on the Compliance Certificate)

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Less:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Cash payments in
  respect of income or franchise taxes

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Regularly
  scheduled principal payments with respect to Debt actually paid (including
  the portion of scheduled payments under Capital Leases allocable to principal
  but excluding repayments of Revolving Loans and other Debt subject to
  re-borrowing to the extent not accompanied by a concurrent and permanent
  reduction of the Revolving Loan Commitment (or equivalent loan commitment),
  and excluding the amortization of debt discount or premium)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total Interest
  Expense (as calculated on the Compliance Certificate)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Restricted
  Distributions made in cash by Borrower and permitted under Section 5.4 of the
  Credit Agreement

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Increase (or plus
  the decrease) in Working Capital (defined below)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Increases (or
  plus the decrease) in long term deferred tax assets

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Decreases (or
  plus the increase) in long term deferred tax liabilities

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Excess Cash Flow

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Required
  prepayment percentage

  	
   

  	
  75.0

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Required
  prepayment amount

  	
   

  	
  $

  	
   

  	
   

  

 

B - 2

 

Decrease (increase) in Working
Capital, for the purposes of the calculation of Excess Cash Flow, means the
following:

 

	
   

  	
   

  	
  Beg. of Period

  	
   

  	
  End of Period

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Current assets

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Less:

  	
  Cash

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Cash Equivalents

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Amounts due from
  Affiliates

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Adjusted current
  assets:

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Current
  liabilities:

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Less:

  	
  Revolving Loans

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Current portion
  of Debt

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Amounts due to
  Affiliates

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Adjusted current
  liabilities:

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Working Capital:

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Decrease (Increase) in Working Capital
  (calculated as the beginning of period Working Capital minus end of period
  Working Capital)

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  
										

 

B - 3

 

Exhibit C
to Credit Agreement (Compliance Certificate)

 

COMPLIANCE
CERTIFICATE

 

WILLIAMS
CONTROLS INDUSTRIES, INC.

WILLIAMS CONTROLS, INC.

 

Date:
              ,
       

 

 

This certificate is given by
                                 ,
a Responsible Officer of [Williams Controls Industries, Inc./William Controls,
Inc] (a “Borrower”), pursuant to
Section 4.1(c) of that certain Credit Agreement dated as of September 27, 2004
among Borrowers, the Lenders from time to time party thereto and Merrill Lynch
Capital, a division of Merrill Lynch Business Financial Services Inc., as Agent
for Lenders (as such agreement may have been amended, restated, supplemented or
otherwise modified from time to time, the “Credit
Agreement”).  Capitalized
terms used herein without definition shall have the meanings set forth in the Credit
Agreement.

 

The undersigned Responsible Officer
hereby certifies to Agent and Lenders that:

 

(a)           the
financial statements delivered with this certificate in accordance with Section
4.1(a) and/or 4.1(b) of the Credit Agreement fairly present in all material
respects the results of operations and financial condition of Holdings and its
Subsidiaries (including Williams) as of the dates of such financial statements;

 

(b)           I
have reviewed the terms of the Credit Agreement and have made, or caused to be
made under my supervision, a review in reasonable detail of the transactions
and conditions of Borrowers and their Subsidiaries during the accounting period
covered by such financial statements;

 

(c)           such
review has not disclosed the existence during or at the end of such accounting
period, and I have no knowledge of the existence as of the date hereof, of any
condition or event that constitutes a Default or an Event of Default, except as
set forth in Schedule 1 hereto, which includes a description of the nature and
period of existence of such Default or an Event of Default and what action
Borrowers have taken, is undertaking and proposes to take with respect thereto;

 

(d)           Borrowers
are in compliance with the covenants contained in Article VI of the Credit Agreement,
as demonstrated by the calculation of such covenants below, except as set forth
in Schedule 1 hereto; and

 

(e)           No
customer (together with its Affiliates) of Williams or any of its Subsidiaries
has accounted for greater than        % of
the gross revenues of Williams and its Consolidated Subsidiaries for the
twelve-month period covered by the financial statements delivered herewith;

 

C - 1

 

IN WITNESS WHEREOF, the undersigned
officer has executed and delivered this certificate this
        day of
                     ,
      .

 

	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title

  	
   

  	
  of

  	
   

  	
   

  
								

 

C - 2

 

CAPITAL
EXPENDITURES

 

(Section
6.1)

 

Capital Expenditures for the applicable measurement period (the “Defined Period”) are defined as follows:

 

	
  Amount capitalized during the Defined
  Period by Borrowers and their consolidated Subsidiaries as capital
  expenditures for property, plant, and equipment or similar fixed asset
  accounts, including any such expenditures by way of acquisition of a Person
  or by way of assumption of Debt or other obligations, to the extent reflected
  as plant, property and equipment

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Plus:

  	
  deposits made in the Defined Period in
  connection with property, plant, and equipment; less deposits of a prior
  period included above

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Less:

  	
  Net Cash Proceeds of Asset Dispositions
  received during the Defined Period which (i) Borrowers or a Subsidiary are
  permitted to reinvest pursuant to the terms of the Credit Agreement and (ii)
  are included in capital expenditures above

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Proceeds of Property Insurance Policies
  received during the Defined Period which (i) Borrowers or a Subsidiary are
  permitted to reinvest pursuant to the terms of the Credit Agreement and (ii)
  are included in capital expenditures above

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Capital
  Expenditures

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Less:

  	
  Portion of Capital Expenditures financed
  during the Defined Period under Capital Leases or other Debt (Debt, for this
  purpose, does not include drawings under the Revolving Loan Commitment)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Unfinanced Capital Expenditures (used in
  calculation of Operating Cash Flow (defined in Section 6.3 of the Compliance
  Certificate))

  	
   

  	
  $

  	
   

  	
   

  

 

C - 3

 

Capital Expenditures (from above)

 

	
  Permitted Capital
  Expenditures

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  In Compliance

  	
   

  	
  Yes/No

  	
   

  

 

C - 4

 

EBITDA

(Section 6.2)

 

EBITDA for the applicable
measurement period (the “Defined Period”)
is defined as follows:

 

	
  Net income (or loss) for the Defined Period
  of Borrowers and their Consolidated Subsidiaries, but excluding:  (a) the income (or loss) of any Person
  (other than Subsidiaries of Borrower) in which a Borrower or any of its
  Subsidiaries has an ownership interest unless received by such Borrower or
  its Subsidiary in a cash distribution; and (b) the income (or loss) of any
  Person accrued prior to the date it became a Subsidiary of a Borrower or is
  merged into or consolidated with a Borrower

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Plus:

  	
  Any provision for (or less any benefit
  from) income and franchise taxes included in the determination of net income
  for the Defined Period

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Interest expense, net of interest income,
  deducted in the determination of net income for the Defined Period

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Amortization and depreciation deducted in
  the determination of net income for the Defined Period

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Losses (or less gains) from Asset
  Dispositions included in the determination of net income for the Defined
  Period (excluding sales,  expenses or
  losses related to current assets)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Other non-cash losses (or less gains)
  included in the determination of net income for the Defined Period and for
  which no cash outlay (or cash receipt) is foreseeable

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Expenses and fees included in the
  determination of net income and incurred during the Defined Period to
  consummate the transactions contemplated by the Operative Documents, but
  solely to the extent disclosed in writing to Agent prior to the Closing Date

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Extraordinary losses (or less gains)
  included in the determination of net income during the Defined Period, net of
  related tax effects

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Less:

  	
  Expenditures made after the Closing Date,
  but during the Defined Period, in connection with the consummation of the
  transactions contemplated by the Operative Documents, but not reflected in
  the pro forma balance sheet referenced in Section 3.5(c) and not deducted in
  the determination of net income

  	
   

  	
   

  	
   

  

 

C - 5

 

	
  EBITDA for the
  Defined Period

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Required EBITDA
  for the Defined Period

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  In Compliance

  	
   

  	
  Yes/No

  	
   

  

 

C - 6

 

FIXED
CHARGE COVERAGE RATIO

 

(Section
6.3)

 

Fixed
Charge Coverage Ratio for the applicable measurement period (the “Defined Period”) is defined as follows:

 

	
  Fixed Charges: Interest expense
  ($          ), net of
  interest income
  ($          ), interest
  paid in kind ($          )
  and amortization of capitalized fees and expenses incurred to consummate the
  transactions contemplated by the Operative Documents and included in interest
  expense ($          ),
  included in the determination of net income of Borrowers and their
  Consolidated Subsidiaries for the Defined Period (“Total Interest Expense”)

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Plus:

  	
  Any provision for (or less any benefit
  from) income or franchise taxes included in the determination of net income
  for the Defined Period

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Scheduled payments of principal for the
  Defined Period with respect to all Debt (including the portion of scheduled
  payments under Capital Leases allocable to principal but excluding mandatory
  prepayments required by Section 2.1(c) and excluding scheduled repayments of
  Revolving Loans and other Debt subject to reborrowing to the extent not
  accompanied by a concurrent and permanent reduction of the Revolving Loan
  Commitment (or equivalent loan commitment))

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Increases (or less the decreases) during
  the Defined Period in deferred tax assets

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Decreases (or less the increases) during
  the Defined Period in deferred tax liabilities

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Restricted Distributions made by Borrowers
  in cash during the Defined Period

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Fixed Charges

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Operating Cash
  Flow:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EBITDA for the Defined Period (calculated
  in the manner required by Section 6.2 of the Compliance Certificate)

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Less:

  	
  Unfinanced Capital Expenditures for the
  Defined Period (calculated in the manner required by Section 6.1 of the
  Compliance Certificate)

  	
   

  	
   

  	
   

  

 

C - 7

 

	
  To the extent not already reflected in the
  calculation of EBITDA, other capitalized costs, defined as the gross amount
  capitalized during the Defined Period, as long term assets, other than
  Capital Expenditures

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Operating Cash Flow

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Fixed Charge Coverage Ratio (Ratio of
  Operating Cash Flow to Fixed Charges) for the Defined Period

  	
   

  	
        to 1.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Minimum Fixed Charge Coverage for the
  Defined Period

  	
   

  	
        to 1.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  In Compliance

  	
   

  	
  Yes/No

  	
   

  
					

 

C - 8

 

INTEREST
COVERAGE RATIO

 

(Section
6.4)

 

	
  Total Interest Expense (calculated in the
  manner required by Section 6.3 of the Compliance Certificate) for the
  applicable measurement period (the “Defined
  Period”)

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Operating Cash Flow for the Defined Period
  (calculated in the manner required by Section 6.3 of the Compliance
  Certificate)

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Interest Coverage Ratio (Ratio of Operating
  Cash Flow to Interest Expenses) for the Defined Period

  	
   

  	
        to 1.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Minimum Required Interest Coverage Ratio
  for the Defined Period

  	
   

  	
        to 1.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  In Compliance

  	
   

  	
  Yes/No

  	
   

  

 

C - 9

 

TOTAL DEBT
TO EBITDA RATIO

 

(Section
6.5)

 

Total
Debt:

 

	
  Average daily principal balance of the Revolving
  Loans for the one month period ending on the last day of the applicable
  measurement period (the “Defined Period”)

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Plus:

  	
  Outstanding principal balance of the Term
  Loan as of the last day of the Defined Period

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Outstanding principal balance of all other
  Debt of Borrowers and their Consolidated Subsidiaries as of the last day of
  the Defined Period

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total Debt

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EBITDA for the Defined Period (calculated
  in the manner required by Section 6.1 of the Compliance Certificate)

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Ratio of Total Debt to EBITDA for the
  Defined Period

  	
   

  	
        to 1.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Maximum Permitted Ratio of Total Debt to
  EBITDA for the Defined Period

  	
   

  	
        to 1.0

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  In Compliance

  	
   

  	
  Yes/No

  	
   

  

 

C - 10

 

Exhibit D
to Credit Agreement (Borrowing Base Certificate)

 

WILLIAMS
CONTROLS INDUSTRIES, INC.

WILLIAMS CONTROLS, INC.

 

Date: 
            ,
     

 

 

This certificate is given by
                          ,
a Responsible Officer of [Williams Controls Industries, Inc./Williams Controls,
Inc.] (a “Borrower”), pursuant to
Section 4.1(m) of that certain Credit Agreement dated as of September 27, 2004
among Borrowers, the Lenders from time to time party thereto and Merrill Lynch
Capital, a division of Merrill Lynch Business Financial Services Inc., as Agent
for Lenders (as such agreement may have been amended, restated, supplemented or
otherwise modified from time to time the “Credit
Agreement”).  Capitalized
terms used herein without definition shall have the meanings set forth in the
Credit Agreement.

 

The undersigned Responsible Officer
hereby certifies to Agent and Lenders that:

 

(a)           Attached
hereto as Schedule 1 is a calculation of the Borrowing Base for Borrowers as of
the above date;

 

(b)           based
on such schedule, the Borrowing Base as the above date is:

 

$                           

 

IN WITNESS WHEREOF, the undersigned
officer has executed and delivered this certificate this
           day of
                  ,
      .

 

	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title

  	
   

  	
  of

  	
   

  	
   

  
								

 

D - 1

 

BORROWING
BASE CALCULATION

 

WILLIAMS
CONTROLS INDUSTRIES, INC.

WILLIAMS CONTROLS, INC.

 

	
  Accounts of Williams and its Subsidiaries
  reflected on the Borrowers’ consolidated balance sheet (as of the date
  above).

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Less:

  	
  Ineligible Accounts:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Accounts which remain unpaid for more than
  60 days after the due date specified in the original invoice or for more than
  90 days after the invoice date if no due date was specified

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Accounts due from customers whose principal
  places of business are located outside of the United States, to the extent
  such accounts exceed 25.0% of Borrowers’ aggregate accounts receivable,
  excluding, however, such Accounts that are backed by a letter of credit (provided that such letter of credit was
  issued or confirmed by a bank that is organized under the laws of the United
  States of America or a State thereof and has capital and surplus in excess of
  $500,000,000)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Accounts with respect to which the customer
  is the United States of America or any department, agency, or instrumentality
  thereof; except for those Accounts for which Williams has complied with the
  Federal Assignment of Claims Act (Ref. 31 U.S.C. Section 3727)

  	
   

  	
   

  	
   

  

 

D - 2

 

	
  Accounts with respect to which the customer
  is an Affiliate of a Borrower or a director, officer, agent, stockholder, or
  employee of a Borrower or any of their Affiliates

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Accounts with respect to which there is any
  unresolved dispute with the respective customer but only to the extent of
  such dispute

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Accounts with respect to which Agent does
  not have a valid, first priority and fully perfected security interest and
  Accounts subject to any Lien except those in favor of Agent and Permitted
  Encumbrances; including Accounts evidenced by an instrument (as defined in
  Article 9 of the UCC) not in the possession of Agent

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Accounts with respect to which the customer
  is the subject of any bankruptcy or other insolvency proceedings

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Accounts due from a customer to the extent
  that such Accounts exceed in the aggregate an amount equal to twenty five
  percent (25%) of the aggregate of all Accounts at said date

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Accounts with respect to which the
  customer’s obligation to pay is conditional or subject to a repurchase
  obligation or right to return, including bill and hold sales, guarantied
  sales, sale or return transactions, sales on approval or consignment sales

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Accounts due from a customer if fifty
  percent (50%) or more of the dollar amount of all Accounts owing by that
  customer are ineligible under the other criteria set forth herein

  	
   

  	
   

  	
   

  

 

D - 3

 

	
  Ineligible
  Accounts

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Eligible Accounts
  (Accounts less Total Ineligible Accounts)

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Advance Rate

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Accounts
  Availability

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Inventory owned by, and in the possession
  of Williams and its Subsidiaries, and located in the United States of
  America, reflected on the Borrowers’ consolidated balance sheet (as of the
  date above), valued at the lower of cost or market (including adequate
  reserves for obsolete, slow moving or excess quantities), on a first-in,
  first-out basis

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Less:

  	
  Ineligible Inventory:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Inventory with respect to which Agent does
  not have a valid, first priority and fully perfected security interest

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Inventory with respect to which there
  exists any Lien (other than Permitted Encumbrances) in favor of any Person
  other than Agent

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Inventory to the extent not readily
  marketable, or otherwise of a type not consumed or held by Williams or a
  Subsidiary for resale in the ordinary course of its business

  	
   

  	
   

  	
   

  

 

D - 4

 

	
  Inventory
  produced in violation of the Fair Labor Standards Act and subject to the
  so-called “hot goods” provisions contained in Title 25  U.S.C. 215(a)(i)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Inventory which
  Agent determines, in the exercise of reasonable discretion and in accordance
  with Agent’s or Borrowers’ customary business practices, to be unacceptable
  for borrowing purposes due to age, quality, type, category and/or quantity
  (e.g. work-in-process)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Ineligible Inventory

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Eligible Inventory (Inventory less Total
  Ineligible Inventory)

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Advance Rate

  	
   

  	
   

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Inventory Availability

  	
   

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Borrowing Base (Accounts Availability plus
  Inventory Availability)

  	
   

  	
   

  	
   

  

 

D - 5

 

Exhibit E to
Credit Agreement (Notice of Borrowing)

 

WILLIAMS
CONTROLS INDUSTRIES, INC.

WILLIAMS CONTROLS, INC.

 

Date: 
                ,
       

 

This certificate is given by
                                 ,
a Responsible Officer of [Williams Controls Industries, Inc./Williams Controls,
Inc.] (a “Borrower”), pursuant to
Section [2.2(b)/2.3(e)] of that certain Credit Agreement dated as of September 27,
2004 among Borrowers, the Lenders from time to time party thereto and Merrill
Lynch Capital, a division of Merrill Lynch Business Financial Services Inc., as
Agent for Lenders (as such agreement may have been amended, restated,
supplemented or otherwise modified from time to time the “Credit Agreement”).  Capitalized terms used herein without
definition shall have the meanings set forth in the Credit Agreement.

 

The undersigned Responsible Officer
hereby gives notice to Agent of Borrowers’ request to:  [complete as appropriate]

 

(a)           on
[    date    ] borrow
$[                  ]
of Revolving Loans, which Revolving Loans shall be [Prime Rate Loans/LIBOR
Loans having an Interest Period of
             
month(s)];

 

(b)           on
[    date    ] convert
$[                  ]of
the aggregate outstanding principal amount of the [                  ]
Loan, bearing interest at the
[                  ]
Rate, into a(n)
[                  ]
Loan [and, in the case of a LIBOR Loan, having an Interest Period of
[          ] month(s)];

 

(c)           on
[    date    ] continue
$[                  ]of
the aggregate outstanding principal amount of the [                  ]
Loan, bearing interest at the LIBOR, as a LIBOR Loan having an Interest Period
of [         ] month(s).

 

The undersigned officer hereby
certifies that, both before and after giving effect to the request above (i)
each of the conditions precedent set forth in Sections 7.2(b), 7.2(c) and
7.2(d) have been satisfied, (ii) all of the representations and warranties
contained in the Credit Agreement and the other Financing Documents are true,
correct and complete as of the date hereof, except to the extent that any such
representation or warranty relates to a specific date in which case such
representation or warranty is true and correct as of such earlier date and
(iii) no Default or Event of Default has occurred and is continuing on the date
hereof.

 

IN WITNESS WHEREOF, the undersigned
officer has executed and delivered this certificate this
       day of
                 ,
      .

 

	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title

  	
   

  	
  ofExhibit
10.03

 

AMENDED AND RESTATED MANAGEMENT SERVICES AGREEMENT

 

This AMENDED AND RESTATED MANAGEMENT SERVICES
AGREEMENT (“Agreement”), dated as of September 30, 2004, is among Williams
Controls, Inc., a Delaware corporation (the “Company”), American Industrial
Partners, a Delaware general partnership (“AIP”) and Dolphin Advisors, LLC, a
Delaware limited liability company (“Dolphin” and, so long as this Agreement
becomes effective pursuant to Section 1, collectively with AIP and any of their
respective designees, the “Advisors”). 
Capitalized terms used herein but not defined herein have the meanings
assigned thereto in that certain Series B Preferred Stock Purchase Agreement,
dated as of May 31, 2002, by and among the Company, American Industrial
Partners Capital Fund III, L.P. (“AIP III”) and the other purchasers named
therein (the “Stock Purchase Agreement”).

 

The Company and AIP are parties to a Management
Agreement dated as of July 1, 2002 (the “Original Agreement”), whereunder the
Company and AIP agreed that AIP would provide certain ongoing management and
advisory services to the Company and its subsidiaries.  The parties no longer desire that AIP
provide the full amount of such services. 
In addition, the Company desires for Dolphin to provide certain ongoing
management and advisory services to the Company and its subsidiaries, and
Dolphin is willing to provide such services subject to the terms and conditions
contained herein.

 

NOW, THEREFORE, for good and valuable consideration,
the receipt of which is hereby acknowledged, the Company, AIP and Dolphin
hereby agree as follows:

 

Section 1.               Effective
Date.  Contemporaneously with the
execution and delivery of this Agreement, AIP and the Company have executed and
delivered a First Amendment to the Management Services Agreement (Option 1)
(the “Option 1 Amendment”) and a First Amendment to Management Services
Agreement (Option 2) (the “Option 2 Amendment” and collectively with the Option
1 Amendment, the “Amendments”).  This
Agreement or the Amendments shall become effective as follows:

 

(a)           If
(i) the Company redeems at least the lesser of 98,114 shares of Preferred Stock
or the number of shares of Preferred Stock set forth in all Acceptance Notices
submitted to the Company by the holders of Preferred Stock pursuant to the
amended Certificate of Designation for the Preferred Stock at a redemption
price of at least $265.00 per share on or before December 31, 2004 (the
“Redemption”), and (ii) Dolphin Offshore Partners, L. P. (“Offshore”) does not
submit an Acceptance Notice pursuant to the amended Certificate of Designation,
this Agreement shall become effective on the effective date of the Redemption
and shall amend and restate the Original Agreement in its entirety, and the
Amendments shall be null and void.

 

(b)           If
(i) the Redemption occurs on or before December 31, 2004, and (ii) Offshore
submits an Acceptance Notice pursuant to the amended Certificate of
Designation, this Agreement and the Option 2 Amendment shall be null and void
and the Option 1 Amendment shall become effective on the effective date of the
Redemption.

 

 

(c)           If
the Redemption has not occurred by December 31, 2004, this Agreement and the
Option 1 Amendment shall be null and void, and the Option 2 Amendment shall
become effective on January 1, 2005.

 

Section 2.               Services.  During the term of this Agreement, the
Advisors shall provide such advisory and management services to the Company and
its subsidiaries as the Board of Directors of the Company shall reasonably
request and the Advisors shall agree to provide from time to time.  The Company agrees that the Advisors shall
have the right, but not the obligation, to act as the sole advisors to the
Company and its subsidiaries with respect to significant business
transactions.  Such services shall be
performed at the Advisors’ respective offices or at such other locations as the
Advisors shall reasonably determine.

 

Section 3.               Compensation.  .In consideration of the services previously
provided and to be provided in accordance with Section 2, the Company agrees to
pay to each of AIP and Dolphin, subject to the conditions precedent to liability
set forth in Section 4 below, an annual management fee (“Annual Fee”), payable
in quarterly installments in advance on January 1, April 1, July 1 and October
1 (or the next succeeding business day, if such day is not a business day) of
each year, commencing January 1, 2005 (each, a “Payment Date”) equal to $80,000
payable to AIP and $120,000 payable to Dolphin.   The Annual Fee shall be subject to reduction as set forth in
Section 5 hereof.

 

Section 4.               Billing
as Condition Precedent to Liability; Forfeiture.  Notwithstanding anything in Section 3 to the contrary, the
Company shall not owe the Annual Fee to AIP or Dolphin, and such amount shall
not in any manner be payable, unless and until AIP or Dolphin, as the case may
be, sends the Company a bill for the amount owed to such person.  AIP or Dolphin, as the case may be, may send
the Company multiple, partial bills for amounts owed as of the same Payment
Date; provided, that for the avoidance of doubt the aggregate amount so billed
shall not exceed the amount that would otherwise be due under Section 3.  To the extent AIP or Dolphin does not bill
the Company for an amount which but for this Section 4 would be owed as of a
Payment Date within 24 months of such Payment Date, such amount shall be deemed
irrevocably forfeited by AIP or Dolphin, as the case may be, and the Company
shall have no further obligation whatsoever to pay such amount to such person.  Forfeiture of one installment (or partial
installment) of the Annual Fee shall not in any way affect any other
installment (or partial installment) of the Annual Fee which is billed within
24 months of its applicable Payment Date. 
No default by AIP hereunder and no defense to the Company’s obligation
to pay AIP its portion of the Annual Fee hereunder shall affect the Company’s
obligation to pay Dolphin its portion of the Annual Fee hereunder.  Likewise, no default by Dolphin hereunder
and no defense to the Company’s obligation to pay Dolphin its portion of the
Annual Fee hereunder shall affect the Company’s obligation to pay AIP its
portion of the Annual Fee hereunder.

 

Section 5.               Reduction
of Annual Fee.  The Annual Fee shall
be subject to reduction or termination as follows:

 

(a)           Except as set forth in Section 5(d),
the amount of the Annual Fee payable to the AIP or Dolphin, as the case may be,
shall be reduced from time to time by 10 percent for each 10 percent reduction,
in one or a series of related or unrelated transactions, in the number of
Conversion Shares held by the AIP or Dolphin, as applicable, from the

 

2

 

number of Conversion Shares held by such person
immediately following the effective date of the conversion (the “Conversion
Date”), such reduction in the amount of the Annual Fee to be effective on the
first day of any quarterly period following the date any such reduction occurs.

 

(b)           Except as set forth in Section 5(d),
the Company’s obligation to pay its portion of the Annual Fee to the AIP or
Dolphin, as the case may be, shall terminate on the first day of the first
quarterly period following the date on which AIP or Dolphin, as applicable, no
longer holds a beneficial interest in or voting control of at least 50 percent
of the Conversion Shares it held at the end of the month in which the
Conversion Date occurred.

 

(c)           Any reduction in or termination of
the Annual Fee payable to AIP pursuant to this Section shall not affect the
Company’s obligation to pay the Annual Fee payable to Dolphin unless and until
such Annual Fee is reduced or terminated with respect to Dolphin.  Likewise, any reduction in or termination of
the Annual Fee payable to Dolphin pursuant to this Section shall not affect the
Company’s obligation to pay the Annual Fee payable to AIP unless and until such
Annual Fee is reduced or terminated with respect to AIP.

 

(d)           Notwithstanding the foregoing, if AIP
III exercises its right (the “Put”) to require the Company to purchase and
redeem its shares of Common Stock pursuant to the Put and Call Agreement
between the Company and AIP III, dated September 30, 2004, and the Company
either fails to pay the “put price” or issues shares of Series C Preferred
Stock thereunder, no reduction in or termination of the Annual Fee payable to
AIP pursuant to this Section shall take effect until the Put Price has been
paid or all shares of the Company’s Series C Preferred Stock have been redeemed
by the Company.

 

Section 6.               Reimbursement.  The Advisors and their respective affiliates
shall be entitled to reimbursement of all reasonable out-of-pocket expenses
(including travel, consultant and legal expenses) incurred in connection with
the performance of this Agreement (other than salary expenses and associated
overhead charges).  The Company agrees
to pay such amounts promptly, in no event later than 30 days of request
therefor.

 

Section 7.               Indemnity;
No Liability.  In consideration of
the execution and delivery of this Agreement by the Advisors, the Company
hereby agrees to indemnify, exonerate and hold each of the Advisors and their
respective affiliates, and each of their respective partners, shareholders,
affiliates, directors, officers, fiduciaries, employees and agents and each of
the partners, shareholders, affiliates, directors, officers, fiduciaries,
employees and agents of each of the foregoing (collectively, the “Indemnitees”)
free and harmless from and against any and all actions, causes of action,
suits, losses, liabilities and damages, and expenses in connection therewith,
including without limitation reasonable attorneys’ fees and disbursements
(collectively, the “Indemnified Liabilities”), incurred by the Indemnitees or
any of them as a result of, or arising out of, or relating to the execution,
delivery, performance, enforcement or existence of this Agreement or the
transactions contemplated hereby or thereby, and will reimburse each Indemnitee
for all Indemnified Liabilities as they are incurred (and in no event later
than 30 days after requested), except for any such Indemnified Liabilities
arising solely on account of such

 

3

 

Indemnitee’s gross negligence or willful misconduct, and if and to the
extent that the foregoing undertaking may be unenforceable for any reason, the
Company hereby agrees to make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities which is permissible under applicable
law.  None of the Indemnitees shall be
liable to the Company or any of their affiliates for any act or omission
suffered or taken by such Indemnitee that is not finally judicially determined
to constitute gross negligence or willful misconduct.  The Company shall not, without the prior written consent of the
applicable Advisor, settle, compromise, consent to the entry of any judgment in
or otherwise seek to terminate any action, claim, suit or proceeding in respect
of which indemnification may be sought hereunder (whether or not any Indemnitee
is a party thereto) unless such settlement, compromise, con-sent or termination
includes a full, complete and unconditional release of each Indemnitee for any
liabilities arising out of such action, claim, suit or proceeding.

 

Section 8.               Independent
Contractor; No Joint Venture.  The
Advisors are performing services hereunder as independent contractors (and not
as agents, representatives or employees of the Company), and the Advisors are
not and shall not be deemed to be co-venturers with, or partners of, the
Company or each other in any respect.

 

Section 9.               Governing
Law; Submission to Jurisdiction. 
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York, without regard to conflicts of law
principles.

 

Section 10.             Termination.  This Agreement may be terminated with
respect to AIP and the Company at any time by written notice from AIP to the
Company, and this Agreement may be terminated with respect to Dolphin and the
Company at any time by written notice from Dolphin to the Company.  In addition, this Agreement will terminate
automatically as of August 1, 2007; provided, however, if AIP III exercises the
Put, this Agreement shall not terminate with respect to AIP until the put price
has been paid or all shares of the Company’s Series C Preferred Stock have been
redeemed by the Company. 
Notwithstanding the foregoing, this Agreement shall always remain in
effect to the extent that any money is owed under Sections 3, 6, 7 or 11
hereof, and Sections 4, 7, 9 and 15 hereof shall survive the termination of
this Agreement.

 

Section 11.             Payment
Default.  In the event that the
Company is in payment de-fault with respect to any amounts due the Advisors
under this Agreement (after expiration of a 7 day grace period from the date
due), such amounts (a) shall accrue interest daily at a rate equal to 15% per
annum, compounding quarterly, and (b) shall be paid in full prior to any
payments being made to any class or series of preferred stock of the Company.

 

Section 12.             Entire
Agreement; Amendment.  This
Agreement constitutes the entire agreement and understanding between the
parties with respect to the subject matter hereof.  This Agreement may be amended or modified, or any provision
hereof may be waived, provided that such amendment or waiver is set forth in
writing and, if it affects AIP, it is executed by AIP and the Company, and if
it affects Dolphin, it is executed by Dolphin and the Company.  No courses of dealing between or among any
persons having any interest in this Agreement will be deemed effective to
modify, amend or discharge any part of this Agreement or any rights or
obligations of any person under or by reason of this Agreement.

 

4

 

Section 13.             No
Assignment.  Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any party hereto without the prior written consent of the other parties hereto;
provided that either Advisor may assign any or all of its rights and
obligations hereunder to any affiliate without the consent of the other
parties; and provided, further, that either Advisor may assign any or all of
its rights hereunder, without the consent of the other parties (i) to any
lender providing financing to it or its affiliates and (ii) in connection with
any sale of all or substantially all of the assets, capital stock or business
of it or the Company (whether effected by sale, exchange, merger, consolidation
or other transaction).

 

Section 14.             Effect.  In the event of assignment of this Agreement
pursuant to Section 13 hereunder, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their successors and permitted
assigns.

 

Section 15.             Notices.  All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given by
personal delivery, by reputable overnight courier or by mail (registered or
certified mail, postage prepaid, return receipt re-quested) to the respective
parties as follows:

 

	
   

  	
  If to the Advisor:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  c/o American Industrial Partners

  	
   

  	
   

  
	
   

  	
   

  	
  551 Fifth Avenue, Suite 3800

  	
   

  	
   

  
	
   

  	
   

  	
  New York, NY 10176

  	
   

  	
   

  
	
   

  	
   

  	
  Telecopy:

  	
   

  	
  212-986-5099

  
	
   

  	
   

  	
  Telephone:

  	
   

  	
  212-983-1399

  
	
   

  	
   

  	
  Attention:

  	
   

  	
  Kirk Ferguson

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  McGuireWoods LLP

  	
   

  	
   

  
	
   

  	
   

  	
  1750 Tysons Boulevard; Suite 1800

  	
   

  	
   

  
	
   

  	
   

  	
  McLean, VA 22102-4215

  	
   

  	
   

  
	
   

  	
   

  	
  Telecopy:

  	
   

  	
  703-712-5050

  
	
   

  	
   

  	
  Telephone:

  	
   

  	
  703-712-5061

  
	
   

  	
   

  	
  Attention:

  	
   

  	
  Robert G. Marks

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  If to Dolphin:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  c/o Dolphin Asset management Corp.

  	
   

  	
   

  
	
   

  	
   

  	
  129 East 17th Street

  	
   

  	
   

  
	
   

  	
   

  	
  New York, NY 10003

  	
   

  	
   

  
	
   

  	
   

  	
  Telecopy:

  	
   

  	
   

  
	
   

  	
   

  	
  Telephone:

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:

  	
   

  	
   

  
								

 

5

 

	
   

  	
  with a copy to:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Hughes, Hubbard & Reed LLP

  	
   

  	
   

  
	
   

  	
   

  	
  One Battery Park Plaza

  	
   

  	
   

  
	
   

  	
   

  	
  New York, NY 10004-1482

  	
   

  	
   

  
	
   

  	
   

  	
  Telecopy:

  	
   

  	
  212-422-4726

  
	
   

  	
   

  	
  Telephone:

  	
   

  	
  212-837-6000

  
	
   

  	
   

  	
  Attention:

  	
   

  	
  Gary Simon

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  If to the Company:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Williams Controls, Inc.

  	
   

  	
   

  
	
   

  	
   

  	
  14100 SW 72nd Avenue

  	
   

  	
   

  
	
   

  	
   

  	
  Portland, OR 97224

  	
   

  	
   

  
	
   

  	
   

  	
  Telecopy:

  	
   

  	
  (503) 624-3812

  
	
   

  	
   

  	
  Telephone:

  	
   

  	
  (503) 670-3307

  
	
   

  	
   

  	
  Attention:

  	
   

  	
  Dennis E. Bunday

  
							

 

or to such other address as any party hereto may, from time to time,
designate in a written notice given in like manner.  Notices will be deemed to have been given hereunder when
delivered personally, five days after deposit in the U.S. mail and one business
day after deposit with a reputable overnight courier service.

 

[SIGNATURE PAGE FOLLOWS]

 

6

 

IN WITNESS WHEREOF, the parties hereto have executed
this Agreement on the date first written above.

 

 

	
   

  	
  WILLIAMS CONTROLS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Dennis Bunday

  	
   

  
	
   

  	
   

  	
  Chief Financial Officer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  AMERICAN INDUSTRIAL PARTNERS

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  DOLPHIN ADVISORS, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

7

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00072-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00072-of-00352.parquet"}]]