Document:

Exhibit
10.1

 

 

CREDIT AND SECURITY AGREEMENT

 

among

 

EPIQ SYSTEMS, INC.,

as Borrower,

 

THE LENDERS NAMED HEREIN,

as Lenders,

 

and

 

KEYBANK NATIONAL ASSOCIATION,

as Lead Arranger, Sole Book Runner and Administrative Agent

 

 

dated as of

July 20, 2004

 

 

 

 

TABLE
OF CONTENTS

 

	
  ARTICLE I.  DEFINITIONS

  	
   

  
	
   

  	
  Section 1.1.  Definitions

  	
   

  
	
   

  	
  Section 1.2.  Accounting Terms

  	
   

  
	
   

  	
  Section 1.3.  Terms Generally

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II.  AMOUNT AND TERMS OF CREDIT

  	
   

  
	
   

  	
  Section 2.1.  Amount and Nature of Credit

  	
   

  
	
   

  	
  Section 2.2.  Revolving Credit

  	
   

  
	
   

  	
  Section 2.3.  Term Loan

  	
   

  
	
   

  	
  Section 2.4.  Interest

  	
   

  
	
   

  	
  Section 2.5.  Evidence of Indebtedness

  	
   

  
	
   

  	
  Section 2.6.  Notice of Credit Event; Funding of Loans

  	
   

  
	
   

  	
  Section 2.7.  Payment on Loans and Other Obligations

  	
   

  
	
   

  	
  Section 2.8.  Prepayment

  	
   

  
	
   

  	
  Section 2.9.  Commitment and Other Fees

  	
   

  
	
   

  	
  Section 2.10.  Modifications of Commitment

  	
   

  
	
   

  	
  Section 2.11.  Computation of Interest and Fees

  	
   

  
	
   

  	
  Section 2.12.  Mandatory Payment

  	
   

  
	
   

  	
  Section 2.13.  Extension of Commitment

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III.  ADDITIONAL PROVISIONS RELATING TO
  EURODOLLAR LOANS; INCREASED CAPITAL; TAXES

  	
   

  
	
   

  	
  Section 3.1.  Requirements of Law

  	
   

  
	
   

  	
  Section 3.2.  Taxes

  	
   

  
	
   

  	
  Section 3.3.  Funding Losses

  	
   

  
	
   

  	
  Section 3.4.  Change of Lending Office

  	
   

  
	
   

  	
  Section 3.5.  Eurodollar Rate Lending Unlawful; Inability to Determine Rate

  	
   

  
	
   

  	
  Section 3.6.  Replacement of Lenders

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV.  CONDITIONS PRECEDENT

  	
   

  
	
   

  	
  Section 4.1.  Conditions to Each Credit Event

  	
   

  
	
   

  	
  Section 4.2.  Conditions to the First Credit Event

  	
   

  
	
   

  	
  Section 4.3.  Post-Closing Conditions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V.  COVENANTS

  	
   

  
	
   

  	
  Section 5.1.  Insurance

  	
   

  
	
   

  	
  Section 5.2.  Money Obligations

  	
   

  
	
   

  	
  Section 5.3.  Financial Statements and Information

  	
   

  
	
   

  	
  Section 5.4.  Financial Records

  	
   

  
	
   

  	
  Section 5.5.  Franchises; Change in Business

  	
   

  
	
   

  	
  Section 5.6.  ERISA Compliance

  	
   

  
	
   

  	
  Section 5.7.  Financial Covenants

  	
   

  
	
   

  	
  Section 5.8.  Borrowing

  	
   

  
	
   

  	
  Section 5.9.  Liens

  	
   

  
	
   

  	
  Section 5.10.  Regulations T, U and X

  	
   

  
	
   

  	
  Section 5.11.  Investments and Loans

  	
   

  

 

i

 

	
   

  	
  Section 5.12.  Merger and Sale of Assets

  	
   

  
	
   

  	
  Section 5.13.  Acquisitions

  	
   

  
	
   

  	
  Section 5.14.  Notice

  	
   

  
	
   

  	
  Section 5.15.  Capital Distributions; Restricted Payments

  	
   

  
	
   

  	
  Section 5.16.  Environmental Compliance

  	
   

  
	
   

  	
  Section 5.17.  Affiliate Transactions

  	
   

  
	
   

  	
  Section 5.18.  Use of Proceeds

  	
   

  
	
   

  	
  Section 5.19.  Corporate Names

  	
   

  
	
   

  	
  Section 5.20.  Subsidiary Guaranties, Security Documents

  	
   

  
	
   

  	
  Section 5.21.  Restrictive Agreements

  	
   

  
	
   

  	
  Section 5.22.  Other Covenants

  	
   

  
	
   

  	
  Section 5.23.  Note Agreement

  	
   

  
	
   

  	
  Section 5.24.  Amendment of Organizational Documents

  	
   

  
	
   

  	
  Section 5.25.  Collateral

  	
   

  
	
   

  	
  Section 5.26.  Property Acquired Subsequent to the
  Closing Date and Right to Take Additional Collateral

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI.  REPRESENTATIONS AND WARRANTIES

  	
   

  
	
   

  	
  Section 6.1.  Corporate Existence; Subsidiaries; Foreign Qualification

  	
   

  
	
   

  	
  Section 6.2.  Corporate Authority

  	
   

  
	
   

  	
  Section 6.3.  Compliance with Laws and Contracts

  	
   

  
	
   

  	
  Section 6.4.  Litigation and Administrative Proceedings

  	
   

  
	
   

  	
  Section 6.5.  Title to Assets

  	
   

  
	
   

  	
  Section 6.6.  Liens and Security Interests

  	
   

  
	
   

  	
  Section 6.7.  Tax Returns

  	
   

  
	
   

  	
  Section 6.8.  Environmental Laws

  	
   

  
	
   

  	
  Section 6.9.  Locations

  	
   

  
	
   

  	
  Section 6.10.  Employee Benefits Plans

  	
   

  
	
   

  	
  Section 6.11.  Consents or Approvals

  	
   

  
	
   

  	
  Section 6.12.  Solvency

  	
   

  
	
   

  	
  Section 6.13.  Financial Statements

  	
   

  
	
   

  	
  Section 6.14.  Regulations

  	
   

  
	
   

  	
  Section 6.15.  Material Agreements

  	
   

  
	
   

  	
  Section 6.16.  Intellectual Property

  	
   

  
	
   

  	
  Section 6.17.  Insurance

  	
   

  
	
   

  	
  Section 6.18.  Deposit Accounts

  	
   

  
	
   

  	
  Section 6.19.  Accurate and Complete Statements

  	
   

  
	
   

  	
  Section 6.20.  Note Agreement

  	
   

  
	
   

  	
  Section 6.21.  Investment Company; Holding Company

  	
   

  
	
   

  	
  Section 6.22.  Defaults

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII.
  SECURITY

  	
   

  
	
   

  	
  Section 7.1.  Security Interest in Collateral

  	
   

  
	
   

  	
  Section 7.2.  Collections and Receipt of Proceeds by Borrower

  	
   

  
	
   

  	
  Section 7.3.  Collections and Receipt of Proceeds by Agent

  	
   

  
	
   

  	
  Section 7.4.  Use of Inventory and Equipment

  	
   

  

 

ii

 

	
  ARTICLE VIII.  EVENTS OF DEFAULT

  	
   

  
	
   

  	
  Section 8.1.  Payments

  	
   

  
	
   

  	
  Section 8.2.  Special Covenants

  	
   

  
	
   

  	
  Section 8.3.  Other Covenants

  	
   

  
	
   

  	
  Section 8.4.  Representations and Warranties

  	
   

  
	
   

  	
  Section 8.5.  Cross Default

  	
   

  
	
   

  	
  Section 8.6.  ERISA Default

  	
   

  
	
   

  	
  Section 8.7.  Change in Control

  	
   

  
	
   

  	
  Section 8.8.  Money Judgment

  	
   

  
	
   

  	
  Section 8.9.  Security

  	
   

  
	
   

  	
  Section 8.10.  Validity of Loan Documents

  	
   

  
	
   

  	
  Section 8.11.  Solvency

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX.  REMEDIES UPON DEFAULT

  	
   

  
	
   

  	
  Section 9.1.  Optional Defaults

  	
   

  
	
   

  	
  Section 9.2.  Automatic Defaults

  	
   

  
	
   

  	
  Section 9.3.  Letters of Credit

  	
   

  
	
   

  	
  Section 9.4.  Offsets

  	
   

  
	
   

  	
  Section 9.5.  Equalization Provision

  	
   

  
	
   

  	
  Section 9.6.  Collateral

  	
   

  
	
   

  	
  Section 9.7.  Other
  Remedies

  	
   

  
	
   

  	
  Section 9.8.  Application of Proceeds

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE X.  THE AGENT

  	
   

  
	
   

  	
  Section 10.1.  Appointment and Authorization

  	
   

  
	
   

  	
  Section 10.2.  Note Holders

  	
   

  
	
   

  	
  Section 10.3.  Consultation With Counsel

  	
   

  
	
   

  	
  Section 10.4.  Documents

  	
   

  
	
   

  	
  Section 10.5.  Agent and Affiliates

  	
   

  
	
   

  	
  Section 10.6.  Knowledge of Default

  	
   

  
	
   

  	
  Section 10.7.  Action by Agent

  	
   

  
	
   

  	
  Section 10.8.  Release of Collateral or Guarantor of
  Payment

  	
   

  
	
   

  	
  Section 10.9.  Notice of Default

  	
   

  
	
   

  	
  Section 10.10. 
  Indemnification of Agent

  	
   

  
	
   

  	
  Section 10.11.  Successor
  Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI. 
  MISCELLANEOUS

  	
   

  
	
   

  	
  Section 11.1.  Lenders’ Independent Investigation

  	
   

  
	
   

  	
  Section 11.2.  No Waiver; Cumulative Remedies

  	
   

  
	
   

  	
  Section 11.3.  Amendments, Consents

  	
   

  
	
   

  	
  Section 11.4.  Notices

  	
   

  
	
   

  	
  Section 11.5.  Costs, Expenses and Taxes

  	
   

  
	
   

  	
  Section 11.6.  Indemnification

  	
   

  
	
   

  	
  Section 11.7.  Obligations Several; No Fiduciary
  Obligations

  	
   

  
	
   

  	
  Section 11.8.  Execution in Counterparts

  	
   

  
	
   

  	
  Section 11.9.  Binding Effect; Borrower’s Assignment

  	
   

  
	
   

  	
  Section 11.10.  Lender
  Assignments

  	
   

  

 

iii

 

	
   

  	
  Section 11.11.  Sale of
  Participations

  	
   

  
	
   

  	
  Section 11.12. 
  Severability of Provisions; Captions; Attachments

  	
   

  
	
   

  	
  Section 11.13. 
  Investment Purpose

  	
   

  
	
   

  	
  Section 11.14.  Entire
  Agreement

  	
   

  
	
   

  	
  Section 11.15.  Legal
  Representation of Parties

  	
   

  
	
   

  	
  Section 11.16.  Governing
  Law; Submission to Jurisdiction

  	
   

  
	
   

  	
  Jury Trial Waiver

  	
   

  

 

iv

 

This CREDIT AND SECURITY
AGREEMENT (as the same may from time to time be amended, restated or otherwise
modified, this “Agreement”) is made effective as of the 20th day of
July, 2004, among:

 

(a)                                  EPIQ
SYSTEMS, INC., a Missouri corporation (“Borrower”);

 

(b)                                 the
lenders listed on Schedule 1 hereto and each other Eligible
Transferee, as hereinafter defined, that becomes a party hereto pursuant to
Section 2.10(b) or 11.10 hereof (collectively, the “Lenders” and,
individually, each a “Lender”); and

 

(c)                                  KEYBANK
NATIONAL ASSOCIATION, as lead arranger, sole book runner and administrative
agent for the Lenders under this Agreement (“Agent”).

 

WITNESSETH:

 

WHEREAS, Borrower, Agent
and the Lenders desire to contract for the establishment of credits in the
aggregate principal amounts hereinafter set forth, to be made available to
Borrower upon the terms and subject to the conditions hereinafter set forth;

 

NOW, THEREFORE, it is
mutually agreed as follows:

 

ARTICLE I.  DEFINITIONS

 

Section 1.1.  Definitions.  As used in this Agreement, the following
terms shall have the following meanings:

 

“Accelerated Maturity
Date” shall mean the date that is sixty (60) days prior to the stated maturity
(or date when scheduled principal payments are due), as in effect from time to
time, of the Convertible Subordinated Notes or any replacement notes.

 

“Acceptable
Non-Acceleration Event” shall mean any of the following events: (a) if Borrower
refinances the all of the outstanding Convertible Subordinated Indebtedness
with new Subordinated Indebtedness that, by its terms, has a stated maturity
(or has scheduled principal payments due) no earlier than sixty (60) days after
the Facility Maturity Date; (b) all of the Convertible Subordinated Notes are
converted into equity; (c) for the period commencing sixty (60) days prior to
the Facility Maturity Date through the Facility Maturity Date (or, if earlier,
until the repayment or conversion of all of the outstanding Convertible
Subordinated Notes), the Available Liquidity is, at all times, no less than an
amount equal to one hundred percent (100%) of the outstanding principal amount
of the Convertible Subordinated Notes; or (d) the Convertible Subordinated
Noteholders agree in writing (in form and substance reasonably acceptable to
Agent) to extend the stated maturity (or date when scheduled principal payments
are due) of the Convertible Subordinated Notes to a date that is no earlier
than sixty (60) days after the Facility Maturity Date.

 

 

“Account” shall mean all
accounts, as defined in the U.C.C.

 

“Account Debtor” shall
mean any Person obligated to pay all or any part of any Account in any manner
and includes (without limitation) any Guarantor thereof.

 

“Acquisition” shall mean
any transaction or series of related transactions for the purpose of or
resulting, directly or indirectly, in (a) the acquisition of all or
substantially all of the assets of any Person (other than a Company), or any
business or division of any Person (other than a Company), (b) the
acquisition of in excess of fifty percent (50%) of the stock (or other equity
interest) of any Person (other than a Company), or (c) the acquisition of
another Person (other than a Company) by a merger, amalgamation or consolidation
or any other combination with such Person.

 

“Additional Commitment”
shall mean that term as defined in Section 2.10(b) hereof.

 

“Additional Lender” shall
mean an Eligible
Transferee that shall become a Revolving Lender hereunder during the
Commitment Increase Period pursuant to Section 2.10(b) hereof.

 

“Additional Lender
Assumption Agreement” shall mean an additional lender assumption agreement, in
form and substance satisfactory to Agent, wherein an Additional Lender shall
become a Revolving Lender hereunder.

 

“Additional Lender
Assumption Effective Date” shall mean that term as defined in
Section 2.10(b) hereof.

 

“Advantage”
shall mean any payment (whether made voluntarily or involuntarily, by offset of
any deposit or other indebtedness or otherwise) received by any Lender in
respect of the Applicable Debt, if such payment results in that Lender having
less than its pro rata share (based upon its Applicable Commitment Percentage
and, in the case of an Equalization Event, based upon its Equalization
Percentage of the Obligations) of the Applicable Debt then outstanding, than
was the case immediately before such payment.

 

“Affiliate” shall mean
any Person, directly or indirectly, controlling, controlled by or under common
control with a Company and “control” (including the correlative meanings, the
terms “controlling”, “controlled by” and “under common control with”) shall
mean the power, directly or indirectly, to direct or cause the direction of the
management and policies of a Company, whether through the ownership of voting
securities, by contract or otherwise.

 

“Agent Fee Letter” shall
mean the Agent Fee Letter between Borrower and Agent, dated as of the Closing
Date, as the same may from time to time be amended, restated or otherwise
modified.

 

“Applicable Commitment
Fee Rate” shall mean:

 

(a)                                  for
the period from the Closing Date through August 31, 2004, forty-five (45)
basis points; and

 

2

 

(b)                                 commencing
with the Consolidated financial statements of Borrower for the fiscal quarter
ending June 30, 2004, the number of basis points set forth in the
following matrix, based upon the result of the computation of the Leverage
Ratio, shall be used to establish the number of basis points that will go into
effect on September 1, 2004 and thereafter:

 

	
  Leverage Ratio

  	
   

  	
  Applicable
  Commitment Fee Rate

  	
   

  
	
  Greater
  than or equal to 2.00 to 1.00

  	
   

  	
  50.00 basis
  points

  	
   

  
	
  Greater
  than or equal to 1.50 to 1.00 but less than 2.00 to 1.00

  	
   

  	
  45.00 basis
  points

  	
   

  
	
  Greater
  than or equal to 1.00 to 1.00 but less than 1.50 to 1.00

  	
   

  	
  40.00 basis
  points

  	
   

  
	
  Less
  than 1.00 to 1.00

  	
   

  	
  35.00 basis
  points

  	
   

  

 

After September 1,
2004, changes to the Applicable Commitment Fee Rate shall be effective on the
first day of each month following the date upon which Agent received, or, if
earlier, Agent should have received, pursuant to Section 5.3(a) or
(b) hereof, the financial statements of Borrower.  The above matrix does not modify or waive,
in any respect, the requirements of Section 5.7 hereof, the rights of Agent
and the Lenders to charge the Default Rate, or the rights and remedies of Agent
and the Lenders pursuant to Articles VIII and IX hereof.  Notwithstanding anything herein to the
contrary, during any period when Borrower shall have failed to timely deliver
the financial statements pursuant to Section 5.3(a) or
(b) hereof, or the Compliance Certificate pursuant to Section 5.3(c)
hereof, and such failure has continued for five Business Days, until such time
as the appropriate financial statements and Compliance Certificate are
delivered, the Applicable Commitment Fee Rate shall be the highest rate per
annum indicated in the above pricing grid regardless of the Leverage Ratio at
such time.

 

“Applicable Commitment
Percentage” shall mean, for each Lender:

 

(a)                                  with
respect to the Revolving Credit Commitment, the percentage, if any, set forth
opposite such Lender’s name under the column headed “Revolving Credit
Commitment Percentage”, as listed in Schedule 1 hereto; and

 

(b)                                 with
respect to the Term Loan Commitment, the percentage, if any, set forth opposite
such Lender’s name under the column headed “Term Loan Commitment Percentage”,
as listed in Schedule 1 hereto.

 

“Applicable Debt” shall
mean:

 

(a)                                  with
respect to the Revolving Credit Commitment, collectively, (i) all Indebtedness
incurred by Borrower to the Revolving Lenders pursuant to this Agreement and
the other Loan Documents, and includes, without limitation, the principal of
and interest on all Revolving Credit Notes and the Swing Line Note and all obligations
with respect to Letters of Credit, (ii) each extension, renewal or refinancing
thereof, in whole or in part, (iii) the commitment, prepayment and other fees
and amounts payable hereunder in connection with the

 

3

 

Revolving Credit
Commitment, and (iv) all Related Expenses incurred in connection with the
foregoing; and

 

(b)                                 with
respect to the Term Loan Commitment, collectively, (i) all Indebtedness
incurred by Borrower to the Term Lenders pursuant to this Agreement and the
other Loan Documents, and includes, without limitation, the principal of and
interest on all Term Notes, (ii) each extension, renewal or refinancing thereof
in whole or in part, (iii) all prepayment and other fees and amounts payable hereunder
in connection with the Term Loan Commitment, and (iv) all Related Expenses
incurred in connection with the foregoing.

 

“Applicable Margin” shall
mean:

 

(a)                                  for
the period from the Closing Date through August 31, 2004, (i) two hundred
fifty (250) basis points for Eurodollar Loans, and (ii) seventy-five (75) basis
points for Base Rate Loans; and

 

(b)                                 commencing
with the Consolidated financial statements of Borrower for the fiscal quarter
ending June 30, 2004, the number of basis points (depending upon whether
Loans are Eurodollar Loans or Base Rate Loans) set forth in the following
matrix, based upon the result of the computation of the Leverage Ratio, shall
be used to establish the number of basis points that will go into effect on
September 1, 2004 and thereafter:

 

	
  Leverage Ratio

  	
   

  	
  Applicable
  Basis

  Points for

  Eurodollar Loans

  	
   

  	
  Applicable
  Basis

  Points for 

  Base Rate Loans

  	
   

  
	
  Greater
  than or equal to 2.50 to 1.00

  	
   

  	
  300.00

  	
   

  	
  125.00

  	
   

  
	
  Greater
  than or equal to 2.00 to 1.00 but less than 2.50 to 1.00

  	
   

  	
  275.00

  	
   

  	
  100.00

  	
   

  
	
  Greater
  than or equal to 1.50 to 1.00 but less than 2.00 to 1.00

  	
   

  	
  250.00

  	
   

  	
  75.00

  	
   

  
	
  Greater
  than or equal to 1.00 to 1.00 but less than 1.50 to 1.00

  	
   

  	
  225.00

  	
   

  	
  50.00

  	
   

  
	
  Less
  than 1.00 to 1.00

  	
   

  	
  200.00

  	
   

  	
  25.00

  	
   

  

 

After September 1,
2004, changes to the Applicable Margin shall be effective on the first day of
each month following the date upon which Agent received, or, if earlier, Agent
should have received, pursuant to Section 5.3(a) or (b) hereof, the
financial statements of Borrower.  The
above matrix does not modify or waive, in any respect, the requirements of
Section 5.7 hereof, the rights of Agent and the Lenders to charge the
Default Rate, or the rights and remedies of Agent and the Lenders pursuant to
Articles VIII and IX hereof.  Notwithstanding
anything herein to the contrary, during any period when Borrower shall have
failed to timely deliver the financial statements pursuant to
Section 5.3(a) or (b) hereof, or the Compliance Certificate pursuant to
Section 5.3(c) hereof, and such failure has continued for five Business
Days, until such time as the appropriate financial statements and Compliance
Certificate are delivered, the Applicable

 

4

 

Margin shall be the
highest rate per annum indicated in the above pricing grid regardless of the
Leverage Ratio at such time.

 

“Assignment Agreement”
shall mean an Assignment and Acceptance Agreement in the form of the attached Exhibit F.

 

“Authorized Officer”
shall mean a Financial Officer or other individual authorized by a Financial
Officer in writing (with a copy to Agent) to handle certain administrative
matters in connection with this Agreement.

 

“Available Liquidity”
shall mean, at any date, the sum of (a) cash on hand of Borrower held at
financial institutions located in the United States plus Cash Equivalents in
excess of Ten Million Dollars ($10,000,000), plus (b) Revolving Credit
Availability.

 

“Base Rate” shall mean a
rate per annum equal to the greater of (a) the Prime Rate or
(b) one-half of one percent (.50%) in excess of the Federal Funds
Effective Rate.  Any change in the Base
Rate shall be effective immediately from and after such change in the Base
Rate.

 

“Base Rate Loan” shall
mean a Revolving Loan or a portion of the Term Loan described in
Section 2.2(a) or 2.3 hereof that shall be denominated in Dollars and on
which Borrower shall pay interest at a rate based on the Derived Base Rate.

 

“Business Day” shall mean
any day that is not a Saturday, Sunday or other day on which national banks are
authorized or required to close, and, if the applicable Business Day relates to
a Eurodollar Loan, a day of the year on which dealings in deposits are carried
on in the London interbank Eurodollar market.

 

“Capital Distribution”
shall mean a payment made, liability incurred or other consideration given by a
Company to any Person that is not a Company, for the purchase, acquisition,
redemption, repurchase or retirement of any capital stock or other equity
interest of such Company or as a dividend, return of capital or other
distribution (other than any stock dividend, stock split or other equity
distribution payable only in capital stock or other equity of such Company) in
respect of such Company’s capital stock or other equity interest.

 

“Capitalized Lease
Obligations” shall mean obligations of the Companies for the payment of rent
for any real or personal property under leases or agreements to lease that, in
accordance with GAAP, have been or should be capitalized on the books of the
lessee and, for purposes hereof, the amount of any such obligation shall be the
capitalized amount thereof determined in accordance with GAAP.

 

“Cash Collateral Account”
shall mean a commercial Deposit Account designated “cash collateral account”
and maintained by Borrower with Agent, without liability by Agent or the
Lenders to pay interest thereon, from which account Agent, on behalf of the
Lenders, subject to the provisions of Section 7.2 hereof, shall have the
exclusive right to withdraw funds until all of the Secured Obligations are paid
in full.

 

5

 

“Cash Equivalents” shall
mean, as to any Person, (a) securities issued by, or directly, unconditionally
and fully guaranteed or insured by, the United States or any agency or instrumentality
thereof (provided that the full faith and credit of the United States is
pledged in support thereof) having maturities of not more than one year from
the date of acquisition by such Person; (b) securities issued by, or directly,
unconditionally and fully guaranteed or insured by, any state of the United
States of America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor’s or Moody’s; (c) time deposits,
certificates of deposit or bankers’ acceptances of any commercial bank having,
or which is the principal banking subsidiary of a bank holding company
organized under the laws of the United States, any state thereof or the
District of Columbia or any United States branch of a foreign bank having,
capital and surplus aggregating in excess of Five Hundred Million Dollars
($500,000,000) and a rating of “A” (or such other similar equivalent rating) or
higher by at least one nationally recognized statistical rating organization
(as defined in Rule 436 under the Securities Act) with maturities of not more
than one year from the date of acquisition by such Person; (d) repurchase
obligations with a term of not more than thirty (30) days for underlying
securities of the types described in subpart (a) above entered into with any
bank meeting the qualifications specified in subpart (c) above, which repurchase
obligations are secured by a valid perfected security interest in the
underlying securities; (e) commercial paper issued by any Person incorporated
in the United States rated at least A-2 or the equivalent thereof by Standard
& Poor’s or at least P-2 or the equivalent thereof by Moody’s, and in each
case maturing not more than one year after the date of acquisition by such
Person; (f) investments in money market funds substantially all of whose assets
are comprised of securities of the types described in subparts (a) through (e)
above; and (g) demand deposit accounts maintained in the ordinary course of
business.

 

“Cash Security” shall
mean all cash, instruments, Deposit Accounts and other cash equivalents,
whether matured or unmatured, whether collected or in the process of
collection, upon which a Company presently has or may hereafter have any claim,
wherever located, including but not limited to any of the foregoing that are
presently or may hereafter be existing or maintained with, issued by, drawn upon,
or in the possession of Agent or any Lender.

 

“Change in Control” shall
mean (a) the acquisition of, or, if earlier, the shareholder or director
approval of the acquisition of, ownership or voting control, directly or
indirectly, beneficially or of record, on or after the Closing Date, by any
Person (other than Tom Olofson or Christopher Olofson) or group (within the
meaning of Rule 13d-3 of the SEC under the Securities Exchange Act of 1934, as
then in effect), of shares representing more than thirty percent (30%) of the
aggregate ordinary Voting Power represented by the issued and outstanding
capital stock of Borrower; (b) the occupation of a majority of the seats
(other than vacant seats) on the board of directors or other governing body of
Borrower by Persons who were neither (i) nominated by the board of
directors or other governing body of Borrower nor (ii) appointed or
approved by directors so nominated; or (c) the occurrence of a change in
control, or other similar provision, as defined in any Material Indebtedness
Agreement.

 

“Closing Commitment
Amount” shall mean Seventy-Five Million Dollars ($75,000,000).

 

6

 

“Closing Date” shall mean
the effective date of this Agreement as set forth in the first paragraph of
this Agreement.

 

“Closing Revolving
Amount” shall mean Fifty Million Dollars ($50,000,000).

 

“Code” shall mean the
Internal Revenue Code of 1986, as amended, together with the rules and
regulations promulgated thereunder.

 

“Collateral” shall mean
all of Borrower’s existing and future (a) personal property; (b) Accounts,
instruments, contract rights, supporting obligations, chattel paper, documents,
Investment Property, letter-of-credit rights, commercial tort claims, General
Intangibles, Inventory and Equipment (other than the following, but exclusive
of proceeds of any of the following, (i) computer equipment provided to
bankruptcy trustees and located on their premises in the ordinary course of
Borrower’s business, (ii) fractional interests in aircraft where a pledge is
prohibited by the agreement among the holders of such interests, (iii) equity
interests in (A) any direct Foreign Subsidiary in excess of sixty-five percent
(65%) of the total outstanding equity interest of such direct Foreign Subsidiary,
and (B) any indirect Foreign Subsidiary, (iv) licenses and contracts which by
the terms of such licenses and contracts prohibit the assignment of such
agreements (to the extent such prohibition is enforceable at law), and (v)
fixed assets subject to a purchase money lien with an underlying contract or
agreement that prohibits the granting of a second lien on such fixed assets,
but only to the extent such prohibition is enforceable at law and only as long
as such liens attach to such fixed assets); (c) funds now or hereafter on
deposit in the Cash Collateral Account, if any; (d) Cash Security (other than
trust and payroll bank accounts); (e) the Real Property; and (f) Proceeds of
any of the foregoing.

 

“Commitment” shall mean
the obligation hereunder of the Lenders, to make Loans and to participate in
the issuance of Letters of Credit pursuant to the Revolving Credit Commitment
and the Term Loan Commitment, up to the Total Commitment Amount.

 

“Commitment Increase
Period” shall mean the period from the Closing Date to the date that is thirty
(30) days prior to the last day of the Commitment Period.

 

“Commitment Period” shall
mean the period from the Closing Date to the earlier of the Accelerated
Maturity Date or July 19, 2008 (or such earlier date on which the
Commitment shall have been terminated pursuant to Article IX hereof);
provided that there shall be no Accelerated Maturity Date if an Acceptable
Non-Acceleration Event shall occur prior to the Accelerated Maturity Date.

 

“Companies” shall mean
Borrower and all Subsidiaries.

 

“Company” shall mean
Borrower or a Subsidiary.

 

“Compliance Certificate”
shall mean a certificate, substantially in the form of the attached Exhibit E.

 

7

 

“Consideration” shall mean,
in connection with an Acquisition, the aggregate consideration paid, including
borrowed funds, cash, the issuance of securities or notes, the assumption or
incurring of liabilities (direct or contingent), the payment of consulting fees
or fees for a covenant not to compete and any other consideration paid for such
Acquisition.

 

“Consolidated” shall mean
the resultant consolidation of the financial statements of Borrower and its
Subsidiaries in accordance with GAAP, including principles of consolidation consistent
with those applied in preparation of the consolidated financial statements
referred to in Section 6.13 hereof.

 

“Consolidated Capital
Expenditures” shall mean, for any period, the amount of capital expenditures of
Borrower (specifically including software development costs, but excluding
capital expenditures directly financed through a capitalized lease (with
acceptable documentation available upon request of Agent or any Lender)), as
determined on a Consolidated basis and in accordance with GAAP.

 

“Consolidated Current
Assets” shall mean, at any date, the current assets of Borrower, as determined
on a Consolidated basis and in accordance with GAAP.

 

“Consolidated Current
Liabilities” shall mean, at any date, the current liabilities of Borrower, as
determined on a Consolidated basis and in accordance with GAAP.

 

“Consolidated
Depreciation and Amortization Charges” shall mean, for any period, the
aggregate of all depreciation and amortization charges of Borrower for such
period, as determined on a Consolidated basis and in accordance with GAAP;
provided that, notwithstanding the foregoing, Consolidated Depreciation and
Amortization Charges shall include any component of Consolidated Interest
Expense resulting from the amortization of any loan fees and Consolidated
Interest Expense resulting from imputed interest that is added to the principal
balance of the underlying Indebtedness.

 

“Consolidated EBITDA”
shall mean, for any period, on a Consolidated basis and in accordance with
GAAP, Consolidated Net Earnings for such period plus the aggregate amounts
deducted in determining such Consolidated Net Earnings in respect of
(a) Consolidated Interest Expense, (b) Consolidated Income Tax
Expense, (c) Consolidated Depreciation and Amortization Charges, (d) (i)
extraordinary or unusual non-cash losses not incurred in the ordinary course of
business but that were counted in the net income calculation for such period,
minus (ii) extraordinary or unusual non-cash gains not incurred in the ordinary
course of business but that were counted in the net income calculation for such
period, (e) unamortized costs, fees and expenses incurred in connection with
the transactions contemplated by this Agreement and any Acquisition (occurring
prior to, on or subsequent to the Closing Date), (f) expenses and charges which
will be indemnified or reimbursed to the extent such amounts are covered by
funds in a valid escrow account or similar arrangement, (g) any other
component of net income (or net loss) which is non-cash and will not convert to
cash within one year, including without exception any charges related to the
granting of share-based payments to employees or directors; provided, however,
that any time an Acquisition on an on-going business is made pursuant to
Section 5.13 hereof, Consolidated EBITDA shall be recalculated to include
the

 

8

 

EBITDA of the acquired
company as if such Acquisition had been completed on the first day of the
relevant measuring period, and (h) Acquisition-related expenses, in the
aggregate for all Companies, up to Four Million Dollars ($4,000,000) during any
twelve (12) month period; provided that, for purposes of calculating
Consolidated EBITDA, Consolidated EBITDA shall be deemed to be (A) Fourteen Million
Nine Hundred Ninety-Nine Thousand Dollars ($14,999,000) for the fiscal quarter
of Borrower ending September 30, 2003, (B) Twelve Million Eight Hundred
Thousand Dollars ($12,800,000) for the fiscal quarter of Borrower ending
December 31, 2003, and (C) Ten Million Six Hundred Twenty-Six Thousand
Dollars ($10,626,000) for the fiscal quarter of Borrower ending March 31,
2004.

 

“Consolidated Fixed
Charges” shall mean, for any period, on a Consolidated basis and in accordance
with GAAP, without duplication, the aggregate of (a) Consolidated Interest
Expense (including, without limitation, the “imputed interest” portion of
Capitalized Lease Obligations, synthetic leases and asset securitizations, if
any, and excluding (i) any fees (including underwriting fees) and expenses paid
in connection with the consummation of Acquisitions (occurring prior to, on or
subsequent to the Closing Date), (ii) any payments made to obtain a Hedge
Agreement, and (iii) any agent or collateral monitoring fees paid or required
to be paid pursuant to this Agreement) paid in cash, (b) Consolidated
Income Tax Expense paid in cash, (c) scheduled principal payments on
Consolidated Funded Indebtedness (other than optional prepayments of the
Revolving Credit Notes and scheduled payments on the Convertible Subordinated
Indebtedness), and (d) Capital Distributions.

 

“Consolidated
Funded Indebtedness” shall mean, at any date, all Indebtedness (including,
but not limited to, current, long-term and Subordinated Indebtedness, if any) of Borrower, as determined on a Consolidated
basis and in accordance with GAAP.

 

“Consolidated Income Tax
Expense” shall mean, for any period, all provisions for taxes based on the net
income of Borrower (including, without limitation, any additions to such taxes,
and any penalties and interest with respect thereto), and all franchise taxes
of Borrower to the extent such taxes have been imposed in lieu of income taxes,
as determined on a Consolidated basis and in accordance with GAAP.

 

“Consolidated Interest
Expense” shall mean, for any period, the interest expense of Borrower for such
period, as determined on a Consolidated basis and in accordance with GAAP;
provided that, notwithstanding the foregoing, Consolidated Interest Expense
shall exclude any interest expense resulting from the amortization of any loan
fees, and interest expense resulting from imputed interest that is added to the
principal balance of the underlying Indebtedness.

 

“Consolidated Net
Earnings” shall mean, for any period, the net income (loss) of Borrower for
such period, as determined on a Consolidated basis and in accordance with GAAP.

 

“Consolidated Net Worth”
shall mean, at any date, the stockholders’ equity of Borrower, determined as of
such date on a Consolidated basis and in accordance with GAAP.

 

“Consolidated Senior
Funded Indebtedness” shall mean, at any date, Consolidated Funded Indebtedness
less Subordinated Indebtedness of the Companies.

 

9

 

“Control Agreement” shall
mean each Control Agreement among a Credit Party, Agent and a depository
institution, dated on or after the Closing Date, as the same may from time to
time be amended, restated or otherwise modified.

 

“Controlled Group” shall
mean a Company and each Person required to be aggregated with a Company under
Code Section 414(b), (c), (m) or (o).

 

“Convertible Subordinated
Documents” shall mean the Note Agreement, the Convertible Subordinated Notes,
and any other agreement entered into or delivered in connection therewith.

 

“Convertible Subordinated
Indebtedness” shall mean the Subordinated Indebtedness under or in respect of
the Convertible Subordinated Notes, in the original principal amount of up to
Fifty Million Dollars ($50,000,000).

 

“Convertible Subordinated
Noteholders” shall mean any Buyer, as defined in the Note Agreement, and any
holder of the Convertible Subordinated Notes.

 

“Convertible Subordinated
Notes” shall mean those certain $50,000,000 4% Contingent Convertible
Subordinated Notes due June 15, 2007, issued pursuant to the Note
Agreement, as the same may from time to time be amended, restated or otherwise
modified with the prior written consent of the Required Lenders.

 

“Credit Event” shall mean
the making by the Lenders of a Loan, the conversion by the Lenders of a Base
Rate Loan to a Eurodollar Loan, the continuation by the Lenders of a Eurodollar
Loan after the end of the applicable Interest Period, the making by the Swing
Line Lender of a Swing Loan, or the issuance by the Fronting Lender of a Letter
of Credit.

 

“Credit Party” shall mean
Borrower and any Subsidiary or other Affiliate that is a Guarantor of Payment.

 

“Current Ratio” shall
mean, at any time, as determined on a Consolidated basis and in accordance with
GAAP, the ratio of (a) Consolidated Current Assets (for the most recently
completed fiscal quarter of Borrower) to (b) Consolidated Current
Liabilities (for the most recently completed fiscal quarter of Borrower);
provided, however, that, for purposes of calculating the Current Ratio,
Consolidated Current Liabilities shall exclude the current portion of
Subordinated Indebtedness and the Revolving Credit Exposure.

 

“Default” shall mean an
event or condition that constitutes, or with the lapse of any applicable grace
period or the giving of notice or both would constitute, an Event of Default,
and that has not been waived by the Required Lenders in writing.

 

“Default Rate” shall mean
(a) with respect to any Loan, a rate per annum equal to two percent (2%)
in excess of the rate otherwise applicable thereto, and (b) with respect
to any other amount, if no rate is specified or available, a rate per annum
equal to two percent (2%) in excess of the Derived Base Rate from time to time
in effect.

 

10

 

“Deposit Account” shall
mean (a) a deposit account, as defined in the U.C.C., (b) any other deposit
account, and (c) any demand, time, savings, checking, passbook, or a similar
account maintained with a bank, savings and loan association, credit union, or
similar organization.

 

“Derived Base Rate” shall
mean a rate per annum equal to the sum of the Applicable Margin (from time to
time in effect) for Base Rate Loans plus the Base Rate.

 

“Derived Eurodollar Rate”
shall mean a rate per annum equal to the sum of the Applicable Margin (from
time to time in effect) for Eurodollar Loans plus the Eurodollar Rate.

 

“Disposition” shall mean
the lease, transfer or other disposition of assets (whether in one or more
transaction) by a Company, other than a sale, lease, transfer or other disposition
made by a Company in the ordinary course of business.

 

“Dollar” or the sign $
shall mean lawful money of the United States of America.

 

“Domestic Subsidiary”
shall mean a Subsidiary that is not a Foreign Subsidiary.

 

“Dormant Subsidiary”
shall mean a Company that (a) is not a Credit Party, (b) has
aggregate assets of less than Two Hundred Fifty Thousand Dollars ($250,000),
and (c) has no direct or indirect Subsidiaries with aggregate assets for
all such Subsidiaries of more than Two Hundred Fifty Thousand Dollars
($250,000).

 

“EBITDA” shall mean, for
any period, in accordance with GAAP, the net earnings of a Person for such
period plus the aggregate amounts deducted in determining such net earnings in
respect of (a) interest expense of such Person, (b) income taxes of such
Person, and (c) the aggregate of all depreciation and amortization charges of
such Person, (d) (i) extraordinary or unusual non-cash losses not incurred in
the ordinary course of business of such Person but that were counted in the net
income calculation for such period, minus (ii) extraordinary or unusual
non-cash gains not incurred in the ordinary course of business of such Person
but that were counted in the net income calculation for such period, (e)
expenses and charges which will be indemnified or reimbursed to the extent such
amounts are covered by funds in a valid escrow account or similar arrangement,
and (f) any other component of net income (or net loss) which is non-cash
and will not convert to cash within one year, including without exception any
charges related to the granting of share-based payments to employees or
directors.

 

“Eligible Transferee”
shall mean a commercial bank, financial institution or other “accredited
investor” (as defined in SEC Regulation D) that is not Borrower, a Subsidiary
or an Affiliate.

 

“Environmental
Laws” shall mean all provisions of law (including the common law), statutes,
ordinances, codes, rules, guidelines, policies, procedures, orders-in-council,
regulations, permits, licenses, judgments, writs, injunctions, decrees, orders,
awards and standards which are legally binding and promulgated by a
Governmental Authority or by any court, agency,

 

11

 

instrumentality,
regulatory authority or commission of any of the foregoing concerning
environmental health or safety and protection of, or regulation of the
discharge of substances into, the environment.

 

“Equalization Event”
shall mean the earlier of (a) the occurrence of an Event of Default under Section 8.11
hereof, or (b) the acceleration of the maturity of the Obligations after
the occurrence of an Event of Default.

 

“Equalization Percentage”
shall mean that term as defined in Section 9.5 hereof.

 

“Equipment” shall mean
all equipment, as defined in the U.C.C.

 

“ERISA” shall mean the
Employee Retirement Income Security Act of 1974, as amended from time to time,
and the regulations promulgated pursuant thereto.

 

“ERISA Event” shall mean
(a) the existence of a condition or event with respect to an ERISA Plan
that would reasonably be expected to result in the imposition of an excise tax
or any other liability on a Company or of the imposition of a Lien on the
assets of a Company; (b) the engagement by a Controlled Group member in a
non-exempt “prohibited transaction” (as defined under ERISA Section 406 or
Code Section 4975) or a breach of a fiduciary duty under ERISA that could
reasonably be expected to result in liability to a Company; (c) the
application by a Controlled Group member for a waiver from the minimum funding
requirements of Code Section 412 or ERISA Section 302 or a Controlled
Group member is required to provide security under Code Section 401(a)(29)
or ERISA Section 307; (d) the occurrence of a Reportable Event with
respect to any Pension Plan as to which notice is required to be provided to
the PBGC; (e) the withdrawal by a Controlled Group member from a
Multiemployer Plan in a “complete withdrawal” or a “partial withdrawal” (as
such terms are defined in ERISA Sections 4203 and 4205, respectively); (f)
notice that any Multiemployer Plan is in reorganization under ERISA
Section 4241; (g) the taking by the PBGC of any steps to terminate a
Pension Plan or appoint a trustee to administer a Pension Plan, or the taking
by a Controlled Group member of any steps to terminate a Pension Plan; (h) the
commencement, existence or threatening of a claim, action, suit, audit or
investigation with respect to an ERISA Plan, other than a routine claim for
benefits; or (i) any incurrence by a Controlled Group member of any liability
for post-retirement benefits under any Welfare Plan, other than as required by
ERISA Section 601, et.  seq. or Code Section 4980B.

 

“ERISA Plan” shall mean
an “employee benefit plan” (within the meaning of ERISA Section 3(3)) that
a Controlled Group member at any time sponsors, maintains, contributes to, has
liability with respect to or has an obligation to contribute to such plan.

 

“Eurocurrency
Liabilities” shall have the meaning assigned to that term in Regulation D of
the Board of Governors of the Federal Reserve System, as in effect from time to
time.

 

“Eurodollar” shall mean a
Dollar denominated deposit in a bank or branch outside of the United States.

 

12

 

“Eurodollar Loan” shall
mean a Revolving Loan or a portion of the Term Loan described in
Section 2.2(a) or 2.3 hereof that shall be denominated in Dollars and on
which Borrower shall pay interest at a rate based upon the Derived Eurodollar
Rate.

 

“Eurodollar Rate” shall
mean, with respect to a Eurodollar Loan, for any Interest Period, a rate per
annum equal to the quotient obtained (rounded upwards, if necessary, to the
nearest 1/16th of 1%) by dividing (a) the rate of interest,
determined by Agent in accordance with its usual procedures (which
determination shall be conclusive absent manifest error) as of approximately
11:00 A.M. (London time) two Business Days prior to the beginning of such
Interest Period pertaining to such Eurodollar Loan, as listed on British
Bankers Association Interest Rate LIBOR 01 or 02 as provided by Reuters (or, if
for any reason such rate is unavailable from Reuters, from any other similar
company or service that provides rate quotations comparable to those currently
provided by Reuters) as the rate in the London interbank market for Dollar
deposits in immediately available funds with a maturity comparable to such
Interest Period, provided that, in the event that such rate quotation is not
available for any reason, then the Eurodollar Rate shall be the average
(rounded upward to the nearest 1/16th of 1%) of the per annum rates at which
deposits in immediately available funds in Dollars for the relevant Interest
Period and in the amount of the Eurodollar Loan to be disbursed or to remain
outstanding during such Interest Period, as the case may be, are offered to
Agent (or an affiliate of Agent, in Agent’s discretion) by prime banks in any
Eurodollar market reasonably selected by Agent, determined as of 11:00 A.M.
(London time) (or as soon thereafter as practicable), two Business Days prior
to the beginning of the relevant Interest Period pertaining to such Eurodollar
Loan hereunder; by (b) 1.00 minus the Reserve Percentage.

 

“Event of Default” shall
mean an event or condition that shall constitute an event of default as defined
in Article VII hereof.

 

“Excluded Taxes” shall
mean net income taxes (and franchise taxes imposed in lieu of net income taxes)
imposed on Agent or any Lender by the Governmental Authority located in the
jurisdiction where Agent or such Lender is organized or conducts business
(other than any such connection arising solely from Agent or such Lender having
executed, delivered or performed its obligations or received a payment under,
or enforced, this Agreement or any other Loan Document).

 

“Existing Letter of
Credit” shall mean that term as defined in Section 2.2(b)(vi) hereof.

 

“Facility Maturity Date”
shall mean the last day of the Commitment Period.

 

“Federal Funds Effective
Rate” shall mean, for any day, the rate per annum (rounded upward to the
nearest one one-hundredth of one percent (1/100 of 1%)) announced by the
Federal Reserve Bank of New York (or any successor) on such day as being the
weighted average of the rates on overnight federal funds transactions arranged
by federal funds brokers on the previous trading day, as computed and announced
by such Federal Reserve Bank (or any successor) in substantially the same
manner as such Federal Reserve Bank computes and announces the weighted average
it refers to as the “Federal Funds Effective Rate” as of the Closing Date.

 

13

 

“Financial Officer” shall
mean any of the following officers: chief executive officer, president, chief
financial officer or treasurer.  Unless
otherwise qualified, all references to a Financial Officer in this Agreement
shall refer to a Financial Officer of Borrower.

 

“Fixed Charge Coverage
Ratio” shall mean, as determined for the most recently completed four fiscal
quarters of Borrower, on a Consolidated basis and in accordance with GAAP, the
ratio of (a) (i) Consolidated EBITDA minus (ii) Consolidated Capital
Expenditures (excluding Consolidated Capital Expenditures that are made (A) in
connection with an Acquisition permitted pursuant to Section 5.13 hereof,
(B) in connection with leasehold improvements (but only to the extent such
improvements are reimbursable by the landlord), or (C) with the net proceeds of
Dispositions of capital assets (excluding real estate), to
(b) Consolidated Fixed Charges.

 

“Foreign Subsidiary”
shall mean a Subsidiary that is organized outside of the United States.

 

“Fronting Lender” shall
mean, as to any Letter of Credit transaction hereunder, Agent as issuer of the
Letter of Credit, or, in the event that Agent either shall be unable to issue
or shall agree that another Revolving Lender may issue, a Letter of Credit,
such other Revolving Lender as shall agree to issue the Letter of Credit in its
own name, but on behalf of the Revolving Lenders hereunder.

 

“GAAP” shall mean
generally accepted accounting principles in the United States as then in
effect, which shall include the official interpretations thereof by the
Financial Accounting Standards Board (or agencies within the United States.
accounting profession with similar or delegated functions and recognized by the
Financial Accounting Standards Board as having authority to issue such
interpretations), applied on a basis consistent with the past accounting
practices and procedures of Borrower and the SEC, which are applicable to the
circumstances as of the date of determination.

 

“General Intangibles”
shall mean all (a) general intangibles, as defined in the U.C.C.; (b) choses in
action, causes of action, all customer lists, corporate or other business
records, inventions, designs, patents, patent applications, service marks,
registrations, trade names, trademarks, copyrights, licenses, goodwill,
computer software, rights to indemnification and tax refunds; and (c) Proceeds
of any of the foregoing, irrespective of the form or kind thereof.

 

“Governmental Authority”
shall mean any nation or government, any state, province or territory or other
political subdivision thereof, any governmental agency, department, authority,
instrumentality, regulatory body, court, central bank or other governmental
entity exercising executive, legislative, judicial, taxing, regulatory or
administrative functions of or pertaining to government, any securities
exchange and any self-regulatory organization.

 

“Guarantor” shall mean a
Person that shall have pledged its credit or property in any manner for the
payment or other performance of the indebtedness, contract or other obligation
of another and includes (without limitation) any guarantor (whether of payment
or of collection),

 

14

 

surety, co-maker,
endorser or Person that shall have agreed conditionally or otherwise to make
any purchase, loan or investment in order thereby to enable another to prevent
or correct a default of any kind.

 

“Guarantor of Payment”
shall mean each of the Companies set forth on Schedule 2 hereto,
that are each executing and delivering a Guaranty of Payment, or any other
Person that shall deliver a Guaranty of Payment to Agent subsequent to the
Closing Date.

 

“Guaranty of Payment”
shall mean each Guaranty of Payment executed and delivered on or after the
Closing Date in connection with this Agreement by the Guarantors of Payment, as
the same may from time to time be amended, restated or otherwise modified.

 

“Hedge Agreement” shall
mean any (a) hedge agreement, interest rate swap, basis swap agreement, cap,
collar or floor agreement, or other interest rate management device (including
forward rate agreements) entered into by a Company with any Person in
connection with any Indebtedness of such Company, or (b) currency swap
agreement, forward currency purchase agreement or similar arrangement or
agreement designed to protect against fluctuations in currency exchange rates
entered into by a Company with any Person.

 

“Indebtedness” shall
mean, for any Company (excluding in all cases trade payables payable in the
ordinary course of business by such Company and accrued expenses), without
duplication, (a) all obligations to repay borrowed money, direct or
indirect, incurred or assumed, (b) all obligations for the deferred
purchase price of capital assets, (c) all obligations under conditional
sales or other title retention agreements, (d) all obligations (contingent
or otherwise) under any letter of credit or banker’s acceptance, (e) all
net obligations under any currency swap agreement, interest rate swap, cap,
collar or floor agreement or other interest rate management device or any Hedge
Agreement, (f) all synthetic leases, (g) all lease obligations that have been
or should be capitalized on the books of such Company in accordance with GAAP,
(h) all obligations of such Company with respect to asset securitization
financing programs, (i) all obligations to advance funds to, or to
purchase assets, property or services from, any other Person in order to maintain
the financial condition of such Person, (j) all indebtedness secured by a Lien
on the property of a Company, whether or not such indebtedness shall have been
assumed by such Company, provided that if such Company has not assumed or
otherwise become liable for such indebtedness, such indebtedness shall be
measured at the fair market value of such property securing such indebtedness
at the time of determination, (k) all indebtedness of any partnership of which
any Company is a general partner, (l) any other transaction (including forward
sale or purchase agreements) having the commercial effect of a borrowing of
money entered into by such Company to finance its operations or capital
requirements, and (m) any
guaranty of any obligation described in subparts (a) through (l) hereof.

 

“Intellectual Property
Collateral Assignment Agreement” shall mean an Intellectual Property Collateral
Assignment Agreement executed and delivered on or after the Closing Date by
Borrower or a Guarantor of Payment, wherein Borrower or such Guarantor of
Payment, as the case may be, has granted to Agent, for the benefit of the
Lenders, a security interest in and a collateral assignment of all intellectual
property owned by Borrower or such Guarantor of Payment, as the same may from
time to time be amended, restated or otherwise modified.

 

15

 

“Interest Adjustment
Date” shall mean the last day of each Interest Period.

 

“Interest Period” shall
mean, with respect to a Eurodollar Loan, the period commencing on the date such
Eurodollar Loan is made and ending on the last day of such period, as selected
by Borrower pursuant to the provisions hereof, and, thereafter (unless such
Eurodollar Loan is converted to a Base Rate Loan), each subsequent period
commencing on the last day of the immediately preceding Interest Period and
ending on the last day of such period, as selected by Borrower pursuant to the
provisions hereof.  The duration of each
Interest Period for a Eurodollar Loan shall be one month, two months, three
months or six months in each case as Borrower may select upon notice, as set
forth in Section 2.6 hereof; provided that, if Borrower shall fail to so
select the duration of any Interest Period for a Eurodollar Loan at least three
Business Days prior to the Interest Adjustment Date applicable to such
Eurodollar Loan, Borrower shall be deemed to have converted such Eurodollar
Loan to a Base Rate Loan at the end of the then current Interest Period.

 

“Inventory” shall mean
all inventory, as defined in the U.C.C.

 

“Investment Property”
shall mean all investment property, as defined in the U.C.C., unless the
Uniform Commercial Code as in effect in another jurisdiction would govern the
perfection and/or priority of a security interest in investment property, and,
in such case, “investment property” shall be defined in accordance with the law
of that jurisdiction as in effect from time to time.

 

“Lender Credit Exposure”
shall mean, for any Lender, at any time, the aggregate of such Lender’s
respective pro rata shares of the Revolving Credit Exposure and the Term Loan
Exposure.

 

“Letter of Credit” shall
mean a standby letter of credit that shall be issued by the Fronting Lender for
the account of Borrower or a Guarantor of Payment, including amendments
thereto, if any, and shall have an expiration date no later than the earlier of
(a) one year after its date of issuance or (b) fifteen (15) days
prior to the last day of the Commitment Period.

 

“Letter of Credit
Commitment” shall mean the commitment of the Fronting Lender, on behalf of the
Revolving Lenders, to issue Letters of Credit in an aggregate face amount of up
to Ten Million Dollars ($10,000,000).

 

“Letter of Credit
Exposure” shall mean, at any time, the sum of (a) the aggregate undrawn face
amount of all issued and outstanding Letters of Credit, and (b) the
aggregate of the draws made on Letters of Credit that have not been reimbursed
by Borrower or converted to a Revolving Loan pursuant to
Section 2.2(b)(iv) hereof.

 

“Leverage Ratio” shall
mean, as determined on a Consolidated basis and in accordance with GAAP, the
ratio of (a) Consolidated Funded Indebtedness (for the most recently completed
fiscal quarter of Borrower) to (b) Consolidated EBITDA (for the most recently
completed four fiscal quarters of Borrower).

 

16

 

“Lien” shall mean any
mortgage, deed of trust, security interest, lien (statutory or other), charge,
encumbrance on, pledge or deposit of, or conditional sale, leasing, sale with a
right of redemption or other title retention agreement and any capitalized
lease with respect to any property (real or personal) or asset.

 

“Liquidity” shall mean,
at any date, an amount equal to the sum of (a) cash, (b) Cash Equivalents
having maturities of not more than one year from the date of acquisition; and
(c) the Revolving Credit Availability.

 

“Loan” shall mean a
Revolving Loan, a Swing Loan or the Term Loan granted to Borrower by the
Lenders in accordance with Section 2.2 or 2.3 hereof.

 

“Loan Documents” shall
mean, collectively, this Agreement, each Note, each Guaranty of Payment, all
documentation relating to each Letter of Credit, each Security Document and the
Agent Fee Letter, as any of the foregoing may from time to time be amended, restated
or otherwise modified or replaced, and any other document delivered pursuant
thereto.

 

“Material Adverse Effect”
shall mean a material adverse effect on (a) the business, operations,
property, condition (financial or otherwise) or prospects of Borrower,
(b) the business, operations, property, condition (financial or otherwise)
or prospects of the Companies taken as a whole, (c) the ability of Borrower or the Companies
to perform its or their obligations under this Agreement or any of the other
Loan Documents, or (d) the validity or enforceability of the Loan
Documents or the rights and remedies of Agent or the Lenders hereunder or
thereunder.

 

“Material Indebtedness
Agreement” shall mean any debt instrument, lease (capital, operating or
otherwise), guaranty, contract, commitment, agreement or other arrangement
evidencing any Indebtedness of any Company or the Companies in excess of the
amount of Three Million Dollars ($3,000,000).

 

“Maximum Amount” shall
mean, for each Lender, the amount set forth opposite such Lender’s name under
the column headed “Maximum Amount” as set forth on Schedule 1
hereto, subject to decreases determined pursuant to Section 2.10(a)
hereof, increases pursuant to Section 2.10(b) hereof and assignments of
interests pursuant to Section 11.10 hereof; provided, however, that the
Maximum Amount for the Swing Line Lender shall exclude the Swing Line
Commitment (other than its pro rata share), and the Maximum Amount of the
Fronting Lender shall exclude the Letter of Credit Commitment (other than its
pro rata share).

 

“Maximum Commitment
Amount” shall mean One Hundred Million Dollars ($100,000,000).

 

“Maximum Revolving
Amount” shall mean Seventy-Five Million Dollars ($75,000,000).

 

“Moody’s” shall mean
Moody’s Investors Service, Inc., or any successor to such company.

 

17

 

“Mortgage” shall mean
each Open-End Mortgage, Assignment of Leases and Rents and Security Agreement
(or comparable document), relating to the Real Property, executed and delivered
by a Credit Party, to further secure the obligations under the Loan Documents,
as the same may from time to time be amended, restated or otherwise modified.

 

“Multiemployer Plan”
shall mean a Pension Plan that is subject to the requirements of Subtitle E of
Title IV of ERISA.

 

“Note” shall mean a
Revolving Credit Note, the Swing Line Note or a Term Note, or any other
promissory note delivered pursuant to this Agreement.

 

“Note Agreement” shall
mean the Security Purchase Agreement, dated as of June 10, 2004, by and
among Borrower and the Buyers, as defined therein, as the same may from time to
time be amended, restated or otherwise modified with the prior written consent
of the Required Lenders.

 

“Notice of Loan” shall
mean a Notice of Loan in the form of the attached Exhibit D.

 

“Obligations” shall mean,
collectively, (a) all Indebtedness and other obligations incurred by Borrower
to Agent, the Fronting Lender, the Swing Line Lender, or any Lender pursuant to
this Agreement and includes the principal of and interest on all Loans and all
obligations pursuant to Letters of Credit, (b) each extension, renewal or
refinancing of the foregoing, in whole or in part, (c) the commitment and other
fees and any prepayment fees payable hereunder, and all fees and charges in
connection with Letters of Credit, and (d) all Related Expenses.

 

“Organizational
Documents” shall mean, with respect to any Person (other than an individual),
such Person’s Articles (Certificate) of Incorporation, operating agreement
or equivalent formation documents, and Regulations (Bylaws), or equivalent
governing documents, and any amendments to any of the foregoing.

 

“Other Taxes” shall mean
any and all present or future stamp or documentary taxes or any other excise,
ad valorem or property taxes, goods and services taxes, harmonized sales taxes
and other sales taxes, use taxes, value added taxes, charges or similar taxes
or levies arising from any payment made hereunder or from the execution,
delivery or enforcement of, or otherwise with respect to, this Agreement or any
other Loan Document.

 

“Overall Commitment
Percentage” shall mean a Lender’s percentage of the Total Commitment Amount
based upon such Lender’s Maximum Amount of the Total Commitment Amount.

 

“PBGC” shall mean the
Pension Benefit Guaranty Corporation, or its successor.

 

“Pension Plan” shall mean
an ERISA Plan that is a “pension plan” (within the meaning of ERISA
Section 3(2)).

 

18

 

“Person” shall mean any
individual, sole proprietorship, partnership, joint venture, unincorporated
organization, corporation, limited liability company, unlimited liability
company, institution, trust, estate, government or other agency or political
subdivision thereof or any other entity.

 

“Pledge Agreement” shall
mean each of the Pledge Agreements, relating to the Pledged Securities,
executed and delivered by Borrower and each Domestic Subsidiary in favor of
Agent, for the benefit of the Lenders, dated as of the Closing Date, and any
other Pledge Agreement executed by any other Domestic Subsidiary on or after
the Closing Date, as any of the foregoing may from time to time be amended,
restated or otherwise modified.

 

“Pledged Securities”
shall mean all of the shares of capital stock or other equity interest of a
Subsidiary of Borrower, whether now owned or hereafter acquired or created, and
all proceeds thereof; provided, however, that Pledged Securities shall only
include up to sixty-five percent (65%) of the shares of capital stock or other
equity interest of any first-tier Foreign Subsidiary.

 

“Prime Rate” shall mean
the interest rate established from time to time by Agent as Agent’s prime rate,
whether or not such rate shall be publicly announced; the Prime Rate may not be
the lowest interest rate charged by Agent for commercial or other extensions of
credit. Each change in the Prime Rate shall be effective immediately from and
after such change.

 

“Proceeds” shall mean (a)
proceeds as defined in the U.C.C., and any other proceeds, and (b) whatever is received
upon the sale, exchange, collection or other disposition of Collateral or
proceeds, whether cash or non-cash. 
Cash proceeds includes, without limitation, moneys, checks and Deposit
Accounts.  Proceeds includes, without
limitation, any Account arising when the right to payment is earned under a
contract right, any insurance payable by reason of loss or damage to the
Collateral, and any return or unearned premium upon any cancellation of
insurance.  Except as expressly
authorized in this Agreement, the right of Agent and the Lenders to Proceeds
specifically set forth herein or indicated in any financing statement shall
never constitute an express or implied authorization on the part of Agent or
any Lender to a Company’s sale, exchange, collection or other disposition of
any or all of the Collateral.

 

“Real Property” shall
mean the real estate owned by a Credit Party, as set forth on Schedule 4
hereto, together with all improvements and buildings thereon and all
appurtenances, easements or other rights thereto belonging, and being defined
collectively as the “Property” in each of the Mortgages.

 

“Regularly Scheduled
Payment Date” shall mean the last day of each March, June, September and
December of each year.

 

“Related Expenses” shall
mean any and all reasonable out-of-pocket costs, liabilities and expenses
(including, without limitation, losses, damages, penalties, claims, actions,
attorneys’ fees, legal expenses, judgments, suits and disbursements)
(a) incurred by Agent, or imposed upon or asserted against Agent or any
Lender in any attempt by Agent and the Lenders to (i) obtain, preserve,
perfect or enforce any Loan Document or any security interest evidenced by

 

19

 

any Loan Document;
(ii) obtain payment, performance or observance of any and all of the
Obligations; or (iii) maintain, insure, audit, collect, preserve,
repossess or dispose of any of the collateral securing the Obligations or any
part thereof, including, without limitation, costs and expenses for appraisals,
assessments and audits of any Company or any such collateral; or
(b) incidental or related to (a) above, including, without
limitation, interest thereupon from the date incurred, imposed or asserted
until paid at the Default Rate.

 

“Related Writing” shall
mean each Loan Document and any other assignment, mortgage, security agreement,
guaranty agreement, subordination agreement, financial statement, audit report
or other writing furnished by any Credit Party, or any of its officers, to Agent
or the Lenders pursuant to or otherwise in connection with this Agreement.

 

“Reportable Event” shall
mean a reportable event as that term is defined in Title IV of ERISA,
except actions of general applicability by the Secretary of Labor under
Section 110 of such Act.

 

“Request for Extension”
shall mean a notice, substantially in the form of the attached Exhibit G.

 

“Required Lenders” shall
mean the holders of at least fifty-one percent (51%) of the sum of (a) the
principal outstanding under the Term Notes, and (b) (i) during the Commitment
Period, the Revolving Amount, or (ii) after the Commitment Period, the
aggregate amount outstanding under all of the Revolving Credit Notes (other
than the Swing Line Note) and the Letter of Credit Exposure and the Swing Line
Exposure; provided, however, that, if there shall be two or more Lenders,
Required Lenders shall constitute at least two Lenders.

 

“Requirement
of Law” shall mean, as to any Person, any law, treaty, rule or regulation or
determination or policy statement or interpretation of an arbitrator or a court
or other Governmental Authority, in each case applicable to or binding upon
such Person or any of its property.

 

“Reserve Percentage”
shall mean for any day that percentage (expressed as a decimal) that is in
effect on such day, as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum reserve
requirement (including, without limitation, all basic, supplemental, marginal
and other reserves and taking into account any transitional adjustments or
other scheduled changes in reserve requirements) for a member bank of the
Federal Reserve System in Cleveland, Ohio, in respect of Eurocurrency
Liabilities.  The Eurodollar Rate shall
be adjusted automatically on and as of the effective date of any change in the
Reserve Percentage.

 

“Restricted Payment”
shall mean, with respect to any Company, (a) any amount paid in redemption
(including any mandatory redemption or optional redemption), retirement,
repurchase, direct or indirect, of the Convertible Subordinated Notes or any
other Subordinated Indebtedness; or (b) the exercise by such Company of any
right of defeasance or covenant defeasance or similar right with respect to the
Convertible Subordinated Notes or any other Subordinated Indebtedness.

 

20

 

“Revolving Amount” shall
mean the Closing Revolving Amount, as such amount may be increased up to the
Maximum Revolving Amount pursuant to Section 2.10(b) hereof, or decreased
pursuant to Section 2.10(a) hereof.

 

“Revolving Credit
Availability” shall mean, at any time, the amount equal to the Revolving Credit
Commitment minus the Revolving Credit Exposure.

 

“Revolving Credit
Commitment” shall mean the obligation hereunder, during the Commitment Period,
of (a) each Revolving Lender to make Revolving Loans, (b) the
Fronting Lender to issue and each Revolving Lender to participate in Letters of
Credit pursuant to the Letter of Credit Commitment, and (c) the Swing Line
Lender to make and each Revolving Lender to participate in Swing Loans pursuant
to the Swing Line Commitment; up to an aggregate principal amount outstanding
at any time equal to the Revolving Amount.

 

“Revolving Credit
Exposure” shall mean, at any time, the sum of (a) the aggregate principal
amount of all Revolving Loans outstanding, (b) the Swing Line Exposure,
and (c) the Letter of Credit Exposure.

 

“Revolving Credit Note”
shall mean a Revolving Credit Note executed and delivered pursuant to
Section 2.5(a) hereof.

 

“Revolving Lender” shall
mean a Lender with a percentage of the Revolving Credit Commitment as set
forth on Schedule 1 hereto.

 

“Revolving Loan” shall
mean a Loan granted to Borrower by the Revolving Lenders in accordance with
Section 2.2 hereof.

 

“SEC” shall mean the
United States Securities and Exchange Commission, or any governmental body or
agency succeeding to any of its principle functions.

 

“Secured Obligations”
shall mean, collectively, (a) the Obligations, and (b) all obligations and
liabilities now existing or hereafter incurred by a Company under a Hedge
Agreement with a Lender.

 

“Security Agreement”
shall mean each Security Agreement, executed and delivered by a Guarantor of
Payment in favor of Agent, for the benefit of the Lenders, dated as of the
Closing Date, and any other Security Agreement executed on or after the Closing
Date, as the same may from time to time be amended, restated or otherwise
modified.

 

“Security Documents”
shall mean each Security Agreement, each Pledge Agreement, each Intellectual
Property Collateral Assignment Agreement, each Mortgage, each Control
Agreement, each U.C.C. Financing Statement or similar filing as to a
jurisdiction located outside of the United States of America filed in
connection herewith or perfecting any interest created in any of the foregoing
documents, and any other document pursuant to which any Lien is granted by a
Company to Agent, for the benefit of the Lenders, as security for the Secured
Obligations,

 

21

 

or any part thereof, as
any of the foregoing may from time to time be amended, restated or otherwise
modified or replaced.

 

“Senior Leverage Ratio”
shall mean, at any time, as determined on a Consolidated basis and in
accordance with GAAP, the ratio of (a) Consolidated Senior Funded Indebtedness
(for the most recently completed fiscal quarter of Borrower) to (b)
Consolidated EBITDA (for the most recently completed four fiscal quarters of
Borrower).

 

“Specific Commitment”
shall mean the Revolving Credit Commitment or the Term Loan Commitment.

 

“Standard &
Poor’s” shall mean Standard & Poor’s Ratings Group, a division of
McGraw-Hill, Inc., or any successor to such company.

 

“Subordinated” shall
mean, as applied to Indebtedness, Indebtedness that shall have been
subordinated (by written terms or written agreement being, in either case, in
form and substance reasonably satisfactory to Agent and the Required Lenders)
in favor of the prior payment in full of the Obligations (other than contingent
indemnity obligations).

 

“Subsidiary” of a Company
shall mean (a) a corporation more than fifty percent (50%) of the Voting
Power of which is owned, directly or indirectly, by such Company or by one or
more other subsidiaries of such Company or by such Company and one or more
subsidiaries of such Company, (b) a partnership or limited liability
company of which such Company, one or more other subsidiaries of such Company
or such Company and one or more subsidiaries of such Company, directly or
indirectly, is a general partner or managing member, as the case may be, or
otherwise has an ownership interest greater than fifty percent (50%) of all of
the ownership interests in such partnership or limited liability company, or
(c) any other Person (other than a corporation, partnership or limited
liability company) in which such Company, one or more other subsidiaries of
such Company or such Company and one or more subsidiaries of such Company,
directly or indirectly, has at least a majority interest in the Voting Power or
the power to elect or direct the election of a majority of directors or other
governing body of such Person.

 

“Swing Line Commitment”
shall mean the commitment of the Swing Line Lender to make Swing Loans to
Borrower up to the aggregate amount at any time outstanding of Five Million
Dollars ($5,000,000).

 

“Swing Line Exposure”
shall mean, at any time, the aggregate principal amount of all Swing Loans
outstanding.

 

“Swing Line Lender” shall
mean KeyBank National Association, as holder of the Swing Line Commitment.

 

“Swing Line Note” shall
mean the Swing Line Note executed and delivered pursuant to Section 2.5(b)
hereof.

 

22

 

“Swing Loan” shall mean a
loan that shall be denominated in Dollars granted to Borrower by the Swing Line
Lender under the Swing Line Commitment.

 

“Swing Loan Maturity
Date” shall mean, with respect to any Swing Loan, the earlier of
(a) thirty (30) days after the date such Swing Loan is made, or
(b) the last day of the Commitment Period.

 

“Taxes” shall mean any
and all present or future taxes of any kind, including but not limited to,
levies, imposts, duties, charges, fees, deductions or withholdings now or
hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority
(together with any interest, penalties, additions to taxes or similar
liabilities with respect thereto) other than Excluded Taxes.

 

“Term Lender” shall mean
a Lender with a percentage of the Term Loan Commitment as set forth
on Schedule 1 hereto.

 

“Term Loan” shall mean
the Loan granted to Borrower by the Term Lenders in accordance with
Section 2.3 hereof.

 

“Term Loan Commitment”
shall mean the obligation hereunder of the Term Lenders to make a Term Loan in
the original principal amount of Twenty-Five Million Dollars ($25,000,000),
with each Term Lender’s obligation to participate therein being in the amount
set forth opposite such Term Lender’s name under the column headed “Term Loan
Commitment Amount” as set forth on Schedule 1 hereto.

 

“Term Note” shall mean a
Term Note executed and delivered pursuant to Section 2.5(c) hereof.

 

“Total Commitment Amount”
shall mean the Closing Commitment Amount, as such amount may be increased up to
the Maximum Commitment Amount pursuant to Section 2.10(b) hereof, or
decreased pursuant to Section 2.10(a) hereof.

 

“U.C.C.” shall mean the
Uniform Commercial Code, as in effect from time to time in Ohio.

 

“U.C.C. Financing
Statement” shall mean a financing statement filed or to be filed in accordance
with the Uniform Commercial Code, as in effect from time to time, in the
relevant state or states.

 

“Voting Power” shall
mean, with respect to any Person, the exclusive ability to control, through the
ownership of shares of capital stock, partnership interests, membership interests
or otherwise, the election of members of the board of directors or other
similar governing body of such Person. 
The holding of a designated percentage of Voting Power of a Person means
the ownership of shares of capital stock, partnership interests, membership
interests or other interests of such Person sufficient to control exclusively
the election of that percentage of the members of the board of directors or
similar governing body of such Person.

 

23

 

“Welfare Plan” shall mean
an ERISA Plan that is a “welfare plan” within the meaning of ERISA
Section 3(l).

 

“Wholly-Owned Subsidiary”
shall mean, with respect to any Person, any corporation, limited liability
company or other entity, all of the securities or other ownership interest of
which 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.

 

Section 1.2.  Accounting Terms.  Any accounting term not specifically defined
in this Article I shall have the meaning ascribed thereto by GAAP.  In the event that any “Accounting Change”
(as defined below) shall occur and such change results in a change in the
method of calculation of financial covenants, standards or terms in this
Agreement, then Borrower, Agent and the Required Lenders agree to enter into
negotiations in order to amend such provisions of this Agreement so as to
equitably reflect such Accounting Changes with the desired result that the
criteria for evaluating Borrower’s financial condition shall be the same after
such Accounting Changes as if such Accounting Changes had not been made.  Until such time as such an amendment shall
have been executed and delivered by Borrower, Agent and the Required Lenders,
all financial covenants, standards and terms in this Agreement shall continue
to be calculated and construed as if such Accounting Changes had not
occurred.  “Accounting Changes” refers
to changes in accounting principles required by the promulgation of any rule,
regulation, pronouncement or opinion by the Financial Accounting Standards
Board of the American Institute of Certified Public Accountants or, if
applicable, the SEC (or successors thereto or agencies with similar functions).

 

Section 1.3.  Terms Generally.  The foregoing definitions shall be
applicable to the singular and plurals of the foregoing defined terms.  Unless otherwise defined in this
Article I, terms that are defined in the U.C.C. are used herein as so
defined.

 

ARTICLE II.  AMOUNT AND TERMS OF CREDIT

 

Section 2.1.  Amount and Nature of Credit.

 

(a)                                  Subject
to the terms and conditions of this Agreement, the Lenders, during the
Commitment Period and to the extent hereinafter provided, shall make Loans to
Borrower, participate in Swing Loans made by the Swing Line Lender to Borrower,
and issue or participate in Letters of Credit at the request of Borrower, in
such aggregate amount as Borrower shall request pursuant to the Commitment;
provided, however, that in no event shall the aggregate principal amount of all
Loans and Letters of Credit outstanding under this Agreement be in excess of
the Total Commitment Amount.

 

(b)                                 Each
Lender, for itself and not one for any other, agrees to make Loans, participate
in Swing Loans, and issue or participate in Letters of Credit, during the
Commitment Period, on such basis that, immediately after the completion of any
borrowing by Borrower or the issuance of a Letter of Credit:

 

24

 

(i)                                     the
aggregate outstanding principal amount of Loans made by such Lender (other than
Swing Loans made by the Swing Line Lender), when combined with such Lender’s
pro rata share, if any, of the Letter of Credit Exposure and the Swing Line
Exposure, shall not be in excess of the Maximum Amount for such Lender; and

 

(ii)                                  with
respect to each Specific Commitment, the aggregate outstanding principal amount
of Loans (other than Swing Loans) made by such Lender with respect to such
Specific Commitment shall represent that percentage of the aggregate principal
amount then outstanding on all Loans (other than Swing Loans) within such
Specific Commitment that shall be such Lender’s Applicable Commitment
Percentage.

 

Within each Specific
Commitment, each borrowing (other than Swing Loans) from the Lenders hereunder
shall be made pro rata according to the respective Applicable Commitment
Percentages of the Lenders.

 

(c)                                  The
Loans may be made as Revolving Loans as described in Section 2.2(a)
hereof, as a Term Loan as described in Section 2.3 hereof, and as Swing
Loans as described in Section 2.2(c) hereof, and Letters of Credit may be
issued in accordance with Section 2.2(b) hereof.

 

Section 2.2.  Revolving Credit.

 

(a)                                  Revolving
Loans.  Subject to the terms and
conditions of this Agreement, during the Commitment Period, the Revolving
Lenders shall make a Revolving Loan or Revolving Loans to Borrower in such
amount or amounts as Borrower may from time to time request, but not exceeding
in aggregate principal amount at any time outstanding hereunder the Revolving
Credit Commitment, when such Revolving Loans are combined with the Letter of
Credit Exposure and the Swing Line Exposure. 
Borrower shall have the option, subject to the terms and conditions set
forth herein, to borrow Revolving Loans, maturing on the last day of the
Commitment Period, by means of any combination of Base Rate Loans or Eurodollar
Loans.  Subject to the provisions of
this Agreement, Borrower shall be entitled under this
Section 2.2(a) to borrow funds, repay the same in whole or in part
and re-borrow hereunder at any time and from time to time during the Commitment
Period.

 

(b)                                 Letters
of Credit.

 

(i)                                     Generally.  Subject to the terms and conditions of this
Agreement, during the Commitment Period, the Fronting Lender shall, in its own
name, on behalf of the Revolving Lenders, issue such Letters of Credit for the
account of a Credit Party, as Borrower may from time to time request.  Borrower shall not request any Letter of
Credit (and the Fronting Lender shall not be obligated to issue any Letter of
Credit) if, after giving effect thereto, (A) the Letter of Credit Exposure
would exceed the Letter of Credit Commitment or (B) the Revolving Credit
Exposure would exceed the Revolving Credit Commitment.  The issuance of each Letter of Credit shall
confer upon each Revolving Lender the benefits and liabilities of a
participation consisting of an undivided pro rata

 

25

 

 interest in the Letter of Credit to the extent
of such Revolving Lender’s Applicable Commitment Percentage.

 

(ii)                                  Request
for Letter of Credit.  Each request
for a Letter of Credit shall be delivered to Agent (and to the Fronting Lender,
if the Fronting Lender is a Lender other than Agent) by an Authorized Officer
not later than 11:00 A.M. (Eastern time) three Business Days prior to the day
upon which the Letter of Credit is to be issued.  Each such request shall be in a form reasonably acceptable to
Agent (and to the Fronting Lender, if the Fronting Lender is a Lender other
than Agent) and shall specify the face amount thereof, the account party, the
beneficiary, the intended date of issuance, the expiry date thereof, and the
nature of the transaction to be supported thereby.  Concurrently with each such request, Borrower, and any Credit
Party for whose account the Letter of Credit is to be issued, shall execute and
deliver to the Fronting Lender an appropriate application and agreement, being
in the standard form of the Fronting Lender for such letters of credit, as
amended to conform to the provisions of this Agreement if required by
Agent.  Agent shall give the Fronting
Lender and each Revolving Lender notice of each such request for a Letter of
Credit.

 

(iii)                               Letter
of Credit Fees.  With respect to
each Letter of Credit and the drafts thereunder, if any, whether issued for the
account of Borrower or any other Credit Party, Borrower agrees to (A) pay to
Agent, for the pro rata benefit of the Revolving Lenders, a non-refundable
commission based upon the face amount of such Letter of Credit, which shall be
paid quarterly in arrears, on each Regularly Scheduled Payment Date, at the
rate per annum of the Applicable Margin for Eurodollar Loans (in effect on the
date such payment is to be made) multiplied by the face amount of such Letter
of Credit; (B) pay to Agent, for the sole benefit of the Fronting Lender, an
additional Letter of Credit fee, which shall be paid on each date that such
Letter of Credit shall be issued, amended or renewed at the rate of one-eighth
percent (1/8%) of the face amount of such Letter of Credit; and (C) pay to
Agent, for the sole benefit of the Fronting Lender, such other issuance,
amendment, negotiation, draw, acceptance, telex, courier, postage and similar
transactional fees as are generally charged by the Fronting Lender under its
fee schedule as in effect from time to time.

 

(iv)                              Refunding
of Letters of Credit with Revolving Loans. 
Whenever a Letter of Credit shall be drawn, Borrower shall promptly
reimburse the Fronting Lender for the amount drawn.  In the event that the amount drawn shall not have been reimbursed
by Borrower on the date of the drawing of such Letter of Credit, at the sole
option of Agent (and the Fronting Lender, if the Fronting Lender is a Lender
other than Agent), Borrower shall be deemed to have requested a Revolving Loan,
subject to the provisions of Section 2.2 and 2.6 hereof (other than the
requirement set forth in Section 2.6(d) hereof), in the amount drawn.  Such Revolving Loan shall be evidenced by
the Revolving Credit Notes.  Each
Revolving Lender agrees to make a Revolving Loan on the date of such notice,
subject to no conditions precedent whatsoever. 
Each Revolving Lender acknowledges and agrees that its obligation to
make a Revolving Loan pursuant to Section 2.2(a) hereof when required by
this Section 2.2(b) shall be absolute and unconditional and shall not be
affected by any circumstance whatsoever, including,

 

26

 

without limitation, the
occurrence and continuance of a Default or Event of Default, and that its
payment to Agent, for the account of the Fronting Lender, of the proceeds of
such Revolving Loan shall be made without any offset, abatement, recoupment,
counterclaim, withholding or reduction whatsoever and whether or not the
Revolving Credit Commitment shall have been reduced or terminated.  Borrower irrevocably authorizes and
instructs Agent to apply the proceeds of any borrowing pursuant to this
subsection (iv) to reimburse, in full, the Fronting Lender for the amount
drawn on such Letter of Credit.  Each
such Revolving Loan shall be deemed to be a Base Rate Loan unless otherwise
requested by and available to Borrower hereunder.  Each Revolving Lender is hereby authorized to record on its
records relating to its Revolving Credit Note such Revolving Lender’s pro rata
share of the amounts paid and not reimbursed on the Letters of Credit.

 

(v)                                 Participation
in Letters of Credit.  If, for any
reason, Agent (and the Fronting Lender, if the Fronting Lender is a Lender
other than Agent) shall be unable to or, in the opinion of Agent, it shall be
impracticable to, convert any Letter of Credit to a Revolving Loan pursuant to
the preceding subsection, Agent (and the Fronting Lender, if the Fronting
Lender is a Lender other than Agent) shall have the right to request that each
Revolving Lender purchase a participation in the amount due with respect to
such Letter of Credit, and Agent shall promptly notify each Revolving Lender
thereof (by facsimile or telephone, confirmed in writing).  Upon such notice, but without further
action, the Fronting Lender hereby agrees to grant to each Revolving Lender,
and each Revolving Lender hereby agrees to acquire from the Fronting Lender, an
undivided participation interest in the amount due with respect to such Letter
of Credit in an amount equal to such Revolving Lender’s Applicable Commitment
Percentage of the principal amount due with respect to such Letter of
Credit.  In consideration and in
furtherance of the foregoing, each Revolving Lender hereby absolutely and
unconditionally agrees, upon receipt of notice as provided above, to pay to
Agent, for the account of the Fronting Lender, such Revolving Lender’s ratable
share of the amount due with respect to such Letter of Credit (determined in
accordance with such Revolving Lender’s Applicable Commitment Percentage).  Each Revolving Lender acknowledges and
agrees that its obligation to acquire participations in the amount due under
any Letter of Credit that is drawn but not reimbursed by Borrower pursuant to
this subsection (v) shall be absolute and unconditional and shall not be
affected by any circumstance whatsoever, including, without limitation, the
occurrence and continuance of a Default or Event of Default, and that each such
payment shall be made without any offset, abatement, recoupment, counterclaim,
withholding or reduction whatsoever and whether or not the Revolving Credit
Commitment shall have been reduced or terminated.  Each Revolving Lender shall comply with its obligation under this
subsection (v) by wire transfer of immediately available funds in the same
manner as provided in Section 2.6 hereof with respect to Revolving
Loans.  Each Revolving Lender is hereby
authorized to record on its records such Revolving Lender’s pro rata share of
the amounts paid and not reimbursed on the Letters of Credit.  In
addition, each Lender agrees to risk participate in the Existing Letters
of Credit as provided in subsection (vi) below.

 

27

 

(vi)                              Existing
Letters of Credit.  Schedule 2.2
hereto contains a description of all letters of credit outstanding on, and to
continue in effect after, the Closing Date. 
Each such letter of credit issued by a bank that is or becomes a Lender
under this Agreement on the Closing Date (each, an “Existing Letter of Credit”)
shall constitute a “Letter of Credit” for all purposes of this Agreement,
issued, for purposes of Section 2.2(a)(v) hereof, on the Closing Date.  Borrower, Agent and the applicable Lenders
hereby agree that, from and after such date, the terms of this Agreement shall
apply to the Existing Letters of Credit, superseding any other agreement
theretofore applicable to them to the extent inconsistent with the terms
hereof.  Notwithstanding anything to the
contrary in any reimbursement agreement applicable to the Existing Letters of
Credit, the fees payable in connection with each Existing Letter of Credit to
be shared with the Lenders shall accrue from the Closing Date at the rate
provided in this Section 2.2.

 

(c)                                  Swing
Loans.

 

(i)                                     Generally.  Subject to the terms and conditions of this
Agreement, during the Commitment Period, the Swing Line Lender shall make a
Swing Loan or Swing Loans to Borrower in such amount or amounts as Borrower,
through an Authorized Officer, may from time to time request; provided that
Borrower shall not request any Swing Loan if, after giving effect thereto, (A)
the Revolving Credit Exposure would exceed the Revolving Credit Commitment, or
(B) the Swing Line Exposure would exceed the Swing Line Commitment.  Each Swing Loan shall be due and payable on
the Swing Loan Maturity Date applicable thereto.

 

(ii)                                  Refunding
of Swing Loans.  If the Swing Line
Lender so elects, by giving notice to Borrower and the Revolving Lenders,
Borrower agrees that the Swing Line Lender shall have the right, in its sole
discretion, to require that any Swing Loan be refinanced as a Revolving
Loan.  Such Revolving Loan shall be a
Base Rate Loan unless otherwise requested by and available to Borrower
hereunder.  Upon receipt of such notice
by Borrower and the Revolving Lenders, Borrower shall be deemed, on such day,
to have requested a Revolving Loan in the principal amount of the Swing Loan in
accordance with subsection (a) of this Section 2.2 and 2.6 hereof
(other than the requirement set forth in Section 2.6(d) hereof).  Such Revolving Loan shall be evidenced by
the Revolving Credit Notes.  Each
Revolving Lender agrees to make a Revolving Loan on the date of such notice,
subject to no conditions precedent whatsoever. 
Each Revolving Lender acknowledges and agrees that such Revolving
Lender’s obligation to make a Revolving Loan pursuant to subsection (a) of
this Section 2.2 hereof when required by this subsection (ii) is
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including, without limitation, the occurrence and continuance of a
Default or Event of Default, and that its payment to Agent, for the account of
the Swing Line Lender, of the proceeds of such Revolving Loan shall be made
without any offset, abatement, recoupment, counterclaim, withholding or
reduction whatsoever and whether or not the Revolving Credit Commitment shall
have been reduced or terminated. 
Borrower irrevocably authorizes and instructs Agent to apply the
proceeds of any borrowing pursuant to this subsection (ii) to repay
in full such Swing Loan.  Each

 

28

 

Revolving
Lender is hereby authorized to record on its records such Revolving Lender’s
pro rata share of the amounts paid to refund such Swing Loan.

 

(iii)                               Participation
in Swing Loans.  If, for any reason,
Agent is unable to or, in the opinion of Agent, it is impracticable to, convert
any Swing Loan to a Revolving Loan pursuant to the preceding
subsection (ii), then on any day that a Swing Loan is outstanding (whether
before or after the maturity thereof), Agent shall have the right to request
that each Revolving Lender purchase a participation in such Swing Loan, and
Agent shall promptly notify each Revolving Lender thereof (by facsimile or
telephone, confirmed in writing).  Upon
such notice, but without further action, the Swing Line Lender hereby agrees to
grant to each Revolving Lender, and each Revolving Lender hereby agrees to
acquire from the Swing Line Lender, an undivided participation interest in such
Swing Loan in an amount equal to such Revolving Lender’s Applicable Commitment
Percentage of the principal amount of such Swing Loan.  In consideration and in furtherance of the
foregoing, each Revolving Lender hereby absolutely and unconditionally agrees,
upon receipt of notice as provided above, to pay to Agent, for the benefit of
the Swing Line Lender, such Revolving Lender’s ratable share of such Swing Loan
(determined in accordance with such Revolving Lender’s Applicable Commitment
Percentage).  Each Revolving Lender
acknowledges and agrees that its obligation to acquire participations in Swing
Loans pursuant to this subsection (iii) is absolute and unconditional
and shall not be affected by any circumstance whatsoever, including, without
limitation, the occurrence and continuance of a Default or an Event of Default,
and that each such payment shall be made without any offset, abatement,
recoupment, counterclaim, withholding or reduction whatsoever and whether or
not the Revolving Credit Commitment shall have been reduced or terminated.  Each Revolving Lender shall comply with its
obligation under this subsection (iii) by wire transfer of immediately
available funds, in the same manner as provided in Section 2.6 hereof with
respect to Revolving Loans to be made by such Revolving Lender.

 

Section 2.3.  Term Loan.

 

Subject to the terms and
conditions of this Agreement, the Term Lenders shall make the Term Loan to
Borrower on the Closing Date, in the amount of the Term Loan Commitment.  The Term Loan shall be payable in fifteen
(15) consecutive quarter annual installments of One Million Five Hundred
Sixty-Two Thousand Five Hundred Dollars ($1,562,500) each, commencing September 30,
2004, and continuing on each Regularly Scheduled Payment Date thereafter, with
the balance thereof payable in full on June 30, 2008.  Borrower shall notify Agent, in accordance
with the notice provisions of Section 2.6 hereof, whether the Term Loan
will be a Base Rate Loan or Eurodollar Loans. 
The Term Loan may be a mixture of a Base Rate Loan and Eurodollar Loans.

 

29

 

Section 2.4.  Interest.

 

(a)                                  Revolving
Loans.

 

(i)                                     Base
Rate Loan.  Borrower shall pay
interest on the unpaid principal amount of a Base Rate Loan outstanding from
time to time from the date thereof until paid at the Derived Base Rate from
time to time in effect.  Interest on
such Base Rate Loan shall be payable, commencing September 30, 2004, and
on each Regularly Scheduled Payment Date thereafter and at the maturity
thereof.

 

(ii)                                  Eurodollar
Loans.  Borrower shall pay interest
on the unpaid principal amount of each Eurodollar Loan outstanding from time to
time, fixed in advance on the first day of the Interest Period applicable
thereto through the last day of the Interest Period applicable thereto (but
subject to changes in the Applicable Margin), at the Derived Eurodollar
Rate.  Interest on such Eurodollar Loan
shall be payable on each Interest Adjustment Date with respect to an Interest
Period (provided that if an Interest Period shall exceed three months, the
interest must be paid every three months, commencing three months from the
beginning of such Interest Period).

 

(b)                                 Swing
Loans.  Borrower shall pay interest
to Agent, for the sole benefit of the Swing Line Lender (and any Revolving
Lender that shall have purchased a participation in such Swing Loan), on the
unpaid principal amount of each Swing Loan outstanding from time to time from
the date thereof until paid at the Derived Base Rate.  Interest on each Swing Loan shall be payable on the Swing Loan
Maturity Date applicable thereto. Each Swing Loan shall bear interest for a
minimum of one day.

 

(c)                                  Term
Loan.

 

(i)                                     Base
Rate Loan.  With respect to any
portion of the Term Loan that shall be a Base Rate Loan, Borrower shall pay
interest on the unpaid principal amount thereof outstanding from time to time
from the date thereof until paid, commencing September 30, 2004, and
continuing on each Regularly Scheduled Payment Date thereafter and at the
maturity thereof, at the Derived Base Rate from time to time in effect.

 

(ii)                                  Eurodollar
Loans.  With respect to any portion
of the Term Loan that shall be a Eurodollar Loan, Borrower shall pay interest
on the unpaid principal amount of such Eurodollar Loan outstanding from time to
time, fixed in advance on the first day of the Interest Period applicable
thereto through the last day of the Interest Period applicable thereto (but
subject to changes in the Applicable Margin), at the Derived Eurodollar
Rate.  Interest on such Eurodollar Loan
shall be payable on each Interest Adjustment Date with respect to an Interest
Period (provided that if an Interest Period shall exceed three months, the interest
must be paid every three months, commencing three months from the beginning of
such Interest Period).

 

(d)                                 Default
Rate.  Anything herein to the
contrary notwithstanding, if an Event of Default pursuant to Section 8.1
or 8.11 hereof shall occur and be continuing, upon the election of the Required
Lenders (i) the principal of each Loan and the unpaid interest thereon
shall bear interest, until paid, at the Default Rate, (ii) the fee for the
aggregate undrawn face amount of all issued and outstanding Letters of Credit
shall be increased by two percent (2%) in excess of the rate otherwise
applicable thereto, and (iii) in the case of any other amount due from
Borrower

 

30

 

hereunder or under any
other Loan Document, such amount shall bear interest at the Default Rate;
provided that, during an Event of Default under Section 8.11 hereof, the
applicable Default Rate shall apply without any election or action on the part
of Agent or any Lender.

 

(e)                                  Limitation
on Interest.  In no event shall the
rate of interest hereunder exceed the maximum rate allowable by law.    Notwithstanding anything to the contrary
contained in any Loan Document, the interest paid or agreed to be paid under
the Loan Documents shall not exceed the maximum rate of non-usurious interest
permitted by applicable Law (the “Maximum Rate”).  If Agent or any Lender shall receive interest in an amount that
exceeds the Maximum Rate, the excess interest shall be applied to the principal
of the Loans or, if it exceeds such unpaid principal, refunded to
Borrower.  In determining whether the
interest contracted for, charged, or received by Agent or a Lender exceeds the
Maximum Rate, such Person may, to the extent permitted by applicable law, (i)
characterize any payment that is not principal as an expense, fee, or premium
rather than interest, (ii) exclude voluntary prepayments and the effects
thereof, and (iii) amortize, prorate, allocate, and spread in equal or unequal
parts the total amount of interest throughout the contemplated term of the
Obligations.

 

Section 2.5.  Evidence of Indebtedness.

 

(a)                                  Revolving
Loans.  The obligation of Borrower
to repay the Revolving Loans made by each Revolving Lender and to pay interest
thereon shall be evidenced by a Revolving Credit Note of Borrower in the form
of the attached Exhibit A, payable to the order of such Revolving
Lender in the principal amount of its Applicable Commitment Percentage of the
Revolving Credit Commitment, or, if less, the aggregate unpaid principal amount
of Revolving Loans made by such Revolving Lender.

 

(b)                                 Swing
Loan.  The obligation of Borrower to
repay the Swing Loans and to pay interest thereon shall be evidenced by a Swing
Line Note of Borrower in the form of the attached Exhibit B, and payable
to the order of the Swing Line Lender in the principal amount of the Swing Line
Commitment, or, if less, the aggregate unpaid principal amount of Swing Loans
made by the Swing Line Lender.

 

(c)                                  Term
Loan.  The obligation of Borrower to
repay the portion of the Term Loan made by each Term Lender and to pay interest
thereon shall be evidenced by a Term Note of Borrower in the form of the
attached Exhibit C, payable to the order of such Term Lender in the
principal amount of its Commitment Percentage of the Term Loan.

 

Section 2.6.  Notice of Credit Event; Funding of Loans.

 

(a)                                  Notice
of Credit Event.  Borrower, through
an Authorized Officer, shall provide to Agent a Notice of Loan prior to
(i) 12:00 noon (Eastern time) on the proposed date of borrowing or
conversion of any Base Rate Loan, (ii) 12:00 noon (Eastern time) three
Business Days prior to the proposed date of borrowing, conversion or
continuation of any Eurodollar Loan, and (iii) 3:00 P.M. (Eastern time) on
the proposed date of borrowing of any Swing Loan.  Borrower shall comply with the notice provisions set forth in
Section 2.2(b) hereof with respect to Letters of Credit.

 

31

 

(b)                                 Funding
of Loans.  Agent shall notify each
Revolving Lender of the date, amount and Interest Period (if applicable)
promptly upon the receipt of a Notice of Loan, and, in any event, by 2:00 P.M.
(Eastern time) on the date such notice is received.  On the date that the Credit Event set forth in such notice is to
occur, each such Lender shall provide to Agent, not later than 3:00 P.M.
(Eastern time), the amount in Dollars in federal or other immediately available
funds, required of it.  If Agent shall
elect to advance the proceeds of such Loan prior to receiving funds from such
Revolving Lender, Agent shall have the right, upon prior notice to Borrower, to
debit any account of Borrower or otherwise receive such amount from Borrower,
promptly after demand, in the event that such Revolving Lender shall fail to
reimburse Agent in accordance with this subsection.  Agent shall also have the right to receive interest from such
Revolving Lender at the Federal Funds Effective Rate in the event that such
Revolving Lender shall fail to provide its portion of the Loan on the date
requested and Agent shall elect to provide such funds.

 

(c)                                  Conversion
of Loans.  At the request of
Borrower to Agent, subject to the notice and other provisions of this
Section 2.6, the appropriate Lenders shall convert a Base Rate Loan to one
or more Eurodollar Loans at any time and shall convert a Eurodollar Loan to a
Base Rate Loan on any Interest Adjustment Date applicable thereto.  Swing Loans may be converted by the Swing
Line Lender to Revolving Loans in accordance with
Section 2.2(c)(ii) hereof.

 

(d)                                 Minimum
Amount.  Each request for:

 

(i)                                     a
Base Rate Loan shall be in an amount of not less than Two Million Dollars
($2,000,000), increased by increments of One Million Dollars ($1,000,000);

 

(ii)                                  a
Eurodollar Loan shall be in an amount of not less than Two Million Dollars
($2,000,000), increased by increments of One Million Dollars ($1,000,000); and

 

(iii)                               a
Swing Loan shall be in an amount not less than One Hundred Thousand Dollars
($100,000).

 

(e)                                  Interest
Periods.  At no time shall Borrower
request that Eurodollar Loans be outstanding for more than eight different
Interest Periods.

 

Section 2.7.  Payment on Loans and Other Obligations.

 

(a)                                  Payments
Generally.  Each payment made
hereunder by Borrower shall be made without any offset, abatement, recoupment, counterclaim,
withholding or reduction whatsoever.

 

(b)                                 Payments
from Borrower.  All payments
(including prepayments) to Agent of the principal of or interest on any Loan or
other payment, including but not limited to principal, interest, fees or any
other amount owed by Borrower under this Agreement, shall be made in
Dollars.  All payments described in this
subsection (b) shall be remitted to Agent, at the address of Agent for
notices referred to in Section 11.4 hereof, for the account of the
Revolving Lenders (or the Fronting Lender or the Swing Line Lender, as
appropriate) not later than 1:00 P.M.

 

32

 

(Eastern time) on the due
date thereof in immediately available funds. 
Any such payments received by Agent after 1:00 P.M. (Eastern time) shall
be deemed to have been made and received on the next Business Day.

 

(c)                                  Payments
to Lenders.  Upon Agent’s receipt of
payments hereunder, Agent shall immediately distribute to the appropriate
Lenders (except with respect to Swing Loans, which shall be paid to the Swing
Line Lender or, with respect to Letters of Credit, certain of which payments
shall only be paid to the Fronting Lender) their respective ratable shares, if
any, of the amount of principal, interest, and commitment and other fees
received by Agent for the account of such Lender.  Payments received by Agent shall be delivered to the Lenders in
immediately available funds.  Each Lender,
as appropriate, shall record any principal, interest or other payment, the
principal amounts of Base Rate Loans, Eurodollar Loans, Swing Loans and Letters
of Credit, all prepayments and the applicable dates, including Interest
Periods, with respect to the Loans made, and payments received by such Lender,
by such method as such Lender may generally employ; provided, however, that
failure to make any such entry shall in no way detract from the obligations of
Borrower under this Agreement or any Note. 
The aggregate unpaid amount of Loans, types of Loans, Interest Periods
and similar information with respect to the Loans and Letters of Credit set
forth on the records of Agent shall be rebuttably presumptive evidence with
respect to such information, including the amounts of principal and interest
owing to each Lender.

 

(d)                                 Timing
of Payments.  Whenever any payment
to be made hereunder, including, without limitation, any payment to be made on
any Loan, shall be stated to be due on a day that is not a Business Day, such
payment shall be made on the next Business Day and such extension of time shall
in each case be included in the computation of the interest payable on such
Loan; provided, however, that, with respect to any Eurodollar Loan, if the next
Business Day shall fall in the succeeding calendar month, such payment shall be
made on the preceding Business Day and the relevant Interest Period shall be
adjusted accordingly.

 

Section 2.8.  Prepayment.

 

(a)                                  Right
to Prepay.  Borrower shall have the
right at any time or from time to time to prepay, on a pro rata basis for all
of the appropriate Lenders (except with respect to Swing Loans, which shall be
paid to the Swing Line Lender), all or any part of the principal amount of the
Loans, as designated by Borrower.  Such
payment shall include interest accrued on the amount so prepaid to the date of
such prepayment and any amount payable under Article III hereof with
respect to the amount being prepaid. Prepayments of Base Rate Loans shall be
without any premium or penalty, other than any prepayment fees, penalties or
other charges that may be contained in any Hedge Agreement.  Each prepayment of the Term Loan shall be
applied to the principal installments thereof on a pro rata basis among the
remaining principal installments.

 

(b)                                 Notice
of Prepayment.  Borrower shall give
Agent notice of prepayment of a Base Rate Loan or Swing Loan by not later than
11:00 A.M. (Eastern time) on the Business Day on which such prepayment is to be
made and written notice of the prepayment of any Eurodollar

 

33

 

Loan not later than 1:00
P.M. (Eastern time) three Business Days before the Business Day on which such
prepayment is to be made.

 

(c)                                  Minimum
Amount.  Each prepayment of a
Eurodollar Loan shall be in the principal amount of not less than Five Hundred
Thousand Dollars ($500,000), increased by increments of Two Hundred Fifty
Thousand Dollars ($250,000), or, with respect to a Swing Loan, the principal
balance of such Swing Loan, except in the case of a mandatory payment pursuant
to Section 2.12 or Article III hereof.

 

Section 2.9.  Commitment and Other Fees.

 

(a)                                  Commitment
Fee.  Borrower shall pay to Agent,
for the ratable account of the Revolving Lenders, as a consideration for the
Revolving Credit Commitment, a commitment fee from the Closing Date to and including
the last day of the Commitment Period, payable quarterly, at a rate per annum
equal to (i) the Applicable Commitment Fee Rate in effect on the payment
date, times (ii) (A) the average daily Revolving Amount in effect during such
quarter, minus (B) the average daily Revolving Credit Exposure (exclusive of
the Swing Line Exposure) during such quarter. 
The commitment fee shall be payable in arrears, on September 30,
2004 and on each Regularly Scheduled Payment Date thereafter, and on the last
day of the Commitment Period.

 

(b)                                 Agent
Fee.  Borrower shall pay to Agent,
for its sole benefit, the fees set forth in the Agent Fee Letter.

 

Section 2.10.  Modifications of Commitment.

 

(a)                                  Optional
Reduction of Commitment.  Borrower
may at any time and from time to time permanently reduce in whole or ratably in
part the Revolving Credit Commitment to an amount not less than the then
existing Revolving Credit Exposure, by giving Agent not fewer than three
Business Days’ written notice of such reduction, provided that any such partial
reduction shall be in an aggregate amount, for all of the Revolving Lenders, of
not less than Five Million Dollars ($5,000,000).  Agent shall promptly notify each Revolving Lender of the date of
each such reduction and such Revolving Lender’s proportionate share
thereof.  After each such reduction, the
commitment fees payable hereunder shall be calculated upon the Revolving Amount
as so reduced.  If Borrower reduces in
whole the Revolving Credit Commitment, on the effective date of such reduction
(Borrower having prepaid in full the unpaid principal balance, if any, of the
Loans, together with all interest and commitment and other fees accrued and
unpaid, and provided that no Letter of Credit Exposure or Swing Line Exposure
shall exist), all of the Notes shall be delivered to Agent marked “Canceled”
and Agent shall redeliver such Notes to Borrower.  Any partial reduction in the Revolving Amount shall be effective
during the remainder of the Commitment Period.

 

(b)                                 Increase
in Commitment.  At any time during
the Commitment Increase Period, Borrower may request that Agent increase the
Revolving Amount from the Closing Revolving Amount up to the Maximum Revolving
Amount by either (i) proportionally increasing, for one or more Revolving
Lenders, with their prior written consent, their respective Applicable

 

34

 

Commitment Percentage of
the Revolving Credit Commitment, or (ii) including one or more Additional
Lenders, each with a new commitment under the Revolving Credit Commitment, as a
party to this Agreement (collectively, the “Additional Commitment”).  During the Commitment Increase Period, the
Lenders agree that Agent shall permit one or more Additional Commitments upon
satisfaction of the following requirements: (A) each Additional Lender, if any,
shall execute an Additional Lender Assumption Agreement, (B) Agent shall
provide to Borrower and each Revolving Lender a revised Schedule 1
to this Agreement, including revised Applicable Commitment Percentages for each
of the Revolving Lenders with respect to the Revolving Credit Commitment
(revised so that each Revolving Lender will have a new Applicable Commitment
Percentage for the Revolving Credit Commitment), at least three Business Days
prior to the date of the effectiveness of such Additional Commitments (each an
“Additional Lender Assumption Effective Date”), (C) Borrower shall execute and
deliver to Agent and the Revolving Lenders such replacement or additional
Revolving Credit Notes as shall be required by Agent, and (D) Borrower shall,
on the Additional Lender Assumption Effective Date, deliver to Agent, for the
benefit of the Lenders, (1) written confirmation (in form and substance
reasonably satisfactory to Agent) that Borrower shall have given written notice
to each Convertible Subordinated Noteholder that the Obligations incurred
pursuant to the Additional Commitments are being designated as Senior
Indebtedness (as defined in the Convertible Subordinated Notes), and (2) a
certificate and any other reasonable evidence required by Agent or the Required
Lenders demonstrating that all terms and conditions for designating Senior
Indebtedness (as defined in the Convertible Subordinated Notes) under the
Convertible Subordinated Notes are being met. 
The Revolving Lenders hereby authorize Agent to execute each Additional
Lender Assumption Agreement on behalf of the Revolving Lenders.  On each Additional Lender Assumption
Effective Date, the Revolving Lenders shall make adjustments among themselves with
respect to the Revolving Loans then outstanding and amounts of principal,
interest, commitment fees and other amounts paid or payable with respect
thereto as shall be necessary, in the opinion of Agent, in order to reallocate
among such Revolving Lenders such outstanding amounts, based on the revised
Applicable Commitment Percentages and to otherwise carry out fully the intent
and terms of this subsection (b). 
In connection therewith, it is understood and agreed that the Maximum
Amount of any Revolving Lender will not be increased (or decreased except
pursuant to Section 2.10(a) hereof) without the prior written consent
of such Revolving Lender.  Borrower
shall not request any increase in the Total Commitment Amount (or the Revolving
Amount) pursuant to this subsection (b) if a Default or an Event of
Default shall then exist, or immediately after giving effect to any such
increase would exist.  Upon the increase
of the Revolving Amount, the Total Commitment Amount shall be proportionally
increased from the Closing Commitment Amount to the Maximum Commitment Amount.

 

Section 2.11.  Computation of Interest and Fees.  With the exception of Base Rate Loans,
interest on Loans, Related Expenses and commitment and other fees and charges
hereunder shall be computed on the basis of a year having three hundred sixty
(360) days and calculated for the actual number of days elapsed.  With respect to Base Rate Loans, interest
shall be computed on the basis of a year having three hundred sixty-five (365)
days or three hundred sixty-six (366) days, as the case may be, and calculated
for the actual number of days elapsed.

 

Section 2.12.  Mandatory Payment.

 

35

 

(a)                                  Revolving
Credit Exposure.  If, at any time,
the Revolving Credit Exposure shall exceed the Revolving Credit Commitment,
Borrower shall, as promptly as practicable, but in no event later than the next
Business Day, prepay an aggregate principal amount of the Revolving Loans
sufficient to bring the Revolving Credit Exposure within the Revolving Credit
Commitment.

 

(b)                                 Swing
Line Exposure.  If, at any time, the
Swing Line Exposure shall exceed the Swing Line Commitment, Borrower shall, as
promptly as practicable, but in no event later than the next Business Day,
prepay an aggregate principal amount of the Swing Loans sufficient to bring the
Swing Line Exposure within the Swing Line Commitment.

 

(c)                                  Mandatory
Payments Generally.  Unless
otherwise designated by Borrower, each prepayment pursuant to
subsection (a) hereof shall be applied in the following order
(i) first, to the outstanding Base Rate Loans, and (ii) second, to the
outstanding Eurodollar Loans, provided that if the outstanding principal amount
of any Eurodollar Loan shall be reduced to an amount less than the minimum
amount set forth in Section 2.6 hereof as a result of such prepayment,
then such Eurodollar Loan shall be converted into a Base Rate Loan on the date
of such prepayment.  Any prepayment of a
Eurodollar Loan or Swing Loan pursuant to this Section 2.12 shall be
subject to the prepayment provisions set forth in Article III hereof.

 

Section 2.13.  Extension of Commitment.  Contemporaneously with the delivery of the
financial statements required pursuant to Section 5.3(b) hereof (beginning
with the financial statements for the fiscal year of Borrower ending
December 31, 2004, Borrower may deliver a Request for Extension,
requesting that the Revolving Lenders extend the maturity of the Revolving
Credit Commitment for an additional year. 
Each such extension shall require the unanimous written consent of all
of the Revolving Lenders and shall be upon such terms and conditions as may be
agreed to by Agent, Borrower and the Revolving Lenders.  Borrower shall pay any attorneys’ fees or
other expenses of Agent in connection with the documentation of any such
extension, as well as such other fees as may be agreed upon between Borrower
and Agent.

 

ARTICLE III.  ADDITIONAL PROVISIONS RELATING TO

EURODOLLAR LOANS; INCREASED CAPITAL; TAXES

 

Section 3.1.  Requirements of Law.

 

(a)                                  If,
after the Closing Date (i) the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof or
(ii) the compliance by any Lender with any request or directive (whether
or not having the force of law) from any central bank or other Governmental
Authority:

 

(A)                              shall
subject any Lender to any tax of any kind whatsoever with respect to this
Agreement, any Letter of Credit or any Eurodollar Loan made by it, or change
the basis of taxation of payments to such Lender in respect thereof (except for
Taxes and Excluded Taxes which are governed by Section 3.2 hereof);

 

36

 

(B)                                shall
impose, modify or hold applicable any reserve, special deposit, compulsory loan
or similar requirement against assets held by, deposits or other liabilities in
or for the account of, advances, loans or other extensions of credit by, or any
other acquisition of funds by, any office of such Lender that is not otherwise
included in the determination of the Eurodollar Rate; or

 

(C)                                shall
impose on such Lender any other condition;

 

and the result of any of
the foregoing is to increase the cost to such Lender of making, converting
into, continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit, or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, Borrower shall pay to such Lender, promptly
after receipt of a written request (or, if required by Borrower, a certificate
of such Lender specifying the basis for such request) therefor, any additional
amounts necessary to compensate such Lender for such increased cost or reduced
amount receivable.  If any Lender
becomes entitled to claim any additional amounts pursuant to this subsection (a),
such Lender shall promptly notify Borrower (with a copy to Agent) of the event
by reason of which it has become so entitled.

 

(b)                                 If
any Lender shall have determined that, after the Closing Date, the adoption of
or any change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority shall have the effect of reducing the rate of return on such Lender’s
or such corporation’s capital as a consequence of its obligations hereunder, or
under or in respect of any Letter of Credit, to a level below that which such Lender
or such corporation could have achieved but for such adoption, change or
compliance (taking into consideration the policies of such Lender or
corporation with respect to capital adequacy), then from time to time, upon
submission by such Lender to Borrower (with a copy to Agent) of a written
request therefor (which shall include the method for calculating such amount in
reasonable detail), Borrower shall promptly pay or cause to be paid to such
Lender such additional amount or amounts as will compensate such Lender for
such reduction.

 

(c)                                  A
certificate as to any additional amounts payable pursuant to this
Section 3.1 submitted by any Lender to Borrower (with a copy to Agent)
shall be conclusive absent manifest error. 
In determining any such additional amounts, such Lender may use any
method of averaging and attribution that it (in its sole discretion) shall deem
applicable.  The obligations of Borrower
pursuant to this Section 3.1 shall survive the termination of this
Agreement and the payment of the Loans and all other amounts payable hereunder.

 

(d)                                 Notwithstanding
the foregoing, no Lender shall be entitled to any indemnification or
reimbursement pursuant to this Section 3.1 to the extent such Lender has
not made demand therefore (as set forth above) within two hundred seventy (270)
days after the occurrence of the event giving rise to such entitlement or, if
later, such Lender having knowledge of such event.

 

37

 

Section 3.2.  Taxes.

 

(a)                                  All
payments made by any Credit Party under any Loan Document shall be made free
and clear of, and without deduction or withholding for or on account of any
Taxes or Other Taxes.  If any Taxes or
Other Taxes are required to be deducted or withheld from any amounts payable to
Agent or any Lender hereunder, the amounts so payable to Agent or such Lender
shall be increased to the extent necessary to yield to Agent or such Lender
(after deducting, withholding and payment of all Taxes and Other Taxes)
interest or any such other amounts payable hereunder at the rates or in the
amounts specified in the Loan Documents.

 

(b)                                 In
addition, the Credit Parties shall pay Taxes and Other Taxes to the relevant
Governmental Authority in accordance with applicable law.

 

(c)                                  Whenever
any Taxes or Other Taxes are required to be withheld and paid by a Credit
Party, such Credit Party shall timely withhold and pay such taxes to the
relevant Governmental Authorities.  As
promptly as possible thereafter, such Credit Party shall send to Agent for its
own account or for the account of the relevant Lender, as the case may be, a
certified copy of an original official receipt received by such Credit Party
showing payment thereof or other
evidence of payment reasonably acceptable to Agent or such Lender.  If such Credit Party shall fail to pay any
Taxes or Other Taxes when due to the appropriate Governmental Authority or
fails to remit to Agent the required receipts or other required documentary
evidence, such Credit Party shall indemnify Agent and the Lenders on demand for
any incremental taxes, interest or penalties that may become payable by Agent
or any Lender as a result of any such failure.

 

(d)                                 If
any Lender shall be so indemnified by a Credit Party, such Lender shall use
reasonable efforts to obtain the benefits of any refund, deduction or credit
for any taxes or other amounts with respect to the amount paid by such Credit
Party and shall reimburse such Credit Party to the extent, but only to the
extent, that such Lender shall receive a refund with respect to the amount paid
by such Credit Party or an effective net reduction in taxes or other
governmental charges (including any taxes imposed on or measured by the total
net income of such Lender) of the United States or any state or subdivision or any
other Governmental Authority thereof by virtue of any such deduction or credit,
after first giving effect to all other deductions and credits otherwise
available to such Lender.  If, at the
time any audit of such Lender’s income tax return is completed, such Lender
determines, based on such audit, that it shall not have been entitled to the
full amount of any refund reimbursed to such Credit Party as aforesaid or that
its net income taxes shall not have been reduced by a credit or deduction for
the full amount reimbursed to such Credit Party as aforesaid, such Credit
Party, upon request of such Lender, shall promptly pay to such Lender the
amount so refunded to which such Lender shall not have been so entitled, or the
amount by which the net income taxes of such Lender shall not have been so
reduced, as the case may be.

 

(e)                                  Each
Lender that is not (i) a citizen or resident of the United States of
America, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States of America (or any
jurisdiction thereof), or (iii) an estate or trust that is subject to
federal income taxation regardless of the source of its income (any such
Person, a “Non-U.S.

 

38

 

Lender”) shall deliver to
Borrower and Agent two copies of either U.S. Internal Revenue Service Form
W-8BEN, W-8IMY or Form W-8ECI, or, in the case of a Non-U.S. Lender claiming
exemption from U.S. federal withholding tax under Section 871(h) or
881(c) of the Code with respect to payments of “portfolio interest”, a
certification with respect to such interest and two copies of Form W-8BEN, or
any subsequent versions thereof or successors thereto, properly completed and
duly executed by such Non-U.S. Lender claiming complete exemption from, or a
reduced rate of, U.S. federal withholding tax on all payments by Credit Parties
under this Agreement and the other Loan Documents.  Such forms shall be delivered by each Non-U.S. Lender on or
before the date it becomes a party to this Agreement or such other Loan
Document.  In addition, each Non-U.S.
Lender shall deliver such forms or appropriate replacements promptly upon the
expiration, obsolescence or invalidity of any form previously delivered by such
Non-U.S. Lender.  Each Non-U.S. Lender
shall promptly notify Borrower at any time it determines that such Lender is no
longer in a position to provide any previously delivered certificate to
Borrower (or any other form of certification adopted by the U.S. taxing
authorities for such purpose). 
Notwithstanding any other provision of this subsection (e), a
Non-U.S. Lender shall not be required to deliver any form pursuant to this
subsection (e) that such Non-U.S. Lender is not legally able to
deliver.

 

(f)                                    The
agreements in this Section 3.2 shall survive the termination of the Loan
Documents and the payment of the Loans and all other amounts payable hereunder.

 

(g)                                 For
any period with respect to which a Non-U.S. Lender has failed to provide
Borrower with the appropriate form, statement or other document described in
subsection (e) above (other than if such failure is due to a change in
law, or in the interpretation or application thereof, occurring subsequent to
the date on which the form otherwise is not required under subsection (e) above),
such Non-U.S. Lender shall not be entitled to indemnification under
Section 3.2(a), (b) or (c) with respect to any additional Taxes imposed by
the United States solely by reason of such failure.

 

(h)                                 If
any Lender is entitled to a reduction in (and not a complete exemption from)
the applicable withholding tax and the Company shall have previously paid in
full such withholding tax prior to such reduction, the Company may withhold
from any interest payment to such Lender an amount equivalent to the reduction
in the applicable withholding tax.

 

Section 3.3.  Funding Losses.  Borrower agrees to indemnify each Lender,
promptly after receipt of a written, reasonably detailed certification and
request therefor, and to hold each Lender harmless from, any loss or expense
that such Lender may sustain or incur as a consequence of (a) default by
Borrower in making a borrowing of, conversion into or continuation of
Eurodollar Loans after Borrower has given a notice requesting the same in
accordance with the provisions of this Agreement, (b) default by Borrower
in making any prepayment of or conversion from Eurodollar Loans after Borrower
has given a notice thereof in accordance with the provisions of this Agreement,
(c) the making of a prepayment of a Eurodollar Loan on a day that is not
the last day of an Interest Period applicable thereto, or (d) any conversion of
a Eurodollar Loan to a Base Rate Loan pursuant to Section 2.6 hereof on a
day that is not the last day of an Interest Period applicable thereto.  Such indemnification shall be in an amount
equal to the excess, if any, of (i) the amount of interest that would have
accrued on

 

39

 

the amounts so prepaid,
or not so borrowed, converted or continued, for the period from the date of
such prepayment or of such failure to borrow, convert or continue to the last
day of such Interest Period (or, in the case of a failure to borrow, convert or
continue, the Interest Period that would have commenced on the date of such failure)
at the applicable rate of interest for such Loans provided for herein
(excluding, however, the Applicable Margin included therein, if any) over
(ii) the amount of interest (as reasonably determined by such Lender) that
would have accrued to such Lender on such amount by placing such amount on
deposit for a comparable period with leading banks in the appropriate London
interbank market, along with any administration fee charged by such
Lender.  A certificate as to any amounts
payable pursuant to this Section 3.3 submitted to Borrower (with a copy to
Agent) by any Lender shall be conclusive absent manifest error.  The obligations of Borrower pursuant to this
Section 3.3 shall survive the termination of this Agreement and the
payment of the Loans and all other amounts payable hereunder.  Notwithstanding the foregoing, no Lender
shall be entitled to any indemnification or reimbursement pursuant to this
Section 3.3 to the extent such Lender has not made demand therefore (as
set forth above) within two hundred seventy (270) days after the occurrence of
the event giving rise to such entitlement or, if later, such Lender having
knowledge of such event.

 

Section 3.4.  Change of Lending Office.  Each Lender agrees that, upon the occurrence
of any event giving rise to the operation of Section 3.1 or 3.2(a) hereof
with respect to such Lender, it will, if requested by Borrower, use reasonable
efforts (subject to overall policy considerations of such Lender) to designate
another lending office (or an affiliate of such Lender, if practical for such
Lender) for any Loans affected by such event with the object of avoiding the
consequences of such event; provided, that such designation is made on terms
that, in the sole judgment of such Lender, cause such Lender and its lending
office(s) to suffer no economic, legal or regulatory disadvantage; and
provided, further, that nothing in this Section shall affect or postpone
any of the obligations of Borrower or the rights of any Lender pursuant to
Section 3.1 or 3.2(a) hereof.

 

Section 3.5.  Eurodollar Rate Lending Unlawful;
Inability to Determine Rate.

 

(a)                                  If
any Lender shall reasonably determine (which determination shall, upon notice
thereof to Borrower and Agent, be conclusive and binding on Borrower) that,
after the Closing Date, (i) the introduction of or any change in or in the
interpretation of any law makes it unlawful, or (ii) any Governmental
Authority asserts that it is unlawful, for such Lender to make or continue any
Loan as, or to convert (if permitted pursuant to this Agreement) any Loan into,
a Eurodollar Loan, the obligations of such Lender to make, continue or convert
any such Eurodollar Loan shall, upon such determination, be suspended until
such Lender shall notify Agent that the circumstances causing such suspension
no longer exist, and all outstanding Eurodollar Loans payable to such Lender
shall automatically convert (if conversion is permitted under this Agreement)
into a Base Rate Loan, or be repaid (if no conversion is permitted) at the end
of the then current Interest Periods with respect thereto or sooner, if
required by law or such assertion.

 

(b)                                 If
Agent or the Required Lenders reasonably determine that for any reason adequate
and reasonable means do not exist for determining the Eurodollar Rate for any
requested Interest Period with respect to a proposed Eurodollar Loan, or that
the Eurodollar Rate for any requested Interest Period with respect to a
proposed Eurodollar Loan does not adequately

 

40

 

and fairly reflect the
cost to the Lenders of funding such Loan, Agent will promptly so notify
Borrower and each Lender.  Thereafter,
the obligation of the Lenders to make or maintain such Eurodollar Loan shall be
suspended until Agent (upon the instruction of the Required Lenders) revokes
such notice.  Upon receipt of such
notice, Borrower may revoke any pending request for a borrowing of, conversion
to or continuation of such Eurodollar Loan or, failing that, will be deemed to
have converted such request into a request for a borrowing of a Base Rate Loan
in the amount specified therein.

 

Section 3.6.  Replacement of Lenders.  Borrower shall be permitted to replace any
Lender that requests reimbursement for amounts owing pursuant to
Section 3.1 or 3.2(a) hereof, or asserts its inability to make a LIBOR
Fixed Rate Loan pursuant to Section 3.5 hereof; provided that
(a) such replacement does not conflict with any Requirement of Law,
(b) no Default or Event of Default shall have occurred and be continuing
at the time of such replacement, (c) prior to any such replacement, such
Lender shall have taken no action under Section 3.4 hereof so as to
eliminate the continued need for payment of amounts owing pursuant to
Section 3.1 or 3.2(a) hereof or, if it has taken any action, such request
has still been made, (d) the replacement financial institution shall
purchase, at par, all Loans and other amounts owing to such replaced Lender on
or prior to the date of replacement and assume all commitments and obligations
of such replaced Lender, (e) Borrower shall be liable to such replaced
Lender under Section 3.3 hereof if any Alternate Currency Loan owing to
such replaced Lender shall be purchased other than on the last day of the
Interest Period relating thereto, (f) the replacement financial
institution, if not already a Lender, shall be reasonably satisfactory to
Agent, (g) the replaced Lender shall be obligated to make such replacement
in accordance with the provisions of Section 10.10 hereof (provided that
Borrower (or the succeeding Lender, if such Lender is willing) shall be
obligated to pay the assignment fee referred to therein), and (h) until such
time as such replacement shall be consummated, Borrower shall pay all
additional amounts (if any) required pursuant to Section 3.1 or 3.2(a)
hereof, as the case may be.

 

ARTICLE IV.  CONDITIONS PRECEDENT

 

Section 4.1.  Conditions to Each Credit Event.  The obligation of the Lenders, the Fronting
Lender and the Swing Line Lender to participate in any Credit Event shall be
conditioned, in the case of each Credit Event, upon the following:

 

(a)                                  all
conditions precedent as listed in Section 4.2 hereof required to be
satisfied prior to the first Credit Event shall have been satisfied prior to or
as of the first Credit Event;

 

(b)                                 Borrower
shall have submitted a Notice of Loan (or with respect to a Letter of Credit,
complied with the provisions of Section 2.2(b) hereof) and otherwise
complied with Section 2.6 hereof;

 

(c)                                  no
Default or Event of Default shall then exist or immediately after such Credit
Event would exist;

 

41

 

(d)                                 no
condition or event shall have occurred that Agent or the Required Lenders
determine has or is reasonably likely to have a Material Adverse Effect; and

 

(e)                                  each
of the representations and warranties contained in Article VI hereof shall
be true in all material respects as if made on and as of the date of such
Credit Event, except to the extent that any thereof expressly relate to an
earlier date.

 

Each request by Borrower
for a Credit Event shall be deemed to be a representation and warranty by
Borrower as of the date of such request as to the satisfaction of the
conditions precedent specified in subsections (c), (d) and (e) above.

 

Section 4.2.  Conditions to the First Credit Event.  The obligation of the Lenders, the Fronting
Lender and the Swing Line Lender to participate in the first Credit Event is
subject to Borrower satisfying each of the following conditions prior to or
concurrently with such Credit Event (unless waived in writing by Agent):

 

(a)                                  Notes.  Borrower shall have executed and delivered
to (i) each Revolving Lender its Revolving Credit Note, (ii) each Term Lender
its Term Note, and (iii) the Swing Line Lender the Swing Line Note.

 

(b)                                 Guaranties
of Payment.  Each Guarantor of
Payment shall have executed and delivered to Agent a Guaranty of Payment.

 

(c)                                  Security
Agreements.  Each Guarantor of
Payment shall have executed and delivered to Agent, for the benefit of the
Lenders, a Security Agreement and such other documents or instruments, as may
be reasonably required by Agent to create the Liens of Agent, for the benefit
of the Lenders, in the assets of such Guarantor of Payment, all to be in form
and substance reasonably satisfactory to Agent and the Lenders.

 

(d)                                 Pledge
Agreement.  Each Company that has a
Subsidiary shall have executed and delivered to Agent, for the benefit of the
Lenders, a Pledge Agreement, in form and substance reasonably satisfactory to
Agent, that provides, among other things, for a pledge of all of the capital
stock of each Subsidiary.

 

(e)                                  Intellectual
Property Collateral Assignment Agreement. 
Borrower shall have executed and delivered to Agent, for the benefit of
the Lenders, an Intellectual Property Collateral Assignment Agreement, in form
and substance reasonably satisfactory to Agent.

 

(f)                                    Officer’s
Certificate, Resolutions, Organizational Documents.  Each Credit Party shall have delivered to
Agent an officer’s certificate (or comparable domestic or foreign documents)
certifying the names of the officers of such Credit Party authorized to sign
the Loan Documents, together with the true signatures of such officers and
certified copies of (i) the resolutions of the board of directors (or
comparable domestic or foreign documents) of such Credit Party evidencing
approval of the execution and delivery of the Loan Documents and the execution
of other Related Writings to which such Credit Party is a party, and
(ii) the Organizational Documents of such Credit Party.

 

42

 

(g)                                 Good
Standing and Full Force and Effect Certificates.  Borrower shall have delivered to Agent a good standing
certificate or full force and effect certificate, as the case may be, for each
Credit Party, issued on or about the Closing Date by the Secretary of State in
the state or states where such Credit Party is incorporated or formed or
qualified as a foreign entity.

 

(h)                                 Legal
Opinion.  Borrower shall have
delivered to Agent an opinion of counsel for each Credit Party, in form and
substance reasonably satisfactory to Agent and the Lenders.

 

(i)                                     Legal
Fees; Agent Fee Letter.  Borrower
shall have (i) executed and delivered to Agent, the Agent Fee Letter and paid
to Agent, for its sole account, the fees stated therein, and (ii) paid all
legal fees and expenses of Agent in connection with the preparation and
negotiation of the Loan Documents.

 

(j)                                     Lien
Searches.  With respect to the
property owned or leased by Borrower and each Guarantor of Payment and any
other property securing the Obligations, Borrower, shall have caused to be
delivered to Agent (i) the results of Uniform Commercial Code lien searches, satisfactory to Agent and
the Lenders, (ii) the results of federal and state tax lien and judicial
lien searches, satisfactory to Agent and the Lenders, and (iii) Uniform Commercial Code termination
statements reflecting termination of all financing statements previously filed
by any Person and not expressly permitted pursuant to Section 5.9 hereof.

 

(k)                                  Existing
Credit Agreement.  Borrower shall
have terminated the Credit Agreement between Borrower and LaSalle Bank National
Association, as agent, dated as of January 30, 2004, as amended, which
termination shall be deemed to have occurred upon payment in full of all of the
Indebtedness outstanding thereunder and termination of the commitments
established therein.

 

(l)                                     Closing
Certificate.  Borrower shall have
delivered to Agent and the Lenders an officer’s certificate certifying that, as
of the Closing Date, (i) all conditions precedent set forth in this
Article IV have been satisfied, (ii) no Default or Event of Default
exists nor immediately after the making of the first Loan or the issuance of
the first Letter of Credit will exist, and (iii) each of the representations
and warranties contained in Article VI hereof are true and correct in all
material respects as of the Closing Date.

 

(m)                               Letter
of Direction.  Borrower shall have
delivered to Agent a letter of direction authorizing Agent, on behalf of the
Lenders, to disburse the proceeds of the Loans, which includes the transfer of
funds under this Agreement and wire instructions setting forth the locations to
which such funds shall be sent.

 

(n)                                 Designation
of Senior Indebtedness.  Borrower
shall, on the Closing Date, deliver to Agent, for the benefit of the Lenders,
written confirmation (in form and substance reasonably satisfactory to Agent)
that Borrower shall have given written notice to each Convertible Subordinated
Noteholder that the Secured Obligations are being designated as Senior
Indebtedness (as defined in the Convertible Subordinated Notes).

 

43

 

(o)                                 Miscellaneous.  Borrower shall have provided to Agent and
the Lenders such other items and shall have satisfied such other conditions as
may be reasonably required by Agent or the Lenders.

 

Section 4.3.  Post-Closing Conditions.  On or before each of the dates specified in
this Section 4.3, Borrower shall satisfy each of the items specified in
the subsections below:

 

(a)                                  Control
Agreement.  No later than thirty
(30) days after the Closing Date (unless a longer period is agreed to by
Agent), Borrower shall have delivered to Agent an executed copy of a Control
Agreement, in form and substance reasonably satisfactory to Agent, for each
deposit account maintained by a Company, unless otherwise agreed by Agent;
provided, that in the event Borrower is not able to deliver such Control
Agreements, Borrower shall use its best efforts to move such accounts to a
depository institution that can provide such Control Agreements as soon as
practicable.

 

(b)                                 Real
Estate Matters.  No later than
forty-five (45) days after the Closing Date (unless a longer period is agreed
to by Agent), with respect to each parcel of the Real Property, Borrower shall
have provided to Lender:

 

(i)                                     an
updated Loan Policy of title insurance, ALTA 1970 Form B (amended 10/17/70 and
10/17/84) issued to Lender by a title company acceptable to Lender (the
“Title Company”), in an amount equal to the appraised value of the Real
Property insuring the Mortgage to be a valid, first-priority lien in the Real
Property, free and clear of all defects and encumbrances except such matters of
record as accepted by Lender, in its sole discretion, and shown as Permitted
Encumbrances in “Exhibit B” to the Mortgage, with such endorsements and
affirmative insurance as Lender may require, including without limitation:

 

(A)                              the
deletion of all so-called “standard exceptions” from such policy;

 

(B)                                a
so-called “comprehensive” endorsement in form and substance acceptable to
Lender;

 

(C)                                affirmative
insurance coverage regarding access, compliance with respect to restrictive
covenants and any other matters to which Lender may have objection or require
affirmative insurance coverage; and

 

(D)                               the
results of a federal tax lien search in the county wherein the Real Property is
located and such Credit Party has its principal place of business;

 

(ii)                                  evidence
to Lender’s satisfaction in its sole discretion that no portion of the Real
Property is located in a Special Flood Hazard Area or is otherwise classified
as Class A or Class BX on the Flood Maps maintained by the Federal Emergency
Management Agency; and

 

44

 

(iii)                               two
fully executed originals of the Mortgage.

 

ARTICLE V. 
COVENANTS

 

Section 5.1.  Insurance.  Each Company shall (a) maintain insurance to such extent and
against such hazards and liabilities as should be maintained in accordance with
its reasonable business judgment; and (b) within ten days of any Lender’s
written request, furnish to such Lender such information about such Company’s
insurance as that Lender may from time to time reasonably request, which
information shall be prepared in form and detail reasonably satisfactory to such
Lender.

 

Section 5.2.  Money Obligations.  Each Company shall pay in full
(a) prior in each case to the date when penalties would attach, all taxes,
assessments and governmental charges and levies (except only those so long as
and to the extent that the same shall be contested in good faith by appropriate
and timely proceedings and for which adequate provisions have been established
in accordance with GAAP) for which it may be or become liable or to which any
or all of its properties may be or become subject; (b) all of its wage
obligations to its employees in compliance with the Fair Labor Standards Act
(29 U.S.C. §§ 206-207) or any comparable provisions; and (c) all of
its other obligations calling for the payment of money (except only those so
long as and to the extent that the same shall be contested in good faith and
for which adequate provisions have been established in accordance with GAAP)
before such payment becomes overdue; except in the case of (a), (b) or (c), as
would not reasonably be expected to have a Material Adverse Effect.

 

Section 5.3.  Financial Statements and Information.

 

(a)                                  Quarterly
Financials.  Borrower shall deliver
to Agent, within forty-five (45) days after the end of each of the first
three quarter-annual periods of each fiscal year of Borrower, balance sheets of
the Companies as of the end of such period and statements of income (loss),
stockholders’ equity and cash flow for the quarter and fiscal year to date
periods, all prepared on a Consolidated basis, in accordance with GAAP, and
certified by a Financial Officer of Borrower.

 

(b)                                 Annual
Audit Report.  Borrower shall
deliver to Agent, within ninety (90) days after the end of each fiscal year of
Borrower, an annual audit report of the Companies for that year prepared on a
Consolidated basis, in accordance with GAAP, and certified by an independent
nationally recognized public accountant, which report shall include balance
sheets and statements of income (loss), stockholders’ equity and cash-flow for
that period.

 

(c)                                  Compliance Certificate.  Borrower
shall deliver to Agent, concurrently with the delivery of the financial
statements set forth in subsections (a) and (b) above, a
Compliance Certificate.

 

45

 

(d)                                 Annual
Budget.  Borrower shall deliver to
Agent, within thirty (30) days after the end of each fiscal year of Borrower,
an annual budget for the current fiscal year, to be in a form reasonably
acceptable to Lender.

 

(e)                                  Management
Report.  Borrower shall deliver to
Agent, concurrently with the delivery of the quarterly and annual financial
statements set forth in subsection (a) and (b) above, a copy of any
management report, letter or similar writing furnished to the Companies by the
accountants in respect of the Companies’ systems, operations, financial
condition or properties.

 

(f)                                    Shareholder
and SEC Documents.  Borrower shall
deliver to Agent, as soon as available, copies of all material notices,
reports, definitive proxy or other statements and other documents sent by
Borrower to its shareholders generally, to the holders of any of its debentures
or bonds generally or the trustee of any indenture securing the same or
pursuant to which they are issued, or sent by Borrower (in final form) to any
securities exchange or over the counter authority or system, or to the SEC or
any similar federal agency having regulatory jurisdiction over the issuance of
Borrower’s securities.

 

(g)                                 Financial
Information of Companies.  Borrower
shall use commercially reasonable efforts to deliver to Agent, within ten days
of the written request of Agent or any Lender, such other information about the
financial condition, properties and operations of any Company as Agent or such
Lender may from time to time reasonably request, which information shall be
submitted in form and detail reasonably satisfactory to Agent or such Lender.

 

Section 5.4.  Financial Records.  Each Company shall at all times maintain
records and books of account which are true and correct in all material
respects, including, without limiting the generality of the foregoing,
appropriate provisions for possible losses and liabilities, all in accordance
with GAAP, and at all reasonable times (during normal business hours and upon
reasonable notice to such Company) permit Agent, or any representative of
Agent, to examine such Company’s books and records and to make excerpts
therefrom and transcripts thereof; provided, however, that, except during the
continuance of an Event of Default, such examinations shall be limited to one
per year.

 

Section 5.5.  Franchises; Change in Business.

 

(a)                                  Except
as otherwise permitted pursuant to Section 5.12 hereof, each Company
(other than a Dormant Subsidiary) shall preserve and maintain at all times its
existence, rights and franchises.

 

(b)                                 No
Company shall engage in any business if, as a result thereof, the general
nature of the business of the Companies taken as a whole would be substantially
changed from the general nature of the business the Companies are engaged in on
the Closing Date.

 

Section 5.6.  ERISA
Compliance.  Except to the
extent a failure to comply would reasonably be expected to result in a Material
Adverse Effect, no Company shall incur any accumulated funding deficiency
within the meaning of ERISA, or any liability to the PBGC, established
thereunder in connection with any ERISA Plan. 
Borrower shall furnish to the

 

46

 

Lenders (a) as soon
as possible and in any event within thirty (30) days after any Company knows or
has reason to know that any Reportable Event with respect to any ERISA Plan has
occurred, a statement of a Financial Officer of such Company, setting forth
details as to such Reportable Event and the action that such Company proposes
to take with respect thereto, together with a copy of the notice of such
Reportable Event given to the PBGC if a copy of such notice is available to
such Company, and (b) promptly after receipt thereof a copy of any notice
such Company, or any member of the Controlled Group may receive from the PBGC
or the Internal Revenue Service with respect to any ERISA Plan administered by
such Company; provided, that this latter clause shall not apply to notices
of general application promulgated by the PBGC or the Internal Revenue Service.  Borrower shall promptly notify the Lenders
of any material taxes assessed, proposed to be assessed or that Borrower has
reason to believe may be assessed against a Company by the Internal Revenue
Service with respect to any ERISA Plan. 
As used in this Section 5.6, “material” means the measure of a
matter of significance that shall be determined as being an amount equal to
five percent (5%) of Consolidated Net Worth. 
As soon as practicable, and in any event within twenty (20) days, after
any Company shall become aware that an ERISA Event shall have occurred that
could reasonably be expected to result in a Material Adverse Effect, such
Company shall provide Agent with notice of such ERISA Event with a certificate
by a Financial Officer of such Company setting forth the details of the event
and the action such Company or another Controlled Group member proposes to take
with respect thereto.  Borrower shall,
at the reasonable request of Agent, deliver or cause to be delivered to Agent
true and correct copies of any documents relating to the ERISA Plan of any
Company.

 

Section 5.7.  Financial Covenants.

 

(a)                                  Leverage
Ratio.  The Companies shall not
suffer or permit at any time the Leverage Ratio to exceed 3.00 to 1.00.

 

(b)                                 Senior
Leverage Ratio.  The Companies shall
not suffer or permit at any time the Senior Leverage Ratio to exceed 1.50 to
1.00.

 

(c)                                  Fixed
Charge Coverage Ratio.  The
Companies shall not suffer or permit at any time the Fixed Charge Coverage
Ratio to be less than (i) 1.10 to 1.00 on the Closing Date through March 30,
2006, (ii) 1.15 to 1.00 on March 31, 2006 through March 30, 2007, and
(iii) 1.25 to 1.00 on March 31, 2007 and thereafter; provided that, for
purposes of calculating Consolidated Fixed Charges, the Company shall be deemed
to have made principal payments on Consolidated Funded Indebtedness totaling
One Million Five Hundred Sixty-Two Thousand Five Hundred Dollars ($1,562,500)
during the fiscal quarter of Borrower ended June 30, 2004.

 

(d)                                 Current
Ratio.  The Companies shall not
suffer or permit at any time the Current Ratio to be less than 1.50 to 1.00.

 

Section 5.8.  Borrowing.  No Company shall create, incur or have outstanding any
Indebtedness of any kind; provided, that this Section 5.8 shall not apply
to the following:

 

(a)                                  the
Loans, the Letters of Credit or any other Indebtedness under this Agreement;

 

47

 

(b)                                 any
loans granted to or capital leases entered into by any Company for the purchase
or lease of fixed assets (and refinancings of such loans or capital leases),
which loans and capital leases shall only be secured by the fixed assets being
purchased, so long as the aggregate principal amount of all such loans and
leases for all Companies shall not exceed Five Million Dollars ($5,000,000) at
any time outstanding;

 

(c)                                  the
Indebtedness existing on the Closing Date, in addition to the other
Indebtedness permitted to be incurred pursuant to this Section 5.8, as set
forth in Schedule 5.8 hereto (and any extension, renewal or
refinancing thereof so long as the principal amount thereof shall not be
increased after the Closing Date);

 

(d)                                 loans
to a Company from a Company so long as each such Company is a Credit Party;

 

(e)                                  Indebtedness
under any Hedge Agreement, so long as such Hedge Agreement shall have been
entered into in the ordinary course of business and not for speculative
purposes;

 

(f)                                    other
Subordinated Indebtedness, in additional to Subordinated Indebtedness existing
as of the Closing Date and referenced on Schedule 5.8 hereto, up to
an aggregate principal amount for all Companies not to exceed Ten Million
Dollars ($10,000,000) at any time outstanding, so long as such Subordinated
Indebtedness is permitted under the Note Agreement and the Convertible
Subordinated Notes; and

 

(g)                                 other
Indebtedness, in addition to the Indebtedness listed above, in an aggregate
principal amount for all Companies not to exceed Two Million Dollars
($2,000,000) at any time outstanding, so long as such Indebtedness is permitted
under the Note Agreement and the Convertible Subordinated Notes.

 

Section 5.9. 
Liens. 
No Company shall create, assume or suffer to exist any Lien upon any of
its property or assets, whether now owned or hereafter acquired; provided that
this Section 5.9 shall not apply to the following:

 

(a)                                  Liens
for taxes not yet due or that are being actively contested in good faith by
appropriate proceedings and for which adequate reserves shall have been
established in accordance with GAAP;

 

(b)                                 other
statutory or common law incidental to the conduct of its business or the
ownership of its property and assets that (i) were incurred in the ordinary
course of business, (ii) were not incurred in connection with the
borrowing of money or the obtaining of advances or credit, and (iii) do
not in the aggregate materially detract from the value of its property or
assets or materially impair the use thereof in the operation of the business of
any Company;

 

(c)                                  Liens
on property or assets of a Subsidiary to secure obligations of such Subsidiary
to a Credit Party;

 

48

 

(d)                                 purchase
money Liens on fixed assets securing the loans and capitalized leases pursuant
to Section 5.8(b) hereof, provided that such Lien is limited to the
purchase price (including shipping costs and taxes) and only attaches to the
property being acquired;

 

(e)                                  any
Lien granted to Agent, for the benefit of the Lenders;

 

(f)                                    the
Liens existing on the Closing Date as set forth in Schedule 5.9
hereto and replacements, extensions, renewals, refundings or refinancings
thereof, but only to the extent that the amount of debt secured thereby shall
not be increased;

 

(g)                                 easements
or other minor defects or irregularities in title of real property not
interfering in any material respect with the use of such property in the
business of any Company;

 

(h)                                 attachment,
appeal bonds, judgments and other similar Liens to the extent such judgments
and Liens do not, in the aggregate for all Companies, exceed Five Hundred
Thousand Dollars ($500,000) at any time;

 

(i)                                     Liens
of a broker or depository institution encumbering deposit, margin, commodity
trading or brokerage accounts held by such broker or depository institution
incurred in the ordinary course of business; or

 

(j)                                     other
Liens, in addition to the Liens listed above, securing amounts, in the
aggregate for all Companies, not to exceed Five Hundred Thousand Dollars
($500,000).

 

No Company shall enter
into any contract or agreement (other than a contract or agreement entered into
in connection with the purchase or lease of fixed assets that prohibits Liens
on such fixed assets or intellectual property licensing agreements) that would
prohibit Agent or the Lenders from acquiring a security interest, mortgage or
other Lien on, or a collateral assignment of, any of the property or assets of
such Company.

 

Section 5.10.  Regulations T, U and X.  No Company shall take any action that would
result in any non-compliance of the Loans or Letters of Credit with Regulations
T, U or X, or any other applicable regulation, of the Board of Governors of the
Federal Reserve System.

 

Section 5.11.  Investments and Loans.  No Company shall (a) create, acquire or
hold any Subsidiary, (b) make or hold any investment in any stocks, bonds
or securities of any kind, (c) be or become a party to any joint venture
or other partnership, (d) make or keep outstanding any advance or loan to
any Person (other than accounts receivable incurred in the ordinary course of
business), or (e) be or become a Guarantor of any kind; provided that this
Section 5.11 shall not apply to the following:

 

(i)                                     any
endorsement of a check or other medium of payment for deposit or collection
through normal banking channels or similar transaction in the normal course of
business;

 

(ii)                                  investments
of the Companies in Cash Equivalents;

 

49

 

(iii)                               loans
to and guaranties of the Indebtedness (permitted under Section 5.8 hereof)
of, a Company from or by a Company so long as each such Company is a Credit
Party;

 

(iv)                              the
holding of each of the Subsidiaries listed on Schedule 6.1 hereto,
and the creation, acquisition and holding of any new Subsidiary after the
Closing Date so long as such new Subsidiary shall have been created, acquired
or held in accordance with the terms and conditions of this Agreement;

 

(v)                                 the
purchase or holding of any stock or other equity interest that has been
acquired pursuant to an Acquisition permitted by Section 5.13 hereof;

 

(vi)                              any
advance or loan to an officer or employee of a Company made in the ordinary course
of such Company’s business, so long as all such advances and loans from all
Companies aggregate not more than the maximum principal sum of One Hundred
Thousand Dollars ($100,000) at any time outstanding;

 

(vii)                           any
securities (whether debt or equity) received by a Company in the ordinary
course of business in connection with the bankruptcy or reorganization of any
customer or supplier of such Company;

 

(viii)                        any
investment received in connection with Dispositions permitted pursuant to
Section 5.12 hereof, so long as any such investments that shall be
securities are promptly pledged to Agent, for the benefit of the Lenders;

 

(ix)                                to
the extent permitted by applicable law, notes from officers and employees in
exchange for capital stock of a Company purchased by such officers or employees
pursuant to a stock ownership or purchase plan or compensation plan; and

 

(x)                                   other
Investments not specifically listed above in an aggregate amount, for all
Companies, not to exceed Two Million Dollars ($2,000,000) at any time.

 

For purposes of this
Section 5.11, the amount of any investment in equity interests shall be
based upon the initial amount invested and shall not include any appreciation
in value or return on such investment.

 

Section 5.12.  Merger and Sale of Assets.  No Company shall merge, amalgamate or
consolidate with any other Person, or sell, lease or transfer or otherwise
dispose of any assets to any Person other than in the ordinary course of
business, except that, if no Default or Event of Default shall then exist or
immediately thereafter shall begin to exist:

 

(a)                                  any
Subsidiary (other than Borrower) may merge with (i) Borrower (provided
that Borrower shall be the continuing or surviving Person) or (ii) any one
or more Guarantors of Payment;

 

50

 

(b)                                 any
Company may sell, lease, transfer or otherwise dispose of any of its assets to
(i) Borrower or (ii) any Guarantor of Payment;

 

(c)                                  any
Company may sell, lease, transfer or otherwise dispose of any assets that are
obsolete or no longer used in such Company’s business for fair market value, as
determined by the board of directors of Borrower;

 

(d)                                 any
sale or other Disposition (including cancellation of Indebtedness) of Cash
Equivalents or non-core assets acquired pursuant to Acquisitions) in the
ordinary course of business for fair market value, as determined by the board
of directors of Borrower; or

 

(e)                                  Acquisitions
may be effected in accordance with the provisions of Section 5.13 hereof.

 

Section 5.13.  Acquisitions.  No Company shall effect an Acquisition;
provided, however, that a Credit Party may effect an Acquisition with the prior
written consent of the Required Lenders or so long as:

 

(a)                                  in
the case of a merger, amalgamation or other combination including Borrower,
Borrower shall be the surviving entity;

 

(b)                                 in
the case of a merger, amalgamation or other combination including a Credit
Party (other than Borrower), a Credit Party shall be the surviving entity;

 

(c)                                  the
business to be acquired shall be reasonably similar to that of the Credit
Parties or a reasonable extension thereof;

 

(d)                                 Borrower
shall have provided to Agent and the Lenders, at least ten (10) Business Days
prior to such Acquisition, historical financial statements of the target entity
and a pro forma financial statement of the Companies accompanied by a
certificate of a Financial Officer of Borrower showing (i) pro forma compliance
with Section 5.7 hereof, both before and after the proposed Acquisition,
(it being understood that, in the calculation of Fixed Charge Coverage Ratio,
(A) the EBITDA of the business to be acquired shall be included in Consolidated
EBITDA as if the Acquisition had been completed on the first day of the
measurement period, (B) Consolidated Interest Expense shall be recalculated as
if any debt incurred or assumed as a result of the Acquisition had been in
place for the entire measurement period, and (C) aside from the adjustment in
subparts (A) and (B) above, the fixed charges of the business to be acquired
shall not be included in the calculation of Fixed Charge Coverage Ratio, and
(ii) positive EBITDA for the acquired entity during the most recently completed
four fiscal quarters of such entity;

 

(e)                                  no
Default or Event of Default shall exist prior to or after giving effect to such
Acquisition;

 

(f)                                    such
Acquisition is not actively opposed by the board of directors (or similar
governing body) of the selling Persons or the Persons whose equity interests
are to be acquired;

 

51

 

(g)                                 Borrower
shall have Liquidity of no less than Ten Million Dollars ($10,000,000) after
giving effect to such Acquisition;

 

(h)                                 the
aggregate amount of Consideration paid for any such Acquisition (or related
series of Acquisitions) would not exceed Sixty-Five Million Dollars
($65,000,000);

 

(i)                                     the
aggregate Consideration (exclusive of the issuance of equity) paid for all
Acquisitions for all Companies, during the Commitment Period, would not exceed
Seventy-Five Million Dollars ($75,000,000); and

 

(j)                                     the
aggregate Consideration paid for all Acquisitions for all Companies, during the
Commitment Period, would not exceed One Hundred Fifty Million Dollars
($150,000,000).

 

Section 5.14.  Notice.

 

(a)                                  Borrower
shall cause a Financial Officer of Borrower to promptly notify Agent and the
Lenders in writing whenever any Default or Event of Default may occur hereunder
or any representation or warranty made in Article VI hereof or elsewhere
in this Agreement or in any Related Writing may for any reason cease in any
material respect to be true and complete.

 

(b)                                 Borrower
shall provide written notice to Agent and the Lenders contemporaneously with
any notice provided to the Convertible Subordinated Noteholders under any of
the Convertible Subordinated Documents.

 

Section 5.15.  Capital Distributions; Restricted
Payments.

 

(a)                                  So
long as no Default or Event of Default shall then exist or immediately
thereafter shall begin to exist, any Company may make Capital Distributions.

 

(b)                                 No
Company shall make or commit itself to make any Restricted Payment at any time,
except that, so long as no Default or Event of Default shall then exist or
immediately thereafter shall begin to exist, Borrower may:

 

(i)                                     make
regularly scheduled payments of interest on the Convertible Subordinated Notes;

 

(ii)                                  convert
the Convertible Subordinated Notes into equity of Borrower; and

 

(iii)                               if
the Available Liquidity is equal to or greater than an amount equal to one
hundred percent (100%) of the outstanding principal amount of the Convertible
Subordinated Notes, prepay any amount of principal of the Convertible
Subordinated Notes.

 

Section 5.16.  Environmental
Compliance.  Each Company
shall comply in all material respects with any and all material Environmental
Laws including, without limitation, all

 

52

 

Environmental Laws in
jurisdictions in which such Company owns or operates a facility or site,
arranges for disposal or treatment of hazardous substances, solid waste or
other wastes, accepts for transport any hazardous substances, solid waste or
other wastes or holds any interest in real property or otherwise.  Borrower shall furnish to the Lenders,
promptly after receipt thereof, a copy of any notice such Company may receive
from any Governmental Authority, private Person or otherwise that any material
litigation or proceeding pertaining to any environmental, health or safety
matter has been filed or is threatened against such Company, any real property
in which such Company holds any interest or any past or present operation of
such Company.  No Company shall allow
the release or disposal of hazardous waste, solid waste or other wastes on,
under or to any real property in which any Company holds any interest or
performs any of its operations, in material violation of any material
Environmental Law.  As used in this
Section, “litigation or proceeding” means any demand, claim, notice, suit, suit
in equity action, administrative action, investigation or inquiry whether
brought by any Governmental Authority, private Person or otherwise.  Borrower shall defend, indemnify and hold
Agent and the Lenders harmless against all costs, expenses, claims, damages,
penalties and liabilities of every kind or nature whatsoever (including
attorneys’ fees) arising out of or resulting from the noncompliance of any
Company with any Environmental Law. 
Such indemnification shall survive any termination of this Agreement.

 

Section 5.17.  Affiliate
Transactions.  No Company
shall, directly or indirectly, enter into or permit to exist any transaction
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any Affiliate (other than a
Company that is a Credit Party) on terms that shall be less favorable to such
Company than those that might be obtained at the time in a transaction with a
non-Affiliate; provided, however, that the foregoing shall not prohibit (a) the
payment of customary and reasonable directors’ fees, (b) the payment of
reasonable compensation and expense reimbursement to officers and employees for
service actually rendered to any such Company, (c) indemnities and
reimbursement paid to directors, (d) stock option and compensation plans of the
Companies, (e) employment contracts with officers and management of the
Companies, (f) transactions among Companies, (g) the repurchase of equity
interests from former officers, directors and employees to the extent permitted
by this Agreement, (h) advances and loans to officers and employees of the Companies
to the extent permitted by this Agreement, and (i) other transactions
specifically permitted under this Agreement.

 

Section 5.18.  Use of Proceeds.  Borrower’s use of the proceeds of the Notes
shall be solely for working capital and other general corporate purposes of the
Companies and for the refinancing of existing Indebtedness.

 

Section 5.19.  Corporate Names.  No Company shall change its corporate name,
unless, in each case, such Company shall provide Agent and the Lenders with at
least thirty (30) days prior written notice thereof.  Borrower shall also promptly notify Agent
and the Lenders of (a) any material change in any location where any Company’s
Inventory or Equipment is maintained, and any new locations where any material
amount of a Company’s Inventory or Equipment is to be maintained; (b) any
change in the location of the office where any Company’s records pertaining to
its Accounts are kept; (c) the location of any new places of business and the
changing or closing of any of its existing places of business; and (d) any
change

 

53

 

in the location of any
Company’s chief executive office.  In
the event of any of the foregoing or if otherwise deemed appropriate by Agent,
Agent is hereby authorized to file new U.C.C. Financing Statements describing
the Collateral and otherwise in form and substance sufficient for recordation
wherever necessary or appropriate, as determined in Agent’s sole discretion, to
perfect or continue perfected the security interest of Agent, for the benefit
of the Lenders, in the Collateral. 
Borrower shall pay all filing and recording fees and taxes in connection
with the filing or recordation of such U.C.C. Financing Statements and shall
promptly reimburse Agent therefore if Agent pays the same.  Such amounts shall be Related Expenses
hereunder.

 

Section 5.20.  Subsidiary Guaranties, Security Documents.  Each Domestic Subsidiary of a Company (that
is not a Dormant Subsidiary) created, acquired or held subsequent to the Closing
Date, shall promptly execute and deliver to Agent, for the benefit of the
Lenders, a Guaranty of Payment of all of the Obligations and a Security
Agreement, such agreements to be in form and substance reasonably acceptable to
Agent, along with any such other supporting documentation, Security Documents,
corporate governance and authorization documents, and an opinion of counsel as
may be deemed necessary or advisable by Agent. 
At such time that a Subsidiary (that has been classified as a Dormant
Subsidiary) no longer meets the requirements of a Dormant Subsidiary, Borrower
shall provide to Agent prompt written notice thereof, and shall provide, with
respect to such Subsidiary, all of the documents referenced in the foregoing
sentence.  In addition, each Subsidiary
that acquires a Subsidiary after the Closing Date, shall execute and deliver to
Agent, for the benefit of the Lenders, a Pledge Agreement and deliver all of
the share certificates (or other evidence of equity) owned by such Subsidiary;
provided, however, that no Company shall be required to pledge more than
sixty-five percent (65%) of the outstanding shares or other ownership interest
of any direct Foreign Subsidiary and shall not be required to pledge any
ownership interest in any indirect Foreign Subsidiary.

 

Section 5.21.  Restrictive
Agreements.  Except as set forth in
this Agreement, Borrower shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Subsidiary to (a) make, directly or indirectly, any Capital Distribution
to Borrower, (b) make, directly or indirectly, loans or advances or
capital contributions to Borrower or (c) transfer, directly or indirectly,
any of the properties or assets of such Subsidiary to Borrower; except for such
encumbrances or restrictions existing under or by reason of (i) applicable
law, (ii) non-assignment provisions in leases or other agreements entered
in the ordinary course of business, or (iii) customary restrictions in
security agreements or mortgages securing Indebtedness or capital leases, of a
Company to the extent such restrictions shall only restrict the transfer of the
property subject to such security agreement, mortgage or lease.

 

Section 5.22.  Other
Covenants.  In the event that any
Company shall enter into, or shall have entered into, the Note Agreement (or
the Convertible Subordinated Documents), or any agreement evidencing
Indebtedness of any Company or the Companies in excess of the amount of Ten
Million Dollars ($10,000,000), wherein the covenants contained therein shall be
more restrictive than the covenants set forth herein, then the Companies shall
be bound hereunder by such more restrictive covenants with the same force and
effect as if such covenants were written herein.

 

54

 

Section 5.23.  Note Agreement.

 

(a)                                  Modifications.  Borrower shall not, without the prior
written consent of Agent and the Required Lenders, amend, restate, supplement
or otherwise modify any of the Convertible Subordinated Documents to (i)
increase the principal amount outstanding thereunder, or (ii) change the date
of any principal or interest payment to an earlier date.

 

(b)                                 No
Default.  No “Default” or “Event of
Default”, as each term is defined in the Convertible Subordinated Documents,
(i) shall exist, or (ii) shall exist immediately after the granting or
continuation of any Loan.

 

(c)                                  Senior
Indebtedness.  The Secured
Obligations shall at all times constitute indebtedness permitted under the
terms of the Convertible Subordinated Documents and “Senior Indebtedness”, as
defined in the Convertible Subordinated Documents, and permitted to be secured
under the Convertible Subordinated Documents.

 

(d)                                 Subordinated
Indebtedness.  The Secured
Obligations constitute shall at all times constitute senior indebtedness which
is entitled to the benefits of the subordination provisions of all outstanding
Subordinated Indebtedness, including, but not limited to, the Convertible
Subordinated Indebtedness.

 

Section 5.24.  Amendment
of Organizational Documents.  No
Company shall amend its Organizational Documents to change its state of
organization, or otherwise amend its Organizational Documents in any manner
adverse to Lenders, without the prior written consent of Agent.

 

Section 5.25.  Collateral.  Borrower shall:

 

(a)                                  at
all reasonable times and after reasonable prior notice, allow Agent or any
Lender by or through any of its officers, agents, employees, attorneys, or
accountants to (i) examine, inspect, and make extracts from Borrower’s books
and other records, including, without limitation, the tax returns of Borrower;
(ii) arrange for verification of Borrower’s Accounts, under reasonable
procedures; and (iii) examine and inspect Borrower’s Inventory and Equipment,
wherever located, under reasonable procedures; provided that any such
examination or verification shall be limited, except during the continuance of
an Event of Default, to one visit per year;

 

(b)                                 use
commercial reasonable efforts to promptly furnish to Agent or any Lender upon
reasonable request (i) additional statements and information with respect to
the Collateral, and all writings and information relating to or evidencing any
of Borrower’s Accounts (including, without limitation, computer printouts or
typewritten reports listing the mailing addresses of all present Account
Debtors), and (ii) any other writings and information as Agent or such Lender
may reasonably request;

 

55

 

(c)                                  notify
Agent in writing immediately upon the creation by any Company of a Deposit
Account not listed on Schedule 6.18 hereto and provide for the
execution of a Control Agreement with respect thereto, if required by Agent or
the Required Lenders;

 

(d)                                 maintain
Borrower’s Equipment (that is necessary in the business of the Companies) in
good operating condition and repair, ordinary wear and tear and casualty loss
excepted, making all necessary replacements thereof in its reasonable business
judgment so that the value and operating efficiency thereof shall at all times
be maintained and preserved;

 

(e)                                  deliver
to Agent to hold as security for the Secured Obligations, within ten Business
Days upon the written request of Agent, all certificated Investment Property
owned by a Credit Party, in suitable form for transfer by delivery, or
accompanied by duly executed instruments of transfer or assignment in blank,
all in form and substance reasonably satisfactory to Agent, or in the event
such Investment Property is in the possession of a securities intermediary or
credited to a securities account, execute with the related securities
intermediary an investment property control agreement over such securities
account in favor of Agent, for the benefit of the Lenders, in form and
substance reasonably satisfactory to Agent; and

 

(f)                                    upon
the reasonable request of Agent, promptly take such action and promptly make,
execute, and deliver all such additional and further items, deeds, assurances,
instruments and any other writings as Agent may from time to time reasonably
deem necessary, including, without limitation, chattel paper, to carry into
effect the intention of this Agreement or so as to completely vest in and
ensure to Agent and the Lenders their respective rights hereunder and in or to
the Collateral or the Real Property.

 

Borrower hereby authorizes
Agent, on behalf of the Lenders, to file U.C.C. Financing Statements with
respect to the Collateral. All Related Expenses are payable to Agent within
thirty (30) days after demand therefor; after the occurrence of an Event of
Default, Agent may, at its option, debit Related Expenses directly to any
deposit account of a Company located at Agent or the Revolving Credit Notes.

 

Section 5.26.  Property Acquired Subsequent to the
Closing Date and Right to Take Additional Collateral.  Borrower shall provide Agent with prompt
written notice with respect to any real property acquired by any Company
subsequent to the Closing Date with an individual value in excess of One
Million Dollars ($1,000,000).  In
addition to any other right Agent and the Lenders may have pursuant to this
Agreement or otherwise, upon written request of Agent, whenever made, Borrower
shall grant to Agent as additional security for the Secured Obligations, a
security interest in or Lien on such real property of Borrower.  Borrower agrees, promptly after the date of
such written request, to secure all of such Indebtedness by delivering to Agent
security agreements, mortgages (or deeds of trust, if applicable) or other
documents, instruments or agreements or such thereof as Agent may require.  In addition, if any Subsidiary acquires any
federally registered intellectual property (including, without limitation, any
patents, patent applications, trademarks, service marks, copyrights, licenses,
and rights with respect to the foregoing) subsequent to the Closing Date,
Borrower shall promptly provide written notice to Agent and such Subsidiary
shall promptly execute and deliver an Intellectual Property Collateral

 

56

 

Assignment Agreement with
respect to such federally registered intellectual property.  Borrower shall pay all recordation, legal
and other expenses in connection with the foregoing.

 

ARTICLE VI.  REPRESENTATIONS AND WARRANTIES

 

Section 6.1.  Corporate Existence; Subsidiaries;
Foreign Qualification.  Each Company
is duly organized, validly existing, and in good standing under the laws of its
state or jurisdiction of incorporation or organization, and is duly qualified
and authorized to do business and is in good standing as a foreign entity in
the jurisdictions set forth opposite its name on Schedule 6.1
hereto, which are all of the states or jurisdictions where the character of its
property or its business activities makes such qualification necessary, except
where a failure to qualify or be in good standing would not reasonably be
expected to result in a Material Adverse Effect.  Schedule 6.1 hereto sets forth, as of the Closing
Date, each Subsidiary of Borrower (and whether such Subsidiary is a Dormant
Subsidiary), its state of formation, its relationship to Borrower, including
the percentage of each class of stock or membership interests owned by a
Company, the location of its chief executive office and its principal place of
business.  Borrower owns all of the
equity interests of each of its Subsidiaries.

 

Section 6.2.  Corporate Authority.  Each Credit Party has the right and power
and is duly authorized and empowered to enter into, execute and deliver the
Loan Documents to which it is a party and to perform and observe the provisions
of the Loan Documents.  The Loan
Documents to which each Credit Party is a party have been duly authorized and
approved by such Credit Party’s board of directors or other governing body, as
applicable, and are the valid and binding obligations of such Credit Party,
enforceable against such Credit Party in accordance with their respective
terms, except as enforceability thereof
may be limited by bankruptcy, insolvency, moratorium and similar laws and by
equitable principles, whether considered at law or in equity.    The execution, delivery and performance of the Loan Documents
will not conflict with nor result in any breach in any of the provisions of, or
constitute a default under, or result in the creation of any Lien (other than
Liens permitted under Section 5.9 hereof) upon any assets or property of
any Company under the provisions of, such Company’s Organizational Documents or
any material agreement.

 

Section 6.3.  Compliance with Laws and Contracts.  Except as would not reasonably be expected
to result in a Material Adverse Effect, each Company:

 

(a)                                  holds
permits, certificates, licenses, orders, registrations, franchises,
authorizations, and other approvals from any Governmental Authority necessary
for the conduct of its business and is in compliance with all applicable laws
relating thereto;

 

(b)                                 is
in compliance with all federal, state, local, or foreign applicable statutes,
rules, regulations, and orders including, without limitation, those relating to
occupational safety and health and equal employment practices; and

 

(c)                                  is
not in violation of or in default under any agreement to which it is a party or
by which its assets are subject or bound.

 

57

 

Section 6.4.  Litigation and Administrative Proceedings.  Except as disclosed on Schedule 6.4
hereto and would not reasonably be expected to result in a Material Adverse
Effect, as of the Closing Date, there are (a) no lawsuits, actions,
investigations, or other proceedings pending or, to the knowledge of each
Company, threatened against any Company, or in respect of which any Company may
have any liability, in any court or before any Governmental Authority,
arbitration board, or other tribunal, (b) no orders, writs, injunctions,
judgments, or decrees of any court or government agency or instrumentality to
which any Company is a party or by which the property or assets of any Company
are bound, or (c) no grievances, disputes, or controversies outstanding
with any union or other organization of the employees of any Company, or
threats of work stoppage, strike, or pending demands for collective bargaining.

 

Section 6.5.  Title to Assets.  Each Company has good title to and ownership
of all property it purports to own, which property is free and clear of all
Liens, except those permitted under Section 5.9 hereof.

 

Section 6.6.  Liens and Security Interests.  On and after the Closing Date, except for
Liens permitted pursuant to Section 5.9 hereof, (a) there is and will
be no U.C.C. Financing Statement or similar notice of Lien outstanding covering
any personal property of any Company, other than a U.C.C. Financing Statement
in favor of Agent for the benefit of the Lenders; (b) there is and will be
no mortgage outstanding covering any real property of any Company, other than a
mortgage in favor of Agent for the benefit of the Lenders; and (c) no real
or personal property of any Company is subject to any security interest or Lien
of any kind, other than any security interest or Lien that may be granted to
Agent, for the benefit of the Lenders. 
No Company has entered into any contract or agreement (other than a
contract or agreement entered into in connection with the purchase or lease of
fixed assets or an intellectual property licensing agreement that prohibits
Liens on such assets) that exists on or after the Closing Date that would
prohibit Agent or the Lenders from acquiring a Lien on, or a collateral
assignment of, any of the property or assets of any Company.

 

Section 6.7.  Tax Returns.  All federal and all material state and local
tax returns and other reports required by law to be filed in respect of the
income, business, properties and employees of each Company have been filed and
all taxes, assessments, fees and other governmental charges that are due and
payable have been paid, except as otherwise permitted herein.  The provision for taxes on the books of each
Company is adequate for all years not closed by applicable statutes and for the
current fiscal year.

 

Section 6.8.  Environmental Laws.  Each Company is in material compliance with
all material Environmental Laws, including, without limitation, all
Environmental Laws in all jurisdictions in which any Company owns or operates,
or has owned or operated, a facility or site, arranges or has arranged for
disposal or treatment of hazardous substances, solid waste or other wastes,
accepts or has accepted for transport any hazardous substances, solid waste or
other wastes or holds or has held any interest in real property or otherwise.  No material litigation or proceeding arising
under, relating to or in connection with any Environmental Law is pending or,
to the best knowledge of any officer of any Company, threatened, against any
Company, any real property in which any Company holds or has held an interest
or any past or present operation of

 

58

 

any Company.  No release, threatened release or disposal
of hazardous waste, solid waste or other wastes is occurring, or has occurred
(other than those that are currently being cleaned up in accordance with
Environmental Laws), on, under or to any real property in which any Company
holds any interest or performs any of its operations, in material violation of
any material Environmental Law.  As used
in this Section 6.8, “litigation or proceeding” means any demand, claim,
notice, suit, suit in equity, action, administrative action, investigation or
inquiry whether brought by any Governmental Authority or private Person, or
otherwise.

 

Section 6.9.  Locations.  As of the Closing Date, the Companies have places of business or
maintain their Accounts, Inventory and Equipment at the locations set forth on Schedule 6.9
hereto.  Each Company’s chief executive
office is set forth on Schedule 6.9 hereto.  Schedule 6.9 further specifies
whether each location, as of the Closing Date, (a) is owned by the
Companies, or (b) is leased by a Company from a third party.  Schedule 6.9 correctly
identifies the name and address of each third party location where assets of
the Companies with a value in excess of One Million Dollars ($1,000,000) are
located.

 

Section 6.10.  Employee Benefits Plans.  Schedule 6.10 hereto identifies
each ERISA Plan as of the Closing Date. 
Except as would not reasonably be expected to result in a Material
Adverse Effect:

 

(a)                                  no
ERISA Event has occurred or is expected to occur with respect to an ERISA Plan;

 

(b)                                 full
payment has been made of all amounts that a Controlled Group member is
required, under applicable law or under the governing documents, to have paid
as a contribution to or a benefit under each ERISA Plan;

 

(c)                                  the
liability of each Controlled Group member with respect to each ERISA Plan has
been fully funded based upon reasonable and proper actuarial assumptions, has
been fully insured, or has been fully reserved for on its financial statements
in accordance with GAAP;

 

(d)                                 no
changes have occurred or are expected to occur that would cause a material
increase in the cost of providing benefits under the ERISA Plan;

 

(e)                                  with
respect to each ERISA Plan that is intended to be qualified under Code
Section 401(a), (i) the ERISA Plan and any associated trust
operationally comply with the applicable requirements of Code
Section 401(a); (ii)  the ERISA Plan and any associated trust have
been amended to comply with all such requirements as currently in effect, other
than those requirements for which a retroactive amendment can be made within
the “remedial amendment period” available under Code
Section 401(b) (as extended under Treasury Regulations and other Treasury
pronouncements upon which taxpayers may rely); (iii) the ERISA Plan and
any associated trust have received a favorable determination letter from the
Internal Revenue Service stating that the ERISA Plan qualifies under Code
Section 401(a), that the associated trust qualifies under Code
Section 501(a) and, if applicable, that any cash or deferred
arrangement under the ERISA Plan qualifies under Code Section 401(k),
unless the ERISA Plan was first adopted at a time for which the above-described
“remedial amendment period” has not yet

 

59

 

expired; (iv) the
ERISA Plan currently satisfies the requirements of Code Section 410(b),
without regard to any retroactive amendment that may be made within the
above-described “remedial amendment period”; and (v) no contribution made
to the ERISA Plan is subject to an excise tax under Code Section 4972; and

 

(f)                                    with
respect to any Pension Plan, the “accumulated benefit obligation” of Controlled
Group members with respect to the Pension Plan (as determined in accordance
with Statement of Accounting Standards No. 87, “Employers’ Accounting for
Pensions”) does not exceed the fair market value of Pension Plan assets.

 

Section 6.11.  Consents or Approvals.  No material consent, approval or
authorization of, or filing, registration or qualification with, any
Governmental Authority or any other Person is required to be obtained or
completed by any Company in connection with the execution, delivery or
performance of any of the Loan Documents, that has not already been obtained or
completed.

 

Section 6.12.  Solvency.  Borrower has received consideration that is the reasonable
equivalent value of the obligations and liabilities that Borrower has incurred
to Agent and the Lenders.  Borrower is
not insolvent as defined in any applicable state, federal or relevant foreign
statute, nor will Borrower be rendered insolvent by the execution and delivery
of the Loan Documents to Agent and the Lenders.  Borrower is not engaged or about to engage in any business or
transaction for which the assets retained by it are or will be an unreasonably
small amount of capital, taking into consideration the obligations to Agent and
the Lenders incurred hereunder. 
Borrower does not intend to, nor does it believe that it will, incur
debts beyond its ability to pay such debts as they mature.

 

Section 6.13.  Financial Statements.  The Consolidated financial statements of
Borrower for the fiscal year ended December 31, 2003 and the quarter ended
March 31, 2004, furnished to Agent and the Lenders, are true and complete
in all material respects, have been prepared in accordance with GAAP, and
fairly present in all material respects the financial condition of the
Companies as of the dates of such financial statements and the results of their
operations for the periods then ending. 
As of the Closing Date, since the dates of such statements, there has
been no material adverse change in any Company’s financial condition,
properties or business or any change in any Company’s accounting procedures.

 

Section 6.14.  Regulations.  No Company is engaged principally or as one
of its important activities, in the business of extending credit for the
purpose of purchasing or carrying any “margin stock” (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System of the
United States of America).  Neither the
granting of any Loan (or any conversion thereof) or Letter of Credit nor the
use of the proceeds of any Loan or Letter of Credit will violate, or be inconsistent
with, the provisions of Regulation T, U or X or any other Regulation of such
Board of Governors.

 

Section 6.15.  Material Agreements.  Except as disclosed on Schedule 6.15
hereto, on the Closing Date, no Company is a party to any (a) debt instrument
(excluding the Loan Documents); (b) real estate lease, whether as lessee
or lessor thereunder; (c) contract, commitment, agreement, or other
arrangement with any of its “Affiliates” (as such term is

 

60

 

defined in the Securities
Exchange Act of 1934, as amended) other than a Company; (d) management or
employment contract or contract for personal services with any of its
Affiliates that is not otherwise terminable at will or on less than ninety (90)
days’ notice without liability; or (e) collective bargaining agreement.

 

Section 6.16.  Intellectual Property.  Each Company owns or has the right to use
all of its material patents, patent applications, industrial designs,
trademarks, service marks, copyrights and licenses, and rights with respect to
the foregoing necessary for the conduct of its business, without any known
significant conflict with the rights of others.  As of the Closing Date, no Subsidiary owns any federally
registered intellectual property, including, without limitation, any patents,
patent applications, trademarks, service marks, copyrights, licenses, and
rights with respect to the foregoing.

 

Section 6.17.  Insurance.  Each Company maintains with financially sound and reputable
insurers insurance with coverage and limits as required by law and as is
customary with Persons engaged in the same businesses as the Companies.  Schedule 6.17 hereto sets forth
all insurance carried by the Companies on the Closing Date, setting forth in
detail the amount and type of such insurance.

 

Section 6.18.  Deposit Accounts.  Schedule 6.18 hereto lists all
banks (other than payroll, tax withholding or trust accounts) and other
financial institutions at which any Company maintains deposit or other accounts
as of the Closing Date, and Schedule 6.18 hereto correctly
identifies the name, address and telephone number of each depository, the name
in which the account is held, a description of the purpose of the account, and
the complete account number therefor.

 

Section 6.19.  Accurate and Complete Statements.  Neither the Loan Documents nor any written
statement made by any Company in connection with any of the Loan Documents
(excluding budgets and projections), contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained therein or in the Loan Documents not materially misleading.  On the Closing Date, after due inquiry by
Borrower, there is no known fact that any Company has not disclosed to Agent
and the Lenders that has or is likely to have a Material Adverse Effect.

 

Section 6.20.  Note Agreement.  No Event of Default (as defined in the Note
Agreement) or Default (as defined in the Note Agreement) exists, nor will any
such Event of Default or Default exist immediately after the granting of any
Loan or the issuance of any Letter of Credit under this Agreement.

 

Section 6.21.  Investment Company; Holding Company.  No Company is (a) an “investment
company” or a company “controlled” by an “investment company” required to be
registered as such within the meaning of the Investment Company Act of 1940, as
amended, or (b) subject to regulation under the Public Utility Holding
Company Act of 1935 or the Federal Power Act, each as amended, or any foreign,
federal, state or local statute or regulation limiting its ability to incur
Indebtedness.

 

61

 

Section 6.22.  Defaults.  No Default or Event of Default exists hereunder, nor will any
begin to exist immediately after the execution and delivery hereof.

 

ARTICLE VII. SECURITY

 

Section 7.1.  Security Interest in Collateral.  In consideration of and as security for the
full and complete payment of all of the Secured Obligations, Borrower hereby
grants to Agent for the benefit of the Lenders a security interest in the
Collateral.

 

Section 7.2.  Collections and Receipt of Proceeds by
Borrower.

 

(a)                                  Upon
written notice to Borrower from Agent, at the election of the Required Lenders,
after the occurrence and during the continuance of an Event of Default, a Cash
Collateral Account shall be opened by Borrower at the main office of Agent (or
such other office as shall be designated by Agent) and all such lawful
collections of Borrower’s Accounts and such Proceeds of Borrower’s Accounts and
Inventory shall be remitted daily by Borrower to Agent in the form in which
they are received by Borrower, either by mailing or by delivering such
collections and Proceeds to Agent, appropriately endorsed for deposit in the
Cash Collateral Account.  In the event
that such notice is given to Borrower from Agent, Borrower shall not commingle
such collections or Proceeds with any of Borrower’s other funds or property,
but shall hold such collections and Proceeds separate and apart therefrom upon
an express trust for Agent, for the benefit of the Lenders.  In such case, Agent may, in its sole
discretion, and shall, at the request of the Required Lenders, at any time and
from time to time after the occurrence and during the continuance of an Event
of Default, apply all or any portion of the account balance in the Cash
Collateral Account as a credit against (i) the outstanding principal or
interest of the Loans, or (ii) any other Secured Obligations.  If any remittance shall be dishonored, or
if, upon final payment, any claim with respect thereto shall be made against
Agent on its warranties of collection, Agent may charge the amount of such item
against the Cash Collateral Account or any other Deposit Account (other than a
trust, tax withholding or payroll account) maintained by Borrower with Agent or
with any other Lender, and, in any event, retain the same and Borrower’s
interest therein as additional security for the Secured Obligations.  Agent may, in its sole discretion, at any
time and from time to time, release funds from the Cash Collateral Account to
Borrower for use in Borrower’s business. 
The balance in the Cash Collateral Account may be withdrawn by Borrower
upon termination of this Agreement and payment in full of all of the Secured
Obligations (other than contingent indemnity obligations).

 

(b)                                 At
Agent’s request after the occurrence and during the continuance of an Event of
Default, Borrower shall cause all remittances representing collections and
Proceeds of Collateral to be mailed to a lock box at a location acceptable to
Agent, to which Agent shall have access for the processing of such items in
accordance with the provisions, terms and conditions of the customary lock box
agreement of Agent.

 

(c)                                  Agent,
or Agent’s designated agent, is hereby constituted and appointed Borrower’s
attorney-in-fact with authority and power to endorse, after the occurrence and
during the continuance of an Event of Default, any and all instruments,
documents, and chattel paper

 

62

 

upon Borrower’s failure
to do so.  Such authority and power,
being coupled with an interest, shall be (i) irrevocable until all of the
Secured Obligations (other than contingent indemnity obligations) are paid,
(ii) exercisable by Agent at any time and without any request upon Borrower by
Agent to so endorse, and (iii) exercisable in Agent’s name or Borrower’s
name.  Borrower hereby waives
presentment, demand, notice of dishonor, protest, notice of protest, and any
and all other similar notices with respect thereto, regardless of the form of
any endorsement thereof.  Agent and the
Lenders shall not be bound or obligated to take any action to preserve any
rights therein against prior parties thereto.

 

Section 7.3.  Collections and Receipt of Proceeds by
Agent.  Borrower hereby constitutes
and appoints Agent, or Agent’s designated agent, as Borrower’s attorney-in-fact
to exercise, at any time after the occurrence and during the continuance of an
Event of Default, all or any of the following powers which, being coupled with
an interest, shall be irrevocable until the complete and full payment of all of
the Secured Obligations (other than contingent indemnity obligations):

 

(a)                                  to
receive, retain, acquire, take, endorse, assign, deliver, accept, and deposit,
in the name of Agent or Borrower, any and all of Borrower’s cash, instruments,
chattel paper, documents, Proceeds of Accounts, Proceeds of Inventory,
collection of Accounts, and any other writings relating to any of the
Collateral;

 

(b)                                 to
transmit to Account Debtors, on any or all of Borrower’s Accounts, notice of
assignment to Agent, for the benefit of the Lenders, security interest therein
of Agent, for the benefit of the Lenders, and to request from such Account
Debtors at any time, in the name of Agent or Borrower, information concerning
Borrower’s Accounts and the amounts owing thereon;

 

(c)                                  to
transmit to purchasers of any or all of Borrower’s Inventory, notice of Agent’s
security interest therein, and to request from such purchasers at any time, in
the name of Agent or Borrower, information concerning Borrower’s Inventory and
the amounts owing thereon by such purchasers;

 

(d)                                 to
notify and require Account Debtors on Borrower’s Accounts and purchasers of
Borrower’s Inventory to make payment of their indebtedness directly to Agent;

 

(e)                                  to
take or bring, in the name of Agent or Borrower, all steps, actions, suits, or
proceedings deemed by Agent necessary or desirable to effect the receipt,
enforcement, and collection of the Collateral; and

 

(f)                                    to
accept all collections in any form relating to the Collateral, including
remittances that may reflect deductions, and to deposit the same, into
Borrower’s Cash Collateral Account or, at the option of Agent, to apply them as
a payment against the Loans or any other Secured Obligations in accordance with
this Agreement.

 

Section 7.4.  Use of Inventory and Equipment.  Until the exercise by Agent and the Required
Lenders of their rights under Article IX hereof, Borrower may (a) retain
possession of and use its Inventory and Equipment in any lawful manner not
inconsistent with this Agreement

 

63

 

or with the terms,
conditions, or provisions of any policy of insurance thereon; (b) sell or lease
its Inventory in the ordinary course of business; provided, however, that a
sale or lease in the ordinary course of business does not include a transfer in
partial or total satisfaction of an Indebtedness; and (c) use and consume any
raw materials or supplies, the use and consumption of which are necessary in
order to carry on Borrower’s business.

 

ARTICLE VIII.  EVENTS OF DEFAULT

 

Each of the following
shall constitute an Event of Default hereunder:

 

Section 8.1.  Payments.  If (a) the interest on any Loan, any commitment or other fee
or any other Obligation (other than those specified in subpart (b) hereof)
shall not be paid in full when due and payable or within three Business Days
thereafter, or (b) the principal of any Loan, or any reimbursement obligation
under any Letter of Credit that has been drawn, shall not be paid in full when
due and payable.

 

Section 8.2.  Special Covenants.  If any Company shall fail or omit to perform
and observe Section 5.7, 5.8, 5.9, 5.11, 5.12, 5.13, 5.15, 5.22 or
5.23(b), (c) or (d) hereof.

 

Section 8.3.  Other Covenants.  If any Company shall fail or omit to perform
and observe any agreement or other provision (other than those referred to in
Section 8.1 or 8.2 hereof) contained or referred to in this Agreement or
any Related Writing that is on such Company’s part to be complied with, and
that Default shall not have been fully corrected within thirty (30) days after the earlier of (a) any Financial
Officer of such Company becomes aware of the occurrence thereof, or (b) the
giving of written notice thereof to Borrower by Agent or the Required Lenders
that the specified Default is to be remedied.

 

Section 8.4.  Representations and Warranties.  If any representation or warranty made in
any Loan Document shall be false or misleading in any material respect.

 

Section 8.5.  Cross
Default.

 

(a)                                  Convertible Subordinated Indebtedness.  If
(i) any event of default (as each term or similar term is defined in any
Convertible Subordinated Document) shall occur under any Convertible
Subordinated Document or any agreement executed in connection therewith, or
(ii) the Indebtedness incurred in connection with any Convertible
Subordinated Note shall be accelerated for any reason.

 

(b)                                 Other Cross Defaults.  If
any Company shall default in the payment of principal or interest due and owing
(i) in an amount in excess of One Million Dollars ($1,000,000) beyond any
period of grace provided with respect thereto; or (ii) under any Material
Indebtedness Agreement beyond any period of grace provided with respect thereto
or in the performance or observance of any other agreement, term or condition
contained in any agreement under which such obligation is created, if the
effect of such default is to allow the acceleration of the maturity

 

64

 

of
such Indebtedness or to permit the holder thereof to cause such Indebtedness to
become due prior to its stated maturity.

 

Section 8.6.  ERISA Default.  The occurrence of one or more ERISA Events
that (a) the Required Lenders reasonably determine would have a Material
Adverse Effect, or (b) results in a Lien on assets of the Companies in
excess of Two Million Dollars ($2,000,000).

 

Section 8.7.  Change in Control.  If any Change in Control shall occur.

 

Section 8.8.  Money Judgment.  A final judgment or order for the payment of
money shall be rendered against any Company by a court of competent
jurisdiction, that remains unpaid or unstayed and undischarged for a period
(during which execution shall not be effectively stayed) of sixty (60) days
after the date on which the right to appeal has expired; provided that the
aggregate of all such judgments for all such Companies shall exceed One Million
Dollars ($1,000,000) (less (a) any
amount that will be covered by the proceeds of insurance and is not subject to
dispute by the insurance provider and (b) any money judgment to the extent such
amounts are provided by funds in a valid escrow account or similar arrangement).

 

Section 8.9.  Security.  If any Lien granted in this Agreement or any other Loan Document
in favor of Agent, for the benefit of the Lenders, shall be determined to be
(a) void, voidable or invalid, or is subordinated or not otherwise given the
priority contemplated by this Agreement with respect to any material amount of
Collateral and the Credit Parties have failed to promptly execute appropriate
documents to correct such matters, or (b) unperfected as to any material amount
of Collateral (as determined by Agent, in its reasonable discretion).

 

Section 8.10.  Validity of Loan Documents.  (a) Any material provision of any
material Loan Document shall at any time for any reason cease to be valid,
binding and enforceable against any Credit Party; (b) the validity,
binding effect or enforceability of any Loan Document against any Credit Party
shall be contested by any Credit Party; (c) any Credit Party shall deny
that it has any or further liability or obligation under any Loan Document; or
(d) any Loan Document shall be terminated, invalidated or set aside, or be
declared ineffective or inoperative in any material respect or in any material
way cease to give or provide to Agent and the Lenders the benefits purported to
be created thereby.  In addition to any
other material Loan Documents, this Agreement, each Note and each Guaranty of
Payment shall be deemed to be “material”.

 

Section 8.11.  Solvency.  If Borrower, Poorman-Douglas Corporation or
any other Company with assets over Five Million Dollars ($5,000,000) shall
(a)  except as permitted pursuant to Section 5.12 hereof, discontinue
business, (b) generally not pay its debts as such debts become due,
(c) make a general assignment for the benefit of creditors, (d) apply
for or consent to the appointment of an interim receiver, a receiver and
manager, an administrator, sequestrator, monitor, a custodian, a trustee, an
interim trustee, liquidator, agent or other similar official of all or a
substantial part of its assets or of such Company, (e) be adjudicated a
debtor or insolvent or have entered against it an order for relief under Title
11 of the United States Code, or under any other bankruptcy insolvency,
liquidation, winding-up, corporate or similar statute or law, foreign, federal,
state or provincial, in any applicable jurisdiction, now or hereafter existing,
as any of the foregoing the same may be amended from time to time, or other
applicable statute

 

65

 

for
jurisdictions outside of the United States, as the case may be, (f) file a
voluntary petition in bankruptcy, or file a proposal or notice of intention to
file a proposal or have an involuntary proceeding filed against it and the same
shall continue undismissed for a period of sixty (60) days from commencement of
such proceeding or case, or file a petition or an answer or an application or a
proposal seeking reorganization or an arrangement with creditors or seeking to
take advantage of any other law (whether federal, provincial or state, or, if
applicable, other jurisdiction) relating to relief of debtors, or admit (by
answer, by default or otherwise) the material allegations of a petition filed
against it in any bankruptcy, reorganization, insolvency or other proceeding
(whether federal, provincial or state, or, if applicable, other jurisdiction)
relating to relief of debtors, (g) suffer or permit or to continue
unstayed and in effect for sixty (60) consecutive days any judgment, decree or
order entered by a court of competent jurisdiction, that approves a petition or
an application or a proposal seeking its reorganization or appoints an interim
receiver, a receiver and manager, an administrator, custodian, trustee, interim
trustee or liquidator of all or a substantial part of its assets, or of such
Company, or (h) take, or omit to take, any action in order thereby to effect
any of the foregoing.

 

ARTICLE IX.  REMEDIES UPON DEFAULT

 

Notwithstanding any
contrary provision or inference herein or elsewhere:

 

Section 9.1.  Optional Defaults.  If any Event of Default referred to in
Section 8.1, 8.2, 8.3, 8.4, 8.5, 8.6, 8.7, 8.8, 8.9, or 8.10 hereof shall
occur, Agent may, with the consent of the Required Lenders, and shall, at the
written request of the Required Lenders, give written notice to Borrower, to:

 

(a)                                  terminate
the Commitment, if not previously terminated, and, immediately upon such
election, the obligations of the Lenders, and each thereof, to make any further
Loan and the obligation of the Fronting Lender to issue any Letter of Credit
immediately shall be terminated; and/or

 

(b)                                 accelerate
the maturity of all of the Obligations (if the Obligations are not already due
and payable), whereupon all of the Obligations shall become and thereafter be
immediately due and payable in full without any presentment or demand and
without any further or other notice of any kind, all of which are hereby waived
by Borrower.

 

Section 9.2.  Automatic Defaults.  If any Event of Default referred to in
Section 8.11 hereof shall occur:

 

(a)                                  all
of the Commitment shall automatically and immediately terminate, if not
previously terminated, and no Lender thereafter shall be under any obligation
to grant any further Loan, nor shall the Fronting Lender be obligated to issue
any Letter of Credit; and

 

(b)                                 the
principal of and interest then outstanding on all of the Loans, and all of the
other Obligations, shall thereupon become and thereafter be immediately due and
payable in full

 

66

 

(if the Obligations are
not already due and payable), all without any presentment, demand or notice of
any kind, which are hereby waived by Borrower.

 

Section 9.3.  Letters of Credit.  If the maturity of the Obligations shall be
accelerated pursuant to Section 9.1 or 9.2 hereof, Borrower shall
immediately deposit with Agent, as security for the obligations of Borrower and
any Guarantor of Payment to reimburse Agent and the Revolving Lenders for any
then outstanding Letters of Credit, cash equal to the sum of the aggregate
undrawn balance of any then outstanding Letters of Credit.  Agent and the Lenders are hereby authorized,
at their option, to deduct any and all such amounts from any deposit balances
then owing by any Lender (or any affiliate of such Revolving Lender, wherever
located) to or for the credit or account of any Company, as security for the
obligations of Borrower and any Guarantor of Payment to reimburse Agent and the
Revolving Lenders for any then outstanding Letters of Credit.

 

Section 9.4.  Offsets.  If there shall occur or exist any Event of Default referred to in
Section 8.11 hereof or if the maturity of the Obligations is accelerated
pursuant to Section 9.1 or 9.2 hereof, each Lender shall have the right at
any time to set off against, and to appropriate and apply toward the payment
of, any and all of the Obligations then owing by Borrower to such Lender
(including, without limitation, any participation purchased or to be purchased
pursuant to Section 2.2 or 9.5 hereof), whether or not the same shall then
have matured, any and all deposit (general or special (but excluding trust, tax
withholding and payroll accounts) balances and all other indebtedness then held
or owing by such Lender (including, without limitation, by branches and
agencies or any affiliate of such Lender) to or for the credit or account of
Borrower or any Guarantor of Payment, all without notice to or demand upon
Borrower or any other Person, all such notices and demands being hereby
expressly waived by Borrower.

 

Section 9.5.  Equalization Provision.

 

(a)                                  Equalization
Within Commitments Prior to an Equalization Event.  Each Revolving Lender agrees with the other
Revolving Lenders that if it, at any time, shall obtain any Advantage over the
other Revolving Lenders, or any thereof, in respect of the Applicable Debt
(except as to Swing Loans, Letters of Credit and amounts under Article III
hereof), such Revolving Lender shall purchase from the other Revolving Lenders,
for cash and at par, such additional participation in the Applicable Debt as
shall be necessary to nullify the Advantage. 
Each Term Lender agrees with the other Term Lenders that if it, at any
time, shall obtain any Advantage over the other Term Lenders, or any thereof,
in respect of the Applicable Debt (except as to amounts under Article III
hereof), such Term Lender shall purchase from the other Term Lenders, for cash
and at par, such additional participation in the Applicable Debt as shall be
necessary to nullify the Advantage.

 

(b)                                 Equalization
Between Commitments After an Equalization Event.  After the occurrence of an Equalization Event, each Lender agrees
with the other Lenders that if such Lender, at any time, shall obtain any
Advantage over the other Lenders or any thereof determined in respect of the
Obligations (including Swing Loans and Letters of Credit but excluding amounts
under Article III hereof) then outstanding, such Lender shall purchase
from the other Lenders, for cash and at par, such additional participation in
the Obligations as shall be

 

67

 

necessary to nullify the
Advantage in respect of the Obligations. 
For purposes of determining whether or not, after the occurrence of an
Equalization Event, an Advantage in respect of the Obligations shall exist,
Agent shall, as of the date that the Equalization Event occurs:

 

(i)                                     add
the Revolving Credit Exposure and the Term Loan Exposure to determine the
equalization maximum amount (the “Equalization Maximum Amount”); and

 

(ii)                                  determine
an equalization percentage (the “Equalization Percentage”) for each Lender by
dividing the aggregate amount of its Lender Credit Exposure by the Equalization
Maximum Amount.

 

After the date of an
Equalization Event, Agent shall determine whether an Advantage exists among the
Lenders by using the Equalization Percentage. 
Such determination shall be conclusive absent manifest error.

 

(c)                                  Recovery
of Amount.  If any such Advantage
resulting in the purchase of an additional participation as set forth in
subsections (a) or (b) hereof shall be recovered in whole or in part from the
Lender receiving the Advantage, each such purchase shall be rescinded, and the
purchase price restored (but without interest unless the Lender receiving the
Advantage is required to pay interest on the Advantage to the Person recovering
the Advantage from such Lender) ratably to the extent of the recovery.

 

(d)                                 Application
and Sharing of Set-Off Amounts. 
Each Lender further agrees with the other Lenders that, if it at any
time shall receive any payment for or on behalf of Borrower on any Indebtedness
owing by Borrower to that Lender (whether by voluntary payment, by realization
upon security, by reason of offset of any deposit or other Indebtedness, by
counterclaim or cross action, by enforcement of any right under any Loan
Document, or otherwise), it shall apply such payment first to any and all
Indebtedness owing by Borrower to that Lender pursuant to this Agreement
(including, without limitation, any participation purchased or to be purchased
pursuant to this Section or any other Section of this
Agreement).  Each Credit Party agrees
that any Lender so purchasing a participation from the other Lenders, or any
thereof, pursuant to this Section 9.5 may exercise all of its rights of
payment (including the right of set-off) with respect to such participation as
fully as if such Lender were a direct creditor of such Credit Party in the amount
of such participation.

 

Section 9.6.  Collateral.  Upon the occurrence and during the continuance of an Event of
Default and at all times thereafter, Agent and the Lenders shall have the
rights and remedies of a secured party under the Ohio Revised Code as in effect
from time to time, in addition to the rights and remedies of a secured party
provided elsewhere within this Agreement, in any other Related Writing executed
by Borrower or otherwise provided in law or equity.  Agent may require Borrower to assemble the Collateral, which
Borrower agrees to do, and make it available to Agent and the Lenders at a
reasonably convenient place to be designated by Agent. Agent may, with or
without notice to or demand upon Borrower and with or without the aid of legal
process, make use of such force as may be necessary to enter any premises where
the Collateral, or any thereof, may be found and to take possession thereof
(including anything found in or on

 

68

 

the Collateral that is
not specifically described in this Agreement, each of which findings shall be
considered to be an accession to and a part of the Collateral) and for that
purpose may pursue the Collateral wherever the same may be found, without
liability for trespass or damage caused thereby to Borrower.  After any delivery or taking of possession
of the Collateral, or any thereof, pursuant to this Agreement, then, with or
without resort to Borrower personally or any other Person or property, all of
which Borrower hereby waives, and upon such terms and in such manner as Agent
may deem advisable, Agent, in its discretion, may sell, assign, transfer and
deliver any of the Collateral at any time, or from time to time.  No prior notice need be given to Borrower or
to any other Person in the case of any sale of Collateral that Agent determines
to be perishable or to be declining speedily in value or that is customarily
sold in any recognized market, but in any other case Agent shall give Borrower
not fewer than ten days prior notice of either the time and place of any public
sale of the Collateral or of the time after which any private sale or other
intended disposition thereof is to be made. 
Borrower waives advertisement of any such sale and (except to the extent
specifically required by the preceding sentence) waives notice of any kind in
respect of any such sale.  At any such
public sale, Agent or the Lenders may purchase the Collateral, or any part
thereof, free from any right of redemption, all of which rights Borrower hereby
waives and releases.  After deducting
all Related Expenses, and after paying all claims, if any, secured by Liens
having precedence over this Agreement, Agent may apply the net proceeds of each
such sale to or toward the payment of the Secured Obligations, whether or not
then due, in such order and by such division as Agent, in its sole discretion,
may deem advisable. Any excess, to the extent permitted by law, shall be paid
to Borrower, and Borrower shall remain liable for any deficiency.  In addition, Agent shall at all times have
the right to obtain new appraisals of Borrower or the Collateral, the cost of
which shall be paid by Borrower.

 

Section 9.7.  Other Remedies.  The remedies in this Article IX are in
addition to, not in limitation of, any other right, power, privilege, or
remedy, either in law, in equity, or otherwise, to which the Lenders may be
entitled.  Agent shall exercise the
rights under this Article IX and all other collection efforts on behalf of
the Lenders and no Lender shall act independently with respect thereto, except
as otherwise specifically set forth in this Agreement.

 

Section 9.8.  Application of Proceeds.

 

(a)                                  Payments
Prior to Exercise of Remedies. 
Prior to the exercise by Agent on behalf of the Lenders of remedies
under this Agreement or the other Loan Documents, all monies received by Agent
shall be applied, unless otherwise required by the terms of the other Loan
Documents or by applicable law, as follows (provided that Agent shall have the
right at all times to apply any payment received from Borrowers first to the
payment of all obligations (to the extent not paid by Borrowers) incurred by
Agent pursuant to Section 11.5 hereof and to the payment of Related
Expenses):

 

(i)                                     with
respect to payments received in connection with the Revolving Credit
Commitment, to the Revolving Credit Lenders (or the Swing Line Lender or the
Fronting Lender, as appropriate); and

 

69

 

(ii)                                  with
respect to payments received in connection with the Term Loan Commitment, to
the Term Lenders.

 

(b)                                 Payments
Subsequent to Exercise of Remedies. 
After the exercise by Agent or the Required Lenders of remedies under
this Agreement or the other Loan Documents, all monies received by Agent shall be
applied, unless otherwise required by the terms of the other Loan Documents or
by applicable law, as follows:

 

(i)                                     first,
to the payment of all obligations (to the extent not paid by Borrowers)
incurred by Agent pursuant to Section 11.5 hereof and to the payment of
Related Expenses;

 

(ii)                                  second,
to the payment pro rata of (A) interest then accrued and payable on the
outstanding Loans, (B) any fees then accrued and payable to Agent, and
(C) any fees then accrued and payable to any Fronting Lender or the holders
of the Letter of Credit Commitment in respect of the Letter of Credit Exposure;

 

(iii)                               third,
(A) to the Lenders, on a pro rata basis, based upon each such Lender’s Overall
Commitment Percentage; provided that the amounts payable in respect of the Letter
of Credit Exposure shall be held and applied by Agent as security for the
reimbursement obligations in respect thereof, and, if any Letter of Credit
shall expire without being drawn, then the amount with respect to such Letter
of Credit shall be distributed to the Lenders, on a pro rata basis in
accordance with this subsection (iii), and (B) the Indebtedness under any
Hedge Agreement, such amount to be based upon the net termination obligation of
Borrower under such Hedge Agreement; with such payment to be pro rata between
(A) and (B) hereof; and

 

(iv)                              finally,
any remaining surplus after all of the Secured Obligations have been paid in
full, to Borrower or to whomsoever shall be lawfully entitled thereto.

 

ARTICLE X.  THE AGENT

 

The Lenders authorize
KeyBank National Association and KeyBank National Association hereby agrees to
act as agent for the Lenders in respect of this Agreement upon the terms and
conditions set forth elsewhere in this Agreement, and upon the following terms
and conditions:

 

Section 10.1.  Appointment and Authorization.  Each Lender hereby irrevocably appoints and
authorizes Agent to take such action as agent on its behalf and to exercise
such powers hereunder as are delegated to Agent by the terms hereof, together
with such powers as are reasonably incidental thereto.  Neither Agent nor any of its affiliates,
directors, officers, attorneys or employees shall (a) be liable for any
action taken or omitted to be taken by it or them hereunder or in connection
herewith, except for its or their own gross negligence or willful misconduct
(as determined by a court of competent jurisdiction), or be responsible in any
manner to any of the Lenders for the effectiveness, enforceability,
genuineness, validity or due execution

 

70

 

of this Agreement or any
other Loan Documents, (b) be under any obligation to any Lender to
ascertain or to inquire as to the performance or observance of any of the
terms, covenants or conditions hereof or thereof on the part of Borrower or any
other Company, or the financial condition of Borrower or any other Company, or
(c) be liable to any of the Companies for consequential damages resulting
from any breach of contract, tort or other wrong in connection with the negotiation,
documentation, administration or collection of the Loans or Letters of Credit
or any of the Loan Documents.

 

Section 10.2.  Note Holders.  Agent may treat the payee of any Note as the
holder thereof until written notice of transfer shall have been filed with
Agent, signed by such payee and in form satisfactory to Agent.

 

Section 10.3.  Consultation With Counsel.  Agent may consult with legal counsel
selected by Agent and shall not be liable for any action taken or suffered in
good faith by it in accordance with the opinion of such counsel.

 

Section 10.4.  Documents.  Agent shall not be under any duty to examine into or pass upon
the validity, effectiveness, genuineness or value of any Loan Document or any
other Related Writing furnished pursuant hereto or in connection herewith or
the value of any collateral obtained hereunder, and Agent shall be entitled to
assume that the same are valid, effective and genuine and what they purport to
be.

 

Section 10.5.  Agent and Affiliates.  With respect to the Loans, Agent shall have
the same rights and powers hereunder as any other Lender and may exercise the
same as though it were not Agent, and Agent and its affiliates may accept
deposits from, lend money to and generally engage in any kind of business with
any Company or any Affiliate.

 

Section 10.6.  Knowledge of Default.  It is expressly understood and agreed that
Agent shall be entitled to assume that no Default or Event of Default has
occurred, unless Agent has been notified by a Lender in writing that such
Lender believes that a Default or Event of Default has occurred and is
continuing and specifying the nature thereof or has been notified by Borrower
pursuant to Section 5.14 hereof.

 

Section 10.7.  Action by Agent.  Subject to the other terms and conditions
hereof, so long as Agent shall be entitled, pursuant to Section 10.6
hereof, to assume that no Default or Event of Default shall have occurred and
be continuing, Agent shall be entitled to use its discretion with respect to
exercising or refraining from exercising any rights that may be vested in it
by, or with respect to taking or refraining from taking any action or actions
that it may be able to take under or in respect of, this Agreement.  Agent shall incur no liability under or in
respect of this Agreement by acting upon any notice, certificate, warranty or
other paper or instrument believed by it to be genuine or authentic or to be
signed by the proper party or parties, or with respect to anything that it may
do or refrain from doing in the reasonable exercise of its judgment, or that
may seem to it to be necessary or desirable in the premises.

 

Section 10.8.  Release of Collateral or Guarantor of
Payment.  In the event of a sale of
assets permitted by Section 5.12 hereof (or otherwise permitted pursuant
to this Agreement)

 

71

 

where the proceeds of
such sale or sales are applied in accordance with the terms of this Agreement
to the extent required to be so applied, Agent, at the request and expense of Borrower,
is hereby authorized by the Lenders to (a) release such Collateral from
this Agreement, (b) release a Guarantor of Payment in connection with an
asset sale permitted hereunder, and (c) duly assign, transfer and deliver
to the affected Company (without recourse and without any representation or
warranty) such Collateral as is then (or has been) so sold or released and as
may be in possession of Agent and has not theretofore been released pursuant to
this Agreement.

 

Section 10.9.  Notice of Default.  In the event that Agent shall have acquired
actual knowledge of any Default or Event of Default, Agent shall promptly
notify the Lenders and shall take such action and assert such rights under this
Agreement as the Required Lenders shall direct and Agent shall inform the other
Lenders in writing of the action taken. 
Agent may take such action and assert such rights as it deems to be
advisable, in its discretion, for the protection of the interests of the
holders of the Obligations.

 

Section 10.10.  Indemnification of Agent.  The Lenders agree to indemnify Agent (to the
extent not reimbursed by Borrower) ratably, according to their respective
Overall Commitment Percentages, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including attorneys’ fees) or disbursements of any kind or nature
whatsoever that may be imposed on, incurred by or asserted against Agent in its
capacity as agent in any way relating to or arising out of this Agreement or
any Loan Document or any action taken or omitted by Agent with respect to this
Agreement or any Loan Document, provided that no Lender shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses (including attorneys’ fees) or disbursements
resulting from Agent’s gross negligence or willful misconduct as determined by
a court of competent jurisdiction, or from any action taken or omitted by Agent
in any capacity other than as agent under this Agreement or any other Loan
Document.

 

Section 10.11.  Successor Agent.  Agent may resign as agent hereunder by
giving not fewer than thirty (30) days prior written notice to Borrower and the
Lenders.  If Agent shall resign under
this Agreement, then either (a) the Required Lenders shall appoint from
among the Lenders a successor agent for the Lenders (with the consent of
Borrower, so long as an Event of Default has not occurred and is continuing,
and which consent shall not be unreasonably withheld), or (b) if a
successor agent shall not be so appointed and approved within the thirty (30)
day period following Agent’s notice to the Lenders of its resignation, then
Agent shall appoint a successor agent that shall serve as agent until such time
as the Required Lenders appoint a successor agent.  Upon its appointment, such successor agent shall succeed to the
rights, powers and duties as agent, and the term “Agent” shall mean such
successor effective upon its appointment, and the former agent’s rights, powers
and duties as agent shall be terminated without any other or further act or
deed on the part of such former agent or any of the parties to this Agreement.

 

72

 

ARTICLE XI. 
MISCELLANEOUS

 

Section 11.1.  Lenders’ Independent Investigation.  Each Lender, by its signature to this
Agreement, acknowledges and agrees that Agent has made no representation or
warranty, express or implied, with respect to the creditworthiness, financial
condition, or any other condition of any Company or with respect to the
statements contained in any information memorandum furnished in connection
herewith or in any other oral or written communication between Agent and such
Lender.  Each Lender represents that it
has made and shall continue to make its own independent investigation of the
creditworthiness, financial condition and affairs of the Companies in
connection with the extension of credit hereunder, and agrees that Agent has no
duty or responsibility, either initially or on a continuing basis, to provide
any Lender with any credit or other information with respect thereto (other
than such notices as may be expressly required to be given by Agent to the
Lenders hereunder), whether coming into its possession before the first Credit
Event hereunder or at any time or times thereafter.  Each Lender further represents that it has reviewed each of the
Loan Documents, and has received copies of and reviewed the Convertible Subordinated
Documents, including but not limited to, the conditions relating to the status
of the Obligations as Senior Indebtedness (as defined in the Convertible
Subordinated Notes).

 

Section 11.2.  No Waiver; Cumulative Remedies.  No omission or course of dealing on the part
of Agent, any Lender or the holder of any Note in exercising any right, power
or remedy hereunder or under any of the Loan Documents shall operate as a
waiver thereof; nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy hereunder or under any of the Loan
Documents.  The remedies herein provided
are cumulative and in addition to any other rights, powers or privileges held
by operation of law, by contract or otherwise.

 

Section 11.3.  Amendments, Consents.  No amendment, modification, termination, or
waiver of any provision of any Loan Document nor consent to any variance
therefrom, shall be effective unless the same shall be in writing and signed by
the Required Lenders and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.  Anything herein to the contrary
notwithstanding, unanimous consent of the Lenders shall be required with
respect to (a) any increase in the Commitment hereunder (except as
specified in Section 2.10(b) hereof), (b) the extension of
maturity of the Loans, the payment date of interest or scheduled principal
thereunder, or the payment date of commitment or other fees or amounts payable
hereunder, (c) any reduction in the rate of interest on the Loans
(provided that the institution of the Default Rate and a subsequent removal of
the Default Rate shall not constitute a decrease in interest rate of this
Section), or in any amount of scheduled principal or interest due on any Loan,
or the payment of commitment or other fees hereunder or any change in the
manner of pro rata application of any payments made by Borrower to the Lenders
hereunder, (d) any change in any percentage voting requirement, voting
rights, or the Required Lenders definition in this Agreement, (e) the
release of any Guarantor of Payment or material amount of Collateral securing
the Obligations, except as specifically permitted hereunder, or (f) any amendment
to this Section 11.3 or Section 9.5 hereof.  Notice of amendments or consents ratified by the Lenders
hereunder shall be forwarded by Agent to all of the Lenders.  Each Lender or other holder of a Note (or
interest in any Loan) shall be bound by any amendment, waiver or consent
obtained as authorized by this Section, regardless of its failure to agree
thereto.

 

73

 

Section 11.4.  Notices.  All notices, requests, demands and other communications provided
for hereunder shall be in writing and, if to Borrower, mailed or delivered to
it, addressed to it at the address specified on the signature pages of
this Agreement, if to a Lender, mailed or delivered to it, addressed to the
address of such Lender specified on the signature pages of this Agreement,
or, as to each party, at such other address as shall be designated by such
party in a written notice to each of the other parties.  All notices, statements, requests, demands
and other communications provided for hereunder shall be deemed to be given or
made when delivered or two Business Days after being deposited in the mails
with postage prepaid by registered or certified mail, addressed as aforesaid,
or sent by facsimile with telephonic confirmation of receipt, except that
notices from Borrower to Agent or the Lenders pursuant to any of the provisions
hereof shall not be effective until received by Agent or the Lenders, as the
case may be.

 

Section 11.5.  Costs, Expenses and Taxes.  Borrower agrees to pay on demand all
reasonable out-of-pocket costs and expenses of Agent and all Related Expenses,
including, but not limited to, (a) syndication, administration, travel and
out-of-pocket expenses, including but not limited to attorneys’ fees and
expenses (excluding allocated costs of in-house counsel), of Agent in
connection with the preparation, negotiation and closing of the Loan Documents
and the administration of the Loan Documents, the collection and disbursement
of all funds hereunder and the other instruments and documents to be delivered
hereunder, (b) extraordinary expenses of Agent in connection with the
administration of the Loan Documents and the other instruments and documents to
be delivered hereunder, and (c) the reasonable fees and out-of-pocket expenses
of special counsel for Agent, with respect to the foregoing, and of local
counsel, if any, who may be retained by said special counsel with respect
thereto.  Borrower also agrees to pay on
demand all costs and expenses of Agent and the Lenders, including reasonable
attorneys’ fees and expenses, in connection with the restructuring or
enforcement of the Obligations, this Agreement or any Related Writing.  In addition, Borrower shall pay any and all
stamp and other taxes and fees payable or determined to be payable in
connection with the execution and delivery of the Loan Documents, and the other
instruments and documents to be delivered hereunder, and agrees to hold Agent
and each Lender harmless from and against any and all liabilities with respect
to or resulting from any delay in paying or failure to pay such taxes or fees.

 

Section 11.6.  Indemnification.  Borrower agrees to defend, indemnify and
hold harmless Agent and the Lenders (and their respective affiliates, officers,
directors, attorneys, agents and employees) from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses (including attorneys’ fees but excluding anticipated
profits) or disbursements of any kind or nature whatsoever that may be imposed
on, incurred by or asserted against Agent or any Lender in connection with any
investigative, administrative or judicial proceeding (whether or not such
Lender or Agent shall be designated a party thereto) or any other claim by any
Person relating to or arising out of any Loan Document or any actual or
proposed use of proceeds of the Loans or any of the Obligations, or any
activities of any Company or its Affiliates; provided that no Lender nor Agent
shall have the right to be indemnified under this Section 11.6 for its own
gross negligence or willful misconduct as

 

74

 

determined by a court of
competent jurisdiction.  All obligations
provided for in this Section 11.6 shall survive any termination of this
Agreement.

 

Section 11.7.  Obligations Several; No Fiduciary
Obligations.  The obligations of the
Lenders hereunder are several and not joint. 
Nothing contained in this Agreement and no action taken by Agent or the
Lenders pursuant hereto shall be deemed to constitute Agent or the Lenders a
partnership, association, joint venture or other entity.  No default by any Lender hereunder shall
excuse the other Lenders from any obligation under this Agreement; but no
Lender shall have or acquire any additional obligation of any kind by reason of
such default.  The relationship between
Borrower and the Lenders with respect to the Loan Documents and the Related
Writings is and shall be solely that of debtor and creditors, respectively, and
neither Agent nor any Lender shall have any fiduciary obligation toward any
Credit Party with respect to any such documents or the transactions
contemplated thereby.

 

Section 11.8.  Execution in Counterparts.  This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts and by
facsimile signature, each of which counterparts when so executed and delivered
shall be deemed to be an original and all of which taken together shall
constitute but one and the same agreement.

 

Section 11.9.  Binding Effect; Borrower’s Assignment.  This Agreement shall become effective when
it shall have been executed by Borrower, Agent and each Lender and thereafter
shall be binding upon and inure to the benefit of Borrower, Agent and each of
the Lenders and their respective successors and permitted assigns, except that
Borrower shall not have the right to assign its rights hereunder or any
interest herein without the prior written consent of Agent and all of the
Lenders.

 

Section 11.10.  Lender Assignments.

 

(a)                                  Assignments
of Commitments.  Each Lender shall
have the right at any time or times to assign to an Eligible Transferee (other
than to a Lender that shall not be in compliance with this Agreement), without
recourse, all or a percentage of all of the following: (i) such Lender’s
Commitment, (ii) all Loans made by that Lender, (iii) such Lender’s Notes, and
(iv) such Lender’s interest in any Letter of Credit or Swing Loan, and any
participation purchased pursuant to Section 2.2 or 9.5 hereof.

 

(b)                                 Prior
Consent.  No assignment may be
consummated pursuant to this Section 11.10 without the prior written
consent of Borrower and Agent (other than an assignment by any Lender to any
affiliate of such Lender which affiliate is an Eligible Transferee and either
wholly-owned by a Lender or is wholly-owned by a Person that wholly owns,
either directly or indirectly, such Lender), which consent of Borrower and
Agent shall not be unreasonably withheld; provided, however, that Borrower’s
consent shall not be required if, at the time of the proposed assignment, any
Default or Event of Default shall then exist. 
Anything herein to the contrary notwithstanding, any Lender may at any
time make a collateral assignment of all or any portion of its rights under the
Loan Documents to a Federal Reserve Bank, and no such assignment shall release
such assigning Lender from its obligations hereunder.

 

75

 

(c)                                  Minimum
Amount.  Each such assignment shall
be in a minimum amount of the lesser of Five Million Dollars ($5,000,000) of
the assignor’s Commitment and interest herein or the entire amount of the
assignor’s Commitment and interest herein.

 

(d)                                 Assignment
Fee.  Unless the assignment shall be
to an affiliate of the assignor or the assignment shall be due to merger of the
assignor or for regulatory purposes, either the assignor or the assignee shall
remit to Agent, for its own account, an administrative fee of Three Thousand
Five Hundred Dollars ($3,500).

 

(e)                                  Assignment
Agreement.  Unless the assignment
shall be due to merger of the assignor or a collateral assignment for
regulatory purposes, the assignor shall (i) cause the assignee to execute
and deliver to Borrower and Agent an Assignment Agreement, and
(ii) execute and deliver, or cause the assignee to execute and deliver, as
the case may be, to Agent such additional amendments, assurances and other
writings as Agent may reasonably require.

 

(f)                                    Non-U.S.
Assignee.  If the assignment is to
be made to an assignee that is organized under the laws of any jurisdiction
other than the United States or any state thereof, the assignor Lender shall
cause such assignee, at least five Business Days prior to the effective date of
such assignment, (i) to represent to the assignor Lender (for the benefit
of the assignor Lender, Agent and Borrower) that under applicable law and
treaties no taxes will be required to be withheld by Agent, Borrower or the
assignor with respect to any payments to be made to such assignee in respect of
the Loans hereunder, (ii) to furnish to the assignor Lender (and, in the
case of any assignee registered in the Register (as defined below), Agent and
Borrower) either U.S. Internal Revenue Service Form W-8ECI or U.S. Internal
Revenue Service Form W-8BEN, as applicable (wherein such assignee claims
entitlement to complete exemption from U.S. federal withholding tax on all
payments hereunder), and (iii) to agree (for the benefit of the assignor,
Agent and Borrower) to provide to the assignor Lender (and, in the case of any
assignee registered in the Register, to Agent and Borrower) a new Form W-8ECI,
Form W-8IMY or Form W-8BEN, as applicable, upon the expiration or obsolescence
of any previously delivered form and comparable statements in accordance with
applicable U.S. laws and regulations and amendments duly executed and completed
by such assignee, and to comply from time to time with all applicable U.S. laws
and regulations with regard to such withholding tax exemption.

 

(g)                                 Deliveries
by Borrower.  Upon satisfaction of
all applicable requirements specified in subsections (a) through (f)
above, Borrower shall execute and deliver (i) to Agent, the assignor and
the assignee, any consent or release (of all or a portion of the obligations of
the assignor) required to be delivered by Borrower in connection with the
Assignment Agreement, and (ii) to the assignee and the assignor, if
applicable, an appropriate Note or Notes. 
After delivery of the new Note or Notes, the assignor’s Note or Notes
being replaced shall be returned to Borrower marked “replaced”.

 

(h)                                 Effect
of Assignment.  Upon satisfaction of
all applicable requirements set forth in subsections (a) through (g)
above, and any other condition contained in this Section 11.10,
(i) the assignee shall become and thereafter be deemed to be a “Lender”
for the purposes of this Agreement, (ii) the assignor shall be released
from its obligations hereunder to the extent that its

 

76

 

interest has been
assigned, (iii) in the event that the assignor’s entire interest has been
assigned, the assignor shall cease to be and thereafter shall no longer be
deemed to be a “Lender” and (iv) the signature pages hereto and Schedule 1
hereto shall be automatically amended, without further action, to reflect the
result of any such assignment.

 

(i)                                     Agent
to Maintain Register.  Agent shall
maintain at the address for notices referred to in Section 11.4 hereof a
copy of each Assignment Agreement delivered to it and a register (the
“Register”) for the recordation of the names and addresses of the Lenders and
the Commitment of, and principal amount of the Loans owing to, each Lender from
time to time.  The entries in the
Register shall be conclusive, in the absence of manifest error, and Borrower,
Agent and the Lenders may treat each Person whose name is recorded in the
Register as the owner of the Loan recorded therein for all purposes of this
Agreement.  The Register shall be
available for inspection by Borrower or any Lender at any reasonable time and
from time to time upon reasonable prior notice.

 

Section 11.11.  Sale of Participations.  Any Lender may, in the ordinary course of
its commercial banking business and in accordance with applicable law, at any
time sell participations to one or more Eligible Transferees (each a
“Participant”) in all or a portion of its rights or obligations under this
Agreement and the other Loan Documents (including, without limitation, all or a
portion of the Commitment and the Loans and participations owing to it and the
Note held by it); provided, that:

 

(a)                                  any
such Lender’s obligations under this Agreement and the other Loan Documents
shall remain unchanged;

 

(b)                                 such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations;

 

(c)                                  the
parties hereto shall continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations under this Agreement and
each of the other Loan Documents;

 

(d)                                 such
Participant shall be bound by the provisions of Section 9.5 hereof, and
the Lender selling such participation shall obtain from such Participant a
written confirmation of its agreement to be so bound; and

 

(e)                                  no
Participant (unless such Participant is itself a Lender) shall be entitled to
require such Lender to take or refrain from taking action under this Agreement
or under any other Loan Document, except that such Lender may agree with such
Participant that such Lender will not, without such Participant’s consent, take
action of the type described as follows:

 

(i)                                     increase
the portion of the participation amount of any Participant over the amount
thereof then in effect, or extend the Commitment Period, without the written
consent of each Participant affected thereby; or

 

77

 

(ii)                                  reduce
the principal amount of or extend the time for any payment of principal of any
Loan, or reduce the rate of interest or extend the time for payment of interest
on any Loan, or reduce the commitment fee, without the written consent of each
Participant affected thereby.

 

Borrower agrees that any
Lender that sells participations pursuant to this Section shall still be
entitled to the benefits of Article III hereof, notwithstanding any such
transfer; provided, however, that the obligations of Borrower shall not
increase as a result of such transfer and Borrower shall have no obligation to
any Participant.

 

Section 11.12.  Severability of Provisions; Captions;
Attachments.  Any provision of this
Agreement that shall be prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.  The several captions to
Sections and subsections herein are inserted for convenience only and
shall be ignored in interpreting the provisions of this Agreement.  Each schedule or exhibit attached to
this Agreement shall be incorporated herein and shall be deemed to be a part
hereof.

 

Section 11.13.  Investment Purpose.  Each of the Lenders represents and warrants
to Borrower that it is entering into this Agreement with the present intention
of acquiring any Note issued pursuant hereto for investment purposes only and
not for the purpose of distribution or resale, it being understood, however,
that each Lender shall at all times retain full control over the disposition of
its assets.

 

Section 11.14.  Entire Agreement.  This Agreement, any Note and any other Loan
Document or other agreement, document or instrument attached hereto or executed
on or as of the Closing Date integrate all of the terms and conditions
mentioned herein or incidental hereto and supersede all oral representations
and negotiations and prior writings with respect to the subject matter hereof.

 

Section 11.15.  Legal Representation of Parties.  The Loan Documents were negotiated by the
parties with the benefit of legal representation and any rule of construction
or interpretation otherwise requiring this Agreement or any other Loan Document
to be construed or interpreted against any party shall not apply to any
construction or interpretation hereof or thereof.

 

Section 11.16.  Governing Law; Submission to Jurisdiction.  This Agreement, each of the Notes and any
Related Writing shall be governed by and construed in accordance with the laws
of the State of Ohio and the respective rights and obligations of Borrower,
Agent, and the Lenders shall be governed by Ohio law, without regard to
principles of conflicts of laws. 
Borrower hereby irrevocably submits to the non-exclusive jurisdiction of
any Ohio state or federal court sitting in Cleveland, Ohio, over any action or
proceeding arising out of or relating to this Agreement, the Obligations or any
Related Writing, and Borrower hereby irrevocably agrees that all claims in
respect of such action or proceeding may be heard and determined in such Ohio
state or federal court.  Borrower, on
behalf of itself and its Subsidiaries, hereby

 

78

 

irrevocably waives, to
the fullest extent permitted by law, any objection it may now or hereafter have
to the laying of venue in any action or proceeding in any such court as well as
any right it may now or hereafter have to remove such action or proceeding,
once commenced, to another court on the grounds of FORUM NON CONVENIENS or
otherwise.  Borrower agrees that a
final, nonappealable judgment in any such action or proceeding shall be conclusive
and may be enforced in other jurisdictions by suit on the judgment or in any
other manner provided by law.

 

[Remainder of
page left intentionally blank]

 

79

 

JURY TRIAL WAIVER.  TO THE EXTENT PERMITTED BY LAW, BORROWER,
AGENT AND EACH LENDER WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING
ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWER,
AGENT AND THE LENDERS, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED
TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH
THIS AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED
OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.

 

IN WITNESS WHEREOF, the
parties have executed and delivered this Agreement as of the date first set
forth above.

 

	
  Address:

  	
  501 Kansas Avenue  

  	
  EPIQ SYSTEMS, INC.  

  
	
   

  	
  Kansas City,
  Kansas  66105  

  	
   

  	
   

  
	
   

  	
  Attn: Elizabeth Braham

  	
  By:

  	
     /s/   Elizabeth
  Braham  

  
	
   

  	
   

  	
   

  	
  Elizabeth Braham  

  
	
   

  	
   

  	
   

  	
  Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
  127 Public Square  

  	
  KEYBANK NATIONAL
  ASSOCIATION,

  
	
   

  	
  Cleveland, Ohio  44114-1306  

  	
    as Agent
  and as a Lender  

  
	
   

  	
  Attn:  Institutional Banking

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
     /s/   Jeff
  Kalinowski

  
	
   

  	
   

  	
  Name:

  	
  Vice President

  
	
   

  	
   

  	
  Title:

  	
  Jeff Kalinowski

  
								

 

1

 

SCHEDULE 1

 

	
  LENDERS

  	
   

  	
  REVOLVING

  CREDIT

  COMMITMENT

  PERCENTAGE

  	
   

  	
  REVOLVING

  CREDIT

  COMMITMENT

  AMOUNT

  	
   

  	
  TERM LOAN

  COMMITMENT

  PERCENTAGE

  	
   

  	
  TERM LOAN

  COMMITMENT

  AMOUNT

  	
   

  	
  MAXIMUM

  AMOUNT

  	
   

  
	
  KeyBank
  National Association

  	
   

  	
  100

  	
  %

  	
  $

  	
  50,000,000

  	
   

  	
  100

  	
  %

  	
  $

  	
  25,000,000

  	
   

  	
  $

  	
  75,000,000

  	
   

  
	
  Total
  Commitment Amount

  	
   

  	
  100

  	
  %

  	
  $

  	
  50,000,000

  	
   

  	
  100

  	
  %

  	
  $

  	
  25,000,000

  	
   

  	
  $

  	
  75,000,000

  	
   

  

 

S-1

 

EXHIBIT A

FORM OF

REVOLVING CREDIT
NOTE

 

	
  $                     

  	
   

  	
  Cleveland, Ohio

  
	
   

  	
   

  	
  July 20,
  2004

  

 

FOR VALUE RECEIVED, the
undersigned, EPIQ SYSTEMS, INC., a Missouri corporation (“Borrower”), promises
to pay, on the last day of the Commitment Period, as defined in the Credit and
Security Agreement (as hereinafter defined), to the order of
[                                             ]
(“Lender”) at the main office of KEYBANK NATIONAL ASSOCIATION, as Agent, as
hereinafter defined, 127 Public Square, Cleveland, Ohio 44114-1306 the
principal sum of

 

	
                                                                                                                                                                                                

  	
  DOLLARS

  

 

or the aggregate unpaid
principal amount of all Revolving Loans, as defined in the Credit and Security
Agreement made by Lender to Borrower pursuant to Section 2.2 of the Credit
and Security Agreement, whichever is less, in lawful money of the United States
of America.

 

As used herein, “Credit
and Security Agreement” means the Credit and Security Agreement dated as of
July 20, 2004, among Borrower, the Lenders, as defined therein, and
KeyBank National Association, as lead arranger, sole book runner and
administrative agent for the Lenders (“Agent”), as the same may from time to
time be amended, restated or otherwise modified.  Each capitalized term used herein that is defined in the Credit
and Security Agreement and not otherwise defined herein shall have the meaning
ascribed to it in the Credit and Security Agreement.

 

Borrower also promises to
pay interest on the unpaid principal amount of each Revolving Loan from time to
time outstanding, from the date of such Revolving Loan until the payment in
full thereof, at the rates per annum that shall be determined in accordance
with the provisions of Section 2.4(a) of the Credit and Security
Agreement.  Such interest shall be
payable on each date provided for in such Section 2.4(a); provided,
however, that interest on any principal portion that is not paid when due shall
be payable on demand.

 

The portions of the
principal sum hereof from time to time representing Base Rate Loans and
Eurodollar Loans, and payments of principal of any thereof, shall be shown on
the records of Lender by such method as Lender may generally employ; provided,
however, that failure to make any such entry shall in no way detract from the
obligations of Borrower under this Note.

 

If this Note shall not be
paid at maturity, whether such maturity occurs by reason of lapse of time or by
operation of any provision for acceleration of maturity contained in the Credit
and Security Agreement, the principal hereof and the unpaid interest thereon
shall bear interest, until paid, at a rate per annum equal to the Default Rate.  All payments of principal of and interest on
this Note shall be made in immediately available funds.

 

This Note is one of the
Revolving Credit Notes referred to in the Credit and Security Agreement.  Reference is made to the Credit and Security
Agreement for a description of the

 

A-1

 

right of the undersigned
to anticipate payments hereof, the right of the holder hereof to declare this
Note due prior to its stated maturity, and other terms and conditions upon
which this Note is issued.

 

Borrower hereby
designates all Indebtedness and other obligations now or hereafter incurred or
otherwise outstanding under this Note, the Credit and Security Agreement and
the other Loan Documents, as defined in the Credit and Security Agreement, to
be “Senior Indebtedness” as defined in the Note Agreement.

 

Except as expressly
provided in the Credit and Security Agreement, Borrower expressly waives
presentment, demand, protest and notice of any kind.  This Note shall be governed by and construed in accordance with
the laws of the State of Ohio, without regard to conflicts of laws provisions.

 

JURY TRIAL WAIVER.  BORROWER, TO THE EXTENT PERMITTED BY LAW,
HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWER, AGENT AND THE
LENDERS, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS
AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.

 

	
   

  	
  EPIQ SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					

 

A-2

 

EXHIBIT B

FORM OF

SWING LINE NOTE

 

	
  $5,000,000

  	
   

  	
  Cleveland, Ohio

  
	
   

  	
   

  	
  July 20,
  2004

  

 

FOR VALUE RECEIVED, the
undersigned, EPIQ SYSTEMS, INC., a Missouri corporation (“Borrower”), promises
to pay to the order of KEYBANK NATIONAL ASSOCIATION (“Lender”) at the main
office of KEYBANK NATIONAL ASSOCIATION, as Agent, as hereinafter defined, 127
Public Square, Cleveland, Ohio 44114-1306 the principal sum of

 

	
  FIVE MILLION AND
  00/100                                                                                                                                             

  	
  DOLLARS

  

 

or the aggregate unpaid
principal amount of all Swing Loans, as defined in the Credit and Security
Agreement (as hereinafter defined) made by Lender to Borrower pursuant to
Section 2.2(c) of the Credit and Security Agreement, whichever is less, in
lawful money of the United States of America on the earlier of the last day of
the Commitment Period, as defined in the Credit and Security Agreement, or,
with respect to each Swing Loan, the Swing Loan Maturity Date applicable
thereto.

 

As used herein, “Credit
and Security Agreement” means the Credit and Security Agreement dated as of
July 20 2004, among Borrower, the Lenders, as defined therein, and KeyBank
National Association, as lead arranger, sole book runner and administrative
agent for the Lenders (“Agent”), as the same may from time to time be amended,
restated or otherwise modified.  Each
capitalized term used herein that is defined in the Credit and Security
Agreement and not otherwise defined herein shall have the meaning ascribed to
it in the Credit and Security Agreement.

 

Borrower also promises to
pay interest on the unpaid principal amount of each Swing Loan from time to
time outstanding, from the date of such Swing Loan until the payment in full
thereof, at the rates per annum that shall be determined in accordance with the
provisions of Section 2.4(b) of the Credit and Security Agreement.  Such interest shall be payable on each date
provided for in such Section 2.4(b); provided, however, that interest on
any principal portion which is not paid when due shall be payable on demand.

 

The principal sum hereof
from time to time and the payments of principal and interest thereon, shall be
shown on the records of Lender by such method as Lender may generally employ;
provided, however, that failure to make any such entry shall in no way detract
from the obligation of Borrower under this Note.

 

If this Note shall not be
paid at maturity, whether such maturity occurs by reason of lapse of time or by
operation of any provision for acceleration of maturity contained in the Credit
and Security Agreement, the principal hereof and the unpaid interest thereon
shall bear interest, until paid, at a rate per annum equal to the Default
Rate.  All payments of principal of and
interest on this Note shall be made in immediately available funds.

 

B-1

 

This Note is the Swing
Line Note referred to in the Credit and Security Agreement.  Reference is made to the Credit and Security
Agreement for a description of the right of the undersigned to anticipate
payments hereof, the right of the holder hereof to declare this Note due prior
to its stated maturity, and other terms and conditions upon which this Note is
issued.

 

Borrower hereby
designates all Indebtedness and other obligations now or hereafter incurred or
otherwise outstanding under this Note, the Credit and Security Agreement and
the other Loan Documents, as defined in the Credit and Security Agreement, to
be “Senior Indebtedness” as defined in the Note Agreement.

 

Except as expressly
provided in the Credit and Security Agreement, Borrower expressly waives
presentment, demand, protest and notice of any kind.  This Note shall be governed by and construed in accordance with
the laws of the State of Ohio, without regard to conflicts of laws provisions.

 

JURY TRIAL WAIVER.  BORROWER, TO THE EXTENT PERMITTED BY LAW,
HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWER, AGENT AND THE
LENDERS, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS
NOTE OR ANY OTHER NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.

 

	
   

  	
  EPIQ SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					

 

B-2

 

EXHIBIT C

FORM OF

TERM NOTE

 

	
  $                          

  	
   

  	
  Cleveland, Ohio

  
	
   

  	
   

  	
  July 20,
  2004

  

 

FOR VALUE RECEIVED, the
undersigned, EPIQ SYSTEMS, INC., a Missouri corporation (“Borrower”), promises
to pay to the order of
[                                                  ]
(“Lender”) at the main office of KEYBANK NATIONAL ASSOCIATION, as Agent, as
hereinafter defined, 127 Public Square, Cleveland, Ohio 44114-1306 the
principal sum of

 

	
                                                                                                                                                                                                

  	
  DOLLARS

  

 

in lawful money of the
United States of America in consecutive principal payments as set forth in the
Credit and Security Agreement.

 

As used herein, “Credit
and Security Agreement” means the Credit and Security Agreement dated as of July 20,
2004, among Borrower, the Lenders, as defined therein, and KeyBank National
Association, as lead arranger, sole book runner and administrative agent for
the Lenders (“Agent”), as the same may from time to time be amended, restated
or otherwise modified.  Each capitalized
term used herein that is defined in the Credit and Security Agreement and not
otherwise defined herein shall have the meaning ascribed to it in the Credit
and Security Agreement.

 

Borrower also promises to
pay interest on the unpaid principal amount of the Term Loan from time to time
outstanding, from the date of the Term Loan until the payment in full thereof,
at the rates per annum that shall be determined in accordance with the
provisions of Section 2.4(c) of the Credit and Security Agreement.  Such interest shall be payable on each date
provided for in such Section 2.4(c); provided, however, that interest on
any principal portion that is not paid when due shall be payable on demand.

 

The portions of the
principal sum hereof from time to time representing Base Rate Loans and
Eurodollar Loans, and payments of principal of either thereof, shall be shown
on the records of Lender by such method as Lender may generally employ;
provided, however, that failure to make any such entry shall in no way detract
from the obligations of Borrower under this Note.

 

If this Note shall not be
paid at maturity, whether such maturity occurs by reason of lapse of time or by
operation of any provision for acceleration of maturity contained in the Credit
and Security Agreement, the principal hereof and the unpaid interest thereon
shall bear interest, until paid, at a rate per annum equal to the Default
Rate.  All payments of principal of and
interest on this Note shall be made in immediately available funds.

 

This Note is one of the
Term Notes referred to in the Credit and Security Agreement.  Reference is made to the Credit and Security
Agreement for a description of the right of the undersigned to anticipate
payments hereof, the right of the holder hereof to declare this Note due prior
to its stated maturity, and other terms and conditions upon which this Note is
issued.

 

C-1

 

Borrower hereby
designates all Indebtedness and other obligations now or hereafter incurred or
otherwise outstanding under this Note, the Credit and Security Agreement and
the other Loan Documents, as defined in the Credit and Security Agreement, to
be “Senior Indebtedness” as defined in the Note Agreement.

 

Except as expressly
provided in the Credit and Security Agreement, Borrower expressly waives
presentment, demand, protest and notice of any kind.  This Note shall be governed by and construed in accordance with
the laws of the State of Ohio, without regard to conflicts of laws provisions.

 

JURY TRIAL WAIVER.  BORROWER, TO THE EXTENT PERMITTED BY LAW,
HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,
WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWER, AGENT AND THE
LENDERS, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS
NOTE OR ANY OTHER NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.

 

	
   

  	
  EPIQ SYSTEMS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
					

 

C-2Exhibit
10.1

 

AXIS SPECIALTY U.S. SERVICES, INC.

430 PARK AVENUE, 15TH FLOOR

NEW YORK, NEW YORK 10022

 

Ms. Lorraine S. Marriano

AXIS Specialty U.S.
Services, Inc.

430 Park Avenue, 15th floor

New York, New York 10022

 

Dear Lorraine:

 

We
are delighted that you have decided to join AXIS Specialty U.S. Services, Inc.,
a Delaware corporation (the “Company”) and wholly owned, indirect
subsidiary of AXIS Capital Holdings Limited, a Bermuda company (the “Parent”).
We thought it would be useful to lay out the terms and conditions of our
agreement in this letter agreement (this “Agreement”).  This Agreement is dated as of April 1,
2004.

 

1.                                      Employment.

 

The
Company hereby agrees to employ you in the position of Chief Human Resources
Officer or in such other position as is mutually agreeable to you and the
Company.  You will report to the Chief
Executive Officer and President of the Parent or any other appropriate designee
as may be directed by him. You will be expected to devote your full business
time and energy, attention, skills and ability to the performance of your
duties and responsibilities to the Company on an exclusive basis, including
service to subsidiaries and other affiliates of the Company as requested by the
Board of Directors of the Parent (the “Board”), and shall faithfully and
diligently endeavor to promote the business and best interests of the Company
and its subsidiaries.

 

2.                                      Compensation and Benefits.

 

(a)                                 During your employment with the
Company, your annual base salary shall be $250,000 (the base salary as may be
increased from time to time “Base Salary”) and shall be paid pursuant to
the Company’s customary payroll practices. The Base Salary will be reviewed
annually and may be increased in the sole discretion of the Company.

 

(b)                                 In addition to the Base Salary, in
each fiscal year of the Company during your employment with the Company, you
will have the opportunity to earn an annual cash bonus (“Annual Bonus”)
if the Company achieves certain performance objectives and subject to your
individual performance (each of which will be determined by the Company for
each such fiscal year).  The Annual
Bonus for each period will be paid only if you are actively employed with the
Company and are not in breach of this Agreement on the date of disbursement.

 

 

(c)                                  During your employment with the
Company, you will be entitled to participate generally in the benefit plans
made available to employees of the Company in accordance with the terms of
those plans and the Company will reimburse you for all reasonable business
expenses upon presentation of statements of such expenses in accordance with
the Company’s policies and procedures now in force or as such policies and
procedures may be modified with respect to the senior executives of the
Company.

 

(d)                                 During your employment with the
Company, you will be entitled to 20 working days of paid vacation per calendar
year (pro rated according to your commencement date).

 

3.                                      Term of Employment

 

(a)                                 The employment period shall
commence on April 1, 2004 and shall terminate on the day preceding the
first anniversary thereof; provided, however, that the term of
employment shall automatically be extended for successive one-year periods
unless either party shall give at least six (6) months’  prior written notice of
non-renewal. Notwithstanding the foregoing, your employment hereunder will be
terminated upon the earliest to occur of the following events:

 

(i)                                    Death. 
Your employment shall automatically terminate upon your death.

 

(ii)                                Disability. 
The Company shall be entitled to terminate your employment if, as a
result of your incapacity due to physical or mental illness or injury, you
shall have been unable to perform your duties hereunder for a period of 181
days in any twelve-month period.

 

(iii)                            Cause. 
The Company may terminate your employment for Cause, which, for purposes
of this Agreement, shall mean (A) your willful misconduct or gross negligence
in connection with the performance of your duties as an employee of the
Company, (B) the willful engagement by you in misconduct that is demonstrably
injurious to the Company (monetarily or otherwise) or its reputation, (C) your
material breach of this Agreement or (D) your conviction of, or pleading guilty
or nolo contendere to, a felony or a crime involving moral turpitude.

 

(iv)                              Without Cause. 
The Company may terminate your employment at any time without Cause.
Termination without Cause shall include the Company’s non-renewal of a
successive one-year period of your employment with the Company as provided for
in this Section 3(a).

 

(v)                                  Voluntary Resignation. 
You may voluntarily terminate your employment hereunder; provided,
however, that you provide the Company with notice of your intent to terminate
at least six months  in advance of the date of termination.  Voluntary Resignation shall include your non-renewal of a
successive one-year period of your employment with the Company as provided for
in this Section 3(a).

 

2

 

(b)                                 In the event that your employment
with the Company shall terminate for any reason, except as otherwise set forth
in this Agreement, the Company’s sole obligation under the Agreement shall be
to (i) pay to you any accrued and unpaid Base Salary through the date of
termination of employment and an amount equal to such reasonable and necessary
unreimbursed business expenses incurred by you on behalf of Company on or prior
to the date of termination of employment and (ii) afford you all the employee
benefits to which you may be entitled under, and in accordance with the terms
of, all employee benefit plans in which you participate.

 

(c)                                  In the event that the Company
terminates your employment without Cause in accordance with the provisions of
Section 3(a)(iv) hereof, you shall be entitled to continuation of your Base
Salary and employee benefits for a period of twelve (12) months  immediately following the date of
such termination; provided, however, that you comply with your
obligations under Sections 3(e), 4, 5 and 6 hereof.

 

(d)                                 In the event that either party
gives notice of the non-renewal of a successive one-year period of your
employment with the Company as provided for in Section 3(a) hereof, or you
voluntarily terminate your employment hereunder and you provide notice thereof,
during the period (or any portion thereof) commencing on the date of such
notice and ending on the date of termination (the “Notice Period”), the
Company may, in its absolute discretion, (i) require you to perform only such
duties as it may allocate to you, (ii) require you not to perform any of your
duties, (iii) require you not to have any contact with customers or clients of
the Company nor any contact (other than purely social contact) with such
employees of the Company as the Company shall determine, (iv)  exclude you from any premises of the Company
and/or (v) require you to resign from all directorships and other offices that
you hold in connection with your employment with the Company (including any
directorships with subsidiaries or other affiliates of the Company) effective
as of any date during the Notice Period. 
If the Company elects to take any such action, such election shall not
constitute a breach by the Company of this Agreement and you shall not have any
claim against the Company in connection therewith so long as, during the Notice
Period, the Company continues to pay to you your accrued and unpaid Base
Salary, afford you all the employee benefits to which you may be entitled
under, and in accordance with the terms of, all employee benefit plans in which
you participate and otherwise comply with the terms of this Agreement.

 

(e)                                  Upon termination of your employment
with the Company for any reason, you agree (i) to resign from all directorships
and other offices that you hold in connection with your employment with the
Company (including any directorships with subsidiaries or other affiliates of
the Company) and (ii) to execute a general release and waiver, waiving all
claims you may have against the Company, its affiliates (including Parent) and
their respective successors, assigns, employees, officers, directors,
consultants, partners and shareholders.

 

(f)                                    If within the first twelve months
following a Change of Control, (i) the nature or scope of your position,
authority or duties are materially adversely changed, (ii) your compensation is
not paid or is reduced, there is a material adverse change in your employee
benefits or the Company otherwise materially breaches this Agreement or (iii)
you are required by the Company to relocate to a place more than 50 miles from
your current place of employment, then, if you provide the Company with written
notice of your intent to terminate

 

3

 

your employment as a
result of such event, providing the specific reasons therefor, and the Company
does not make the necessary corrections within thirty days of receipt of your
written notice, you may terminate your employment within the ten days following
the expiration of such thirty day notice period and continue to receive your
Base Salary and employee benefits for a period of twelve
months  immediately following the date of
such termination and the Annual Bonus that your would have been entitled to
during such twelve months assuming all performance targets had been exceeded; provided,
however, that you comply with your obligations under Section 3(e), 4, 5
and 6 hereof.  For purposes of this
Agreement, the term “Change in Control” will be deemed to have occurred
as of the first day any of the following events occurs:

 

(i)                                    Any person
or entity is or becomes the “beneficial owner” (as defined in Rule 13d-3 under
the U.S. Securities Exchange Act of 1934, as amended), directly or indirectly,
of securities of the Parent representing 50% or more of the combined voting
power of the Parent’s then outstanding voting securities entitled to vote
generally in the election of directors (the “Outstanding Parent Voting Securities”); provided, however, that
for purposes of this Section 3(f) (i), the following acquisitions shall
not constitute a Change in Control: (A) any acquisition directly from the
Parent, (B) any acquisition by the Parent, (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Parent or any
affiliate of the Parent or (D) any acquisition by any entity pursuant to a
transaction which complies with clauses (A), (B) and (C) of Section 3(f)
(iii) hereof;

 

(ii)                                Individuals who, as of the date of
this Agreement, constitute the Board (hereinafter referred to as the “Incumbent
Board”) cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by the
Parent’s stockholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered a member of the
Incumbent Board, excluding any individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect to
the election or removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a person or entity other than the
Board;

 

(iii)                            Consummation of a reorganization,
merger, share exchange, amalgamation, recapitalization, consolidation or
similar transaction by and among the Parent and another person or entity,
including, for this purpose, a transaction as a result of which another person
or entity owns the Parent or all or substantially all of the Parent’s assets,
either directly or through one or more subsidiaries (a “Business Combination”),
in each case, unless, following such Business Combination, (A) all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of

 

4

 

the Outstanding Parent
Voting Securities immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 50% of the combined voting power of the
then outstanding voting securities entitled to vote generally in the election
of directors (or equivalent management personnel) of the entity resulting from
such Business Combination or that, as a result of such Business Combination,
owns the Parent or all or substantially all of the Parent’s assets, either directly
or through one or more subsidiaries, in substantially the same proportions as
their ownership of the Outstanding Parent Voting Securities immediately prior
to such Business Combination; (B) no person or entity (excluding any entity
resulting from such Business Combination, or that, as a result of such Business
Combination, owns the Parent or all or substantially all of the Parent’s
assets, either directly or through one or more subsidiaries, or any employee
benefit plan (or related trust) of the foregoing) beneficially owns, directly
or indirectly, 50% or more of the then outstanding shares of common stock or
the combined voting power of the then outstanding voting securities entitled to
vote generally in the election of directors (or equivalent management
personnel) of the entity resulting from such Business Combination or that, as a
result of such Business Combination, owns the Parent or all or substantially
all of the Parent’s assets, either directly or through one or more
subsidiaries, except to the extent that such ownership existed with respect to
the Parent prior to the Business Combination; and (C) at least a majority of
the members of the board of directors (or equivalent management personnel) of
the entity resulting from such Business Combination or that, as a result of
such Business Combination, owns the Parent or all or substantially all of the
Parent’s assets, either directly or through one or more subsidiaries, were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, pursuant to which such Business
Combination is effected or approved; or

 

(iv)                              Approval by the shareholders of the
Parent of a complete liquidation or dissolution of the Parent or the sale or
other disposition of all or substantially all of the Parent’s assets.

 

4.                                      Assignment of Intellectual Property
Rights

 

(a)                                 Assignment. 
You hereby assign all of your rights, title and interest to and in all
Intellectual Property Rights (as defined below) conceived, developed, invented,
made by you or otherwise owned by you and directly or indirectly relating to
the Business (defined in Section 7(a)) and you agree and acknowledge that,
on the date hereof, such rights to and in such Intellectual Property Rights
shall become the sole property of, and belong to, the Company.

 

(b)                                 Intellectual Property Rights. 
For the purposes of this Agreement, the term “Intellectual Property
Right” shall mean all proprietary and other rights in and to: (i)
trademarks, service marks, brand names, certification marks, trade dress,
assumed names, trade names and

 

5

 

other indications of
origin; (ii) patents, inventors’ certificates and invention disclosures; (iii)
trade secrets and other confidential or non-public business information,
including ideas, formulae, compositions, inventions, discoveries and
improvements, know-how, manufacturing and production processes and techniques,
and research and development information (whether patentable or not); drawings,
specifications, designs, plans, proposals and technical data; and financial,
marketing and business data, pricing and cost information, business and
marketing plans and customer and supplier lists and information; (iv) writings
and other works of authorship, whether copyrightable or not, including computer
programs, data bases and documentation therefor, and all copyrights to any of
the foregoing; (v) mask works; (vi) rights, title and interest in know-how,
technical information, processes, practices and systems, whether or not
protectable by patent, copyright or trade secret law; (vii) moral rights;
(viii) rights to limit the use or disclosure of confidential information by any
person; (ix) any similar tangible or intangible intellectual property or proprietary
rights, information and technology; (x) registrations of, and applications to
register, any of the foregoing with any governmental agency or authority and
any renewals or extensions thereof, (xi) the goodwill associated with each of
the foregoing and (xii) any claims or causes of action arising out of or
related to any infringement or misappropriation of any of the foregoing; in
each case in any jurisdiction.

 

5.                                      Non-Disclosure

 

(a)                                 In view of the fact that your work
for the Company will bring you into close contact with many confidential
affairs of the Company not readily available to the public, as well as plans
for future developments, you agree during your employment with the Company and
thereafter:

 

(i)                                    to keep secret and retain in the
strictest confidence all proprietary or confidential matters or trade secrets
of the Company or any of its subsidiaries and affiliates (which information
will be deemed confidential notwithstanding any prior unauthorized
disclosures), including, but not limited to, data, know-how, formulae,
practices, processes, methodologies, designs, sketches, photographs, plans,
drawings, specifications, samples, reports, member or customer lists, price
lists, business strategies or arrangements, studies, findings, inventions, ideas,
software, source code, business plans and other technical, business or
financial information relating to the Company’s business, whether existing on
the date hereof or hereafter (such material collectively, “Restricted
Material”), and not to disclose such Restricted Material except with the
Company’s permission to such third parties as may be necessary in the
furtherance of the Company’s interests and in the discharge of your duties; and

 

(ii)                                to deliver promptly to the Company
upon the termination of your employment or at any other time as the Company may
so request, all documents (and all copies thereof), in whatever form,
containing Restricted Material, and all property associated therewith, which
you may then possess or have under your control; provided, however, that
Restricted Material shall not be subject to the confidentiality restrictions of

 

6

 

this Section 5 where
you can show that such information is, at the time of disclosure, generally
known to the public.

 

(b)                                 In the event that you are requested
or required (by oral questions, interrogatories, requests for information or
documents, subpoena or similar process) to disclose any Restricted Material,
you agree to provide the Company with prompt notice of such request(s) so that
the Company may seek an appropriate protective order or other appropriate
remedy and/or waive your compliance with the provisions of this Agreement. In
the event that such protective order or other remedy is not obtained, or that
the Company grants a waiver hereunder, you may furnish that portion (and only
that portion) of the Restricted Material which you are legally compelled to
disclose and will exercise your reasonable best efforts to obtain reliable
assurance that confidential treatment will be accorded any Restricted Material
so furnished.

 

(c)                                  Nothing in this Section 5
shall be construed as granting or implying any right to you under any patent or
unpatented intellectual property right of the Company, or your right to use any
invention covered thereby.

 

6.                                      Non-Solicitation

 

Except
with prior written permission of the Company, you shall not, directly or
indirectly (individually or on behalf of other persons), during your employment
with the Company or any of its affiliates and for a period of six (6) months
following the termination of your employment with the Company for any reason,
hire, offer to hire, entice away or in any manner persuade or attempt to
persuade any officer, employee or agent of the Parent or any of its affiliates
(including the Company and any subsidiary) or any then current or prospective
customer, client or broker of the Parent or any of its affiliates (including
the Company and any subsidiary), to discontinue his or her relationship with
the Parent or any of its affiliates (including the Company and any subsidiary)
or to otherwise do business with any competing business of Parent or any of its
affiliates (including the Company and any subsidiary).

 

7.                                      Non-Competition

 

Except
with prior written permission of the Company, you shall not, during your
employment with the Company or any of its affiliates and if you terminate
employment for any reason (other than your voluntary termination of employment
or non-renewal of this Agreement in which you provide the six months’ notice
required by Section 3(a) hereof), for a period of six (6) months  following
your termination of employment, directly or indirectly (individually or on
behalf of other persons): (a) enter the employ of, or render services to, any
person, firm or corporation engaged in the insurance or reinsurance business or
any other business in which the Company is, or has announced an intention to
become, engaged in at any time during your employment with the Company and in
each case within any State in the United States in which Parent or any of its
affiliates (including the Company and any subsidiary) does business
(hereinafter collectively referred to as the “Business”); (b) engage in
such Business on your own account; or (c) become interested in any such
Business, directly or indirectly, as an owner, partner, shareholder, member,
director, officer, principal, consultant or in any other senior executive or
managerial capacity; provided, however, that nothing contained in this
Section 7

 

7

 

shall be deemed to prohibit you from
acquiring, solely as a passive investment, no more than 5% of the total
outstanding securities of any publicly-held corporation.

 

8.                                      Enforcement

 

(a)                                 The parties hereto hereby declare
that it is impossible to measure in money the damages that will accrue to the
Company by reason of your failure to perform any of your obligations under
Sections 4, 5, 6 and 7. Accordingly, if the Company institutes any action or
proceeding to enforce the provisions hereof, to the extent permitted by
applicable law, you hereby waive the claim or defense that the Company has an
adequate remedy at law, and you shall not urge in any such action or proceeding
the defense that any such remedy exists at law. The foregoing rights shall be
in addition to any other rights and remedies available to the Company under law
or in equity.

 

(b)                                 If any of the covenants contained
in Sections 4, 5, 6 and 7 or any part thereof, is construed to be invalid or
unenforceable, the same shall not affect the remainder of the covenant or
covenants, which shall be given full effect, without regard to the invalid
portion(s). In addition, if any of the covenants contained in Sections 4, 5, 6
and 7 hereof, or any part thereof, is held by any person or entity with
jurisdiction over the matter to be invalid or unenforceable because of duration
of such provision or the geographical area covered thereby, the parties agree
that such person or entity shall have the power to reduce the duration and/or
geographical area of such provision and, in its reduced form, said provisions
shall then be enforceable.

 

(c)                                  It is understood and agreed that no
failure or delay by the Company in exercising any right, power or privilege
contained in Sections 4, 5, 6 and 7 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 right, power or privilege contained in
Sections 4, 5, 6 and 7.

 

9.                                      Dispute Resolution

 

In
the event of any dispute or difference between you and the Company with respect
to either the enforcement or interpretation of this Agreement, both you and the
Company agree to resolve any such dispute or difference by the terms and
conditions set forth in the Company’s Dispute Resolution Guidelines. By
executing this Agreement, you acknowledge receiving and reviewing Company’s
Dispute Resolution Guidelines.

 

10.                               Miscellaneous

 

(a)                                 Any notice or other communication
required or permitted under this Agreement shall be effective only if it is in
writing and shall be deemed to be given when delivered personally or three days
after it is mailed by registered or certified mail, postage prepaid, return
receipt requested or one day after it is sent by a reputable overnight courier
service and, in each case, addressed to the relevant party at the address
provided for such party on the first page hereof, or to such other address as
any party hereto may designate by notice to the other in accordance with the
foregoing.

 

8

 

(b)                                 This Agreement constitutes the
entire agreement among you and the Company with respect to your employment by
the Company, and supersedes and is in full substitution for any and all prior
understandings or agreements with respect to your employment.

 

(c)                                  This Agreement may be amended only
by an instrument in writing signed by the parties hereto, and any provision
hereof may be waived only by an instrument in writing signed by the party
against whom or which enforcement of such waiver is sought.

 

(d)                                 This Agreement and all rights and
obligations hereunder, including, without limitation, matters of construction,
validity and performance, shall be governed by and construed and interpreted in
accordance with the laws of New York without regard to principles of conflict
of laws.

 

(e)                                  In the event of any contest or
dispute between you and the Company with respect to this Agreement, each of the
parties shall be responsible for their respective legal fees and expenses in
accordance with the Company’s Dispute Resolution Guidelines.

 

(f)                                    This Agreement shall inure for the
benefit of and be an obligation of the Company’s assigns and successors; provided,
however, that you may not assign your duties and obligations hereunder to any
other party.

 

(g)                                 The headings in this Agreement are
inserted for convenience of reference only and shall not be a part of or
control or affect the meaning of any provision hereof.

 

If
the terms of this Agreement meet with your approval, please sign and return one
copy to the Company.

 

	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
  AXIS SPECIALTY U.S.
  SERVICES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Dennis B. Reding

  	
   

  
	
   

  	
  Name: Dennis B. Reding

  
	
   

  	
  Title: Executive Vice
  President

  

 

 

Accepted and Agreed

as of the date first set
forth above:

 

 

	
  Lorraine S. Mariano

  	
   

  
	
  Lorraine S. Mariano

  

 

9

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